UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

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

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

Commission File Number: 001-33803

WESTERN LIBERTY BANCORP

(Exact name of registrant as specified in its charter)

Delaware		30-0615838
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1370 Avenue of the Americas, 28th Floor, New York, New York 10019
(212) 445-7800

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

As of August 6, 2010, the registrant had 10,959,169 shares of its common stock, par value $0.0001 per share, outstanding.

 

 

WESTERN LIBERTY BANCORP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3
Condensed Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009		3
Condensed Statements of Operations for the three and six months ended June 30, 2010 and 2009 (unaudited)		4
Condensed Statement of Changes in Stockholders’ Equity for the six months ended June 30, 2010 (unaudited)		5
Condensed Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (unaudited)		6
Notes to Condensed Financial Statements (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		15
Item 4. Controls and Procedures		15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		16
Item 1A. Risk Factors		16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		16
Item 3. Defaults Upon Senior Securities		16
Item 4. (Removed and Reserved)		16
Item 5. Other Information		16
Item 6. Exhibits		16
Signatures		17
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

WESTERN LIBERTY BANCORP

CONDENSED BALANCE SHEETS

		June 30, 2010				December 31, 2009
		(unaudited)
Assets
Cash and cash equivalents		$	85,477,134			$	87,969,242
Prepaid expenses			627,467				551,198
		$	86,104,601			$	88,520,440
Liabilities and Stockholders’ Equity
Liabilities
Accrued expenses		$	378,602			$	628,493
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; None issued or outstanding			—				—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 10,959,169 issued and outstanding			1,096				1,096
Additional paid-in capital			104,992,784				103,730,471
Accumulated deficit			(19,267,881	)			(15,839,620	)
			85,725,999				87,891,947
		$	86,104,601			$	88,520,440

The accompanying notes are an integral part of these condensed financial statements.

WESTERN LIBERTY BANCORP

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
		June 30, 2010				June 30, 2009				June 30, 2010				June 30, 2009
Revenue		$	—			$	—			$	—			$	—
Operating expenses
General and administrative expenses			1,045,184				2,468,765				2,169,560				3,297,219
Stock based compensation			631,156				93,750				1,262,313				187,499
Loss from operations			(1,676,340	)			(2,562,515	)			(3,431,873	)			(3,484,718	)
Interest income			1,628				10,562				3,612				81,184
Net loss		$	(1,674,712	)		$	(2,551,953	)		$	(3,428,261	)		$	(3,403,534	)
Earnings per share
Net loss		$	(1,674,712	)		$	(2,551,953	)		$	(3,428,261	)		$	(3,403,534	)
Deferred interest on investments held in trust relating to common shares subject to possible conversion			—				—				—				—
Net loss attributable to common stockholders		$	(1,674,712	)		$	(2,551,953	)		$	(3,428,261	)		$	(3,403,534	)
Weighted average number of common shares subject to possible conversion outstanding							9,584,654								9,584,654
Earnings per share common shares subject to possible conversion						$	—							$	—
Weighted average number of common shares outstanding — basic and diluted			10,959,169				39,936,064				10,959,169				39,936,064
Basic and diluted loss per common share		$	(0.15	)		$	(0.06	)		$	(0.31	)		$	(0.09	)

The accompanying notes are an integral part of these condensed financial statements.

WESTERN LIBERTY BANCORP

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(Unaudited)

		Common Stock								Additional
		Shares				Amount				paid-in capital				Accumulated deficit				Total stockholderes’ equity
Balance at January 1, 2010			10,959,169			$	1,096			$	103,730,471			$	(15,839,620	)		$	87,891,947
Stock based compensation			—				—				1,262,313				—				1,262,313
Net loss			—				—				—				(3,428,261	)			(3,428,261	)
Balance at June 30, 2010			10,959,169			$	1,096			$	104,992,784			$	(19,267,881	)		$	85,725,999

The accompanying notes are an integral part of these condensed financial statements.

