**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 
 **FORM
        10-Q**
 
 x
              **QUARTERLY****REPORT
                  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
 
 **FOR
        THE QUARTERLY PERIOD ENDED**  **SEPTEMBER
        30, 2008**
  **OR**
 
 o
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934**
 
 **For
        the transition period from ____________ to ____________.**
 
 **Commission
        File Number 001-33711**
 **SP
        ACQUISITION HOLDINGS, INC.**
 *(Exact
        name of Registrant as specified in its charter)*
 
 **Delaware**
              
              **20-8523583***(State
                  or other jurisdiction of*
              
              *(I.R.S.
                  Employer**Incorporation
                  or organization)*
              
              *Identification
                  Number)***590
                  MADISON AVENUE,****32****nd********FLOOR**
                **NEW
                  YORK, NY**
              
              **10022***(Address
                  of principal executive offices)*
              
              *(Zip
                  Code)*
 
 **Registrant's
        telephone number including area code: (212) 520-2300**
 
 **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** **x** **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
        definition of “accelerated filer,” “large accelerated filer” and “smaller
        reporting company” in Rule 12b-2 of the Exchange Act).**
  **Large
                  accelerated filer o**
              **Accelerated
                  filer o******
              ******Non-accelerated
                  filer x**
              **Smaller
                  reporting company 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**
  **There
        were 54,112,000 shares of the Registrant’s Common Stock, par value $.001,
        outstanding on November 5, 2008.**
  
 
  **SP
        ACQUISITION HOLDINGS, INC.**
 
 **FORM
        10-Q**
 
 **Quarter
        ended**  **September
        30, 2008**
 
 **TABLE
        OF CONTENTS**
 
 Page**PART
                  I**FINANCIAL
                  INFORMATIONItem
                  1.
              Condensed
                  Financial Statements:Condensed
                  Balance Sheets as of September 30, 2008 (unaudited) and December
                  31,
                  2007
              
              4Condensed
                  Statements of Operations (unaudited) for the three months ended
                  September
                  30, 2008 and 2007, for the nine months ended September 30, 2008 and
                  for
                  the period from  February 14, 2007 (inception) through September 30,
                  2007 and for the period from February 14, 2007 (inception) through
                  September 30, 2008
              
              5Condensed
                  Statements of Cash Flows (unaudited) for the nine months ended
                  September
                  30, 2008 and 2007, and for the period from February 14, 2007 (inception)
                  through September 30, 2008
              
              6Condensed
                  Statements of Stockholders’ Equity for the period February 14, 2007
                  (inception) through December 31, 2007 and for the nine months ended
                  September 30, 2008 (unaudited)
              
              7Notes
                  to Condensed Financial Statements
              
              8Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              17Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              19Item
                  4.
              Controls
                  and Procedures
              
              20**PART
                  II**OTHER
                  INFORMATIONItem
                  1.
              Legal
                  Proceedings
              
              20Item
                  1A.
              Risk
                  Factors
              
              20Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              
              21Item
                  3.
              Defaults
                  Upon Senior Securities
              
              21Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              21Item
                  5.
              Other
                  Information
              
              21Item
                  6.
              Exhibits
              
              21Signatures
              22Exhibit
                  Index
              
              23Certifications
  2
 
 **CAUTIONARY
        NOTE REGARDING FORWARD-LOOKING STATEMENTS**
 
 This
        report, and the information incorporated by reference in it, include “forward
        looking statements” within the meaning of Section 27A of the Securities Act of
        1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
        as
        amended, (the “Exchange Act”). Our forward-looking statements include, but are
        not limited to, statements regarding our or our management’s expectations,
        hopes, beliefs, intentions or strategies regarding the future. In addition,
        any
        statements that refer to projections, forecasts or other characterizations
        of
        future events or circumstances, including any underlying assumptions, are
        forward-looking statements. The words “anticipates,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predicts,” “project,” “should,” “would” and similar expressions
        may identify forward-looking statements, but the absence of these words does
        not
        mean that a statement is not forward-looking. Forward-looking statements
        in this
        report may include, for example, statements about our:
  ·
              ability
                  to complete our initial business
                  combination;
 
 ·
              success
                  in retaining or recruiting, or changes required in, our officers,
                  key
                  employees or directors following our initial business
                  combination;
 
 ·
              officers
                  and directors allocating their time to other businesses and potentially
                  having conflicts of interest with our business or in approving
                  our initial
                  business combination, as a result of which they would then receive
                  expense
                  reimbursements;
 
 ·
              potential
                  ability to obtain additional financing to complete a business
                  combination;
 
 ·
              ability
                  of our officers and directors to generate a number of potential
                  investment
                  opportunities;
 
 ·
              potential
                  change in control if we acquire one or more target businesses for
                  stock;
  ·
              our
                  public securities’ potential liquidity and trading; listing or delisting
                  of our securities from the American Stock Exchange or the ability
                  to have
                  our securities listed on the American Stock Exchange following
                  our initial
                  business combination;
 
 ·
              use
                  of proceeds not held in the trust account or available to us from
                  interest
                  income on the trust account balance;
                  or
 
 ·
              financial
                  performance.
 
 The
        forward-looking statements contained or incorporated by reference in this
        report
        are based on our current expectations and beliefs concerning future developments
        and their potential effects on us. There can be no assurance that future
        developments affecting us will be those that we have anticipated. These
        forward-looking statements involve a number of risks, uncertainties (some
        of
        which are beyond our control) or other assumptions that may cause actual
        results
        or performance to be materially different from those expressed or implied
        by
        these forward-looking statements. These risks and uncertainties include,
        but are
        not limited to, those factors described under the heading “Risk Factors.” Should
        one or more of these risks or uncertainties materialize, or should any of
        our
        assumptions prove incorrect, actual results may vary in material respects
        from
        those projected in these forward-looking statements. We undertake no obligation
        to update or revise any forward-looking statements, whether as a result of
        new
        information, future events or otherwise, except as may be required under
        applicable securities laws.
 
 References
        in this report to “we,” “us” or “our company” refer to SP Acquisition Holdings,
        Inc. References to “public stockholders” refer to purchasers of our securities
        by persons other than our founders in, or subsequent to, our initial public
        offering.
  3
  **PART
        1. FINANCIAL INFORMATION**
 **SP
        ACQUISITION HOLDINGS, INC.**
 (a
        corporation in the development stage)
 **CONDENSED
        BALANCE SHEETS**
  **September 30,**
                **2008**
              
              **December 31,**
                **2007****(Unaudited)****Current
                  Assets**:Cash
                  and cash equivalents
              
              $
              2,559,121
              
              $
              1,317,688Trust
                  account, interest available for working capital and taxes:Cash
                  and cash equivalents held in trust account, interest
                available
                  for working capital and taxes
              
              
              374,401
              
              
              989,183Accrued
                  interest receivable
              
              
              —
              
              
              469,705Total
                  trust account, interest available for working capital and
                  taxes
              
              
              374,401
              
              
              1,458,888Other
                  receivable
              
              
              —
              
              
              26,323Prepaid
                  expenses
              
              
              67,132
              
              
              108,024**Total
                  current assets**
              
              
              3,000,654
              
              
              2,910,923Deferred
                  tax assets - non current
              
              
              —
              
              
              125,406**Total
                  current assets**
              
              
              3,000,654
              
              
              3,036,329**Non
                  current assets**Trust
                  account, restrictedCash
                  and cash equivalents held in trust account
              
              
              426,869,010
              
              
              425,909,120Accrued
                  interest receivable
              
              
              7,725
              
              
              —Trust
                  account, restricted
              
              
              426,876,735
              
              
              425,909,120**Total
                  Assets**
              
              $
              429,877,389
              
              $
              428,945,449**Current
                  Liabilities**:Accounts
                  payable
              
