UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-K





ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
year ended December 31, 2008




Commission
File Number 001-33711





SP Acquisition Holdings,
Inc.


(Exact
name of Registrant as specified in its charter)





Delaware
                (State
      or other jurisdiction of incorporation)
              
              20-8523583
                (IRS
      Employer Identification
Number)





590
Madison Avenue


32nd Floor


New
York, New York 10022


(Address
of principal executive offices)




(212)
520-2300


(Registrant’s
telephone number, including area code)









Securities
registered pursuant to Section 12(b) of the Act:





Title of each class
                
                Name
      of each exchangeon which registeredUnits,
      each consisting of one share of Common Stock, $0.001 par value, and one
      Warrant
                
                NYSE
      Alternext USCommon
      Stock included in the Units
                
                NYSE
      Alternext USWarrants
      included in the Units
                
                NYSE
      Alternext US





Securities
registered pursuant to Section 12(g) of the Act:





None


(Title of
class)









Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes  ̈ No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  ̈ No x





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  ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K.  x




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. (Check one):





 ̈ Large accelerated
      filer
            x Accelerated
      filer ̈
       Non-accelerated filer
             ̈ Smaller reporting
      company




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





The
aggregate market value of the voting common stock held by non-affiliates of the
registrant computed by reference to the closing sales price for the registrant’s
common stock as of June 30, 2008, the last day of the registrant’s most recently
completed second quarter, as reported on the NYSE Alternext US was approximately
$402,593,280.





In
determining the market value of the voting stock held by any non-affiliates,
shares of common stock of the registrant beneficially owned by directors,
officers and holders of more than 10% of the outstanding shares of common stock
of the registrant have been excluded. This determination of affiliate status is
not necessarily a conclusive determination for other purposes.





The
number of shares of common stock outstanding as of March 9, 2009 was
54,112,000.












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 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,” “intend,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “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 business 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
      inability 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 NYSE Alternext US or the ability to have our
      securities listed on the NYSE Alternext US following our initial business
      combination;
  ·
              use of
      proceeds not 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.




Except
as otherwise indicated herein, all unit amounts reflect dividends paid by the
company of (i) 0.15 units for each unit outstanding on August 8, 2007 and (ii)
one third of a unit for each unit outstanding on September 4,
2007.







Table of
Contents




PageITEM
      1.
                        Business
                        1ITEM
      1A.
                        Risk
      Factors
                        19ITEM
      1B.
                        Unresolved
      Staff Comments
                        37ITEM
      2.
                        Properties
                        37ITEM
      3.
                        Legal
      Proceedings
                        37ITEM
      4.
                        Submission
      of Matters to a Vote of Security Holders
                        37ITEM
      5.
                        Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                        38ITEM
      6.
                        Selected
      Financial Data
                        40ITEM
      7.
                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                        40ITEM
      7A.
                        Quantitative
      and Qualitative Disclosures About Market Risk
                        42ITEM
      8.
                        Financial
      Statements and Supplementary Data
                        43ITEM
      9.
                        Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                        58ITEM
      9A.
                        Controls
      and Procedures
                        58ITEM
      9B.
                        Other
      Information
                        60ITEM
      10.
                        Directors,
      Executive Officers and Corporate Governance
                        60ITEM
      11.
                        Executive
      Compensation
                        67ITEM
      12.
                        Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                        68ITEM
      13.
                        Certain
      Relationships, Related Transactions and Director
    Independence
                        72ITEM
      14.
                        Principal
      Accounting Fees and Services
                        75ITEM
      15.
                        Exhibits
      and Financial Statement Schedules
                        76Exhibit
      IndexSignaturesCertifications




i


PART
I




ITEM 1.   Business




General




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, which we refer to as our “initial
business combination.” Our efforts in identifying a prospective target business
are not limited to a particular industry.





A
registration statement for our initial public offering was declared effective on
October 10, 2007. On October 16, 2007, we sold 40,000,000 units in our initial
public offering, and on October 31, 2007 the underwriters for our initial public
offering purchased an additional 3,289,600 units pursuant to an over-allotment
option. Each unit consists of one share of common stock and one warrant. Each
warrant entitles the holder to purchase one share of our common stock at a price
of $7.50 commencing on consummation of a business combination, provided that
there is an effective registration statement covering the shares of common stock
underlying the warrants in effect. The warrants expire on October 10, 2012,
unless earlier redeemed.




