**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

___________________

 

**FORM 10-QSB**

**__________________**

(Mark One)

x  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

 

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**        **20-1191778**

(State or other Jurisdiction of incorporation)            (I.R.S. Employer Identification No.)

 

**9821 Katy Freeway, Suite 101**

**Houston, Texas 77024**

(Address of Principal Executive Office)

 

**(713) 722-7808**

(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

 

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

 

As of September 30, 2006, 6,520,000****shares of common stock, par value $.01 per share, were issued and outstanding.

 

Transitional Small Business Disclosure Format (check one): 

Yes o No x

 

 

 

 

|                                         |                                                                         |                                         |
|----------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------|
|                                         | **Index**                                                                    | **Page No.**                                 |
|                                         | ** **                                                                   | ** **                                   |
| **Part I:  Condensed Financial Information** | ** **                                                                   |
| ** **                                   | ** **                                                                   |
| ** **                                   | Item 1 – Financial Statements                                           | 3                                            |
| ** **                                   |                                                                         |                                         |
| ** **                                   |                                                                         | Condensed Balance Sheets                     | 3 |
| ** **                                   |                                                                         | Condensed Unaudited Statements of Operations | 4 |
| ** **                                   |                                                                         | Condensed Unaudited Statements of Cash Flows | 5 |
| ** **                                   |                                                                         | Notes to Condensed Financial Statements      | 6 |
| ** **                                   |                                                                         |                                         |   |
| ** **                                   | Item 2 – Management’s Discussion and Analysis or Plan of Operation | 11                                           |
| ** **                                   |                                                                         |                                         |   |
| ** **                                   | Item 3 – Controls and Procedures                                        | 15                                           |
| ** **                                   |                                                                         |                                         |   |
| ** **                                   |                                                                         |                                         |   |
| **Part II.  Other Information******          |                                                                         |
| ** **                                   |                                                                         |                                         |   |
| ** **                                   | Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds    | 16                                           |
| ** **                                   |                                                                         |                                         |
| ** **                                   | Item 6 – Exhibits                                                       | 17                                           |
| ** **                                   |                                                                         |                                         |
| ** **                                   |                                                                         |                                         |
| Signatures                                   | 18                                                                           |
|                                              |                                                                         |
|                                         |                                                                         |
|                                              |                                                                              |                                              |  |  |

 

 

 

2

 

 

 

**PART I.  CONDENSED FINANCIAL INFORMATION**

**Item 1.  Condensed Financial Statements**

 

**COASTAL BANCSHARES ACQUISITION CORP.**

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

**CONDENSED BALANCE SHEETS**

 

 

|                                                                                                                                                 | **December 31,**

**2005 (restated)****** | ** **       | **September 30,**

**2006****** |
|------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|------------------|---------------------------------|
| **ASSETS******                                                                                                                                       |                                      |             |                            |   |   |   |   |
| **Current Assets******                                                                                                                               |                                      |             |                            |   |   |   |   |
| Cash and cash equivalents                                                                                                                            | $                                         | 925,643     |                            | $ | 10,439  |
| Trust fund                                                                                                                                           |                                      | 29,269,727  |                            |   | 30,278,179  |
| Prepaid expenses                                                                                                                                     |                                      | 19,630      |                            |   | 6,301  |
| Total current assets                                                                                                                                 |                                      | 30,215,000  |                            |   | 30,294,919  |
| **Deferred acquisition costs******                                                                                                                   |                                      | -           |                            |   | 771,318  |
|                                                                                                                                                 | $                                         | 30,215,000  |                            | $ | 31,066,237  |
|                                                                                                                                                 |                                      |             |                            |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS EQUITY******                                                                                                          |                                      |             |                            |   |   |   |   |
| **Current Liabilities******                                                                                                                          |                                      |             |                            |   |   |   |   |
| Accounts payable and accrued expenses                                                                                                                | $                                         | 95,550      |                            | $ | 330,099  |
| Note payable to affiliate                                                                                                                            |                                      | -           |                            |   | 50,000  |
| Warrant liability                                                                                                                                    |                                      | 4,747,200   |                            |   | 2,097,600  |
| Federal income tax payable                                                                                                                           |                                      | 123,000     |                            |   | 234,000  |
| Total liabilities                                                                                                                                    |                                      | 4,965,750   |                            |   | 2,711,699  |
|                                                                                                                                                 |                                      |             |                            |   |   |   |   |
| **Common stock subject to stockholders’ right to**

**conversion; 1,103,448 shares at conversion value**                                        |                                      | 5,851,018   |                            |   | 6,052,608  |
|                                                                                                                                                 |                                      |             |                            |   |   |   |   |
| **Commitments – Note 7******                                                                                                                    |                                      |             |                            |   |   |   |   |
|                                                                                                                                                 |                                      |             |                            |   |   |   |   |
| **Stockholders’ equity:**                                                                                                                       |                                      |             |                            |   |   |   |   |
| Preferred stock, $0.01 par value; 5,000,000 shares authorized                                                                                        |                                      | -           |                            |   | -  |
| Common stock, $0.01 par value; 50,000,000 shares

authorized; 6,520,000 outstanding (including the

1,103,448 shares subject to possible conversion) |                                      | 54,166      |                            |   | 54,166  |
| Additional paid-in capital                                                                                                                           |                                      | 16,836,761  |                            |   | 16,635,171  |
| Deferred compensation                                                                                                                                |                                      | (93,506)         |                            |   | -  |
| Earnings accumulated during the development stage                                                                                                    |                                      | 2,600,811   |                            |   | 5,612,593  |
|                                                                                                                                                 |                                      | 19,398,232  |                            |   | 22,301,930  |
|                                                                                                                                                 | $                                         | 30,215,000  |                            | $ | 31,066,237  |

 

 

 

*See accompanying notes to condensed financial statements*.

