**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, 2007**




**or**





o
            
            **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*
              *I**ncorporation
                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**
              **NONE**
            **Name
                of each exchange on which registered**
              **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 Yes   x 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 o         Accelerated
      filer o


Non-accelerated
      filer o (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: $3,549,292 (U.S.) at June 30, 2007.





**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, 46,211,604 shares outstanding as of March 26, 2008.





**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










**TABLE
      OF CONTENTS**





**Page****PART
                  I**Item
                  1.
              Business
              
              3General
              
              3Crude
                  Oil and Natural Gas Exploration and Development
              
              4Environmental
                  and Other Regulations
              
              5Competition
              
              6Employees
              
              6Oil
                  and Gas Properties
              
              7Acreage
                  and Wells
              
              9Drilling
                  Activity
              
              9Item
                  1B.
              Unresolved
                  Staff Comments
              
              10Item
                  2.
              Properties
              
              10Item
                  3.
              Legal
                  Proceedings
              
              11Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              11**PART
                  II**Item
                  5.
              Market
                  for the Company's Common Stock, RelatedStockholder
                  Matters and Issuer Purchases of Equity Securities
              
              12Item
                  6.
              Selected
                  Consolidated Financial Data
              
              15Item
                  7.
              Management's
                  Discussion and Analysis of Financial Conditionand
                  Results of Operation
              
              16Item
                  7A.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              21Item
                  8.
              Financial
                  Statements and Supplementary Data
              
              22Item
                  9.
              Changes
                  in and Disagreements with Accountants onAccounting
                  and Financial Disclosure
              
              41Item
                  9A.
              Controls
                  and Procedures
              
              41**PART
                  III**Item
                  10.
              Directors
                  and Executive Officers of the Registrant
              
              45Item
                  11.
              Executive
                  Compensation
              
              48Item
                  12.
              Security
                  Ownership of Certain Beneficial Owners and Management
              
              56and
                  Related Stockholder MattersItem
                  13.
              Certain
                  Relationships and Related Transactions
              
              58Item
                  14.
              Principal
                  Accountant Fees and Services
              
              59**PART
                  IV**Item
                  15.
              Exhibits,
                  Financial Statement Schedules
              
              61







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





2


**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 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,
      2007, 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 124,882 net acres 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. See
      Item
      3. “Legal Proceedings”.





After
      the
      United States Supreme Court refused to hear the case in 2004, the State of
      Florida approached the Company regarding a possible buyback of the Company’s
      leases on the condition that all parties with oil, gas or mineral interests
      in
      the lands covered by the leases were joined in one agreement. On June 1, 2005
      the Company, Coastal Petroleum and other royalty holders (“Royalty Holders”)
      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 .





By
      agreement with the State, the compensation received under the Agreement was
      deposited into an escrow account and payments were made to the Royalty Holders,
      Lykes Mineral Corporation, the Settlement Consultant, and creditors of both
      Coastal Caribbean and Coastal Petroleum. The Company and its subsidiary received
      approximately $4,872,000 in net proceeds. The Company also regained 100%
      ownership of its subsidiary, Coastal Petroleum.




3





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
      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 casing
      was
      run into the hole. The well has confirmed that the structure to be tested is
      high in relation to other wells in the area. Operations
      to complete and test the well in
      two
      horizons in which there were gas shows 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
      will not allow the completion and testing operations or any further drilling
      to
      begin between December 1st and July 1st, so operations have been suspended
      until
      July.





W ithin
      30
      days after the test well is completed, Western Standard has the 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, payable in
      $200,000 installments based on certain milestones related to drilling step-out
      wells. The Company has received a permit to drill one of the step-out wells
      and
      is currently in the permitting process for two additional permits.





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. The Company expects
      that the well will be completed and tested as soon as weather and state
      regulators permit. Upon completion of the well, F-Cross has the option to
      acquire a 50% working interest in the approximately 64,000 acres covered by
      the
      agreement for $25 per acre. F-Cross also may extend its option to acquire the
      50% working interest by drilling a second Lodgepole test 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.




4





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 has three agreements with two different entities under which the Company
      expects approximately four wells to be drilled in Montana and one in North
      Dakota. Four of the Montana wells are expected to be drilled on the shallow
      gas
      prospect under the Company’s agreement with Western Standard. In North Dakota,
      the Company expects that Western Standard will drill one Lodgepole oil test
      well
      out of the four prospects the Company sold them in December of 2007. The Company
      is proceeding with the process of permitting wells in its main block of leases
      in Valley County, Montana, in order to accommodate the drilling of the expected
      wells.





**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.




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 aware of any environmental claims existing as of
      December 31, 2007 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.




5




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.




6




**Oil
      and Gas Properties**




**Williston
      Basin**





***Blaine
      County, Montana***





The
      Company had a 100% working interest in one property consisting of 160 acres
      located in northern Blaine County under a farm-in agreement. The Company drilled
      a well on the property and encountered natural gas, but not in economic
      quantities. The well was abandoned and pursuant to the farm-in agreement the
      Company retained no interest in the property.





***Valley
      County, Montana*** ****





The
      Company’s assets in Valley County consist of leases covering approximately
      124,882 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 approximately
      27,780 gross acres (27,740 net acres) were acquired in February of 2006. Two
      wells have been drilled on these leases but they have not yet been completed
      and
      tested so the Company has no proved reserves on the property as yet. The Company
      has entered into two separate agreements with other entities on two different
      areas of the Valley County Leases.





First,
      in
      August 2007, the Company entered into a farm-out agreement with Western Standard
      Energy Corp. (f/k/a Lusora Healthcare Systems Inc.) (“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 will have a 100% working interest in the well
      until payout when it will be reduced to 80% with Coastal receiving the other
      20%
      working interest. W ithin
      30
      days after the test well is completed, Western Standard has the 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, 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 and the
      well is awaiting completion and testing for gas in two horizons in which there
      were gas shows. 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 have been suspended until July. 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 has committed to pay the estimated
      well completion costs of $65,000 no later than April 30, 2008 so that completion
      operations can be commenced as soon as they are allowed.





7





Second,
      in September 2007, the Company received $50,000 from F-Cross Resources, LLC
      (“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 has the option to drill a Lodgepole test
      well within six months and after drilling that well has the further option
      to
      acquire an interest in surrounding acreage. F-Cross is 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 with the Company
      retaining a 20% working interest. The first well with F-Cross was spudded on
      November 3, 2007 and has finished drilling but is awaiting completion and
      testing. Unlike the shallow gas well on Federal land, this well is located
      on
      State land and provided that there is no State objection, we expect that F-Cross
      will resume operations to complete and test the well once the weather and state
      regulators permit it.  Upon
      completion of the well, F-Cross has the option to acquire a 50% working interest
      in the approximately 64,000 acres covered by the agreement for $25 per acre.
      F-Cross also may extend its option to acquire the 50% working interest by
      drilling a second Lodgepole test well.





