As filed with the Securities and Exchange Commission on ____, 2000
Registration No.________
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(Exact name of registrant as specified in its charter)
BERMUDA
(State or other jurisdiction of incorporation or organization)
1330
(Primary Standard Industrial Classification Code Number)
NONE
(I.R.S. Employer Identification No.)
Clarendon House, Church Street, Hamilton, Bermuda
Telephone (441) 295-1422
(Address including zip code, and telephone number, including area
code of registrant's principal executive offices)
Timothy L. Largay, Esq.
MURTHA, CULLINA, RICHTER AND PINNEY LLP
CityPlace, 29th Floor
185 Asylum Street
Hartford, Connecticut 06103
Telephone (860) 240-6017
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon after
the effective date as practicable.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ X ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------- ---------------------- ------------------ ------------------------ -----------------
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered offering price aggregate offering registration fee
registered per share price
-------------------------- ---------------------- ------------------ ------------------------ -----------------
-------------------------- ---------------------- ------------------ ------------------------ -----------------
<S> <C> <C> <C> <C> <C>
common stock, 10,000,000 shares (1) $1.00 (1) $10,000,000 $2,640.00
$.12 per share
-------------------------- ---------------------- ------------------ ------------------------ -----------------
</TABLE>
(1) Estimated in accordance with Rule 457(c) under the Securities Act of 1933,
solely for the purpose of calculating the registration fee.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell nor does it seek an offer to but these
securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS
___________ Shares of Common Stock of
Coastal Caribbean Oils & Minerals, Ltd.
This is an offering of [_________] shares of our common stock by
subscription right to our existing shareholders. For every __ shares of common
stock held as of _______, 2000, each stockholder will be entitled to purchase __
shares at a price of $[____]. In addition, each stockholder who purchases
his/her full allotment of shares will be entitled to purchase additional shares
which are unsubscribed by other shareholders.
The Offering
Your Price Commission Proceeds to Coastal Caribbean
Per Share $________ $________ $________
Total $________ $________ $________
Our common stock is traded on the Boston Stock Exchange under the symbol
CCO. On __________ __, 2000, the last reported sale price of our common stock as
reported on the Boston Stock Exchange was $.____ per share.
The shares of common stock offered hereby involve a high degree of
risk. You should purchase shares only if you can afford a complete loss. See
"Risk Factors" beginning on page 5 for a discussion of certain factors that you
should consider before you purchase any shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May___, 2000.
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary.........................................................2
Selected Consolidated Financial Data.......................................4
Risk Factors...............................................................5
Cautionary Statement About Forward-Looking Statements......................11
Use of Proceeds............................................................11
Capitalization.............................................................12
Dilution...................................................................13
Management's Discussion and Analysis of Financial
Condition And Results of Operations........................................13
Market Risk Disclosures....................................................16
Our Business and Properties.............. .................................17
Legal Proceedings..........................................................23
Our Management.............................................................26
Certain Business Relationships.............................................29
Principal Shareholders.....................................................30
Description of Our Common Stock............................................31
Price Range of Our Common Stock............................................35
Performance Graph..........................................................36
Terms of the Offering......................................................37
U.S. Tax Consequences of the Offering......................................39
Legal Matters..............................................................40
Experts....................................................................40
Where You Can Find More Information........................................41
Index to Consolidated Financial Statements.................................F-1
* * * * *
We are incorporated in Bermuda. Our principal executive office is
located at Clarendon House, Church Street, Hamilton, Bermuda [postal code]. Our
telephone number at that address is (441) 295-1422. Our internet web address is
http://www.coastalcarib.com. The contents of our web site are not incorporated
into this prospectus. In this prospectus, "Coastal Caribbean," "we," "us," and
"our" refer to Coastal Caribbean Oils & Minerals, Ltd. and its majority owned
subsidiary, Coastal Petroleum Company, unless the context otherwise dictates.
References to "dollars" or "$" are to United States dollars.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone (including any
broker or salesman) to provide you with information different from that
contained in this prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it. We are offering to sell and
seeking offers to buy shares of our common stock only in jurisdictions where
offers and sales are permitted. You should assume that the information contained
in this prospectus is accurate only as of May __, 2000. You should not assume
that this prospectus is accurate as of any other date.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. The summary
may not contain all of the information that is important to you. This prospectus
and the documents we incorporate by reference contain forward-looking statements
which involve risks and uncertainties. You should carefully read the entire
prospectus, including the risk factors which begin on page __ and the financial
statements, before deciding whether to invest in our common stock.
The Company o Coastal Caribbean Oils & Minerals Ltd.,
a Bermuda corporation, was founded in 1953.
Our principal asset is our majority owned
subsidiary, Coastal Petroleum Company. Coastal
Petroleum's principal assets are its
nonproducing oil, gas and mineral leases and
royalty interests in the State of Florida. To
date, Coastal Petroleum has made no commercial
discoveries on the lands covered by these
leases.
Our Operating History o Although we have been in business since
1953, we are still a development stage company
because our exploration for oil, gas and
minerals has not yielded any significant
revenues or reserves. We incurred a loss of
$1,105,000 in 1999 and a loss of $1,155,000 in
1998. We have an accumulated deficit of
$27,362,000 at December 31, 1999. You should
also see Note 1 of our financial statements
regarding our continuation as a going concern.
The Offering o [ ] shares of our common stock, par
value $.12 per share.
Subscription Privilege o Each shareholder will be entitled to purchase
[__] shares for every [__] shares of common
stock held on the record date at a price of
$[ ] per share.
Record Date o _____________, 2000.
Expiration Date o Rights not exercised prior to 4:30 PM,
Eastern Daylight Time, on ________, 2000 will
be void and of no value.
Oversubscription Privilege o Each shareholder who purchases the entire
guaranteed allotment of shares will be
permitted to subscribe pro rata for additional
shares not purchased by other shareholders
prior to the expiration date.
How to Exercise o If you wish to purchase shares, you should
complete the subscription card and deliver it,
accompanied by full payment of the subscription
price, prior to the expiration date to our
subscription agent.
Our Subscription Agent o American Stock Transfer & Trust Co.,
40 Wall Street, 46th Floor, New York, NY 10005,
Telephone: (800) 937-5449.
Common Stock Outstanding o We had 40,056,000 shares of common stock
outstanding at December 31, 1999 If all shares
offered are sold, there will be [___] shares
outstanding.
Dividends o We have never paid a dividend and will not be
permitted to do so until the accumulated
deficit ($27,362,000 at December 31, 1999) is
eliminated.
Use of Proceeds o The proceeds of the offering will be used for
general corporate purposes, including working
capital, exploration and development and to
continue the litigation against the State of
Florida.
Litigation o Coastal Petroleum is currently involved in
litigation with the State of Florida which
involve two basic claims: whether Coastal
Petroleum may obtain an oil and gas exploration
drilling permit, and, if so, the amount of the
required surety in connection with any
drilling;and whether the denial of a permit
is a taking of Coastal Petroleum's property.
We are also involved in litigation with the
State of Florida seeking compensation for
confiscation of certain royalty interest
acreage off the Florida coast.
<PAGE>
SUMMARY FINANCIAL DATA
The following summary financial data for the three years in the period
ended December 31, 1999 are derived from the consolidated financial statements
of Coastal Caribbean Oils & Minerals, Ltd. The data should be read in
conjunction with the consolidated financial statements, related notes and other
financial information included in this prospectus. The summary financial data
for the years ended December 31, 1996 and 1995 have been derived from the
consolidated financial statements which are not included in this prospectus.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Net loss (1,105,000) (1,155,000) (1,611,000) (1,148,000) (880,000)
=========== =========== =========== =========== ===========
Net loss per share
(Basic and Diluted) (.03) (.03) (.04) (.03) (.03)
===== ===== ===== ===== =====
Common stock shares outstanding 40,056,000 40,056,000 40,056,000 37,487,000 33,364,000
========== ========== ========== ========== ==========
Cash and marketable securities
available 1,042,000 2,181,000 3,749,000 5,789,000 308,000
========= ========== ========== ========== ==========
Cost associated with leasehold
Interests in oil, gas and
mineral properties (unproved) 4,760,000 4,735,619 4,395,000 3,944,000 3,689,000
========= ========== ========== ========== ==========
Total assets 6,207,000 7,311,050 8,462,000 10,021,000 4,128,000
========= ========== ========== ========== ==========
Shareholders' equity:
Common stock 4,807,000 4,807,000 4,807,000 4,805,000 4,004,000
Capital in excess of par value 28,693,000 28,693,000 28,693,000 28,443,000 22,395,000
Deficit accumulated during
development stage (27,362,000) (26,256,000) (25,102,000) (23,490,000) (22,342,000)
------------ ------------ ------------ ------------ ------------
Total shareholders' equity 6,138,000 7,244,000 8,398,000 9,758,000 4,057,000
============ ============ ============ ============ ============
</TABLE>
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and other information in this
prospectus and the documents we incorporate by reference in evaluating our
company before you purchase any shares of our common stock. If any of the
following risks actually occur, our business, financial condition or results of
operations could be materially adversely affected. In this case, the trading
price of the common stock could decline and you may lose all or part of your
investment.
RISKS RELATED TO OUR BUSINESS
We have a history of losses and anticipate further losses, which could
cause us to discontinue our business.
Our business has never had substantial revenues and has operated at a
loss in each year since our inception in 1953. We recorded a loss of $1,105,000
in 1999 and a loss of $1,155,000 in 1998. If we continue to sustain losses and
are unable to achieve profitability, we may not be able to continue our business
and may have to curtail, suspend or cease operations. You should also see Note 1
of our financial statements regarding our continuation as a going concern.
During the past three years, we have spent approximately $ 2 million on
expenses incurred in lawsuits against the State of Florida relating to drilling
permits and royalty interests. We currently predict that we will continue to
spend at least $400,000 annually and possibly much more on such expenses. If we
continue to incur significant expenses and are unable to raise additional funds
to meet these expenses, we may have to cease or suspend our lawsuits or cease
operations entirely.
In addition, if we were to receive drilling permits related to the St.
George Island prospect or other exploratory wells, we would be required to incur
a significant amount of operating expenditures to commence drilling operations
and would need to generate significant revenues to achieve profitability. We
cannot assure you that we will be able to achieve or sustain revenues,
profitability or positive cash flow or that profitability, if achieved, will be
sustained.
Without additional financing, we only have enough liquid assets on hand
to continue to operate the Company for the remainder of the year 2000.
We believe that our assets on hand will be sufficient to permit us to
continue to operate through the end of the year 2000 and to pay the expenses
related to this offering which will cost approximately $300,000. After that
time, we may have to suspend or cease operations unless and until we can secure
additional financing. We may seek to raise additional funds through the issuance
of debt or equity securities to investors other than our shareholders. We
currently do not have any commitments for additional financing. We cannot be
certain that additional financing will be available in the future on acceptable
terms or at all.
If ultimately the Florida courts rule that the state may deny us a
permit and not compensate us for the taking of our property, we may
be unable to continue our business.
In the event that the Court of Appeal rehears our case or the Florida
Supreme Court determines that the State of Florida is entitled to deny us a
permit without compensation, it is likely that we would be unable to continue
our business and shareholders could suffer a complete loss of their investment.
If the Court of Appeal decision is affirmed and valuation litigation
ensues, we may be unable to raise the additional financing needed to
cover the substantial litigation costs.
In the event that the October 6, 1999 Court of Appeals decision is
affirmed and litigation to determine the nature and amount of compensation due
to us by the State of Florida ensues, we will need to secure additional
financing to cover the costs of this litigation, which we believe would require
us to spend approximately $1,500,000 per year. If we are unable to secure the
additional financing adequate to fund the costs of such litigation for a lengthy
period of time, we would be unable to undertake the valuation litigation and
might have to cease the lawsuits against the State of Florida without any
meaningful recovery.
If the amount of money we seek to recover from the State of Florida is
inadequate to cover our costs, we may suffer additional losses.
Our lawsuits against the State of Florida involve highly specialized
technical engineering and legal judgments. Any recovery that we may receive as a
result of a court judgment against the State of Florida may be insufficient to
cover the costs of prosecuting the claims at trial. If this occurs, we may be
forced to cease operations and the value of your investment in our common stock
could decline significantly, including a total loss of your investment.
<PAGE>
RISKS RELATED TO OUR INDUSTRY
If we are unable to secure the necessary state and federal permits and
licenses to commence exploratory and drilling operations, our business
would suffer significant harm.
Our oil and gas properties are currently unproved and undeveloped. We
have applied for a drilling permit from the State of Florida to drill an
exploratory well (the St. George Island prospect) in the water near
Apalachicola, Florida, but the State of Florida has resisted the issuance of a
drilling permit. We cannot assure you that the State of Florida will ever grant
us the required drilling permits to drill exploratory wells. Any failure to
secure the necessary permits may require us to cease operations.
If we are successful in obtaining a state drilling permit, then we must
also do the following:
o obtain a federal drilling permit;
o finance drilling of the well (including the cost of the
recommended surety), which is currently estimated to cost
approximately $5.5 million; and
o begin drilling the well within one year of the date on which the
state issues us a permit.
We cannot assure you that we will be able to successfully obtain the
necessary federal permits and licenses or that we will be able to finance and
commence drilling operations in a timely manner.
We may not find and develop oil and gas reserves on our leasehold
properties that are economically recoverable; and if so, we may not be
successful in the future.
Because we have been unable to secure a drilling permit from the State
of Florida since 1990, we have not engaged in significant exploratory drilling
activities which would enable us to accurately predict the extent of extractable
oil and gas reserves in the offshore Florida properties covered by our leasehold
interests. If we fail to discover and develop sufficient oil and gas reserves,
we will be unable to generate sufficient revenues to cover our costs and may
have to curtail, suspend or cease our business operations.
Drilling activities involve numerous risks, including the risk that no
commercially productive natural gas or oil reservoirs will be discovered. The
cost of drilling, completing and operating wells is often uncertain, and
drilling operations may be curtailed, delayed or canceled as a result of adverse
conditions beyond our control. Poor results from our exploration and drilling
activities could prevent us from developing sufficient oil and gas reserves at a
commercially acceptable cost. Even if we receive the necessary permits, our
future prospects will depend on the success of our exploration and drilling
program.
Compliance with environmental and other governmental regulations could
be costly and could negatively impact our business.
Our operations and right to obtain interests in and hold properties or to
conduct our business may be affected to an unpredictable extent by limitations
imposed by the laws and regulations which are now in effect or which may be
adopted by the jurisdictions in which we carry on our business. We cannot
predict the nature of any further legislation or regulation that might
ultimately be adopted or its effects upon our operations or those of Coastal
Petroleum. The limitations imposed by such legislation or regulations could
effectively preclude us from conducting operations on our properties.
Further measures that have been or might be imposed include increased
bond requirements, conservation, proration, curtailment, cessation or other
forms of limiting or controlling production of hydrocarbons or minerals, as well
as price controls or rationing or other similar restrictions. In particular,
environmental control and energy conservation laws and regulations adopted by
federal, state and local authorities may have to be complied with by
leaseholders such as Coastal Petroleum.
We face strong competition from larger oil and gas companies that may
impair our ability to carry on operations.
If we receive the necessary state and federal permits to conduct
operations, we will operate in the highly competitive areas of oil and gas
exploration, development and production. We may not be able to compete with, or
enter into cooperative relationships with, our potential competitors, which
include major integrated oil companies, substantial independent energy
companies, affiliates of major interstate and intrastate pipelines and national
and local gas gatherers. If we are unable to establish and maintain
competitiveness, our business would be threatened.
Many of our competitors possess greater financial, technical and other
resources than we do. Factors which affect our ability to successfully compete
in the marketplace include:
o the financial resources of our competitors;
o the availability of alternate fuel sources; and
o the costs related to the extraction and transportation of oil and
gas.
RISKS RELATED TO THE OFFERING
The price of our common stock is volatile, which could hinder your
ability to sell your stock and avoid a loss on your investment.
Our common stock has been quoted and traded in the over-the-counter
market on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. under the symbol COCBF.OB and on the Boston Stock
Exchange under the symbol CCO. The market price of our common stock has
fluctuated in the past and may continue to be volatile in the future. As a
result of this volatility, you may find it more difficult to sell our stock in a
declining market and avoid a loss on your investment. This volatility is a
result of a variety of factors, including our current and anticipated results of
operations; and the anticipated outcome of our litigation with the State of
Florida over drilling permits and royalty issues.
Our Bye-laws contain provisions that may limit a shareholder's efforts
to influence our policies and prevent or delay a change in control of
our Company.