3

 

 

 

**COASTAL BANCSHARES ACQUISITION CORP.**

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

**CONDENSED UNAUDITED STATEMENTS OF OPERATIONS**

 

|                                          | **Three Months Ended**

**September 30,****** | ** **       | **Nine Months Ended**

**September 30,****** |       | **Period from**

**Inception**

**(May 19, 2004)**

**Ended**

**September 30, 2006** |
|-----------------------------------------------|-----------------------------------------------|------------------|----------------------------------------------|------------|---------------------------------------------------------------------------------------|
|                                          | **(Restated)**

**2005******                  | ** **       | **2006******                                 | ** ** | **(Restated)**

**2005******                                                          | ** ** | **2006****** |   |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Formation and operating costs                 | $                                             | 173,283     |                                         | $          | 126,430                                                                          |   | $ | 377,084  |   | $ | 420,106  |   | $ | 930,519  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Operating loss                                |                                          | (173,283)        |                                         |       | (126,430)                                                                             |   |   | (377,084) |   |   | (420,106) |   |   | (930,519) |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Interest income:                              |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Received and accrued                          |                                          | 409,040     |                                         |       | 815,328                                                                          |   |   | 417,022  |   |   | 822,037  |   |   | 1,627,461  |
| Market value adjustment                       |                                          | (154,422)        |                                         |       | (445,397)                                                                             |   |   | 135,431  |   |   | 193,353  |   |   | 193,353  |
|                                          |                                          | 254,618     |                                         |       | 369,931                                                                          |   |   | 552,453  |   |   | 1,015,390  |   |   | 1,820,814  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Warrant liability income

(expense)           |                                          | (1,325,000)      |                                         |       | 1,435,200                                                                        |   |   | 552,000  |   |   | 2,649,600  |   |   | 5,078,400  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Pre-tax income (loss)                         |                                          | (1,243,665)      |                                         |       | 1,678,701                                                                        |   |   | 727,369  |   |   | 3,244,884  |   |   | 5,968,695  |
| Provision for income taxes                    |                                          | 22,616      |                                         |       | 90,000                                                                           |   |   | 66,000  |   |   | 233,102  |   |   | 356,102  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| **Net income (loss)******                     | $                                             | (1,266,281)      |                                         | $          | 1,588,701                                                                        |   | $ | 661,369  |   | $ | 3,011,782  |   | $ | 5,612,593  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| **Weighted average shares**

**outstanding:** |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Basic                                         |                                          | 6,520,000   |                                         |       | 6,520,000                                                                        |   |   | 5,549,451  |   |   | 6,520,000  |   |   | 4,763,056  |
| Diluted                                       |                                          | 17,560,000  |                                         |       | 17,560,000                                                                       |   |   | 14,648,352  |   |   | 17,560,000  |   |   | 12,289,167  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| **Earnings (loss) per share:******            |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |
| Basic                                         | $                                             | (0.19)           |                                         | $          | 0.24                                                                             |   | $ | 0.12  |   | $ | 0.46  |   | $ | 1.18  |
| Diluted                                       | $                                             | (0.19)           |                                         | $          | 0.01                                                                             |   | $ | 0.01  |   | $ | 0.02  |   | $ | 0.04  |
|                                          |                                          |             |                                         |       |                                                                                  |   |   |   |   |   |   |   |   |   |

 

 

*See accompanying notes to condensed financial statements*.

4

 

 

 

**COASTAL BANCSHARES ACQUISITION CORP.**

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

**CONDENSED UNAUDITED STATEMENTS OF CASH FLOWS**

 

|                                                                                         | **Nine Months Ended**

**September 30,****** |             | **Period from**

**Inception**

**(May 19, 2004)**

**Ended**

**September 30, 2006** |
|----------------------------------------------------------------------------------------------|----------------------------------------------|------------------|---------------------------------------------------------------------------------------|
|                                                                                         | **(Restated)**