On March
22, 2007, SP Acq LLC, which is controlled by Warren G. Lichtenstein, our
Chairman, President, and Chief Executive Officer, purchased 11,500,000 of our
units, which we refer to as founder’s units (and the shares of common stock and
warrants comprising the founder’s units are referred to founder’s shares and
initial founder’s warrants, respectively). SP Acq LLC subsequently purchased on
October 16, 2007 an aggregate of 7,000,000 warrants, which we refer to as
additional founder’s warrants, at a price of $1.00 per warrant ($7.0 million in
the aggregate) in a private placement that occurred immediately prior to our
initial public offering. In addition, Steel Partners II, L.P., an affiliate of
SP Acq LLC, has entered into an agreement with us requiring it to purchase
3,000,000 of our units, which we refer to as the co-investment units, from us at
a price of $10.00 per unit ($30.0 million in the aggregate) in a private
placement that will occur immediately prior to the consummation of our initial
business combination.




We
received gross proceeds of approximately $439,896,000 from our initial public
offering and sale of the additional founder’s warrants. Of those gross proceeds,
approximately $17,315,840 is attributable to the portion of the underwriters’
discount, which has been deferred until the consummation of our initial business
combination. Net proceeds of approximately $425,909,120 were deposited into a
trust account and will be part of the funds distributed to our public
stockholders in the event we are unable to complete a business combination.
Unless and until a business combination is consummated, the proceeds held in the
trust account will not be available to us. For a more complete discussion of our
financial information, see the section appearing elsewhere in our Annual Report
on Form 10-K entitled “Selected Financial Data.”




Our
efforts in identifying a prospective acquisition target are not limited to a
particular industry. Instead, we focus on industries and target businesses in
the United States, Europe, and Asia, that may provide significant opportunity
for value creation. Our investment philosophy is based on the strategies
employed by Steel Partners, which reflect a value-orientation and investment
discipline that are the result of having investments in public and private debt
and equity, as well as distressed debt over 18 years in a diverse range of
industries. This includes investments where Steel Partners has exercised control
over the portfolio company. Steel Partners focuses on maintaining discipline
with respect to purchase price, analyzing the business based on long-term value
creation that can be achieved, extensive business and financial analysis and
utilizing numerous resources to maximize value post-acquisition.







Similar
to those strategies employed by Steel Partners, we have identified certain
criteria and guidelines that we believe are important in evaluating prospective
target businesses. However, we may decide to enter into an initial business
combination with a target business or businesses that do not meet all of these
criteria and guidelines.




We intend
to benefit from the investment criteria employed by Steel Partners. We seek to
acquire established businesses that are easy to understand. Additionally, we
target businesses that we believe are fundamentally sound but potentially in
need of certain financial, operational, strategic or managerial redirection to
maximize value. We do not intend to acquire start-up companies, companies with
speculative business plans or companies that are excessively
leveraged.




Competitive
Strengths




We
believe that we have the following competitive strengths:




Experienced
management.




Warren G. Lichtenstein , Co-Founder of Steel Partners II,
L.P.




·
              Chairman, President and Chief
      Executive Officer of SP Acquisition Holdings,
  Inc.
 
 ·
              More than 20 years of experience
      investing globally in public and private companies, including debt and
      equity securities.
 
 ·
              Co-Founded and manages Steel
      Partners II, L.P., Steel Partners Japan Strategic Fund (Offshore), L.P.,
      Steel Partners China Access I
L.P.
 
 ·
              Managing Member of Steel Partners
      II GP LLC, general partner of Steel Partners II,
    L.P.
 
 ·
              Chief Executive Officer of Steel
      Partners LLC, a global investment management
  firm.
 
 ·
              Extensive global experience
      serving on and leading boards of directors, including serving in Chairman
      and Chief Executive Officer positions of portfolio
      companies.




Jack L. Howard , Co-Founder of Steel Partners II,
L.P.


·
              Chief Operating Officer and
      Secretary of SP Acquisition Holdings,
  Inc.
 
 ·
              More than 23 years of experience
      in sourcing, evaluating, structuring and managing
      investments.
 
 ·
              Co-Founded Steel Partners II,
      L.P.
 
 ·
              President of Steel Partners LLC,
      a global investment management
firm.
 
 ·
              Extensive experience serving on
      and leading boards of directors, including serving in Chairman and Chief
      Executive Officer positions of portfolio
  companies.




2


James R. Henderson , Managing Director and operating
partner of Steel Partners LLC


·
              Executive Vice President of SP
      Acquisition Holdings, Inc.
 
 ·
              More than 27 years of experience
      as an operating executive in various companies, including serving in
      senior executive capacities.
 
 ·
              Extensive experience serving on
      and leading boards of directors, including serving in Chairman and Chief
      Executive Officer positions of portfolio
  companies.




Access
to Steel Partners investment platform.




The
senior investment professionals of Steel Partners have extensive experience
investing in public and private equity and debt, including distressed debt, with
various degrees of control. We will have access to the broad capabilities of
Steel Partners and its professionals based in New York, Los Angeles and
London.




