UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





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




For the
quarterly period ended September
30,
2009





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 1-4668




COASTAL
      CARIBBEAN OILS & MINERALS, LTD.(Exact
      name of registrant as specified in its
charter)


BERMUDA
              
              NONE(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      No.)
 
 Clarendon
      House, Church Street, Hamilton, Bermuda
              HM
      11(Address
      of principal executive offices)
              (Zip
      Code)
 
 (850)
      556-5924(Registrant's
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report)
 Indicate by check mark whether the
registrant (l) has filed all reports required to be filed by Section 13 or 15
(d) of the Securities Exchange Act of l934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.  T  Yes   ̈  No
  Indicate by check mark whether the
registrant is 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 oNon-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).   ̈  Yes  T
No
 
 The number of shares outstanding of the
issuer's single class of common stock as of November 20, 2009 was
47,286,604.
 
 
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 September 30,
2009
 Table
of Contents
 
 PART
I - FINANCIAL INFORMATION
 
 ITEM
      1
              Financial
      Statements
              
              PageConsolidated
      balance sheets at September 30, 2009 and December 31,
      2008
              
              3Consolidated
      statements of operations for the three and nine month periods ended
      September 30, 2009 and 2008  and for the period from
      January 31, 1953 (inception) to September 30, 2009
              
              4Consolidated
      statements of cash flows for the nine month periods ended
      September 30, 2009 and 2008 and for the period from January 31,
      1953 (inception) to September 30, 2009
              
              5Notes
      to consolidated financial statements
              
              6ITEM
      2
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              12ITEM
      3
              Quantitative
      and Qualitative Disclosure About Market Risk
              
              17ITEM
      4
              Controls
      and Procedures
              
              17PART
      II - OTHER INFORMATIONITEM
      1
              Legal
      Proceedings
              
              19ITEM
      5
              Other
      Information
              
              19ITEM
      6
              Exhibits
              
              21Signatures
              
              22
  2
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART I -
FINANCIAL INFORMATION
 September 30,
2009
  ITEM 1 - Financial
Statements
 
 CONSOLIDATED
BALANCE SHEETS
 (Expressed
in U.S. dollars)
 
 (A
Bermuda Corporation)
 A
Development Stage Company
 
  
 September 30,
              
              
              December 31,2009
              
              
              2008(Unaudited)
              
              
              (Note)AssetsCurrent
      assets:Cash
      and cash equivalents
              
              $
              3,166
              
              
              $
              752Total
      current assets
              
              
              3,166
              
              
              
              752Certificates
      of deposit, restricted
              
              
              85,529
              
              
              
              84,765Petroleum
      leases
              
              
              2,236,181
              
              
              
              2,200,475Equipment,
      net
              
              
              4,525
              
              
              
              6,415Total
      assets
              
              $
              2,329,401
              
              
              $
              2,292,407Liabilities
      and Shareholders’ EquityCurrent
      liabilities:Accounts
      payable and accrued liabilities
              
              $
              235,820
              
              
              $
              58,885Amounts
      due to related parties
              
              
              1,020,236
              
              
              
              758,021Notes
      payable
              
              
              73,198
              
              
              
              -Notes
      payable to related parties
              
              
              45,000
              
              
              
              -Total
      current liabilities
              
              
              1,374,254
              
              
              
              816,906Shareholders'
      equity:Common
      stock, par value $.12 per share:Authorized
      - 250,000,000 sharesOutstanding
      – 46,886,604 and 46,211,604 shares,respectively
              
              
              5,626,392
              
              
              
              5,551,392Discount
      on common stock issued
              
              
              (45,000
              )
              
              
              -Capital
      in excess of par value
              
              
              32,139,311
              
              
              
              32,139,31137,720,703
              
              
              
              37,690,703Deficit
      accumulated during the development stage
              
              
              (36,765,556
              )
              
              
              (36,215,202
              )Total
      shareholders’ equity
              
              
              955,147
              
              
              
              1,475,501Total
      liabilities and shareholders’ equity
              
              $
              2,329,401
              
              
              $
              2,292,407
  Note: The
balance sheet at December 31, 2008 has been derived from
 the
audited consolidated financial statements at that date.
 
 See accompanying
notes.
 
 3
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART I -
FINANCIAL INFORMATION
 September 30,
2009
   ITEM
1 - Financial
Statements
 
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (Expressed
in U.S. dollars)
 
 (A
Bermuda Corporation)
 A
Development Stage Company
 
 (Unaudited)
 Three
      months ended September 30,
                
                
                Nine
      months ended September 30,
                
                
                For
      the period from Jan.31, 1953 (inception) to September 30,2009
                
                
                2008
                
                
                2009
                
                
                2008
                
                
                2009Interest
      and other income
                
                $
                417
                
                
                $
                1,587
                
                
                $
                764
                
                
                $
                3,960
                
                
                $
                3,984,735Gain
      on settlement
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                8,124,016417
                
                
                
                1,587
                
                
                
                764
                
                
                
                3,960
                
                
                
                12,108,751Expenses:Legal
      fees and costs
                
                
                5,870
                
                
                
                37,640
                
                
                
                81,538
                
                
                
                115,006
                
                
                
                17,653,226Administrative
      expenses
                
                
                47,002
                
                
                
                63,384
                
                
                
                199,521
                
                
                
                221,900
                
                
                
                11,044,242Salaries
                
                
                31,250
                
                
                
