UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549





Form
10-K


(Mark
One)





x
            ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the fiscal year ended December 31,
2008




or





 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For the transition period
from 
to_________________





Commission
file number  001-04668





Coastal Caribbean Oils &
Minerals, Ltd.


(Exact name of Registrant as
specified in its charter)





BERMUDA
                  
                  NONE(State
      or Other Jurisdiction of Incorporation or Organization)
                  
                  (I.R.S.
      Employer Identification No.)Clarendon House, Church Street,
      Bermuda
                  
                  HM 11(Address
      of Principle Executive Offices)
                  
                  (Zip
      Code)





Registrant’s
telephone number, including area code:


(850)
653-2732





Securities
registered pursuant to Section 12(b) of the Act:





Title of each class
                    
                    Name of each exchange on which
      registeredNONE
                    
                    NONE





Securities
registered pursuant to Section 12(g) of the Act:





Title of
Class




Common stock, par value $.12 per
share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. o  Yes       x  No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. o  Yes       x  No








Note–Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.





Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.x  Yes       o  No





Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    o Yesx No





Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):





Large accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if smaller reporting company)
              Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o Yes x No





State the aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter: $10,083,205 (U.S.)
at June 30, 2008.





Note – If a determination as
to whether a particular person or entity is an affiliate cannot be made without
involving unreasonable effort and expense, the aggregate market value of the
common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided that the assumptions
are set forth in this Form.





Indicate the number of shares
outstanding of each of the registrant's classes of common stock, as of the
latest practicable date:  Common stock, par value $.12 per share,
46,261,604 shares outstanding as of March 27, 2009.





DOCUMENTS
INCORPORATED BY REFERENCE





List
hereunder the following documents if incorporated by reference and the Part of
the Form 10K (e.g. Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly described for identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980).





None


2





TABLE OF
CONTENTS





PagePART
      IItem
      1.
                        Business
                        
                        5General
                        
                        5Crude
      Oil and Natural Gas Exploration and Development
                        
                        5Environmental
      and Other Regulations
                        
                        6Competition
                        
                        7Employees
                        
                        7Oil
      and Gas Properties
                        
                        8Acreage
      and Wells
                        
                        9Drilling
      Activity
                        
                        10Item
      1B.
                        Unresolved
      Staff Comments
                        
                        10Item
      2.
                        Properties
                        
                        11Item
      3.
                        Legal
      Proceedings
                        
                        11Item
      4.
                        Submission
      of Matters to a Vote of Security Holders
                        
                        11PART
      IIItem
      5.
                        Market
      for the Company's Common Stock, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                        
                        12Item
      6.
                        Selected
      Consolidated Financial Data
                        
                        14Item
      7.
                        Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation
                        
                        15Item
      7A.
                        Quantitative
      and Qualitative Disclosures About Market Risk
                        
                        19Item
      8.
                        Financial
      Statements and Supplementary Data
                        
                        20Item
      9.
                        Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                        
                        33Item
      9A.
                        Controls
      and Procedures
                        
                        33PART
      IIIItem
      10.
                        Directors
      and Executive Officers of the Registrant
                        
                        35Item
      11.
                        Executive
      Compensation
                        
                        37Item
      12.
                        Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                        
                        44Item
      13.
                        Certain
      Relationships and Related Transactions
                        
                        46Item
      14.
                        Principal
      Accountant Fees and Services
                        
                        46
  3
  PART
      IVItem 15.
                      Exhibits,
      Financial Statement Schedules
                      
                      48


___________________________




All
monetary figures set forth are expressed in United States
currency.


4




PART I





Item 1.    Business





Company
Website





The Company has a website located at
http://www.coastalcarib.com.  The
website can be used to access recent news releases, Securities and Exchange
Commission (“SEC”) filings, and other items of interest.   The
contents of the Company’s website are not incorporated into this
document.  Securities and Exchange Commission filings, including
supplemental schedules and exhibits can also be accessed free of charge through
the SEC website at http://www.sec.gov.





General





Coastal Caribbean Oils & Minerals,
Ltd.  (“Company” or “Coastal Caribbean”), was organized in Bermuda on
February 14, 1962.  The Company is the successor to Coastal Caribbean
Oils, Inc., a Panamanian corporation organized on January 31, 1953 to be the
holding company for Coastal Petroleum Company (“Coastal
Petroleum”).  Coastal Caribbean, has been engaged, through its
subsidiary, Coastal Petroleum, in the exploration for oil and gas
reserves.  At December 31, 2008, Coastal Caribbean's principal asset
was its 100% interest in its subsidiary Coastal Petroleum.  Coastal
Petroleum's principal assets are its nonproducing oil and gas leases in the
States of Montana and North Dakota in a fertile oil producing region know as the
Williston Basin. Coastal Petroleum is the lessee under leases relating to the
exploration for and production of oil and gas on approximately 114,832 net acres
(87,415 net acres after some leases expired in March 2009) of land in Valley
County, Montana and approximately 8,510 net acres of land in Billings, Slope and
Stark Counties, North Dakota.





Prior to acquiring leases in Montana
and North Dakota, and beginning in the 1940’s the Company held State of Florida
oil, gas and mineral leases covering approximately 3,700,000 acres of submerged
lands along the Gulf Coast and under certain inland lakes and
rivers.  For more than 15 years, the State of Florida used laws,
policies and permit denials to prevent Coastal Petroleum from using its
leases.  The Company vigorously litigated to be able to use its leases
or to be compensated for the State’s taking of them, but Florida courts
ultimately ruled against the Company.  On June 1, 2005 the Company,
Coastal Petroleum and other royalty holders, based upon the court decisions and
State policies, entered an agreement to exchange mutual releases, dismiss
pending actions and to surrender the leases and royalty rights back to the State
of Florida in exchange for a total compensation of $12.5 million to be divided
among the parties in interest.  The Company and its subsidiary
received approximately $4,872,000 in net proceeds and the Company regained 100%
ownership of its subsidiary, Coastal Petroleum.





The Company has utilized the funds it
received from the Agreement with the State of Florida to acquire the leases in
Montana and North Dakota described above and to begin drilling
there.  No economical oil or gas discoveries have yet been made on
these properties; therefore, the Company has no proved reserves of oil and gas
and has had no production.





Crude Oil and Natural Gas
Exploration





Through its wholly owned subsidiary,
Coastal Petroleum, the Company has begun to explore for oil and gas in
Montana.





Under an
agreement with Western Standard Energy Corp. (“Western Standard”) a well, the
Federal 1-19, was drilled on our Valley County, Montana Leases to test a shallow
gas prospect during October 2007.  The well reached a total depth of
1,126 feet and confirmed the structural high that was targeted. The well also
had gas shows in two zones. Casing was run into the hole and operations to
complete and test the well were scheduled to begin at the end of November, but
were delayed by equipment repairs. The well is located on Federal land and the
Bureau of Land Management would not allow the completion and testing operations
or any further drilling to begin until July 2008, so operations were suspended
until that time.  During the second and third quarters of 2008, the Company
engaged in three stages of completion operations, including stimulation of the
well, a common procedure in completing oil and gas wells.


5


The Company was unable to determine by
this well whether the target formations contain economic quantities of
gas.  Drilling damage in the well prevented the testing of either of
the prospective formations at this location.  Completion efforts found
that the Eagle formation was damaged by the initial drilling and the formation
was not able to be tested from this well.  Further drilling into the
Eagle formation during completion did not yield gas like the gas show seen from
the upper part of the formation that was damaged.  The Judith River
formation, a secondary target, was damaged by drilling fluids lost into the
formation while drilling through it to get to the Eagle formation, the primary
target.  Future wells to test this structure will incorporate the
information obtained from these wells to prevent that damage from occurring
again in other locations on the structure.





Western Standard had 30 days after the
completion of the Federal 1-19 to exercise an option to purchase a 50% interest
in approximately 42,000 acres near the well location (referred to as “Valley
County Shallow Gas Assembly”) for $1,000,000, but the deadline passed without
being exercised.   Western Standard no longer has an interest in
these leases and Coastal Petroleum is now in control of them again.





On November 3, 2007, F-Cross Resources,
LLC (“F- Cross”) spudded the first well under an Agreement with the
Company.  The well was drilled to test a Lodgepole reef oil prospect
and drilling on the well has finished and is awaiting completion.  As
of this time it is uncertain whether F-Cross will proceed with
completion.  F-Cross did not meet the requirements in the agreement
and in late March 2008 the option to acquire an interest in the additional
64,000 acres covered by the agreement expired, leaving F-Cross with rights only
in the section in which it drilled the well.





In
January 2006, the Company drilled a well in north-central
Montana.  The Company completed and tested multiple zones in the well
that potentially could contain oil or gas.  While the targeted
Lodgepole reef was reached and while gas was encountered in uphole zones, the
well did not contain economic quantities of oil or gas.  This well was
abandoned during 2007.





The Company also drilled a well, along
with several other participants, in Valley County, Montana.  The well
was a twin to the Evaline 1-18 well, the only Lodgepole producer in
Montana.  The drilling began on September 5, 2006, and the well
reached the targeted Lodgepole reef and encountered oil, but there were not
sufficient quantities of oil to be economical for the Company to
develop.  The well was abandoned during 2007.





The
Company is actively engaged in pursuing funding for our 2009 Drilling
Program.  The Program is an aggressive $9,500,000 exploration
operation which would allow the Company to explore the potential of each of the
areas held under its leases.  The Program covers exploration in four
areas: a development Red River Formation prospect in Slope County, North Dakota,
on approximately 400 acres we acquired; the drilling of three Lodgepole
Formation prospects on the Company’s North Dakota Leases; ten step out wells
from the Federal 1-19 well on the Starbuck East prospect in Montana; and the
drilling of two other shallow gas prospects in Montana, but located off from the
Starbuck East prospect.  The 2009 Drilling Program is currently being
reviewed by prospective funding parties.  The Company is proceeding
with the relativily inexpensive process of permitting wells in its main block of
leases in Valley County, Montana, in order to accommodate the drilling of the
expected wells.  We have no assurances at this time that any funding
will be available for the Drilling Program.





Environmental Regulation




Coastal
Caribbean is committed to responsible management of the environment, health and
safety, as these areas relate to the Company’s operations. The Company strives
to achieve the long-term goal of sustainable development within the framework of
sound environmental, health and safety practices and standards.




All
facets of the Company's operations are affected by a myriad of federal, state,
regional and local laws, rules and regulations. The Company is further affected
by changes in such laws and by constantly changing administrative regulations.
Furthermore, government agencies may impose substantial penalties if the Company
fails to comply with such regulations or for any contamination resulting from
the Company's operations.




The costs
incurred to ensure compliance with environmental, health and safety laws and
other regulations are inextricably connected to normal operating expenses such
that the Company is unable to separate the expenses related to these
matters.


6




When
acting as the operator and conducting drilling operations, Coastal Caribbean
maintains insurance coverage that it believes is customary in the industry
although it is not fully insured against all environmental or other risks. The
Company is not currently conducting drilling operations and therefore does not
currently have such insurance.  The Company is not aware of any
environmental claims existing as of December 31, 2008 that would have a material
impact upon the Company's financial position, results of operations, or
liquidity.




Regulation
of Oil and Gas




The oil
and gas industry is extensively regulated by numerous federal, state and local
authorities. Legislation affecting the oil and gas industry is under constant
review for amendment or expansion, frequently increasing the regulatory burden.
Also, numerous departments and agencies, both federal and state are authorized
by statute to issue rules and regulations binding on the oil and gas industry
and its individual members, some of which carry substantial penalties for
failure to comply. Although the regulatory burden on the oil and gas industry
increases the Company's cost of doing business and, consequently, may affect
profitability, these burdens generally do not affect the Company any differently
or to any greater or lesser extent than they affect other companies in the
industry with similar types, quantities and locations of
production.




The
Company's operations are subject to various types of regulation at federal,
state and local levels. These types of regulation include requiring permits for
the drilling of wells, drilling bonds and reports concerning operations. Most
states, and some counties and municipalities in which the Company operates may
also regulate one or more of the following: the location of wells; the method of
drilling and casing wells; the rates of production or "allowables;" the surface
use and restoration of properties upon which wells are drilled; the plugging and
abandoning of wells; and notice to surface owners and other third
parties.




State
laws regulate the size and shape of drilling and spacing units or proration
units governing the pooling of oil and natural gas properties. Some states allow
forced pooling or integration of tracts to facilitate exploration while other
states rely on voluntary pooling of lands and leases. In some instances, forced
pooling or unitization may be implemented by third parties and may reduce the
Company's interest in the unitized properties. In addition, state conservation
laws establish maximum rates of production from oil and natural gas wells,
generally prohibit the venting or flaring of natural gas, and impose
requirements regarding the ratability of production. These laws and regulations
may limit the amount of oil and natural gas the Company can produce from its
wells or limit the number of wells or the locations at which it can
drill.




Moreover,
each state generally imposes a property, production or severance tax with
respect to the production and sale of oil, natural gas and natural gas liquids
within its jurisdiction.





Competition





The oil
and gas industry is highly competitive. The Company must compete with other
companies that have substantially greater resources available to
them.  As an independent, the Company does not own any refining or
retail outlets and, therefore, it would have little control over the price it
may receive for any crude oil it produces. In acquisition activities,
significant competition exists as integrated and independent companies and
individual producers are active bidders for desirable oil and gas properties.
Although many of these competitors have greater financial and other resources
than the Company, Management believes that Coastal Caribbean is in a position to
compete effectively due to its low cost structure, transaction flexibility,
experience and determination.




Employees





The Company currently has one
employee.  The Company relies heavily on consultants for legal,
accounting, geological and administrative services.  The Company uses
consultants because it believes it is more cost effective than employing a
larger full time staff.




7





Oil and Gas
Properties





Williston
Basin





Valley County,
Montana





The Company’s assets in Valley County
consist of leases covering approximately 87,415 net acres.  The
Company’s working interest in these properties is 100% and would be reduced to
75% at payout, except as modified by the agreements described
below.  Most of the leases were acquired during 2005, but some were
included in the approximately 27,780 gross acres (27,740 net acres) the Company
acquired in February of 2006, most of which expired in March
2009.  Two wells have been drilled on the leases held by the Company
but one has not yet been completed and tested and the other was damaged during
drilling and could not be tested, so the Company has no proved reserves on the
property as yet.  The Company currently has one active agreement
covering part of its Valley County Leases.  Two other agreements
covering areas of the Valley County Leases expired during 2008.





In May 2008, the Company entered an
agreement with Cobra Oil and Gas (“Cobra”).  Under the agreement,
Cobra paid Coastal $180,000 for the option to acquire a half interest in
approximately 78,000 acres (originally 87,000 acres, but some have expired) of
Coastal’s Valley County Leases.  The agreement allowed the Company to
pay its Lease rentals that were due June 1st and
brought in a new party to explore on the Leases. Cobra has two years to exercise
the option by spending $1,000,000 on behalf of the Company, drilling wells on
the leases under the agreement.  Those leases include approximately
62,000 acres of leases that were formally under an agreement with F-Cross
Resources that expired earlier this year and more than 17,000 acres of other
leases Coastal held in Valley County.