Bye-Law 1 provides that any matter to be voted on at any meeting of
shareholders must be approved not only by a simple majority of the shares voted
at such meeting, but also by a majority of the shareholders present in person or
by proxy and entitled to vote at the meeting. This provision may have the effect
of making it more difficult to take corporate action than customary "one share
one vote" provisions, because it may not be possible to obtain the necessary
majority of both votes. As a consequence, Bye-Law 1 may make it more difficult
that a takeover of the company will be consummated, which could prevent the
company's shareholders from receiving a premium for their shares. In addition,
an owner of a substantial number of shares of our common stock may be unable to
influence our policies and operations through the shareholder voting process
(e.g., to elect directors).
Our Bye-Laws also require the approval of 75% of the voting
shareholders and of the voting shares for the consummation of any business
combination (such as a merger, amalgamation or acquisition proposal) involving
our company. This higher vote requirement may deter business combination
proposals which shareholders may consider favorable.
You may face obstacles to bringing suit in Bermuda against our officers
and directors.
We are a Bermuda company and certain of our directors and officers are
residents of Bermuda and are not citizens of the United States. As a result, it
may be difficult for investors to effect service of process on us or on these
directors and officers within the United States or to enforce against these
directors and officers judgments of U.S.courts predicated on the civil
liabilities under the federal securities laws. If investors are unable to bring
such suits, they may be unable to recover a loss on their investment resulting
from any violations of the federal securities laws.
There is no precedent for, and therefore no assurance that, the courts
in Bermuda would enforce civil liabilities, whether in original actions in
Bermuda or in the form of final judgments of U.S. courts, arising under the
federal securities laws against us or the persons signing this registration
statement. In addition, there is no treaty in effect between the United States
and Bermuda providing for the enforcement of civil liabilities and there are
grounds upon which Bermuda Courts may not enforce judgements of U.S.
courts. In addition, some remedies available under the laws of U.S.
jurisdictions, including some remedies available under the United States federal
securities laws, may not be allowed in Bermuda courts as contrary to that
nation's public policy.
Our dividend policy could depress our stock price.
We have never declared or paid dividends on our common stock and do not
anticipate declaring or paying any dividends in the foreseeable future. We plan
to retain any future earnings to reduce our accumulated deficit of $27,362,000
(at December 31, 1999) and to finance our operations and growth. As a result,
our dividend policy could depress the market price for our common stock and
cause investors to lose some or all of their investment.
There may be u.S. Withholding taxes on any dividends received from
coastal petroleum.
We are a Bermuda corporation. Bermuda currently imposes no taxes on
corporate income or capital gains realized outside of Bermuda. However, any
dividends we receive from Coastal Petroleum are subject to a 30% United States
withholding tax. As a result, our investors will realize a smaller rate of
return on their investment in our common stock.
Purchasers in this offering will experience immediate dilution and may
experience further dilution from the future exercise of stock options
or from future stock offerings.
We expect that the offering price of our common stock in this offering will
be substantially higher than the net tangible book value per share of our
outstanding common stock. Accordingly, if the offering is successful, purchasers
of common stock in the offering will experience immediate and substantial
dilution of approximately $_____ in net tangible book value per share, or
approximately ____% of the assumed public offering price of $____ per share.
Investors will incur additional dilution upon the exercise of outstanding stock
options. See "Dilution" on page 13 for further discussion of the dilution that
new investors will incur.
Finally, if we raise additional funds by issuing equity or convertible
debt securities, your percentage ownership may be further diluted. Any
securities issued could have rights, preferences and privileges senior to our
common stock.
<PAGE>
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
In this prospectus and the documents that we incorporate by reference,
we make statements that relate to our future plans, objectives, expectations and
intentions that involve risks and uncertainties. We have based these statements
on our current expectations and projections about future events. These
statements may be identified by the use of words such as "expect," "anticipate,"
"intend," "plan," "believe" and "estimate" and similar expressions. Any
statements that refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, and are subject to the
safe harbor created by that Act.
Forward-looking statements necessarily involve risks and uncertainties.
Our actual results could differ materially from those discussed in, or implied
by, these forward-looking statements. Factors that could contribute to such
differences include, but are not limited to, those discussed in the "Risk
Factors" section at page 5 and elsewhere in this prospectus. The factors set
forth in the Risk Factors section and other cautionary statements made in this
prospectus should be read and understood as being applicable to all related
forward-looking statements wherever they appear in this prospectus.
All subsequent written and oral forward-looking statements attributable
to us are expressly qualified in their entirety by the cautionary statements.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. We undertake no obligations to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
USE OF PROCEEDS
The proceeds will be used for general corporate purposes, including working
capital, exploration and development and continuation of the Florida litigation.
See "Legal Proceedings" and "Business and Properties." Assuming all of the
shares offered by this prospectus are sold at a price of $_____ per share, We
will realize net proceeds (after estimated expenses of the offering of $300,000
or approximately $______. The net proceeds of the offering would be added to our
general funds and would not be expressly designated for any particular purpose.
However, we currently expect that the net proceeds would be used for the
following purposes:
Exploration and development $___________
Litigation (including legal fees and experts' costs) $___________
Administrative, accounting, legal and other expenses $___________
Litigation expenses may vary depending on the progress of the cases in
which we are involved. If the net proceeds are substantially less than the
estimated amounts, and if we and Coastal Petroleum are unable to obtain
additional funds, Coastal Petroleum may be unable to pursue the exploration and
development of its leases or the Florida litigation. If the gross proceeds of
the offering do no exceed the costs of this offering, the excess costs over
gross proceeds would be paid by us from our current assets.
CAPITALIZATION
The following table shows our cash and cash equivalents, investments
and total capitalization:
o on an actual basis as of December 31, 1999; and
o as adjusted to reflect the sale of [__________] shares of common
stock offered by this prospectus at an assumed public offering
price of $[___] per share, after deducting the estimated offering
expenses payable by us.
You should read this information together with our financial statements
and the notes relating to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Use of Proceeds"
appearing elsewhere in this prospectus.
As of December 31, 1999
Actual As adjusted
Cash and cash equivalents $651,124 $________
Marketable Securities $390,941 $________
Short-Term Debt - -
Long-Term Debt - -
Minority Interests - -
Shareholders' Equity:
Common stock, par value $.12 per share:
250,000,000 share authorized
40,056,358 shares outstanding
Common stock $4,806,763 (_________)
Capital in excess of par value 28,693,033 (_________)
Deficit accumulated during development stage (27,362,000) (_________)
------------ ---------
Total Shareholders Equity $ 6,138,000 $( )
=========== ============
The number of shares as adjusted for this offering excludes
o 527,000 shares which may be issued upon the exercise of
outstanding options held by our directors and officers as of
December 31, 1999; and
o 7,800,000 shares which may be issued in the event that Lykes
Minerals Corp. exercises its rights to exchange Coastal
Petroleum shares for shares of our common stock.
DILUTION
You will experience immediate and substantial dilution in net tangible
book value of your common stock as a result of this offering. The following
table illustrates the per share dilution to purchasers of shares giving effect
to the sale of all of the shares in the offering at a price of $____ per share.
Offering price attributable to each share of common stock ______
Net tangible book value before the offering(1) ______
Increase attributable to payments for shares of common stock ______
Pro forma net tangible book value per share after the offering ______
Dilution to purchasers of the shares (2)(3) ______
(1) We calculate net tangible book value per share by dividing the number of
shares of common stock outstanding into the tangible net worth of Coastal
Caribbean (tangible assets less liabilities and minority interest) outstanding
at December 31, 1999.
(2) We calculate dilution to new investors by subtracting net tangible book
value per share of common stock after the offering from the per share price
attributable to a share of common stock purchased.
(3) This estimate of dilution does not reflect the results of operations since
December 31, 1999 nor does it give any effect to the outstanding options to
purchase shares of our common stock. There are 7,800,000 shares of common stock
reserved which may be issued in exchange for 78 Coastal Petroleum shares and
980,000 shares reserved for stock options granted to our officers, directors and
consultants. Of these options, 527,000 were exercisable at December 31, 1999. If
the options to acquire the 527,000 shares had been exercised at December 31,
1999, then the dilution to purchasers would be $.___ per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The following is a discussion of certain factors affecting our results
for the three fiscal years ending December 31, 1999 and our liquidity and
capital resources. This discussion should be read along with our consolidated
financial statements and their notes, which can be found on page F-1 of this
prospectus.
Liquidity and Capital Resources
Short Term Liquidity
At December 31 1999, Coastal Caribbean had approximately $1.1 million
of cash and securities available and this amount should be sufficient to fund
the Company's operations in the year 2000. These funds are expected to be used
for general corporate purposes, including any required exploration and
development and to continue 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 December 31, 1999. As more fully described
in Notes 1 and 5 to the consolidated financial statements, 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.
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.
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 or whether there has been a taking of Coastal Petroleum's
leases should be determined in the Circuit Court. A decision by the Court of
Appeal on that motion is pending. In the event that the Court of Appeal affirms
its decision and Coastal Petroleum commences an inverse condemnation action in
the Circuit Court to be compensated for the value of Lease 224A, the cost of the
litigation would be substantial and would require the Company to obtain
additional capital. See "Legal Proceedings", page 23.
In 1997, the Coastal Petroleum filed 12 additional applications for
drilling permits. The Company had objected to certain requests for additional
data by the State of Florida DEP. On March 26,1999, an administrative law judge
upheld the DEP's requirements. Coastal Petroleum filed a Notice of Appeal with
the First District Court of Appeal. The decision of the administrative law judge
was affirmed by the Court of Appeal on February 29, 2000.
In order to fully permit the Apalachicola Reef Play which includes the St.
George Island prospect on October 29, 1998, Coastal Petroleum filed four
additional permit applications (1310-1313). The DEP also requested additional
data for these permits . The permits are dependent on the DEP's current rule
making regarding offshore drilling.
If any of the drilling permits are granted, the Company would not have
the assets sufficient to fund all the expenditures which would be necessary to
drill the St. George Island prospect ($5.5 million) or any other exploration
wells. 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
The Company, a development stage enterprise, has never had substantial
revenues and has operated at a loss each year since its inception in 1953. The
Company has been involved in litigation since 1968 and its total Florida
litigation-related expenses have been approximately $ 2 million during the three
years ended December 31, 1999.
1999 vs. 1998
The Company recorded a loss of $1,105,000 for 1999, compared to a loss
of $1,155,000 in 1998.
Interest income and other income decreased 67% to $55,000 in 1999 from
$167,000 in 1998 because less funds were available for investment during 1999.
Legal fees and costs decreased 19% in 1999 to $405,000 compared to
$502,000 in the prior year. In 1998, the Company had been involved in various
appeals and hearings in connection with the opposition by the State of Florida
and others to the issuance of a drilling permit and the taking claim regarding
its royalty interest acreage. During 1999, the level of legal activity
decreased.
Administrative expenses decreased 4% in 1999 to $474,000 compared to
$495,000 in 1998.
Salaries decreased 2% to $158,000 during 1999 compared to $161,000
during 1998.
Shareholder communications costs decreased 23% from $133,000 in 1998 to
$103,000 in 1999. The decrease in costs during 1999 resulted from a reduction
in mailing costs to the Company's shareholders.
Exploration costs decreased from $31,000 in 1998 to $21,000 in 1999 in
connection with the Company's program to identify potential drilling prospects.
These miscellaneous exploration expenses do not include the exploration
expenditures totaling $24,000 that were capitalized in 1999 ($340,000 in 1998).
1998 vs. 1997
The Company recorded a loss of $1,155,000 for 1998, compared to a loss
of $1,611,000 in 1997.
Interest income and other income decreased 40% to $167,000 in 1998 from
$279,000 in 1997 because less funds were available for investment during 1998
and interest rates were lower.
Legal fees and costs decreased 52% in 1998 to $502,000 compared to
$1,047,000 in the prior year. In 1997, the Company had been involved in various
appeals and hearings in connection with the opposition by the state and others
to the issuance of a drilling permit and the taking claim regarding its royalty
interest acreage. During 1998, the level of legal activity decreased.
Administrative expenses increased 11% in 1998 to $495,000 compared to
$448,000 in 1997. The primary reason for the increase was an increase in the
cost of directors' and officers' liability insurance in 1998.
Shareholder communications costs decreased 29% from $188,000 in 1997 to
$133,000 in 1998. In 1997, the cost of printing and mailing was higher because
of the size of the documents and the number of mailings compared to 1998.
Exploration costs decreased from $53,000 in 1997 to $31,000 in 1998 in
connection with the Company's program to identify potential drilling prospects.
These miscellaneous exploration expenses do not include the exploration
expenditures totaling $340,000 that were capitalized in 1998 ($452,000 in 1997).
Market Risk Disclosures
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 December 31, 1999, the carrying value of such investments was
approximately $391,000, the fair value was $391,000 and the face value was
$400,000.
OUR BUSINESS AND PROPERTIES
General
Coastal Caribbean is a company organized under the laws of Bermuda,
with its principal executive offices at Clarendon House, Church Street,
Hamilton, Bermuda (telephone number: 809-295-1422). Shares of our common stock
are listed on the Boston Stock Exchange and also are traded over-the-counter in
the OTC-BB marketplace of the National Association of Securities Dealers, Inc.
We rely heavily on consultants for legal, accounting and administrative
services. Our principal asset is our 59.25% owned subsidiary, Coastal Petroleum,
a Florida corporation.
Operations
Coastal Petroleum is the lessee under leases with the State of Florida
relating to the exploration for and production of oil, gas and minerals on
approximately 3,700,000 acres of submerged lands along the Gulf Coast and under
certain inland lakes and rivers. The leases provide for a working interest in
approximately 1,250,000 acres and a royalty interest in approximately 2,450,000
acres covered by the leases. Coastal Petroleum has made no commercial
discoveries on its leaseholds.
Coastal Petroleum has been involved in various lawsuits for many years.
Coastal Petroleum's current litigation (the "Florida Litigation") involves two
basic claims: whether Coastal Petroleum may obtain an oil and gas exploration
drilling permit and the amount of the required surety in connection with any
drilling, and whether the denial of a permit is a taking of its property. In
addition, Coastal Caribbean is a party to one additional action in which Coastal
Caribbean claims that certain of its royalty interests have been confiscated by
the State. During 1999, the Company actively pursued the Florida Litigation. See
"Legal Proceedings" page 23.
In 1990, the State of Florida enacted legislation that prohibits
drilling or exploration for oil or gas on Florida's offshore acreage. The law
does not apply to areas where Coastal Petroleum is entitled to conduct
exploration. However, in those areas where Coastal Petroleum has only a royalty
interest, the law effectively prohibits production of oil and gas, rendering it
impossible for Coastal Petroleum to collect royalties from those areas. Coastal
Petroleum's lawsuit on the issue is part of the Florida Litigation.
Business
Coastal Caribbean was organized in Bermuda on February 14, 1962. We are
the successor to Coastal Caribbean Oils, Inc., a Panamanian corporation
organized on January 31, 1953 to be the holding company for Coastal Petroleum.
We own 59.25% of Coastal Petroleum. We are considered to be a
development stage company since our exploration for oil, gas and minerals has
not yielded any significant revenues. Coastal Petroleum's principal assets are
its nonproducing oil, gas and mineral leases and royalty interests. Coastal
Petroleum believes that its leases have been confiscated by the State of
Florida. Coastal Petroleum also believes the leases or the potential recovery
from the State of Florida are properly considered to be assets.
Properties
Coastal Petroleum holds certain working interests in nonproducing oil,
gas and mineral leases covering approximately 1,250,000 acres, and a royalty
interest in approximately 2,450,000 acres, in and offshore the State of Florida.
No commercial oil or gas discoveries have been made on the properties covered by
these leases and Coastal Petroleum has no proved reserves of oil or gas and has
had no significant production.
Coastal Petroleum caused oil and gas exploration to take place on its
leases prior to the beginning of litigation in 1968 but has conducted only
limited exploration since that time. Exploration expenditures during the years
1999, 1998 and 1997 were $45,000, $371,000 and $504,000, respectively.
In 1941, Arnold Oil Explorations, Inc., renamed Coastal Petroleum
Company in 1947, entered into a contract with the Trustees of the Internal
Improvement Trust Fund of the State of Florida , in whom title to publicly owned
lands in the State of Florida, including bottoms of salt and fresh waters, is
irrevocably vested, for the exploration of oil, gas and minerals on such lands.