              $
              80,095
              
              $
              449,194Note
                  payable to affiliate
              
              
              —
              
              
              250,000Advances
                  payable to affiliate
              
              
              1,504
              
              
              26,818Interest
                  payable to affiliate
              
              
              —
              
              
              9,435Accrued
                  expenses
              
              
              197,668
              
              
              96,915Income
                  taxes payable
              
              
              324,129
              
              
              808,278Other
                  payables - deferred underwriters’ fee
              
              
              17,315,840
              
              
              17,315,840**Total
                  Current Liabilities**
              
              
              17,919,236
              
              
              18,956,480**Common
                  stock, subject to possible conversion, 12,986,879 shares at conversion
                  value:**
              
              
              127,772,726
              
              
              127,772,726**Deferred
                  interest, attributable to common stock subject to possible
                  conversion**
              
              
              290,284
              
              
              —**Commitments
                  and Contingencies:**
              
              
              —
              
              
              —**Stockholders’
                  Equity**:Preferred
                  stock, $.001 par value; 1,000,000 authorized, none issued
              
              
              —
              
              
              —Common
                  stock, $.001 par value, 200,000,000 shares authorized; 41,125,121
                  shares
                  issued and outstanding (excluding 12,986,879 shares subject to
                  possible
                  conversion)
              
              
              41,125
              
              
              41,125Additional
                  paid-in capital
              
              
              280,418,541
              
              
              280,708,825Retained
                  earnings accumulated during the development stage
              
              
              3,435,477
              
              
              1,466,293**Total
                  Stockholders’ Equity**
              
              
              283,895,143
              
              
              282,216,243**Total
                  Liabilities and Stockholders’ Equity**
              
              $
              429,877,389
              
              $
              428,945,449
 
 The
        accompanying notes are an integral part of these condensed financial
        statements.
  4
 
 **SP
        ACQUISITION HOLDINGS, INC.**
 **(a
        corporation in the development stage)**
  **CONDENSED
        STATEMENTS OF OPERATIONS**
 **(Unaudited)**
  **For the Three**
                **Months**
                **Ended**
                **September 30,**
                **2008**
              
              **For the Three**
                **Months**
                **Ended**
                **September 30,**
                **2007**
              
              **For the Nine**
                **months Ended**
                **September 30,**
                **2008**
              
              **For the**
                **Period from**
                **February 14,**
                **2007**
                **(inception) to**
                **September 30,**
                **2007**
              
              **For the**
                **Period from**
                **February 14,**
                **2007**
                **(inception) to**
                **September 30,**
                **2008**Formation
                  and operating costs
              
              $
              344,539
              
              $
              11,250
              
              $
              843,768
              
              $
              36,818
              
              $
              1,108,141Loss
                  from operations
              
              
              (344,539
              )
              
              (11,250
              )
              
              (843,768
              )
              
              (36,818
              )
              
              (1,108,141
              )Interest
                  income - Trust
              
              
              1,706,294
              
              
              —
              
              
              6,048,123
              
              
              —
              
              
              8,992,516Interest
                  income - other
              
              
              10,577
              
              
              —
              
              
              36,004
              
              
              —
              
              
              42,084Interest
                  expense
              
              
              —
              
              
              (3,125
              )
              
              (6,146
              )
              
              (6,310
              )
              
              (15,581
              )Income
                  (loss) before tax
              
              
              1,372,332
              
              
              (14,375
              )
              
              5,234,213
              
              
              (43,128
              )
              
              7,910,878Provision
                  for income taxes
              
              
              (1,088,526
              )
              
              —
              
              
              (3,265,029
              )
              
              —
              
              
              (4,475,401
              )Net
                  income (loss)
              
              
              283,806
              
              
              (14,375
              )
              
              1,969,184
              
              
              (43,128
              )
              
              3,435,477Deferred
                  interest, attributable to common stock subject to possible
                  conversion
              
              
              (179,249
              )
              
              —
              
              
              (290,284
              )
              
              —
              
              
              (290,284
              )Net
                  income (loss) attributable to common stock
              
              $
              104,557
              
              $
              (14,375
              )
              $
              1,678,900
              
              $
              (43,128
              )
              $
              3,145,193Net
                  income (loss) attributable to common stock per common share, basic
                  and
                  diluted
              
              $
              0.00
              
              $
              (0.00
              )
              $
              0.04
              
              $
              (0.00
              )Weighted
                  average number of common shares outstanding - excluding shares
                  subject to
                  possible conversion, basic and diluted
              
              
              41,125,121
              
              
              10,000,000
              
              
              41,125,121
              
              
              10,000,000
 
 The
        accompanying notes are an integral part of these condensed financial
        statements.
  5
  
 **SP
        ACQUISITION HOLDINGS, INC.**
 **(a
        corporation in the development stage)**
  **CONDENSED
        STATEMENTS OF CASH FLOWS**
  **For the Nine**
                **months ended**
                **September 30,**
                **2008**
              
              **For the Period**
                **from February**
                **14,**
                **2007 (inception)**
                **to**
                **September 30,**
                **2007**
              
              **For the Period**
                **from February**
                **14,**
                **2007 (inception)**
                **to September 30,**
                **2008****(unaudited)**
              
              
              
              **(unaudited)**Cash
                  flows from operating activities:Net
                  income (loss)
              
              $
              1,969,184
              
              $
              (43,128
              )
              $
              3,435,477Adjustments
                  to reconcile net income (loss) to net cash used in operating
                  activities:Deferred
                  tax asset and valuation allowance
              
              
              125,406
              
              
              —
              
              
              —Changes
                  in asset and liability accounts:Accrued
                  interest receivable
              
              
              461,980
              
              
              —
              
              
              (7,725
              )Other
                  receivable
              
              
              26,323
              
              
              —
              
              
              —Prepaid
                  expenses
              
              
              40,892
              
              
              —
              
              
              (67,132
              )Accounts
                  payable
              
              
              (369,099
              )
              
              —
              
              
              80,095Advances
                  payable to affiliate
              
              
              (25,314
              )
              
              26,818
              
              
              1,504Interest
                  payable to affiliate
              
              
              (9,435
              )
              
              6,310
              
              
              —Accrued
                  expenses
              
              
              100,753
              
              
              10,000
              
              
              197,668Income
                  taxes payable
              
              
              (484,149
              )
              
              —
              
              
              324,129Net
                  cash generated in operating activities
              
              
              1,836,541
              
              
              —
              
              
              3,964,016Cash
                  flows from investing activities:Cash
                  and cash equivalents held in trust account, interest available
                  for working
                  capital and taxes
              
              
              614,782
              
              
              —
              
              
              (374,401
              )Trust
                  account restricted
              
              
              (959,890
              )
              
              —
              
              
              (426,869,010
              )Net
                  cash used in investing activities
              
              
              (345,108
              )
              
              —
              
              
              (427,243,411
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of founder’s units
              
              
              —
              
              
              25,000
              
              
              25,000Proceeds
                  from issuance of additional founder’s warrants
              
              
              —
              
              
              —
              
              
              7,000,000Proceeds
                  from note payable to affiliate
              
              
              —
              
              
              250,000
              
              
              250,000Repayment
                  of note payable to affiliate
              
              
              (250,000
              )
              
              —
              
              
              (250,000
              )Proceeds
                  from initial public offering
              
              
              —
              
              
              —
              
              
              432,896,000Payment
                  of offering costs
              
              
              —
              
              
              (88,415
              )
              
              (14,082,484
              )Net
                  cash provided by (used in) financing activities
              
              
              (250,000
              )
              