**2005******                 | ** **       | **2006******                                                                          |   |
| **CASH FLOW FROM OPERATING ACTIVITIES******                                                  |                                         |             |                                                                                  |   |   |   |   |   |
| Net income                                                                                   | $                                            | 661,369     |                                                                                  | $ | 3,011,782  |   | $ | 5,612,593  |
| Adjustments to reconcile net income to net cash

provided by (used in) operating activities: |                                         |             |                                                                                  |   |   |   |   |   |
| Increase in market value of treasury bill                                                    |                                         | (135,431)        |                                                                                  |   | (193,353) |   |   | (193,353) |
| Amortization of deferred compensation                                                        |                                         | 69,530      |                                                                                  |   | 93,506  |   |   | 199,000  |
| Decrease in warrant liability                                                                |                                         | (552,000)        |                                                                                  |   | (2,649,600) |   |   | (5,078,400) |
| Changes in operating assets and liabilities:                                                 |                                         |             |                                                                                  |   |   |   |   |   |
| Purchases of treasury bill in trust account                                                  |                                         | (28,886,958)     |                                                                                  |   | (815,099) |   |   | (30,084,826) |
| (Increase) decrease in prepaid expenses                                                      |                                         | (51,255)         |                                                                                  |   | 13,329  |   |   | (6,301) |
| (Increase (decrease) in accounts payable and

accrued expenses                               |                                         | 75,140      |                                                                                  |   | 38,094  |   |   | 133,644  |
| Increase in income taxes payable                                                             |                                         | 66,000      |                                                                                  |   | 111,000  |   |   | 234,000  |
| Net cash used in operating activities                                                        |                                         | (28,753,605)     |                                                                                  |   | (390,341) |   |   | (29,183,643) |
|                                                                                         |                                         |             |                                                                                  |   |   |   |   |   |   |
| CASH FLOW FROM INVESTING ACTIVITIES                                                          |                                         | -           |                                                                                  |   | -  |   |   | -  |
| Net cash used in investing activities                                                        |                                         | -           |                                                                                  |   | -  |   |   | -  |
|                                                                                         |                                         |             |                                                                                  |   |   |   |   |   |
| CASH FLOW FROM FINANCING ACTIVITIES                                                          |                                         |             |                                                                                  |   |   |   |   |   |
| Proceeds from private sale of common stock                                                   |                                         | 25,000      |                                                                                  |   | -  |   |   | 25,000  |
| Gross proceeds from public offering                                                          |                                         | 33,120,000  |                                                                                  |   | -  |   |   | 33,120,000  |
| Costs of public offering                                                                     |                                         | (3,387,523)      |                                                                                  |   | -  |   |   | (3,227,055) |
| Common stock granted as compensation                                                         |                                         |             |                                                                                  |   | -  |   |   | (199,000) |
| Deferred acquisition costs, net                                                              |                                         |             |                                                                                  |   | (574,863) |   |   | (574,863) |
| Proceeds from stockholder loan                                                               |                                         | 20,000      |                                                                                  |   | 50,000  |   |   | 125,000  |
| Repayment of stockholder loan                                                                |                                         | (75,000)         |                                                                                  |   | -  |   |   | (75,000) |
| Net cash provided by (used in) financing activities                                          |                                         | 29,702,477  |                                                                                  |   | (524,863) |   |   | 29,194,082  |
|                                                                                         |                                         |             |                                                                                  |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH                                                              |                                         | 948,872     |                                                                                  |   | (915,204) |   |   | 10,439  |
| CASH AT BEGINNING OF PERIOD                                                                  |                                         | 21,711      |                                                                                  |   | 925,643  |   |   | -  |
| CASH AT END OF PERIOD                                                                        | $                                            | 970,583     |                                                                                  | $ | 10,439  |   | $ | 10,439  |
|                                                                                         |                                         |             |                                                                                  |   |   |   |   |   |
| **Supplemental disclosure of cash flow**

**information:******                               |                                         |             |                                                                                  |   |   |   |   |   |
| Income taxes paid                                                                            | $                                            | -           |                                                                                  | $ | 122,102  |   | $ | 122,102  |
| **Supplemental disclosure of non-cash financing**

**activities:**                           |                                         |             |                                                                                  |   |   |   |   |   |
| Deferred acquisition costs included

in accounts payable                                     | $                                            | -           |                                                                                  | $ | 196,455  |   | $ | 196,455  |
|                                                                                         |                                         |             |                                                                                  |   |   |   |   |   |
|                                                                                              |                                              |                  |                                                                                       |  |  |  |  |  |  |

 

 

 

*See accompanying notes to condensed financial statements*.

5

 

 

 

**COASTAL BANCSHARES ACQUISITION CORP.**

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

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

 

 

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

 

The financial statements included herein as of December 31, 2005 and September 30, 2006, and for the three and nine-month periods ended September 30, 2005 and 2006, and the period since inception (May 19, 2004) through September 30, 2006, 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 suchrules and regulations, although the Company believes 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 and Form 10-KSB/A for the year ended December 31, 2005.  The Company had no operating activity for the period from inception on May 19, 2004 through August 5, 2005.

 

*Restatement*

 

Under EITF No. 00-19, *“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”* (“EITF No. 00-19”), the fair value of the warrants issued as part of the Units have been reported as a liability. The warrant agreement provides for the Company to register the shares underlying the warrants and is silent as to the penalty to be incurred in the absence of the Company’s ability to deliver registered shares to the warrant holders upon warrant exercise. Under EITF No. 00-19, registration of the common stock underlying the warrants is not within the Company’s control. As a result, the Company must assume that it could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability.Further EITF No. 00-19, requires the Company to record the potential settlement liability at each reporting date using the current estimated fair value of the warrants, with any changes being recorded through the Company’s statement of operations. The potential settlement obligation will continue to be reported as a liability until such time as the warrants are exercised, expire, or the Company is otherwise able to modify the registration requirements in the warrant agreement to remove the provisions which require this treatment. The fair value of the warrant liability in the accompanying balance sheets was determined using the trading value of the warrants. The fair value of the warrants was determined by the trading value of the securities on the last day of each period.