The Trustees and Coastal Petroleum entered into three leases in late 1944 and
early 1946. The acreage covered by these leases is located for the most part
along offshore areas on the gulf coast of Florida and in submerged lands under
certain bays, inlets, riverbeds and lakes, of which Lake Okeechobee is the
largest.
In 1968, Coastal Petroleum sued the Secretary of the Army of the United
States in a dispute regarding certain mineral rights. In 1969, as part of that
litigation, the Trustees claimed that the leases were invalid and had been
forfeited. Coastal Petroleum and the Trustees settled their disagreement on
January 6, 1976.
Under the terms of the 1976 settlement agreement, the two leases (224-A
and 224-B) bordering the Gulf Coast were divided into three areas, each running
the entire length of the coastline from Apalachicola Bay to the Naples area:
>> The inner area, including rivers, bays, and harbors, extends seaward from
the Florida shoreline a distance of 4.36 statute miles (5,280 feet per
statute mile) into the Gulf, covers approximately 2.25 million acres, and
is subject to a royalty interest payable to Coastal Petroleum. This
interest is a 6.25% royalty on the wellhead value of all oil and gas, 25
cents per long ton on sulphur, receivable in cash or in kind at Coastal
Petroleum's option, and a 5% royalty on production or the market value of
other minerals.
>> The middle area, three statute miles wide and covering more than 800,000
acres, was released by Coastal Petroleum to the Trustees, and Coastal
Caribbean has no further interest in the area.
>> Coastal Petroleum presently owns a 100% working interest in the outside
area, which extends seaward an additional three statute miles and borders
federal offshore acreage. This area, exceeding 800,000 acres, remains
subject to royalties payable to the State of Florida of 12.50% on oil and
gas, $.50 per long ton of sulphur and 10% on other minerals. The Florida
legislature has enacted statutes designed to protect the Big Bend Seagrass
Aquatic Preserve, an area covering approximately one quarter of Coastal
Petroleum's working interest area. However, the legislation and legislative
history recognize and preserve Coastal Petroleum's prior rights as granted
by the leases.
Coastal Petroleum retains a 100% working interest in 450,000 acre Lake
Okeechobee which is a part of Lease 248 and which is also subject to royalties
payable to the State of Florida of 12.50% on oil and gas, $.50 per long ton of
sulphur and 10% on other minerals. Under the settlement with the State of
Florida in 1976, Coastal Petroleum agreed not to conduct exploration, drilling
or mining operations on Lake Okeechobee without the prior approval of the State.
As to the balance of this lease, covering approximately 200,000 acres, Coastal
Petroleum retains royalty interests of 6.25% on oil, gas and sulphur and 5% on
other minerals.
Under the 1976 settlement agreement with the Trustees, the three leases
have a term of 40 years beginning from January 6, 1976 and require the payment
of an annual rental of $59,247; if oil, gas or minerals are being produced in
economically sustainable quantities at January 6, 2016, these operations will be
allowed to continue until they become uneconomic. Further, the settlement
agreement provides that the drilling requirements shall be governed by Chapter
20680, Laws of Florida, Acts of 1941, and that all other drilling requirements
are waived. Under the 1941 Act, a lessee is required to drill at least one test
well on lands leased in each five year period under the term of the lease.
Coastal Petroleum believes it is current in fulfilling its drilling
requirements. Drilling requirements of Lease 224-A have been satisfied through
the five year obligation period ended August 2, 2004. The State of Florida has
refused Coastal Petroleum the right to drill on Lease 248 since August 10, 1986.
Drilling requirements of Lease 224-B have been satisfied through the five year
obligation period ended October 31, 2000.
<PAGE>
The following charts reflect the acreage and annual rental obligations
resulting from the 1976 settlement agreement with the Trustees and the
approximate acreage under lease at December 31, 1999:
<TABLE>
<CAPTION>
Acreage after 1976 Settlement
Current Current Current
Working Royalty Annual
Interest Interest Rental
<S> <C> <C> <C>
224-A and 224-B 800,000 2,250,000 $39,261
248 450,000 200,000 19,986
---------- ---------- --------
1,250,000 2,450,000 $59,247
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Acreage under lease at December 31, 1999
Gross Acres (*) Net Acres (**)
Undeveloped Developed Undeveloped Developed
Working Interest
<S> <C> <C> <C> <C>
1,250,000 -0- 1,250,000 -0-
Royalty interest
2,450,000 -0- 153,125 -0-
--------- --- --------- ---
Total 3,700,000 -0- 1,403,125 -0-
========= === ========= ===
</TABLE>
* A gross acre is an acre in which a working interest is owned.
** A net acre is when the sum of fractional ownership working interests in
gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole
numbers and fractions.
Employees
We currently have only two employees. We rely heavily on consultants
for legal, accounting, geological and administrative services. We use
consultants because it is more cost effective than employing a larger full time
staff.
<PAGE>
The following graphic presentation has been omitted, but the following is a
description of the omitted material:
Map showing Coastal Petroleum's Lease Areas in the State of Florida
<PAGE>
Disclosure Concerning Oil and Gas Operations
Undeveloped Acreage
The Company's undeveloped acreage as of December 31, 1999 was as
follows:
<TABLE>
<CAPTION>
Gross Acres Net Acres
<S> <C> <C>
Working Interest 1,250,000 1,250,000
Royalty Interest 2,450,000 153,125
--------- --------
Total 3,700,000 1,403,125
========= =========
</TABLE>
Drilling Activity
No drilling has taken place since June 1987 when one shallow mineral test
well was drilled on Lease 224-A and one test well was drilled on Lease 224-B.
Royalties and Other Interests
In addition to royalties payable to the State of Florida as set forth
above, Coastal Petroleum's leases are subject to several royalties and other
interests. The leases are presently subject to overriding royalties aggregating
1/16 as to oil, gas and sulphur and 13/600ths as to minerals other than oil, gas
and sulphur.
We also have granted to certain officers, directors, counsel and
consultants of Coastal Petroleum and Coastal Caribbean the right to receive a
total of 8.65% of the net recoveries from the Florida Litigation. See "Legal
Proceedings" at page 23 and "Certain Business Relationships" at page 29.
Mineral Rights
Coastal Petroleum's Leases 224-A, 224-B and 248 were determined by a
Florida State court in 1960 to cover not only oil, gas and sulphur, but all
other minerals. Subsequent litigation has held that these other minerals do not
embrace certain deposits of shell accumulated on water bottoms which had not yet
become mineral, and that Lake Hancock is not within the area covered by Lease
224-B. Under the 1976 settlement agreement with the State of Florida, Coastal
Petroleum retains a 5% royalty with respect to mineral production. However, it
cannot conduct mining operations in 450,000-acre Lake Okeechobee without the
prior approval of the State of Florida. Although Coastal Petroleum had conducted
limited mineral exploration activities on its leases, the courts during the
1980's limited its rights to mine minerals. Coastal Petroleum has no independent
knowledge of commercial deposits on its leases.
LEGAL PROCEEDINGS
Florida Litigation
We have been involved in various lawsuits for many years. Our current
litigation (the "Florida Litigation") involves two basic claims: whether Coastal
Petroleum may obtain an oil and gas exploration drilling permit and the amount
of the required surety in connection with any drilling, and whether the denial
of a permit is a taking of its property. In addition, we are a party to another
action in which Coastal Caribbean claims that certain of its royalty interests
have been confiscated by the State. During 1999, we actively pursued the Florida
Litigation.
1. Coastal Petroleum Company v. State Department of Environmental
Protection, (Case No. 98-1998, First District Court of Appeal).
Drilling Permit Litigation.
In 1992, Coastal Petroleum applied to the Florida Department of
Environmental Protection (the "DEP") for a permit to drill an exploratory oil
and gas well off Apalachicola, Florida. The proposed well would be located in an
area included within Lease 224A. The DEP subsequently denied the application for
issuance of a drilling permit for various reasons and imposed a $1.9 billion
bond. Coastal Petroleum appealed the actions of the DEP to the Florida First
District Court of Appeal ("Court of Appeal"). After two decisions by the Court
of Appeal in favor of Coastal Petroleum, the Florida Supreme Court in July 1996
denied the DEP's petition to review an April 1996 Court of Appeal decision. The
Florida Supreme Court had also refused to review an earlier Court of Appeal
decision.
On August 16, 1996, the DEP notified Coastal Petroleum that it was
prepared to issue the drilling permit subject to Coastal Petroleum publishing a
Notice of Intent to Issue ("Notice") the permit. The Notice allowed interested
parties to request administrative hearings on the permit.
On May 28, 1997, the Oil and Gas Drilling Bill (SB550) was enacted in
Florida. The legislation requires that a surety will now be based on the
projected cleanup costs and possible natural resource damage associated with
offshore drilling as estimated by the DEP and as established by the
Administration Commission (the "Commission") which is comprised of the Governor
of Florida and the Cabinet. Previously, the required surety was satisfied by a
payment of $4,000 to the Mineral Trust Fund in the first year, with a maximum
$30,000 per year and a payment of $1,500 per well for each subsequent year. On
September 9, 1997, the State of Florida set a new surety amount of $4.25 billion
as a precondition for the issuance of the drilling permit.
On October 20, 1997, a public hearing on the permit application
convened and concluded on November 6, 1997. The hearing included the Company's
appeal of the $4.25 billion surety requirement. On April 8, 1998, a Florida
Administrative Law Judge recommended that Coastal Petroleum was entitled to a
drilling permit with the requirement of a $225 million surety. On May 13, 1998,
the Commission rejected the $225 million surety and remanded the proceedings to
the Administrative Law Judge with instructions to recalculate the surety amount.
On May 26, 1998, the DEP refused to issue a permit to Coastal Petroleum
to drill an offshore exploration well near St. George's Island. Coastal
Petroleum appealed both the denial of the permit by the DEP and the imposition
of the surety to the Court of Appeal.
On October 6, 1999, the Court of Appeal ruled that the DEP has the
authority to deny Coastal Petroleum's drilling permit for its St. George Island
prospect, provided that Coastal Petroleum 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 whether there has been a taking of
Coastal Petroleum's leases should be determined in the Circuit Court. A decision
by the Court of Appeal on that motion is pending.
2. Coastal Petroleum Company v. State of Florida, Department of
Environmental Protection (DOAH Case Nos. 98-1901-1912). (DCA Case
1999-2112) 12 Permit Applications.
On February 25, 1997 Coastal Petroleum filed 12 additional applications
for drilling permits. Coastal Petroleum objected to certain requests for
additional data by the Florida DEP. On March 26, 1999, an administrative law
judge upheld the DEP's requirements. Coastal Petroleum filed a Notice of Appeal
with the First District Court of Appeal. The decision of the administrative law
judge was affirmed by the Court of Appeal on February 29, 2000.
In order to fully permit the Apalachicola Reef Play which includes the St.
George Island prospect on October 29, 1998, Coastal Petroleum filed four
additional permit applications(1310-1313). The DEP also requested additional
data for these permits . The permits are dependent on the DEP's current rule
making regarding offshore drilling.
During December 1998, the DEP began the administrative process to adopt
new rules regarding offshore drilling in Florida. Coastal Petroleum, which holds
the only leases offshore, and other interested parties have submitted comments.
The DEP is still in the process of drafting the new rules.
3. Cottingham v. State of Florida, (Case No. 94-768-CA-01, Circuit Court
of the Second Judicial Circuit in Leon County). Coastal Caribbean
Royalty Litigation.
The offshore areas covered by Coastal Petroleum's original leases
(prior to the 1976 Settlement Agreement) are subject to certain other royalty
interests held by third parties, including Coastal Caribbean. Several of those
third parties, including Coastal Caribbean, have instituted a separate lawsuit
against the State. That lawsuit claims that the royalty holders' interests have
been confiscated as a result of the State's actions discussed above and that
they are entitled to compensation for that taking.
The royalty holders were not parties to the 1976 Settlement Agreement,
and the royalty holders contend that the terms of the Settlement Agreement do
not insulate the State from taking claims by those royalty holders. The case is
currently pending before the Circuit Court in Tallahassee. On December 2,1999,
the Circuit Court denied the State's motion to dismiss the plaintiffs' claim of
inverse condemnation but dismissed several other claims. The case will now
proceed to trial.
Any recovery made in the royalty holders' lawsuit would be shared among
the various plaintiffs in that lawsuit, including Coastal Caribbean, but not
Coastal Petroleum.
Counsel
Mr. Robert J. Angerer of Tallahassee, Florida is Coastal Petroleum's
principal trial counsel in the Florida Litigation. Mr. Angerer, age 53, is a
graduate of the University of Michigan (B.S.E. 1969) and received his law degree
with high honors from Florida State University in 1974.
Fee Arrangements
In connection with the Florida Litigation against the State of Florida
described herein, we have agreed to pay the following legal firms, in addition
to their charges on a time spent basis, a total of 5.25 % in contingent fees
based upon any net recovery from execution on or satisfaction of judgment or
from settlement of such lawsuit as follows:
Percent of net recovery
Robert J. Angerer 1.50
Other counsel 3.75
----
Total 5.25
====
We have also assigned 3.4% of net recoveries from the Florida
Litigation to its officers and others.
Uncertainty
At December 31, 1999, the amount of unproved oil, gas and mineral
properties totaled $4.8 million which costs the Company expects to recover.
However, no assurances can be given that Coastal Petroleum or Coastal Caribbean
will prevail on any of the issues set forth above, that they will recover
compensation for any of their claims, or that a drilling permit will be granted.
In addition, even if Coastal Petroleum were to prevail on any or all of the
issues to be decided, no assurance can be given that Coastal Caribbean or
Coastal Petroleum will have sufficient financial resources to survive until such
decisions become final or to drill any wells for which permits are received.
There is also no assurance that any wells drilled will be successful and lead to
production of any oil or gas in commercial quantities.
<PAGE>
OUR MANAGEMENT
Our Directors and Executive Officers
Our board of directors includes five members, two of whom also serve as
executive officers. The board is divided into three classes, with each class
serving a term of office of three years.
<TABLE>
<CAPTION>
Name Position Biographical Information
Class of 2000
<S> <C> <C>
Graham B. Collis Director Mr. Collis, a director since 1998, is a member of the law
Secretary firm of Conyers, Dill & Pearman, Hamilton, Bermuda, our
Audit Committee Bermuda counsel. Age forty.
John D. Monroe Director Mr. Monroe is a real estate broker and was formerly
Audit Committee President of a real estate brokerage and development firm
in Naples, Florida. Mr. Monroe, a director since 1981, is
also a director of our subsidiary, Coastal Petroleum.
Age seventy-three.
Class of 2001
Nicholas B. Dill Director Mr. Dill is a member of the law firm of Conyers, Dill &
Pearman, Hamilton, Bermuda, our Bermuda counsel. Mr. Dill,
a director since 1997, is also a director of Worldwide
Securities Ltd., First Olsen Tankers Ltd., Bermuda Electric
Light Co. Ltd., Watlington Waterworks Ltd. and SAL Ltd.
Age sixty-seven.
Class of 2002
Benjamin W. Heath Director Mr. Heath, a director since 1962, is Chairman and also
President serves as director of Coastal Petroleum Company, Magellan
Petroleum Corporation, and Canada Southern Petroleum Ltd.
Age eighty-five.
Phillip W. Ware Director Mr. Ware, a geologist, has been President of Coastal
Vice President Petroleum since April 1985. Mr. Ware, a director since
1985, is also a director of Coastal Petroleum. Age fifty.
Our other executive officer is the Chief Financial Officer. All of the
officers of Coastal Caribbean and Coastal Petroleum are elected annually by the
board and report directly to it.
James R. Joyce Treasurer, Assistant Mr. Joyce has been our Treasurer, Assistant Secretary and
Secretary and Chief Chief Financial Officer since 1994. He is also President,
Financial Officer Chief Financial Officer and a director of Magellan Petroleum
Corporation. Mr. Joyce is President of G&O'D INC, a firm that
provides accounting and administrative services, office
facilities and support to Coastal Caribbean and other clients.
Age fifty-nine.
</TABLE>
All of the named companies are engaged in oil, gas or mineral
exploration and/or development except where noted. The business experience
described for each director or executive officer above covers the past five
years.
We are not aware of any arrangements or understandings between any of
the individuals named above and any other person by which any of the individuals
named above was selected as a director and/or executive officer. We are not
aware of any family relationship among the officers and directors of Coastal
Caribbean or its subsidiary.
