UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
-------------------------------------------------
[ ] 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
--------------
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 11
..................................................................................
(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 May 14, 2002 was 43,468,329.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
MARCH 31, 2002
Table of Contents
PART I - FINANCIAL INFORMATION
Page
ITEM 1 Financial Statements ----
Consolidated balance sheets at March 31, 2002 and
December 31, 2001 3
Consolidated statements of operations for the three months
ended March 31, 2002 and 2001 and for the period from January
31, 1953 (inception) to March 31, 2002
4
Consolidated statements of cash flows for the three months
ended March 31, 2002 and 2001and for the period from January
31, 1953 (inception) to March 31, 2002 and 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 10
PART II - OTHER INFORMATION
ITEM 5 Other Information 11
ITEM 6 Exhibits and Reports on Form 8-K 11
Signatures 12
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED BALANCES SHEETS
(Expressed in U.S. dollars)
(A Bermuda Corporation)
A Development Stage Company
March 31, December 31,
2002 2001
----------- -------------
ASSETS (unaudited) (Note)
Current assets:
Cash and cash equivalents $ 271,475 $ 609,024
Interest and accounts receivable 1,661 8,604
Notes receivable 15,000 15,000
Prepaid expenses 290,723 353,596
-------- --------
Total current assets 578,859 986,224
-------- --------
Contingent litigation claim (Note 4) - -
Deferred financing costs 236,273 90,391
------------- ------------
Total assets $ 815,132 $ 1,076,615
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 360,732 $ 71,677
Accrued liabilities 289,908 286,944
-------- --------
650,640 358,621
------- -------
Minority interests
- -
Shareholders' equity:
Common stock, par value $.12 per share:
Authorized - 250,000,000 shares
Outstanding - 43,468,329 shares 5,216,199 5,216,199
Capital in excess of par value 31,497,362 31,497,362
---------- ----------
36,713,561 36,713,561
Deficit accumulated during the development stage (36,549,070) (35,995,567)
------------ ------------
Total shareholders' equity 164,491 717,994
------------ -----------
Total liabilities and shareholders' equity $ 815,132 $ 1,076,615
============ ===========
Note: The balance sheet at December 31, 2001 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)
For the
period from
Jan. 31, 1953
Three months ended (inception)
March 31, to March 31,
2002 2001 2002
---------- ---------- ------------
Interest and other income $ 3,662 $ 37,280 $ 3,873,217
---------- ---------- ------------
Expenses:
Legal fees and costs 316,432 524,699 14,997,391
Administrative expenses 193,755 150,404 8,600,995
Salaries 37,950 37,950 3,410,378
Shareholder communications 9,028 15,248 3,894,523
Write off of improved properties - - 5,501,247
Exploration costs - 480 188,218
Lawsuit judgments - - 1,941,916
Minority interests - - (632,974)
Other - - 364,865
Contractual services - - 2,155,728
---------- ---------- ------------
557,165 728,781 40,422,287
---------- ---------- ------------
Net loss $(553,503) $(691,501)
========== ==========
Deficit accumulated during
the development stage $(36,549,070)
=============
Net loss per share (basic & diluted) $(.01) $(.02)
====== ======
Average number of shares
outstanding (basic & diluted) 43,468,329 43,468,329
========== ==========
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)
For the period from
Jan. 31, 1953
Three months ended (inception)
March 31, to
2002 2001 Mar. 31, 2002
------------ ------------ -------------
Operating activities:
Net loss $(553,503) $(691,501) $(36,549,070)
Adjustments to reconcile net loss to net cash
used in operating activities:
Minority interest - - (632,974)
Write off of unproved properties - - 5,501,247
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:
Interest and accounts receivable 6,943 9,145 (1,661)
Prepaid expenses 62,873 33,826 (290,723)
Accounts payable and accrued liabilities 292,020 110,607 650,641
Deferred financing costs (145,882) (83) (236,273)
------------- ------------ ------------
(83)
Net cash used in operating activities (337,549) (538,006) (31,112,140)
------------- ------------ ------------
Investing activities:
Additions to oil, gas, and mineral properties
net of assets acquired for common stock and
reimbursements - 2,195 (3,621,688)
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 - 2,195 (3,451,604)
---------------- ------------ -----------
Financing activities:
Sale of common stock net of expenses - - 29,480,970
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 - - 34,835,219
---------------- ---------------- ----------
Net increase (decrease) in cash and cash equivalents (337,549) (535,811) 271,475
Cash and cash equivalents at beginning of period 609,024 2,958,674 -
------------ ------------ ----------
Cash and cash equivalents at end of period $ 271,475 $ 2,422,863 $ 271,475
============ ============ ==========
See accompanying notes.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
PART I - FINANCIAL INFORMATION
March 31, 2002
ITEM 1 - Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited 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 months ended March 31, 2002 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2002. 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, 2001.
Note 2. Litigation
A motion for summary judgment by the State of Florida in the taking
lawsuit is scheduled to be heard by the Leon County Circuit trial judge on June
13, 2002.
Note 3. Loss per share
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 (the
Company has continuing losses).
Note 4. Going Concern
The Company has a limited amount of working capital, has incurred
recurring losses and has a deficit accumulated during the development stage.
Furthermore, on January 16, 2001, Coastal Petroleum Company filed a complaint in
the Leon County Circuit Court in Florida against the State of Florida seeking
compensation for the State's taking of its property rights to explore for oil
and gas within its Lease 224-A. On November 27, 2001, the Leon County Circuit
Court set a trial date for two weeks beginning September 30, 2002 for Coastal
Petroleum's lawsuit against the State of Florida. The cost of that litigation
has been substantial and will require the Company to obtain additional capital.