 

The Company had previously issued financial statements which did not present the warrant liability. The accompanying financial statements have been restated to correct this error. The impact of the correction of this error in previously reported financial statements is as follows:

 

6

 

 

 

(*in thousands except per share amounts)*

 

|                                         | **As of and for the**

**Three Months Ended**

**September 30, 2005** |         | **As of and for the**

**Nine Months Ended**

**September 30, 2005****** |      | **As of and for the**

**Year Ended**

**December 31, 2005****** |
|----------------------------------------------|-----------------------------------------------------------------------|--------------|--------------------------------------------------------------------------|-----------|------------------------------------------------------------------|
|                                         | **As**

**Previously**

**Reported******                              |         | **As**

**Restated******                                                 |      | **As**

**Previously**

**Reported******                         |   | **As**

**Restated****** |   | **As**

**Previously**

**Reported****** |   | **As**

**Restated****** |
|  

Assets                               | $                                                                     | 30,044  |                                                                     | $         | 30,044                                                      |   | $ | 30,044  |   | $ | 30,044  |   | $ | 30,215  |   | $ | 30,215  |
|  

Liabilities                          | $                                                                     | 149     |                                                                     | $         | 6,773                                                       |   | $ | 149  |   | $ | 6,773  |   | $ | 219  |   | $ | 4,966  |
|  

Common stock subject to

conversion  | $                                                                     | 5,802   |                                                                     | $         | 5,802                                                       |   | $ | 5,802  |   | $ | 5,802  |   | $ | 5,851  |   | $ | 5,851  |
|  

Stockholders’ equity            | $                                                                     | 24,094  |                                                                     | $         | 17,470                                                      |   | $ | 24,094  |   | $ | 17,470  |   | $ | 24,145  |   | $ | 19,398  |
|  

Warranty liability income

(expense) | $                                                                     | -       |                                                                     | $         | (1,325)                                                          |   | $ | -  |   | $ | 552  |   | $ | -  |   | $ | 2,429  |
|  

Pre-tax income (loss)                | $                                                                     | 81      |                                                                     | $         | (1,243)                                                          |   | $ | 175  |   | $ | 727  |   | $ | 297  |   | $ | 2,726  |
|  

Provision for income taxes           | $                                                                     | 23      |                                                                     | $         | 23                                                          |   | $ | 66  |   | $ | 66 |   | $ | 123  |   | $ | 123  |
|  

Net income (loss)                    | $                                                                     | 59      |                                                                     | $         | (1,266)                                                          |   | $ | 109  |   | $ | 661  |   | $ | 174  |   | $ | 2,603  |
|  

**Weighted average shares:******     |                                                                  |         |                                                                     |      |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                        | 6,520,000                                                             |         | 6,520,000                                                                | 5,549,451 |                                                             | 5,549,451 |   | 5,794,082 |   | 5,794,082 |
| Diluted                                      | 6,520,000                                                             |         | 6,520,000                                                                | 5,549,451 |                                                             | 14,648,352 |   | 5,794,082 |   | 15,382,247 |
|  

**Earnings (loss) per share**

Basic | $                                                                     | 0.01    |                                                                     | $         | (0.19)                                                           |   | $ | 0.02  |   | $ | 0.12  |   | $ | 0.03  |   | $ | 0.45  |
| Diluted                                      | $                                                                     | 0.01    |                                                                     | $         | 0.19)                                                            |   | $ | 0.02  |   | $ | 0.01  |   | $ | 0.03  |   | $ | 0.01 |
|                                              |                                                                       |              |                                                                          |           |                                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

*Reclassification*

 

The Company has previously reported the increase or decrease in its warrant liability as part of its operating income or loss.  The Company has also previously reported the purchase of treasury bills in its trust account as an investing activity.  These amounts have been reclassified in the presentation of prior periods to conform to the current presentation.

 

7

 

 

 

 

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

 

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 $29.9 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 tosuccessfully affect a Business Combination.  Using proceeds from the Offering, the amount of $28,483,200 was placed in an interest bearing trust account (“Trust Fund”) 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 signed a definitive agreement for the merger with a target business (See Note 10) and submitted the transaction for stockholder approval.  In the event that stockholders holding shares issued in the Offering (the “Public Stockholders”) owning 20% or more of the outstanding stock excluding, for this purpose, those persons who were stockholders immediately prior to the Offering (the “Initial Stockholders”), vote against the Business Combination and exercise their right to convert their shares of common stock into their pro rata portion of the Trust Fund, the Business Combination would not be consummated.  On October 26, 2006, the Company held a special meeting of stockholders for the primary purpose of voting on a proposed Business Combination.  At that special meeting, the stockholders of the Company did not approve the Business Combination and morethan 20% of the Public Stockholders voted against the Business Combination and exercised their conversion rights.  As a result, the Business Combination was not consummated.  The Company’s certificate of incorporation provides that the officers of the Company shall take all actions necessary to liquidate the Company, in the event that the Company does not consummate a Business Combination within 18 months from the date of the consummation of the Offering (August 18, 2006), or 24 months from the consummation of the Offering (February 18, 2007) if certain extension criteria have been satisfied.  Following the special meeting, the Board of Directors of the Company held a meeting and adopted a resolution to proceed with the liquidation of the Company and submit a plan of liquidation to the stockholders of the Company for approval.  In the event of liquidation, the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will beless than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units offered in the Offering as described in Note 3).