Committees of Our Board of Directors
Board of Directors; Committees; Attendance
The only standing committee of the Board is the Audit Committee which
is comprised of Mr. Graham B. Collis and Mr. John D. Monroe. The Audit
Committee is governed by an Audit Committee Charter which requires the committee
to perform the following functions:
(1) to recommend the particular persons or firm to be employed by Coastal
Caribbean as its independent auditors;
(2) to consult with the persons or firm so chosen to be the independent
auditors with regard to the plan of audit;
(3) to review, in consultation with the independent auditors, their
report of audit, or proposed report of audit, and the accompanying
management letter, if any; and
(4) to consult with the independent auditors (periodically, as
appropriate, out of the presence of management) with regard to the
adequacy of internal controls.
We do not presently have standing nominating or compensation committees of
the Board of Directors. The functions that would be performed by such committees
are performed by the Board of Directors. A stock option committee is appointed
periodically.
Compensation Committee Interlocks and Insider Participation
The entire board of directors constitutes the compensation committee.
Benjamin W. Heath and Phillip W. Ware are directors and the Presidents,
respectively, of Coastal Caribbean and Coastal Petroleum.
Compensation of Directors
For the year 1999, Messrs. Collis, Dill and Monroe each received directors'
fees of $22,500. On March 23, 2000, each of the named directors received 10 year
options to purchase 100,000 shares of our common stock at a price of $.91 per
share.
Executive Compensation
The following table sets forth certain summary information concerning the
compensation of our two executive officers. No other executive officer earned
compensation in excess of $100,000 during the year 1999. <TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term
Compensation
Name and Award All Other
Principal Position Year Salary ($) Options/SARs(#) Compensation ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Benjamin W. Heath, President 1999 40,000 - 15,550(1)
and Chief Executive Officer 1998 40,000 45,000 12,000(1)
1997 40,000 - 12,000(1)
- ------------------------------------------------------------------------------------------------------------------------
Phillip W. Ware, Vice President 1999 92,000 - 13,800(2)
- ------------------------------------------------------------------------------------------------------------------------
(1) Reimbursement for office expense $9,550 in 1999, $6,000 in 1998 and 1997. Payment to SEP-IRA pension plan $6,000
in 1999, 1998 and 1997.
(2) Payment to SEP-IRA pension plan.
</TABLE>
Stock Options
There were no stock options granted during 1999. On March 6, 2000, five
year options to purchase 312,000 shares of our common stock expired without
being exercised. On March 24, 2000, ten year options to purchase 700,000 shares
of our common stock at $.91 per share were granted to directors, officers and
legal counsel. Messrs. Collis, Dill, Heath, Joyce, Monroe, Ware and our legal
counsel each received options to purchase 100,000 shares of our common stock.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Aggregated Option/SAR Exercises in 1999 and December 31, 1999
Option/SAR Values
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Shares Number of Unexercised Value of Unexercised
Acquired Value Options/SARs (#) In-The-Money
On Exercise Realized ($) at December 31, 1999 Options/SARs ($)
(#) at December 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benjamin W. Heath -0- -0- 72,000 - 18,000 -
Benjamin W. Heath -0- -0- 45,000 - -0- -
- -----------------------------------------------------------------------------------------------------------------------
Phillip W. Ware -0- -0- 120,000 - 30,000 -
Phillip W. Ware -0- -0- 72,000 - -0- -
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Certain Business Relationships
G&O'D INC
During the year 1999, $144,495 was paid or accrued for accounting and
administrative services, office facilities and support staff provided to us by
G&O'D INC, a firm that is owned by James R. Joyce, our Treasurer and
Assistant Secretary. The services rendered by G&O'D to us include the
following: preparation and filing of all reports required by Federal and State
governments, preparations of reports and registration statements required under
the Federal securities laws; preparation and filing of interim, special and
annual reports to shareholders; maintaining corporate ledgers and records;
furnishing office facilities and record retention. G&O'D is also responsible for
the investment of our available funds and other banking relations and securing
adequate insurance to protect us. G&O'D is responsible for the preparation and
maintenance of all the minutes of any directors' and shareholders' meetings,
arranging all meetings of directors and shareholders, coordinating the
activities and services of all companies and firms rendering services to us,
responding to stockholder inquiries, and such other services as may be requested
by us. G&O'D maintains and provides current information about our activities so
that our directors may keep themselves informed as to our activities. G&O'D's
fees are based on the time spent in performing these services to us.
Royalty Interests
The State of Florida oil, gas and mineral leases held by Coastal
Petroleum on approximately 3,700,000 acres of submerged lands along the Gulf
Coast and certain inland lakes and rivers are subject to certain overriding
royalties aggregating 1/16th as to oil, gas and sulphur, and 13/600ths as to
minerals other than oil, gas and sulphur. Of the overriding royalties as to oil,
gas and sulphur, a 1/90th overriding royalty, and of the overriding royalties on
minerals other than oil, gas and sulphur, a 1/60th overriding royalty, is held
by Johnson & Company, a Connecticut partnership which is used as a nominee by
the members of the family of the late William F. Buckley. A trust, in which Mr.
Heath has a 54.4% beneficial interest, has a beneficial interest in such royalty
interest held by Johnson & Company. No payments have been made to Johnson &
Company (or to the beneficial owners of such royalty interests) in more than
forty years.
In 1990, Coastal Petroleum granted to officers 3.4% of any net recovery
from execution on or satisfaction of judgment or from settlement of the lawsuit
against the State of Florida as follows:
Relationship to
Percent of Coastal Petroleum
Name Net Recovery at Date of Grant
Benjamin W. Heath 1.25 Chairman of Board
Phillip W. Ware 1.25 President
Arthur B. O'Donnell 0.30 Vice President and Treasurer
James R. Joyce 0.30 Assistant Treasurer
James J. Gaughran 0.30 Secretary
----
Total 3.40
PRINCIPAL SHAREHOLDERS
Security Ownership of Certain Beneficial Owners
The following table provides information as to the number of shares of
our stock owned beneficially at April 14, 2000 by each person who is known to be
the beneficial owner of more than 5% of the outstanding shares of our common
stock.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership
Name and Address of Shares Held Shares Subject
Beneficial Owner Directly to Option Percent of Class
<S> <C> <C> <C>
Leon S. Gross 4,408,470 - 10.86
3900 Ford Road
Philadelphia, PA 19131
Lykes Minerals Corp. - 7,800,000* 16.3**
111 East Madison Street
P.O. Box 1690
Tampa, FL 33601
- ------------------------
* Lykes Minerals Corp. has purchased a total of 78 shares of Coastal Petroleum which are convertible into 7,800,000 of
our shares.
** Assumes all outstanding options are exercised to acquire our shares.
</TABLE>
<PAGE>
Security Ownership of Management
The following table provides information as to the number of shares of
our common stock owned beneficially at April 14, 2000 by each of our directors
and by all directors and our executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Ownership
Individual Shares Held Percent of
or Group Directly or Indirectly Options Class
<S> <C> <C> <C>
Graham B. Collis 25,000(1) 112,000 *
Nicholas B. Dill -(2) 124,000 *
Benjamin W. Heath 20,000 145,000 *
John D. Monroe 400 136,000 *
Phillip W. Ware 3,791 172,000 *
Directors and executive officers
as a group (a total of 6 persons) 59,336 825,000 2.2%
- ------------------------
* Less than 1%.
(1) Director of corporation which owns 17,758 shares.
(2) Beneficiary of an estate which owns 3,355 shares.
</TABLE>
DESCRIPTION OF OUR COMMON STOCK
General
Our Memorandum of Association provides that we may issue up to 250,000,000
shares of common stock. We only have one class of stock. As of April 14, 2000,
we had approximately 9,200 shareholders of record with a total of 40,056,358
shares of common stock outstanding. Below is a brief description of our common
stock and the rights of shareholders as determined under Bermuda law. Neither
Bermuda law, nor our Memorandum of Association or Bye-laws impose any
limitations on the rights of non-residents of Bermuda to vote and hold our
shares of common stock. Set forth below is a summary of the principal terms of
our Memorandum and Bye-laws governing our common stock.
Common Stock
Dividend Rights. The holders of common stock are entitled to receive
dividends, if and when they are declared by the Board of Directors. Each share
outstanding is entitled to share equally with every other share in every
dividend distribution. Current Bermuda law does not restrict the remittance of
dividends to Bermuda non-residents, and any dividends paid to U.S. shareholders
would not be subject to a withholding tax. We have never paid a dividend and
will not be permitted to pay dividends until the accumulated deficit
($27,362,000 at December 31, 1999) is eliminated.
Classified Board of Directors. Bye-Law 81 provides that the Board of
Directors is divided into three classes. See "Our Management - Our Directors
and Executive Officers" above.
Liquidation Rights. Subject to the rights of creditors, all rights to
the assets of Coastal Caribbean available for distribution upon liquidation are
vested in the holders of common stock and each share is entitled to participate
equally with every other share in such liquidation.
Pre-emptive Rights, Conversion Rights, Redemption Provisions, Sinking
Fund and Further Assessments. The holders of common stock have no pre-emptive
rights. There are no conversion rights attached to the common stock and there
are no provisions for sinking funds or redemption of shares. Under Bermuda law
unless authorized by our Memorandum of Association or Bye-laws, we may not
repurchase our own common stock, and our Memorandum of Association and Bye-laws
do not permit us to redeem shares of common stock. The holders of outstanding
common stock are not liable to any further calls or assessments by us on their
shares.
Rights of Appraisal, Derivative Actions Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a shareholder to bring an action in the name
of the company, if the directors or officers are alleged to be acting beyond the
corporate powers of the company, committing illegal acts or violating the
Memorandum of Association or Bye Laws of the company. In addition, minority
shareholders would probably be able to challenge a corporate action that
allegedly constituted a fraud against them or required the approval of a greater
percentage of the shareholders' vote. The winning party generally would be able
to recover a portion of attorneys' fees incurred in bring the lawsuit.
Taxes. Bermuda currently imposes no taxes on corporate income or
capital gains realized outside of Bermuda, nor is there any withholding tax on
any dividends that we might pay to you. Any amounts received by us from United
States sources as dividends, interest, or other fixed or determinable annual or
periodic gains, profits and income, will be subject to a 30% U. S. withholding
tax. In addition, any dividends from Coastal Petroleum will not be eligible for
the 100% dividends received deduction, which is allowable in the case of a U. S.
parent corporation. U. S. residents or citizens holding shares are subject to
federal estate and gift and local inheritance taxation. Any dividends received
by U. S. resident or citizens will also be subject to federal, state and local
income taxation. These rules are of general application only and reflect law in
force as of the date of this prospectus. Shareholders should seek professional
advice for the current rules applicable to their particular circumstances.
Under current Bermuda law, we are not required to pay any income tax or
capital gains tax. We have obtained from the Bermuda Minister of Finance an
assurance under The Exempted Undertakings Tax Protection Act 1966 of Bermuda, to
the effect that in the event of there being enacted in Bermuda any legislation
imposing tax computed on profits or income, or computed on any capital asset,
gain or appreciation, or any tax in the nature of estate duty or inheritance
tax, then the imposition of any such tax shall not be applicable to us or to any
of our operations, shares, debentures or other obligations until 2016. These
assurances are subject to the condition that they are not interpreted so as to
prevent the application of any tax or duty to such persons as are ordinarily
resident in Bermuda or to prevent the application of any tax payable in
accordance with the provisions of The Land Tax Act 1967 of Bermuda or otherwise
payable in relation to any property we lease. We are required to pay annual
Bermuda government fees.
Foreign Exchange Control Regulations. We have been designated as a
non-resident for exchange control purposes by the Bermuda Monetary Authority
whose permission for the issue of shares of common stock pursuant to this
Offering has been obtained. This designation allows us to engage in
transactions, or to pay dividends to non-residents of Bermuda who are holders of
our shares, in currencies other than the Bermuda Dollar.
The transfer of shares between persons regarded as resident outside
Bermuda for exchange control purposes and the issue of shares after the
completion of this offering to or by such persons may take place without
specific consent under the Exchange Control Act 1972. Issues and transfers of
shares involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Exchange Control Act 1972.
Non-Bermuda owners of our shares of common stock are not restricted in
the exercise of the rights to hold or vote their shares. Because we have been
designated as a non-resident for Bermuda exchange control purposes, there are no
restrictions on its ability to transfer funds in and out of Bermuda or to pay
dividends to U.S.residents who are holders of our common stock, other
than in respect of local Bermuda currency.
Under Bermuda law, share certificates are only issued in the names of
corporations or individuals. In the case of an applicant acting in a special
capacity (for example as a trustee), certificates may, at the request of the
applicant, record the capacity in which the applicant is acting, but we are not
bound to investigate or incur any responsibility in respect of the proper
administration of any such trust. We will take no notice of any trust applicable
to any of our shares whether or not we have notice of the trust.
As an "exempted company", we are exempt from Bermuda laws which restrict
the percentage of share capital that may be held by non-Bermudians, but as an
exempted company we may not participate in certain business transactions
including: (1) the acquisition or holding of land in Bermuda (except that
required for their business and held by way of lease or tenancy for terms of not
more than 50 years) without the express authorization of the Bermuda
legislature, (2) the taking of mortgages on land in Bermuda to secure an amount
in excess of $50,000 without the consent of the Minister of Finance, (3) the
acquisition of any bonds or debentures secured by any land in Bermuda, other
than certain types of Bermuda government securities or (4) the carrying on of
business of any kind in Bermuda, except in furtherance of their business carried
on outside Bermuda.
We will be required to comply with the provisions of the Companies Act
regulating the payment of dividends and making distributions from contributed
surplus. Pursuant to the Companies Act, a company shall not declare or pay a
dividend, or make a distribution out of contributed surplus, if there are
reasonable grounds for believing that: (1) the company is, or would after the
payment be, unable to pay its liabilities as they become due; or (2) the
realizable value of the company's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts.
Voting Rights. All voting rights are vested in the holders of common
stock, each share voting equally with every other share. The holders of 25% of
the total number of shares entitled to be voted at the meeting, present in
person or by proxy constitutes a quorum for the transaction of business. Bye-Law
1, which was adopted by U. S. shareholders on July 25, 1997, provides that any
matter to be voted upon at any meeting of shareholders must be approved, not
only by a simple majority of the shares voted at such meeting, but also by a
simple majority of the shareholders voting.
Bye-Law 1 provides in part that shareholder approval requires:
a resolution passed by both (i) simple majority of votes cast
by such Members as, being entitled so to do, vote in person
or, in the case of any Member being a corporation, by its duly
authorised representative or, where proxies are allowed, by
proxy and (ii) a simple majority in number of the Members
present in person or in the case of any Member being a
corporation by its duly authorised representative or where
proxies are allowed, by proxy, at a general meeting of which
not less than fourteen (14) clear days' Notice (save where a
longer period is required by these Bye-laws) has been duly
given PROVIDED THAT when shares are held by members of another
company, firm, partnership, association or other body
corporate or unincorporated and such persons act in concert,
or when shares are held by or for a group of Members who act
in concert, such persons shall be deemed to be one Member.
Bye-Law 161 requires that a resolution adopted by the holders of 75% or
more of the outstanding common stock and adopted by not less than 75% of the
shareholders is required to approve any business combination (defined as any
"arrangement, reconstruction, amalgamation, takeover, or similar business
combination") involving the Company and any other person.
Limitation of Director Liability and Indemnification
Director liability. The Companies Act imposes two basic duties on each
director and officer:
Duty of loyalty. A director or officer must act honestly and in good
faith with a view to the best interests of the company. This means that
in conflict of interest situations, a director must place the best
interests of the company above his own personal interests. It also
means that a director may not use his position as a director to make a
personal profit from opportunities that rightfully belong to the
company.
Duty of care. A director or officer must exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable
circumstances. Based on English case law precedent, this means that a
director must act reasonably in accordance with the level of skill
expected from a person of his knowledge and experience. A director must
attend diligently to the company's affairs, but is permitted to do so
on an intermittent rather than a continuous basis. A director may
delegate management functions to suitably qualified persons, although
he will not avoid his duty by delegation to others.
A Bermuda court is unlikely to interfere with decisions of directors
unless one of these two duties is breached. The court must find that the
directors acted in bad faith or that no reasonable board of directors could have
come to the decision that was reached.
Director indemnification. We may under Bermuda law indemnify our
directors and officers for any loss or liability that they may incur in their
capacity as our directors and officers. The loss or liability may result from
any law that finds them guilty of negligence, default, breach of duty or breach
of trust. A director or officer may not be indemnified for his own fraud or
dishonesty.
