**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

___________________

 

**FORM 10-QSB/A**

**__________________**

 

(Mark One)

x  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

 

o  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________.

 

**Commission File Number****000-51155**

 

**Coastal Bancshares Acquisition Corp.**

--------------------------------

(Exact Name of Small Business Issuer as Specified in Its Charter)

 

| **Delaware**

(State or other Jurisdiction of incorporation)                                          | **20-1191778**

(I.R.S. Employer Identification No.) |
|-------------------------------------------------------------------------------------------------------|------------------------------------------------------|
|                                                                                                  |                                                 |
| **9821 Katy Freeway, Suite 500**

**Houston, Texas**

(Address of Principal Executive Office)

  |
| **(713) 827-2104**

(Issuer’s Telephone Number, Including Area Code)                             |

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.  Yes x No o

 

As of June 30, 2005, 6,520,000****shares of common stock, par value $.01 per share, were issued and outstanding.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

 

Transitional Small Business Disclosure Format (check one):  Yes o No x

 

 

 

 

Coastal Bancshares Acquisition Corp., a Delaware corporation (the “Company”), hereby amends, as set forth herein, the Company’s Quarterly Report on Form 10-QSB for the period ended June 30, 2005 filed with the Securities and Exchange Commission on July 25, 2005 (the “Form 10-QSB”).  The item numbers and responses thereto are in accordance with the requirements of Form 10-QSB.  All capitalized terms used and not otherwise defined herein shall have the meaning specified in the Form 10-QSB.

 

 

 

**PART I.  CONDENSED FINANCIAL INFORMATION**

**Item 1.  Condensed Financial Statements**

**COASTAL BANCSHARES ACQUISITION CORP.**

**(A Corporation in the Development Stage)**

**CONDENSED BALANCE SHEETS**

 

|                                                                                                                                   | June 30, 2005

(Unaudited)   |   | December 31,

2004           |
|----------------------------------------------------------------------------------------------------------------------------------------|------------------------------|--------|------------------------------|
| **ASSETS******                                                                                                                         | (Restated)                   |   |                         |
| **Current assets:******                                                                                                                |                         |   |                         |
| Cash                                                                                                                                   | $1,015,656              |   | $21,711                 |
| Treasury securities held in trust, at market                                                                                           | 28,773,056              |   | --                      |
| Prepaid expenses                                                                                                                       | 82,880                  |   | --                      |
| Total current assets                                                                                                                   | 29,871,592              |   | 21,711                  |
| Deferred offering costs                                                                                                                | --                      |   | 63,532                  |
| **Total Assets******                                                                                                                   | $29,871,592             |   | $85,243                 |
|                                                                                                                                   |                         |   |                         |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY******                                                                                      |                         |   |                         |
| **Current Liabilities:******                                                                                                           |                         |   |                         |
| Accounts payable and accrued expenses                                                                                                  | $27,500                 |   | $7,697                  |
| Income taxes payable                                                                                                                   | 43,385                  |   | --                      |
| Notes payable, stockholder                                                                                                             | --                      |   | 55,000                  |
| **Total Liabilities******                                                                                                              | 70,885                  |   | 62,697                  |
| ** **                                                                                                                             |                         |   |                         |
| **Common stock subject to shareholders’ right to conversion;**

**1,103,448 shares at conversion value******                      |  

5,751,734       |   |  

--              |
|                                                                                                                                   |                         |   |                         |
| **Stockholders’ Equity:******                                                                                                     |                         |   |                         |
| Preferred stock, $0.01 par value                                                                                                       |                         |   |                         |
| Authorized 5,000,000 shares; none issued                                                                                               | $--                     |   | $--                     |
| Common stock, $0.01 par value                                                                                                          |                         |   |                         |
| Authorized 50,000,000 shares                                                                                                           |                         |   |                         |
| Issued and outstanding, 6,520,000 (including the 1,103,448

shares subject to possible conversion) and 1,000,000 shares,

respectively |  

 

54,166  |   |  

 

10,000  |
| Additional paid-in capital                                                                                                             | 24,112,045              |   | 15,000                  |
| Deferred compensation                                                                                                                  | (165,434)                    |   | --                      |
| Earnings (Deficit) accumulated during the development state                                                                            | 48,196                  |   | (2,454)                      |
| **Total Stockholders’ Equity******                                                                                                | 24,048,973              |   | 22,546                  |
| **Total Liabilities and Stockholders’ Equity******                                                                                | $29,871,592             |   | $85,243                 |

