Mail Stop 3561
July 17, 2005
Mr. Gary A. Simanson, President and CEO
Community Bankers Acquisition Corp.
717 King Street
Alexandria, Virginia 22314
Re: Community Bankers Acquisition Corp.
Registration Statement on Form S-1
Amendment No. 1 filed June 13, 2005
File No. 333-124240
Dear Mr. Simanson:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. We note your response to our previous comment one. On page 24,
we
note your disclosure that "[i]n no event will our existing
officers .
.. . or any entity with which they are affiliated be paid any
finder`s
fee, consulting fee or similar type fees from any person or entity
in
connection with a business combination." Please affirmatively
confirm that First Capital Group will not participate in the
company`s search for a target or receive any fees in connection
with
the company`s business combination.
2. We note your response to our previous comment two and reissue
the
comment. We were unable to find disclosure discussing the
incentive
for existing stockholders. Please provide disclosure with respect
to
the conversion rights to discuss the relative benefits and
financial
advantages to utilization of such feature between the existing
stockholders and the public stockholders. This disclosure should
include, in part, an analysis and comparison of the financial
consequences of the exercise of the conversion right when
exercised
by an existing stockholder as compared to a public stockholder.
In
this context we note that: (i) the existing stockholders are
allowed,
and in fact intend to make purchases of shares in both the
offering
and in the open market subsequent to the offering; (ii) there
appears
to be a disincentive for public stockholders to exercise their
conversion rights due to the fact that the amount available to
such
stockholders (approximately $7.20 per share) is virtually certain
to
be less than the purchase price paid for the unit in the offering
($8.00); and (iii) there does not appear to be a corresponding
disincentive for existing stockholders to exercise their
conversion
rights since the average price of their existing shares was $.025
per
share and thus even after paying the offering price and/or market
price for the other shares acquired after the date of the
prospectus,
the effective cost to the existing stockholders of their shares
will
be less that the conversion price of approximately $7.20 per
share.
Similar disclosure should be provided, as applicable, with respect
to
the shares held by the Underwriters. We may have further comment.
3. Please clarify with disclosure in an appropriate place whether
the
funds not held in trust could be used as a down payment or a
lockup
in a proposed business combination. To the extent they can,
explain
how ongoing expenses will be satisfied and include appropriate
line
item disclosure in the Use of Proceeds section identifying such
use.
In addition, to the extent the funds not held in trust could be
used
for such purpose, the summary and risk factor disclosure should
make
clear that in the event of a breach by the company, these funds
would
be forfeited, the company would no longer be able to conduct due
diligence or other similar operations without additional
financing,
and that without additional financing, holders could lose on their
investment in the units.
4. We note that your initial business combination must be with a
business with a fair market value of at least 80% of your net
assets
at the time of acquisition. Please clarify throughout that there
is
no limitation on your ability to raise funds privately or through
loans that would allow you to acquire a company with a fair market
value in any amount greater than 80% of your net assets at the
time
of acquisition. Disclose as well whether any such financing
arrangements have been entered into or contemplated with any third
parties to raise such additional funds through the sale of
securities
or otherwise.
5. Discuss in an appropriate place the company`s expectation as to
whether the current management will remain associated with the
company after the consummation of the business combination.
Detail
how the company intends to accomplish this, referencing the
necessary
transaction structure, valuation determinations, exchange ratios,
and
other contingencies which must be addressed and structured so as
to
ensure that the company`s management will be able to maintain its
position with the company post-business combination.
6. We note the disclosure on page 45 of the prospectus that
"[a]lthough there can be no assurance, such purchases may assist
in
stabilizing the market price of the warrants." We also note the
disclosure on page 54 under the subheading "Short Sales,
Stabilizing
Transactions and Penalty Bids" and your response to our previous
comment 51. In light of this disclosure, please advise how the
company will comply with Regulation M. We may have further
comments.
7. We note your disclosure on the prospectus cover page and on
page
24 concerning your efforts, or lack thereof, with respect to
locating
a potential candidate for a business combination transaction.
Provide additional disclosure in the form of an affirmative
statement, if accurate, that neither the company nor any of its
affiliates or representatives has, as of the date of the
prospectus,
taken steps towards locating or consummating a business
combination
transaction. Alternatively, provide disclosure of the steps taken
to
date.
Prospectus Summary, page 1
8. We note your response to our previous comment 17 and reissue
the
comment. We were unable to find in the prospectus the disclosure
referenced in your response. Please provide, here or elsewhere in
the prospectus as appropriate, a definition for the term "public
stockholder" as used by the company with respect to this offering.