The
      Company still holds approximately 22,000 acres under its Valley County Leases
      that are not under agreement with any third party and the Company is not
      currently looking for other entities to team with to explore that
      acreage.





***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, u nder
      a
      farm-out agreement with Western Standard Energy Corp. (“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.





The
      Company originally acquired these and other leases in these countiescovering
      approximately 30,345 gross acres in 2005, however, some of the leases have
      since
      expired.




8




**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, 2007:




Acreage under lease at December
      31, 2007


**Lease**
              
              **Gross
                  Acres***
              
              **Net
                  Acres******Location**
              
              ***Undeveloped***
              
              ***Developed***
              
              ***Undeveloped***
              
              ***Developed***Montana
              
              
              125,302.23
              
              
              0
              
              
              124,882.22
              
              
              0North
                  Dakota
              
              
              8,748.94
              
              
              0
              
              
              8,510.31
              
              
              0**Total:**
              
              
              134,051.17
              
              
              0
              
              
              133,392.53
              
              
              0





*  A
      gross
      acre is an acre in which a working interest is owned.




**  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.





Two
      wells
      were drilled in 2007 and two wells were drilled in 2006 on our
      leases.





**Drilling
      Activity**





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 was drilled by Western Standard Energy Corp. (“Western Standard”) to test a
      shallow natural gas prospect near the middle of the Company’s Valley County
      Leases. This well is the initial well drilled under an agreement with Western
      Standard. The well reached a total depth of 1,126 feet, casing was run into
      the
      hole and the well will be completed and tested for gas in two horizons in which
      there were gas shows. 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 between December 1st and July 1st,
      so operations have been suspended until July.





The
      second well drilled on the Company’s Valley County Leases in 2007 was drilled by
      F-Cross Resources, LLC (“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 drilling has finished,
      but the well is awaiting completion and testing of several zones which have
      potential for both oil and gas. Unlike the shallow gas well on Federal land,
      this well is located on State land and provided that there is no State
      objection, the Company expects F-Cross will resume operations to complete and
      test the well once the weather and state regulators permit it.





The
      Company’s initial well in Blaine County, Montana drilled 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 the fourth quarter of 2006. This well
      was
      abandoned by the Company.




9





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.”





**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, 2007 was as
      follows:





Gross Acres
            
            Net AcresMontana
            
            
            125,302.23
            
            
            124,882.22North
                Dakota
            
            
            8,748.94
            
            
            8,510.31**Total:**
            
            
            134,051.17
            
            
            133,392.53




(6)  Drilling Activity .





Two
      wells
      were drilled on the Company’s leases during 2007 through farm-out agreements
      with two separate entities. See Drilling Activity section under Item 1 Business
      at page 9.




10




(7)  Present Activities .





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





**Item 3.****Legal Proceedings**





**Agreement
      with the State of Florida**





For
      years
      the Company’s subsidiary, Coastal Petroleum litigated against the State in an
      effort to secure drilling permits and drill for oil off the coast of Florida.
      The State denied Coastal Petroleum permission to drill on its Leases, a decision
      that was upheld by a Florida court. Florida courts also denied Coastal Petroleum
      compensation for a taking of the Leases. Furthermore, the longstanding State
      policy against any drilling for oil or gas offshore of Florida remains in place
      as a reflection of the Florida Statutes which bans such activity, and there
      is
      no indication that it will change. Given the policy and court decisions, any
      additional attempt by Coastal Petroleum to secure a permit to drill its Florida
      Leases was considered by Management as futile.





After
      the
      United States Supreme Court refused to hear Coastal Petroleum’s taking case in
      2004 and the Company’s legal options were limited, the State of Florida
      approached Coastal Petroleum regarding a possible buyback of its leases. With
      limited financial resources to continue a legal fight which was further
      frustrated with recent court decisions, Coastal Petroleum continued discussions
      with the State and ultimately, on June 1, 2005 was joined by Coastal Caribbean
      and other royalty holders in
      accepting an offer by the State of Florida to repurchase Coastal Petroleum’s
      Florida Leases and other royalty rights. The
      proceeds from the State were divided by the parties to the Agreement and
      t he
      Company and its subsidiary received approximately $4.871 million after payment
      to all their creditors. The
      Agreement resulted in the closing and dismissal of all of the Company’s
      litigation concerning the leases including the following:





·
            Drilling
                Permit Litigation - Lease Taking Case (Lease 224-A)




·
            Ancillary
                Matters to Lease Taking Case (Lease
                224-A)




·
            Coastal
                Caribbean Royalty Litigation




·
            Lease
                Taking Case (Lease 224-B)





The
      Company is currently not a party to any litigation.





**Contingency
      Fees**





All
      contingency fees previously issued to firms or individuals relating to the
      litigation against the State of Florida, were released or nullified by the
      2005
      Agreement with the State of Florida or in the mutual releases exchanged pursuant
      to that Agreement. No contingency fees remain in effect.





**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 and
      the
      Pink Sheets (Pink Sheets LLC) during the last two years were as
      follows:





**2006**
            
            **1****st****quarter**
            
            **2****nd****quarter**
            
            **3****rd****quarter**
            
            **4****th****quarter**High
            
            
            0.72
            
            
            0.73
            
            
            0.39
            
            
            0.23Low
            
            
            0.15
            
            
            0.32
            
            
            0.21
            
            
            0.12




**2007**
            
            **1****st****quarter**
            
            **2****nd****quarter**
            
            **3****rd****quarter**
            
            **4****th****quarter**High
            
            
            0.33
            
            
            0.16
            
            
            0.15
            
            
            0.23Low
            
            
            0.11
            
            
            0.081
            
            
            0.075
            
            
            0.106




**Holders** **.**





The
      approximate number of record holders of the Company's common stock at March
      20,
      2008 was 8,227.





**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 $35,669,640 at December 31, 2007 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.




12





***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.





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 2007,
      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 2007.




13





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.





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 2007. 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.




14





**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, 2007 has been extracted from the
      Company's consolidated financial statements.