During 2008 two agreements the Company
had with other entities on the Valley County Leases expired.  First,
in August 2007, the Company entered into a farm-out agreement with Western
Standard.  Under the agreement Western Standard paid $40,000 to
Coastal and then paid an additional $384,000 to cover the costs of drilling the
first well to test a shallow natural gas prospect in Valley County, Montana and
to cover associated lease rentals.  Western Standard would have had an
interest in that well and the option to purchase a 50% interest in approximately
37,000 acres near the well location for $1,000,000, payable in $200,000
installments based on certain milestones related to drilling step-out
wells.





The first well under the agreement with
Western Standard was drilled during October 2007, and reached a total depth of
1,126 feet, casing was run into the hole after there were gas shows at two
horizons during drilling.  The well is located on Federal land and the
Bureau of Land Management would not allow the completion and testing operations
or any further drilling to begin between December 1st and July 1st, so
operations were suspended until July 2008.  In light of the delay an
additional agreement was reached with Western Standard in which the Company
received an additional $29,000 from Western Standard to cover costs associated
with the delay in well completion.  Western Standard also paid the
estimated well completion costs of $65,000 and completion operations performed
in two stages during the third quarter of 2008 and proceeded to the third stage
during the fourth quarter.  In October 2008, the Company received
approximately $29,000 from Western Standard to pay for the third stage of
operations which included stimulation of the well, a common procedure in
completing oil and gas wells.





The Company was unable to determine by
this well whether the target formations contain economic quantities of
gas.  Drilling damage in the well prevented the testing of either of
the prospective formations at this location.  Completion efforts found
that the Eagle formation was damaged by the initial drilling and the formation
was not able to be tested from this well.  Further drilling into the
Eagle formation during completion did not yield gas like the gas show seen from
the upper part of the formation that was damaged.  The Judith River
formation, a secondary target, was damaged by drilling fluids lost into the
formation while drilling through it to get to the Eagle formation, the primary
target.  Future wells to test this structure will incorporate the
information obtained from these wells to prevent that damage from occurring
again in other locations on the structure.





It is not unusual that the first well
confirming a structure does not become a producing well.  The test
well did produce valuable information about the two gas bearing formations and
their potential for economically feasible commercial gas
production.  Problems encountered in drilling the test well can now be
avoided when future wells are drilled on the Starbuck East
Prospect.  With the first two objectives met, the Company will now
focus on achieving the third objective, specifically finding commercial gas in
either the Eagle or Judith River formations.


8





Western Standard had 30 days after the
completion of the Federal 1-19 to exercise an option to purchase a 50% interest
in approximately 37,000 acres near the well location for $1,000,000, but the
deadline passed without being exercised.   Western Standard no
longer has an interest in these leases and Coastal Petroleum is now in control
of them again.





The Company’s agreement with F-Cross
was the other agreement that expired in 2008.  Originally entered, in
September 2007, the Company received $50,000 from F-Cross under the farm-out
agreement covering approximately 64,000 acres on the northwest part of the
Company’s Valley County Leases.  F-Cross had the option to drill a
Lodgepole test well at its cost within six months and after drilling that well
had the further option to acquire an interest in surrounding
acreage.   F-Cross also could have extended its option to acquire
the 50% working interest by drilling a second Lodgepole test well.  On
November 3, 2007, F-Cross spudded the first well under the Agreement with the
Company.  The well was drilled to test a Lodgepole reef oil prospect
and drilling on the well has finished and is awaiting completion.  As
of this time it is uncertain whether F-Cross will proceed with
completion.  F-Cross, however, did not meet the requirements in the
agreement and in late March 2008 the option to acquire an interest in the
additional 64,000 acres covered by the agreement expired, leaving F-Cross with
rights only in the section in which it drilled the well.





Billings, Slope
and Stark Counties, North Dakota





The
Company owns leases covering approximately 8,510 net acres in these three
counties.  Generally, the Company’s working interest in these
properties is 100% and at payout is reduced to 75%.  However, under a
farm-out agreement with Western Standard, Coastal assigned leases over four of
its high-graded Lodgepole Reef prospects to Western Standard in return for
$80,000.  Coastal retains a back-in working interest of 20% in those
leases after payout.  The leases cover all rights below the Tyler
formation, including the Lodgepole formation, with an 80% net revenue interest.
These and other leases in the area were acquired in 2005 by Coastal from Oil For
America for $50,000 and Coastal has invested some additional funds to
geochemically test and high-grade these and other prospects on the
leases.  Oil For America has agreed to waive the drilling obligation
on the four prospects assigned to Western Standard.  After the
assignment, Coastal still retains additional Lodgepole reef prospects on its
North Dakota leases under the general working interest described
above.  The Company has not yet begun any drilling on the property and
has no proved reserves on the property.





Acreage and
Wells





The
following chart reflects the approximate acreage held under lease by Coastal
Caribbean through its wholly owned subsidiary Coastal Petroleum, at
December 31, 2008:





Acreage under lease at December
31, 2008





Lease
      Location
                
                Gross
      Acres(1)
                
                
                Net
      Acres(2)Undeveloped
                
                
                Developed
                
                
                Undeveloped
                
                
                DevelopedMontana(3)
                
                
                114,912.82
                
                
                
                0
                
                
                
                114,832.82
                
                
                
                0North
      Dakota
                
                
                . 8,748.94
                
                
                
                0
                
                
                
                .8,510.31
                
                
                
                0Total:
                
                
                123,661.76
                
                
                
                0
                
                
                
                123,343.13
                
                
                
                0





(1) A gross
acre is an acre in which a working interest is owned.


(2) A net
acre is deemed to exist 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 thereof.


(3) Subsequent
to the end of 2008, leases covering 27,496.04 gross acres (27,417.04 net acres)
on the Company’s Montana acreage expired in March 2009.


9





Completion efforts were undertaken on
one well in 2008, but it could not be tested and two wells were drilled in 2007
on our leases.





Drilling
Activity





During
2008 no wells were drilled, but completion efforts were undertaken on the
Federal 1-19 well drilled in 2007, but the well could not be
tested.  The results for that well are discussed below.





During
2007, two wells were drilled on the Company’s Valley County, Montana Leases
under two separate agreements, with two different entities and covering
different areas within the Company’s Valley County Leases.





The first
well, the Federal 1-19, was drilled by Western Standard to test a shallow
natural gas prospect near the middle of the Company’s Valley County Leases. This
well was the initial well drilled under an agreement with Western
Standard.  The well reached a total depth of 1,126 feet, and
operations to complete and test the well were delayed until 2008 because the
well is located on Federal land and the Bureau of Land Management would not
allow the completion and testing operations or any further drilling to begin
between December 1st and July 1st.





Once
operations were resumed, the Company was unable to determine by this well
whether the target formations contain economic quantities of
gas.  Drilling damage in the well prevented the testing of either of
the prospective formations at this location.  Completion efforts found
that the Eagle formation was damaged by the initial drilling and the formation
was not able to be tested from this well.  Further drilling into the
Eagle formation during completion did not yield gas like the gas show seen from
the upper part of the formation that was damaged.  The Judith River
formation, a secondary target, was damaged by drilling fluids lost into the
formation while drilling through it to get to the Eagle formation, the primary
target.  Future wells to test this structure will incorporate the
information obtained from these wells to prevent that damage from occurring
again in other locations on the structure.





The
second well drilled on the Company’s Valley County Leases in 2007 was drilled by
F-Cross under an agreement with F-Cross, covering the northwestern part of
Coastal’s Valley County, Montana Leases.  The first Lodgepole test
well was spudded on November 3, 2007 and the well is awaiting completion and
testing of several zones which have potential for both oil and
gas.  F-Cross, however, did not meet the requirements in the agreement
and in late March 2008 the option to acquire an interest in the additional
64,000 acres covered by the agreement expired, leaving F-Cross with rights only
in the section in which it drilled the well.





The
Company also participated in and acted as operator in a twin well to the only
known well to produce from the Lodgepole in Montana. The targeted Lodgepole reef
contained oil, but not in sufficient quantities to be economical for the Company
to develop. Likewise, an uphole test of the Mission Canyon Formation resulted in
oil being encountered, but not in sufficient quantities to be economical for the
Company to develop. The Company’s participation costs in the twin well were
approximately $245,000, which was expensed in the fourth quarter of 2006. The
total cost of the well was approximately $1,360,000.  There are
approximately $115,000 in unpaid expenses related to this well that are
collectively the responsibility of the various partners.  This amount
is not reflected as a liability in the accompanying financial
statements.  This well was abandoned.





Item 1B.           
Unresolved Staff
Comments





None





Item 2.      Properties





Properties





Information required by Item 2
“Properties” is included under Item 1 “Business.”


10





Disclosure Concerning Oil
and Gas Operations.





Since the properties in which the
Company has interests are undeveloped and nonproducing, items 2 through 4 of
Securities Exchange Act Industry Guide 2 are not applicable.





(5)
            Undeveloped
      Acreage.





The Company's undeveloped acreage as of
December 31, 2008 was as follows:





Gross Acres
                              
                              
                              Net AcresMontana*
                              
                              
                              114,912.82
                              
                              
                              
                              114,832.82North
      Dakota
                              
                              
                              8,748.94
                              
                              
                              
                              8,510.31Total:
                              
                              
                              123,661.76
                              
                              
                              
                              123,343.13


_________________


*
            Subsequent
      to the end of 2008, leases covering 27,496.04 gross acres (27,417.04 net
      acres) on the Company’s Montana acreage expired in March
    2009.





(6)
            Drilling Activity.





One well
underwent completion efforts, but could not be tested during 2008 on the
Company’s leases through a farm-out agreement.  See Drilling Activity
section under Item 1 Business at page 9.





(7)
            Present Activities.





See Drilling Activity section under
Item 1 Business at page 9.





Item 3.    Legal Proceedings





None.





Item 4.    Submission of Matters to a
Vote of Security Holders





None.




11





PART II





Item
5.    Market for the Company's
Common Stock, Related


Stockholder Matters and
Issuer Purchases of Equity Securities





Market Information.





The principal market for the Company's
common stock is in the over-the-counter market on the "Electronic Bulletin
Board" of the National Association of Securities Dealers, Inc. under the symbol
COCBF.  The
quarterly high and low closing prices on the Electronic Bulletin Board during
the last two years were as follows:





2007
                                                  
                                                  1stquarter
                                                  
                                                  
                                                  2ndquarter
                                                  
                                                  
                                                  3rdquarter
                                                  
                                                  
                                                  4thquarterHigh
                                                  
                                                  0.33
                                                  
                                                  
                                                  0.16
                                                  
                                                  
                                                  0.15
                                                  
                                                  
                                                  0.23Low
                                                  
                                                  0.11
                                                  
                                                  
                                                  0.081
                                                  
                                                  
                                                  0.075
                                                  
                                                  
                                                  0.1062008
                                                  
                                                  1stquarter
                                                  
                                                  
                                                  2ndquarter
                                                  
                                                  
                                                  3rdquarter
                                                  
                                                  
                                                  4thquarterHigh
                                                  
                                                  0.12
                                                  
                                                  
                                                  0.23
                                                  
                                                  
                                                  0.32
                                                  
                                                  
                                                  0.15Low
                                                  
                                                  0.095
                                                  
                                                  
                                                  0.09
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  0.021





Holders.





The approximate number of record
holders of the Company's common stock at March 12, 2009 was 8,263.





Dividends.





The Company has never declared or paid
dividends on its common stock and it does not anticipate declaring or paying any
dividends in the foreseeable future.  The Company plans to retain any
future earnings to reduce the deficit accumulated during the development stage
of $36,215,202 at December 31, 2008 and to finance its operations.





Foreign Exchange Control Regulations





The Company is subject to the
applicable laws of The Islands of Bermuda relating to exchange control, but has
the permission of the Foreign Exchange Control of Bermuda to carry on business
in, to receive, disburse and hold United States dollars and dollar securities
under its designation as an External Account Company.  The Company has
been advised that, although as a matter of law it is possible for such
designation to be revoked, there is little precedent for revocation under
Bermuda law.





Income
and Withholding Taxes





Coastal Caribbean is a Bermuda
corporation.  Bermuda currently imposes no taxes on corporate income
or capital gains realized outside of Bermuda.  Any amounts received by
Coastal Caribbean 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% United States withholding tax.  In addition, any
dividends from its domestic subsidiary, Coastal Petroleum, will not be eligible
for the 100% dividends received deduction, which is allowable in the case of a
United States parent corporation.  Shares of the Company held by
persons who are citizens or residents of the United States are subject to
federal estate and gift and local inheritance taxation.  Any dividends
received by such persons will also be subject to federal, State and local income
taxation.  The foregoing rules are of general application only, and
reflect law in force as of the date of this report.


12





A convention between Bermuda and the
United States relating to mutual assistance on tax matters became operative in
1988.





Passive
Foreign Investment Company Rules





The Internal Revenue Code of 1986, as
amended, provides special rules for distributions received by U.S. holders on
stock of a passive foreign investment company (PFIC), as well as amounts
received from the sale or other disposition of PFIC stock.





Under the
PFIC rules, a non-U.S. corporation will be classified as a PFIC for U.S. federal
income tax purposes in any taxable year in which, after applying certain
look-through rules, either (1) at least 75 percent of its gross income is
passive income or (2) at least 50 percent of the gross value of its assets is
attributable to assets that produce passive income or are held for the
production of passive income.





Passive income for this purpose
generally includes dividends, interest, royalties, rents, and gains from
commodities and securities transactions. Special rules apply in cases where a
foreign corporation owns directly or indirectly at least a 25 percent interest
in a subsidiary, measured by value.  In this case, the foreign
corporation is treated as holding its proportionate share of the assets of the
subsidiary and receiving directly its proportionate share of the income of the
subsidiary when determining whether it is a PFIC.  Thus, Coastal
Caribbean would be deemed to receive its pro rata share of the income and to
hold its pro rata share of the assets, of Coastal Petroleum.





Based on
certain estimates of its gross income and gross assets and the nature of its
business, Coastal Caribbean would be classified as a PFIC for the years 1987
through 2006.  Once an entity is considered a PFIC for a taxable year,
it will be treated as such for all subsequent years with respect to owners
holding the stock in a year that it was classified as a PFIC under the income or
asset test described above. Whether the Company will be a PFIC under either of
these tests in future years will be difficult to determine because the tests are
applied annually.  Based upon the estimated gross income of the
Company during 2008, the major source of the income being from the farm-out
agreements through which the Company sold an interest in parts of its leases to
other companies, and the relatively small amount of interest the Company
received, the Company believes that Coastal Caribbean would not be classified as
a PFIC for the year 2008.





If Coastal Caribbean is classified as a
PFIC with respect to a U.S. holder any gain from the sale of, and certain
distributions with respect to, shares of our common stock, would cause a U.S.
holder to become liable for U.S. federal income tax under Code section 1291 (the
interest charge regime).  The Company recommends that any such U.S.
holder should consult his or her own tax advisor on this issue.  The
tax is computed by allocating the amount of the gain on the sale or the amount
of the distribution, as the case may be, to each day in the U.S. shareholder’s
holding period.  To the extent that the amount is allocated to a year,
other than the year of the disposition or distribution, in which the corporation
was treated as a PFIC with respect to the U.S. holder, the income will be taxed
as ordinary income at the highest rate in effect for that year, plus an interest
charge.  The interest charge would generally be calculated as if the
distribution or gain had been recognized ratably over the U.S. holder's holding
period (for PFIC purposes) for the shares.  To the extent an amount is
allocated to the year of the disposition or distribution, or to a year before
the first year in which the corporation qualified as a PFIC, the amount so
allocated is included as additional gross income for the year of the disposition
or distribution.   A U.S. holder also would be required to make
an annual return on IRS Form 8621 that describes any distributions received with
respect to our shares and any gain realized on the sale or other disposition of
our shares.