                31,250
                
                
                
                93,750
                
                
                
                93,750
                
                
                
                4,365,181Shareholder
      communications
                
                
                2,175
                
                
                
                2,066
                
                
                
                16,881
                
                
                
                9,226
                
                
                
                4,141,902Goodwill
      impairment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                801,823Write
      off of unproved properties
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                6,690,752Exploration
      costs
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                188,218Lawsuit
      judgments
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,941,916Minority
      interests
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (632,974
                )Other
                
                
                45,000
                
                
                
                -
                
                
                
                45,000
                
                
                
                -
                
                
                
                409,865Contractual
      services
                
                
                18,019
                
                
                
                -
                
                
                
                114,428
                
                
                
                -
                
                
                
                2,270,156149,316
                
                
                
                134,340
                
                
                
                551,118
                
                
                
                439,882
                
                
                
                48,874,307Income
      tax benefit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss
                
                $
                (148,899
                )
                
                $
                (132,753
                )
                
                $
                (550,354
                )
                
                $
                (435,922
                )Deficit
      accumulated during the development stage
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                $
                (36,765,556
                )Weighted
      average number of Shares outstanding (basic & diluted)
                
                
                46,436,326
                
                
                
                46,229,122
                
                
                
                46,285,688
                
                
                
                46,211,604Net
      loss per share (basic & diluted)
                
                $
                (.00
                )
                
                $
                (.00
                )
                
                $
                (.01
                )
                
                $
                (.01
                )
 See
accompanying notes.
 4
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART I -
FINANCIAL INFORMATION
 September 30,
2009
 
 ITEM 1 - Financial
Statements
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (Expressed
in U.S. Dollars)
 
 (A
Bermuda Corporation)
 A
Development Stage Company
 (Unaudited)
  Nine
      months ended
                September
      30,
              
              
              For
      the period from
                Jan.
      31, 1953 (inception) to2009
              
              
              2008
              
              
              September 30, 2009Operating
      activities:Net
      loss
              
              $
              (550,354
              )
              
              $
              (435,922
              )
              
              $
              (36,765,556
              )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
              
              
              1,890
              
              
              
              1,890
              
              
              
              8,448Write
      off of unproved properties
              
              
              -
              
              
              
              -
              
              
              
              6,690,752Common
      stock issued for services
              
              
              -
              
              
              
              -
              
              
              
              119,500Compensation
      recognized for stock option grant
              
              
              -
              
              
              
              -
              
              
              
              75,000Recoveries
      from previously written off properties
              
              
              -
              
              
              
              -
              
              
              
              252,173Net
      change in:Prepaid
      expenses and other
              
              
              -
              
              
              
              30,040
              
              
              
              -Income
      taxes receivable
              
              
              -
              
              
              
              -
              
              
              
              -Accounts
      payable and accrued liabilities
              
              
              442,076
              
              
              
              338,173
              
              
              
              1,258,983Income
      taxes payable
              
              
              -
              
              
              
              -
              
              
              
              -Net
      cash used in operating activities
              
              
              (106,388
              )
              
              
              (65,819
              )
              
              
              (36,315,867
              )Investing
      activities:Additions
      to oil, gas, and mineral propertiesnet
      of assets acquired for common stock
      and  reimbursements
              
              
              (38,632
              )
              
              
              (224,363
              )
              
              
              (6,491,884
              )Well
      drilling costs
              
              
              -
              
              
              
              -
              
              
              
              (1,071,011
              )Sale
      of unproved nonoperating interests
              
              
              -
              
              
              
              217,820
              
              
              
              512,595Net
      proceeds from settlement
              
              
              -
              
              
              
              -
              
              
              
              8,124,016Proceeds
      from relinquishment of surface rights
              
              
              -
              
              
              
              -
              
              
              
              246,733Purchase
      of certificate of deposit
              
              
              (764
              )
              
              
              50,696
              
              
              
              (140,184
              )Redemption
      of certificate of deposit
              
              
              -
              
              
              
              -
              
              
              
              54,655Purchase
      of minority interest in CPC
              
              
              -
              
              
              
              -
              
              
              
              (801,823
              )Purchase
      of fixed assets
              
              
              -
              
              
              
              -
              
              
              
              (74,623
              )Net
      cash provided by (used in) investing activities
              
              
              (39,396
              )
              
              
              44,153
              
              
              
              358,474Financing
      activities:Loan
      proceeds
              
              
              73,198
              
              
              
              -
              
              
              
              73,198Loans
      from officers
              
              
              45,000
              
              
              
              -
              
              
              
              156,790Repayments
      of loans from officers
              
              
              -
              
              
              
              -
              
              
              
              (111,790
              )Sale
      of common stock net of expenses
              
              
              30,000
              
              
              
              -
              
              
              
              30,410,612Shares
      issued upon exercise of options
              
              
              -
              
              
              
              7,500
              
              
              
              891,749Sale
      of shares by subsidiary
              
              
              -
              
              
              
              -
              
              
              
              820,000Sale
      of subsidiary shares
              
              
              -
              
              
              
              -
              
              
              
              3,720,000Net
      cash provided by financing activities
              
              
              148,198
              
              
              
              7,500
              
              
              
              35,960,559Net
      (decrease) increase in cash and cash equivalents
              
              
              2,414
              
              
              
              (14,166
              )
              
              
              3,166Cash
      and cash equivalents at beginning of period
              
              
              752
              
              
              