WESTERN LIBERTY BANCORP

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months Ended				Six Months Ended
		June 30, 2010				June 30, 2009
Cash flow from operating activities
Net loss		$	(3,428,261	)		$	(3,403,534	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities
Stock based compensation			1,262,313				187,499
Interest earned on cash held in trust			—				(78,838	)
Changes in operating assets and liabilities
Prepaid expenses			(76,269	)			150,301
Accrued expenses			(249,891	)			2,088,752
Net cash used in operating activities			(2,492,108	)			(1,055,820	)
Net decrease in cash and equivalents			(2,492,108	)			(1,055,820	)
Cash and cash equivalents, beginning of period			87,969,242				1,445,882
Cash and cash equivalents, end of period		$	85,477,134			$	390,062

The accompanying notes are an integral part of these condensed financial statements.

WESTERN LIBERTY BANCORP

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1 Interim Financial Information

These unaudited condensed financial statements as of June 30, 2010 and for the three and six months ended June 30, 2010 and 2009, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any other interim period or for the full year. These interim unaudited financial statements should be read in conjunction with the financial statements for the year ended December 31, 2009, which are included in Western Liberty Bancorp’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

2 Organization and Business Operations

On October 7, 2009, Global Consumer Acquisition Corp.’s stockholders approved the proposal to change its name to Western Liberty Bancorp (“WLBC”, “us” or “we”). All references to Global Consumer Acquisition Corp. have been changed to Western Liberty Bancorp.

General

We were formerly known as “Global Consumer Acquisition Corp.” and were a special purpose acquisition company, formed under the laws of Delaware on June 28, 2007, to consummate an acquisition, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On October 7, 2009, our stockholders approved our initial acquisition of 1st Commerce Bank, a Nevada-chartered non-member bank (“1st Commerce Bank”) (such acquisition was subsequently terminated by mutual agreement of the parties), along with certain amendments to our Amended and Restated Certificate of Incorporation removing certain provisions specific to special purpose acquisition companies, changing our name to “Western Liberty Bancorp” and authorizing the distribution and termination of our trust account. Effective October 7, 2009, the Company began its business operations and exited its development stage.

Stockholder Approval to Become Western Liberty Bancorp

On October 7, 2009, WLBC’s stockholders approved certain proposals to amend its Amended and Restated Certificate of Incorporation (the “COI Amendments”) and its existing Investment Management Trust Agreement and the acquisition of 1st Commerce Bank at a special meeting of its stockholders held on October 7, 2009 (the “Special Meeting”).

Amendment to Trust Agreement

At the Special Meeting, WLBC’s stockholders authorized WLBC and Continental Stock Transfer & Trust Company, as trustee (the “Trustee”) to distribute and terminate WLBC’s trust account pursuant to an Amendment No. 1 to the Investment Management Trust Agreement, dated October 7, 2009 (the “Trust Agreement Amendment”). The Trust Agreement Amendment amends the Trust Agreement, which provided that the Trustee could only liquidate the trust account upon the consummation of WLBC’s initial business combination or on November 27, 2009.

COI Amendments

The COI Amendments were also approved at the Special Meeting. The COI Amendments amended WLBC’s Amended and Restated Certificate of Incorporation as follows:

	•		amended the definition of “Business Combination” to remove the requirement that WLBC’s initial acquisition of one or more assets or operating businesses needed to have a fair market value of at least 80% of WLBC’s net assets held in trust (net of taxes and amounts disbursed for working capital purposes and excluding the amount held in the trust account representing a portion of the underwriters’ discount) at the time of acquisition;
	•		removed the prohibition on the consummation of a business combination if holders of an aggregate of 30% or more in interest of the shares of WLBC’s common stock issued in its initial public offering (“Public Shares”) exercised their conversion rights;
	•		removed the requirement that only holders of Public Shares who voted against WLBC’s initial business combination could covert their Public Shares into cash;
	•		changed WLBC’s name from “Global Consumer Acquisition Corp.” to “Western Liberty Bancorp”;
	•		changed WLBC’s corporate existence to perpetual, so WLBC will not be required to liquidate on November 27, 2009;
	•		deleted the provision in the Certificate of Incorporation that provided that in the event a business combination was not consummated prior to November 27, 2009, WLBC’s corporate purpose would automatically have been limited to effecting and implementing WLBC’s dissolution and liquidation and that WLBC’s powers would be limited to those set forth in Section 278 of the Delaware General Corporation Law and as otherwise may be necessary to implement the limited purpose; and
	•		deleted the following restrictions only applicable to special purpose acquisition companies:

	•		the requirement that a business combination be submitted to WLBC’s stockholders for approval and authorized by the vote of a majority of the Public Shares cast at a meeting of stockholders to approve such business combination;
	•		the procedures for exercising conversion rights;
	•		the provision for when funds may be disbursed from WLBC’s trust account established in connection with its initial public offering;
	•		the provision that no other business combination could be consummated until WLBC initial business combination is consummated; and
	•		the provision that holders of Public Shares would be entitled to receive distributions from WLBC’s trust account only in the event of WLBC’s liquidation or by demanding conversion.

Amendment to Amended and Restated Warrant Agreement

On October 7, 2009, WLBC and the Warrant Agent entered into Amendment No. 1 (the “Warrant Agreement Amendment”) to the Amended and Restated Warrant Agreement. The Warrant Agreement Amendment (i) amends the definition of “Business Combination” as set forth in the Warrant Agreement to allow for the exercise of WLBC’s warrants immediately upon consummation of an initial business combination, subject to certain requirements as set forth in the Amended and Restated Warrant Agreement, and (ii) makes certain technical amendments to the Insider Letters in conformance with the COI Amendments and the Trust Agreement Amendment.

Service1st Merger Agreement

On November 6, 2009, WLBC, entered into an agreement and Plan of Merger as amended by the first amendment to the agreement and Plan of Merger, dated as of June 21, 2010 (the “Merger Agreement”) with WL-S1 Interim Bank, a Nevada corporation (“Merger Sub”), Service1st Bank of Nevada, a Nevada-chartered non-member bank (“Service1st”) and Curtis W. Anderson, as representative of the former stockholders of Service1st, which provides for the merger (the “Merger”) of Merger Sub with and into Service1st, with Service1st being the surviving entity and becoming our wholly-owned subsidiary.

In connection with the Merger, WLBC intends to continue the process to become a bank holding company, which will enable us to participate in financial lines of business. WLBC banking operations will be conducted through Service1st, which will be the surviving entity pursuant to the Merger Agreement and will retain the Service1st name. Founded in 2007, Service1st holds a Nevada bank charter and will continue to operate following the consummation of the Merger. As a result of the Merger, all of the outstanding shares of Service1st common stock will be cancelled and automatically converted into the right of the holders of Service1st common stock to receive shares of our common stock.

The Merger is expected to be consummated upon the fulfillment of certain conditions, including (a) obtaining all necessary approvals from governmental agencies and other third parties that are required for the consummation of the transactions contemplated by the Merger Agreement, (b) the receipt of the affirmative vote of Service1st’s stockholders and the receipt of the affirmative vote of WLBC’s stockholders to adopt the Merger Agreement (c) other customary closing conditions. There is no guarantee when all of the conditions precedent to the consummation of the Merger will be satisfied.

As a result of the Merger, all of the outstanding shares of Service1st common stock will be cancelled and automatically converted into the right of the holders of Service1st common stock to receive shares of WLBC common stock. The base merger consideration shall be the agreed upon tangible book value of Service1st on the last day of the calendar month immediately preceding the month in which the all regulatory approvals for the consummation of the Merger have been received (the “Valuation Date”), less the sum of (x) a portion of Service1st’s transaction expenses and (y) $1 million (the “Base Merger Consideration”). Furthermore, on or prior to the second anniversary of the consummation of the Merger (the “Closing Date”), if the closing price of the common stock of WLBC exceeds $12.75 per share for 30 consecutive trading days, then an additional “earn out” provision of 20.0% of the agreed upon tangible book value of Service1st at the close of business on the Valuation Date would be added to the purchase price; (the “Contingent Merger Consideration”). The number of shares to be issued to the stockholders of Service1st as of the Closing Date will be determined by dividing (a) the Base Merger Consideration by (b) the product of (x) the number of outstanding shares of Service1st common stock as of the Closing Date and (y) the average closing price of WLBC’s common stock for the five trading days immediately prior to and after the date on which all regulatory approvals for the Merger have been received (subject to certain adjustments as set forth in the Merger Agreement) (the “Exchange Ratio”). The number of additional shares to be issued to the former stockholders of Service1st as of the date any earn out consideration is due will be determined by dividing (a) the Contingent Merger Consideration by (b) the product of (x) the number of outstanding shares of Service1st common stock as of the Closing Date and (y) the average of the closing price of WLBC’s common stock for the first 30 consecutive trading days on which the closing price of WLBC’s common stock shall have been more than $12.75.