As an alternative to taxation under the
interest charge regime, a U.S. holder generally can elect, subject to certain
limitations, to annually take into gross income the appreciation or depreciation
in our common shares' value during the tax year (mark-to-market election). If a
U.S. holder makes the mark-to-market election, the U.S. holder will not be
subject to the above-described rule.   Instead, if a U.S. holder
makes the mark-to-market election, the U.S. holder recognizes each year an
amount equal to the difference as of the close of the taxable year between the
U.S. holder's fair market value of the common shares and the adjusted basis in
the common shares. Losses would be allowed only to the extent of net gain
previously included by the U.S. holder under the mark-to-market election for
prior taxable years. Amounts included in or deducted from income under the
mark-to-market election and actual gains and losses realized upon the sale or
disposition of the common shares, subject to certain limitations, will be
treated as ordinary gains or losses.   If the mark-to-market
election is made for a year other than the first year in the U.S. holder’s
holding period in which the corporation was a PFIC, the first year’s
mark-to-market inclusion, if any, is taxed as if it were a distribution subject
to the interest charge regime discussed above.


13





Another
alternative election which would allow a U.S. holder to elect to take its pro
rata share of Coastal Caribbean's undistributed income into gross income as it
is earned by Coastal Caribbean (QEF election) would only be available to a U.S.
holder if Coastal Caribbean provided certain information to the shareholders of
Coastal Caribbean.  Coastal Caribbean has had no undistributed income
for the years 1987 through 2008.  If the QEF election is made in a
year other than the first year of the U.S. holder’s holding period in which the
foreign corporation is a PFIC, both the QEF regime and interest charge regime
can apply, unless a special election is made.  Under this special
election, the taxpayer is treated as if it disposed of its PFIC stock in a
transaction subject to the interest charge rules to the extent gain is deemed to
be recognized.  Once this election is made, the holder will be subject
only to the QEF regime.





Recent Sales of Unregistered
Securities





None





Purchases of Equity
Securities by the Issuer and Affiliated Purchasers





None





Item
6.    Selected Consolidated
Financial Information





The following selected consolidated
financial information (in thousands except for per share amounts) for the
Company insofar as it relates to each of the three years in the period ended
December 31, 2008 has been taken from the Company's consolidated financial
statements.


Years
      ended December 31,2008
                          
                          
                          2007
                          
                          
                          2006Net
      loss
                          
                          $
                          (546
                          )
                          
                          $
                          (690
                          )
                          
                          $
                          (1,621
                          )Net
      loss per share  (basic and diluted)
                          
                          $
                          (.01
                          )
                          
                          $
                          (.01
                          )
                          
                          $
                          (.04
                          )Cash
      and cash equivalents and marketable securities
                          
                          $
                          1
                          
                          
                          $
                          30
                          
                          
                          $
                          343Unproved
      oil, gas and, mineral properties (full cost method)
                          
                          $
                          2,200
                          
                          
                          $
                          2,168
                          
                          
                          $
                          2,200Total
      assets
                          
                          $
                          2,292
                          
                          
                          $
                          2,373
                          
                          
                          $
                          2,709Shareholders'
      (deficit) equity:Common
      stock
                          
                          $
                          5,551
                          
                          
                          $
                          5,545
                          
                          
                          $
                          5,545Capital
      in excess of par value
                          
                          
                          32,139
                          
                          
                          
                          32,138
                          
                          
                          
                          32,138Deficit
      accumulated during the development stage
                          
                          
                          (36,215
                          )
                          
                          
                          (35,670
                          )
                          
                          
                          (34,979
                          )Total
      shareholders’ equity
                          
                          $
                          1,475
                          
                          
                          $
                          2,013
                          
                          
                          $
                          2,704Common
      stock shares outstanding (weighted average)
                          
                          
                          46,250
                          
                          
                          
                          44,212
                          
                          
                          
                          44,212
  14
  
 Item
7.    Management's Discussion and
Analysis of Financial Condition
 and Results of
Operations
 
 Statements
included in Management's Discussion and Analysis of Financial Condition and
Results of Operations which are not historical in nature are intended to be
forward looking statements. The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements. For a discussion of certain risk factors affecting the Company,
please see “Risk Factors” above.
 
 General
 
 We are an
active independent oil and gas exploration company and through our subsidiary,
Coastal Petroleum, we hold mineral rights in Montana and North Dakota in the oil
producing region known as the Williston Basin.  Our objective
formations on those leases include the Lodgepole and the Eagle among
others.  The Company's future growth will be driven primarily by
exploration and development activities.  Our business strategy is to
increase shareholder value by acquiring and drilling reasonably priced prospects
that have good potential, whether in the Williston Basin or in other parts of
the United States, with the goal of shaping the Company into a producing
independent oil and gas firm. We will continue to seek high quality exploration
projects with potential for providing long-term drilling inventories that
generate high returns.
 
 In
Montana, we have obtained the rights to explore for oil and gas in one area
which will be our primary area of focus.  This primary area is a large
assembly of leases covering approximately 87,415 net acres in Valley County,
located in northeastern Montana close to known production from a Lodgepole
reef.  At the end of 2008, the Company held 114,832 net acres in
Valley County, but in March 2009, approximately 27,417 acres
expired.  Those expired leases were not covering our Starbuck East
propect.
 
 This area
of Montana has a number of other producing formations in addition to the
Lodgepole, including the Eagle sands.  Currently we have one agreement
with a party covering some of the areas of the leases and during 2008 we had two
agreements expire under which exploration had begun on the leases.  We
also hold leases in southwestern North Dakota and have an agreement covering
four Lodgepole prospects on those leases.
 
 We are
actively engaged in pursuing funding for our 2009 Drilling
Program.  The Program is an aggressive $9,500,000 exploration
operation which would allow us to explore the potential of each of the areas we
hold under lease.  The Drilling Program covers exploration in four
areas: a development Red River Formation prospect in Slope County, North Dakota,
on approximately 400 acres we acquired; the drilling of three Lodgepole
Formation prospects we have on our North Dakota Leases; ten step out wells from
the Federal 1-19 well on the Starbuck East prospect in Montana; and the drilling
of two other shallow gas prospects in Montana, but located off from the Starbuck
East prospect.  The Company is proceeding with the relativily
inexpensive process of permitting wells in its main block of leases in Valley
County, Montana, in order to accommodate the drilling of the expected
wells.  The 2009 Drilling Program is currently being reviewed by
prospective funding parties.  This Drilling Program is separate from
the agreements described below.
 
 In May
2008, we entered an agreement with Cobra.  Under the agreement, Cobra
paid Coastal $180,000 for the option to acquire a half interest in approximately
87,000 acres of Coastal’s Valley County Leases.  The agreement allowed
the Company to pay its Lease rentals that were due June 1st and
brings in a new party to explore on the Leases. Cobra will have two years to
exercise the option by spending $1,000,000 on behalf of the Company, drilling
wells on the leases covered by the agreement.  Those leases include
approximately 62,000 acres of leases that were formally under an agreement with
F-Cross Resources that expired earlier this year and more than 20,000 acres of
other leases Coastal held in Valley County.  No drilling has taken
place yet under this agreement.
  15
  Two other agreements covering the
leases expired during 2008.  The first of the two agreements was a
farm-out agreement with Western Standard, entered in August
2007.  Under the agreement, Western Standard paid us $40,000 at
execution and then paid an additional $384,000.  From the $384,000,
$255,000 was paid to cover the costs of drilling the first well to test a
shallow natural gas prospect in Valley County, Montana and $129,000 was paid to
cover associated lease rentals.  Western Standard would have had an
interest in the first well drilled as well as an option to purchase a 50%
interest in the 42,000 acres under the lease.  Upon receiving the
funds to cover lease rentals, we repaid in full our loan of
$126,000.  Under the loan agreement, the individual that loaned us the
money continues to hold a 5% overriding royalty on the same approximately 42,000
acres that are covered in the Western Standard farm-out agreement.
 
 The first
well under this agreement was drilled during October 2007, to test a shallow
natural gas prospect near the middle of the Company’s Valley County Leases. The
well, known as the Federal 1-19 Well, had three objectives: to confirm the
34,000 acre Starbuck East Prospect by finding that the Eagle formation was high
to surrounding wells off the Prospect; to confirm that there were good natural
gas shows in the Starbuck East Prospect; and to find commercial gas in either
the Eagle formation or the Judith River formation. The first two objectives were
met. Due to drilling damage, the third objective has not yet been
met.
 
 During
October 2007, the Federal 1-19 well reached a total depth of 1,126 feet, and
confirmed the structural high that was targeted. The well also had gas shows in
two zones. Casing was run into the hole and operations to complete and test the
well were scheduled to begin at the end of November, but were delayed by
equipment repairs. The well is located on Federal land and the Bureau of Land
Management would not allow the completion and testing operations or any further
drilling to begin until July 2008, so operations were suspended until that
time. The Company also received an additional $29,000 from Western Standard
to cover additional drilling and other costs associated with the delay in well
completion, which has been recorded as a reduction in capitalized petroleum
lease costs. Western Standard paid the estimated well completion costs of
$65,000 and operations to complete and test the well were performed in two
stages during the third quarter and proceeded to the third stage in the fourth
quarter of 2008.  In October 2008, the Company received approximately
$29,000 from Western Standard to pay for the third stage of operations which
included stimulation of the well, a common procedure in completing oil and gas
wells.
 
 The Company was unable to determine by
this well whether the target formations contain economic quantities of
gas.  Drilling damage in the well prevented the testing of either of
the prospective formations at this location.  Completion efforts found
that the Eagle formation was damaged by the initial drilling and the formation
was not able to be tested from this well.  Further drilling into the
Eagle formation during completion did not yield gas like the gas show seen from
the upper part of the formation that was damaged.  The Judith River
formation, a secondary target, was damaged by drilling fluids lost into the
formation while drilling through it to get to the Eagle formation, the primary
target.  Future wells to test this structure will incorporate the
information obtained from these wells to prevent that damage from occurring
again in other locations on the structure.
 
 It is not unusual that the first well
confirming a structure does not become a producing well.  The test
well did produce valuable information about the two gas bearing formations and
their potential for economically feasible commercial gas
production.  Problems encountered in drilling the test well can now be
avoided when future wells are drilled on the Starbuck East
Prospect.  With the first two objectives met, the Company will now
focus on achieving the third objective, specifically finding commercial gas in
either the Eagle or Judith River formations. We have received one permit to
drill a step-out well and are currently in the permitting process for two
more.
 
 After the completion efforts on the
Federal 1-19 well were finished, Western Standard had the option to purchase a
50% interest in approximately 42,000 acres near the well location for
$1,000,000.  The time to exercise that option passed and Western
Standard did not exercise it, so we regained complete control of the leases
formerly under the Western Standard agreement and Western Standard no longer has
an interest in them.
 
 The other agreement that expired in
2008 was with F-Cross and was entered in September of 2007, covering
approximately 64,000 acres on the northwest part of our Valley County
Leases.  Under the agreement, F-Cross had the option to drill a
Lodgepole test well within six months and after drilling that well had the
further option to acquire an interest in surrounding
acreage.   F-Cross was to pay for the cost of drilling the
initial well and will receive a 100% working interest in the well until payout
and an 80% working interest subsequent to payout.   F-Cross
exercised its option and the first Lodgepole test well was spudded on November
3, 2007.  Drilling has finished, but the well is still awaiting
completion and testing of several zones which have potential for both oil and
gas.  However, F-Cross did not meet the requirements in the agreement
and in late March 2008 the option to acquire an interest in additional acreage
expired, leaving F-Cross with rights only in the section in which it drilled the
well.
  16
 
 The two
wells we were involved with drilling during 2006 and that were abandoned during
2007 were drilled in areas outside of our Valley County Leases.  The
first of those wells we drilled ourselves on a small tract in Blaine County in
north central Montana, more than 130 miles west of our Valley County
acreage.  We drilled to a depth of 4,600 feet and reached the targeted
Lodgepole reef, but the reef had been flushed with water and there was no oil
present.  The well passed through multiple other zones that
potentially contained oil or gas and each of the other zones was tested, but no
gas or oil was present in economic quantities. We will not pursue any further
drilling in this area.
 
 The
second well drilled under a farm-in agreement on a location in Valley County,
south of our primary acreage.  We participated in and acted as
operator for the drilling of that well which was known as the Evaline twin
well.   It was drilled to total depth into the Lodgepole reef
that was targeted and encountered oil, but not in sufficient quantities for us
to earn an interest.  We then moved uphole and perforated the Mission
Canyon Formation which had a significant show of oil while we were drilling to
the Lodgepole.  We tested the Mission Canyon and it too contained oil,
but again not in sufficient quantities for us to earn an interest in the well.
Under the Agreement with farmor Helis, there was a production threshold that had
to be met to earn the interest and that threshold could not be met. We have
abandoned this well and will now focus on our primary area.
 
 In North Dakota, we control the working
interest on approximately 8,510 net acres in Slope, Billings, and Stark
Counties, on which a number of drillable prospects have been mapped to
date.  The depth of wells in North Dakota is greater than in Montana
(approximately 9,500 feet versus approximately 5,000 feet), and thus the cost of
drilling is higher.  A typical North Dakota wildcat well costs about
$1.5 million to drill.  We had originally intended to bring in others
to share the risk and investment in wells it drills in North Dakota until the
Company is in a stronger financial position, but are now actively seeking
funding to allow us to begin such exploration on our own.
 
 Through our efforts to bring in others
to explore our North Dakota leases, in December of 2007 we entered a new
farm-out agreement with Western Standard.  Under the agreement, we
assigned leases over four of our high-graded Lodgepole Reef prospects to Western
Standard in return for $80,000.  We received $40,000 in November 2007,
$25,000 in February 2008 and the other $15,000 in April 2008.  We will
also retain a back-in working interest of 20% in the leases after
payout.  The leases cover all rights below the Tyler formation,
including the Lodgepole formation, with an 80% net revenue interest. We acquired
these and other leases in the area in 2005 from Oil For America for $50,000 and
we have invested some additional funds to geochemically test and high-grade
these and other prospects on the leases.  Oil For America has agreed
to waive the drilling obligation on these four prospects.  We will
still retain additional Lodgepole reef prospects on our North Dakota leases that
are not covered by this farm-out agreement.
 