              186,585
              
              
              425,838,516Net
                  increase in cash
              
              
              1,241,433
              
              
              186,585
              
              
              2,559,121Cash
                  at the beginning of the period
              
              
              1,317,688
              
              
              —
              
              
              —Cash
                  at the end of the period
              
              $
              2,559,121
              
              $
              186,585
              
              $
              2,559,121Supplemental
                  disclosure of non-cash financing activities:Deferred
                  offering costs
              
              $
              —
              
              $
              661,579
              
              $
              —Accrual
                  of deferred underwriters’ discount
              
              $
              —
              
              $
              —
              
              $
              17,315,840Cash
                  payments for federal, state and local income taxes
              
              $
              3,623,000
              
              $
              —
              
              $
              4,200,000
 
 The accompanying notes are an integral part of these condensed financial
        statements.
  6
  **SP
        ACQUISITION HOLDINGS, INC.**
 **(a
        corporation in the development stage)**
 **STATEMENT
        OF STOCKHOLDERS’ EQUITY**
  **Common**
                **Stock Shares**
              
              **Common**
                **Stock**
                **Amount**
              
              **Additional Paid-**
                **in****Capital**
              
              **Retained**
                **Earnings**
                **Accumulated**
                **During the**
                **Development**
                **Stage**
              
              **Total**
                **Stockholders’**
                **Equity**Proceeds from founder’s units issued on March 22, 2007
              
              
              11,500,000
              
              $
              11,500
              
              $
              13,500
              
              $
              -
              
              $
              25,000Proceeds
                  from issuance of 40,000,000 units, net of underwriters’ commissions and
                  offering expenses of $29,030,049 on October 16, 2007
              
              
              40,000,000
              
              
              40,000
              
              
              370,929,951
              
              
              —
              
              
              370,969,951Net
                  proceeds subject to possible conversion of 11,999,999
                  shares
              
              
              (11,999,999
              )
              
              (12,000
              )
              
              (118,187,990
              )
              
              —
              
              
              (118,199,990
              )Proceeds
                  from issuance of 7,000,000 warrants on October 16, 2007
              
              
              —
              
              
              —
              
              
              7,000,000
              
              
              —
              
              
              7,000,000Proceeds
                  from issuance of 3,289,600 units, net of underwriters’ commissions and
                  offering expenses of $2,368,275 on October 31, 2007
              
              
              3,289,600
              
              
              3,290
              
              
              30,524,435
              
              
              —
              
              
              30,527,725Net
                  proceeds subject to possible conversion of 986,880 shares
              
              
              (986,880
              )
              
              (987
              )
              
              (9,571,749
              )
              
              —
              
              
              (9,572,736
              )Common
                  stock forfeited by founders on October 31, 2007
              
              
              (677,600
              )
              
              (678
              )
              
              678
              
              
              —
              
              
              —Net
                  income
              
              
              —
              
              
              —
              
              
              —
              
              
              1,466,293
              
              
              1,466,293Balances
                  at December 31, 2007
              
              
              41,125,121
              
              
              41,125
              
              
              280,708,825
              
              
              1,466,293
              
              
              282,216,243Deferred
                  interest, attributable to common stock subject to possible
                  conversion
                (unaudited)
              
              
              —
              
              
              —
              
              
              (290,284
              )
              
              —
              
              
              (290,284
              )Net
                  income attributable to common stockholders (unaudited)
              
              
              —
              
              
              —
              
              
              —
              
              
              1,969,184
              
              
              1,969,184Balances
                  at September 30, 2008 (unaudited)
              