Legal expenses. We are required to pay all expenses, including
attorney's fees, incurred by a director in defending any legal proceeding as
they are incurred in advance of final disposition if the director agrees to
repay those amounts if it is proved by clear and convincing evidence that the
director's action or omission was undertaken with deliberate intent to cause
injury to the company or with reckless disregard for our best interests and if
the director reasonably cooperates with the corporation during the proceeding.
Bye-Laws. Our Bye-Laws provide for indemnification of our directors and
officers which is coextensive with that permitted under Bermuda law.
D&O Insurance. Coastal Caribbean has purchased directors' and officers'
liability insurance coverage in the amount of $12,200,000 at an annual cost of
$192,000.
Transfer Agent and Registrar
Our transfer agent and registrar is American Stock Transfer and Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005. Telephone:
800-937-5449, or 718-921-8200. Website: http://www.amstock.com.
Price Range of Our Common Stock
The principal market for our common stock is the Boston Stock Exchange. Our
common stock is also traded in the over-the-counter market on the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc. The
quarterly high and low closing prices on the Boston Stock Exchange were as
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1999 1st quarter 2nd quarter 3rd quarter 4th quarter
- ---- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
High 1.88 2.00 1.81 2.06
Low 1.00 1.50 1.31 1.06
- ------------------------------------------------------------------------------
1998 1st quarter 2nd quarter 3rd quarter 4th quarter
- ---- ----------- ----------- ----------- -----------
High 2.88 3.50 1.81 1.56
Low 1.50 1.56 1.00 1.06
- ------------------------------------------------------------------------------
</TABLE>
On May __, 2000, the closing price of our common stock on the Boston
Stock Exchange was $_____. On May __, 2000, our outstanding common stock was
owned by approximately 9,200 shareholders of record.
PERFORMANCE GRAPH
The graph below compares the cumulative total returns, including
reinvestment of dividends, if applicable, of our stock with the companies in the
NASDAQ Market Index Media General's Independent Oil & Gas Industry Group. The
chart displayed below is presented in accordance with SEC requirements.
Shareholders are cautioned against drawing any conclusions from the data
contained therein, as past results are not necessarily indicative of future
performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
1994 1995 1996 1997 1998 1999
Coastal Caribbean 100 161.54 430.77 269.23 176.92 169.23
Independent Oil & Gas 100 109.42 141.00 131.27 85.03 119.12
NASDAQ Market Index 100 129.71 161.18 197.16 278.08 490.46
TERMS OF THE OFFERING
In General
We are offering for sale, to our sharekholders only, a total of
_________ shares of our common stock. For every _______ shares that you hold on
the record date, _______, 2000, you are guaranteed the right to purchase __
shares for a purchase price of $_____ per share. If you purchase all of the
shares that you are guaranteed the right to buy, you will also have the right to
purchase additional shares which are contingent on the number of shares that are
not purchased by the other shareholders. This contingent right to purchase
additional shares is limited to three times the guaranteed number of shares that
you are entitled to purchase.
The shares being offered for sale will first be allocated to satisfy
the shareholders' guaranteed right to purchase shares. If there are unsold
shares remaining after these allocations, then any unsold shares will be
allocated proportionately among the shareholders who exercised their contingent
right to purchase the unsold shares.
The subscription right is not transferable. The offering is not subject
to a minimum number of subscriptions.
How the Contingent Right Operates
To illustrate how the offering works, assume a stockholder owned 300
shares of common stock as of the record date. He is guaranteed the right to
purchase ___ shares. In addition, if he purchases the total 60 shares, then he
may also exercise his contingent right for up to ___ additional shares.
In the event that the offering is oversubscribed, we will accept
subscriptions by shareholders for the guaranteed shares first. Any remaining
shares unsold will then be allocated proportionately among the shareholders who
subscribed for the purchase of shares on a contingent basis.
For example, assume that our shareholders subscribe for a total of
8,000,000 shares, 2,000,000 shares of which are guaranteed. Under the terms of
the offering _________ shares are being offered for sale, 2,000,000 shares would
be issued to sharekholders who purchased their guaranteed shares. The remaining
shares offered for sale (_________ minus 2,000,000) would be available for the
shareholders who exercised their contingent right to purchase shares on a pro
rata basis. Each stockholder who exercised his contingent right would receive
____% (_________ available divided by 6,000,000 contingent rights) of the
contingent amount of available shares.
Subscription Cards and Termination Date
Subscription cards, which indicate the number of shares you will be
guaranteed the right to purchase, will be issued in the name and address of the
holders of common stock of record on _______, 2000 and mailed to holders as soon
as practicable after the record date. The offering will end at 4:30 P.M. Eastern
Daylight Time, on _________, 2000. The date and time when the offering expires
is herein referred to as the "expiration date."
All subscriptions received prior to the expiration date will be held by
the American Stock Transfer & Trust Company, our subscription agent. Prior to
the formal acceptance of the subscriptions, all payments will be held by
American Stock Transfer. Subscriptions may be revoked by delivery of written
notice of revocation to us prior to the expiration date. Subscriptions will be
accepted, if at all, promptly after the expiration date by our delivery of
written confirmation of acceptance to American Stock Transfer authorizing the
issuance of the shares and the payment of any refunds, without interest, to the
extent that the offering is oversubscribed. We reserve the right to reject any
subscription, absent proof in writing from you that all terms of the offering
have been complied with on a timely basis. We will notify the subscriber
promptly of any rejection.
You may not purchase fractional shares, and only whole shares will be
issued. The purchase price will be $______ per share for each share and the
right to purchase shares is nontransferable. In establishing the offering price,
our directors considered recent market prices for our stock. The purchase price
is intended by the directors to be attractive to our sharekholders and result in
a higher subscription rate. The purchase price does not reflect our assessment
of the actual value of our assets. All interpretations of matters relating to
the offering will be made by our management and will be final.
How to Purchase Shares
Shares may be purchased by delivering the subscription card, along with
a signed subscription agreement, together with full payment of the purchase
price for both the stockholder's guaranteed and contingent amounts. Payment of
the purchase price must be made by check, bank draft or money order payable to
the order of American Stock Transfer. Any subscriptions satisfying these
conditions will be accepted; however, subscriptions received after the
expiration date will not be honored and we will not be responsible for
subscriptions not delivered by that time. You are advised to choose a reliable
method (e.g., such as overnight courier service) for the delivery of your
subscriptions to American Stock Transfer.
You may also subscribe by delivering to American Stock Transfer before
the expiration date each of the following:
o the full purchase price by telegram or otherwise, together
with a signature guarantee in writing or by telegram from a
bank or trust company or a member firm of any U.S. registered
stock exchange that a subscription card with respect to shares
subscribed for has been or will be promptly delivered to
American Stock Transfer, and
o information setting forth the name of the subscriber and the
serial number of the subscription card. Subscriptions
satisfying these conditions will be accepted subject to prompt
receipt by American Stock Transfer of the duly executed
subscription card.
Registration of the Shares You Purchase
We have made application for the registration of the common stock being
offered under the applicable securities laws of each of the United States which
do not provide an exemption. In the event that the offering is not permitted
under the law of any state or states, or in the event that qualification of the
securities in any state or states would prove to be impracticable in the
judgment of management, we will not issue subscription cards to shareholders in
those states.
UNITED STATES TAX CONSEQUENCES OF THE OFFERING
Your receipt of your subscription rights will have certain federal
income tax consequences. The following discussion is the likely position of the
Internal Revenue Service regarding the tax consequences of the receipt of your
subscription rights. This discussion is not intended to serve as tax advice to
you, and you should consult your personal tax advisor for advice relating to
your personal tax situation.
The mere receipt of the subscription rights will not result in the
recognition of taxable income. While you will not have to report taxable income
upon the receipt of your subscription rights, you may have to allocate a portion
of the adjusted basis of your original shares to any shares that you purchase in
the offering.
If you do not exercise your subscription rights, you will not be
allowed to claim a loss, and no adjustment will be made to the tax basis of your
shares. If the subscription rights are exercised, you may be required to
allocate a portion of the basis of your original shares to the shares that you
purchase in the offering, depending on whether the fair market value of the
rights equals or exceeds 15% of the fair market value of your original shares on
the date of distribution of your rights.
If you exercise your subscription rights and the fair market value of
your subscription rights on the date of distribution is 15% or more of the fair
market value of the shares you own on that date, you must allocate to the
purchased shares that part of the basis of your original shares that is
attributable to each subscription right that you exercise. The basis of your
original shares that is allocated to your subscription rights will equal your
basis in your original shares multiplied by a fraction the numerator of which is
the fair market value of your subscription rights and the denominator of which
is the total of the fair market value of your original shares and the fair
market value of your subscription rights. The basis of your original shares that
is allocated to each subscription right that you exercise will equal the basis
of your original shares that is allocated to your subscription rights divided by
the total number of subscription rights issued to you. Accordingly, the tax
basis of each share that you purchase will equal the basis of your original
shares that is allocated to each subscription right that you exercise plus the
purchase price of each purchased share. The holding period for a share acquired
by exercise of a subscription right will begin from the date the subscription
right is exercised. The basis of your original shares will be correspondingly
reduced by the portion of the basis in your original shares that is allocated to
the purchased shares.
If you exercise your subscription rights and the fair market value of
the subscription rights on the date of distribution is less than 15% of the fair
market value of the shares you own on that date, you may elect to allocate a
portion of your current tax basis to the shares that you purchase as discussed
above. If you do not elect to allocate your tax basis, then your tax basis in
the purchased shares will be your purchase price of the offered stock.
LEGAL MATTERS
Legal matters relating to U.S. law in connection with this
offering have been passed upon by Murtha, Cullina, Richter and Pinney LLP
Hartford, Connecticut. All matters relating to Bermuda law affecting Coastal
Caribbean and its common stock have been passed upon by the firm of Conyers Dill
& Pearman, Hamilton, Bermuda, of which firm Mr. Collis, a director and Secretary
of Coastal Caribbean, is a partner. Mr. Dill, a director, is also a partner of
the firm of Conyers Dill & Pearman. All matters relating to litigation in which
Coastal Petroleum is involved have been passed upon by Robert J. Angerer,
Tallahassee, Florida. Murtha, Cullina, Richter & Pinney LLP may rely, insofar as
Bermuda law is concerned, on the opinion of Bermuda counsel, and insofar as
Coastal Petroleum's litigation is involved, on the opinions of Mr. Angerer.
EXPERTS
The consolidated financial statements of Coastal Caribbean Oils & Minerals,
Ltd. (a development stage company) at December 31, 1999 and 1998 and from
inception (January 31, 1953) through December 31, 1999 and for each of the three
years in the period ended December 31, 1999, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon,(which contains an explanatory
paragraph describing conditions that raise substantial doubt about Coastal
Caribbean's ability to continue as a going concern as described in Note 1 to the
consolidated financial statements) appearing elsewhere herein, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a public company and file annual, quarterly and special reports
and other information with the SEC. You may read and copy and documents we file
at the SEC's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain further information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. You can obtain copies of
this material from the Public Reference Section of the SEC, Washington, D.C.
20549, at prescribed rates. Our reports, proxy and information statements and
other information are also available to the public at the SEC's web site. The
Internet address of that site is http://www.sec.gov.
Our common stock is listed on the Boston Stock Exchange and reports,
proxy statements and other information can also be examined at that exchange.
This prospectus is only part of a registration statement on Form S-1
that we have filed with the SEC under the Securities Act and therefore omits
certain information contained in the registration statement. We have also filed
exhibits and schedules with the registration statement that are excluded from
this prospectus, and you should refer to the applicable exhibit or schedule for
a complete description of any statement referring to any contract or other
document. You may inspect a copy of the registration statement, including the
exhibits and schedules, without charge at the SEC's public reference room or
through its web site.
<PAGE>
F-14
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Reference
<S> <C>
Report of Independent Auditors F-2
Consolidated balance sheets at December 31, 1999 and 1998. F-3
Consolidated statement of operations from inception (January 31, 1953) to
December 31, 1999 and for each of the three years
in the period ended December 31, 1999. F-4
Consolidated statement of cash flows from inception (January 31, 1953) to
December 31, 1999 and for each of the three years
in the period ended December 31, 1999. F-5
Consolidated statement of common stock and capital in excess of par value
from inception (January 31, 1953) to December 31, 1999. F-6
Notes to consolidated financial statements. F-7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Coastal Caribbean Oils & Minerals, Ltd.
We have audited the accompanying consolidated balance sheets of Coastal
Caribbean Oils & Minerals, Ltd. (a development stage company) as of December 31,
1999 and 1998, and the related consolidated statements of operations, cash
flows, and common stock and capital in excess of par value from inception
(January 31, 1953) to December 31, 1999 and for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coastal Caribbean Oils & Minerals, Ltd. at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows from inception
(January 31, 1953) to December 31, 1999 and for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As more fully
described in Notes 1 and 5 to the consolidated financial statements, the Company
has a limited amount of working capital, has incurred recurring losses and has
an accumulated deficit. In addition, the Company has been and continues to be
involved in several legal proceedings which have limited the Company's ability
to commence development activities on its unproved oil or gas properties or
obtain compensation for certain property rights it believes have been
confiscated. 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 form the outcome of this uncertainty.
/s/ Ernst & Young LLP
Stamford, Connecticut
January 14, 2000
<PAGE>
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars)
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $ 651,124 $ 52,480
Accounts receivable 25,583 52,634
Marketable securities - 828,839
Prepaid expenses 352,089 314,280
---------- ----------
Total current assets 1,028,796 1,248,233
--------- ---------
Marketable securities 390,941 1,300,000
Unproved oil, gas and mineral properties (full cost
method) 4,759,532 4,735,619
Other 27,445 27,198
--------------- ---------------
Total assets $ 6,206,714 $ 7,311,050
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 68,424 $ 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 (27,361,506) (26,256,045)
------------ ------------
Total shareholders' equity 6,138,290 7,243,751
------------- -------------
Total liabilities and shareholders' equity $ 6,206,714 $ 7,311,050
============ ============
See accompanying notes.
</TABLE>
<PAGE>
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
From
inception
(Jan. 31, 1953)
Year ended December 31, to
1999 1998 1997 Dec. 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest and other income $ 55,275 $ 167,178 $ 279,469 $ 3,728,579
--------- ---------- ---------- ------------
Expenses:
Legal fees and costs 405,380 501,708 1,046,779 12,376,991
Administrative expenses 474,027 495,161 447,622 7,338,337
Salaries 157,550 161,000 156,000 3,068,828
Shareholder communications 102,825 132,924 187,644 3,671,780
Exploration costs 20,954 31,066 52,558 804,614
Lawsuit judgments - - - 1,941,916
Minority interests - - - (632,974)
Other - - - 364,865
Contractual services - - - 2,155,728
---------------- ---------------- ---------------- ---------
1,160,736 1,321,859 1,890,603 31,090,085
--------- --------- --------- ----------
Net loss $(1,105,461) $(1,154,681) $(1,611,134)
============ ============ ============
Deficit accumulated during
development stage $(27,361,506)
==========
Net loss per share based on average number of shares outstanding during the
period:
Basic and Diluted EPS $(.03) $(.03) $(.04)
====== ====== ======
Average number of shares outstanding
(Basic and Diluted) 40,056,358 40,056,358 40,055,589
========== ========== ==========
See accompanying notes.
</TABLE>
<PAGE>
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
From
inception
(Jan. 31, 1953)
Year ended December 31, To
1999 1998 1997 Dec. 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Operating activities:
<S> <C> <C> <C> <C>
Net loss $(1,105,461) $(1,154,681) $(1,611,134) $(27,361,506)
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 27,051 24,668 27,813 (25,583)
Prepaid expenses (37,809) (100,440) (34,972) (352,089)
Current liabilities 1,125 3,324 (198,447) 68,424
Other (247) (433) (1,121) 471,461
--------------- --------------- -------------- -------------
Net cash used in operating activities (1,115,341) (1,227,562) (1,817,861) (27,076,293)
----------- ----------- ----------- ------------
Investing activities:
Additions to oil, gas, and mineral properties
Net of assets acquired for common stock (23,913) (340,487) (451,612) (4,759,532)
Marketable securities (net) 1,737,898 1,304,196 1,910,226 (390,941)
Reimbursement of lease rentals and
Other expenses - - - 1,243,085
Purchase of fixed assets - - - (61,649)
---------------- ---------------- ---------------- ------------
Net cash provided by (used in) investing
Activities 1,713,985 963,709 1,458,614 (3,969,037)
--------- ---------- --------- -----------
Financing activities:
Sale of common stock less expenses - - - 26,342,205
Shares issued upon exercise of options - - 11,250 884,249
Sale of shares by subsidiary - - - 750,000
Sale of subsidiary shares - - 240,000 3,720,000
----------------- ----------------- --------- ---------
Net cash provided by financing activities - - 251,250 31,696,454
----------------- ----------------- --------- ----------
Net increase (decrease) in cash and cash
Equivalents 598,644 (263,853) (107,997) 651,124
Cash and cash equivalents at beginning of
Period 52,480 316,333 424,330 -
--------- --------- --------- ----------
Cash and cash equivalents at end of period $ 651,124 $ 52,480 $316,333 $ 651,124
========== ========= ======== ==========
</TABLE>
See accompanying notes.