 If our funding efforts are succesfull,
we plan to drill or participate in as many as sixteen exploratory wells under
our 2009 Drilling Plan.  However, the number of wells that we drill in
2009 and their cost will be subject to various factors, including whether or not
we can obtain sufficient funding to carry out the 2009 drilling program, whether
Cobra will exercise its option and begin exploration under its agreements, the
availability of drilling rigs that we can hire and whether we drill alone or
with other participants.  In addition, we could reduce the number of
wells that we drill if oil and natural gas prices were to decline
significantly.  We expect the cost of drilling the sixteen wells to
depend upon many factors, including those above, which may affect the cost of
operations and whether and to what extent others participate with the
Company.
  17
  Liquidity
and Capital Resources
 
 As more fully described in Note 1 to
the consolidated financial statements, we have no recurring revenues, have
experienced recurring losses and have a deficit accumulated during the
development stage.  We, along with various other related parties,
settled several lawsuits in 2005, which were filed by the Company, our
subsidiary Coastal Petroleum Company and other related parties against the State
of Florida.  All of these lawsuits were related to the State’s actions
limiting our ability to commence development activities through our
subsidiary.  The cost of that litigation was
substantial.  Management believes its current cash position, the
agreement with Cobra, and its active efforts to obtain funding will allow the
Company to move forward to explore and develop profitable oil and gas
operations, although there is no assurance these efforts will be
successful.  These situations raise substantial doubt about our
ability to continue as a going concern.  Our 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, which may result from the outcome of these
uncertainties.
 
 At December 31, 2008, we have
approximately $1,000 in cash compared to approximately $30,000 at December 31,
2007.  Our current liabilities exceed our current assets by
approximately $816,000 at December 31, 2008. We have suspended payments to
our directors, general legal counsel, and employee since the second quarter of
2007 and have accrued $817,000 in expenses as of December 31,
2008.  We expect to continue to suspend payments to these parties for
at least the first quarter of 2009 or until sufficient funding can be secured to
resume exploration operations and cover normal operating expenses.
 
 During 2008, we received approximately
$218,000 under farm-out agreements for lease and drilling rights on our leases
and options to acquire additional rights and redeemed a $50,000 certificate of
deposit released from restrictions as a drilling bond.  Also during
2008,  we used the funds received during the year primarily to pay our
annual lease payments and other operating expenses.  We may need to
sell additional lease rights to obtain the cash to make future lease rental
payments, although there is no guarantee we will be able to sell additional
lease rights.
 
 During 2007, we abandoned the two wells
we drilled and participated in 2006 and we spent $263,000 for well drilling
costs and maintenance of our oil and gas lease rights including the payment of
rentals on the approximately 124,882 net acres of leases we held at the time in
Valley County, Montana, totaling $244,000, of which $126,000 was received from
Western Standard.  These leases are subject to various overriding
royalty interests held by others of up to 19.5%.  The leases expire in
years from 2011 to 2014.
 
 We expect to continue to participate
with others or to obtain sufficient funding to allow the Company to drill
additional wells both in Montana and North Dakota.
 
 Results
of Operations and Critical Accounting Policies and Estimates
 
 Development Stage Enterprise
Presentation
 
 The Company is a development stage
enterprise.  It has never had substantial revenues and has operated at
a loss each year (except 2005) since its inception in 1953.
 
 Oil and Gas
Accounting
 
 The
Company follows the full cost method of accounting for its oil and gas
properties.  All costs associated with property acquisition,
exploration and development activities whether successful or unsuccessful are
capitalized.
 
 The capitalized costs are subject to a
ceiling test which basically limits such costs to the aggregate of the estimated
present value discounted at a 10% rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.  The Company
assesses whether its unproved properties are impaired on a periodic
basis.  This assessment is based upon work completed on the properties
to date, the expiration date of its leases and technical data from the
properties and adjacent areas.
 
 During 2007, we drilled two wells on
Company leases under two farm-out agreements.  We expect to determine
the success of these wells in July 2008.  We expensed an additional
$53,000 related to abandoning the 2006 wells.
  18
  During 2008, we did not conduct
drilling activities due to weather and/or landowner access restrictions on our
leases from January 1st to July 1st. We performed some completion work in two
stages during the 3rd quarter and finished the remainder of the operations,
including completion work, stimulation and testing of the well, during the
4th quarter of 2008. Substantially all the drilling activity on our leases
during 2007 and 2008 was financed under farm-out agreements with other entities,
and we expect that to continue, although there is no guarantee we will enter
additional farm-out agreements.
 
 2008 vs.
2007
 
 During 2007, two wells were drilled
on our leases under two farm-out agreements and completion efforts were carried
out on one of those wells in 2008.  Substantially all drilling costs
were financed by our farm-out partner.  We also continued to seek
additional leases and prospects as well as capital partners with whom to
drill.  However, we did not recognize any revenue in 2007 or
2006.  Our net loss for 2008 was $(546,000) compared to a net loss of
$(690,000) for 2007.
 
 For 2008 and 2007, we focused on
seeking other entities to drill wells on our leases and in drilling
wells.  Our expenses did not change significantly in 2008 from 2007,
except we wrote off our well drilling costs of $53,000 in 2007.  Our
expenses consist of administrative corporate and regulatory costs, and the
administrative, travel, and lodging costs to conduct drilling operations in
Montana.
 
 Item
7A.          Quantitative and Qualitative
Disclosure About Market Risk
 
 Not applicable.
  19
  Item
8.    Financial Statements and
Supplementary Data
 
 Report
of Independent Registered Public Accounting Firm
 
 To the
Board of Directors
 Coastal
Caribbean Oils & Minerals, Ltd.
 Apalachicola,
Florida
 
 We have
audited the consolidated balance sheets of Coastal Caribbean Oils &
Minerals, Ltd. and subsidiary as of December 31, 2008 and 2007, and the related
consolidated statements of operations, cash flows and common stock and capital
in excess of par value, for the years then ended, and for the period from
January 31, 1953 (inception) to December 31, 2008.  These consolidated
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (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 audit provided 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. and subsidiary as of December 31, 2008 and
2007, and the results of their operations and cash flows for the years then
ended, and for the period from January 31, 1953 (inception) to December 31,
2008, in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  As discussed in Note 1 to
the consolidated financial statements, the Company suffered recurring losses
from operations and has not yet realized any revenues from development
activities.  This raises substantial doubt about the Company’s ability
to continue as a going concern.  The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
 
 We were
not engaged to examine management’s assertion about the effectiveness of Coastal
Caribbean Oils & Minerals, Ltd’s internal control over financial reporting
as of December 31, 2008  included in the accompanying Management’s annual report on
internal control over financial reporting and, accordingly, we do not
express an opinion thereon.
 
 /s/
Baumann, Raymondo & Company PA
 Tampa,
Florida
 March 27,
2009
  20
  COASTAL CARIBBEAN OILS &
MINERALS, LTD.
 (A
Bermuda Corporation)
 A
Development Stage Company
 
 CONSOLIDATED
BALANCE SHEETS
 (Expressed
in U.S. dollars)
 
 December
      31,2008
                                    
                                    
                                    2007AssetsCurrent
      assets:Cash
      and cash equivalents
                                    
                                    $
                                    752
                                    
                                    
                                    $
                                    30,264Prepaid
      expenses and other
                                    
                                    
                                    -
                                    
                                    
                                    
                                    30,040Total
      current assets
                                    
                                    
                                    752
                                    
                                    
                                    
                                    60,304Certificates
      of deposit
                                    
                                    
                                    84,765
                                    
                                    
                                    
                                    135,364Petroleum
      leases
                                    
                                    
                                    2,200,475
                                    
                                    
                                    
                                    2,168,293Equipment,
      net
                                    
                                    
                                    6,415
                                    
                                    
                                    
                                    8,935___________
                                    
                                    
                                    ___________Total
      assets
                                    
                                    $
                                    2,292,407
                                    
                                    
                                    $
                                    2,372,896Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Accounts
      payable and accrued liabilities
                                    
                                    $
                                    58,885
                                    
                                    
                                    $
                                    11,125Amounts
      due to related parties
                                    
                                    
                                    758,021
                                    
                                    
                                    
                                    348,208Total
      current liabilities
                                    
                                    
                                    816,906
                                    
                                    
                                    
                                    359,333Shareholders'
      equity:Common
      stock, par value $.12 per share:Authorized
      – 250,000,000 sharesOutstanding
      – 46,261,604 and 46,211,604 shares, respectively
                                    
                                    
                                    5,551,392
                                    
                                    
                                    
                                    5,545,392Capital
      in excess of par value
                                    
                                    
                                    32,139,311
                                    
                                    
                                    
                                    32,137,81137,690,703
                                    
                                    
                                    
                                    37,683,203Deficit
      accumulated during the development stage
                                    
                                    
                                    (36,215,202
                                    )
                                    
                                    
                                    (35,669,640
                                    )Total
      shareholders’ equity
                                    
                                    
                                    1,475,501
                                    
                                    
                                    
                                    2,013,563Total
      liabilities and shareholders’ equity
                                    
                                    $
                                    2,292,407
                                    
                                    
                                    $
                                    2,372,896
 
 See
accompanying notes.
  21


COASTAL
CARIBBEAN OILS & MINERALS, LTD.


(A
Bermuda Corporation)


A
Development Stage Company





CONSOLIDATED
STATEMENTS OF OPERATIONS


(Expressed
in U.S. Dollars)





Years Ended December 31,
              
              
              For the period
                  from Jan. 31,
                  1953
                  (inception) to
                  Dec. 31, 20082008
              
              
              2007Gain
      on settlement
              
              $
              -
              
              
              $
              -
              
              
              $
              8,124,016Interest
      and other income
              
              
              4,057
              
              
              
              10,270
              
              
              
              3,983,9714,057
              
              
              
              10,270
              
              
              
              12,107,987Expenses:Legal
      fees and costs
              
              
              152,793
              
              
              
              159,659
              
              
              
              17,571,688Administrative
      expenses
              
              
              262,500
              
              
              
              330,938
              
              
              
              10,844,721Salaries
              
              
              125,000
              
              
              
              135,400
              
              
              
              4,271,431Shareholder
      communications
              
              
              9,326
              
              
              
              22,185
              
              
              
              4,125,021Goodwill
      impairment
              
              
              -
              
              
              
              -
              
              
              
              801,823Write
      off of unproved properties
              
              
              -
              
              
              
              52,576
              
              
              
              6,690,752Exploration
      costs
              
              
              -
              
              
              
              -
              
              
              
              188,218Lawsuit
      judgments
              
              
              -
              
              
              
              -
              
              
              
              1,941,916Minority
      interests
              
              
              -
              
              
              
              -
              
              
              
              (632,974
              )Other
              
              
              -
              
              
              
              -
              
              
              
              364,865Contractual
      services
              
              
              -
              
              
              
              -
              
              
              
              2,155,728549,619
              
              
              
              700,758
              
              
              
              48,323,189Net
      loss before income taxes
              
              
              (545,562
              )
              
              
              (690,488
              )
              
              
              (36,215,202
              )Income
      tax benefit
              
              
              -
              
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (545,562
              )
              
              $
              (690,488
              )Deficit
      accumulated during the development stage
              
              
              
              
              
              
              
              
              
              $
              (36,215,202
              )Net
      loss per share based on weighted average number of shares outstanding
      during the period:Basic
      and diluted EPS
              
              $
              (.01
              )
              
              $
              (.01
              )Weighted
      average number of shares outstanding (basic and diluted)
              
              
              46,249,960
              
              
              
              46,211,604





See
accompanying notes.


22


COASTAL
CARIBBEAN OILS & MINERALS, LTD.


(A
Bermuda Corporation)


A
Development Stage Company





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Expressed
in U.S. Dollars)





Years Ended December 31,
              
              
              For the period
                fromJan. 31,
                1953(inception)
                to2008
              
              
              2007
              
              
              Dec.
      31, 2008Operating
      activities:Net
      loss
              
              $
              (545,562
              )
              
              $
              (690,488
              )
              
              $
              (36,215,202
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Gain
      on settlement
              
              
              -
              
              
              
              -
              
              
              
              (8,124,016
              )Goodwill
      impairment
              
              
              -
              
              
              
              -
              
              
              
              801,823Minority
      interest
              
              
              -
              
              
              
              -
              
              
              
              (632,974
              )Depreciation
              
              
              2,520
              
              
              
              2,520
              
              
              
              6,558Write
      off of unproved properties
              
              
              -
              
              
              
              52,576
              
              
              
              6,690,752Common
      stock issued for services
              
              
              -
              
              
              
              -
              
              
              
              119,500Compensation
      recognized for stock option grant
              
              
              -
              
              
              
              -
              
              
              
              75,000Recoveries
      from previously written off properties
              
              
              -
              
              
              
              -
              
              
              
              252,173Net
      change in:Prepaid
      expenses and other
              
              
              30,041
              
              
              
              (785
              )
              
              
              -Accounts
      payable and accrued liabilities
              
              
              457,572
              
              
              
              354,011
              
              
              
              816,907Income
      taxes payable
              
              
              -
              
              
              
              -
              
              
              
              -Net
      cash used in operating activities
              
              
              (55,429
              )
              
              
              (282,166
              )
              
              
              (36,209,479
              )Investing
      activities:Additions
      to oil, gas, and mineral properties net of assets acquired for common
      stock and reimbursements
              
              
              (250,163
              )
              
              
              (263,098
              )
              
              
              (6,453,252
              )Well
      drilling costs
              
              
              -
              
              
              
              (52,576
              )
              
              
              (1,071,011
              )Sale
      of unproved nonoperating interests
              
              
              217,981
              
              
              
              294,614
              
              
              
              512,595Net
      proceeds from settlement
              
              
              -
              
              
              
              -
              
              
              
              8,124,016Proceeds
      from relinquishment of surface rights
              
              
              -
              
              
              
              -
              
              
              
              246,733Purchase
      of certificates of deposit
              
              
              (4,056
              )
              
              
              (9,051
              )
              
              
              (139,420
              )Redemption
      of certificate of deposit
              
              
              54,655
              
              
              
              -
              
              
              
              54,655Purchase
      of Minority interest in subsidiary
              
              
              -
              
              
              
              -
              
              
              
              (801,823
              )Purchase
      of equipment
              
              
              -
              
              
              
              -
              
              
              
              (74,623
              )Net
      cash provided by (used in) investing activities
              
              
              18,417
              
              
              
              (30,111
              )
              
              
              397,870Financing
      activities:Loans
      from Officers
              
              
              -
              
              
              
              -
              
              
              
              111,709Repayment
      of loans to officers
              
              
              -
              
              
              
              -
              
              
              
              (111,709
              )Sale
      of common stock, net of expenses
              
              
              -
              
              
              
              -
              
              
              
              30,380,612Shares
      issued upon exercise of options
              
              
              7,500
              
              
              
              -
              
              
              
              891,749Sale
      of shares by subsidiary
              
              
              -
              
              
              
              -
              
              
              
              820,000Sale
      of subsidiary shares
              
              
              -
              
              
              
              -
              
              
              
              3,720,000Net
      cash provided by financing activities
              
              
              7,500
              
              
              
              -
              
              
              
              35,812,361Net
      (decrease) increase in cash and
cash  equivalents
              
              
              (29,512
              )
              
              
              (312,277
              )
              
              
              752Cash
      and cash equivalents at beginning of period
              
              
              30,264
              
              
              
              342,541
              
              
              
              -Cash
      and cash equivalents at end of period
              
              $
              752
              
              
              $
              30,264
              
              
              $
              752




See
accompanying notes.