Years
                ended December 31,2007
            
            2006
            
            2005Net
                income (loss)
            
            $
            (690
            )
            $
            (1,621
            )
            $
            6,766Net
                income (loss) per share (basic and diluted)
            
            
            (.02
            )
            
            (.04
            )
            
            .15Cash
                and cash equivalents and marketable securities
            
            
            30
            
            
            343
            
            
            2,250Unproved
                oil, gas and, mineral properties (full cost method)
            
            
            2,168
            
            
            2,200
            
            
            1,861Total
                assets
            
            
            2,373
            
            
            2,709
            
            
            4,387Shareholders'
                (deficit) equity:Common
                stock
            
            
            5,545
            
            
            5,545
            
            
            5,545Capital
                in excess of par value
            
            
            32,138
            
            
            32,138
            
            
            32,138Deficit
                accumulated during the development stage
            
            
            (35,670
            )
            
            (34,979
            )
            
            (33,358
            )Total
                shareholders’ (deficit) equity
            
            $
            2,013
            
            $
            2,704
            
            $
            4,325Common
                stock shares outstanding (weighted average)
            
            
            44,212
            
            
            44,212
            
            
            44,212




15




**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 124,882 net acres in Valley County, located
      in
      northeastern Montana close to known production from a Lodgepole reef. This
      area
      of Montana has a number of other producing formations in addition to the
      Lodgepole, including the Eagle sands. Currently we have two agreements with
      two
      different entities covering separate areas of the leases and exploration has
      begun under those agreements. During 2006, we drilled two wells on lands outside
      these leases and they did not find economic quantities of oil or gas and were
      abandoned. We also hold leases in southwestern North Dakota and have an
      agreement covering four Lodgepole prospects on those leases.





The
      first
      of the two agreements we entered into was a farm-out agreement with Western
      Standard Energy Corp. (f/k/a Lusora Healthcare Systems Inc.) (“Western
      Standard”) 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 will have a 100% working interest in the well
      until payout when it will be reduced to 80% and we will receive the other 20%
      working interest. 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.




16




The
      first
      well under this agreement was drilled during October 2007, to test a shallow
      natural gas prospect near the middle of our Valley County Leases. The well
      reached a total depth of 1,126 feet, and confirmed the structural high that
      we
      believed to be there. The well also had gas shows in two zones. Casing was
      run
      into the hole and o perations
      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 between December 1st and July 1st,
      so operations have been suspended until July. In December, we entered a
      Memorandum of Understanding with Western Standard which led to a farm-out
      agreement on our North Dakota Leases discussed below, but also allowed us to
      use
      $29,000 of the funds from Western Standard originally sent to cover completion
      to now cover lease rental and other costs associated with the delay in well
      completion. Western Standard has committed to send additional funds to pay
      the
      estimated well completion costs of $65,000 no later than April 30,
      2008.




Once
      operations resume, and w ithin
      30
      days after the test well is completed, Western Standard has the option to
      purchase a 50% interest in approximately 42,000 acres near the well location
      (referred to as “Valley County Shallow Gas Assembly”). The cost to exercise the
      option would be $1,000,000, payable in $200,000 installments based on certain
      milestones related to drilling step-out wells. We have received one permit
      to
      drill a step-out well and are currently in the permitting process for two more.





Under
      the
      second agreement, which we entered in September 2007, we received $50,000 from
      F-Cross Resources, LLC (“F-Cross”) when the two parties executed a farm-out
      agreement covering approximately 64,000 acres on the northwest part of our
      Valley County Leases. Under the agreement, F-Cross has the option to drill
      a
      Lodgepole test well within six months and after drilling that well has the
      further option to acquire an interest in surrounding acreage. F-Cross is 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 awaiting
      completion and testing of several zones which have potential for both oil and
      gas. Unlike the shallow gas well on Federal land, this well is located on State
      land and provided that there is no State objection, we expect that F-Cross
      will
      resume operations to complete and test the well once the weather and state
      regulators permit it.  Upon
      completion of the well, F-Cross has the option to acquire a 50% working interest
      in the approximately 64,000 acres covered by the agreement for $25 per acre.
      F-Cross also may extend its option to acquire the 50% working interest by
      drilling a second Lodgepole test well.





We
      still
      hold approximately 22,000 acres under our Valley County Leases that are not
      under agreement with any third party and we are not currently looking for other
      entities to team with to explore that acreage.





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.




17




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 intend 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





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 expect to receive the other $15,000
      in the first quarter of 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.





As
      briefly described above, in the Memorandum of Understanding which gave rise
      to
      the new farm-out agreement, Western Standard also agreed that we could use
      the
      more than $29,000 originally forwarded to be used for completion of the first
      shallow gas well to cover the costs associated with the delay in operations,
      including annual rentals. This amount combined with the $80,000 paid for the
      four reef prospects will help cover our operations during the first half of
      2008.




18





We
      expect
      that the relationships we have begun with Western Standard and F-Cross will
      allow the Company to explore both the oil and gas potentials of its leases
      in
      Montana and North Dakota. The agreement with Western Standard in Montana should
      not only allow for further exploration on the Valley County Leases through
      several more wells, but we expect the agreement to be completed and to receive
      $1,000,000 during the drilling of those wells. Likewise, if F-Cross exercises
      its option for a 50% interest in the acreage under its agreement the Company
      would receive more than $1,000,000 under that agreement.





We
      plan
      to drill or participate in approximately four exploratory wells in 2008.
      However, the number of wells that we drill in 2008 and their cost will be
      subject to various factors, including Western Standard and F-Cross continuing
      exploration under their 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 four 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.





**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 and the agreements with Western Standard and F-Cross 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, 2007, we have $30,000 in cash compared to $343,000 at December
      31,
      2006. Our current liabilities exceed our current assets by $300,000 at
      December 31, 2007. We have suspended payments to our directors, general
      legal counsel, and employee since the second quarter of 2007 and have accrued
      $311,000 in expenses as of December 31, 2007. We expect to continue to
      suspend payments to these parties for at least the first three quarters of
      2008
      or until the success of our two wells drilled in 2007 can be
      determined.





During
      2007, we received approximately $309,000 under farm-out agreements for lease
      and
      drilling rights on our leases and options to acquire additional rights. We
      also
      received $255,000 that was used to drill one of the wells on our leases. In
      the
      first quarter of 2008, we received $25,000 and expect to receive an additional
      $15,000 under these agreements. We have paid lease rentals of $53,020 for
      payments due in the first quarter of 2008 and $100,214 in lease payments are
      due
      in the second quarter of 2008. We may need to sell additional lease rights
      to
      obtain the cash to make these payments, although there is no guarantee we will
      be able to sell additional lease rights. Western has committed to pay the
      estimated gas well completion costs of $65,000 no later than April 30,
      2008.




19





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 have
      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 2007
      to
      2014.