<PAGE>
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(A Bermuda Corporation)
A Development Stage Company
CONSOLIDATED STATEMENT OF COMMON STOCK
AND CAPITAL IN EXCESS OF PAR VALUE
(Expressed in U.S. dollars)
From inception (January 31, 1953) to December 31, 1999
<TABLE>
<CAPTION>
Capital in
Number of Common Excess
Shares Stock of Par Value
Shares issued for net assets and unrecovered costs
<S> <C> <C> <C>
at inception 5,790,210 $ 579,021 $ 1,542,868
Shares issued upon sales of common stock 26,829,486 3,224,014 16,818,844
Shares issued upon exercise of stock options 510,000 59,739 799,760
Market value ($2.375 per share) of shares issued in
1953 to acquire an investment 54,538 5,454 124,074
Shares issued in 1953 in exchange for 1/3rd of a 1/60th
overriding royalty (sold in prior year) in nonproducing
leases of Coastal Petroleum 84,210 8,421 -
Market value of shares issued for services rendered
during the period 1954-1966 95,188 9,673 109,827
Net transfers to restate the par value of common stock
outstanding in 1962 and 1970 to $0.12 per share - 117,314 (117,314)
Increase in Company's investment (equity) due to
capital transactions of Coastal Petroleum in 1976 - - 117,025
------------------ ---------------- ------------
Balance at December 31, 1990 33,363,632 4,003,636 19,395,084
Sale of subsidiary shares - - 300,000
------------------ ---------------- ------------
Balance at December 31, 1991 33,363,632 4,003,636 19,695,084
Sale of subsidiary shares - - 390,000
------------------ ---------------- ------------
Balance at December 31, 1992 33,363,632 4,003,636 20,085,084
Sale of subsidiary shares - - 1,080,000
------------------ ---------------- -----------
Balance at December 31, 1993 33,363,632 4,003,636 21,165,084
Sale of subsidiary shares - - 630,000
------------------ ---------------- ------------
Balance at December 31, 1994 33,363,632 4,003,636 21,795,084
Sale of subsidiary shares - - 600,000
------------------ ---------------- ------------
Balance at December 31, 1995 33,363,632 4,003,636 22,395,084
Sale of common stock 6,672,726 800,727 5,555,599
Sale of subsidiary shares - - 480,000
Exercise of stock options 10,000 1,200 12,300
------------- ------------ -------------
Balance at December 31, 1996 40,046,358 4,805,563 28,442,983
Sale of subsidiary shares - - 240,000
Exercise of stock options 10,000 1,200 10,050
------------- ------------ -------------
Balance at December 31, 1997,1998 and 1999 40,056,358 $4,806,763 $28,693,033
=========== ========== ===========
</TABLE>
See accompanying notes.
<PAGE>
COASTAL CARIBBEAN OILS & MINERALS, LTD.
Notes to Consolidated Financial Statements
December 31, 1999
1. Summary of significant accounting policies
Consolidation
The accompanying consolidated financial statements include the accounts
of Coastal Caribbean Oils & Minerals, Ltd. ("Coastal Caribbean") and its
majority owned subsidiary, Coastal Petroleum Company ("Coastal Petroleum"),
hereinafter referred to collectively as the Company. The Company, which is
engaged in a single industry and segment, is considered to be a development
stage company since its exploration for oil, gas and minerals has not yielded
any significant revenue or reserves. All intercompany transactions have been
eliminated.
Continuation as going concern
The Company has a limited amount of working capital, has incurred
recurring losses and has an accumulated deficit. Furthermore, as discussed in
Note 5, the Company believes the State of Florida has taken its working interest
properties. In the event that the Court of Appeal affirms its decision and
Coastal Petroleum commences an inverse condemnation action in the Circuit Court
to be compensated for the value of its properties, the cost of that litigation
would be substantial and would require the Company to obtain additional capital.
There can be no assurances that funds on hand or realized or realizable on the
sales of the Company's shares described in Note 6 will be sufficient to allow
the Company to survive until such litigation is concluded.
At December 31, 1999, the Company had cash and securities of $1.1
million. These funds are expected to be used principally to continue the
litigation in which Coastal Petroleum is involved and also to pay operating and
limited exploration expenses. Current working capital should be sufficient to
finance the Company's operations and litigation through December 31, 2000.
In order to continue the litigation and operate the Company beyond the
year 2000, the Company believes it will be necessary to obtain additional
capital either from Coastal Caribbean's or Coastal Petroleum's shareholders.
Success in realizing significant funds is critical to the existence of the
Company. If the Company is unsuccessful in obtaining additional capital from its
shareholders or the time necessary to obtain such funds is unduly protracted, or
Coastal Petroleum's shareholders are unwilling to provide additional capital,
then the Company will likely have insufficient funds to continue operations and
the Company will be unable to continue as a going concern.
<PAGE>
Cash and cash equivalents
The Company considers all highly liquid short-term investments with
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are carried at cost which approximates
market value. The components of cash and cash equivalents are as follows:
December 31,
1999 1998
Cash $59,061 $52,480
Short term investments 592,063 -
-------- -------
$651,124 $52,480
======== =======
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The outcome of the litigation
and the ability to develop the Company's oil and gas properties will have a
significant effect on the Company's financial position and results of
operations. Actual results could differ from those estimates.
Unproved oil and gas properties
The Company follows the full cost method of accounting for its oil
and gas properties. All costs, whether successful or unsuccessful,
associated with property acquisition, exploration and development activities are
capitalized. Since the Company's properties are undeveloped and nonproducing,
capitalized costs are not being amortized.
The Company does not expect to amortize these costs until there is
production from the properties. Production cannot begin until several events
occur because the Company must: (1) obtain state and federal drilling permits
(2) finance the drilling of an exploratory well, either with internal resources
or by securing one or more partners in the drilling activity, (3) discover
commercial quantities of oil and/or gas, and (4) finance and begin a production
program. The Company cannot predict if or when any of these events may occur;
however, the Company expects that under the most favorable circumstances
production would not begin before 2002. If the Company obtains the permits to
drill, the total cost of drilling an exploration well is currently estimated to
be approximately $5.5 million. The Company does not currently have assets
sufficient to fund all of this cost and would be required to seek debt or equity
financing from public or private sources 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 to fund these development activities.
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. These properties are subject to extensive
litigation with the State of Florida. Although the property interests may be
impaired by the actions taken by the State, the likelihood of loss with respect
to the recorded costs of the leasehold interests is not probable. (See Note 5
"Litigation".) Based on the exploration activities on the properties completed
to date, the exploration and development activities of others in the Gulf of
Mexico and the laws applicable to the taking of property, the Company expects to
recover its $4.8 million of capitalized costs. However, there can be no
assurance that it will be successful and that costs associated with these
properties will be realized.
Sale of Subsidiary Shares
All amounts realized from the sale of Coastal Petroleum shares have
been credited to capital in excess of par value.
Earnings per share
Earnings per common 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).
Financial instruments
The carrying value for cash and cash equivalents, accounts receivable,
marketable securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.
In June 1998, FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133"). SFAS No. 133 provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The statement requires all derivatives
to be recognized on the balance sheet at fair value and establishes
standards for the recognition of changes in such fair value. SFAS No. 133 is
effective for the Company's 2001 fiscal year. Because the Company does not
currently use derivatives, the adoption of SFAS No. 133 will not have a
significant effect on earnings or the financial condition of the Company.
<PAGE>
2. Coastal Petroleum Company - Minority Interests
In 1992, Coastal Caribbean granted Lykes Minerals Corp. ("Lykes"), a
wholly owned subsidiary of Lykes Bros. Inc., an option to acquire 78 shares of
Coastal Petroleum at $40,000 per share. Lykes exercised all of its options to
purchase Coastal Petroleum shares at a total cost of $3,120,000 and at December
31, 1998 and 1997, held 26.7% of Coastal Petroleum.
The Lykes agreement provides that Lykes is entitled to exchange each
Coastal Petroleum share for 100,000 Coastal Caribbean shares, subject to
adjustment for dilution and other factors. If fully exercised, that entitlement
would leave Lykes with about 16% of Coastal Caribbean's outstanding shares.
Lykes also has the right to exchange Coastal Petroleum shares for overriding
royalty interests in Coastal Petroleum's properties. If Lykes were to exchange
its 26.7% interest in Coastal Petroleum for a royalty interest, its overriding
royalty interest in Coastal Petroleum's working-interest acreage would be 3.3%.
As of December 31, 1999 and 1998, Coastal Petroleum shares were owned
as follows:
Shares %
------ ----
Coastal Caribbean 173 59.3
Lykes 78 26.7
Others 41 14.0
---- ------
292 100.0
=== =====
<PAGE>
3. Marketable Securities
At December 31, 1999 the following marketable securities were available
for sale because of the Company's capital requirements:
Maturity Carrying
Security Par Value Date Value Fair Value
--------- --------- ---- ----- ----------
Connecticut State Serial A Taxable
Bond 6.25% $400,000 July 1, 2003 $390,941 $390,941
======== ======== ========
At December 31, 1998, the Company had the following marketable
securities held until maturity:
Maturity Carrying
Security Par Value Date Value Fair Value
--------- --------- ---- ----- ----------
Short-term securities
- ---------------------
Federal Home Loan Bank $150,000 Jan. 6, 1999 $147,091 $149,912
Federal Home Loan Bank 500,000 Feb. 22, 1999 486,422 489,938
Federal Home Loan Bank 200,000 May 11, 1999 195,326 195,550
--------- --------- ---------
Total $850,000 $828,839 $835,400
======== ======== ========
Long-term securities
Federal Home Loan Bank $1,300,000 Jan. 28, 2000 $1,300,000 $1,300,403
========== ========== ==========
4. Unproved oil, gas and mineral properties
Coastal Petroleum holds three unproved and nonproducing oil, gas and
mineral leases granted by the Trustees of the Internal Improvement Fund of the
State of Florida (the "Trustees"). These leases cover submerged and unsubmerged
lands, principally along the Florida Gulf Coast, and certain inland lakes and
rivers throughout the State.
The two leases bordering the Gulf Coast have been divided into three
areas, each running the entire length of the coastline from Apalachicola Bay to
the Naples area. Coastal Petroleum has certain royalty interests in the inner
area, no interest in the middle area and has a 100% working interest in the
outside area.
Coastal Petroleum also has a 100% working interest in Lake Okeechobee,
and a royalty interest in other areas. Coastal Petroleum has agreed not to
conduct exploration, drilling, or mining operations on said lake, except with
prior approval of the Trustees.
<PAGE>
The three leases have a term of 40 years from January 6, 1976 and require
the payment of annual lease rentals of $59,247; if oil, gas or minerals are
being produced in economically sustainable quantities at January 6, 2016, these
operations will be allowed to continue until they become uneconomic. The
drilling requirements are governed by Chapter 20680, Laws of Florida, Acts of
1941. The Company believes that it is current in fulfilling its drilling
requirements. During July 1998, the Company resumed the payment of lease rentals
which had been suspended during the litigation.
The working interest areas of the three leases are subject to royalties
payable to the Trustees of 12 1/2% on oil and gas, $.50 per long ton of sulfur
and 10% on other minerals. The leases are subject to additional overriding
royalties which aggregate 1/16th as to oil, gas and sulfur and 13/600ths as to
other minerals. The Coastal Petroleum leases also are subject to a 10%
overriding royalty granted by Coastal Petroleum to Coastal Caribbean.
During 1999, the Company capitalized approximately $24,000 ($340,000 in
1998 and $452,000 in 1997) under a program to identify potential drilling
prospects. The amount of 2000 expenditures, if any, will depend on the outcome
of the Florida litigation.
The following is a summary of the cost of unproved oil, gas and mineral
properties, accounted for under the full cost method, all of which are located
in Florida:
1999 1998
Lease acquisition costs $ 914,619 $ 914,619
Lease and royalty costs (principally legal fees) 591,616 591,616
Lease rentals 2,447,774 2,388,527
Dry hole costs 587,987 587,987
Other exploratory expenses 1,240,372 1,275,706
Salaries 466,983 466,983
------------ ------------
6,249,351 6,225,438
----------- -----------
Deduct:
Reimbursement for lease rentals and other expenses 1,243,086 1,243,086
Proceeds from relinquishment of surface rights 246,733 246,733
------------ ------------
1,489,819 1,489,819
----------- -----------
Total unproved oil, gas and mineral properties $4,759,532 $4,735,619
========== ==========
<PAGE>
5. Litigation
Florida Litigation
Coastal Petroleum has been involved in various lawsuits for many years.
Coastal Petroleum's current litigation (the "Florida Litigation") involves two
basic claims: whether Coastal Petroleum may obtain an oil and gas exploration
drilling permit and the amount of the required surety in connection with any
drilling, and whether the denial of a permit is a taking of its property. In
addition, Coastal Caribbean is a party to another action in which Coastal
Caribbean claims that certain of its royalty interests have been confiscated by
the State. During 1999, the Company actively pursued the Florida Litigation.
1. Coastal Petroleum Company v. State Department of Environmental
Protection, (Case No. 98-1998, First District Court of Appeal). Drilling
Permit Litigation.
In 1992, Coastal Petroleum applied to the Florida Department of
Environmental Protection (the "DEP") for a permit to drill an exploratory oil
and gas well off Apalachicola, Florida. The proposed well would be located in an
area included within Lease 224A. The DEP subsequently denied the application for
issuance of a drilling permit for various reasons and imposed a $1.9 billion
bond. Coastal Petroleum appealed the actions of the DEP to the Florida First
District Court of Appeal ("Court of Appeal"). After two decisions by the Court
of Appeal in favor of Coastal Petroleum, the Florida Supreme Court in July 1996
denied the DEP's petition to review an April 1996 Court of Appeal decision. The
Florida Supreme Court had also refused to review an earlier Court of Appeal
decision.
On August 16, 1996, the DEP notified Coastal Petroleum that it was
prepared to issue the drilling permit subject to Coastal Petroleum publishing a
Notice of Intent to Issue ("Notice") the permit. The Notice allowed interested
parties to request administrative hearings on the permit.
On May 28, 1997, the Oil and Gas Drilling Bill (SB550) was enacted in
Florida. The legislation requires that a surety will now be based on the
projected cleanup costs and possible natural resource damage associated with
offshore drilling as estimated by the DEP and as established by the
Administration Commission (the "Commission") which is comprised of the Governor
and Cabinet. Previously, the required surety was satisfied by a payment of
$4,000 to the Mineral Trust Fund in the first year, with a maximum $30,000 per
year and a payment of $1,500 per well for each subsequent year. On September 9,
1997, the State of Florida set a new surety amount of $4.25 billion as a
precondition for the issuance of the drilling permit.
On October 20, 1997, a public hearing on the permit application
convened and concluded on November 6, 1997. The hearing included the Company's
appeal of the $4.25 billion surety requirement. On April 8, 1998, a Florida
Administrative Law Judge recommended that Coastal Petroleum was entitled to a
drilling permit with the requirement of a $225 million surety. On May 13, 1998,
the Commission rejected the $225 million surety and remanded the proceedings to
the Administrative Law Judge with instructions to recalculate the surety amount.
On May 26, 1998, the DEP refused to issue a permit to Coastal Petroleum
to drill an offshore exploration well near St. George's Island. Coastal
Petroleum appealed both the denial of the permit by the DEP and the imposition
of the surety to the Court of Appeal.
On October 6, 1999, the Court of Appeal ruled that the DEP has the
authority to deny Coastal Petroleum's drilling permit for its St. George Island
prospect, provided that Coastal Petroleum 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 whether there has been a taking of
Coastal Petroleum's leases should be determined in the Circuit Court. A decision
by the Court of Appeal on that motion is pending.
2. Coastal Petroleum Company v. State of Florida, Department of Environmental
Protection (DOAH Case Nos. 98-1901-1912). (DCA Case 1999-2112) 12 Permit
Applications.