23


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)


For the
period from January 31, 1953 (inception) to December 31, 2008




Capital inNumber of
                        
                        
                        Common
                        
                        
                        ExcessShares
                        
                        
                        Stock
                        
                        
                        of Par ValueShares
      issued for net assets and unrecovered costs at inception
                        
                        
                        5,790,210
                        
                        
                        $
                        579,021
                        
                        
                        $
                        1,542,868Sales
      of common stock
                        
                        
                        26,829,486
                        
                        
                        
                        3,224,014
                        
                        
                        
                        16,818,844Shares
      issued upon exercise of stock options
                        
                        
                        510,000
                        
                        
                        
                        59,739
                        
                        
                        
                        799,760Market
      value ($2.375 per share) of shares issued in 1953 to acquire an
      investment
                        
                        
                        54,538
                        
                        
                        
                        5,454
                        
                        
                        
                        124,074Shares
      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
                        
                        
                        
                        109,827Net
      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
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        117,025Balance
      at December 31, 1990
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        19,395,084Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        300,000Balance
      at December 31, 1991
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        19,695,084Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        390,000Balance
      at December 31, 1992
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        20,085,084Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,080,000Balance
      at December 31, 1993
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        21,165,084Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        630,000Balance
      at December 31, 1994
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        21,795,084Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        600,000Balance
      at December 31, 1995
                        
                        
                        33,363,632
                        
                        
                        
                        4,003,636
                        
                        
                        
                        22,395,084Sale
      of common stock
                        
                        
                        6,672,726
                        
                        
                        
                        800,727
                        
                        
                        
                        5,555,599Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        480,000Exercise
      of stock options
                        
                        
                        10,000
                        
                        
                        
                        1,200
                        
                        
                        
                        12,300Balance
      at December 31, 1996
                        
                        
                        40,046,358
                        
                        
                        
                        4,805,563
                        
                        
                        
                        28,442,983Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        240,000Exercise
      of stock options
                        
                        
                        10,000
                        
                        
                        
                        1,200
                        
                        
                        
                        10,050Balance
      at December 31, 1997,1998 and 1999
                        
                        
                        40,056,358
                        
                        
                        
                        4,806,763
                        
                        
                        
                        28,693,033Sale
      of common stock
                        
                        
                        3,411,971
                        
                        
                        
                        409,436
                        
                        
                        
                        2,729,329Compensation
      recognized for stock option grant
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        75,000Balance
      at December 31, 2000 and 2001
                        
                        
                        43,468,329
                        
                        
                        
                        5,216,199
                        
                        
                        
                        31,497,362Sale
      of common stock
                        
                        
                        2,743,275
                        
                        
                        
                        329,193
                        
                        
                        
                        570,449Balance
      as of December 31, 2002
                        
                        
                        46,211,604
                        
                        
                        
                        5,545,392
                        
                        
                        
                        32,067,811Sale
      of subsidiary shares
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        70,000Balance
      as of December 31, 2003 through 2007
                        
                        
                        46,211,604
                        
                        
                        
                        5,545,392
                        
                        
                        
                        32,137,811Exercise
      of stock options
                        
                        
                        50,000
                        
                        
                        
                        6,000
                        
                        
                        
                        1,500Balance
      as of December 31, 2008
                        
                        
                        46,261,604
                        
                        
                        $
                        5,551,392
                        
                        
                        $
                        32,139,311





See
accompanying notes.


24


1.
            Summary of significant accounting policies





Consolidation





The
accompanying consolidated financial statements include the accounts of Coastal
Caribbean Oils & Minerals, Ltd., a Bermuda corporation (“Coastal Caribbean”)
and its wholly owned subsidiary, Coastal Petroleum Company (“Coastal
Petroleum”), referred to collectively as the Company.  The Company,
which has been 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.  Certain prior year amounts have
been reclassified to conform with the current year presentation.





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.





Equipment





Equipment
is recorded at cost. Depreciation is provided using straight-line over five
years, the estimated useful lives of the assets.





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 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, Gas and
Mineral Properties





The
Company follows the full cost method of accounting for its oil and gas
properties.  All costs associated with property acquisition,
exploration and development activities whether successful or unsuccessful are
capitalized.




Once the
Company has proved reserves the capitalized costs will be subject to a ceiling
test which basically limits such costs to the aggregate of the estimated present
value discounted at a 10% rate of future net revenues from proved reserves,
based on current economic and operating conditions.  Currently the
capitalized costs are carried at the lower of cost or fair market value of
unproved properties.





The
Company assesses whether its unproved properties are impaired on a periodic
basis.  This assessment is based upon work completed on the properties
to date, the expiration date of its leases and technical data from the
properties and adjacent areas.  As of December 31, 2008, no impairment
existed.  Sales of unproved nonoperating interests in oil and gas
leases are accounted for as a reduction in the capitalized amount of the
leases.





Sale of Subsidiary
Shares





All
amounts realized from the sale of Coastal Petroleum shares have been credited to
capital in excess of par value.





Net Income (Loss) Per
Share





Net
income (loss) 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.


25





1.           
Summary of significant accounting policies
(Cont'd)





Financial
instruments





The
carrying value for cash and cash equivalents, certificates of deposit, and
accounts payable approximates fair value based on anticipated cash flows and
current market conditions.





Stock Based
Compensation





The
Company uses the fair value based method of accounting for its stock option
plans. Effective January 1, 2006, the Company adopted SFAS No. 123 (Revised
2004), Share-Based
Payments, which requires companies to expense stock options and other
share-based payments. SFAS No. 123R supersedes SFAS No. 123, which permitted
either expensing stock options or providing pro forma disclosure. The Company
adopted the modified prospective application transition method as proscribed by
SFAS No. 123R, which applies to all new awards and to awards granted, modified,
canceled, or repurchased after January 1, 2006, as well as the unvested portion
of the prior awards.  The adoption of SFAS No. 123R resulted in no
changes to the 2006 or prior financial statement amounts or
disclosures.





New Accounting
Pronouncements





The
Financial Accounting Standards Board (“FASB”) has issued several new standards
which have implementation dates subsequent to the Company’s year
end.  Management does not believe that any of these new standards will
have a material impact on the Company’s financial position, results of
operations or cash flows.





Going
Concern





The
Company has no recurring revenues, had recurring losses since 2006 and prior to
2005, and has a deficit accumulated during the development stage.  The
Company's current cash position is not adequate to fund existing operations or
exploration and development of its oil and gas properties.  Curently,
management is actively pursuing funding to allow the Company to undertake
exploration efforts on its own.  The Company


has had
contact with several parties interested in investing in the Company so that the
Company could explore its leases on its own.  In addition, the Company
has been in contact with other parties interested in working with the Company,
in buying some of the Company’s leases or in buying an interest in those
leases.  There is no assurance that the Company will be able to obtain
any funding, that sufficient funding can be obtained, or that the Company will
be able to raise necessary funds through the sale of some of its leases or
interests in those leases.





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, which may
result from the outcome of this uncertainty.





2.          
 Unproved Oil,
Gas and Mineral Properties





Farm-out Agreements and
Drilling Activity





In May
2008, the Company entered an agreement with Cobra Oil and Gas
(“Cobra”).  Under the agreement, Cobra paid Coastal $180,000 for the
option to acquire a half interest in approximately 78,000 acres of Coastal’s
Valley County Leases.  The agreement allowed the Company to pay its
Lease rentals that were due June 1st and
brings in a new party to explore on the Leases. Cobra will have two years to
exercise the option by spending $1,000,000 on behalf of the Company, drilling
wells on the leases under the agreement.  Those leases include
approximately 62,000 acres of leases that were formally under an agreement with
F-Cross Resources (“F-Cross”) that expired earlier this year and more than
17,000 acres of other leases Coastal held in Valley County.


26




2.           
Unproved Oil, Gas
and MineralProperties
(Cont'd)




In August
2007, the Company entered into a farm-out agreement with Western Standard Energy
Corp. (“Western Standard”) Under the agreement Western Standard paid $40,000 up
front to Coastal and then paid an additional $255,000 to cover the costs of
drilling the first well to test a shallow natural gas prospect in Valley
County, Montana and $129,000 to cover associated lease rentals. The Company did
not record the receipt of the $255,000 or the cost of the associated well and
recorded the remaining $169,000 as a reduction in capitalized petroleum lease
costs.  The Agreement expired in 2008 when Western Standard did not
exercise its option under the Agreement.





The first
well under this agreement was drilled during October 2007, to test a shallow
natural gas prospect near the middle of the Company’s Valley County
Leases.  The well reached a total depth of 1,126 feet, and confirmed
the structural high that the Company believed to be there.  The well
also had gas shows in two zones.  Casing was run into the hole and
operations to complete and test the well were delayed but took place in
2008.  The Company also received an additional $29,000 from Western
Standard to cover additional drilling and other costs associated with the delay
in well completion, which has been recorded as a reduction in capitalized
petroleum lease costs.  Western Standard also paid the estimated well
completion costs of $65,000 before operations began in 2008.  The
completion efforts revealed that the well had been damaged and could not be
tested.  Once completion efforts were finished on the well, Western
Standard had 30 days to exercise its option to purchase a 50% interest in the
leases, but did not so exercise.





In
September 2007, the Company received $50,000 from F-Cross when the two parties
entered into a farm-out agreement covering approximately 64,000 acres on the
northwest part of the Company’s Valley County Leases. Under the agreement,
F-Cross had the option to drill a Lodgepole test well within six months and
after drilling that well had the further option to acquire an interest in
surrounding acreage. F-Cross was to pay for the cost of drilling the initial
well and receive a 100% working interest in the well until payout and an 80%
working interest subsequent to payout with the Company retaining the other 20%.
The first Lodgepole test well was spudded on November 3, 2007 and drilling has
finished, but the well is awaiting completion and testing of several zones which
have potential for both oil and gas.  However, F-Cross did not meet
the requirements in the agreement and in late March the option to acquire an
interest in additional acreage expired, leaving F-Cross with rights only in the
section in which it drilled the well.





During
2006, the Company drilled one well and participated in the drilling of a second
well, neither of which proved economic quantities of oil or gas, and expensed
the $53,000 and $1,018,000 of drilling costs in 2007 and 2006,
respectively.  The Company’s initial well in Blaine County, Montana in
January 2006 hit the target Lodgepole reef, but the reef had been flushed with
fresh water. Several other formations were tested and while gas was encountered,
the well did not contain economic quantities of oil or gas. The Company expensed
$800,000 in drilling costs related to this well in 2006. This well was abandoned
by the Company.





The
Company also participated in and acted as operator in a twin well to the only
known well to produce from the Lodgepole in Montana. The targeted Lodgepole reef
contained oil, but not in sufficient quantities to be economical for the Company
to develop. Likewise, an uphole test of the Mission Canyon Formation returned
oil, but not in sufficient quantities to be economical for the Company to
develop. The Company’s participation costs in the twin well were approximately
$245,000, which was expensed in the fourth quarter of 2006. The total cost of
the well was approximately $1,360,000.  There are approximately
$115,000 in unpaid expenses related to this well that are collectively the
responsibility of the various partners.  This amount is not reflected
as a liability in the accompanying financial statements.  This well
was abandoned.





Montana
Leases





The
Company’s primary presence in Montana is in Valley County, where it holds leases
covering approximately 114,832 net acres (87,415 net acres after approximately
27,417 net acres expired in March 2009), which are the remaining unexpired
leases from those leases the Company acquired in three separate acquisitions
between July 2005 and February 2006. The leases acquired in those acquisitions
are contiguous to each other and are referred to collectively as “the Valley
County Leases.”


27




2.           
Unproved Oil, Gas
and MineralProperties
(Cont'd)


The first
acquisition of the Valley County Leases was in July 2005, when the Company
acquired the rights to drill two 6,500 foot wells to test Mississippian
Lodgepole reefs in Valley County, in northeast Montana for a one time fee of
$50,000 from an entity controlled by one of the Company’s
Directors. That acquisition included a small amount of acreage and the option to
drill fifty additional prospects in the Valley County area.





The
second acquisition of the Valley County Leases was in November 2005, when the
Company acquired a group of oil and gas lease rights to approximately 109,423
net acres in eastern Montana for $1,568,000 from EOG Resources, Inc. and Great
Northern Gas Company. These leases are subject to various overriding royalty
interests to others ranging up to 19.5%. These leases expire in years from 2007
to 2014.





The final
acquisition of acreage within the Valley County Leases was in February 2006,
when the Company acquired additional oil and gas leases in eastern Montana
covering 27,740 net acres contiguous to its existing Montana leases. These
leases were acquired from the Bureau of Land Management and United States
Department of the Interior.





The
Company borrowed $126,000 in May 2007 to pay its lease obligations that were due
in June 2007. The note required the loan to be repaid prior to the Company
spudding the first well on any of the approximately 42,000 acres its leases
covered by the loan agreement. Coastal assigned a 5% overriding royalty interest
(before all expenses) in 8/8ths of the oil or natural gas produced from those
Valley County Montana leases to the lender. The loan was repaid on October 15,
2007, prior to the spudding of the first well on the acreage, out of the money
advanced by Western Standard to cover lease rentals under their agreement with
the Company.





North Dakota
Leases





In July
2005, the Company acquired leases to the deeper rights in approximately 21,688
net acres in and near Slope County, North Dakota for a one time fee of $50,000
from an entity controlled by one of the Company’s Directors and the Company has
invested some additional funds to geochemically test and high-grade these and
other prospects on the leases. Since that time, some of the leases have expired
and the Company currently holds leases on approximately 8,748 gross and 8,510
net acres in North Dakota. The Company is obligated to drill a test well on the
original leases totaling 7,031.08 acres before June 1, 2009, and has the option
to drill the remaining Lodgepole Reef prospects on these leases. The Company had
intended to team with other entities to share the cost of the initial 9,700 foot
test well, the total estimated drilling cost of which is estimated to be
$1,500,000, however, it is unlikely that the Company will be able to identify
and contract with a team prospect prior to the expiration date. The leases
making up the remaining acreage were leased by the Company and have no
obligation associated with them. The Company is actively seeking funding
sufficient to allow it to explore its lease on its own.





In an effort to explore the North
Dakota leases, in December of 2008 the Company entered a new farm-out agreement
with Western Standard.  Under the agreement, the Company assigned
leases over four of its high-graded Lodgepole Reef prospects to Western Standard
in return for $80,000. The Company received $40,000 in November 2007, $25,000 in
February 2008 and received the other $15,000 in April of 2008, which was
recorded as a reduction in capitalized petroleum lease costs.  The
Company will also retain a back-in working interest of 20% in the leases after
payout.  Oil For America has agreed to waive the drilling obligation
on these four prospects.  The Company still retains additional
Lodgepole reef prospects on its North Dakota leases that are not covered by this
farm-out agreement.





(Intentionally
left blank.)