We
      expect
      to continue to participate with others 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
      2005, we acquired new oil and gas leases in North Dakota and Montana. We have
      capitalized these and other related costs and have begun a site selection and
      well drilling program.





During
      2006, the Company drilled one well and participated in the drilling of a second
      well that did not prove to contain economic quantities of oil or gas, and
      expensed the $1,018,000 of drilling costs.





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.




20





**2007
      vs. 2006**





During
      2007, two wells were drilled on our leases under two farm-out agreements. 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,
      and have not determined the success of the two wells. Our net loss for 2007
      was
      $(690,000). During 2006, we drilled two wells. However, we did not recognize
      any
      revenue in 2006 and wrote off the costs of our two wells, realizing a net loss
      of $(1,621,000) for the year.





For
      2007
      and 2006, we focused on seeking other entities to drill wells on our leases
      and
      in drilling wells. Our expenses did not change significantly in 2007 from 2006,
      except we wrote off our well drilling costs of $53,000 and $1,018,000 in 2007
      and 2006, respectively. 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.




21




**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 sheet of Coastal Caribbean Oils & Minerals,
      Ltd. and subsidiary as of December 31, 2007 and 2006, and the related
      consolidated statements of operations, common stock and capital in excess of
      par
      value and cash flows, for the years then ended, and for the period from January
      31, 1953 (inception) to December 31, 2007. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our 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, 2007 and
      2006, 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,
      2007, 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, 2007 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
      21,
      2008




22


**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**


(A
      Bermuda Corporation)


A
      Development Stage Company





**CONSOLIDATED
      BALANCE SHEETS**


(Expressed
      in U.S. dollars)


December
                  31,2007
              
              2006**Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              30,264
              
              $
              342,541Prepaid
                  expenses and other
              
              
              30,040
              
              
              29,255Total
                  current assets
              
              
              60,304
              
              
              371,796Certificates
                  of deposit
              
              
              135,364
              
              
              126,313Petroleum
                  leases
              
              
              2,168,293
              
              
              2,199,809Equipment,
                  net
              
              
              8,935
              
              
              11,455Total
                  assets
              
              $
              2,372,896
              
              $
              2,709,373**Liabilities
                  and Shareholders’ Equity**Current
                  liabilities:Accounts
                  payable and accrued liabilities
              
              $
              11,125
              
              $
              5,322Amounts
                  due to related parties
              
              
              348,208
              
              
              0Total
                  current liabilities
              
              
              359,333
              
              
              5,322Shareholders'
                  equity:Common
                  stock, par value $.12 per share:Authorized
                  - 250,000,000 sharesOutstanding
                  - 46,211,604shares,
                  respectively
              
              
              5,545,392
              
              
              5,545,392Capital
                  in excess of par value
              
              
              32,137,811
              
              
              32,137,81137,683,203
              
              
              37,683,203Deficit
                  accumulated during the development stage
              
              
              (35,669,640
              )
              
              (34,979,152
              )Total
                  shareholders’ equity
              
              
              2,013,563
              
              
              2,704,051Total
                  liabilities and shareholders’ equity
              
              $
              2,372,896
              
              $
              2,709,373




See
      accompanying notes.




23


**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) to2007
              
              2006
              
              Dec.
                  31, 2007**Gain
                  on settlement**
              
              $
              -
              
              $
              -
              
              $
              8,124,016**Interest
                  and other income**
              
              
              10,270
              
              
              41,350
              
              
              3,979,91410,270
              
              
              41,350
              
              
              12,103,930**Expenses:**Legal
                  fees and costs
              
              
              159,659
              
              
              204,169
              
              
              17,418,895Administrative
                  expenses
              
              
              330,938
              
              
              313,743
              
              
              10,582,221Salaries
              
              
              135,400
              
              
              143,200
              
              
              4,146,431Shareholder
                  communications
              
              
              22,185
              
              
              17,601
              
              
              4,115,695Goodwill
                  impairment
              
              
              -
              
              
              -
              
              
              801,823Write
                  off of unproved properties
              
              
              52,576
              
              
              1,018,435
              
              
              6,631,505Exploration
                  costs
              
              
              -
              
              
              -
              
              
              247,465Lawsuit
                  judgments
              
              
              -
              
              
              -
              
              
              1,941,916Minority
                  interests
              
              
              -
              
              
              -
              
              
              (632,974
              )Other
              
              
              -
              
              
              -
              
              
              364,865Contractual
                  services
              
              
              -
              
              
              -
              
              
              2,155,728700,758
              
              
              1,697,148
              
              
              47,773,570**Net
                  loss before income**
              
              
              (690,488
              )
              
              (1,655,798
              )
              
              (35,669,640
              )**Taxes****Income
                  tax benefit**
              
              
              -
              
              
              35,000
              
              
              -**Net
                  loss**
              
              $
              (690,488
              )
              $
              (1,620,798
              )Deficit
                  accumulated during thedevelopment
                  stage
              
              
              
              
              
              
              
              $
              (35,669,640
              )Net
                  loss per share based on weighted average number of shares outstanding
                  during the period:Basic
                  and diluted EPS
              
              $
              (.015
              )
              $
              (.035
              )Weighted
                  average number of shares outstanding (basic and diluted)
              
              
              46,211,604
              
              
              46,211,604





See
      accompanying notes.


24


**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 from Jan. 31, 1953 (inception) to2007
              
              2006
              
              Dec.
                  31, 2007**Operating
                  activities:**Net
                  loss
              
              $
              (690,488
              )
              $
              (1,620,798
              )
              $
              (35,669,640
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Gain
                  on settlement
              
              
              -
              
              
              -
              
              
              (8,124,016
              )Goodwill
                  impairment
              
              
              -
              
              
              -
              
              
              801,823Minority
                  interest
              
              
              -
              
              
              -
              
              
              (632,974
              )Depreciation
              
              
              2,520
              
              
              1,398
              
              
              4,038Write
                  off of unproved properties
              
              
              52,576
              
              
              1,018,435
              
              
              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
              
              
              (785
              )
              
              170,499
              
              
              (30,041
              )Accounts
                  payable and accrued liabilities
              
              
              354,011
              
              
              (22,204
              )
              
              359,335Income
                  taxes payable
              
              
              -
              
              
              (35,000
              )
              
              -Net
                  cash used in operating activities
              
              
              (282,166
              )
              
              (487,670
              )
              
              (36,154,050
              )**Investing
                  activities:**Additions
                  to oil, gas, and mineral propertiesnet
                  of assets acquired for common stock and reimbursements
              
              
              (263,098
              )
              
              (339,195
              )
              
