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, 1999
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[ ] 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 July 26, 1999 was 40,056,358.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED BALANCE SHEET
(Expressed in U.S. dollars)
(unaudited)
June 30, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 955,666 $ 52,480
Accounts and interest receivable 48,877 52,634
Marketable securities 356,163 828,839
Prepaid expenses 229,296 314,280
------------ ------------
Total current assets 1,590,002 1,248,233
------------ ------------
Marketable securities 400,000 1,300,000
Unproved oil, gas and mineral properties (full cost method) 4,702,894 4,735,619
Other 27,161 27,198
------------ ------------
Total assets $ 6,720,057 $ 7,311,050
============ ============
LIABILITIES, MINORITY INTERESTS AND
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 53,800 $ 67,299
------------ ------------
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 28,693,033 28,693,033
------------ ------------
33,499,796 33,499,796
Deficit accumulated during development stage (26,833,539) (26,256,045)
------------ ------------
Total shareholders' equity 6,666,257 7,243,751
------------ ------------
Total liabilities, minority interests and shareholders' equity $ 6,720,057 $ 7,311,050
============ ============
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS
(Expressed in U.S. dollars)
(unaudited)
From inception
Three months ended Six months ended (Jan. 31, 1953)
June 30, June 30, to June 30,
1999 1998 1999 1998 1999
--------- --------- --------- --------- ------------
Interest and other income $ 20,568 $ 46,807 $ 45,937 $ 98,781 $ 3,719,241
--------- --------- --------- --------- ------------
Expenses:
Legal fees and costs 96,918 149,005 203,667 262,944 12,175,278
Administrative expenses 117,412 123,588 250,429 256,878 7,114,739
Salaries 37,950 41,500 81,650 80,500 2,992,928
Shareholder communications 48,133 56,697 75,537 90,957 3,644,492
Exploration costs 8,832 5,480 12,148 12,961 795,808
Lawsuit judgments - - - - 1,941,916
Minority interests - - - - (632,974)
Other - - - - 364,865
Contractual services - - - - 2,155,728
--------- --------- --------- ---------
309,245 376,270 623,431 704,240 30,552,780
--------- --------- --------- ---------
Net loss $(288,677) $(329,463) $(577,494) $(605,459)
========== ========== ========== ==========
Deficit accumulated during
development stage $(26,833,539)
============
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) $(.01) $(.02)
====== ====== ====== ======
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in U.S. Dollars)
(unaudited)
From inception
Three months ended (Jan. 31, 1953)
June 30, to June 30,
1999 1998 1999
----------- ----------- ------------
Operating activities:
Net loss $(577,494) $(605,459) $(26,833,539)
Adjustments to reconcile net loss
to net cash used for operating activities:
Minority interest - - (632,974)
Exploration and other - - 755,974
Net change in:
Accounts receivable 3,758 (12,912) (48,876)
Prepaid expenses 84,984 (25,267) (229,296)
Current liabilities (13,499) 89,790 53,800
Other 36 (1,241) 471,744
----------- ----------- ------------
Net cash provided by (used for) operating activities (502,215) (555,089) (26,463,167)
----------- ----------- ------------
Investing activities:
Additions to oil, gas, and mineral properties
net of assets acquired for common stock 32,725 (219,062) (4,702,894)
Reimbursement of lease rentals and other expenses - - 1,243,085
Marketable securities (net) 1,372,676 986,249 (756,163)
Purchase of fixed assets - - (61,649)
----------- ----------- ------------
Net cash provided by investing activities 1,405,401 767,187 (4,277,621)
----------- ----------- ------------
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 in cash and cash equivalents 903,186 212,098 955,666
Cash and cash equivalents at beginning of period 52,480 316,333 -
----------- ----------- ------------
Cash and cash equivalents at end of period $ 955,666 $ 528,431 $ 955,666
=========== =========== ============
COASTAL CARIBBEAN OILS & MINERALS LTD.
PART I - FINANCIAL INFORMATION
June 30, 1999
ITEM 1 - Financial Statements
The information for the three month and six month periods ended June
30, 1999 and 1998 is unaudited, but includes all adjustments which Coastal
Caribbean Oils & Minerals, Ltd. (the "Company") considers necessary for a fair
statement of the results of operations for those periods. The consolidated
financial statements include the Company's 59.25% owned subsidiary, Coastal
Petroleum Company ("Coastal Petroleum").
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 which would be
necessary to fund any exploration and development permitted
by the State of Florida
The Company's principal assets are oil, gas, and mineral leases, the
costs of which total $4.7 million at June 30, 1999. 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 confiscated. These 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 Operation
Liquidity and Capital Resources
Short Term Liquidity
At June 30, 1999, Coastal Caribbean had cash and marketable securities
of approximately $1.7 million. These funds are expected to be used for general
corporate purposes, including exploration and development and to continue the
litigation against the State of Florida.
COASTAL CARIBBEAN OILS & MINERALS LTD.