Additionally, all outstanding Service1st options and warrants shall be converted into options and warrants of similar tenor to purchase additional shares of WLBC common stock in amounts equal to the product of (a) the number of shares of Service1st common stock that would be issuable upon exercise of such option or warrant immediately prior to the Closing Date and (b) the Exchange Ratio. The per share exercise price for the warrants and options will be equal to the quotient determined by dividing (x) the per share exercise price for such option or warrant immediately prior to the Closing Date by (y) the Exchange Ratio. The shares of those Service1st stockholders who do not exercise their dissenter’s rights under Nevada law will be cancelled and extinguished and exchanged for each stockholder’s pro rata portion of the overall merger consideration. In addition, WLBC has agreed to make a capital contribution of $25 million to Service1st on the Closing Date.

WLBC filed a Form S-4 Registration Statement with the Securities and Exchange Commission on February 8, 2010. On February 23, 2010, the Company filed Amendment 1 to the Form S-4. The S-4 contained the “Notice of Special Meeting of Stockholders to be Held on March 25, 2010”. The meeting was to consider and vote on the Merger Agreement, dated November 6, 2009. The record date was established as March 1, 2010. On March 23, 2010, WLBC supplemented its proxy statement/prospectus dated February 25, 2010 announcing that the Special Meeting of Stockholders originally scheduled to be held on March 25, 2010 had been postponed.

Post-Effective Amendment No. 1 to the Registration Statement on Form S-4 was filed with the Securities and Exchange Commission on July 2, 2010 by WLBC. It amends and restates the prospectus dated February 23, 2010 of WLBC. WLBC’s securities are no longer listed on the New York Stock Exchange Amex (the “NYSE Amex”) or another nationally-recognized exchange and therefore we are not subject to NYSE Amex’s or another exchange’s stockholder approval requirements. Furthermore, approval of the Merger by WLBC’s stockholders is not required under Delaware or other applicable law. As a result, WLBC will no longer be soliciting the approval of its stockholders to consummate the Merger, and the prospectus no longer includes a proxy statement.

Voting Agreement

On January 28, 2010, certain stockholders of Service1st (the “Stockholders”) entered into an Amended and Restated Voting Agreement with WLBC (the “Voting Agreement”), whereby the Stockholders agreed to vote all of the shares of Service1st common stock currently beneficially owned by them or acquired by them after such date in favor of approval of the approval of the Merger. The Voting Agreement contains restrictions limiting the ability of the Stockholders to sell or otherwise transfer the shares of Service1st beneficially owned by them. The Voting Agreement terminates upon the earliest to occur of (i) the date of the effectiveness of the Merger and (ii) the date of the termination of the Merger Agreement in accordance with its terms.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