              
              41,125,121
              
              $
              41,125
              
              $
              280,418,541
              
              $
              3,435,477
              
              $
              283,895,143
 
 The
        accompanying notes are an integral part of these condensed financial
        statements.
  7
  **SP
        ACQUISITION HOLDINGS, INC.**
 **(a
        corporation in the development stage)**
 **NOTES
        TO CONDENSED FINANCIAL STATEMENTS**
 **(Unaudited)**
  **NOTE
        A — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND INTERIM FINANCIAL
        INFORMATION**
  SP
        Acquisition Holdings, Inc. (a corporation in the development stage) (the
        “Company”) was incorporated in Delaware on February 14, 2007. The Company was
        formed to acquire one or more businesses or assets through a merger, capital
        stock exchange, asset acquisition, stock purchase or other similar business
        combination (“Business Combination”). The Company has neither engaged in any
        operations nor generated operating revenues to date. The Company will not
        generate any operating revenues until after the completion of its initial
        business combination. Since the completion of its initial public offering,
        the
        Company generates non-operating income in the form of interest income on
        cash
        and cash equivalents.
  The
        Company is considered to be in the development stage as defined in Statement
        of
        Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting By
        Development Stage Enterprises,” and is subject to the risks associated with
        activities of development stage companies.
  The
        Company was initially formed and capitalized through the sale of founder’s units
        to a related entity, SP Acq LLC (See Note D).
  The
        registration statement for the Company’s initial public offering (“Offering”)
        was declared effective on October 10, 2007. The Company consummated the Offering
        on October 16, 2007 and recorded proceeds of $370,969,951, net of the
        underwriters’ discount and commission of $28,000,000 and offering costs of
        $1,030,049. Simultaneously with the consummation of the Offering, the Company
        consummated the private sale of 7,000,000 warrants to SP Acq LLC at a price
        of
        $1 per warrant (an aggregate purchase price of $7,000,000) (see Note
        D).
  On
        October 31, 2007, the underwriters exercised a portion and terminated the
        balance of their over allotment option granted in connection with the initial
        public offering and consummated the purchase of an additional 3,289,600 units
        at
        a price of $10.00 per unit, for gross proceeds of $32,896,000 or net proceeds
        of
        $30,527,725, net of the underwriters’ discount and commission of $2,302,720 and
        offering costs of $65,555.
  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 Business Combination. Furthermore, there is no assurance that
        the
        Company will be able to successfully effect a Business Combination.
  A
        total
        of $425,909,120 (or approximately $9.84 per share), including $371,000,000
        of
        the net proceeds from the Offering, $7,000,000 from the sale of warrants
        to the
        founding shareholders (see Note D), $30,593,280 of net proceeds of the over
        allotment issuance and $17,315,840 of deferred underwriting discounts and
        commissions, has been placed in a trust account at JPMorgan Chase Bank, N.A.,
        with Continental Stock Transfer & Trust Company as trustee (the “Trust”)
        which is to be invested in United States “government securities” within the
        meaning of Section 2(a)(16) of the Investment Company Act of 1940 having
        a
        maturity of 180 days or less or in money market funds meeting certain conditions
        under Rule 2a-7 promulgated under the Investment Company Act of 1940. Except
        for
        up to $3,500,000 of Trust interest income to be released to the Company to
        fund
        expenses relating to investigating and selecting a target business and other
        working capital requirements, and any additional amounts needed to pay income
        taxes on the Trust earnings, the proceeds held in the Trust will not be released
        from the Trust until the earlier of the completion of the Company’s Business
        Combination or the liquidation of the Company. As of September 30, 2008,
        the
        balance in the Trust account was $427,243,411 (which includes $374,401 of
        funds
        to be transferred to the operating account for the payment of taxes) and
        interest receivable on trust assets was $7,725. The $374,401 has been classified
        on the September 30, 2008 unaudited balance sheet as cash and cash equivalents
        held in trust account, interest available for working capital and taxes.
        Through
        September 30, 2008, the Trust has released $3,500,000 of interest income
        to the
        Company. Through September 30, 2008, the Company had paid a total of $4,200,000
        in taxes, of which $4,150,500 has been reimbursed by the Trust and the balance
        was funded from working capital. The Company intends to seek reimbursement
        of
        the balance of the taxes from the Trust.
  8
  The
        placing of funds in the Trust may not protect those funds from third party
        claims against the Company. Although the Company will seek to have all vendors
        and service providers (which would include any third parties we engaged to
        assist us in any way in connection with our search for a target business)
        and
        prospective target businesses execute agreements with the Company waiving
        any
        right, title, interest or claim of any kind in or to any monies held in the
        Trust, there is no guarantee that they will execute such
        agreements.
  SP
        Acq
        LLC has agreed that it will be liable to the Company if and to the extent
        claims
        by third parties reduce the amounts in the trust account available for payment
        to our stockholders in the event of a liquidation and the claims are made
        by a
        vendor for services rendered, or products sold, to us, or by a prospective
        target business. A “vendor” refers to a third party that enters into an
        agreement with us to provide goods or services to us. However, the agreement
        entered into by SP Acq LLC specifically provides for two exceptions to the
        indemnity given: there will be no liability (1) as to any claimed amounts
        owed
        to a third party who executed a legally enforceable waiver, or (2) as to
        any
        claims under our indemnity of the underwriters of our initial public offering
        against certain liabilities, including liabilities under the Securities Act.
        Furthermore, there could be claims from parties other than vendors, third
        parties with which we entered into a contractual relationship or target
        businesses that would not be covered by the indemnity from SP Acq LLC, such
        as
        shareholders and other claimants who are not parties in contract with us
        who
        file a claim for damages against us.
  The
        Company, after signing a definitive agreement for the acquisition of a target
        business, will submit such transaction for stockholder approval. In the event
        that 30% or more of the outstanding stock (excluding, for this purpose, those
        shares of common stock issued prior to the Offering) vote against the Business
        Combination and exercise their conversion rights described below, the Business
        Combination will not be consummated. Public stockholders voting against a
        Business Combination will be entitled to convert their stock into a pro rata
        share of the Trust (including the additional 4% of the gross proceeds payable
        to
        the underwriters upon the Company’s consummation of a Business Combination),
        including any interest earned (net of taxes payable and the amount distributed
        to the Company to fund its working capital requirements) on their pro rata
        share, if the Business Combination is approved and consummated. However,
        voting
        against the Business Combination alone will not result in election to exercise
        a
        stockholder’s conversion rights. A stockholder must also affirmatively exercise
        such conversion rights at or prior to the time the Business Combination is
        voted
        upon by the stockholders. All of the Company’s stockholders prior to the
        Offering, and all of the officers and directors of the Company have agreed
        to
        vote all of the shares of the Company stock held by them that they acquired
        prior to the consummation of the offering in accordance with the vote of
        the
        majority in interest of all other stockholders of the Company.
  In
        the
        event the Company does not consummate a Business Combination on or before
        October 10, 2009, the proceeds held in the Trust, including the unpaid portion
        of the underwriters’ commission (See Note D) will be distributed to the
        Company’s public stockholders (excluding SP Acq LLC, Steel Partners II, L.P. and
        Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S.
        Nicholas Walker, each a director of the Company), to the extent of their
        pre-Offering stock holdings.
  These
        unaudited interim condensed financial statements 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. The operating results for the interim
        periods presented are not necessarily indicative of the results to be expected
        for any other interim period or for the full year.
  9
  These
        unaudited interim condensed financial statements should be read in conjunction
        with the financial statements and notes thereto included in the Company’s
        December 31, 2007 Annual Report on Form 10-K, filed on March 26, 2008. The
        accounting policies used in preparing these unaudited condensed financial
        statements are consistent with those described in the audited financial
        statements included in the Company’s December 31, 2007 Form 10-K.
  **NOTE
        B — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
  ***1.***  ***Development
        Stage Company:***
  The
        Company complies with the reporting requirements of SFAS No. 7, “Accounting and
        Reporting by Development Stage Enterprises.”
  As
        indicated in the accompanying unaudited interim condensed financial statements,
        the Company has incurred substantial organizational, legal, accounting and
        offering costs in the pursuit of its financing plans and expects to incur
        additional costs in pursuit of its acquisition plans. As of September 30,
        2008,
        the Company had cash on hand of $2,559,121 as well as $427,243,411 of cash
        and
        cash equivalents in the Trust. Under terms of the investment management trust
        agreement, up to $3,500,000 of interest may be released to the Company in
        such
        amounts and such intervals as we request, subject to availability. At September
        30, 2008, $3,500,000 of Trust interest has been released to the Company.
        Management has reviewed its cash requirements as of September 30, 2008 and
        believes that its cash on hand, along with the funds available to it from
        the
        interest income from the Trust is sufficient to cover its expenses for the
        next
        twelve months.
  As
        discussed in Note D, the note with Steel Partners Ltd. had a due date of
        December 31, 2007. Steel Partners Ltd. has confirmed on May 7, 2008 that
        the
        note was not in default and that the payment may be made on or before December
        31, 2008. On June 27, 2008, the note was paid in full.
  There
        is
        no assurance that the Company’s plan to complete a Business Combination will be
        successful.
  ***2.***  ***Cash
        and cash equivalents:***
  The
        Company considers investments with a maturity of three months or less when
        purchased to be cash equivalents.
  ***3.***  ***Common
        Stock and Unit Dividends:***
  Each
        share of common stock has one vote. As discussed in Note F, on August 8,
        2007,
        the Company declared a unit dividend of 0.15 units for each unit outstanding
        and
        on September 4, 2007 declared a unit dividend of one third of a unit for
        each
        unit outstanding. All of the unit holders agreed to transfer their units
        due
        them with respect to these dividends to SP Acq LLC. Such stock dividends
        are
        presented as if they were stock splits and are presented retroactively for
        each
        period presented. All unit amounts outstanding reflect such dividends, except
        for weighted average shares outstanding as discussed in
        Note B-4.
  ***4.***  ***Net
        Income (loss) Per Common Share:***
  The
        Company follows the provisions of Statement of Financial Accounting Standards
        (“SFAS”) No. 128, “Earnings Per Share”. In accordance with SFAS No. 128,
        earnings per common share amounts (“Basic EPS”) is computed by dividing earnings
        by the weighted average number of common shares outstanding for the period.
        Common shares subject to possible conversion of 12,986,879 shares have been
        excluded from the calculation of basic earnings per share since such shares,
        if
        redeemed, only participate in their pro rata shares of the trust earnings.
        Such
        earnings are deducted from earnings available to common stockholders. Earnings
        per common share amounts, assuming dilution (“Diluted EPS”), gives effect to
        dilutive options, warrants and other potential common stock outstanding during
        the period. SFAS No. 128 requires the presentation of both Basic EPS and
        Diluted
        EPS on the face of the statements of operations. The effect of the 61,112,000
        outstanding Warrants issued in connection with the Public Offering and the
        Private Placement described in Note A has not been considered in the diluted
        earnings per share calculation since the exercise of the Warrants are contingent
        upon the occurrence of future events, and therefore, not includable in the
        calculation of diluted earning per share in accordance with SFAS
        128.
  10
  ***5.*** ***Reclassification:***
  The
        Company reclassified certain prior period amounts to conform to the current
        period’s presentation. The Company reclassified amounts held in trust from
        current assets to long-term assets with the exception of amounts held in
        trust
        that are available for current operations of the Company. These classifications
        have no effect on the results reported for the year ended December 31,
        2007.
 ***6.***   
          ***Concentration
          of Credit Risk:***
  Financial
        instruments that potentially subject the Company to concentrations of credit
        risk consist of cash accounts in a financial institution, which at times,
        exceeds the Federal Depository Insurance Corporation and the Securities Investor
        Protection Corporation limits Management believes the risk of loss to be
        minimal. As of September 30, 2008, assets in the Trust account of $427,243,411
        were invested in United States Government Treasury-Bills maturing on October
        23,
        2008.
  ***7.*** ***Fair
          Value of Financial Instruments:***
  The
        fair
        value of the Company’s assets and liabilities, which qualify as financial
        instruments under SFAS No. 107, “Disclosure About Fair Value of Financial
        Instruments,” approximate the carrying amounts represented in the balance sheet
        because of their short term maturities.
 *8.   
              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 and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
  *9.   
              Trust Account-Restricted:*
  The
        Company considers the restricted portion of the funds held in the Trust Account
        to be a non-current asset. A current asset is one that is reasonably expected
        to
        be used to pay current liabilities, such as accounts payable or short-term
        debt
        or to pay current operating expenses, or will be used to acquire other current
        assets. Since the acquisition of a business is principally considered to
        be for
        a long-term purpose, with long-term assets such as property and tangibles
        typically being a major part of the acquired assets, the Company has reported
        the funds anticipated to be used in the acquisition as a non-current
        asset.
  As
        discussed in Note A, the Trust Account is invested in T Bills with a 30 day
        maturity as of September 30, 2008 and December 31, 2007,
        respectively.
  11
  *10.   
              Income tax:*
  The
        Company complies with SFAS 109, “Accounting for Income Taxes,” which requires an
        asset and liability approach to financial accounting and reporting for income
        taxes. Deferred income tax assets and liabilities are computed for differences
        between the financial statement and tax bases of assets and liabilities that
        will result in future taxable or deductible amounts, based on enacted tax
        laws
        and rates applicable to the periods in which the differences are expected
        to
        affect taxable income. Valuation allowances are established, when necessary,
        to
        reduce deferred tax assets to the amount expected to be realized.
  On
        February 14, 2007, the Company adopted the provisions of Financial Accounting
        Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
        prescribes a recognition threshold and measurement process for financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return and also provides guidance on derecognition,
        classification, interest and penalties, accounting in interim period, disclosure
        and transition.
 ***11.***   
          ***Share-based
          compensation:***
  The Company accounts for stock options and warrants using the fair value
        recognition provisions of SFAS No.123 (Revised 2004), “ Share-Based Payment ”,
        (“SFAS 123(R)”). SFAS 123(R) addresses all forms of share based compensation
        awards including shares issued under employment stock purchase plans, stock
        options, restricted stock and stock appreciation rights. Under SFAS 123 (R),
        share based payment awards will
        be
        measured at fair value on the awards grant date, based on estimated number
        of
        awards that are expected to vest and will be reflected as compensation expense
        in the financial statements.
 ** ***12.***   
          ***Recent Accounting
          Pronouncements:***
  In
        September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
        No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a single
        definition of fair value and a framework for measuring fair value, sets out
        a
        fair value hierarchy to be used to classify the source of information used
        in
        fair value measurements, and requires new disclosures of assets and liabilities
        measured at fair value based on their level in the hierarchy. This statement
        applies under other accounting pronouncements that require or permit fair
        value
        measurements. In February 2008, the FASB issued Staff Positions (FSPs)
        No. 157-1 and No. 157-2, which, respectively, remove leasing
        transactions from the scope of SFAS No. 157 and defer its effective date
        for one year relative to certain nonfinancial assets and liabilities. As
        a
        result, the application of the definition of fair value and related disclosures
        of SFAS No. 157 (as impacted by these two FSPs) was effective for the
        Company beginning January 1, 2008 on a prospective basis with respect to
        fair value measurements of (a) nonfinancial assets and liabilities that are
        recognized or disclosed at fair value in the Company’s financial statements on a
        recurring basis (at least annually) and (b) all financial assets and
        liabilities. This adoption did not have a material impact on the Company’s
        results of operations or financial condition. The remaining aspects of SFAS
        No. 157 for which the effective date was deferred under FSP No. 157-2
        was adopted effective January 1, 2008. Areas impacted by the deferral relate
        to
        nonfinancial assets and liabilities that are measured at fair value, but
        are
        recognized or disclosed at fair value on a nonrecurring basis. This deferral
        applies to such items as nonfinancial assets and liabilities initially measured
        at fair value in a business combination (but not measured at fair value in
        subsequent periods) or nonfinancial long-lived asset groups measured at fair
        value for an impairment assessment. The effects of these remaining aspects
        of
        SFAS No. 157 are to be applied to fair value measurements prospectively
        beginning January 1, 2009.
 