              30,264
              
              
              
              -Cash
      and cash equivalents at end of period
              
              $
              3,166
              
              
              $
              16,098
              
              
              $
              3,166
  See
accompanying notes.
 5
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
1                 Financial
Statements
 Note
      1.
              Basis of
      Presentation
 
 The
accompanying unaudited consolidated financial statements include Coastal
Caribbean Oils & Minerals, Ltd. (“the Company”) and its wholly owned
subsidiary, Coastal Petroleum Company (“Coastal Petroleum”) and have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.  In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included.  All such adjustments are of a normal recurring
nature.  Operating results for the three month period ended September
30, 2009, are not necessarily indicative of the results that may be expected for
the year ending December 31, 2009.  For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.  On November 20, 2009, the date the
September 30, 2009, interim consolidated financial statements of the Company
were issued, the Company evaluated the recognition and disclosure of subsequent
events.
 
 Note
      2.
              Going
      Concern
 
 As of
September 30, 2009, the Company had no revenues, had recurring losses from
operations and has had an accumulated deficit 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.  Currently, management is actively pursuing funding and
has had contact with several parties interested in investing in the Company so
that the Company could explore its leases on its own.  In addition,
the Company has been in contact with other parties interested in working with
the Company, in buying some of the Company’s leases or in buying an interest in
those leases.  There is no assurance that the Company will be able to
obtain any funding, that sufficient funding can be obtained, or that the Company
will be able to raise necessary funds through the sale of some of its leases or
interests in those leases.  These situations raise substantial doubt
about the Company's ability to continue as a going concern.  These
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
amounts and classification of liabilities, which may result from the outcome of
this uncertainty.
 
 Note
      3.
              Net income (loss) per
      share
 
 Net
income (loss) per share is based upon the weighted average number of common and
common equivalent shares outstanding during the period.  The Company’s
basic and diluted calculations of EPS are the same because the exercise of
options is not assumed in calculating diluted EPS, as the result would be
anti-dilutive.
 6
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
1                 Financial
Statements
  Note
      4.
              Unproved Oil, Gas and
      Mineral Properties
 
 Farm-out Agreements and
Drilling Activity
 
 In May
2008, the Company entered an agreement with Cobra Oil and Gas
(“Cobra”).  Under the agreement, Cobra paid Coastal $180,000 for the
option to acquire a half interest in approximately 78,000 acres of Coastal’s
Valley County Leases.  The agreement allowed the Company to pay its
Lease rentals that were due June 1, 2008, and brought in a new party to explore
on the Leases. Cobra has until May 2010 to exercise the option by spending
$1,000,000 on behalf of the Company, drilling wells on the leases under the
agreement.  Those leases included approximately 62,000 acres of leases
that were formally under an agreement with F-Cross Resources (“F-Cross”) that
expired in 2008 and more than 17,000 acres of other leases Coastal held in
Valley County.
 
 The
Company had previously entered two farm-out agreements with Western Standard
Energy Corp. (“Western Standard”) and F-Cross Resources (“F-Cross”), both of
which expired in 2008.
 
 Montana
Leases
 
 The
Company’s primary presence in Montana is in Valley County, where it holds leases
covering approximately 35,873 net acres, which are the remaining unexpired
leases from those leases the Company acquired in three separate acquisitions
between July 2005 and February 2006. The leases acquired in those acquisitions
are contiguous to each other and are referred to collectively as “the Valley
County Leases.”
 
 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 through
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.
 
 Coastal
assigned a 5% overriding royalty interest (before all expenses) in 8/8ths of the
oil or natural gas produced from those Valley County (Starbuck East prospect)
Montana leases to a previous lender.
 7
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
1                 Financial
Statements
 
 Note
      4.
              Unproved Oil, Gas and
      Mineral
Properties  (Continued)
 
 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 January 1, 2009, and has the
option to drill the remaining Lodgepole Reef prospects on these leases. The
Company had intended to team with other entities to share the cost of the
initial 9,700 foot test well, the total estimated drilling cost of which is
estimated to be $1,500,000, however, it is unlikely that the Company will be
able to identify and contract with a team prospect prior to the expiration date.
The leases making up the remaining acreage were leased by the Company and have
no obligation associated with them. The Company is actively seeking funding
sufficient to allow it to explore its leases on its own.
 
 In
December 2007, the Company entered a second 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
which the Company received between November 2007 and April 2008, and 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 on wells drilled by Western Standard on these prospects.  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.
 
 Note
      5.
              Income
      Taxes
 
 For the
three and nine month periods ending September 30, 2009and 2008, the Company
reported a loss for both financial statement reporting and income tax
purposes.  The Company has provided a 100% valuation allowance on its
deferred tax asset as a result of its net operating loss
carryforwards.  The Company had approximately $10,000,000 in net
operating loss carryforwards at December 31, 2008.
 
 Note
      6.
              Related Party
      Transactions
 
 In May
2009, the Company borrowed $45,000 from Phillip Ware, the President of Coastal
Petroleum Company, which was used to pay a due diligence fee for a group
interested in entering an agreement to drill (“Agreement”) on the Company’s
leases.  The loan is non interest bearing and has no set repayment
terms.  If the Agreement is successful, the loan plus a fee of $45,000
is due.  If the Agreement is unsuccessful, the loan is due out of a
refund of the due diligence fee, plus 250,000 shares of restricted common stock
of the Company.  The Company expensed the $45,000 due diligence fee
during the three months ended September 30, 2009.  The Agreement was
never fulfilled and was terminated by the Company.  The Company is
pursuing collection of the $45,000 fee.
  8
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
1                 Financial
Statements
  Note
      6.
              Related Party
      Transactions  (Continued)
 
 In
November 2009, the Company borrowed $10,000 from Robert Angerer, Sr., a Director
and shareholder, which was used to pay certain operating expenses of the
Company.  The loan is non interest bearing, has no set repayment terms
and is convertible into 200,000 shares of restricted common stock of the Company
if not repaid from future capital raising.
 