On February 25, 1997, Coastal Petroleum filed 12 additional
applications for drilling permits. Coastal Petroleum objected to certain
requests for additional data by the Florida DEP. On March 26, 1999, an
administrative law judge upheld the DEP's requirements. Coastal Petroleum filed
a Notice of Appeal with the First District Court of Appeal. The decision of the
administrative law judge was affirmed by the Court of Appeal on February 29,
2000.
In order to fully permit the Apalachicola Reef Play which includes the St.
George Island prospect on October 29, 1998, Coastal Petroleum filed four
additional permit applications (1310-1313). The DEP also requested additional
data for these permits. These permits are dependent on the DEP's current rule
making regarding offshore drilling.
During December 1998, the DEP began the administrative process to adopt
new rules regarding offshore drilling in Florida. Coastal Petroleum who holds
the only leases offshore and other interested parties have submitted comments.
The DEP is still in the process of drafting the new rules.
<PAGE>
3. Cottingham v. State of Florida, (Case No. 94-768-CA-01, Circuit
Court of the Second Judicial Circuit in Leon County). Coastal Caribbean
Royalty Litigation.
The offshore areas covered by Coastal Petroleum's original leases
(prior to the 1976 Settlement Agreement) are subject to certain other royalty
interests held by third parties, including Coastal Caribbean. Several of those
third parties, including Coastal Caribbean, have instituted a separate lawsuit
against the State. That lawsuit claims that the royalty holders' interests have
been confiscated as a result of the State's actions discussed above and that
they are entitled to compensation for that taking.
The royalty holders were not parties to the 1976 Settlement Agreement,
and the royalty holders contend that the terms of the Settlement Agreement do
not insulate the State from taking claims by those royalty holders. The case is
currently pending before the Circuit Court in Tallahassee. On December 2, 1999,
the Circuit Court denied the State's motion to dismiss the plaintiffs' claim of
inverse condemnation but dismissed several other claims. The case will now
proceed to trial.
Any recovery made in the royalty holders' lawsuit would be shared among
the various plaintiffs in that lawsuit, including Coastal Caribbean but not
Coastal Petroleum.
Fee Arrangements
In connection with the Florida Litigation against the State of Florida
described herein, Coastal Petroleum has agreed to pay the following firms, in
addition to their charges on a time spent basis, a total of 5.25 % in contingent
fees based upon any net recovery from execution on or satisfaction of judgment
or from settlement of such lawsuit as follows:
Percent of net recovery
Robert J. Angerer 1.50
Other counsel 3.75
----
Total 5.25
====
Coastal Petroleum has also assigned 3.4% of net recoveries from the
Florida Litigation to its officers and others.
<PAGE>
Uncertainty
At December 31, 1999, the amount of unproved oil, gas and mineral
properties totaled $4.8 million which costs the Company expects to recover. But,
no assurances can be given that Coastal Petroleum or Coastal Caribbean will
prevail on any of the issues set forth above, that they will recover
compensation for any of their claims, or that a drilling permit will be granted.
In addition, even if Coastal Petroleum were to prevail on any or all of the
issues to be decided, no assurance can be given that Coastal Caribbean or
Coastal Petroleum will have sufficient financial resources to survive until such
decisions become final or to drill any wells for which permits are received.
There is also no assurance that any wells drilled will be successful and lead to
production of any oil or gas in commercial quantities.
6. Common Stock
The Company's Bye-Law No. 21 provides that any matter to be voted upon
must be approved not only by a majority of the shares voted at such meeting, but
also by a majority in number of the shareholders present in person or by proxy
and entitled to vote thereon.
The Company has been financing its operations primarily from sales of
common stock and sales of shares of Coastal Petroleum (See Note 2).
During 1997, the shareholders of the Company approved an increase in
the authorized capital of the Company from 100,000,000 shares to 250,000,000
shares.
During May 2000, the Company expects to file a registration statement
with the Securities and Exchange Commission for a proposed offering of its
common stock to its shareholders.
<PAGE>
The following represents shares issued upon sales of common stock:
Number of Capital in Excess
Shares Capital Stock of Par Value
1953 300,000 $ 30,000 $ 654,000
1954 53,000 5,300 114,265
1955 67,000 6,700 137,937
1956 77,100 7,710 139,548
1957 95,400 9,540 152,492
1958 180,884 18,088 207,135
1959 123,011 12,301 160,751
1960 134,300 13,430 131,431
1961 127,500 12,750 94,077
1962 9,900 990 8,036
1963 168,200 23,548 12,041
1964 331,800 46,452 45,044
1965 435,200 60,928 442,391
1966 187,000 26,180 194,187
1967 193,954 27,153 249,608
1968 67,500 9,450 127,468
1969 8,200 1,148 13,532
1970 274,600 32,952 117,154
1971 299,000 35,880 99,202
1972 462,600 55,512 126,185
1973 619,800 74,376 251,202
1974 398,300 47,796 60,007
1975 - - (52,618)
1976 - - (8,200)
1977 850,000 102,000 1,682,706
1978 90,797 10,896 158,343
1979 1,065,943 127,914 4,124,063
1980 179,831 21,580 826,763
1981 30,600 3,672 159,360
1983 5,318,862 638,263 1,814,642
1985 - - (36,220)
1986 6,228,143 747,378 2,178,471
1987 4,152,095 498,251 2,407,522
1990 4,298,966 515,876 26,319
1996 6,672,726 800,727 5,555,599
----------- ---------- ---------
33,502,212 $4,024,741 $22,374,443
========== ========== ===========
The following represents shares issued upon exercise of stock options:
1955 73,000 $ 7,300 $175,200
1978 7,000 840 6,160
1979 213,570 25,628 265,619
1980 76,830 9,219 125,233
1981 139,600 16,752 227,548
1996 10,000 1,200 12,300
1997 10,000 1,200 10,050
-------- --------- ----------
530,000 $62,139 $822,110
======= ======= ========
Coastal Caribbean has reserved 7,800,000 shares of its common stock which
may be issued in exchange for Coastal Petroleum shares, as described in Note 2.
<PAGE>
7. Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
Interpretations in accounting for its stock options because the alternative fair
value accounting provided under FASB Statement No. 123, "Accounting for Stock
Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB No. 25, because the
exercise price of the Company's stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
During 1995, the Company adopted a Stock Option Plan covering 1,000,000
shares of the Company's common stock. Options are normally immediately
exercisable and issued for a period of five years. The following table
summarizes stock option activity:
<TABLE>
<CAPTION>
Number of Shares Exercise Price ($)
<S> <C> <C> <C> <C>
Outstanding and exercisable at December 31, 1996 372,000 1.13
Exercised (10,000) 1.13
--------
Outstanding and exercisable at December 31, 1997 362,000 1.13
Granted 225,000 2.625
-------
Outstanding and exercisable at December 31, 1998 587,000 1.13-2.625
Expired (60,000) 1.13
-------=
Outstanding and exercisable at December 31, 1999 527,000 1.13-2.625
=======
(1.77 weighted average)
Available for grant at December 31,1999 453,000
=======
</TABLE>
Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, and has been determined as if the Company
had accounted for its stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option-pricing model.
Option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. The assumptions used
in the valuation model were: risk free interest rate - 5.45%, expected life - 5
years, expected volatility - .707 and expected dividend - 0.
<PAGE>
Because the Company's stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For the purpose of pro forma disclosures, the estimated fair value of
the stock options is expensed in the year of grant since the options are
immediately exercisable. The Company's pro forma information follows:
Amount Per Share
Net loss as reported - December 31, 1998 $(1,154,681) $(.03)
Stock option expense (369,000) $(.01)
------------ ------
Pro forma net loss (1,523,681) $(.04)
=========== ======
8. Income taxes
Bermuda currently imposes no taxes on corporate income or capital gains
outside of Bermuda. The Company's subsidiary, Coastal Petroleum, has U.S. net
operating loss carry forwards for federal and state tax purposes, which may be
used to reduce its taxable income, if any, during future years which aggregated
approximately $12,077,000 at December 31, 1999 ($11,806,000 at December 31,
1998) and expire in varying amounts from 1999 through 2019. For financial
reporting purposes, a valuation allowance has been recognized to offset the
deferred tax assets relating to those carry forwards. Significant components of
the Company's deferred tax assets were as follows:
1999 1998
---- ----
Net operating losses $4,544,000 $4,443,000
Deferred intercompany interest deduction 1,109,000 652,000
---------- ----------
Total deferred tax assets 5,653,000 5,095,000
Valuation allowance (5,653,000) (5,095,000)
----------- -----------
Net deferred tax assets $ - $ -
=========== ===========
9. Related parties
G&O'D INC provides accounting and administrative services and office
facilities and support staff to the Company. G&O'D INC is owned by James R.
Joyce, Treasurer and Assistant Secretary. During 1999, 1998 and 1997, G&O'D
INC billed fees of $144,495, $160,764 and $172,160, respectively.
<PAGE>
<PAGE>
Prospective investors may rely only on the information contained in this
prospectus. Coastal Caribbean Oils & Minerals, Ltd., has not authorized anyone
to provide any other information. This prospectus is not an offer to sell to -
nor is it seeking an offer to buy these securities from - any person in any
jurisdiction where the offer and sale is not permitted. The information here is
accurate only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or any sale of these securities.
No action is being taken in any jurisdiction outside the United States to permit
a pubic offering of the common stock or possession or distribution of this
prospectus in any such jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are required to inform
themselves about and to observe the restrictions of that jurisdiction related to
this offering and the distribution of this prospectus.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
__________ SHARES
Common Stock
------------------
PROSPECTUS
------------------
__________, 2000
<PAGE>
II-7
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following is an estimate of our expenses in connection
with the issuance and distribution of the securities being registered, subject
to future contingencies:
Registration Fees $_________
Stock Exchange Listing Fees _________
Printing and Engraving Expenses _________
Transfer Agent's and Registrar's Fees _________
Blue Sky Qualification Fees and Expenses _________
Legal and Accounting Fees and Expenses _________
Miscellaneous _________
----------
Total $
==========
Item 14. Indemnification of Directors and Officers.
Paragraph 161 of Coastal Caribbean's Bye-Laws contains the
following provisions respecting indemnification:
161. (1) The Directors, Secretary and other officers and each
person who is or was or had agreed to become a Director or
officer of the Company, and each such person who is or was
serving or who had agreed to serve at the request of the Board
of Directors or an officer of the Company as an employee or
agent of the Company or as a Director, officer, employee or
agent of another company, corporation, partnership, joint
venture, trust or other enterprise and every Auditor for the
time being of the Company and the liquidator or trustees (if
any) for the time being acting in relation to any of the
affairs of the Company and everyone of them, and every one of
their heirs, executors, administrators and estates, shall be
indemnified and secured harmless out of the assets and profits
of the Company from and against all actions, costs, charges,
losses, damages and expenses which they or any of them, their
or any of their heirs, executors, administrators or estates,
shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their
duty, or supposed duty, in their respective offices or trusts;
and none of them shall be answerable for the acts, receipts,
neglects or defaults of the other or others of them or for
joining in any receipts for the sake of conformity, or for any
bankers or other persons with whom any moneys or effects
belonging to the Company shall or may be lodged or deposited
for safe custody, or for insufficiency or deficiency of any
security upon which any moneys of or belonging to the Company
shall be placed out on or invested, or for any other loss,
misfortune or damage which may happen in the execution of
their respective offices or trusts, or in relation thereto;
PROVIDED THAT this indemnity shall not extend to any matter in
respect of any fraud or dishonesty which may attach to any of
said persons. Subject to the provisions of the Act and without
limiting the generality or the effect of the foregoing, the
Company may enter into one or more agreements with any person
which provide for indemnification greater or different than
that provided in this Bye-law. Any repeal or modification of
this Bye-law shall not adversely affect any right or
protection existing hereunder immediately prior to such repeal
or modification.
(2) Each Member and the Company agree to waive any
claim or right of action he or it might have, whether
individually or by or in the right of the Company, against any
Director on account of any action taken by such Director, or
the failure of such Director to take any action, in the
performance of his duties, or supposed duties, with or for the
Company; PROVIDED THAT such waiver shall not extend to any
matter in respect of any fraud or dishonesty which may attach
to such Director. Any repeal or modification of this Bye-law
shall not adversely affect any right or protection of a
Director of the Company existing immediately prior to such
repeal or modification.
In 1987, we purchased $100,000 of directors' and officers' liability
insurance coverage from an unaffiliated Bermuda company at a cost of $100,000
plus an annual $7,500 service fee during the period of the policy. During June
1997, the amount of the policy was increased from $100,000 to $200,000. We are
credited with investment income from the policy premium during the term of the
policy and all or a portion of such premium will be refunded at the end of the
policy term to the extent that no claims are made. We have been unable to obtain
any other liability coverage for the Company's directors and officers.
In recent years, the Company has been able to purchase directors' and
officers' insurance coverage. The current amount of its D&O coverage is $12.2
million (including the above policy) at an annual cost of $192,000.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Item
1. Underwriting agreement.
Not applicable.
2. Plan of acquisition, reorganization, arrangement, liquidation
or succession.
Not applicable.
3. (i) Articles of Incorporation.
Memorandum of Association as amended on June 30, 1982, May 14,
1985 and April 7, 1988, filed as Exhibit 3(a) to Report on
Form 10-K for the year ended December 31, 1998 are
incorporated herein by reference.
(ii) Bye-Laws.
Bye-Laws of the Company are incorporated by reference to
Exhibit A of the Company's Schedule 14(a) Proxy Statement
filed on May 13, 1997.
4. Instruments defining the rights of security holders, including
indentures.
None.
5. Opinion re legality.
Form of Opinion of Conyers Dill & Pearman filed herein.
8. Opinion re tax matters.
Not applicable.
9. Voting trust agreement
Not applicable.
10. Material contracts.
(a) Drilling Lease No. 224-A, as modified, between the
Trustees of the Internal Improvement Fund of the State of Florida and Coastal
Petroleum Company dated February 27, 1947 filed as Exhibit 10(a) to Report on
Form 10-K for the year ended December 31, 1998 is incorporated herein by
reference.
(b) Drilling Lease No. 224-B, as modified, between the
Trustees of the Internal Improvement Fund of the State of Florida and Coastal
Petroleum Company dated February 27, 1947 filed as Exhibit 10 (b) to Report on
Form 10-K for the year ended December 31, 1998 is incorporated herein by
reference.
(c) Drilling Lease No. 248, as modified, between the Trustees
of the Internal Improvement Fund of the State of Florida and Coastal Petroleum
Company dated February 27, 1947 filed as Exhibit 10(c) to Report on Form 10-K
for the year ended December 31, 1998 is incorporated herein by reference.
(d) Memorandum of Settlement dated January 6, 1976 between
Coastal Petroleum Company and the State of Florida filed as Exhibit 10(d) to
Report on Form 10-K for the year ended December 31, 1998 is incorporated herein
by reference.
(e) Agreement between the Company and Coastal Petroleum dated
December 3, 1991 filed as Exhibit 10(e) to Report on Form 10-K for the year
ended December 31, 1998 is incorporated herein by reference.
(f) Agreement between Lykes Minerals Corp. and Coastal
Caribbean and Coastal Petroleum dated October 16, 1992 filed as Exhibit 10(f) to
Report on Form 10-K for the year ended December 31, 1998 is incorporated herein
by reference.
(g) Stock Option Plan adopted March 7, 1995 filed as Exhibit
4A to Form S-8 dated July 28, 1995 is incorporated herein by reference.
11. Statement re computation of per share earnings.
See Consolidated Financial Statements.
12. Statement re computation of ratios.
None.
15. Letter re unaudited interim financial statements.
None.
16. Letter re change in certifying accountant.
Not applicable.
21. Subsidiaries of the registrant.
The Company has one subsidiary, Coastal Petroleum
Company, a Florida corporation which is 59.25% owned.
23. Consent of experts and counsel.
Ernst & Young LLP - filed herein.
Conyers Dill & Pearman - filed herein.
Murtha, Cullina, Richter and Pinney LLP- filed herein.
Robert J. Angerer - filed herein
24. Power of attorney.
Powers of attorney of Graham B. Collis, Nicholas B. Dill,
Benjamin W. Heath, John D. Monroe, and Phillip W. Ware are
filed herein.
25. Statement of eligibility of trustee.
Not applicable.
26. Invitations for competitive bids.
Not applicable.
27. Financial Data Schedule
Filed herein.