 In
        February 2007, the FASB issued FASB Statement No. 159, “The Fair Value
        Option for Financial Assets and Financial Liabilities—Including an Amendment of
        FASB Statement No. 115” (“SFAS No. 159”). SFAS 159 creates a “fair
        value option” under which an entity may elect to record certain financial assets
        or liabilities at fair value upon their initial recognition. Subsequent changes
        in fair value would be recognized in earnings as those changes occur. The
        election of the fair value option would be made on a contract-by-contract
        basis
        and would need to be supported by concurrent documentation or a preexisting
        documented policy. SFAS 159 requires an entity to separately disclose the
        fair
        value of these items on the balance sheet or in the footnotes to the financial
        statements and to provide information that would allow the financial statement
        user to understand the impact on earnings from changes in the fair value.
        The
        Company adopted SFAS 159 effective January 1, 2008 and has elected not to
        record
        any assets for the “fair value option” at this time.
  12
 
 In
        December 2007, the FASB issued Statement No. 141 (revised 2007), “Business
        Combinations,” (“SFAS 141(R)”).  SFAS 141(R) retains the fundamental
        requirements of SFAS 141 that the acquisition method of accounting (which
        SFAS
        141 called the purchase method) be used for all business combinations and
        for an
        acquirer to be identified for each business combination.  SFAS 141(R)
        establishes principles and requirements for recognizing and measuring
        identifiable assets and goodwill acquired, liabilities assumed, and any
        noncontrolling interest in an acquisition, at their fair value as of the
        acquisition date.  SFAS 141(R) also requires an acquirer to recognize
        assets acquired and liabilities assumed arising from contractual contingencies
        as of the acquisition date, measured at their acquisition-date fair
        values.  Additionally, SFAS 141(R) will require that
        acquisition-related costs in a business combination be expensed as incurred,
        except for costs incurred to issue debt and equity securities. This statement
        applies prospectively to business combinations effective with the Company’s
        first fiscal quarter of 2009.  Early adoption is not
        permitted.  SFAS 141(R) would have an impact on accounting for any
        business acquired after the effective date of this pronouncement.
 