PART I - FINANCIAL INFORMATION
June 30, 1999
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Long Term Liquidity
The Company estimates that as much as $400,000 per year may be required
in connection with the Florida litigation. The Company expects that the Florida
litigation will continue at least through 1999, although the State may take
actions that could shorten or lengthen that period. The Company has suspended
its program to evaluate the Company's leases pending the outcome of the appeal
of the denial of its permit application to drill the St. George Island prospect.
The Company's oil and gas properties are currently unproved and
undeveloped. The Company has applied for a drilling permit from the State of
Florida to drill an exploratory well (St. George Island prospect) in the water
near Apalachicola, Florida. The State of Florida has resisted the issuance of a
drilling permit. If the Company is successful in obtaining a state drilling
permit, then the Company must also do the following:
1. Obtain a federal drilling permit.
2. Obtain the necessary funds to drill the well (including the
cost of the recommended surety), which is estimated to cost
approximately $5.5 million.
3. Begin drilling the well within one year of the date the state
permit is issued.
The Company does not currently have assets sufficient to fund these
expenditures to drill the 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.
The Company has assessed its Year 2000 readiness and it is currently
compliant. The Year 2000 change should have no material impact on the Company's
internal operations or financial results. However, the Company will be dependent
on its suppliers and potential partners to make their systems Year 2000
compliant. Due to the limited nature of the Company's current operations, the
Company does not expect that any inability of suppliers or potential partners to
be Year 2000 compliant would have a material impact on the Company.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Results of Operations
Three month period ended June 30, 1999 vs. June 30, 1998
The Company incurred a loss of $289,000 for the 1999 quarter, compared
to a loss of $329,000 for the comparable 1998 quarter.
Interest income and other income decreased 56% from $47,000 in 1998 to
$21,000 in 1999 because less funds were available for investment during the 1999
period and interest rates were lower.
Legal fees and costs decreased 35% to $97,000 for the 1999 quarter,
compared to $149,000 in the 1998 quarter period. In the 1998 period, the Company
hadbeen involved in various appeals and hearings in opposition to t issuance of
a drilling permit. During the 1999 period, the level of legal activity decreased
because the Company was awaiting a decision on the appeal of the St. George
Island permit denial.
Administrative expenses decreased 5% from $124,000 during the 1998
period to $117,000 during the 1999 quarter.
Salaries decreased 9% during the 1999 quarter to $38,000 compared to
$42,000 in the 1998 quarter because an employee resigned during the quarter. The
employee has not yet been replaced.
Shareholder communications decreased 15% from $57,000 in 1998 to
$48,000 in 1999. The decrease in expense during the period results from a
reduction in mailing costs to the Company's shareholders.
Six month period ended June 30, 1999 vs. June 30, 1998
The Company incurred a loss of $577,000 for the 1999 period, compared
to a loss of $605,000 for the comparable 1998 period.
Interest income and other income decreased 54% from $99,000 in 1998 to
$46,000 in 1999 because less funds were available for investment during 1999 and
interest rates were lower.
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operation (Cont'd)
Legal fees and costs decreased 23% to $204,000 in the 1999 period,
compared to $263,000 in the 1998 period. During the 1999 period, the level of
expenditures decreased because the Company was awaiting a decision on the appeal
of its St. George Island permit denial.
Administrative expenses decreased 3% to $250,000 in 1999 from $257,000
in the 1998 period.
Salaries increased 1% to $82,000 during the 1999 period compared to
$81,000 during the 1998 period.
Shareholder communications decreased 17% from $91,000 in 1998 to
$76,000 in 1999. The decrease in expense during the 1999 period results from a
reduction in mailing costs to the Company's shareholders.
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, 1999, the carrying value of such investments was
approximately $1,630,000, the fair value was $1,634,000 and the face value was
$1,650,000. 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, 1999
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) On May 20, 1999, the Company held its Annual Meeting of
Shareholders.
(b) Directors Benjamin W. Heath and Phillip W. Ware were reelected for
three year terms expiring at the 2002 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
--- -------- --- --------
Benjamin W. Heath 28,856,331 188,376 2,781 123
Phillip W. Ware 28,859,164 185,543 2,786 118
(c) The firm of Ernst & Young LLP was approved as the Company's
independent auditors for the fiscal year ending December 31, 1999. 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
--- ------- ------- --- ------- -------
28,832,412 88,245 124,050 2,779 45 80
ITEM 5 - Other Information
In 1997, the Company filed 12 additional applications for drilling
permits. The Company objected to certain requests for additional data by the
State of Florida Department of Environmental Protection ("DEP") and the Company
petitioned for a formal administrative hearing to resolve the dispute which was
held during January 1999. On March 26, 1999, an administrative law judge upheld
the DEP's requirements. The Company filed a Notice of Appeal on June 8, 1999.
On May 12, 1999, Florida's First District Court of Appeal heard oral
arguments on the Company's appeal of the DEP's denial of a drilling permit for
the St. George Island prospect. The court has not yet rendered a decision on the
appeal.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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 30, 1999 By /s/ James R. Joyce
-----------------------------------
James R. Joyce
Treasurer and Chief Accounting and
Financial Officer