99. Additional exhibits
Rights Offering Documents
99.1 Form of subscription card - filed herein.
99.2 Instructions for Purchasing Stock - filed herein.
99.3 Offering cover letter - filed herein.
99.4 The decision Coastal Petroleum Company v. Florida
Wildlife Federation et al. of the First District Court of Appeal dated October
6, 1999 that Florida's Department of Environmental Protection has the authority
to deny Coastal Petroleum Company's drilling permit for its St. George Island
prospect, provided that Coastal receives just compensation for what was taken is
incorporated by reference to Exhibit 99(a) to the Company's Current Report on
Form 8-K filed on October 7, 1999.
(b) Financial Statement Schedules
Not applicable.
Item 17. Undertakings.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by either registrant pursuant to section 13
or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this amendment to this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Newport Beach, in the State of California, on the 9th day of May, 2000.
COASTAL CARIBBEAN OILS & MINERALS, LTD.
(Registrant)
By /s/ Benjamin W. Heath
Benjamin W. Heath, President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this registration statement has been signed below by the following
persons in the capacities and on the dates indicated.
Name Title Date
(i) Principal executive officer:
/s/Benjamin W. Heath President and May 9, 2000
- ---------------------------------- Director
Benjamin W. Heath
(ii) Principal financial officer:
and controller or principal
accounting officer:
/s/James R. Joyce Treasurer May 9, 2000
James R. Joyce
(iii) A majority of the Board of
Directors:
/s/James R. Joyce May 9, 2000
James R. Joyce
Attorney-in-Fact for:
Graham B. Collis Director
Nicholas B. Dill Director
Benjamin W. Heath Director
John D. Monroe Director
Phillip W. Ware Director
Pursuant to the requirement of the Securities Act of 1933, the
undersigned has signed this registration statement on May 9,2000.
/s/James R. Joyce
James R. Joyce
Authorized Representative in the
United States
<PAGE>
INDEX OF EXHIBITS
Item Number Description
5 Form of Opinion of Counsel - Conyers Dill & Pearman
23.1 Consent of Ernst & Young LLP
23.2 Consent of Conyers Dill & Pearman
23.3 Consent of Murtha, Cullina, Richter and Pinney LLP
23.4 Consent of Robert J. Angerer
24 Powers of Attorney
Graham B. Collis, Nicholas B. Dill, Benjamin W. Heath,
John D. Monroe and Phillip W. Ware
27 Financial Data Schedule
Additional Exhibits - Rights Offering Documents
99.1 Form of subscription card
99.2 Instructions for Purchasing Stock
99.3 Offering cover letter to Shareholders
Exhibit 5 - Opinion of Conyers, Dill & Pearman
May [__], 2000
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
RE: Registration Statement on Form S-1 of Coastal Caribbean
Oils & Minerals Ltd.
We have acted as special counsel in Bermuda to Coastal Caribbean Oils &
Minerals, Ltd. (the "Company") in connection with the filing with the Securities
and Exchange Commission of a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act of 1933, as amended, of the
United States of America registering up to 10,000,000 shares (the "Shares") of
the Company with a par value of $0.12 per Share.
For the purposes of giving this opinion, we have examined a facsimile
copy of a draft of the Registration Statement. We have also reviewed the
Memorandum of Association and the Bye-laws of the Company, minutes of the
meetings of the Company and its Directors and such other documents and made such
enquiries as to the questions of Bermuda law as we have deemed necessary in
order to render the opinion set forth below.
We have assumed:
1.the genuiness and authenticity of all signatures and the conformity
to the originals of all copies (whether or not certified) of all documents
reviewed by us and the authenticity and completeness of the originals from which
such copies were taken;
2. the capacity, power and authority of each of the parties to such
documents, other than the Company;
3. the due execution and delivery of such documents by each of the
parties thereto;
4. the accuracy and completeness of all factual statements,
representations and warranties made in such documents;
5. that there is no provision of the law of any jurisdiction, other
than Bermuda, which would have any implication in relation to the opinions
expressed herein;
6. the validity and binding effect of the Registration Statement under
the laws of the United State of America;
7. that the Registration Statement has been or will be duly filed with
the Securities and Exchange Commission;
8. that the Shares will be issued to persons who are regarded as non
resident in Bermuda for exchange control purposes;
9. that there is no improper purpose for the issue of the Shares; and
10. that due payment will be made for the Shares.
We have made no investigation of and express no opinion in relation to
the laws of any country other than Bermuda. This opinion is to be governed by
and construed in accordance with the laws of Bermuda and is limited to and is
given on the basis of the current law and practice in Bermuda. This opinion is
issued solely for your benefit in connection with the filing of the Registration
Statement with the Securities and Exchange Commission and is not to be relied
upon by any other person, firm or entity or in respect of any other matter
without our prior express consent in writing.
On the basis of and subject to the foregoing, we are of the opinion
that:
1. the authorized capital of the Company is adequate to enable the Shares to be
issued.
2. the Shares will, when issuedand paid for in accordance with the Registration
Statement, be legally issued and credited as fully paid or non assessable
(meaning that no further sums will be payable by the person holding the shares
to the Company in respect of the Shares).
Yours Faithfully,
CONYERS DILL & PEARMAN
By:_____________________________________
Exhibit 23.1 - Consent of Ernst & Young LLP
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 14, 2000, in the Registration Statement
(Form S-1) and related Prospectus of Coastal Caribbean Oils & Minerals, Ltd. for
the registration of 10,000,000 shares of its common stock.
/s/ Ernst & Young LLP
Stamford, Connecticut
May 4, 2000
Exhibit 23.2 Consent of Conyers Dill & Pearman
Conyers Dill & Pearman
Clarendon House
2 Church Street
P.O. Box HM 666
Hamilton, Bermuda HM CX
Telephone: (441) 295-1422 Facsimile: (441) 292-4720 E-Mail: [email protected]
10 May 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Coastal Caribbean Oils & Minerals Ltd.
Ladies and Gentlemen:
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus constituting a part of the registration statement on
Form S-1 relating to 10,000,000 shares of common stock of Coastal Caribbean Oils
& Minerals, Ltd., a Bermuda corporation.
Yours faithfully,
/s/ Conyers Dill & Pearman
CONYERS DILL & PEARMAN
Exhibit 23.3 - Consent of Murtha, Cullina, Richter and Pinney LLP
MURTHA, CULLINA RICHTER AND PINNEY LLP
CITYPLACE I
185 ASYLUM STREET
HARTFORD, CONNECTICUT 06103-3469
TELEPHONE (860) 240-6000
FACSIMILE (860) 240-6150
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Coastal Caribbean Oils & Minerals Ltd.
Ladies and Gentlemen:
We hereby consent to the reference to our firm under the caption "Legal Matters"
in the prospectus constituting a part of the registration statement on Form S-1
filed by Coastal Caribbean Oils & Minerals, Ltd., a Bermuda corporation.
Very truly yours,
MURTHA, CULLINA, RICHTER AND PINNEY LLP
By:/s/ Timothy L. Largay
Timothy L. Largay
A Partner
Hartford, Connecticut
May 9, 2000
Exhibit 23.4 - Consent of Robert J. Angerer
ANGERER & ANGERER
ATTORNEYS AT LAW
150 S. Monroe Street, Suite 300
Tallahassee, Florida 32301
MAILING ADDRESS:
POST OFFICE BOX 10468
TALLAHASEE, FLORIDA 32302-2468
ROBERT J. ANGERER
TELEPHONE: (850) 576-5982
ROBERT J. ANGERER, JR.
FACSIMILE: (850) 576-1342
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Coastal Caribbean Oils & Minerals Ltd.
Ladies and Gentlemen:
I hereby consent to the reference to me under the caption "Legal
Proceedings" and under the caption "Legal Matters" in the prospectus
constituting a part of the registration statement on Form S-1 relating to
10,000,000 shares of common stock of Coastal Caribbean Oils & Minerals, Ltd., a
Bermuda corporation.
Very truly yours,
By: /s/ Robert J. Angerer
Robert J. Angerer
Tallahassee, Florida
May 9, 2000
Exhibit 24 - Power of Attorney of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does
hereby appoint and constitute James R. Joyce, Benjamin W. Heath and Timothy L.
Largay and each of them as his agent and attorney-in-fact to execute in his
name, place and stead (whether on behalf of the undersigned individually or as
an officer or director of Coastal Caribbean Oils & Minerals Ltd. or otherwise)
the Registration Statement on Form S-1 of Coastal Caribbean Oils & Minerals Ltd.
respecting shares of common stock of Coastal Caribbean Oils & Minerals Ltd. to
be offered to the stockholders thereof, and any and all amendments thereto and
to file such Form S-1 and any such amendment thereto with the Securities and
Exchange Commission. Each of the said attorneys shall have the power to act
hereunder with or without the other.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
9th day of May 2000.
By: /s/ Graham B. Collis By: /s/ Nicholas B. Dill
Name: Graham B. Collis Name: Nicholas B. Dill
By: /s/Benjamin W. Heath By: /s/ John D. Monroe
Name: Benjamin W. Heath Name: John D. Monroe
By: /s/ Philip W. Ware
Name: Philip W. Ware
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 651,124
<SECURITIES> 0
<RECEIVABLES> 25,583
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,028,796
<PP&E> 4,759,532
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,206,714
<CURRENT-LIABILITIES> 68,424
<BONDS> 0
0
0
<COMMON> 4,806,763
<OTHER-SE> 1,331,527
<TOTAL-LIABILITY-AND-EQUITY> 6,206,714
<SALES> 0
<TOTAL-REVENUES> 55,275
<CGS> 0
<TOTAL-COSTS> 1,160,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,105,461)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,105,461)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,105,461)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
Exhibit 99.1 - Form of Subscription Card
Nontransferable Subscription Card GUARANTEED ALLOTMENT
COASTAL CARIBBEAN OILS & MINERALS, LTD. CONTINGENT ALLOTMENT
NONTRANSFERABLE
VOID UNLESS DELIVERED IN ACCORDANCE WITH THE TERMS OF THE
PROSPECTUS BEFORE 4:30 P.M., EASTERN DAYLIGHT TIME, ON , 2000
Please fill in the amount due and number of shares you wish to purchase,
which may not exceed amounts in upper right hand corner of this card. Refunds,
as set forth in the Prospectus, will be made by the subscription agent in the
event the offering is oversubscribed.
(1) (2)
---------------------------------------------
Shares Amount due
Allotment Subscribed For ($1.00 x col 1)
---------------------------------------------
---------------------------------------------
Guaranteed A D
---------------------------------------------
---------------------------------------------
Contingent* B E
---------------------------------------------
---------------------------------------------
Total C F
---------------------------------------------
*May not exceed three times the amount in Box A above.
BE SURE TO COMPLETE BOTH SIDES OF THIS CARD BEFORE MAILING
RETURN TO THE SUBSCRIPTION AGENT:
To exercise your subscription rights, complete both sides of this card
and return with full payment (make checks payable to American Stock
Transfer & Trust Company) to Coastal Caribbean Oils & Minerals, Ltd., c/o
American Stock Transfer & Trust Company, 40 Wall Street, New York, N.Y.
10005. Delivery must be made before 4:30 p.m., Eastern Daylight Time, New
York, N.Y. on , 2000.
I (We) hereby subscribe for
the number of shares of the common
stock of Coastal Caribbean Oils &
Minerals, Ltd., as indicated in
Column (1) on the opposite side of
this subscription card and in
accordance with the terms
specified in the Prospectus
relating hereto, receipt of which
is hereby acknowledged.
........................ ........................
Signature of Shareholder Signature of Shareholder
(if jointly held)
BE SURE TO COMPLETE BOTH SIDES OF THIS CARD BEFORE MAILING
Exhibit 99.2 - Instructions for Purchasing Stock
Coastal Caribbean Oils & Minerals, Ltd.
INSTRUCTIONS
FOR
PURCHASING
STOCK
<PAGE>
The following instructions are intended to assist you in completing the enclosed
SUBSCRIPTION CARD. We urge you to read the enclosed PROSPECTUS before completing
the SUBSCRIPTION CARD.
IF AFTER READING THESE INSTRUCTIONS YOU HAVE ADDITIONAL QUESTIONS ABOUT FILLING
OUT THE SUBSCRIPTION CARD PLEASE CALL MORROW AND CO. CALL TOLL-FREE .
Please refer to the Sample Subscription Card for the location of the circled
numbers that are referred to in the instructions.
STEP 1
You are entitled to purchase __ share for every ( )shares of common stock you
held of record at the close of business on , 2000. The number of shares you own
of record, divided by ___, is printed in the upper right hand corner of the
SUBSCRIPTION CARD (1). For example, if you own of record___ shares, then the
number___is printed as the GUARANTEED ALLOTMENT. When you have determined the
number of shares you wish to purchase from the Guaranteed Allotment, enter that
amount in Box A (2). The amount in Box A may not exceed the amount of your
Guaranteed Allotment (1).
STEP 2
If you have subscribed for the entire amount of your Guaranteed Allotment (1),
then you may also subscribe for the purchase of additional shares which are not
subscribed for by other shareholders. This Contingent Allotment may not exceed
three times the amount of the Guaranteed Allotment. The amount of the Contingent
Allotment is printed (3) under the amount of your Guaranteed Allotment. If you
wish to purchase any of these additional shares, please enter the number you
wish to purchase in Box B (4). The amount in Box B may not exceed three times
the amount in Box A. In the case of an oversubscription of the Contingent
Allotment, shares will be issued on a prorata basis, and appropriate refunds
will be made by the subscription agent.
STEP 3
Multiply the amount in Box A times $____________(the subscription price per
share) and enter the result in Box D (5).
STEP 4
Multiply the amount, if any, in Box B times $_____________(the subscription
price per share) and enter the result in Box E (6).
STEP 5
Add the amount, if any, in Box D (5) and the amount due, if any, in Box E (6)
AND ENTER THE TOTAL IN BOX F (7).
STEP 6
Make check payable to American Stock Transfer & Trust Company for the amount due
in Box F (7).
STEP 7
Sign the SUBSCRIPTION CARD in the area indicated (8). All registered owners must
sign exactly as their names appear on the SUBSCRIPTION CARD (9).
STEP 8
Send the completed SUBSCRIPTION CARD and check in payment of amount due (make
check payable to American Stock Transfer & Trust Company) to Coastal Caribbean
Oils & Minerals, Ltd., c/o American Stock Transfer & Trust Company, 40 Wall
Street, New York, N.Y. 10005. Properly completed SUBSCRIPTION CARDS and checks
must be received by 4:30 p.m. Eastern Daylight Time on , 2000.
A postage paid REPLY ENVELOPE is provided for your convenience in returning your
SUBSCRIPTION CARD and payment.
Exhibit 99.3 - Letter to Shareholders
C O A S T A L C A R I B B E A N O I L S & MI N E R A L S, LTD.
, 2000
To: COASTAL CARIBBEAN OILS & MINERALS, LTD. SHAREHOLDERS
Dear Fellow Shareholders:
The Company is offering for sale, to its shareholders only, shares
of its common stock to fund its operations and litigation costs. For every
( ) shares of common stock held of record by a shareholder at the close of
business on
, 2000, that shareholder will be entitled to purchase ______
share of common stock (the "Guaranteed Allotment") at the subscription price
of $ . In addition, each shareholder who purchases the entire Guaranteed
Allotment will be permitted (at the same time) to subscribe for the purchase
of additional shares which are unsubscribed for by other shareholders (the
"Contingent Allotment:").
Enclosed with this letter are:
1.) The PROSPECTUS, by which your Company is offering, to its
shareholders only, the right to subscribe to its common stock.
2.) A nontransferable SUBSCRIPTION CARD which should be completed
and returned to the subscription agent in the enclosed REPLY ENVELOPE, if
you wish to purchase shares of the Company.
3.) INSTRUCTIONS for completing the SUBSCRIPTION CARD.
THE ENCLOSED SUBSCRIPTION CARD IS VALUABLE. PLEASE NOTE,
HOWEVER, THAT YOUR SUBSCRIPTION RIGHTS WILL EXPIRE IF NOT EXERCISED PRIOR
TO 4:30 P.M., EASTERN DAYLIGHT TIME, ON , 2000.
If your shares are held in the name of your broker or nominee, you
will not receive a subscription card since the subscription agent will mail
cards only to shareholders of record; therefore, if you wish to subscribe,
please instruct your account representative as soon as possible.
Subscription information and additional copies of the offering
materials are available from Morrow and Co. Inc. Call Toll-Free.
ON BEHALF OF THE BOARD OF DIRECTORS
Benjamin W. Heath, President