28


3.           
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
following represents shares issued upon sales of common stock:





Number
                  
                  
                  Common
                  
                  
                  Capital in ExcessYear
                  
                  of Shares
                  
                  
                  Stock
                  
                  
                  of Par Value1953
                  
                  
                  300,000
                  
                  
                  $
                  30,000
                  
                  
                  $
                  654,0001954
                  
                  
                  53,000
                  
                  
                  
                  5,300
                  
                  
                  
                  114,2651955
                  
                  
                  67,000
                  
                  
                  
                  6,700
                  
                  
                  
                  137,9371956
                  
                  
                  77,100
                  
                  
                  
                  7,710
                  
                  
                  
                  139,5481957
                  
                  
                  95,400
                  
                  
                  
                  9,540
                  
                  
                  
                  152,4921958
                  
                  
                  180,884
                  
                  
                  
                  18,088
                  
                  
                  
                  207,1351959
                  
                  
                  123,011
                  
                  
                  
                  12,301
                  
                  
                  
                  160,7511960
                  
                  
                  134,300
                  
                  
                  
                  13,430
                  
                  
                  
                  131,4311961
                  
                  
                  127,500
                  
                  
                  
                  12,750
                  
                  
                  
                  94,0771962
                  
                  
                  9,900
                  
                  
                  
                  990
                  
                  
                  
                  8,0361963
                  
                  
                  168,200
                  
                  
                  
                  23,548
                  
                  
                  
                  12,0411964
                  
                  
                  331,800
                  
                  
                  
                  46,452
                  
                  
                  
                  45,0441965
                  
                  
                  435,200
                  
                  
                  
                  60,928
                  
                  
                  
                  442,3911966
                  
                  
                  187,000
                  
                  
                  
                  26,180
                  
                  
                  
                  194,1871967
                  
                  
                  193,954
                  
                  
                  
                  27,153
                  
                  
                  
                  249,6081968
                  
                  
                  67,500
                  
                  
                  
                  9,450
                  
                  
                  
                  127,4681969
                  
                  
                  8,200
                  
                  
                  
                  1,148
                  
                  
                  
                  13,5321970
                  
                  
                  274,600
                  
                  
                  
                  32,952
                  
                  
                  
                  117,1541971
                  
                  
                  299,000
                  
                  
                  
                  35,880
                  
                  
                  
                  99,2021972
                  
                  
                  462,600
                  
                  
                  
                  55,512
                  
                  
                  
                  126,1851973
                  
                  
                  619,800
                  
                  
                  
                  74,376
                  
                  
                  
                  251,2021974
                  
                  
                  398,300
                  
                  
                  
                  47,796
                  
                  
                  
                  60,0071975
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (52,618
                  )1976
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (8,200
                  )1977
                  
                  
                  850,000
                  
                  
                  
                  102,000
                  
                  
                  
                  1,682,7061978
                  
                  
                  90,797
                  
                  
                  
                  10,896
                  
                  
                  
                  158,3431979
                  
                  
                  1,065,943
                  
                  
                  
                  127,914
                  
                  
                  
                  4,124,0631980
                  
                  
                  179,831
                  
                  
                  
                  21,580
                  
                  
                  
                  826,7631981
                  
                  
                  30,600
                  
                  
                  
                  3,672
                  
                  
                  
                  159,3601983
                  
                  
                  5,318,862
                  
                  
                  
                  638,263
                  
                  
                  
                  1,814,6421985
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (36,220
                  )1986
                  
                  
                  6,228,143
                  
                  
                  
                  747,378
                  
                  
                  
                  2,178,4711987
                  
                  
                  4,152,095
                  
                  
                  
                  498,251
                  
                  
                  
                  2,407,5221990
                  
                  
                  4,298,966
                  
                  
                  
                  515,876
                  
                  
                  
                  26,3191996
                  
                  
                  6,672,726
                  
                  
                  
                  800,727
                  
                  
                  
                  5,555,5992000
                  
                  
                  3,411,971
                  
                  
                  
                  409,436
                  
                  
                  
                  2,729,3292002
                  
                  
                  2,743,275
                  
                  
                  
                  329,193
                  
                  
                  
                  570,44939,657,458
                  
                  
                  $
                  4,763,370
                  
                  
                  $
                  25,674,221





The following represents shares issued
upon exercise of stock options:





Number
                  
                  
                  Common
                  
                  
                  Capital in ExcessYear
                  
                  of Shares
                  
                  
                  Stock
                  
                  
                  of Par Value1955
                  
                  
                  73,000
                  
                  
                  $
                  7,300
                  
                  
                  $
                  175,2001978
                  
                  
                  7,000
                  
                  
                  
                  840
                  
                  
                  
                  6,1601979
                  
                  
                  213,570
                  
                  
                  
                  25,628
                  
                  
                  
                  265,6191980
                  
                  
                  76,830
                  
                  
                  
                  9,219
                  
                  
                  
                  125,2331981
                  
                  
                  139,600
                  
                  
                  
                  16,752
                  
                  
                  
                  227,5481996
                  
                  
                  10,000
                  
                  
                  
                  1,200
                  
                  
                  
                  12,3001997
                  
                  
                  10,000
                  
                  
                  
                  1,200
                  
                  
                  
                  10,0502008
                  
                  
                  50,000
                  
                  
                  
                  6,000
                  
                  
                  
                  1,500580,000
                  
                  
                  $
                  68,139
                  
                  
                  $
                  823,610


29





4.           
Stock Option
Plans





At
December 31, 2008, the Company maintains two stock-based employee compensation
plans.




During
1995, the Company adopted a Stock Option Plan covering 1,000,000 shares of the
Company’s common stock. In July 2005, the Company issued an option to its
president to acquire 50,000 shares of the Company’s common stock at a price of
$.15 per share under the Company’s stock option plan. The option expires in ten
years and was fully vested when issued. The Company determined the fair value of
the stock did not exceed the exercise price on the date of issue and no expense
was recorded in 2005.





Unexercised
options that existed prior to the 2005 Agreement with the State of Florida were
terminated by the Agreement or the releases exchanged during the process of
closing that Agreement.





In
December 2005, the Company issued options to its directors to acquire 200,000
shares of the Company’s common stock at a price of $.15 per share. The option
expires in December 2015 and was fully vested when issued.  The
Company determined the fair value of the stock did not exceed the exercise price
on the date of issue.





During
2005, the Company adopted a Stock Option Plan covering 2,300,000 shares of the
Company’s common stock. In September 2005, the Company issued an option to its
president to acquire 250,000 shares of the Company’s common stock at a price of
$.20 per share under the Company’s stock option plan, subject to the approval of
the Plan by shareholders.  The Plan was approved at the shareholders
meeting on December 9, 2005. The option expires in ten years and was fully
vested when issued. The Company determined the fair value of the stock did not
exceed the exercise price on the date of issue.





Effective
January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), Share-Based Payments, which
requires companies to expense stock options and other share-based payments. The
Company did not issue any stock options or share-based payments in 2007 or in
2008.





The
following table summarizes employee stock option activity:





Employee Options outstanding
                                        
                                        Number of
                                          Shares
                                        
                                        
                                        Range of
                                          Per Share
                                          Option Price
                                          ($)
                                        
                                        
                                        Weighted
                                          Average
                                          Exercise
                                          Price ($)
                                        
                                        
                                        Aggregate
                                          Option Price
                                          ($)Outstanding
      and exercisable at December 31, 2006
                                        
                                        
                                        500,000
                                        
                                        
                                        
                                        .15
      - .20
                                        
                                        
                                        
                                        .19
                                        
                                        
                                        
                                        87,500Issued
      or cancelled during 2007
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Outstanding
      and exercisable at December 31, 2007
                                        
                                        
                                        500,000
                                        
                                        
                                        
                                        .15
      - .20
                                        
                                        
                                        
                                        .19
                                        
                                        
                                        
                                        87,500Exercised
      during 2008
                                        
                                        
                                        (50,000
                                        )
                                        
                                        
                                        (.15
                                        )
                                        
                                        
                                        (.15
                                        )
                                        
                                        
                                        (7,500
                                        )Issued
      or cancelled during 2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Outstanding
      and exercisable at December 31, 2008
                                        
                                        
                                        450,000
                                        
                                        
                                        
                                        .15
      - .20
                                        
                                        
                                        
                                        .17
                                        
                                        
                                        
                                        80,000Available for grant at December 31,
      2008
                                        
                                        
                                        2,775,000


30





4.         
  Stock
Option Plans (Cont'd)





Summary of Employee Options
Outstanding at December 31, 2008





Year Granted
                
                Number of Shares
                
                Expiration Date
                
                Exercise Prices
                  ($)Granted
      2005
                
                
                50,000
                
                July
      25, 2015
                
                
                .15Granted
      2005
                
                
                250,000
                
                September
      27, 2015
                
                
                .20Granted
      2005
                
                
                150,000
                
                December
      20, 2015
                
                
                .15





The
weighted-average remaining contractual life of the outstanding stock options at
December 31, 2008, and 2007 was 7 years and 8 years,
respectively.





Nonqualified Stock
Options





In July
2005, the Company issued an option to its legal counsel to acquire 25,000 shares
of the Company’s common stock at a price of $.15 per share. The option expires
in July 2015 and was fully vested when issued. The market value of the stock
equaled the exercise price on the date of issue.





A summary
of non-employee option activity follows:





Non-Employee Options outstanding
                    
                    Number of
                      Shares
                    
                    
                    Range of
                      Per Share
                      Option Price
                      ($)
                    
                    
                    Weighted
                      Average
                      Exercise
                      Price ($)
                    
                    
                    Aggregate
                      Option Price
                      ($)Outstanding
      and exercisable at December 31, 2006
                    
                    
                    25,000
                    
                    
                    
                    .15
                    
                    
                    
                    .15
                    
                    
                    
                    3,750Issued
      or cancelled during 2007
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      and exercisable at December 31, 2007
                    
                    
                    25,000
                    
                    
                    
                    .15
                    
                    
                    
                    .15
                    
                    
                    
                    3,750Issued
      or cancelled during 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      and exercisable at December 31, 2008
                    
                    
                    25,000
                    
                    
                    
                    .15
                    
                    
                    
                    .15
                    
                    
                    
                    3,750





Effective
January 1, 2006, the Company adopted SFAS No. 123 (Revised 2004), Share-Based Payments, which
requires companies to expense stock options and other share-based payments. The
Company did not issue any stock options or share-based payments to non-employees
in 2006 or in 2007.





The
following table summarizes information about non-employee stock
options:





Summary of Non Employee
Options Outstanding at December 31, 2008





Year Granted
                
                Number of Shares
                
                Expiration Date
                
                Exercise Prices
                  ($)Granted
      2005
                
                
                25,000
                
                July
      25, 2015
                
                
                .15


31





5.          
 Income taxes





The
Company is organized under the laws of Bermuda.  Bermuda currently
imposes no taxes on corporate income or capital gains outside of
Bermuda.  The Company’s subsidiary is a U.S. corporation and is
subject to U.S. income tax and files income tax returns in the U.S. and the
State of Florida.  For 2008 and 2007, the subsidiary has net taxable
loss.  The subsidiary will have approximately $10,000,000 in net
operating losses to carry forward to 2009.  The remaining net
operating loss carry forwards expire in periods from 2009 through 2028 as
follows: $62,000 in 2009, $571,000 in 2010, $955,000 in 2011, $1,281,000 in
2012, $757,000 in 2018, $622,000 in 2019, $749,000 in 2020, $1,884,000 in 2021,
$1,693,000 in 2022, $132,000 in 2023, $57,000 in 2024, $1,434,000 in 2026,
$195,000 in 2027, and $90,000 in 2028.  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:





December 31,2008
                    
                    
                    2007Net
      operating losses
                    
                    $
                    3,500,000
                    
                    
                    $
                    3,400,000Accruals
      to related parties
                    
                    
                    758,000
                    
                    
                    
                    75,000Total
      deferred tax assets
                    
                    
                    4,258,000
                    
                    
                    
                    3,475,000Valuation
      allowance
                    
                    
                    (4,258,000
                    )
                    
                    
                    (3,475,000
                    )Net
      deferred tax assets
                    
                    $
                    -
                    
                    
                    $
                    -





Components
of the income tax provision for the years ended December 31, are as
follows:




2008
                  
                  
                  2007Provision
      for income taxesCurrent
      provision (benefit) for income taxes
                  
                  $
                  (30,000
                  )
                  
                  $
                  (65,000
                  )Benefit
      of net operating loss
                  
                  
                  -
                  
                  
                  
                  -Deferred
      asset valuation allowance (reversal)
                  
                  
                  30,000
                  
                  
                  
                  65,000Net
      income tax provision (benefit)
                  
                  $
                  -
                  
                  
                  $
                  -





6.           
Related party
transactions





Oil and Gas Exploration
Activities





Pursuant
to a written agreement with respect to the Valley County Leases, the Company
uses an entity controlled by an individual who is a shareholder, officer and
director of the Company to perform geotechnical analysis of potential drilling
sites at a cost of $1,000 per site. The Company capitalized $2,000 paid to this
entity for the year ended December 31, 2007 and made no such payments for the
year ending December 31, 2008.





Services





The
Company expensed $144,000 and $144,000 in fees by Angerer & Angerer in 2008
and 2007, respectively. The Company owes $240,000 to Angerer & Angerer at
December 31, 2008.  Robert Angerer, Sr. was elected a director of
Coastal Caribbean and of Coastal Petroleum on January 30, 2003 and re-elected a
Vice President of Coastal Caribbean and Coastal Petroleum in December
2005.





The
Company expensed $8,193 and $16,062 for legal fees by the law firm of Igler
& Dougherty, PA, during 2008 and 2007, respectively.  The Company
owed Igler & Dougherty, PA $1,625 at December 31, 2008.  Mr.
Herbert D. Haughton, a shareholder of the firm, was elected a director of
Coastal Caribbean and of Coastal Petroleum in December 2005.


32





7.           
Concentrations of
credit risk





All
demand and certificate of deposits are held by commercial banks. The Company has
no policy requiring collateral or other security to support its deposits,
although all demand and certificate of deposits with banks are federally insured
up to $250,000 under FDIC protection. Demand deposit bank balances totaled $752
and $44,096 at December 31, 2008 and 2007, respectively. Certificate of
deposit balances were $84,765 and $135,364 at December 31, 2008 and 2007,
respectively.





Item
9.   Changes in and Disagreements
with Accountants on


Accounting and Financial
Disclosure




None





Item
9A.          Controls
and Procedures





a.
              Management’s
      annual report on internal control over financial
      reporting.





1.         Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934.  Our internal control over
financial reporting is a process designed to provide reasonable assurance that
assets are safeguarded against loss from unauthorized use or disposition,
transactions are executed in accordance with appropriate management
authorization and accounting records are reliable for the preparation of
financial statements in accordance with generally accepted accounting
principles.





2.         Internal
control over financial reporting is a process tailored to the Company’s unique
circumstances, designed under the supervision of the Company's Chief Executive
and Chief Financial Officer, and effected by the Company's Board of Directors,
its consultants and other personnel, taking into account the small size of the
Company, small number of employees and others involved in the Company’s
finances.  The process uses a system of checks and balances to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:





·           pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the Company's assets and the review
of those transactions and dispositions by the Company’s compliance
officer;





·           provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that the Company's receipts and expenditures are
being made only in accordance with authorizations of management or the Company's
Board of Directors; and





·           provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material adverse effect on the Company's financial statements.





The
Company’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2008. In making this
assessment, it used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated
Framework.


33





3.         As
required by Rule 13a-15(b) under the Exchange Act, management carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this report.
Based on that assessment, management believes that, as of December 31, 2008, the
Company’s internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f), is effective based on the COSO
criteria.





4.         This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.





b.
            Changes
      in internal controls. The Company made no changes in its internal
      control over financial reporting that occurred during the Company’s fourth
      fiscal quarter that has materially affected, or which is reasonably likely
      to materially affect the Company’s internal control over financial
      reporting.