 

8

 

 

 

 

| **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.  The Warrants will terminate upon the liquidation of the Company.

 

| **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 are 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 (August 18, 2006), or 24 months from the consummation of the Offering (February 18, 2007) 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 was 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 (August 18, 2006).  The Company selected 18 months as the appropriate amortization period because it believed that this was the earliest date that vesting could occur.

 

| **6.** | **WARRANT LIABILITY** |
|--------|-----------------------|

 

The Company has outstanding warrants, which provides for the Company to register the shares underlying the warrants and is silent as to the penalty to be incurred in the absence of the Company’s ability to deliver registered shares to the warrant holders upon warrant exercise. Under EITF No. 00-19 *“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”* (“EITF No. 00-19”), registration of the common stock underlying the Company’s warrants is not within the Company’s control. As a result, the Company must assume that it could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability. Further EITF No. 00-19, requires the Company to record the potential settlementliability at each reporting date using the current estimated fair value of the warrants, with any changes being recorded through the Company’s statement of operations. The potential settlement obligation related to the warrants will continue to be reported as a liability until such time that the warrants are exercised, expire, or the Company is otherwise able to modify the registration requirements in the warrant agreement to remove the provisions which require this treatment. The fair value of the warrant liability is determined using the trading value of the warrants.

 

9

 

 

 

 

| **7.** | **COMMITMENTS** |
|--------|-----------------|

 

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.  The Company entered into an unsecured promissory note with Coastal Acquisition, LLC on August 4, 2006, pursuant to which Coastal Acquisition, LLC advanced $50,000 to the Company.   The Company entered into a second unsecured promissory note with Coastal Acquisition, LLC on October 2, 2006, pursuant to which Coastal Acquisition, LLC advanced an additional $25,000 to the Company.  Each of the loans accrues interestat a rate of twelve percent per annum and is payable on the earlier of the consummation of the merger of Intercontinental and Coastal Merger Corp. and October 27, 2006.

 

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

At December 31, 2005 and September 30, 2006, 50,000,000 shares of $0.01 par value common stock were authorized and 6,520,000 shares were outstanding.  Of the common stock outstanding, 1,103,448 shares are subject to the right by stockholders to convert their shares into cash.  The conversion amount per share is determined by dividing the balance in the trust account on the date when the right of conversion occurs by 5,520,000 shares. As of December 31, 2005 and September 30, 2006, the conversion amount would have been $5.30 and $5.48 per share, respectively.

 

| **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 Directors.

 

| **10.** | **PROPOSED BUSINESS COMBINATION** |
|---------|-----------------------------------|

 

On April 5, 2006, the Company and its wholly-owned subsidiary Coastal Merger Corp., a Texas corporation (“Merger Sub”), entered into a definitive Agreement and Plan of Merger with Intercontinental Bank Shares Corporation, a Texas corporation (“Intercontinental”), pursuant to which Merger Sub would merge with and into Intercontinental in a cash-for-stock transaction (the “Merger”).  On October 26, 2006, the stockholders of the Company did not approve the Merger at the Company’s special meeting.  As a result, the Business Combination was not consummated.  Following the special meeting, the Board of Directors of the Company held a meeting and adopted a resolution to proceed with the liquidation of the Company and submit a plan of liquidation to the stockholders of the Company for approval.

 

10

 

 

 

**Item 2.  Management’s Discussion and Analysis or Plan of Operation**

 

The following discussion should be read in conjunction with the financial statements and footnotes thereto incorporated by reference in this report.

 

**Forward Looking Statements**

 

Certain statements contained in this interim report that are not historical facts, including, but not limited to, statements that can be identified by the use of  forward-looking  terminology such as “may,” “expect,” “anticipate,” “predict,” “believe,” “plan,” “estimate” or “continue” or the negative thereof or other variations thereon or comparable terminology, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this interim report could differ materially from those stated in such forward-looking statements due to various factors, including but not limited to, our being a development stage company with no operating history, our dependenceon key personnel some of whom may join us following a business combination, our personnel allocating their time to other businesses and potentially having conflicts of interest with our business, our potentially being unable to obtain additional financing to complete a business combination, the ownership of our securities being concentrated, risks associated with the banking industry and those other risks and uncertainties detailed in the Company’s filings with the Securities and Exchange Commission, including our Registration Statement on Form S-1 that was declared effective February 14, 2005 and the definitive Prospectus thereunder, our annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 17, 2006, and the uncertainties set forth from time to time in the Company’s filings and other public statements.