 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 paid no amounts to this entity
for either of the three and nine months ended September 30, 2009, and
2008.
 
 Through
May 2009, the Company paid a monthly retainer to the law firm of Angerer &
Angerer which had been litigation counsel to the Company for more than
twenty-five years and also served 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.  The principals of the law firm included two
individuals who are collectively shareholders, officers and a director of the
Company.  The Company expensed $60,000 and $108,000 in legal fees
billed by Angerer & Angerer for the nine months ended September 30, 2009 and
2008, respectively, including $0 and $36,000 in legal fees for the three months
ended September 30, 2009 and 2008, respectively.  The Company owes
$300,000 in accrued legal fees to Angerer & Angerer as of September 30,
2009.
 
 Since
June 2009, the Company has retained Robert J. Angerer, Sr. as legal
counsel.  Mr. Angerer 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 and
representing the Company before state and federal agencies for
permitting.  Mr. Angerer, Sr. is also a shareholder, officer and a
director of the Company.  The Company expensed $11,600 and $11,600,
respectively, in legal fees to Mr. Angerer, Sr. for the three and nine month
periods ended September 30, 2009.
 
 Also
since June 2009, the Company has retained Robert J. Angerer, Jr. who serves as
the Company’s corporate secretary and handles management services, public
relations, shareholder relations and management of the Company’s
website.  The Company expensed $0 in fees to Mr.  Angerer,
Jr. for the three and nine month periods ended September 30, 2009.
 
 The
Company has retained the law firm of Igler & Dougherty, P.A. as securities
counsel.  One of the Company’s directors is a shareholder in the law
firm.  The Company has expensed $12,528 and $12,447 in legal fees and
costs for the nine months ended September 30, 2009and 2008, respectively,
including $6,270 and $2,768 in legal fees for the three months ended September
30, 2009 and 2008, respectively.
 9
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
1                 Financial
Statements
  Note
      7.
              Stock
      Transactions
 
 In
November 2009, the Company received $25,000 from the sale of 333,000 shares of
restricted common stock of the Company to an individual and an entity, which the
Company used to pay the November 2009 rentals due on its leases in the amount of
$21,550.  The individual and entity also each received a 0.25% royalty
covering the Company’s leases covering its Starbuck East Montana shallow gas
leases.  In connection with this transaction, the Company paid a
consultant $3,500 and issued 66,667 shares of restricted Company common stock
and a .25% overriding royalty in the Company’s Starbuck East Montana Shallow Gas
leases.
 
 On
September 1, 2009, the Company received $15,000 from the sale of 325,000
restricted shares of stock of the Company to an individual, which the Company
used to pay its September 1st annual
lease rentals on other Montana, Starbuck East leases.  In August, the
Company received $15,000 from the sale of 300,000 restricted shares of stock of
the Company to an entity, which the Company used to pay certain operational
expenses. In these two transactions, the shares were issued at a discount to par
value.
 
 In March
2008, the Company received $7,500 from the exercise of outstanding stock options
for 50,000 shares from Robert J. Angerer, Sr., a vice president and a director
of the Company.
 
 Note
      8.
              Certificates of
      Deposit – Restricted
 
 The
Company has pledged certificates of deposit for pollution bond requirements
under three previous well permits.
 
 Note
      9.
              Notes
      Payable
 
 During
the first six months of 2009, the Company borrowed $48,198 from an individual,
which was used to make annual rental payments on specific leases.  The
loan is non interest bearing and has no set repayment terms.  The
individual was granted a 0.5% royalty interest in the leases for which the
borrowed money was used to pay rentals, which are located primarily in the
Starbuck prospect area in Montana.
 
 During
August 2008, the Company borrowed $25,000 from an entity working with the
Company to identify investors to consummate the Agreement and fund the 2009
Drilling Plan.  The funds from the loan were used to pay the Company’s
annual corporate fee to Bermuda as well as certain other operational
expenses.  The loan is non interest bearing and has no set repayment
terms.  If the Agreement is successful, the loan plus a fee of $25,000
is due.
  10
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
  Forward
Looking Statements
 
 Statements included in Management’s
Discussion and Analysis of Financial Condition and Results of Operations, which
are not historical in nature are intended to be forward looking
statements.  The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements.  Among the risks and uncertainties are: the uncertainty of
securing additional funding through the sale of shares of Coastal Petroleum
and/or Coastal Caribbean; changes in the income tax laws relating to tax loss
carry forwards; the failure of the Company’s test wells to locate oil or gas
reserves or the failure to locate oil or gas reserves which are economically
feasible to recover; reductions in world wide oil or gas prices; adverse weather
conditions; or mechanical failures of equipment used to explore the Company’s
leases.
 