On October 20, 2009, WLBC received notice from the staff of the NYSE Amex (the “Exchange”) indicating that the Exchange believes that WLBC no longer complies with the Exchange’s continued listing standards due to the recent amendments to the Certificate of Incorporation approved at WLBC’s stockholder meeting on October 7, 2009 and an insufficient number of public shareholders of WLBC’s common stock, as set forth in Section 1003(c) of the Exchange’s Company Guide, and that its securities are, therefore, subject to being delisted from the Exchange. The Company appealed this determination and was granted the right to a hearing before a committee of the NYSE Amex on February 11, 2010. On February 17, 2010, the Listed Qualification Panel of the NYSE Amex’s Committee on Securities (the “Panel”) affirmed the determination by the staff (the “Staff”) of the Exchange to delist the securities of WLBC from the Exchange. In the Panel’s notice to WLBC, it advised WLBC that the Exchange expected to suspend trading in WLBC’s securities as soon as practicable. On February 22, 2010, the Staff advised WLBC that the Exchange would be suspending WLBC’s securities from trading, effective at the open of business on Thursday, February 25, 2010. In the interim, WLBC filed an application with the Financial Industry Regulation Authority (“FINRA”) to allow its securities to quote on the Over the Counter Bulletin Board (the “OTCBB”). Trading in WLBC’s securities was suspended at the open of business on Thursday, February 25, 2010. Concurrently, however, WLBC’s securities were cleared for quotation on the OTCBB, effective at the open of business on Thursday, February 25, 2010. WLBC expects to be listed on a national exchange upon closing of the previously announced Services1st Bank of Nevada acquisition.

3 Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

WLBC considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

At June 30, 2010, financial instruments that potentially expose WLBC to credit risk consist of cash and cash equivalents. WLBC maintains its cash balances in various financial institutions. The Federal Deposit Insurance Corporation insures balances in bank accounts up to $250,000 and the Securities Investor Protection Corporation insures balances up to $500,000 in brokerage accounts. WLBC has not experienced losses on these accounts and management believes WLBC is not exposed to significant risks on such accounts.

As of June 30, 2010, approximately $85,003,710 of the Company’s cash and cash equivalents were invested in the Federated U.S. Treasury Cash Reserve Fund (UTIXX) and the Goldman Sachs Financial Square Funds — Treasury Instruments Fund (FTIXX). Both funds, under normal circumstances, invests their assets exclusively in obligations of the U.S. Treasury, including Treasury bills, bonds and notes and other obligations issued or guaranteed by the U.S. Treasury.

Income (loss) Per Common Share

Basic income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares for the period. Diluted income (loss) per share reflects the potential dilution that could occur if derivative securities were to be exercised or converted and would otherwise result in the issuance of common stock.

For the three and six months ended June 30, 2010 and 2009, the Company had potentially dilutive securities in the form of 48,067,758 warrants, including 8,500,000 sponsors’ warrants issued in a private placement, 7,618,908 warrants from shares restructured into warrants and 31,948,850 warrants issued as part of the units in our initial public offering. In addition, for the three and six months ended June 30, 2010, the Company also had potentially dilutive securities in the form of 200,000 restricted stock units granted to certain members of our board of directors and our president. The Company uses the “treasury stock method” to calculate potential dilutive shares, as if they were redeemed for common stock at the beginning of the period.

For the three and six months ended June 30, 2010 and 2009, potentially dilutive securities are excluded from the computation of fully diluted earnings per share as their effects are anti-dilutive.

The statements of operations for the three and six months ended June 30, 2009 includes a presentation of income (loss) per common share subject to possible redemption in a manner similar to the two class method of income (loss) per common share. Basic and diluted income per common share amount for the maximum number of common shares subject to possible redemption is calculated by dividing the net interest attributable to common shares subject to redemption by the weighted average number of common shares subject to possible redemption. Basic and diluted income per share amount for the common shares outstanding not subject to possible redemption is calculated by dividing the net income exclusive of the net interest income attributable to common shares subject to redemption by the weighted average number of common shares not subject to possible redemption.

4 Stockholders Equity

Preferred Stock

WLBC is authorized to issue 1,000,000 shares of blank check preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors of WLBC (the “Board of Directors”).

Common Stock

On October 7, 2009, 21,357,987 shares of common stock were redeemed and 7,618,908 shares of common stock were restructured into warrants as a result of the shareholder meeting (Note 1).

At June 30, 2010 and December 31, 2009, there were 48,267,758 shares of common stock reserved for issuance upon exercise of WLBC’s outstanding options and warrants.