 

**Restatement:**

 

Under EITF No. 00-19, *“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”* (“EITF No. 00-19”), the fair value of the warrants issued as part of the Units have been reported as a liability. The warrant agreement provides for the Company to register the shares underlying the warrants and is silent as to the penalty to be incurred in the absence of the Company’s ability to deliver registered shares to the warrant holders upon warrant exercise. Under EITF No. 00-19, registration of the common stock underlying the warrants is not within the Company’s control. As a result, the Company must assume that it could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability.Further EITF No. 00-19, requires the Company to record the potential settlement liability at each reporting date using the current estimated fair value of the warrants, with any changes being recorded through the Company’s statement of operations. The potential settlement obligation will continue to be reported as a liability until such time as the warrants are exercised, expire, or the Company is otherwise able to modify the registration requirements in the warrant agreement to remove the provisions which require this treatment. The fair value of the warrant liability in the accompanying balance sheets was determined using the trading value of the warrants. The fair value of the warrants was determined by the trading value of the securities on the last day of each period.

 

11

 

 

 

The Company had previously issued financial statements which did not present the warrant liability. The accompanying financial statements have been restated to correct this error. The impact of the correction of this error in previously reported financial statements is as follows:

 

(*in thousands except per share amounts)*

 

|                                         | **As of and for the**

**Three Months Ended**

**September 30, 2005** |         | **As of and for the**

**Nine Months Ended**

**September 30, 2005****** |      | **As of and for the**

**Year Ended**

**December 31, 2005****** |
|----------------------------------------------|-----------------------------------------------------------------------|--------------|--------------------------------------------------------------------------|-----------|------------------------------------------------------------------|
|                                         | **As**

**Previously**

**Reported******                              |         | **As**

**Restated******                                                 |      | **As**

**Previously**

**Reported******                         |   | **As**

**Restated****** |   | **As**

**Previously**

**Reported****** |   | **As**

**Restated****** |
|  

Assets                               | $                                                                     | 30,044  |                                                                     | $         | 30,044                                                      |   | $ | 30,044  |   | $ | 30,044  |   | $ | 30,215  |   | $ | 30,215  |
|  

Liabilities                          | $                                                                     | 149     |                                                                     | $         | 6,773                                                       |   | $ | 149  |   | $ | 6,773  |   | $ | 219  |   | $ | 4,966  |
|  

Common stock subject to

conversion  | $                                                                     | 5,802   |                                                                     | $         | 5,802                                                       |   | $ | 5,802  |   | $ | 5,802  |   | $ | 5,851  |   | $ | 5,851  |
|  

Stockholders’ equity            | $                                                                     | 24,094  |                                                                     | $         | 17,470                                                      |   | $ | 24,094  |   | $ | 17,470  |   | $ | 24,145  |   | $ | 19,398  |
|  

Warranty liability income

(expense) | $                                                                     | -       |                                                                     | $         | (1,325)                                                          |   | $ | -  |   | $ | 552  |   | $ | -  |   | $ | 2,429  |
|  

Pre-tax income (loss)                | $                                                                     | 81      |                                                                     | $         | (1,243)                                                          |   | $ | 175  |   | $ | 727  |   | $ | 297  |   | $ | 2,726  |
|  

Provision for income taxes           | $                                                                     | 23      |                                                                     | $         | 23                                                          |   | $ | 66  |   | $ | 66 |   | $ | 123  |   | $ | 123  |
|  

Net income (loss)                    | $                                                                     | 59      |                                                                     | $         | (1,266)                                                          |   | $ | 109  |   | $ | 661  |   | $ | 174  |   | $ | 2,603  |
|  

**Weighted average shares:******     |                                                                  |         |                                                                     |      |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                        | 6,520,000                                                             |         | 6,520,000                                                                | 5,549,451 |                                                             | 5,549,451 |   | 5,794,082 |   | 5,794,082 |
| Diluted                                      | 6,520,000                                                             |         | 6,520,000                                                                | 5,549,451 |                                                             | 14,648,352 |   | 5,794,082 |   | 15,382,247 |
|  

**Earnings (loss) per share**

Basic | $                                                                     | 0.01    |                                                                     | $         | (0.19)                                                           |   | $ | 0.02  |   | $ | 0.12  |   | $ | 0.03  |   | $ | 0.45  |
| Diluted                                      | $                                                                     | 0.01    |                                                                     | $         | 0.19)                                                            |   | $ | 0.02  |   | $ | 0.01  |   | $ | 0.03  |   | $ | 0.01 |
|                                              |                                                                       |              |                                                                          |           |                                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

**Plan of Operation:**

 

We were incorporated on May 19, 2004, to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating commercial bank or bank holding company.  We consummated our initial public offering (the “Offering”) on February 18, 2005.  The net proceeds, after deducting the underwriters discount and offering expenses, and including the sale of 720,000 units in the underwriters over-allotment option, was $29,693,945.  $28,483,200 of these net proceeds were placed in a trust fund and invested in United States government securities.  The funds held in the trust account will not be released until the earlier of the date on which we consummate a business combination or liquidate our assets.  We intend to utilize cash derived from the proceeds of the Offering, our capital stock, debt or a combination of these ineffecting a business combination.