 Critical
Accounting Policies
 
 The Company follows the full cost
method of accounting for its oil and gas properties.  All costs
associated with property acquisition, exploration and development activities
whether successful or unsuccessful are capitalized
 
 The capitalized costs are subject to a
ceiling test which basically limits such costs to the aggregate of the estimated
present value discounted at a 10% rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties.
 
 The Company assesses whether its
unproved properties are impaired on a periodic basis.  This assessment
is based upon work completed on the properties to date, the expiration date of
its leases and technical data from the properties and adjacent
areas.
 
 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 35,873 net acres in Valley County,
located in northeastern Montana close to known production from a Lodgepole
reef.
  11
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 This area
of Montana has a number of other producing formations in addition to the
Lodgepole, including the Eagle sands.  Currently we have one agreement
with a party covering some of the areas of the leases and during 2008 we had two
agreements expire under which exploration had begun on the leases.  We
also hold leases in southwestern North Dakota and have an agreement covering
four Lodgepole prospects on those leases.
 
 Liquidity and Capital Resources
 Liquidity
 
 The Company had $3,000 in cash,
excluding certificate of deposits pledged for drilling permits, at September 30,
2009, and no available cash at December 31, 2008.  Our current
liabilities exceed our current assets by $1,361,000 at September 30,
2009.  We have suspended payments to our directors, general legal
counsel, and employee since the second quarter of 2007 and have accrued
$1,364,000 in expenses as of September 30, 2009.  We expect to
continue to suspend payments to these parties until sufficient funding can be
secured to resume exploration operations and cover normal operating
expenses.  During the three months ended September 30, 2009, we
received $30,000 from the sale of common stock and borrowed $70,000 from various
individuals and entities.  Subsequent to September 30, 2009, we
received $25,000 from the sale of restricted shares of common stock and borrowed
$10,000 from an officer of the Company.
 
 In April 2009, we received a loan of
$20,800 from a private party, which we used to pay lease payments due March 31,
2009, in exchange for the right to be repaid once the Company acquires funding
as well as a 0.5% royalty in the leases for which rentals were paid by the loan.
We also received another loan in May 2009 from that individual in the amount of
$27,398, under the same terms, which we used to pay some of the lease payments
on June 1, 2009, covering the most prospective lease acreage upon which the
rentals were due at that time.  Those leases are located in our
Starbuck Prospect area and the lease rentals on additional acreage which was
located well to the west of the Starbuck Prospect were not able to be paid and
expired.  That same individual paid the Company $15,000 on September
1, 2009, in exchange for 325,000 restricted shares of the Company common stock
to allow the Company to pay its September 1st annual
lease rentals on other Montana, Starbuck East leases.
 
 In May 2009, the Company borrowed
$45,000 from Philip Ware, the President of Coastal Petroleum Company, which was
used to pay a due diligence fee for a group interested in drilling on the
Company’s leases.  The loan is non interest bearing and has no set
repayment terms.  If the Agreement is successful, the loan plus a fee
of $45,000 is due.  If the Agreement is unsuccessful, the loan is due
out of a refund of the due diligence fee, plus 250,000 shares of restricted
common stock of the Company.  The Company expensed the $45,000 due
diligence fee during the three months ended September 30, 2009.  The
Agreement was never fulfilled and was terminated by the Company.  The
Company is pursuing collection of the $45,000 fee.
 12
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 During August 2009, the Company also
received a loan of $25,000 form an entity working with the Company to identify
investors to fund the 2009 Drilling Plan.  The funds from the loan
were used to pay the Company’s annual corporate fee to Bermuda as well as
operational costs associated with remaining a reporting public
company.  The terms of the loan reflect the risk involved and call for
repayment of $50,000 once the Company secures funding to begin drilling
operations.  Also in August 2009, the Company made another sale of
stock to an entity for $15,000 to cover operational costs associated with
remaining a reporting public company, in exchange for 300,000 shares of
restricted common stock and an option to pay additional funds to begin
exploration under the 2009 Drilling Plan.
 
 In November 2009, the Company issued
333,000 restricted shares of common stock to an individual in return for $25,000
which the Company used to pay the November 2009 rentals due on its leases in the
amount of $21,550.  The individual also each received a 0.25% royalty
covering the Company’s leases covering its Starbuck East Montana shallow gas
leases.  In connection with this transaction, the Company paid a
consultant $3,500 and issued 66,667 shares of restricted Company common stock
and a .25% overriding royalty in the Company’s Starbuck East Montana Shallow Gas
leases.
 
 In November 2009, the Company borrowed
$10,000 from Robert Angerer, Sr., a Director and shareholder, which was used to
pay certain operating expenses of the Company.  The loan is non
interest bearing, has no set repayment terms and is convertible into 200,000 of
restricted shares of common stock of the Company if not repaid from future
capital raising.
 
 We have additional lease rental
payments in the amount of $20,800 due by April 1, 2010.  We may need
to sell additional lease rights, obtain additional loans or secure funding to
obtain the cash to make these payments, although there is no guarantee we will
be able to sell additional lease rights or obtain loans or
funding.
 
 We are
actively engaged in pursuing funding for our Drilling Program.  The
Drilling Program is an aggressive $9,500,000 exploration operation which would
allow us to explore the potential of each of the areas we hold under
lease.  The Drilling Program covers exploration in three areas: a
development Red River Formation prospect in Slope County, North Dakota, on
approximately 400 acres we acquired; the drilling of three Lodgepole Formation
prospects we have on our North Dakota Leases; and twelve step out wells from the
Federal 1-19 well on the Starbuck East prospect in Montana.  The
Company is proceeding with the relatively inexpensive process of permitting
wells in its main block of leases in Valley County, Montana, in order to
accommodate the drilling of the expected wells.  The Drilling Program
is separate from the agreements described below.
 