Restricted Stock

Pursuant to Letter Agreements dated December 23, 2008 between WLBC and each of its independent directors, Richard A.C. Coles, Michael B. Frankel and Mark Schulhof, and a letter agreement dated as of April 28, 2009 between WLBC and Daniel B. Silvers, WLBC’s President, WLBC granted each independent director and Mr. Silvers 50,000 restricted stock units with respect to shares of WLBC’s common stock, subject to certain terms and conditions. The restricted stock units shall fully vest on the closing date of a business combination. Settlement of vested restricted stock units will occur on the date that is 180 calendar days after the vesting date. Restricted stock units will be settled by delivery of one share of WLBC’s common stock for each restricted stock unit settled. WLBC incurred compensation expense equal to the grant date fair value of the restricted stock units. Based upon the market price of WLBC common shares at grant date, WLBC determined that the grant date fair value of the restricted stock units was $9.25 per unit, $1,850,000 in the aggregate. WLBC recorded compensation expense of $1,850,000 over the estimated vesting period of 266 days. WLBC estimated the vesting period as the number of days from the grant date to the estimated closing date of the business combination. WLBC recorded $631,156 and $1,262,313 in compensation expense for the restricted stock units for the three and six months ended June 30, 2010. The amount is fully expensed as of June 30, 2010.

WLBC will also provide a one-time grant of restricted stock equal to $250,000 divided by the closing price of WLBC’s common stock on the closing date of the Merger to George A. Rosenbaum Jr., WLBC’s Chief Financial Officer, for his future services. In addition, WLBC shall also issue restricted stock with respect to shares of our common stock to William E. Martin, who will become a member of our board of directors and serve as our Chief Executive Officer and as Chief Executive Officer of Service1st. Mr. Martin will be issued restricted shares of WLBC common stock in an amount equal to $1.0 million divided by the closing price of our common stock on the closing date of the Merger in consideration for his future services, subject to the closing of the Merger.

5 Transaction Costs

For the three and six months ended June 30, 2010, WLBC incurred transaction costs relating to the proposed business combination with Service1st in the amount of $738,764 and $1,580,492. Such transaction costs were expensed as professional fees.

6 Commitments and Contingencies

There is no material litigation currently pending against WLBC or any members of its management team in their capacity as such.

7 Indemnifications

WLBC has entered into agreements with its officers and directors to provide contractual indemnification in addition to the indemnification provided in its amended and restated certificate of incorporation. WLBC believes that these provisions and agreements are necessary to attract qualified officers and directors. WLBC’s bylaws also will permit it to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification. WLBC has purchased a policy of directors’ and officers’ liability insurance that insures WLBC’s directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures WLBC against its obligations to indemnify the directors and officers.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and our combined and consolidated financial statements and related notes thereto included in or incorporated into Part II, Item 8 of our Annual Report on Form 10-K and the Risk Factors included in Part I, Item 1A of our Annual Report on Form 10-K , as well as other cautionary statements and risks described elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K .

References to “us”, “we” or “WLBC” refer to Western Liberty Bancorp. The following discussion and analysis of WLBC’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission. We wish to caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Overview

Upon the consummation of the Merger, we will operate as a “new” Nevada financial institution bank holding company and will conduct our operations through our wholly-owned subsidiary, Service1st.

Post-acquisition, Service1st will provide a full range of traditional community banking services focusing on core commercial business in the form of commercial and commercial real estate lending, small business lending, consumer loans and a broad range of commercial and consumer depository products. Following the consummation of the Merger, we intend to pursue additional acquisitions and to fund the growth of our loan portfolio and deposit base.

We do not expect to present any acquisitions to our stockholders for a vote, except as required under Delaware or other applicable law, or stock exchange rules, including any acquisition of a troubled financial institution as part of a sale by the FDIC or other regulator. If the Merger is not consummated, we do not expect to present alternative acquisition targets to a vote of stockholders, except as required under Delaware or other applicable law, or stock exchange rules. In general, no vote of our stockholders is required under our Second Amended and Restated Certificate of Incorporation or Delaware law to authorize the purchase by us of the assets of another entity (including, for example, assets purchased from a troubled financial institution as part of a sale by the FDIC or other regulator) or to authorize acquisitions effected through a merger in which we are the surviving corporation, each share of our stock outstanding immediately prior to the effectiveness of the merger is an identical share of the surviving corporation, and our authorized unissued shares or treasury shares to be issued or delivered under the relevant merger agreement do not exceed 20% of the shares of our common stock outstanding immediately prior to the effective date of the merger. Such matters could be authorized by our board of directors, which is charged with directing our business and affairs.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities that would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

Contractual Obligations, Commitments and Contingencies

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities. We previously paid a monthly fee of $10,000 for office space and general and administrative services payable to Hayground Cove. We began incurring this fee on November 27, 2007, and incurred this fee through August 31, 2009.