34


PART III





Item 10. Directors and Executive
Officers of the Company





Directors





As of December 31, 2008, the board of
directors included three members, two of whom, Mr. Ware and Mr. Angerer, also
serve as executive officers.  In October of 2008, Directors Anthony
Randazzo and Matthew Cannon resigned, citing personal reasons.  Their
positions have not been filled and the board will remain divided into three
classes, with each class serving a term of office of three years or until such
time as their successors are elected, qualified, and assume
office.  One class currently has no directors.  The Company
has not held an annual meeting since the annual meeting held in December 2005
due to the high cost of holding such a meeting.  Therefore, the
directors whose terms expired at the annual meetings to be held in 2007 and 2008
continue to serve until their successors are elected and assume
office.





Director
                            
                            Other Offices Held
                            
                            Age and Business Experience For theName
                            
                            Since
                            
                            With the Company
                            
                            Past Five YearsDirectors
      With Three Year Terms Expiring at the 2008 Annual
  Meeting:Phillip
      W. Ware
                            
                            1985
                            
                            President,
      Chief
                              Executive
      Officer and
                              Principal
                              Accounting
      Officer
                            
                            Mr.
      Ware, age 59, has been employed by Coastal Petroleum Company since
      1976.  He has served as President of Coastal Petroleum since
      April 1985.   Mr. Ware is a 1975 graduate of the University
      of Florida and is a professional geologist registered with the State of
      Florida.Robert
      J. Angerer, Sr.*
                            
                            2003
                            
                            Vice
      President and
                              Chairman
      of the
                              Board
                            
                            Mr.
      Angerer, age 62, is a partner in Oil For America, an oil exploration
      business formed in 2002, with operations primarily in North Dakota and
      Montana. He is a lawyer and an engineer and has been a member of the
      Florida Bar since 1974.  He has been a partner in the
      Tallahassee law firm of Angerer & Angerer since 1994.  He is
      a graduate of the University of Michigan and of Florida State University
      College of Law.  He has served as a director of Coastal
      Petroleum since 2003.
 Directors
      With Two Year Terms Expiring at the 2007 Annual MeetingHerbert
      D. Haughton*
                            
                            2005
                            
                            None
                            
                            Mr.
      Haughton, age 67, is a banking, corporate and securities
      lawyer.  He is a shareholder in the Tallahassee, Florida law
      firm of Igler & Dougherty, PA, where he has practiced law since 1994,
      following his admission to the Florida Bar.  Prior to entering
      the practice of law, Mr. Haughton spent over 30 years in the banking
      industry serving as president and chief executive officer of three
      different community banks in Florida from 1977 to 1991.  He is a
      graduate of Cleary University and Florida State University College of
      Law.




*  Members
of the Bord of Directors Compensation Committee.





35




Executive
Officers





Phillip W. Ware has been President of
Coastal Petroleum and Vice President of Coastal Caribbean for many years and
became President of Coastal Caribbean effective March 1, 2003, and Robert J.
Angerer, Sr., became a director of Coastal Caribbean on January 30, 2003 and
Vice President of Coastal Caribbean on February 27, 2003.  Effective
August 18, 2005, Mr. Ware was appointed Principle Accounting
Officer.





Officers of Coastal Caribbean are
elected annually by the board and report directly to it.





Only Mr. Ware received direct
compensation for his services as an officer of Coastal Caribbean or Coastal
Petroleum.  During 2008, all $125,000 of Mr. Ware’s compensation for
his services was accrued.  Mr. Ware devotes 100% of his professional
time to the business and affairs of Coastal Caribbean and Coastal
Petroleum.  The other executive officer devotes a significant portion
of his professional time as an officer on behalf of the Companies.





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 except for the
father and son relationship between Mr. Angerer, Sr. and Robert J. Angerer, Jr.,
who serves as the Company’s Secretary.  Neither Robert J. Angerer, Sr.
or Robert J. Angerer, Jr. are paid a salary or other compensation by the Company
for this service as a Company officer.





Compliance with Section
16(a) of the Securities Exchange Act of 1934





Section
16(a) of the Securities Exchange Act of 1934 requires the Company's executive
officers, directors and persons who beneficially own more than 10% of the
Company's Common Stock to file initial reports of beneficial ownership and
reports of changes in beneficial ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by the SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by such
persons. Based solely on its copies of forms received by it, or written
representations from certain reporting  persons that no Form 5's were
required for those persons, the Company believes that during the just completed
fiscal year, its executive officers, directors, and greater than 10% beneficial
owners compiled with all applicable filing requirements.


36


Code of
Ethics





The Company has adopted a Code of
Ethics applicable to principle executive and financial officers.  The
Code of Ethics is posted on the Company’s website at www.coastalcarib.com
and may be reviewed by following the link entitled “Corporate Governance
Materials.”





Item
11.             Executive
Compensation





Compensation
Discussion and Analysis





Compensation
Philosophy





The
Company’s executive compensation program reflects the Company’s philosophy that
executive’s compensation should be structured so as to closely align executives’
interests with the interests of our shareholders. The primary objectives of the
Company in determining compensation are to emphasize operating performance
criteria that enhance shareholder value and to establish and maintain a
competitive executive compensation program that enables the Company to retain
and motivate a highly qualified executive who will contribute to the long-term
success of the Company. When used in this Compensation Discussion and Analysis
section, the term “named executive officer” means the person listed in the
Summary Compensation Table.





Consistent
with this philosophy, we seek to provide compensation for the named executive
officer that is similar to comparable companies in the oil and gas industry. In
making these determinations, we annually review each compensation component and
compare it to market reference points. The application of our compensation
philosophy to our named executive officer is described below in this
Compensation Discussion and Analysis section.





Executive
Compensation Program Design





The
objective of the Company and the Compensation Committee is to attract, retain
and motivate the most highly qualified executive officer who will contribute to
the Company’s goals by consistently delivering exceptional performance while
working within the annual budget of a development stage Company. In order to
accomplish the Company’s goals, we believe compensation paid to the executive
officer should be designed around a combination of a competitive based salary
combined with performance-based pay including equity-based or other incentives
which thereby align the interest of our executive officer with those of the
Company’s shareholders.





Base
salary constituted nearly all of the compensation package of the indicated named
executive officer during the year ended December 31, 2008.





At the
request of the Compensation Committee, our compensation program is reviewed on
an annual basis to ensure it meets the objectives of our compensation program
and is benchmarked with the market.  Prior compensation from the
Company, such as gains from previously awarded stock options, is not generally
taken into account in setting other elements of compensation, such as base pay
and long-term incentive awards. We believe that our executive officer should be
fairly compensated each year relative to market pay levels of our peer groups
and internal equity within the Company.





Compensation
Program Benchmarking





The
Compensation Committee endeavors to conduct its review on an annual basis for
the named executive officer to ensure that our compensation program works as
designed and intended. This review by the Compensation Committee also
facilitates discussion among the members of the Compensation Committee regarding
our compensation program.


37


Compensation
Program Overview





Following
is an overview of the principal components of our compensation
program:





How Amounts for Compensation
Components are Determined





In
addition to the information provided above, following are other details on
specific compensation components for 2008:





2008 Base Salary.Base salary
level of the named executive officer is determined based on a combination of
factors, including our compensation philosophy, market compensation data,
competition for key executive talent, the named executive officer’s experience,
leadership, achievement of specified business objectives and contribution to the
Company’s success, the Company’s overall annual budget for merit increases and
the named executive officer’s individual performance. In the Compensation
Committee’s first meeting of each year, the Compensation Committee conducts an
annual review of the base salary of our named executive officer by taking into
account these factors.





The base
salary of the named executive officer did not increase during 2008 based upon
the factors set out above.  The Compensation Committee focused on the
Company’s annual budget and the beginning of new operations in an effort to
establish production and revenue for the Company.





2008 Long-Term Incentives.The Company has in the past provided long-term
incentives.  Primarily this has been done through the issuance of
stock options, however there is no set program or requirements for issuance of
the stock options.  Instead, stock options may be issued at the
discretion of the Compensation Committee in conjunction with the Board of
Directors.





In
addition to our philosophy, internal equity,current share price, and
individual performance during the prior year are considered. We do not target
long-term incentive opportunities to be a particular percentage of total
compensation. The Compensation Committee did not grant any stock options in 2008
to any individuals (including our Chief Executive Officer).





Another
long-term incentive used in the oil and gas industry is the granting of
overriding interest in wells to be drilled.  On June 22, 2005, the
Company approved of its subsidiary granting such an incentive to Mr. Ware and
that incentive was granted as a 1% overriding interest in any well that he
recommends that is drilled by the Company or its subsidiary Coastal
Petroleum.  No payments under this incentive plan were earned or paid
during 2008.





Retirement and Other
Benefits





We
currently do not offer retirement programs within the Company that are intended
to supplement the employee’s personal savings and social security. However, the
Company contributes to the SEP-IRA of the named executive
employee.  The Company believes that this contribution assists the
Company in maintaining a competitive position in terms of retaining our named
executive employee.





Other
Benefits





The
Company does not provide the named executive officer with perquisites or other
personal benefits.  The Company does provide healthcare insurance for
its named executive officer, which the Company believes assists in maintaining a
competitive position in terms of retaining him.


38


Board
Process and Independent Review of Compensation Program





The
Compensation Committee is responsible for determining the compensation of our
directors and our Chief Executive Officer. In addition, the Compensation
Committee is authorized to exercise all the powers granted to it in its charter.
The Compensation Committee charter provides that the Compensation Committee will
have access to the necessary corporate resources to carry out its charter
authority.





For our
Chief Executive Officer, the Compensation Committee evaluates and assesses our
Chief Executive Officer’s performance related to leadership, financial and
operating results, board relations, and other material considerations. These
considerations as well as market information concerning compensation for similar
positions are then incorporated into the Compensation Committee’s compensation
adjustment decisions. Market information is obtained through various sources
including reference to materials published by the American Association of
Petroleum Geologists (AAPG) annually in their AAPG
Explorer.  These materials review compensation being paid to
geologists holding various degrees and of varying years of experience in oil and
gas companies across the country.





The
following table sets forth the compensation of the President of the Company, Mr.
Ware, who served as our Chief Executive Officer and Principal Financial Officer
for the three years ending with 2008.  We have determined that Mr.
Ware is our only named executive officer pursuant to the applicable rules of the
SEC (the “named executive officer”). No other company employee received $100,000
or more in total compensation. Mr. Ware’s current base salary is
$125,000.





(Intentionally
left blank)


39





Summary
Compensation Table




Name and Principal Position
                      
                      Year
                      
                      Salary
                        ($)
                      
                      
                      Bonus(1)
                        ($)
                      
                      
                      Stock
                        Awards
                        ($)
                      
                      
                      Option
                        Awards(3)
                        ($)
                      
                      
                      Non-Equity
                        Incentive Plan
                        Compensation
                        ($)
                      
                      
                      Change in
                        Pension
                        Value and
                        Nonqualified
                        Deferred
                        Compensation
                        Earnings
                        ($)
                      
                      
                      All Other
                        Compensation(2)(5)
                        ($)
                      
                      
                      Total
                        ($)Phillip
      W. Ware, Chief Executive
                      
                      2008
                      
                      
                      125,000
                      (4)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      18,750
                      
                      
                      
                      143,750Officer,
      President,
                      
                      2007
                      
                      
                      125,000
                      (3)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      18,750
                      
                      
                      
                      143,750Chief
      Financial Officer, Director
                      
                      2006
                      
                      
                      125,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      18,750
                      
                      
                      
                      143,750





(1)         Annual
Cash Bonus Award - Annual incentive awards, which were paid during the year or
immediately following the year indicated.


(2)         Other
Annual Compensation - All additional forms of cash and non-cash compensation
paid, awarded or earned, including automobile allowances, 401(k) Plan matching
contributions, and club membership costs.


(3)         Payment
of $89,700 was accrued and not paid in 2007.


(4)         Payment
of 125,000 was accrued and not paid in 2008.


(5)         Payment
to SEP-IRA pension plan (2007 and 2008 amounts have been deferred).





The
Company does not have a contract with its named executive officer nor does it
have a change of control employment agreement which would be effective upon
change of control of the Company or in the event of termination of
employment.


40


Stock
Options





The Company has not adjusted or amended
the exercise price of any stock options during the year end December 31,
2008.





The
following table sets forth certain information with respect to outstanding
equity awards at December 31, 2008 held by the named executive
officer.





Outstanding
Equity Awards at Fiscal Year-End




Option Awards
                                  
                                  Stock AwardsNumber of
                                    Securities
                                    Underlying
                                    Unexercised
                                    Options
                                    (#)
                                  
                                  
                                  Number of
                                    Securities
                                    Underlying
                                    Unexercised
                                    Options
                                    (#)
                                  
                                  
                                  Equity
                                    Incentive
                                    Plan Awards:
                                    Number of
                                    Securities
                                    Underlying
                                    Unexercised
                                    Unearned
                                    Options
                                  
                                  
                                  Option
                                    Exercise
                                    Price
                                  
                                  Option
                                    Expiration
                                  
                                  Number of
                                    Shares or
                                    Units of
                                    Stock That
                                    Have Not
                                    Vested
                                  
                                  
                                  Market
                                    Value of
                                    Shares or
                                    Units of
                                    Stock That
                                    Have Not
                                    Vested
                                  
                                  
                                  Equity Incentive
                                    Plan Awards:
                                    Number of
                                    Unearned
                                    Shares, Units
                                    or Other
                                    Rights That
                                    Have Not
                                    Vested
                                  
                                  
                                  Equity
                                    Incentive
                                    Plan Awards:
                                    Market or
                                    Payout Value
                                    of Unearned
                                    Shares,
                                    Units
                                    or Other
                                    Rights That
                                    Have Not
                                    VestedName
                                  
                                  Exercisable
                                  
                                  
                                  Unexercisable
                                  
                                  
                                  (#)
                                  
                                  
                                  ($)
                                  
                                  Date
                                  
                                  (#)
                                  
                                  
                                  ($)
                                  
                                  
                                  (#)
                                  
                                  
                                  ($)Phillip
      W. Ware
                                  
                                  
                                  50,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0.15
                                  
                                  July
      25, 2015
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -250,000
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  0.20
                                  
                                  September 27, 2015
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -


41


Option
Exercises





In March 2008, the Company received
$7,500 from the exercise of outstanding stock options for 50,000 shares from
Robert J. Angerer, Sr., a vice president and a director of the
Company.





Compensation of
Directors





The
Compensation Committee of our Board sets the compensation of our directors. In
determining the appropriate level of compensation for our directors, the
Compensation Committee considers the commitment required from our directors in
performing their duties on behalf of the Company, as well as comparative
information the committee obtains from various sources. Set forth below is a
description of the compensation of our directors.





Annual
Retainers and Other Fees and Expenses.





We pay
our directors an annual retainer of $25,000.  There is currently no
provision for paying directors additional fees based upon attending meetings,
service on a committee, or serving as chair of a committee.  We do not
regularly compensate directors for their service through stock options, although
in the past the Company has issued stock options to Directors.  We do
reimburse directors for travel, lodging and related expenses they may incur in
attending shareholder, Board and committee meetings.