 As
of September 30, 2009, we had no revenues, had recurring losses prior to 2005
and since 2005, and had an accumulated deficit during the development
stage.  Our current cash position is not adequate to fund existing
operations or exploration and development of its oil and gas
properties.  These situations raise substantial doubt about our
ability to continue as a going concern.
 13
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 
 Capital
Resources
 
 In May
2008, we entered an agreement with Cobra.  Under the agreement, Cobra
paid Coastal $180,000 for the option to acquire a half interest in approximately
87,000 acres of Coastal’s Valley County Leases.  The agreement allowed
the Company to pay its Lease rentals that were due on June 1, 2008, and brought
in a new party to explore on the Leases. Cobra has until May 2010 to exercise
the option by spending $1,000,000 on behalf of the Company, drilling wells on
the leases covered by the agreement.  Those leases included
approximately 62,000 acres of leases that were formally under an agreement with
F-Cross Resources that expired in 2008 and more than 17,000 acres of other
leases Coastal held in Valley County.  No drilling has taken place yet
under this agreement.
 
 Two other agreements covering the
leases expired during 2008.  The first of the two agreements was a
farm-out agreement with Western Standard, entered in August
2007.  Upon execution of the agreement, Western Standard paid us
$40,000.  Subsequently, they paid an additional $384,000, $255,000 of
which covered the costs of drilling the first well to test a shallow natural gas
prospect in Valley County, Montana and $129,000 was paid to cover associated
lease rentals.  Western Standard would have had an interest in the
first well drilled as well as an option to purchase a 50% interest in the 42,000
acres under the lease.  Upon receiving the funds to cover lease
rentals, we repaid in full our loan of $126,000.  Under the loan
agreement, the individual that loaned us the money continues to hold a 5%
overriding royalty on the same approximately 42,000 acres that are covered in
the Western Standard agreement.
 
 The first
well under this agreement was drilled during October 2007, to test a shallow
natural gas prospect near the middle of the Company’s Valley County Leases. The
well, known as the Federal 1-19 Well, had three objectives: to confirm the
34,000 acre Starbuck East Prospect by finding that the Eagle formation was high
to surrounding wells off the Prospect; to confirm that there were good natural
gas shows in the Starbuck East Prospect; and to find commercial gas in either
the Eagle formation or the Judith River formation. The first two objectives were
met. Due to drilling damage, the third objective has not yet been
met.
 
 During
October 2007, the Federal 1-19 well reached a total depth of 1,126 feet, and
confirmed the structural high that was targeted. The well also had gas shows in
two zones. Casing was run into the hole and operations to complete and test the
well were scheduled to begin at the end of November, but were delayed by
equipment repairs. The well is located on Federal land and the Bureau of Land
Management would not allow the completion and testing operations or any further
drilling to begin until July 2008, so operations were suspended until that
time. The Company also received an additional $29,000 from Western Standard
to cover additional drilling and other costs associated with the delay in well
completion, which has been recorded as a reduction in capitalized petroleum
lease costs. Western Standard paid the estimated well completion costs of
$65,000 and operations to complete and test the well were performed in two
stages during the third quarter and proceeded to the third stage in the fourth
quarter of 2008.  In October 2008, the Company received approximately
$29,000 from Western Standard to pay for the third stage of operations which
included stimulation of the well, a common procedure in completing oil and gas
wells.
 14
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 The Company was unable to determine by
this well whether the target formations contain economic quantities of
gas.  Drilling damage in the well prevented the testing of either of
the prospective formations at this location.  Completion efforts found
that the Eagle formation was damaged by the initial drilling and the formation
was not able to be tested from this well.  Further drilling into the
Eagle formation during completion did not yield gas like the gas show seen from
the upper part of the formation that was damaged.  The Judith River
formation, a secondary target, was damaged by drilling fluids lost into the
formation while drilling through it to get to the Eagle formation, the primary
target.  Future wells to test this structure will incorporate the
information obtained from these wells to prevent that damage from occurring
again in other locations on the structure.
 
 It is not unusual that the first well
confirming a structure does not become a producing well.  The test
well did produce valuable information about the two gas bearing formations and
their potential for economically feasible commercial gas
production.  Problems encountered in drilling the test well can now be
avoided when future wells are drilled on the Starbuck East
Prospect.  With the first two objectives met, the Company will now
focus on achieving the third objective, specifically finding commercial gas in
either the Eagle or Judith River formations. We have received two permits to
drill a step-out well and are currently in the permitting process for one
more.
 
 After the completion efforts on the
Federal 1-19 well were finished, Western Standard had the option to purchase a
50% interest in approximately 42,000 acres near the well location for
$1,000,000.  The time to exercise that option passed and Western
Standard did not exercise it, so we regained complete control of the leases
formerly under the Western Standard agreement and Western Standard no longer has
an interest in them.  The Company abandoned the Federal 1-19 well in
September 2009.
 