              (6,203,089
              )Well
                  drilling costs
              
              
              (52,576
              )
              
              (1,018,435
              )
              
              (1,071,011
              )Sale
                  of unproved nonoperating interests
              
              
              294,614
              
              
              -
              
              
              294,614Net
                  proceeds from settlement
              
              
              -
              
              
              -
              
              
              8,124,016Proceeds
                  from relinquishment of surface rights
              
              
              -
              
              
              -
              
              
              246,733Purchase
                  of certificates of deposit
              
              
              (9,051
              )
              
              (51,313
              )
              
              (135,364
              )Purchase
                  of Minority interest in subsidiary
              
              
              -
              
              
              -
              
              
              (801,823
              )Purchase
                  of equipment
              
              
              -
              
              
              (11,082
              )
              
              (74,623
              )Net
                  cash provided by (used in) investing activities
              
              
              (30,111
              )
              
              (1,420,025
              )
              
              379,453**Financing
                  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
              
              
              -
              
              
              -
              
              
              884,249Sale
                  of shares by subsidiary
              
              
              -
              
              
              -
              
              
              820,000Sale
                  of subsidiary shares
              
              
              -
              
              
              -
              
              
              3,720,000Net
                  cash provided by financing activities
              
              
              -
              
              
              -
              
              
              35,804,861**Net
                  increase (decrease) in cash and cash equivalents**
              
              
              (312,277
              )
              
              (1,907,695
              )
              
              30,264Cash
                  and cash equivalents at beginning of period
              
              
              342,541
              
              
              2,250,236
              
              
              -Cash
                  and cash equivalents at end of period
              
              $
              30,264
              
              $
              342,541
              
              $
              30,264




See
      accompanying notes.


25


**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, 2007


Capital
                  inNumber
                  of
              
              Common
              
              ExcessShares
              
              Stock
              
              of
                  Par ValueShares
                  issued for net assets and unrecovered costsat
                  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 in1953
                  to acquire an investment
              
              
              54,538
              
              
              5,454
              
              
              124,074Shares
                  issued in 1953 in exchange for 1/3rdof
                  a 1/60thoverriding
                  royalty (sold in prior year) in nonproducingleases
                  of Coastal Petroleum
              
              
              84,210
              
              
              8,421
              
              
              -Market
                  value of shares issued for services renderedduring
                  the period 1954-1966
              
              
              95,188
              
              
              9,673
              
              
              109,827Net
                  transfers to restate the par value of common stockoutstanding
                  in 1962 and 1970 to $0.12 per share
              
              
              -
              
              
              117,314
              
              
              (117,314
              )Increase
                  in Company's investment (equity) due tocapital
                  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, 2004, 2005 2006 and 2007
              
              
              46,211,604
              
              
              $5,545,392
              
              
              $32,137,811




See
      accompanying notes.




26




**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**


**Notes
      to Consolidated Financial Statements**


**For
      The Years Ended December 31, 2007 and 2006**


**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.





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.





27


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


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





Sales
      of
      unproved nonoperating interests in oil and gas leases are accounted for as
      a
      reduction in the capitalized amount of the leases.





Prior
      to
      2005, the Company’s undeveloped and nonproducing Florida properties were subject to extensive
      litigation with the State of Florida and all
      costs
      associated with oil and gas properties were deemed impaired and had been
      expensed.





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.





In
      August
      2007, the Company entered into a farm-out agreement with Western Standard Energy
      Corp. (f/k/a Lusora Healthcare Systems Inc.) (“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. Western Standard will have a 100% working interest
      in
      the well until payout when it will be reduced to 80% with Coastal receiving
      the
      remaining 20% working interest.





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
      was targeted. The well also had gas shows in two zones. Casing was run into
      the
      hole and o perations
      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 will not allow the completion and testing
      operations or any further drilling to begin until July, so operations have
      been
      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 has committed to pay the estimated well completion
      costs of $65,000 no later than April 30, 2008.





Once
      operations resume and within 30 days after the test well is completed, Western
      Standard has the option to purchase a 50% interest in approximately 42,000
      acres
      near the well location (referred to as “Valley County Shallow Gas Assembly”).
      The cost to exercise the option would be $1,000,000, payable in $200,000
      installments based on certain milestones related to drilling step-out wells.
      The
      Company is currently in the permitting process for permits to drill those
      step-out wells.





In
      September 2007, the Company received $50,000 from F-Cross Resources, LLC (“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 has the option to drill a Lodgepole test
      well within six months and after drilling that well has the further option
      to
      acquire an interest in surrounding acreage. F-Cross is 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. 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. Unlike the shallow gas well on Federal land,
      this well is located on State land and provided that there is no State
      objection, the Company expects F-Cross will resume operations to complete and
      test the well once the weather permits it.  Upon
      completion of the well, F-Cross has the option to acquire a 50% working interest
      in the approximately 64,000 acres covered by the agreement for $25 per acre.
      F-Cross also may extend its option to acquire the 50% working interest by
      drilling a second Lodgepole test well.




28


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**
  **1.** **Summary of significant accounting policies
          (Cont'd)**


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.





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.




29


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


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




Going
      Concern





The
      Company has no recurring revenues, had recurring losses in 2007, 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. Management currently
      has in place two agreements with separate parties covering different parts
      of
      the Company’s leases under which the parties will each drill a test well and
      then have the option to purchase a 50% working interest in the leases covered
      by
      their agreement. If both parties exercised their options the Company would
      receive approximately $2,500,000, although there is no assurance the drilling
      will be successful or that the options will be exercised.





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
      August
      2007, the Company entered into a farm-out agreement with Western Standard Energy
      Corp. (f/k/a Lusora Healthcare Systems Inc.) (“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 $174,000 as a reduction
      in
      capitalized petroleum lease costs. Western Standard will have a 100% working
      interest in the well until payout when it will be reduced to 80% with Coastal
      receiving the other 20% working interest.





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
      we believed to be there. The well also had gas shows in two zones. Casing was
      run into the hole and o perations
      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, so operations have
      been
      suspended until that time. We 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 has committed to pay the estimated well completion costs of
      $65,000 no later than April 30, 2008.




30


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**2.** **Unproved
        Oil, Gas and Mineral** **Properties
        (Cont'd)**




Within
      30
      days after the test well is completed, Western Standard has the option to
      purchase a 50% interest in approximately 42,000 acres near the well location
      (referred to as “Valley County Shallow Gas Assembly”). The cost to exercise the
      option would be $1,000,000, payable in $200,000 installments based on certain
      milestones related to drilling step-out wells. The Company is currently in
      the
      permitting process for permits to drill those step-out wells.