 In
        May
        2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
        Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
        accounting principles and the framework for selecting the principles to be
        used
        in the preparation of financial statements of nongovernmental entities that
        are
        presented in conformity with generally accepted accounting principles in
        the
        United States. It is effective 60 days following the SEC’s approval of the
        Public Company Accounting Oversight Board amendments to AU Section 411, “The
        Meaning of Present Fairly in Conformity With Generally Accepted Accounting
        Principles”. The adoption of this statement is not expected to have a material
        effect on the Company’s financial position, statement of operations or cash
        flows.
  Management
        does not believe that any other recently issued, but not yet effective
        accounting standards if currently adopted would have a material effect on
        the
        financial statements.
  **NOTE
        C — INITIAL PUBLIC OFFERING**
  On
        October 16, 2007 the Company sold to the public an aggregate of 40,000,000
        units
        at a price of $10.00. Each unit consists of one share of the Company’s common
        stock, $0.001 par value, and one redeemable common stock purchase warrant.
        On
        October 31, 2007, the underwriters exercised a portion and cancelled the
        balance
        of their over-allotment option granted in connection with the Offering and
        consummated the sale of an additional 3,289,600 units at a price of $10.00
        per
        unit.
  The
        Company has incurred an underwriters’ fee of 7% of the gross offering proceeds
        in connection with the completion of the Offering and the over-allotment
        option.
        Of this fee, $12,000,000 and $986,880 were paid at the closing of the Offering
        and over-allotment option on October 16, 2007 and October 31, 2007,
        respectively, and $17,315,840 is held in the Trust and will be paid to the
        underwriters in connection with the consummation of a Business Combination.
        As
        of September 30, 2008 and December 31, 2007, respectively, the remaining
        underwriting commitment of $17,315,840 is included as Other payables - deferred
        underwriters’ fee.
  **NOTE
        D — RELATED PARTY TRANSACTIONS**
  SP
        Acq
        LLC purchased 11,500,000 of the Company’s founder’s units, each consisting of
        one common share and one warrant to purchase a common share, for a price
        of
        $25,000 in a private placement. The units are identical to those sold in
        the
        Offering, except that SP Acq LLC, Steel Partners II, L.P., and Messrs.
        Bergamo, LaBow, Lorber, Toboroff and Walker agreed to vote their founder’s
        shares in the same manner as a majority of the public stockholders who vote
        at
        the special or annual meeting called for the purpose of approving the Company’s
        Business Combination. As a result, they will not be able to exercise conversion
        rights with respect to the founder’s shares if the Company’s Business
        Combination is approved by a majority of its public stockholders. The founder’s
        shares included therein will not participate with the common stock included
        in
        the units sold in the Offering in any liquidating distribution. The founder’s
        units, including the founder’s shares and initial founder’s warrants may not be
        sold or transferred until at least one year after the completion of a Business
        Combination.
  13
  The
        founder’s units included up to 1,500,000 units that were subject to forfeiture
        by SP Acq LLC to the extent that the underwriters’ over-allotment option was not
        exercised or was exercised in part such that the holders of the Company’s
        founder’s units would collectively own 20% of the Company’s units after
        consummation of the Offering and exercise or expiration of the over-allotment
        option (assuming none of the holders of our founder’s units purchase units in
        the Offering). On October 31, 2007, in connection with the partial exercise
        of
        the over-allotment option, 677,600 founder’s units were forfeited to the Company
        and cancelled.
  The
        Company has issued warrants to purchase 11,500,000 common shares at an exercise
        price of $7.50 per share as part of the founder’s units in connection with its
        initial capitalization on March 22, 2007 (“initial founder’s warrants”). On
        October 31, 2007, in connection with the partial exercise of the underwriters’
over-allotment option, 677,600 initial founder’s warrants were forfeited to the
        Company and cancelled.
  Additionally,
        pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
        LLC has sold a total of 500,000 founder’s units to certain directors of the
        Company.
  SP
        Acq
        LLC, pursuant to an agreement dated March 22, 2007, also sold to its affiliate
        Steel Partners II, L.P. a portion of its founder’s units, with the final number
        of units to be determined based on the number of units sold in the Offering
        once
        the underwriters’ over-allotment option was exercised or expired. As of October
        16, 2007 upon the closing of the Offering, Steel Partners II, L.P. owned
        662,791
        founder’s units. On October 31, 2007, the underwriters exercised a portion of
        their over-allotment option and SP Acq LLC sold an additional 6,197 of its
        founders units to Steel Partners II, L.P., bringing Steel Partners II, L.P.
        ownership to 668,988 units.
  On
        March
        28, 2007 the Company issued a $250,000 unsecured promissory note to Steel
        Partners, Ltd., an affiliate of SP Acq LLC and the Company. This note bears
        interest at a rate of 5% per annum, is unsecured and principal and interest
        payments were due on December 31, 2007. Interest payable of $15,581 has been
        accrued on this note through June 27, 2008, at which time the note and accrued
        interest were repaid in full.
  Advances
        payable of $1,504 and $26,818 at September 30, 2008 and December 31, 2007,
        respectively, relate to certain costs paid by Steel Partners, Ltd. on behalf
        of
        the Company. The Company intends to repay such advances and thus such amounts
        are reflected as a liability to affiliate. None of the officers and directors
        of
        the Company received compensation for their services to the
        Company.
  The
        Company presently occupies office space provided by Steel Partners, Ltd.
        Steel
        Partners, Ltd. has agreed that, until the acquisition of a target business
        by
        the Company, it will make such office space, as well as certain office,
        administrative and secretarial services, available to the Company, as may
        be
        required by the Company from time to time. The Company has agreed to pay
        Steel
        Partners, Ltd. $10,000 per month for such services. Services commenced on
        October 16, 2007. The Company has incurred $90,000 and $25,000 for such services
        through September 30, 2008 and December 31, 2007, respectively of which $30,000
        and $25,000 are included in accrued expenses at September 30, 2008 and December
        31, 2007, respectively.
  SP
        Acq
        LLC purchased, in a private placement on October 16, 2007, 7,000,000 additional
        founder’s warrants at a price of $1 per warrant (an aggregate purchase price of
        $7,000,000) directly from the Company and not as part of the Offering. The
        purchase price of these additional founder’s warrants has been determined by the
        Company to be the fair value of such warrants as of the October 16, 2007
        purchase date. An aggregate of 500,000 additional founder’s warrants were sold
        by SP Acq LLC to certain directors.
  In
        addition, Steel Partners II, L.P., has entered into an agreement with the
        Company requiring it to purchase 3,000,000 units (“co-investment units”) at a
        price of $10 per unit (an aggregate price of $30,000,000) from the Company
        in a
        private placement that will occur immediately prior to the Company’s
        consummation of a Business Combination. These private placement units will
        be
        identical to the units sold in the Offering. It has also agreed that these
        units
        will not be sold, transferred, or assigned until at least one year after
        the
        completion of the Business Combination. In the event that Steel Partners
        II,
        L.P. does not purchase the co-investment units, SP Acq LLC, Steel Partners
        II,
        L.P. and the directors who purchased founder’s units have agreed to surrender
        and forfeit its founder’s units and additional founder’s warrants to the
        Company, provided however that such surrender and forfeiture will not be
        required if SP Acq LLC purchases the co-investment units. In such event,
        Steel
        Partners II, L.P. has agreed to transfer its founder’s units to SP Acq LLC. None
        of the co-investment units have been issued by the Company as of September
        30,
        2008 or December 31, 2007.
  14
  **NOTE
        E — PREFERRED STOCK**
  The
        Company is authorized to issue 1,000,000 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. No shares have been issued as of
        September 30, 2008 or December 31, 2007.
  **NOTE
        F — UNIT DIVIDENDS**
  Effective
        August 8, 2007, the Board of Directors of the Company declared a unit dividend
        to the holders of record. The dividend consisted of 0.15 units for each
        outstanding share of common stock and totaled 1,125,000 units. Effective
        September 4, 2007, the Board of Directors of the Company declared a unit
        dividend to the holders of record. The dividend consisted of one third of
        a unit
        for each outstanding share of common stock and totaled 2,875,000 units. All
        of
        the unit holders agreed to transfer their units due them with respect to
        these
        dividends to SP Acq LLC.
 