We did not pay our directors in 2008
and accrued $112,500 owed to them at December 31, 2008.  Directors
fees of $125,000 were also accrued and not paid in 2007.  The
following table shows the compensation of the Company’s directors for the year
ended December 31, 2008.





(Intentionally
left blank)


42


Director
Compensation


Name
                  
                  Fees Earned or
                    Paid in Cash(1)
                    ($)
                  
                  
                  Stock Awards
                    ($)
                  
                  
                  Option Awards
                    ($)
                  
                  
                  Non-Equity
                    Incentive
      Plan
                    Compensation
                    ($)
                  
                  
                  Change
                    in
      Pension
                    Value
      and
                    Nonqualified
                    Deferred
                    Compensation
                    Earnings
                    ($)
                  
                  
                  All
      Other
                    Compensation
                    ($)
                  
                  
                  Total
                    ($)Phillip
      W. Ware
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Robert
      J. Angerer, Sr.
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Herbert
      D. Haughton
                  
                  
                  25,000
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  25,000Matthew
      D. Cannon
                  
                  
                  18,750
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18,750Anthony
      F. Randazzo
                  
                  
                  18,750
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  18,750





(1)           All
fees were accrued but not paid.


43


Compensation Committee
Interlocks and Insider Participation





The
Compensation Committee serves with regard to compensation and personnel
policies, programs and plans, including management development and succession,
and to approve employee compensation and benefit programs. The Compensation
Committee’s charter was adopted on December 20, 2005.  A copy of the
Compensation Committee Charter may be obtained by a written request addressed to
Mr. Robert J. Angerer, Jr., Secretary, P.O. Box 10468, Tallahassee, Florida
32302.  Members of the Compensation Committee are: Herbert D. Haughton and
Robert J. Angerer, Sr.





Compensation
Committee Report


To the
Shareholders of


Coastal
Caribbean Oils & Minerals, Ltd.:





The
Compensation Committee has reviewed and discussed with management of the Company
the Compensation Discussion and Analysis included in this annual report on Form
10-K. Based on such review and discussion, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be
included in this annual report on Form 10-K.


March 27,
      2009
            
            COMPENSATION
      COMMITTEEHerbert
      D. Haughton, Chair
              Robert
      J. Angerer, Sr.





Item 12.Security Ownership of
Certain Beneficial Owners and Management





Security Ownership of
Certain Beneficial Owners





As of
December 31, 2008, Mr. Robert J. Angerer, Sr. owned 1,583,757 shares, or
3.42% of our common stock and his son, Mr. Robert J. Angerer, Jr., owned
1,016,914 shares, or 2.19% of our common stock.  Mr. Angerer, Sr.
disclaims beneficial ownership of any shares owned by his son.





As of March 27, 2009, no persons or
apparent groups of persons are known by management to own beneficially five
percent or more of the Company’s outstanding shares.





Security Ownership of
Management





The following table sets forth
information as to the number of shares of the Company's common stock owned
beneficially at December 31, 2008, by each director of the Company and by all
directors and executive officers as a group:





Amount
      and Nature of Beneficial
                      OwnershipName of Individual or Group
                    
                    Shares
      Held Directly or
                      Indirectly
                    
                    
                    Options
                    
                    
                    Percent
      of
                      ClassPhillip
      W. Ware
                    
                    
                    204,121
                    
                    
                    
                    300,000
                    
                    
                    
                    1.09
                    %Robert
      J. Angerer, Sr.
                    
                    
                    1,583,757
                    
                    
                    
                    0
                    
                    
                    
                    3.42
                    %Herbert
      D. Haughton
                    
                    
                    50,000
                    
                    
                    
                    50,000
                    
                    
                    
                    0.22
                    %Directors
      and executive officersas
      a group (a total of 3 persons)
                    
                    
                    1,837,878
                    
                    
                    
                    350,000
                    
                    
                    
                    4.73
                    %


44


EQUITY COMPENSATION PLAN
INFORMATION





The following table provides
information about the Company’s common stock that may be issued upon the
exercise of options and rights under the Company’s 1995 Stock Option Plan and
the Company’s 2005 Employee’s Incentive Stock Option Plan as of
December 31, 2008




Plan Category
                        
                        Number of Securities
                          to be issued upon
                          exercise of
                          outstanding options,
                          warrants and rights
                          (a) (#)
                        
                        
                        Weighted average
                          exercise price of
                          outstanding
                          options, warrants
                          and rights
                          (b) ($)
                        
                        
                        Number of securities
                          remaining available for
                          issuance under equity
                          compensation plans
                          (excluding securities
                          reflected in column (a))
                          (c) (#)(3)Equity
      compensation plans not approved by security holders (1)
                        
                        
                        100,000
                        
                        
                        $0.15
                        
                        
                        
                        850,000Equity
      compensation plans approved by security holders (2)
                        
                        
                        250,000
                        
                        
                        $0.20
                        
                        
                        
                        2,050,000Total:
                        
                        
                        350,000
                        
                        
                        $0.15
      – 0.20
                        
                        
                        
                        2,900,000





(1)           1995
Stock Option Plan


(2)           2005
Employee’s Incentive Stock Option Plan


(3)           Options
to acquire 100,000 shares of the Company’s common stock under the 1995 Stock
Option Plan granted to former directors Cannon and Randazzo expired one month
after their resignation and were returned to the options available to be
issued.





The
Company’s 1995Stock Option Plan was
adopted by the Board of Directors of the Company in March
1995.  1,000,000 shares of the Company's common stock were authorized
for issuance under the terms of the plan.  Options under the plan may
be granted only to directors, officers, key employees of, and consultants and
consulting firms to, (i) the Company, (ii) subsidiary corporations of the
Company from time to time and any business entity in which the Company from time
to time has a substantial interest, who, in the sole opinion of the Committee of
the Board administering the Plan, are responsible for the management and/or
growth of all or part of the business of the Company.  The exercise
price of each option to be granted under the plan shall not be less than the
fair market value of the stock subject to the option on the date of grant of the
option.





The
Company’s 2005 Employees’ Stock Option and Limited Rights Plan (“Employees’
Plan”) was adopted by the Board on September 27, 2005, for the benefit of
officers and other key employees of Coastal and Coastal
Caribbean.  The Plan was approved by the shareholders at the Annual
General Meeting held on December 9, 2005.  The Employees’ Plan
provides for 2,300,000 shares of Coastal common stock to be reserved for future
issuance pursuant to the exercise of stock options.  This represents
5% of the total number of shares of the Company’s outstanding common
stock.  Employees of Coastal or Coastal Petroleum may be granted
options to purchase shares of common stock, as determined by the Board in its
sole discretion.





Options
granted under the Program will be “incentive stock options” within the meaning
of section 422A of the Internal Revenue Code of 1986, as amended, which are
designed to result in beneficial tax treatment to the employee but no tax
deduction to Coastal. The per share exercise price at which the shares of common
stock may be purchased upon exercise of a granted option will be equal to or
greater than the Fair Market Value of a share of common stock as of the date of
grant. Fair Market Value of a share of common stock is defined in the Employees’
Plan.  At no time will Coastal have total cumulative stock options
outstanding to acquire more than 15% of the outstanding common stock of Coastal
under all of its plans.


45





Item
13.                      Certain
Relationships and Related Transactions





Angerer
& Angerer





The law firm of Angerer & Angerer,
Tallahassee, Florida, has been litigation counsel to the Company for more than
twenty-five years and continues to serve the Company in that capacity as well as
others including general counsel services, management services, public
relations, shareholder relations and representing the Company before state and
federal agencies for permitting.  Mr. Robert J. Angerer, Sr., a
partner of the firm, was elected a director of Coastal Caribbean and of Coastal
Petroleum on January 30, 2003, and a Vice President of Coastal Caribbean and
Coastal Petroleum on February 28, 2003.  During 2008 and 2007, Angerer
& Angerer billed Coastal Petroleum $144,000 and $144,000 respectively for
legal fees.





Robert
J. Angerer, Sr.





On July
15, 2005 Coastal Petroleum acquired a lease and the rights to drill two 5,100
foot wells to test a Mississippian Lodgepole reef in Valley County, in northeast
Montana.  Coastal Petroleum acquired these rights for $50,000 from Oil
For America, a partnership in which Robert J. Angerer, Sr. is a partner.
Included in the agreement is the right to drill additional prospects in the
Valley County area.





Coastal Petroleum also acquired leases
from Oil For America to the deeper rights in approximately 21,688 net acres in
and near Slope County, North Dakota for an additional $50,000. The Company has
the option to drill the remaining Lodgepole reef prospects on these
leases.





The leases were acquired on terms and
under circumstances that are substantially the same or at least as favorable as
those prevailing at the time for comparable transactions with or involving other
non-affiliated companies.





Igler
& Dougherty, PA





The law firm of Igler & Dougherty,
PA, Tallahassee, Florida, has been SEC counsel to the Company for almost five
years.  Mr. Herbert D. Haughton, a shareholder of the firm, was
elected a director of Coastal Caribbean and of Coastal Petroleum in December
2005.  During 2008 and 2007, Igler & Dougherty billed Coastal
Petroleum $8,193 and $16,062, respectively for legal fees.





Item
14.                      Principal
Accountant Fees and Services





Baumann, Raymondo and Company, P.A.
audited the Company’s financial statements for 2008 and 2007 and performed the
reviews for 2008 and 2007.  Fees related to services performed by
Baumann, Raymondo and Company, P.A. in 2008 and 2007 were as
follows:




2008
                    
                    
                    2007Audit
      Fees (1)
                    
                    $
                    31,859
                    
                    
                    $
                    31,081Audit-Related
      Fees
                    
                    
                    -0-
                    
                    
                    
                    -0-Tax
      Fees (2)
                    
                    
                    -0-
                    
                    
                    
                    -0-Total
                    
                    $
                    31,859
                    
                    
                    $
                    31,081


46





(1)
            Audit
      fees represent fees for professional services provided in connection with
      the audit of our financial statements and review of our quarterly
      financial statements.  The Audit Committee must pre-approve
      audit related and non-audit services not prohibited by law to be performed
      by the Companies independent auditors.  Since their appointment
      on December 9, 2005, directors Matthew D. Cannon and Anthony F. Randazzo
      served as the members of the Audit Committee until their resignation in
      October of 2008.  With those resignations, there are currently
      not enough independent directors to comprise an Audit Committee, so since
      that time the entire Board of Directors has carried out the duties that
      would otherwise be carried out by an Audit
      Committee.    The Audit Committee, or the Board of
      Directors after October 2008, pre-approved all audit related and non-audit
      services in 2008 and 2007.





The
      Board of Directors has reviewed Coastal Caribbean’s audited financial
      statements as of, and for, the fiscal year ended December 31, 2008, and
      met with both management and Coastal Caribbean’s independent auditors to
      discuss those financial statements. Management has represented to the
      Audit Committee that the financial statements were prepared in accordance
      with accounting principles generally accepted in the United States of
      America.





The
      Audit Committee has received from, and discussed with Baumann, Raymondo
      & Company, PA, the written disclosure and the letter required by
      applicable requirements of the Public Company Accounting Oversight Board
      regarding the independent accountant’s communications with the audit
      committee concerning independence. These items relate to that firm’s
      independence from Coastal Caribbean. The Board of Directors has also
      discussed with Baumann, Raymondo & Company any matters required to be
      discussed by Statement on Auditing Standards No. 61 (Communication with Audit
      Committees).





Based
      on the reviews and discussions referred to above, the Board approved the
      inclusion of Coastal Caribbean’s audited financial statements in the
      Company’s Annual Report on Form 10-K for the fiscal year ended December
      31, 2008, and filed with the Securities and Exchange
      Commission.





(2)
            Tax
      fees principally included tax advice, tax planning and tax return
      preparation.


47





PART IV





Item 15. 
Exhibits and Financial
Statement Schedules





Financial Statements





The financial statements listed below
and included under Item 8 above are filed as part of this report.




PageReports
      of Independent Registered Public Accounting Firms
                      
                      20Consolidated
      balance sheets at December 31, 2008 and 2007
                      
                      21Consolidated
      statements of operations for each of the three years in the period ended
      December 31, 2008 and for the period from January 31, 1953 (inception) to
      December 31, 2008.
                      
                      22Consolidated
      statements of cash flows for each of the three years in the period ended
      December 31, 2008 and for the period from January 31, 1953 (inception) to
      December 31, 2008.
                      
                      23Consolidated
      statement of common stock and capital in excess of par value for the
      period from January 31, 1953 (inception) to December 31,
      2008
                      
                      24Notes
      to consolidated financial statements.
                      
                      25-37





Financial Statement Schedules





All schedules have been omitted since
the required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the consolidated financial statements and the notes
thereto.


48


Exhibits





The following exhibits are filed as
part of this report:





10.
            Material contracts.





(g)
            Stock
      Option Plan adopted March 7, 1995 filed as Exhibit 4A to form S-8 dated
      July 28, 1995 (File Number 001-04668) is incorporated herein by
      reference.





(h)
            Memorandum
      of Settlement dated June 1, 2005 between Coastal Petroleum Company, et al.
      and the State of Florida filed as Exhibit 10(h) to form 10K-A dated July
      27, 2005 (File Number 001-04668) is incorporated herein by
      reference.





(i)
            Incentive
      Stock Option Plan adopted September 30, 2005 and approved by the
      shareholders on December 9, 2005 filed as Appendix A to form DEF 14A dated
      November 3, 2005 (File Number 001-04668) is incorporated herein by
      reference.





(j)
            Code
      of Ethics applicable to principle executive and financial officers adopted
      December 20, 2005 filed as Exhibit 10(j) to form 10K dated March 8, 2006
      (File Number 001-04668) is incorporated herein by
    reference.





21.
            Subsidiaries of the registrant.





The
      Company has one subsidiary, Coastal Petroleum Company, a Florida
      corporation which is 100 % owned.





23.
            Consent of experts and
      counsel.





23.1
            Consent
      of Baumann, Raymondo & Company
PA





31.1
            Certification
      of Chief Executive Officer and Principal Financial Officer Required by
      Rule 13a-14(a)-15d-14(a) under the Exchange
Act





32.1
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002 executed by Phillip W.
  Ware.


49


SIGNATURES





Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





COASTAL CARIBBEAN OILS
      & MINERALS, LTD.(Registrant)By
                  /s/ Phillip W. WarePhillip W. Ware, Chief
      Executive OfficerPresident and Principal Financial
  Officer





Dated:  March
27, 2008





Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
date indicated.





By
              /s/ Phillip W. Ware
              
              By
              /s/Robert J. AngererPhillip
      W. Ware
              
              
              Robert
      J. AngererDirector,
      Chief Executive Officer,
              
              
              Director
      and Vice PresidentPresident
      and Principal Financial OfficerDated:
      March 27, 2009
              
              Dated:
      March 27, 2009By
              /s/Herbert D. HaughtonHerbert
      D. HaughtonDirectorDated:
      March 27, 2009


50





INDEX TO
EXHIBITS





Exhibit
No.


23.1
              Consent
      of Baumann, Raymondo & Company,
PA
 
 31.1
              Certification
      pursuant to Rule 13a-14 by Phillip W.
Ware
 
 32.1
              Certification
      pursuant to Section 906 by Phillip W.
Ware