In
      September 2007, the Company received $50,000 from F-Cross Resources, LLC (“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 has the option to drill a Lodgepole test
      well within six months and after drilling that well has the further option
      to
      acquire an interest in surrounding acreage. F-Cross is 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 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. Unlike the shallow gas well on Federal land,
      this well is located on State land and provided that there is no State
      objection, the Company expects that F-Cross will resume operations to complete
      and test the well once the weather and state regulators permit it.  Upon
      completion of the well, F-Cross has the option to acquire a 50% working interest
      in the approximately 64,000 acres covered by the agreement for $25 per acre.
      F-Cross also may extend its option to acquire the 50% working interest by
      drilling a second Lodgepole test well.





The
      Company still holds approximately 22,000 acres of lease in its Valley County
      Leases that are not under agreement with any third party and the Company is
      not
      currently looking for other entities to team with to explore that
      acreage.





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.




31


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**2.**  **Unproved
      Oil, Gas and Mineral** **Properties
      (Cont'd)**





**Montana
      Leases**





The
      Company’s primary presence in Montana is in Valley County, where it holds leases
      covering approximately 124,882 net acres, which 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.”





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 has an agreement with a consultant entity, controlled by one of the
      Company’s Directors, to identify Mississippian Lodgepole reef prospects to be
      drilled on and near its Valley County Leases. Previously under the agreement,
      the Company was required to drill a test well on an identified Lodgepole reef
      prospect by a certain time, however, there is no longer a drilling obligation
      under the agreement.





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.




32


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**2.**  **Unproved
      Oil, Gas and Mineral** **Properties
      (Cont'd)**





**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, 2008, 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 still intends to team with other entities.





In
      an
      effort to explore the North Dakota leases, in December of 2007 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 expects to receive the other $15,000 in
      the
      first quarter 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.




33




**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**


**Notes
      to Consolidated Financial Statements**


**For
      The Years Ended December 31, 2007 and 2006**


**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.





No
      common
      stock has been issued since 2002.





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
            
            
            10,050530,000
            
            $
            62,139
            
            $
            822,110




34




**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**


**Notes
      to Consolidated Financial Statements**


**For
      The Years Ended December 31, 2007 and 2006**




**4.**  **Stock
      Option Plans**





At
      December 31, 2007, 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 2006 or
      in
      2007.





35




**COASTAL
      CARIBBEAN OILS & MINERALS, LTD.**


**Notes
      to Consolidated Financial Statements**


**For
      The Years Ended December 31, 2007 and 2006**




**4.**  **Stock
      Option Plans (Cont'd)**





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, 2005
            
            
            500,000
            
            
            .15
                - .20
            
            
            .15
                - .20
            
            
            87,500Issued
                or cancelled during 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                and exercisable at December 31, 2006
            
            
            500,000
            
            
            .15
                - .20
            
            
            .15
                - .20
            
            
            87,500Issued
                or cancelled during 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -Outstanding
                and exercisable at December 31, 2007
            
            
            500,000
            
            
            .15
                - .20
            
            
            .18
            
            
            87,500**Available
                for grant at December 31, 2007**
            
            
            2,775,000





**Summary
                of Employee Options Outstanding at December 31,
                2007**




**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
            
            
            200,000
            
            December
                20, 2015
            
            
            .15





The
      weighted-average remaining contractual life of the outstanding stock options
      at
      December 31, 2007, and 2006 was 8 years and 9 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.




36


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**4.**  **Stock
      Option Plans (Cont'd)**





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, 2005
            
            
            25,000
            
            
            .15
            
            
            .15
            
            
            3,750Issued
                or cancelled during 2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -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
            
            
            3,750





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,
                2007**




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




37


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**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 2007 and 2006,
      the
      subsidiary has net taxable loss. The subsidiary will have approximately
      $10,000,000 in net operating losses to carry forward to 2008.The remaining
      net
      operating loss carry forwards expire in periods from 2009 through 2026 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 and
      $195,000 in 2027. For financial reporting purposes, a valuation allowance has
      been recognized to offset the deferred tax assets relating to those carry
      forwards.





For
      2005,
      the Company provided an estimated U.S. income tax provision of $35,000 resulting
      from the settlement with the State of Florida. The Company ultimately did not
      realize a tax liability for 2005 and this provision was reversed in 2006 as
      an
      income tax benefit.





Significant
      components of the Company’s deferred tax assets were as follows:





2007
            
            2006Net
                operating losses
            
            $
            3,400,000
            
            $
            3,800,000Accruals
                to related parties
            
            
            75,000
            
            
            -Total
                deferred tax assets
            
            
            3,475,000
            
            
            3,800,000Valuation
                allowance
            
            
            (3,475,000
            )
            
            (3,800,000
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -





Components
      of the income tax provision are as follows:




**2007**
            
            **2006****Provision
                for income taxes**Current
                provision (benefit) for income taxes
            
            $
            (65,000
            )
            $
            (35,000
            )Benefit
                of net operating loss
            
            
            -
            
            
            (600,000
            )Deferred
                asset valuation allowance (reversal)
            
            
            65,000
            
            
            600,000Net
                income tax provision (benefit)
            
            $
            -
            
            $
            (35,000
            )




38


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**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 and $72,800
      paid to this entity for the year ended December 31, 2007 and 2006,
      respectively.





Services





The
      Company expensed $144,000 and $144,000 in fees by Angerer & Angerer in 2007
      and 2006, respectively. The Company owes $96,000 to Angerer & Angerer at
      December 31, 2007. 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 $16,062 and $50,453 for legal fees by the law firm of Igler
      & Dougherty, PA, during 2007 and 2006, respectively. Mr. Herbert D.
      Haughton, a shareholder of the firm, was elected a director of Coastal Caribbean
      and of Coastal Petroleum in December 2005.