 **NOTE
        G — WARRANTS**
  The
        following table presents warrants outstanding:
 
 **September 30, 2008**
              
              **December 31, 2007**Initial
                  Founder’s Warrants
              
              
              10,822,400
              
              
              10,822,400Additional
                  Founder’s Warrants
              
              
              7,000,000
              
              
              7,000,000Public
                  Warrants
              
              
              43,289,600
              
              
              43,289,600Total
              
              
              61,112,000
              
              
              61,112,000
  Initial
        founder’s warrants are not redeemable while held by SP Acq LLC or its permitted
        transferees and the exercisability of initial founder’s warrants are subject to
        certain additional restrictions. Each initial founder’s warrant entitles the
        holder to purchase from the Company one share of common stock at an exercise
        price of $7.50 only in the event that the last sale price of the common stock
        is
        at least $14.25 per share for any 20 trading days within a 30 trading day
        period
        beginning 90 days after a Business Combination. If the Company is unable
        to
        deliver registered shares of common stock to the holder upon exercise of
        the
        warrants during the exercise period, there will be no cash settlement of
        the
        warrants and the warrants will expire worthless.
  Additional
        founder’s warrants entitle the holder to purchase from the Company one share of
        common stock at an exercise price of $7.50 for each warrant commencing on
        the
        completion of a Business Combination with a target business, and expire five
        years from the date of the prospectus. SP Acq LLC has also agreed that the
        warrants purchased by it will not be sold or transferred until after the
        completion of a Business Combination, and will be non-redeemable so long
        as they
        are held by the Company’s founders or their permitted transferees. Additionally,
        pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
        LLC sold 500,000 of such initial founder’s warrants to certain directors on
        October 16, 2007.
  Public
        warrants entitle the holder to purchase from the Company one share of common
        stock for each warrant at an exercise price of $7.50 commencing on the later
        of
        (a) one year from the date of the final prospectus for the Offering or (b)
        the
        completion of a Business Combination with a target business, and will expire
        five years from the date of the prospectus. The warrants are redeemable at
        the
        option of the Company at a price of $0.01 per warrant upon 30 days prior
        notice
        after the warrants become exercisable, only in the event that the last sale
        price of the common stock is at least $14.25 per share for any 20 trading
        days
        within a 30 trading day period ending on the third business day prior to
        the
        date on which notice of redemption is given. If the Company is unable to
        deliver
        registered shares of common stock to the holder upon exercise of the warrants
        during the exercise period, there will be no cash settlement of the warrants
        and
        the warrants will expire worthless.
  15


As
      disclosed in Note D, the initial founder’s warrants and additional founder’s
      warrants have certain restrictions and may be surrendered or forfeited under
      certain circumstances.




Pursuant
      to a registration rights agreement between the Company and SP Acq LLC, Steel
      Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker,
      the
      holders of our founder’s units, founder’s shares and initial founder’s warrants
      and shares issuable upon exercise thereof will be entitled to certain
      registration rights at any time commencing three months prior to the date that
      they are no longer subject to transfer restrictions.




**NOTE
      H — TAXES ON INCOME**




Deferred
      tax assets reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial statement purposes
      and
      the amounts used for income tax purposes. During the nine-months ended September
      30, 2008, the Company recorded a full valuation allowance for its deferred
      tax
      assets, as the Company determined that it no longer met the more likely than
      not
      realization criteria of FAS 109.





The
      Company has paid a total of $4,200,000 since inception in estimated tax payments
      for federal, New York State and City income taxes.





The
      difference between the provision for income taxes and the amounts computed
      by
      applying the federal statutory income tax rate to the income before tax is
      due
      to state and local taxes, including New York capital based taxes, and the
      increase in the deferred tax valuation allowance.


16


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




**Forward
      Looking Statements**




All
      statements other than statements of historical fact included in this 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 operation, are “forward looking statements” within the meaning of the
      Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
      Act of 1933, as amended (the “Security Act”) and Section 21E of the Securities
      Exchange Act of 1934. When used in this Form 10-Q, words such as "anticipate,"
      "believe," "plan," "expect," "future," "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. 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**




We
      are a
      blank check company organized under the laws of the State of Delaware on
      February 14, 2007. We were formed for the purpose of acquiring, through a
      merger, capital stock exchange, asset acquisition or other similar business
      combination, one or more businesses or assets. We consummated our initial public
      offering on October 16, 2007. We are currently in the process of evaluating
      and
      identifying targets for a business combination. We intend to utilize cash from
      our initial public offering, our capital stock, debt or a combination of cash,
      capital stock and debt, in effecting a business combination. The issuance of
      additional shares of our capital stock:





·
            may
                significantly reduce the equity interest of our
                stockholders;





·
            will
                likely cause a change in control if a substantial number of our shares
                of
                common stock are issued, which may affect, among other things, our
                ability
                to use our net operating loss carry forwards, if any, and may also
                result
                in the resignation or removal of one or more of our current officers
                and
                directors; and





·
            may
                adversely affect prevailing market prices for our common
                stock.Similarly,
                if we issue debt securities, it could result
                in:




·
            default
                and foreclosure on our assets if our operating revenues after a business
                combination were insufficient to pay our debt
                obligations;





·
            acceleration
                of our obligations to repay the indebtedness even if we have made
                all
                principal and interest payments when due if the debt security contained
                covenants that require the maintenance of certain financial ratios
                or
                reserves and any such covenant were breached without a waiver or
                renegotiation of that covenant; and





·
            our
                immediate payment of all principal and accrued interest, if any,
                if the
                debt security were payable on demand; and our inability to obtain
                additional financing, if necessary, if the debt security contained
                covenants restricting our ability to do
                so.




17




**Results
      of Operations and Known Trends Or Future Events**





We
      have
      neither engaged in any operations nor generated any revenues to date. We will
      not generate any operating revenues until after completion of our initial
      business combination, at the earliest. We will continue to generate
      non-operating income in the form of interest income on cash and cash
      equivalents. Net income for the three months ended September 30, 2008 was
      $283,806, which consisted of $1,716,871 in interest income, partially offset
      by
      $344,539 in operating expenses, and $1,088,526 in taxes on income and
      capital based taxes .
      Net
      loss for the three months ended September 30, 2007 was $14,375, which consisted
      of formation and related costs. Net income for the nine months ended September
      30, 2008 was $1,969,184, which consisted of $6,084,127 in interest income,
      partially offset by $843,768 in operating expenses, $6,146 in interest expense
      and $ 3,265,029 in taxes on income and capital based taxes. Net loss for the
      period from February 14, 2007 (inception) to September 30, 2007 was $43,128,
      which consisted of formation and related costs. Net income for the period from
      February 14, 2007 (inception) through September 30, 2008 was $3,435,477, which
      consisted of $9,034,600 in interest income partially offset by $1,108,141 in
      formation and operating expenses, $15,581 in interest expense and $4,475,401
      in
      taxes on income and capital based taxes. Through September 30, 2008, we did
      not
      engage in any significant operations. Our entire activity from inception through
      September 30, 2008 was to prepare for our initial public offering and begin
      the
      identification of and negotiations with a suitable business combination
      candidate.





The
      trustee of the trust account will pay any taxes resulting from interest accrued
      on the funds held in the trust account out of the funds held in the trust
      account. In addition, we will incur expenses as a result of being a public
      company (for legal, financial reporting, accounting and auditing compliance),
      as
      well as for due diligence expenses.





**Off-Balance
      Sheet Arrangements**





We
      have
      never entered into any off-balance sheet financing arrangements and have never
      established any special purpose entities. We have not guaranteed any debt or
      commitments of other entities or entered into any options on non-financial
      assets.





**Contractual
      Obligations**





We
      do not
      have any long term debt, capital lease obligations, operating lease obligations,
      purchase obligations or other long term liabilities.