In this context, please discuss in particular whether this term
would
include the "existing stockholders" of the company and/or their
affiliates, in the case of shares held by such persons that are
acquired in the offering, pursuant to open market purchases of
units,
common stock or warrants, or from the exercise of warrants held by
such persons.
9. Disclose here, and elsewhere as appropriate, whether the
redemption of the warrants by the company would include the
warrants
held by I-Bankers Securities Incorporated as a result of the
exercise
of the Underwriters` option. Alternatively, if such warrants are
not
included, discuss the reasons why such warrants are not included.
In
addition, discuss whether I-Bankers Securities has the right to
consent before the company can exercise its redemption right and
if
so, discuss the conflicts of interest that result from such right.
Use of Proceeds, page 16
10. We note that the company states that "[t]he proceeds held in
the
trust account may be used as consideration to pay the sellers of a
target business . . . Any amounts not paid as consideration to
the
sellers of the target business may be used to finance operations
of
the target business." Please discuss all possible uses of the
proceeds held in trust if such funds are released to the company.
Please include any finder`s fees and expenses that are in addition
to
those expenses to be paid from the net proceeds not held in trust.
Please reconcile this disclosure with the disclosure in the last
paragraph on page 21 in the MD&A section.
11. On page 17, we note the statement that "[n]o compensation of
any
kind . . . will be paid to any of our existing stockholders."
Please
reconcile this statement with the disclosure that "existing
stockholders will receive reimbursement for . . . performing due
diligence." Also, please explain whether the $200,000 allocated
to
due diligence in the table, would be used to pay existing
stockholders for their performance of due diligence. Please
clarify
which line items in the use of proceeds table that the
reimbursements
will be paid from.
Capitalization, page 20
12. Please provide a footnote to the capitalization table to
disclose
the revolving credit agreement from a related party and the
outstanding advance that will be repaid with offering proceeds.
Alternatively, in the event that the capitalization table is
updated,
please include the outstanding balance of the revolving credit
agreement in the body of the table.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 21
13. We note the statement "[w]e may use substantially all of the
net
proceeds of this offering to acquire a target business, including
identifying and evaluating prospective acquisition candidates,
selecting the target businesses, and structuring, negotiating and
consummating the business combination." Please discuss whether or
not these expenses will be paid from the proceeds held in trust.
Please explain these expenses in more detail. It may be helpful
to
explain in greater detail the expected use of the proceeds held in
trust.
Proposed Business, page 23
Effecting a Business Combination, page 24
14. We note your response to our previous comment 42 and we
reissue
the comment. We were unable to find the disclosure referenced in
your response. In the disclosure under the heading "Probable lack
of
business diversification," provide additional disclosure to
clarify,
in light of the company`s requirement that any acquisition must be
of
a company with a fair market value equal to at least 80% of the
company`s net assets, how the company would be able to effectuate
a
business combination with more than one target business.
Employees, page 29
15. We note your response to our previous comment 44 and reissue
the
comment. We were unable to find the disclosure referenced in your
response. Please revise the business section to discuss in detail
how management intends to carry out its duty of seeking a target
business.
Underwriting, page 52
16. Please confirm with respect to any electronic offer, sale or
distribution of the shares, if true, that the procedures you will
follow will be consistent with those previously described to and
cleared by the Office of Chief Counsel.
17. Tell us whether you or the underwriters have any arrangements
with a third party to host or access your preliminary prospectus
on
the Internet. If so, identify the party and the website, describe
the material terms of your agreement, and provide us with a copy
of
any written agreement. Provide us also with copies of all
information concerning your company or prospectus that has
appeared
on their website. Again, if you subsequently enter into any such
arrangements, promptly supplement your response.
Part II
Exhibits
18. We note that the heading on the first page of the underwriting
agreement and on Schedule I lists Costal Bancshares Acquisition
Corp.
as the company. Please revise.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Maureen Bauer at (202) 551-3237 or Terence
O`Brien at (202) 551-3355 if you have questions regarding comments
on
the financial statements and related matters. Please contact
Thomas
Kluck at (202) 551-3233 or Mike Karney, who supervised the review
of
your filing, at (202) 551-3847 with any other questions.
Sincerely,
John Reynolds
Assistant Director
cc: Kathleen Cerveny, Esq.
Fax: (202) 452-0930
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Mr. Gary A. Simanson
Community Bankers Acquisition Corp.
July 17, 2005
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