 The other agreement that expired in
2008 was with F-Cross and was entered in September of 2007, covering
approximately 64,000 acres on the northwest part of our Valley County
Leases.  Under the agreement, F-Cross had the option to drill a
Lodgepole test well within six months and after drilling that well had the
further option to acquire an interest in surrounding
acreage.   F-Cross was to pay for the cost of drilling the
initial well and will receive a 100% working interest in the well until payout
and an 80% working interest subsequent to payout.   F-Cross
exercised its option and the first Lodgepole test well was spudded on November
3, 2007.  Drilling has finished, but the well is still awaiting
completion and testing of several zones which have potential for both oil and
gas.  However, F-Cross did not meet the requirements in the agreement
and in late March 2008 the option to acquire an interest in additional acreage
expired, leaving F-Cross with rights only in the section in which it
drilled.
 
 In North Dakota, we control the working
interest on approximately 8,510 net acres in Slope, Billings, and Stark
Counties, on which a number of drillable prospects have been mapped to
date.  The depth of wells in North Dakota is greater than in Montana
(approximately 9,500 feet versus approximately 5,000 feet), and thus the cost of
drilling is higher.  A typical North Dakota wildcat well costs about
$1.5 million to drill.  We had originally intended to bring in others
to share the risk and investment in wells it drills in North Dakota until the
Company is in a stronger financial position, but are now actively seeking
funding to allow us to begin such exploration on our own.
 15
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 In December of 2007 we entered a second
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 which we received between November 2007 and April
2008.  We will also retain a back-in working interest of 20% in the
leases after payout.  The leases cover all rights below the Tyler
formation, including the Lodgepole formation, with an 80% net revenue interest.
We acquired these and other leases in the area in 2005 from Oil For America for
$50,000 and we have invested some additional funds to geochemically test and
high-grade these and other prospects on the leases.  Oil For America
has agreed to waive the drilling obligation on these four
prospects.  We will still retain three additional Lodgepole reef
prospects on our North Dakota leases that are not covered by this farm-out
agreement.
 
 If our funding efforts are successful,
we plan to drill or participate in as many as sixteen exploratory wells under
our Drilling Plan.  However, the number of wells that we drill in 2009
and their cost will be subject to various factors, including whether or not we
can obtain sufficient funding to carry out the Drilling Plan, whether Cobra will
exercise its option and begin exploration under its agreements, the availability
of drilling rigs that we can hire and whether we drill alone or with other
participants.  In addition, we could reduce the number of wells that
we drill if oil and natural gas prices were to decline
significantly.  We expect the cost of drilling the sixteen wells
incorporated in the Drilling Plan 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.
 
 Results of Operations
 
 Nine months ended
September 30, 2009 vs. September 30, 2008
 
 We did not conduct new drilling
activities on our leased property for the nine months ended September 30, 2009,
due to lack of funding.  We did not conduct drilling activities on our
leased property for the nine months ended September 30, 2008, due to weather
and/or landowner access restrictions on our leases from January 1st to July
1st.  We
expensed $114,000 for the nine months ended September 30, 2009, for well closure
costs.  There was some activity paid for under our farm-out agreements
with other entities to perform some completion activities during the third
quarter of 2008.  Substantially all the drilling activity on our
leases for 2008 was conducted in the fourth quarter and was financed under
farm-out agreements with other entities.   We reduced our legal
fees by $36,000 per quarter beginning June 1, 2009 and our directors fee expense
by $6,250 per quarter effective July 1, 2009.  Therefore, our expenses
are primarily administrative and our 2009 expenses remained consistent with 2008
amounts.
 
 Our interest income decreased in 2009
from 2008 due to lower cash balances.
 16
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 Three months ended
September 30, 2009 vs. September 30, 2008
 
 We did not conduct any drilling
activities in for the three months ended September 30, 2009, due to lack of
funding.  We did not conduct drilling activities on our leased
property for the nine months ended September 30, 2008, due to weather and/or
landowner access restrictions on our leases from January 1st to July
1st.  We
expensed $18,000 for the three months ended September 30, 2009, for well closure
costs.  There was some activity paid for under our farm-out agreements
with other entities to perform some completion activities in the third quarter
of 2008.  Substantially all the drilling activity on our leases for
2008 was conducted in the fourth quarter and was financed under farm-out
agreements with other entities.  We reduced our legal fees by $36,000
per quarter beginning June 1, 2009 and our directors fee expense by $6,250 per
quarter effective July 1, 2009.  Therefore, our expenses are primarily
administrative and our 2009 expenses remained consistent with 2008
amounts.
 
 Our interest income decreased in 2009
from 2008 due to lower cash balances.
 ITEM
      3
                Quantitative and
      Qualitative Disclosure About Market
Risk
 
 The Company does not have any
significant exposure to market risk as there were no investments in marketable
securities at September 30, 2009.
 ITEM
      4
                Controls and
      Procedures
 a.
                Management’s
      annual report on internal control over financial
      reporting.
 