 

 

 

 

**COASTAL BANCSHARES ACQUISITION CORP.**

**(A Corporation in the Development Stage)**

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

 

| **1.** | **BASIS OF PRESENTATION** |
|--------|---------------------------|

 

The financial statements included herein for the quarterly period ended June 30, 2005, the six month period ended June 30, 2005 and the period since inception (May 19, 2004) ended June 30, 2005, have been prepared by Coastal Bancshares Acquisition Corp. (the “Company”) without audit pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  Accordingly, these statements reflect all adjustments (consisting only of normal recurring entries), which are, in the opinion of the Company, necessary for a fair presentation of the financial results for the interim periods.  Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Companybelieves that the disclosures are adequate to make the information presented not misleading.  Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full fiscal year.  These financial statements should be read in conjunction with the financial statements that were included in the Company’s Annual Report on Form 10-KSB for the period ended December 31, 2004.  The Company had no operating activity for the period from inception on May 19, 2004 through August 5, 2004.

 

| **2.** | **ORGANIZATION, BUSINESS OPERATIONS** |
|--------|---------------------------------------|

 

Coastal Bancshares Acquisition Corp.  (the “Company”) was incorporated in Delaware on May 19, 2004 as a blank check company whose objective is to acquire or merge with an operating commercial bank or bank holding company.  The Company’s initial stockholders’ purchased 1,000,000 shares of common stock, $0.01 par value, for $25,000 on August 6, 2004.  

 

The registration for the Company’s initial public offering (the “Offering”) of 4,800,000 units was declared effective on February 14, 2005.  The Company consummated the Offering on February 18, 2005.  The underwriters also exercised their over-allotment option to purchase an additional 720,000 units on February 18, 2005. The Company received proceeds, net of the underwriters’ discount and offering expenses of approximately $29.7 million.  The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a merger with or acquisition of an operating commercial bank or bank holding company (“Business Combination”).  There is no assurance that the Company will be able to successfullyaffect a Business Combination.  The amount of $28,483,200 was placed in an interest bearing trust account (“Trust Fund”) upon consummation of the Offering to be held until the earlier of (i) the consummation of its first Business Combination or (ii) liquidation of the Company.   Under the agreement governing the Trust Fund, funds may only be invested in United States government securities with a maturity of 180 days or less.  The remaining proceeds may be used to pay for business, legal and accounting due diligence on prospective mergers or acquisitions and continuing general and administrative expenses.

 

The Company, after signing a definitive agreement for the merger with or acquisition of a target business, will submit such transaction for stockholder approval.  In the event that stockholders’ owning 20% or more of the outstanding stock excluding, for this purpose, those persons who were stockholders immediately prior to the Offering, vote against the Business Combination, the Business Combination will not be consummated.  All of the Company’s stockholders prior to the Offering, including all of the officers and directors of the Company (“Initial Stockholders”), have agreed to vote their founding shares 

 

 

of common stock in accordance with the vote of the majority in interest of all other stockholders of the Company (“Public Stockholders”) with respect to a Business Combination.  The business combination will not be completed unless more than 50% of the Public Stockholders vote in favor of the transaction.  After consummation of the Company’s first Business Combination, these voting safeguards no longer apply.  

 

With respect to the first Business Combination which is approved and consummated, any Public Stockholder who voted against the Business Combination may demand that the Company redeem his or her shares.  The per share redemption price will equal the amount in the Trust Fund as of the record date for determination of stockholders entitled to vote on the Business Combination divided by the number of shares of common stock held by Public Stockholders at the consummation of the Offering.  Accordingly, Public Stockholders holding 19.99% of the aggregate number of shares owned by all Public Stockholders may seek redemption of their shares in the event of a Business Combination.  Such Public Stockholders are entitled to receive their per share interest in the Trust Fund computed without regard to the shares held by Initial Stockholders.

 

The Company’s Certificate of Incorporation provides for the mandatory liquidation of the Company, without stockholder approval, in the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied.  In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units to be offered in the Offering as described in Note 3).