**7.**  **Selected
      quarterly financial data (unaudited)** ****





The
      following is a summary (in thousands, except for per share amounts) of the
      quarterly results of operations for the years ended December 31, 2007 and
      2006:





**2007**
            
            **QTR
                1**
            
            **QTR
                2**
            
            **QTR
                3**
            
            **QTR
                4**($)
            
            ($)
            
            ($)
            
            ($)Total
                revenues
            
            
            -
            
            
            -
            
            
            -
            
            
            -Expenses
            
            
            (168
            )
            
            (245
            )
            
            (98
            )
            
            (190
            )Gains
                and other income
            
            
            1
            
            
            4
            
            
            -
            
            
            5Income
                Taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            
            (167
            )
            
            (241
            )
            
            (98
            )
            
            (185
            )Per
                share (basic & diluted)
            
            
            (.004
            )
            
            (.005
            )
            
            (.002
            )
            
            (.004
            )Weighted
                average number of shares outstanding
            
            
            46,212
            
            
            46,212
            
            
            46,212
            
            
            42,212




39


**COASTAL
        CARIBBEAN OILS & MINERALS, LTD.**
 **Notes
        to Consolidated Financial Statements**
 **For
        The Years Ended December 31, 2007 and 2006**


**7.**  **Selected
      quarterly financial data (unaudited)** **(Cont'd)**





**2006**
            
            **QTR
                1**
            
            **QTR
                2**
            
            **QTR
                3**
            
            **QTR
                4**($)
            
            ($)
            
            ($)
            
            ($)Total
                revenues
            
            
            -
            
            
            -
            
            
            -
            
            
            -Expenses
            
            
            (197
            )
            
            (181
            )
            
            (177
            )
            
            (1,130
            )Gains
                and other income
            
            
            15
            
            
            11
            
            
            9
            
            
            6Income
                Taxes
            
            
            -
            
            
            -
            
            
            35
            
            
            -Impairment
                of goodwill
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            
            (182
            )
            
            (170
            )
            
            (133
            )
            
            (1,136
            )Per
                share (basic & diluted)
            
            
            (.004
            )
            
            (.004
            )
            
            (.003
            )
            
            (.024
            )Weighted
                average number of shares outstanding
            
            
            46,212
            
            
            46,212
            
            
            46,212
            
            
            46
                212





**8.**  **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 $100,000 under FDIC protection. Demand deposit bank balances totaled
      $44,096 and $126,313 at December 31, 2007 and 2006, respectively.
      Certificate of deposit balances were $135,364 and $126,313 at December 31,
      2007 and 2006, respectively.





40





**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, 2007. 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* .




41





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, 2007, 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.





42




**PART III**





**Item
      10.****Directors
      and Executive Officers of the Company**




**Directors**





As
      of
      December 31, 2007, the board of directors included five members, two of whom,
      Mr. Ware and Mr. Angerer, also serve as executive officers. The board is 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.
      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 2006 and
      2007
      continue to serve until their successors are elected and assume office.





Name
            
            Director
              Since
            
            Other
                Offices Held
              With
                the Company
            
            Age
                and Business Experience
              For
                the 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 58, 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 61, 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.




43




Directors
                With Two Year Terms Expiring at the 2007 Annual
                MeetingHerbert
                D. Haughton
            
            N/A
            
            None
            
            Mr.
                Haughton, age 66, 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.Anthony
                F. Randazzo, Ph.D.
            
            N/A
            
            None
            
            Dr.
                Randazzo, age 66, is Professor Emeritus of Geological Sciences at
                the
                University of Florida where he has worked since 1967. He served as
                Chairman of the Department of Geology at the University of Florida
                from
                1988 to 1995. He is also currently a co-principal and President of
                the
                geotechnical consulting firm Geohazards, Inc. which he was instrumental
                in
                forming in1985. He earned his B.S. degree at The City College of
                New York
                in 1963, his M.S. from the University of North Carolina at Chapel
                Hill
                1965, and his Ph.D. from the University of North Carolina at Chapel
                Hill
                in 1968. He is a Registered Professional Geologist in the State of
                Florida
                and the State of Georgia.




44





Director
                With One Year Term Expiring at the 2006 Annual
                MeetingMatthew
                D. Cannon
            
            N//A
            
            None
            
            Mr.
                Cannon, age 63, is currently a partner in the Cannon Trading Partnership,
                which he formed in 1993. From 1991 to 1992 he served as a partner
                in
                Seisma Drilling Corporation. From 1988 to 1991 he served as vice
                president
                and director of Hilb, Rogal and Hamilton Company, an insurance agency
                located in Gainesville, Florida which specialized in underwriting,
                rating,
                sales, collections and claims associated with commercial lines insurance
                policies. Prior to that he served as vice president and director
                of the
                Cannon-Treweek insurance agency from 1968
                to1988.





**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 2007, $89,700 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 small percentage 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.




45





**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.





**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.” A
      copy of the Code of Ethics is also filed herein as Exhibit (j).





**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.




46





**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, 2007.





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.





**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 2007:





*2007
      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.




47




The
      base
      salary of the named executive officer did not increase during 2007 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.





*2007
      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 2007 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 2007.





***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.




48




**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.




49


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 2007. 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.
  **S** **UMMARY** **C** **OMPENSATION** **T** **ABLE**




**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
                
                
                2007
                
                
                125,000
                (4)
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                18,750
                
                
                143,750Officer,
                    President ,
                
                
                2006
                
                
                125,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                18,750
                
                
                138,800Chief
                    Financial Officer, Director
                
                
                2005
                
                
                112,020
                
                
                -
                
                
                -
                
                
                47,000
                
                
                -
                
                
                -
                
                
                13,800
                
                
                172,820




(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)  Stock
      Options - Grant of stock options to acquire 50,000 shares was made under the
      Company’s 1995 Stock Option Plan. Grant of stock options to acquire 250,000
      shares was made under the Company’s 2005 Incentive Stock Option Plan




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




(5)  Payment
      to SEP-IRA pension plan (2006 and 2007 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.




50




**Stock
      Options**





The
      Company granted Mr. Ware an option to acquire 50,000 shares of our common stock,
      exercisable at $.15 per share and 250,000 shares of our common stock,
      exercisable at $.20 per share, for ten years during the year ended
      December 31, 2005. The Company has not adjusted or amended the exercise
      price of any stock options during the year end December 31, 2007.





All
      the
      outstanding options that existed prior to the 2005 Agreement with the State
      of
      Florida were terminated as part of the Agreement with the State of Florida
      and
      through the mutual releases exchanged as a part of the closing under that
      Agreement.





The
      following table sets forth certain information with respect to outstanding
      equity awards at December 31, 2007 held by the named executive officer.





**O** **UTSTANDING** **E** **QUITY** **A** **WARDS
        AT** **F** **ISCAL** **Y** **EAR-** **E** **ND**


**Option
                  Awards**
              
              **Stock
                  Awards****Number
                  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**
                **Vested****Name**
              
              **Exercisable**
              
              **Unexercisable**
              
              **(#)**
              
              **($)**
              
              **Date**
              
              **(#)**
              
              **($)**
              
              **(#)**
              
              **($)**Phillip
                  W. Ware
              
              
              50,000
              
              
              -
              
              
              -
              
              
              0.15
              
              
              July
                  25, 2015
              
              
              -
              
              
              -
              
              
              -
              
              
              -250,000
              
              
              -
              
              
              -
              
              
              0.20
              
              
              September
                  27, 2015
              
              
              -
              
              
              -
              
              
              -
              
              
              -





51




**O** **PTION** **E** **XERCISES**


There
      were no options exercised in 2007.