 

 

12

 

 

 

**Adoption of EITF No. 00-19:**

 

Under EITF No. 00-19, *“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”* (“EITF No. 00-19”), the fair value of the warrants issued as part of the Units sold in our initial public offering have been reported as a liability. The warrant agreement provides for us to register the shares underlying the warrants and is silent as to the penalty to be incurred in the absence of our ability to deliver registered shares to the warrant holders upon warrant exercise. Under EITF No. 00-19, registration of the common stock underlying the warrants is not within our control. As a result, we must assume that we could be required to settle the warrants on a net-cash basis, thereby necessitating the treatment of the potential settlement obligation as a liability. Further EITFNo. 00-19, requires us to record the potential settlement obligation at each reporting date using the current estimated fair value of the warrants, with any changes being recorded through our statement of operations.

 

We restated our financial statements as of and for the period ended March 31, 2005, the first period ending after we issued warrants, through March 31, 2006.  The potential settlement obligation will continue to be reported as a liability until such time as the warrants are exercised, expire, or we are otherwise able to modify the registration requirements in the warrant agreement to remove the provisions which require this treatment. The fair value of the warrant liability in our balance sheets was determined using the trading value of the warrants. The fair value of the warrant liability at February 14 and 18, 2005 (the dates of issuance), and December 31, 2005, March 31, 2006, June 30, 2006 and September 30, 2006 was $7,176,000, $4,747,200, $6,624,000, $3,532,800, and $2,097,600 respectively. The fair value of the warrants was determined by the trading value of the securities on thelast day of each period. Amounts reported as warrant liability income in our statements of operations resulting from the (increase)/decrease in valuation of the warrant liability was $(1,325,000) and $ 1,435,200 for the three months ended September 30, 2005 and 2006, respectively, and, $552,000 and $2,649,600 for the nine months ended September 30, 2005 and 2006, respectively

 

**Results of Operations:**

 

For the three months ended September 30, 2006, we had net income of $1,588,701.  Our net income for the period included $1,435,200 resulting from a reduction in our warrant liability.  We earned interest income of $229 on our money market account and $815,099 on our trust account.  The unrealized appreciation in the value of our trust account decreased by $445,397, because a treasury bill matured near the end of the quarter.  We incurred operating expenses of $126,430.  Our expenses consisted primarily of professional fees, overhead fees, amortization of prepaid insurance, amortization of deferred compensation, franchise taxes and certain other expenses associated with being a public company. We recorded an income tax provision of $90,000.  

 

For the nine months ended September 30, 2006, we had net income of $3,011,782.  Our net income for the period included $2,649,600 resulting from a reduction in our warrant liability.  We earned interest income of $6,938 on our money market account and $815,099 on our trust account.  The unrealized appreciation in the value of our trust account was $193,353.  We incurred operating expenses of $420,106.  Our expenses consisted primarily of professional fees, overhead fees, amortization of prepaid insurance, amortization of deferred compensation, franchise taxes and certain other expenses associated with being a public company. We recorded an income tax provision of $233,102.  

 

13

 

 

 

**Liquidity and Capital Resources:**

 

The net proceeds from the Offering and the capital contributed by our Initial Stockholders amounted to approximately $29.7 million.  As of September 30, 2006, we had cash of $10,439. The net proceeds of our IPO and initial capitalization reduced by the amount we placed in the trust account was approximately $1.236 million.  On August 4, 2006, we borrowed $50,000 from Coastal Acquisition, LLC, an affiliate of certain of our officers and directors.  The difference between the capital available to us and our cash balance of approximately $1.276 million is the amount of cash we have used since inception.  We have used $191,245 to pay for our Directors’ & Officers liability insurance policies, $574,863 to pay for costs associated with our pending merger, $185,877 for income and franchise taxes, $145,180 for monthly overhead fees to Coastal Acquisition, LLC, $52,300 for financialadvisory fees, and $75,043 for professional fees (not including professional fees associated with our pending merger).  The balance was used to pay general and administrative expenses, public company expenses and other expenses. 

 

We are obligated, commencing February 14, 2005, to pay to Coastal Acquisition, LLC, an affiliate of several of our directors and executive officers, a monthly fee of $7,500 for general and administrative services.  The Company entered into an unsecured promissory note with Coastal Acquisition, LLC on August 4, 2006, pursuant to which Coastal Acquisition, LLC advanced $50,000 to the Company.   The Company entered into a second unsecured promissory note with Coastal Acquisition, LLC on October 2, 2006, pursuant to which Coastal Acquisition, LLC advanced an additional $25,000 to the Company.  Each of the loans accrues interest at a rate of twelve percent per annum and is payable on the earlier of the consummation of the merger of Intercontinental and Coastal Merger Corp. and October 27, 2006.

 

On October 26, 2006, the stockholders of the Company did not approve the proposed Business Combination at the Company’s special meeting.  As a result, the Business Combination was not consummated.  Following the special meeting, the Board of Directors of the Company held a meeting and adopted a resolution to proceed with the liquidation of the Company and submit a plan of liquidation to the stockholders of the Company for approval.  In connection with our initial public offering, Cary Grossman and W. Donald Brunson, members of our board of directors, agreed to indemnify us for claims by vendors and service providers for services rendered and products sold and for claims by target companies, to the extent necessary to ensure that the amounts in the trust account for the benefit of our stockholders is not reduced.  We do not have sufficient resources outside of the trust accountmaintained for the benefit of our stockholders to pay all of our obligations.  As part of our plan of liquidation, we expect that obligations to vendors and service providers of which we are currently aware will be settled or paid by Messrs. Grossman and Brunson pursuant to their indemnification agreements.  As of October 31, 2006, we estimate that we owe approximately $175,000 for federal income and state franchise taxes which are not covered by the indemnification agreement of Messrs. Grossman and Brunson.  We expect that the amounts  to be distributed to our stockholders from the trust fund will be net of these taxes. 