**Liquidity
      and Capital Resources**





The
      net
      proceeds from (i) the sale of the units in our initial public offering
      (including the underwriters’ over-allotment option), after deducting offering
      expenses of approximately $1,095,604 and underwriting discounts and commissions
      of approximately $30,302,720, together (ii) with $7,000,000 from SP Acq LLC’s
      investment in the additional founder’s warrants, were approximately
      $408,497,676. We expect that most of the proceeds held in the trust account
      will
      be used as consideration to pay the sellers of a target business or businesses
      with which we ultimately complete our initial business combination. As of
      September 30, 2008, assets in the Trust account of $427,243,411 were invested
      in
      United States Government Treasury-Bills which matured on October 23, 2008.
      Upon
      maturity of the Treasury-Bills on October 23, 2008, the Company reinvested
      the
      assets in the Trust account in United Stated Government Treasury-Bills with
      a
      cost of $427,274,345, maturing on December 26, 2008 and bearing interest at
      an
      per annum rate of 0.385%. We expect to use substantially all of the net proceeds
      of our initial public offering not in the trust account to pay expenses in
      locating and acquiring a target business, including identifying and evaluating
      prospective acquisition candidates, selecting the target business, and
      structuring, negotiating and consummating our initial business combination.
      To
      the extent that our capital stock or debt financing is used in whole or in
      part
      as consideration to effect our initial business combination, any proceeds held
      in the trust account as well as any other net proceeds not expended will be
      used
      to finance the operations of the target business.





We
      do not
      believe we will need additional financing in order to meet the expenditures
      required for operating our business prior to our initial business combination.
      However, we will rely on interest earned of up to $3,500,000 on the trust
      account to fund such expenditures and, to the extent that the interest earned
      is
      below our expectation, we may have insufficient funds available to operate
      our
      business prior to our initial business combination. Moreover, in addition to
      the
      co-investment we may need to obtain additional financing to consummate our
      initial business combination. We may also need additional financing because
      we
      may become obligated to convert into cash a significant number of shares of
      public stockholders voting against our initial business combination, in which
      case we may issue additional securities or incur debt in connection with such
      business combination. Following our initial business combination, if cash on
      hand is insufficient, we may need to obtain additional financing in order to
      meet our obligations.


18


**Critical
      Accounting Policies**





The
      Company’s significant accounting policies are more fully described in Note B to
      the condensed financial statements. However, certain accounting policies are
      particularly important to the portrayal of financial position and results of
      operations and require the application of significant judgments by management.
      As a result, the unaudited interim condensed financial statements are subject
      to
      an inherent degree of uncertainty. In applying those policies, management used
      its judgment to determine the appropriate assumptions to be used in
      determination of certain estimates. During the nine months ended September
      30,
      2008, the Company recorded a full valuation allowance for its deferred tax
      assets, as the Company determined that it no longer met the more likely than
      not
      realization criteria of FAS 109. These estimates are based on the Company’s
      historical experience, terms of existing contracts, observance of trends in
      the
      industry and information available from outside sources, as
      appropriate.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




**Interest
      Rate Sensitivity**




As
      of
      September 30, 2008, our efforts were limited to organizational activities and
      activities relating to our initial public offering. Since our initial public
      offering, we have been identifying possible acquisition candidates. We have
      neither engaged in any operations nor generated any revenues other than interest
      income.





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. $418,909,120 of the net Offering proceeds, including
      $17,315,840 of the proceeds attributable to the underwriters’ deferred fees from
      the Offering, as well as $7,000,000 of the proceeds of the private placement
      of
      7,000,000 additional founders warrants were placed in a trust account at
      JPMorgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust
      Company, acting as trustee. As of September 30, 2008, the balance in the trust
      account was $427,243,411 (which includes $374,401 of funds to be transferred
      to
      the operating account for the payment of taxes) and interest receivable on
      the
      trust account of $7,725. The proceeds held in trust have only been invested
      in
      U.S. Government securities having a maturity of 90 days or less or in money
      market funds which invest principally in either short term securities issued
      or
      guaranteed by the United States or having the highest rating from recognized
      credit rating agency or tax exempt municipal bonds issued by government entities
      located within the United States or otherwise meeting the conditions under
      Rule
      2a-7 under the Investment Company Act. Thus, we are currently subject to market
      risk primarily through the effect of changes in interest rates on short-term
      government securities and other highly rated money-market instruments. As of
      September 30, 2008, assets in the Trust account of $427,243,411 were invested
      in
      United States Government Treasury-Bills which matured on October 23, 2008.
      Upon
      maturity of the Treasury-Bills on October 23, 2008, the Company reinvested
      the
      assets in the Trust account in United Stated Government Treasury-Bills with
      a
      cost of $427,274,345, maturing on December 26, 2008 and bearing interest at
      an
      per annum rate of 0.385%. A one percentage point change in the interest rate
      received on our cash, short-term government securities and money-market
      instruments of $427,243,411 at September 30, 2008 would result in an
      increase or decrease of up to $1,068,000 in interest income over the following
      90-day period. Management cannot provide any assurance about the actual effect
      of changes in interest rates on net interest income.  The estimate
      provided does not include the effects of possible strategic changes in the
      balances of various assets and liabilities throughout 2008 or additional actions
      the Company could undertake in response to changes in interest
      rates.


19


**ITEM
      4. CONTROLS AND PROCEDURES**




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
      recorded, processed, summarized and reported, within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed in company reports filed or
      submitted under the Exchange Act is accumulated and communicated to management,
      including our Chief Executive Officer and Chief Operating Officer and
      Secretary.




As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive
      Officer and Chief Operating Officer and Secretary carried out an evaluation
      of
      the effectiveness of the design and operation of our disclosure controls as
      of
      September 30, 2008. Based on their evaluation, they concluded that our
      disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15
      (e) under the Exchange Act) were effective.





Our
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, our Chief Executive Officer and our Chief Operating Officer
      and
      Secretary and effected by our board of directors, management and other
      personnel, to provide reasonable assurance regarding the reliability of our
      financial reporting and the preparation of our financial statements for external
      purposes in accordance with generally accepted accounting principles (United
      States). Internal control over financial reporting includes policies and
      procedures that pertain to the maintenance of records that in reasonable detail
      accurately and fairly reflect the transactions and dispositions of our assets,
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of our financial statements in accordance with generally
      accepted accounting principles (United States), and that our receipts and
      expenditures are being made only in accordance with the authorization of our
      board of directors and management, and provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use of disposition
      of our assets that could have a material effect on our financial
      statements.





During
      the most recently completed fiscal quarter, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.




**PART
      II. OTHER INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**




None.




**ITEM
      1A. RISK FACTORS**





Factors
      that could cause our actual results to differ materially form those in this
      report are any of the risks described in our December 31, 2007 Form 10-K filed
      with the SEC. Any of these factors could result in significant or material
      adverse effect on our results of operations or financial condition. Additional
      risk factors not presently known to us or that we currently deem immaterial
      may
      also impair our business or results of operations.





As
      of
      November 5, 2008 there have been no material changes to the risk factors
      disclosed in our December 31, 2007 Form 10-K, 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.


20


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





None.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.




**ITEM**  **5.
      OTHER INFORMATION**





None.




**ITEM**  **6.**  **EXHIBITS**





An
      index
      of exhibits filed as part of this Report is on page 23.


21


**SIGNATURE**





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





SP
                Acquisition Holdings, Inc.By:
            /s/ Warren
                G. LichtensteinWarren
                G. Lichtenstein
              Chairman, President and Chief Executive Officer
              (Principal
                Executive Officer)SP
                Acquisition Holdings, Inc.By:
            /s/ Jack
                L. HowardJack
                L. Howard
              Chief
                Operating Officer and Secretary
              (Principal Financial Officer and Principal Accounting Officer)Dated:
                November 6, 2008


22


**EXHIBIT
      INDEX**




Exhibit
              Number
            
            Description31.1
            
            Certification
                of Principal Executive Officer, pursuant to Rule 13a -14 and 15d-14
                of the
                Securities Exchange Act of 1934.31.2
            
            Certification
                of Principal Financial and Principal Accounting Officer, pursuant
                to Rule
                13a-14 and 15d-14 of the Securities Exchange Act of
                193432.1
            
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                200232.2
            
            Certification
                Principal Financial and Principal Accounting Officer pursuant to
                18 U.S.C.
                Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                Act
                of 2002




23