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.

 
2
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
 
 
September 30, 2005
 
December 31, 2004 
  
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.
 
3
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
(unaudited)
 
   
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.

4

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.
 
5
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).
 
 
6
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).
 
7
 
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.
 
 
8
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.
 
9
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.

10
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.


11
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.


12
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
 
 

13
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


14