 We
maintain controls and procedures designed to ensure that information required to
be disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.  Our Chief Executive Officer and our Chief
Financial Officer, after evaluating the effectiveness of our “disclosure
controls and procedures” (as defined in the Securities Exchange Act of 1934 (the
“Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of the end of the period
covered by this quarterly report, have concluded that our disclosure controls
and procedures are effective based on their evaluation of these controls and
procedures required by paragraph (b) of Exchange Act Rules 13a-15 or
15d-15.
 
 b.
              Changes
      in internal controls. The Company made no changes in its internal
      control over financial reporting that occurred during the Company’s first
      fiscal quarter that has materially affected, or which is reasonably likely
      to materially affect the Company’s internal control over financial
      reporting.
 
 c.
              Limitations
      on the Effectiveness of Controls  Our
      management, including our ChiefExecutive
      and Chief Financial Officer, does not expect that our disclosure controls
      and internal controls will prevent all error and all fraud. A control
      system, no matter how well conceived and operated, can provide only
      reasonable, not absolute, assurance that the objectives of the control
      system are met. Further, the design of a control system must reflect the
      fact that there are resource constraints, and the benefits of controls
      must be considered relative to their costs. Because of the inherent
      limitations in all control systems, no evaluation of controls can provide
      absolute assurance that all control issues and instances of fraud, if any,
      within the Company have been detected. These inherent limitations include
      the realities that judgments in decision-making can be faulty, and that
      breakdowns can occur because of simple error or mistake. Additionally,
      controls can be circumvented by the individual acts of some persons, by
      collusion of two or more people, or by management override of the
      control.
  17
 COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART
I - FINANCIAL INFORMATION
 September
30, 2009
 
 ITEM
      2
                  Management's
      Discussion and Analysis of Financial Condition andResults of
      Operations
 The
      design of any system of controls also is based in part upon certain
      assumptions about the likelihood of future events, and there can be no
      assurance that any design will succeed in achieving its stated goals under
      all potential future conditions; over time, controls may become inadequate
      because of changes in conditions, or the degree of compliance with the
      policies or procedures may deteriorate. Because of the inherent
      limitations in a cost-effective control system, misstatements due to error
      or fraud may occur and not be
detected.
  18
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART II -
OTHER INFORMATION
 September
30, 2008
 ITEM
      1
                Legal
      Proceedings
 During the third quarter, the Company
was involved as a defendant in a case entitled American Pipe & Supply Co. v.
Coastal Petroleum Company, et.al, Cause No. DV 08-63, in the Montana
Seventeenth Judicial District Court in Valley County, Montana. This claim is in
relation to the failure of our farmee, F-Cross, who has filed for bankruptcy, to
pay for pipe purchased from the Plaintiff to drill the State 7-16 well. The
claim seeks relief against Coastal Petroleum Company: to foreclose and oil and
gas lien on the single part of one lease involved which is held in Coastal
Petroleum Company’s name; and damages for breach of contract and quantum meruit
in the amount of about $80,000. Because the farmee has filed bankruptcy the
proceeding is in abeyance. Coastal has filed an answer and its counsel advises
it is likely that only the claim to foreclose the lien should withstand a motion
for summary judgment by Coastal. While it is likely that the Plaintiff will
obtain the lien, this lien would only apply to the small area under that
specific lease that was drilled. We have an outstanding invoice for $800 due to
the Coastal’s counsel in the case.
 
 Except as described in the preceding
paragraph, to the best knowledge of our management, there are no material
litigation matters pending or threatened against us.
  ITEM
      5
                Other
      Information
 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.
 
 The Company believes that it would not
be classified as a PFIC for the year 2008, because it derived the majority of
its gross income in 2008 from the sale of interests in parts of its leases to
other companies through farm-out agreements, and received a relatively small
amount of interest the Company.  However, the Company may have been
considered a PFIC in previous years, which could result in negative tax
consequences to a shareholder.  The determination of whether the
Company will be considered a PFIC for United States federal income tax purposes
is an annual determination that cannot be made until the close of the fiscal
year.  Also, how the Company was classified last year does not affect
how it will be classified this year.
 
 If, for any taxable year, the Company’s
passive income or assets that produce passive income exceed levels provided by
U.S. law, the Company would be a "passive foreign investment company," or PFIC,
for U.S. federal income tax purposes.  For the years 1987 through 2004
and in 2006, Coastal Caribbean's passive income and assets that produce passive
income exceeded those levels and for those years Coastal Caribbean constituted a
PFIC.  If Coastal Caribbean is a PFIC for any taxable year, then the
Company’s U.S. shareholders potentially would be subject to adverse U.S. tax
consequences of holding and disposing of shares of our common stock for that
year and for future tax years.  Any gain from the sale of, and certain
distributions with respect to, shares of the Company’s common
stock,  19
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 PART II -
OTHER INFORMATION
 September
30, 2008
 ITEM
      5
                Other Information
      (continued)
 would
cause a U.S. holder to become liable for U.S. federal income tax under section
1291 of the Internal Revenue Code (the interest charge regime).  The
tax is computed by allocating the amount of the gain on the sale or the amount
of the distribution, as the case may be, to each day in the U.S. shareholder’s
holding period.  To the extent that the amount is allocated to a year,
other than the year of the disposition or distribution, in which the corporation
was treated as a PFIC with respect to the U.S. holder, the income will be taxed
as ordinary income at the highest rate in effect for that year, plus an interest
charge.
 
 For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.
  20
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 September
30, 2009
 ITEM
      6
                Exhibits
 31.1
                Certification
      pursuant to Rule 13a-14 by Phillip W.
Ware
 
 32.1
              Certification
      pursuant to Section 906 by Phillip W.
Ware
  21
  COASTAL
CARIBBEAN OILS & MINERALS, LTD.
 FORM
10-Q
 September
30, 2009
   SIGNATURES
 
 
 Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
 
  COASTAL CARIBBEAN OILS
      & MINERALS, LTD.
                  RegistrantDate:   November
      20, 2009
                By:
                /s/ Phillip
      W. WarePhillip
      W. WareChief
      Executive Officer, President
      and Treasurer
 22