Results of Operations for the Three Months Ended June 30, 2010

For the three months ended June 30, 2010, we had a net loss of $1,674,712. All of our income was derived from interest income. Our operating expenses for the three months ended June 30, 2010 were $1,676,340 and consisted primarily of expenses related to stock based compensation, insurance costs, legal and accounting professional fees related to pursuing a business combination and due diligence.

Results of Operations for the Six Months Ended June 30, 2010

For the six months ended June 30, 2010, we had a net loss of $3,428,261. All of our income was derived from interest income. Our operating expenses for the six months ended June 30, 2010 were $3,431,873 and consisted primarily of expenses related to stock based compensation, insurance costs, legal and accounting professional fees related to pursuing a business combination and due diligence.

Liquidity and Capital Resources

On October 7, 2009, our stockholders authorized the Continental Stock Transfer & Trust Company, as trustee, (the “Trustee”) to distribute and terminate our trust account immediately following stockholder approval of the Merger. As a result, the Trustee distributed $211,764,441 from our trust account to stockholders who elected to convert their shares into a pro rata portion of the trust account. The Trustee distributed the remaining $105,014,080 to us from the trust account. The funds are available for working capital.

As of June 30, 2010, we had unrestricted cash and cash equivalents of $85,477,134, net of all payments made to underwriters, advisors, consultants in connection with our initial public offering and operations thereafter.

We may apply the cash released to us from the trust account to acquire one or more target businesses, including identifying and evaluating prospective target businesses, selecting one or more target businesses and structuring, negotiating and consummating the Merger. We may also apply the cash released to us for general corporate purposes, including for maintenance or expansion of operations of Service1st, the payment of principal or interest due on indebtedness incurred in consummating the Merger, to fund the purchase of other companies or for working capital.

Assuming that a business combination is not consummated, we anticipate making the following expenditures during the time period:

	•		legal, accounting and other expenses attendant to the due diligence investigations, structuring and negotiating of a business combination, including without limitation third-party fees for assisting us in performing due diligence investigations of prospective target businesses
	•		legal and accounting fees relating to our SEC reporting obligations (including a proxy / registration statement in connection with a business combination);
	•		expenses and fees relating to certain general and administrative services; and
	•		general working capital that will be used for miscellaneous expenses, including reimbursement of any out-of-pocket expenses incurred by our founding stockholders, directors and officers in connection with activities on our behalf, director and officer liability and other insurance premiums and, if we must dissolve and liquidate, further expenditures for dissolution and liquidation costs.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the disclosure of contingent assets and liabilities in the financial statements and the accompanying notes, and the reported amounts of revenue and expenses during the periods presented. Actual amounts and results could differ from those estimates. If we were to effect a business combination, estimates and assumptions would be based on historical factors, current circumstances and the experience and judgment of our management, and we would evaluate these assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. The estimates and assumptions that management believes are the most significant in preparing our financial statements are described below.

Fair value of financial instruments

We do not enter into financial instruments or derivative contracts for trading or speculative purposes. The carrying amounts of financial instruments classified as current assets and liabilities approximate their fair value due to their short maturities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. We are not and, until such time as we consummate the Merger or another business combination, we will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. Given our limited risk in our exposure to government securities and money market funds, we do not view the interest rate risk to be significant.

We have not engaged in any hedging activities since our inception. We do not currently expect to engage in any hedging activities with respect to the market activities to which we are exposed.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management (including our Chief Executive Officer and Chief Financial Officer), our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (ii) accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

As of August 6, 2010, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 and the risk factors disclosed in our Prospectus filed pursuant to Rule 424(b)(3) of the Securities Act of 1934, as amended, each filed with the SEC, except we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit
Number		Description
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.