**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 2007 and accrued $125,000 owed to them at December
      31,
      2007. Directors were paid $125,000 in 2006. The following table shows the
      compensation of the Company’s directors for the year ended December 31,
      2006.




52




**D** **IRECTOR** **C** **OMPENSATION**


**Name**
            
            **Fees Earned or**
              **Paid in Cash**
              **($)**
            
            **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
            
            
            25,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            25,000Anthony
                F. Randazzo
            
            
            25,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            25,000





53





**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
      Matthew D. Cannon.





**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 19,
                2008
            
            COMPENSATION
                COMMITTEEMatthew
                D. Cannon, ChairHerbert
                D. Haughton




**Item
      12.****Security
      Ownership of Certain Beneficial Owners and Management**





**Security
      Ownership of Certain Beneficial Owners**




As
      of
      December 31, 2007, Mr. Robert J. Angerer, Sr. owned 1,933,757 shares, or
      4.18% of our common stock and his son, Mr. Robert J. Angerer, Jr., owned
      2,191,914 shares, or 4.74% of our common stock. Mr. Angerer, Sr. disclaims
      beneficial ownership of any shares owned by his son.




As
      of
      March 25, 2008, no persons or apparent groups of persons are known by management
      to own beneficially five percent or more of the Company’s outstanding
      shares.




54




**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, 2007, by each director
      of the Company and by all directors and executive officers as a group:





Amount
                and Nature of BeneficialOwnershipName
                of Individual or Group
            
            Shares
                Held Directly orIndirectly
            
            Options
            
            Percent
                ofClassPhillip
                W. Ware
            
            
            204,121
            
            
            300,000
            
            
            1.09
            %Robert
                J. Angerer, Sr.
            
            
            1,933,757
            
            
            50,000
            
            
            4.25
            %Herbert
                D. Haughton
            
            
            50,000
            
            
            50,000
            
            
            0.21
            %Anthony
                F. Randazzo
            
            
            100,000
            
            
            50,000
            
            
            0.32
            %Matthew
                D. Canon
            
            
            105,300
            
            
            50,000
            
            
            0.33
            %Directors
                and executive officersas
                a group (a total of 5 persons)
            
            
            2,393,178
            
            
            500,000
            
            
            6.19
            %







**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, 2007





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)
                (#)Equity
                compensation plans not approved by security holders(1)
            
            
            250,000
            
            $
            0.15
            
            
            750,000Equity
                compensation plans approved by security holders(2)
            
            
            250,000
            
            $
            0.20
            
            
            2,050,000Total:
            
            
            500,000
            
            $
            0.15
                - 0.20
            
            
            2,800,000





(1)  1995
      Stock Option Plan




(2)  2005
      Employee’s Incentive Stock Option Plan




55





The
      Company’s 1995 **** Stock
      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.





**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 2007 and 2006,
      Angerer & Angerer billed Coastal Petroleum $144,000 and $144,000
      respectively for legal fees.




56




***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 2007 and 2006, Igler & Dougherty billed Coastal
      Petroleum $16,062 and $50,453, respectively for legal fees.





**Item
      14.****Principal
      Accountant Fees and Services**





Baumann,
      Raymondo and Company, P.A. audited the Company’s financial statements for 2006
      and 2005 and performed the reviews for 2006 and the quarter ended September
      30,
      2005. James Moore & Co., P.L. audited the Company’s financial statements for
      2004 and performed the review for the quarters ended March 31, 2005 and June
      30,
      2005.





Fees
      related to services performed by Baumann, Raymondo and Company, P.A. in 2007
      and
      2006 were as follows:





2007
            
            2006Audit
                Fees (1)
            
            $
            31,081
            
            $
            30,500Audit-Related
                Fees
            
            
            -0-
            
            
            -0-Tax
                Fees (2)
            
            
            -0-
            
            
            -0-Total
            
            $
            31,081
            
            $
            30,500




57


(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, newly elected directors Matthew D. Cannon and Anthony F. Randazzo
                have served as the members of the Audit Committee. The Audit Committee
                pre-approved all audit related and non-audit services in 2007 and
                2006.





The
                Audit Committee has reviewed Coastal Caribbean’s audited financial
                statements as of, and for, the fiscal year ended December 31, 2007,
                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
                Independence Standards Board Standard No. 1*(Independence
                Discussions with Audit Committees)*.
                These items relate to that firm’s independence from Coastal Caribbean. The
                Audit Committee 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 Audit Committee
                recommended to the Board that Coastal Caribbean’s audited financial
                statements be included in the Company’s Annual Report on Form 10-K for the
                fiscal year ended December 31, 2007, and filed with the Securities
                and
                Exchange Commission.





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





58





**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
            
            
            22Consolidated
                balance sheets at December 31, 2007 and 2006
            
            
            23Consolidated
                statements of operations for each of the three years in the period
                ended
                December 31, 2007 and for the period from January 31, 1953 (inception)
                to
                December 31, 2007.
            
            
            24Consolidated
                statements of cash flows for each of the three years in the period
                ended
                December 31, 2007 and for the period from January 31, 1953 (inception)
                to
                December 31, 2007.
            
            
            25Consolidated
                statement of common stock and capital in excess of par value for
                the
                period from January 31, 1953 (inception) to December 31,
                2007
            
            
            26Notes
                to consolidated financial statements.
            
            
            27-40





**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.




59




**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.




60




**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)Dated:
              March 26, 2008
            By
            */s/
              Phillip W. Ware***Phillip
                W. Ware**,
                Chief Executive Officer
              President
                and Principal Financial Officer




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*
              
              **Phillip
                W. Ware**
              Director,
                Chief Executive Officer,
              President
                and Principal Financial Officer
              
              Dated:
                March 26, 2008
            By*/s/
                Robert J. Angerer*
              **Robert
                J. Angerer**
              Director
                and Vice President
              
              
              Dated:
                March 26, 2008By*/s/
                Herbert D. Haughton*
              **Herbert
                D. Haughton**
              Director
              
              Dated:
                March 26, 2008
            By*/s/
                Anthony F. Randazzo*
              
              
              **Anthony
                F. Randazzo**
              Director
              
              Dated:
                March 26, 2008By*/s/
                Matthew D. Cannon*
              
              **Matthew
                D. Cannon**
              Director
              
              Dated:
                March 26, 2008





61




**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




62