On January 10, 2002, the Company filed a registration statement for the sale of
its common stock, which has not yet been declared effective by the Securities
and Exchange Commission. The terms of the offering have not yet been determined.
There can be no assurances that funds on hand or realized or realizable on the
sales of the Company's shares will be sufficient to allow the Company to survive
until such litigation is concluded. The Company believes the funds on hand at
March 31, 2002 are sufficient to pay the expenses associated with the proposed
rights offering and to fund the Company's operations through the second quarter
of 2002. In addition, an estimated minimum amount of $500,000 would be necessary
to fund the Company's operations through December 31, 2002. In the event that
the offering of the Company's common stock is inadequate to fund the Company's
capital needs, the Company intends to explore other possible funding sources,
particularly the other shareholders of Coastal Petroleum. 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.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------
Results of Operations
---------------------
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; and
2. the substantial cost of continuing the litigation.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations (Cont'd)
------------------------------
Short Term Liquidity
At March 31, 2002, Coastal Caribbean had approximately $271,000 of cash
and cash equivalents available and this amount should be sufficient to fund the
Company's operations through the second quarter of 2002 and to pay the remaining
expenses associated with the proposed rights offering of approximately $114,000.
After June 30, 2002, the Company may have to suspend or cease operations unless
and until the Company can secure additional financing. In addition, an estimated
minimum amount of $500,000 would be necessary to fund the Company's operations
through December 31, 2002. These funds are expected to be used for general
corporate purposes, including lease rental payments of approximately $60,000
annually and to continue the litigation against the State of Florida. The
estimated working capital necessary to fund the Company's operations, including
the costs of the litigation and the proposed rights offering, for 2002 is
approximately $2,400,000. In the event that the offering of the Company's common
stock is inadequate to fund the Company's capital needs, the Company intends to
explore other possible funding sources, particularly the other shareholders of
Coastal Petroleum. Effective February 20, 2002, the Company's directors,
officers, legal counsel and administrative consultants have agreed to defer the
payment of all of their salaries and fees until the Company has working capital
of at least $1 million. The amount of this deferral, which is included in the
2002 working capital requirements of approximately $2,400,000, amounts to
approximately $1,300,000 on an annual basis.
Coastal Caribbean has a limited amount of working capital, has incurred
recurring losses and has a deficit accumulated during the development stage. On
January 16, 2001, Coastal Petroleum filed a complaint in the Leon County Circuit
Court in Florida against the State of Florida seeking compensation for the
State's taking of its property rights to explore for oil and gas within its
Lease 224-A. The cost of that litigation has been substantial and will require
the Company to obtain additional capital. On January 10, 2002, the Company filed
a preliminary registration statement for the sale of its common stock. The terms
of the offering have not yet been determined.
Long Term Liquidity
On January 16, 2001, Coastal Petroleum Company filed a complaint in the
Leon County Circuit Court, Florida against the State of Florida seeking
compensation for the State's taking of its property rights to explore for oil
and gas within its state Lease 224-A. The Company expects that the cost of the
litigation will be substantial.
In the event that the offering of the Company's common stock referred
to above is inadequate to fund the Company's capital needs, the Company intends
to explore other possible funding sources, particularly the other shareholders
of Coastal Petroleum.
Results of Operations
Three month period ended March 31, 2002 vs. March 31, 2001
The Company incurred a loss of $554,000 for the 2002 quarter, compared
to a loss of $692,000 for the comparable 2001 quarter.
Interest and other income decreased 89% from $37,000 in the 2001
quarter to $4,000 in the 2002 quarter because of the lack of funds to invest.
Legal fees and costs decreased 40% to $316,000 for the 2002 quarter,
compared to $525,000 in the prior period. Legal fees and costs had increased in
the 2001 period because on January 16, 2001, Coastal Petroleum Company filed a
complaint in the Leon County Circuit Court, Florida against the State of Florida
seeking compensation for the State's taking of its property rights to explore
for oil and gas within its state Lease 224-A. In addition, Coastal Petroleum
responded to the State's motions to dismiss the lawsuit. The Company expects
that the cost of the litigation will continue to be substantial in the year
2002.
Administrative expenses increased 29% to $194,000 in the 2002 period
compared to $150,000 in the 2001 period. Auditing and accounting expenses
increased during the 2002 period to $88,000 compared to $63,000 in the 2001
period because of the costs associated with various filings with the Securities
and Exchange Commission.
Salaries did not change during the periods and remained at $38,000 in
the 2002 quarter.
Shareholder communications decreased 40% during the 2002 period to
$9,000 from $15,000 in the 2001 period because during the 2001 period the
Company's public relations costs increased as a result of the filing of the
taking case in January 2001.
Exploration costs decreased from $500 in the 2001 quarter to $0 in the
2002 quarter.
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 classified as cash and cash equivalents. At March 31, 2002, the
carrying value of such investments was approximately $200,000, the fair value
was $200,000 and the face value was $200,000. 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
March 31, 2002
ITEM 5 - Other Information
A motion for summary judgment by the State of Florida in the taking
lawsuit is scheduled to be heard by the Leon County Circuit trial judge on June
13, 2002.
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 US
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 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.
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, 2001.
ITEM 6 - Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None
COASTAL CARIBBEAN OILS & MINERALS, LTD.
FORM 10-Q
March 31, 2002
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: May 14, 2002 By /s/ James R. Joyce
---------------------------------------
James R. Joyce
Treasurer and Chief Accounting and
Financial Officer