 

| **3.** | **PUBLIC OFFERING** |
|--------|---------------------|

 

On February 18, 2005, the Company sold 4,800,000 units (“Units”) in a public offering, which included granting the underwriters’ an over-allotment option to purchase up to an additional 720,000 Units.  On February 18, 2005, the underwriters exercised the entire amount of the option.  Each Unit consists of one share of the Company’s common stock, $0.01 par value, and two Redeemable Common Stock Purchase Warrants (“Warrants”).  Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of $5.00 commencing on the later of the completion of a Business Combination or February 13, 2006, and expiring February 13, 2010.  The Warrants will be redeemable by the Company at a price of $0.01 per Warrant upon 30 days’ notice after the Warrants become exercisable, only in the event that the last sale price ofthe common stock is at least $8.50 per share for any 20 trading days within a 30 trading day period ending on the third day prior to the date on which notice of the redemption is given.  In connection with the Offering, the Company issued an option for $100 to the underwriters’ to purchase 325,000 Units at an exercise price of $7.50 per Unit. The Units issuable upon exercise of this option are identical to those included in the Offering except that the exercise price of the Warrants included in the units will be $6.65 per share.

 

| **4.** | **TREASURY SECURITIES** |
|--------|-------------------------|

 

Treasury securities are classified as trading securities and are carried at fair value, with gains or losses resulting from changes in fair value recognized currently in earnings.

 

| **5.** | **DEFERRED COMPENSATION** |
|--------|---------------------------|

 

On April 7, 2005, the Company made a restricted stock grant of 40,000 shares to a director.  The shares are subject to forfeiture in the event that the Company does not consummate a Business 

 

 

Combination within 18 months from the date of the consummation of the Offering, or 24 months from the consummation of the Offering if certain extension criteria have been satisfied.  The grant was recorded based on the closing price of the Company’s common stock on the date of the grant and is being amortized as compensation expense over the period from the date of the grant through the date that is 18 months after consummation of the Offering.

 

| **6.** | **COMMITMENT** |
|--------|----------------|

 

The Company presently occupies office space provided by an affiliate of an Initial Stockholder.  Such affiliate has agreed that, until the acquisition of a target business by the Company, it will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time.  The Company has agreed to pay such affiliate $7,500 per month for such services commencing on the effective date of the Offering.

 

| **7.** | **NOTE PAYABLE** |
|--------|------------------|

 

Coastal Acquisition, LLC, a stockholder and an affiliate of our co-chief executive officers, Mr. Grossman and Mr. Brunson, entered into a non-interest bearing revolving credit agreement with the Company in the amount of $75,000.  The loan, which at the time of the Offering had a balance of $75,000, was repaid on February 18, 2005 out of the net proceeds of the Offering.

| **8.** | **COMMON STOCK** |
|--------|------------------|

At June 30, 2005, 50,000,000 shares of $0.01 par value common stock were authorized and 6,520,000 shares were outstanding.

 

| **9.** | **PREFERRED STOCK** |
|--------|---------------------|

 

The Company is authorized to issue 5,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Director.

 

| **10.** | **RESTATEMENT** |
|---------|-----------------|

 

The balance sheet as of June 30, 2005 has been restated to reclassify out of stockholders’ equity the value of 1,103,448 shares subject to possible conversion into cash by stockholders.

 

 

 

 

**Item 3. Controls and Procedures**

 

An evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2005 was made under the supervision and with the participation of our management, including our co-chief executive officers.  Based on that evaluation, they concluded that our disclosure controls and procedures are effective. However we have been advised by our independent registered accounting firm, Hein & Associates LLP (“Hein”) that we may need to reclassify certain amounts in our financial statements from our stockholders’ equity to common stock subject to possible conversion.  Hein based its conclusions upon a review of recently filed registration statements and periodic filings for other targeted acquisition companies similar to ourselves and their review of applicable accounting literature, and recommended that we make such reclassifications to reflect currentpractice in this area. We addressed this concern by determining to restate our financial statements to reflect this reclassification.  During the most recently completed fiscal quarter, there has been no significant change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated:  February 2, 2006

 

| COASTAL BANCSHARES ACQUISITION CORP. |
|--------------------------------------|

 

| /s/ Cary M. Grossman |  
Cary M. Grossman

 
Co-Chief Executive Officer

 

/s/ W. Donald Brunson

 
W. Donald Brunson

 
Co-Chief Executive Officer

 

 

 

 

 

**EXHIBIT INDEX**

 

Number****

Description****

 

31.1

Section 302 Certification by Co-CEO

 

31.2

Section 302 Certification by Co-CEO

 

32.1

Section 906 Certification by Co-CEO

 

32.2

Section 906 Certification by Co-CEO

 

 

 

 

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|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|