 

**Recent Developments:**

 

On April 5, 2006, the Company and its wholly-owned subsidiary Coastal Merger Corp., a Texas corporation (“Merger Sub”), entered into a definitive Agreement and Plan of Merger (“Merger Agreement”) with Intercontinental Bank Shares Corporation, a Texas corporation (“Intercontinental”), pursuant to which Merger Sub will merge with and into Intercontinental in a cash-for-stock transaction (the “Merger”).  

 

On October 26, 2006, the Company held a special meeting of stockholders’ for the primary purpose of voting on a proposed Business Combination.  At that special meeting, the stockholders of the Company failed to approve the Business Combination and more than 20% of the Public Stockholders voted against the Business Combination and exercised their right to convert their shares of common stock into their pro rata portion of the trust fund.  As a result, the Business Combination was not consummated.  Following the special meeting, the Board of Directors of the Company held a meeting and adopted a resolution to proceed with the liquidation of the Company and submit a plan of liquidation to the stockholders of the Company for approval.

 

14

 

 

 

On November 1, 2006, the Company received a notice from Intercontinental of termination (the “Notice”) of the Merger Agreement.  The Notice included a request for payment by us of a break-up fee and related expenses in connection with our stockholders failure to approve the Merger.  The total amount of termination fees and expenses requested in the Notice by Intercontinental is $385,000.  The Company is currently reviewing the Notice and the Merger Agreement to determine whether the Company owes a termination fee to Intercontinental and, if so, the amount of such termination fee.  As a result of termination, the Merger Agreement is void and has no effect, with no liability or obligation on either party, except with respect to the termination fee provisions and the remedy provisions and other than for claims based on or arising from the willful and material breach by any partyto the Merger Agreement of any representation, warranty or covenant of any provision set forth in the Merger Agreement or for the fraud of any party to the Merger Agreement.  In connection with the negotiation of the Merger Agreement, Intercontinental has entered into an agreement with the Company, pursuant to which Intercontinental has waived any claims it has against the Company’s trust fund.  While Intercontinental has agreed not to seek recourse against the amounts in the trust fund, because the Company has no other assets, there can be no assurance that Intercontinental will not attempt to recover any termination fee from the trust fund.  The Company does not believe Intercontinental would be successful if it brought such a claim against the trust fund; however, the Company cannot give assurances of this.

**Item 3.  Controls and Procedures**

 

An evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2006 was made under the supervision and with the participation of our management, including our chief executive officer and our principal financial officer. Based on that evaluation, they concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. 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 internalcontrol over financial reporting. 

 

15

 

 

 

**PART II.  OTHER INFORMATION**

 

**Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.**

 

| (a)  Unregistered Sales of Equity Securities by Small Business Issuer. |
|------------------------------------------------------------------------|

 

| None. |
|-------|

 

| (b) | Use of Proceeds. |
|-----|------------------|

 

On February 18, 2005, we closed the Offering of 4,800,000 units, with each unit consisting of one share of our common stock and two warrants, each to purchase one share of our common stock at an exercise price of $5.00 per share.  The units were sold at an offering price of $6.00 per unit, generating gross proceeds of $28,800,000.  Additionally, the underwriters’ purchased 720,000 units, pursuant to the exercise of the over-allotment option granted in connection with the Offering, generating gross proceeds of $4,320,000. The representatives of the underwriters in the Offering were I-Bankers Securities Incorporated and Newbridge Securities Corporation.  The securities sold in the Offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (No. 333-118294). The Securities and Exchange Commission declared the registration statement effective onFebruary 14, 2005.

 

We paid a total of $3,081,600 in underwriting discounts and commissions, including $432,000 for the underwriters’ non-accountable expense allowance, and incurred approximately $344,500 for other costs and expenses related to the Offering.

 

After deducting the underwriting discounts and commissions and the Offering expenses, the total net proceeds to us from the Offering were approximately $29,694,000, of which $28,483,200 was deposited into a trust fund and the remaining proceeds are available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.  

 

| (c) | Purchases of Equity Securities by Small Business Issuer. |
|-----|----------------------------------------------------------|

 

| None. |
|-------|

 

16

 

 

 

**Item 6:  Exhibits**

 

| Exhibits: |                                   |
|-----------|----------------------------------------|
|      |                                   |
| 31.1      | Section 302 Certification by CEO       |
|      |                                   |
| 31.2      | Section 302 Certification by President |
|      |                                   |
| 32.1      | Section 906 Certification by CEO       |
|      |                                   |
| 32.2      | Section 906 Certification by President |
|      |                                   |

 

 

 

17

 

 

 

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:  November 14, 2006

 

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

 

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

 
Chief Executive Officer

 

 

 

18

 

 

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