Deal
sourcing network.




We
believe we are well positioned to source a business combination as a result of
our access to Steel Partners’ extensive infrastructure, which includes its
offices located in New York, Los Angeles and London and 14 investment
professionals. We intend to capitalize on the diverse deal-sourcing
opportunities that we believe Steel Partners brings to us as a result of its
investment experience, track record and extensive network of relationships
including private equity sponsors, management teams of public and private
companies, investment bankers, commercial bankers, brokers, attorneys,
accountants and investors throughout the United States, Asia and
Europe.




Disciplined
investment process.




In
identifying potential target businesses, we apply Steel Partners’ investment
process. This includes analysis of, among other things: (i) the acquisition
multiple; (ii) historic and projected financials; (iii) the key drivers of
revenues and the balance between unit volume and pricing factors; (iv) key cost
components, including raw materials, labor, overhead, insurance, etc.; (v)
capital expenditures; (vi) working capital needs; (vii) micro and macroeconomic
trends that impact the business and the industry; (viii) the business’s products
and its sales channels; (ix) qualitative analysis of company management; (x) the
competitive dynamics of the industry and the target company’s position; and (xi)
input from third-party consultants.




Experience
with middle market companies.




We expect
to benefit from Steel Partners’ experience, which has historically been focused
on investments in middle market companies. We use Steel Partners’ network of
relationships including private equity sponsors, management teams of public and
private companies, investment bankers, commercial bankers, brokers, attorneys,
accountants and investors throughout the United States, Asia and Europe to
locate potential target businesses. Through Steel Partners’ experience of
investing in numerous companies, most of which are middle-market, it has
developed an extensive network of relationships and possesses valuable insights
into industry trends.




3


Access
to Steel Partners’ infrastructure.




Steel
Partners’ offices in New York, Los Angeles and London have more than 25
employees, including 14 investment and operating professionals, who are
available to support our operations. Steel Partners’ finance and administration
function which addresses legal, compliance, and operational matters will also be
available to us.




Steel
Partners Senior Management




In
addition to Messrs. Lichtenstein, Howard and Henderson, the following members of
Steel Partners senior management are involved in helping us to source, analyze
and execute a business combination. We have no agreements or understandings
between us and Steel Partners regarding the use of Steel Partners employees (and
we incur no additional costs with respect to the use of such employees). None of
such employees is required to devote a specific amount of time to efforts on our
behalf.




Sanford Antignas, Managing Director, Chief Operating
Officer, Secretary, and investment professional of Steel Partners LLC —
Mr. Antignas has been associated with Steel Partners LLC, a global management
firm, and its affiliates since November 2006. He has served as director of
Barbican Group Holdings, a property and casualty insurance and reinsurance
company, since November 2007. From 1996 to February 2005 he served as a senior
investment professional of Bassini, Playfair and Associates LLC, an emerging
markets private equity firm, in various capacities where his last position was
Managing Director. While there he served as its Chief Financial Officer from
1996 to 2003 and as a director of eleven of its portfolio companies in various
countries, and as the interim Chief Executive Officer of one such company. From
1994 to 1996, Mr. Antignas was Director of International Investments at American
International Group Inc. and served as a Managing Director of its AIG Capital
Partners subsidiary. From 1987 to 1993, he served in various capacities with GE
Capital Corporation in its Corporate Finance Group where his last position was
Vice President. From 1983 to 1985, Mr. Antignas was with the Middle/Emerging
Markets Business Services practice at Deloitte Haskins and Sells, a public
accounting firm, and then served on the staff of its national office until 1987.
Mr. Antignas graduated from the University of California, Berkeley with a B.S.
in Business Administration. He earned an M.B.A. from New York University. Mr.
Antignas is also a degree candidate for a Master of International Affairs from
Columbia University. He is a Certified Public Accountant.




Glen M. Kassan, Managing Director and operating
partner of Steel Partners LLC — Mr. Kassan has been associated with Steel
Partners LLC, a global management firm, and its affiliates since August 1999. He
has served as a director of SL Industries, Inc., a designer and manufacturer of
power electronics, power motion equipment, power protection equipment, and
teleprotection and specialized communication equipment, since January 2002, its
Chairman since May 2008, its Vice Chairman from August 2005 to May 2008 and its
President from February 2002 to August 2005.  Mr. Kassan has served as
a director of WHX Corporation, a holding company, since July 2005 and as its
Vice Chairman, Chief Executive Officer and Secretary since October 2005. He
served as the Vice President, Chief Financial Officer and Secretary of a
predecessor entity of WebFinancial L.P., a diversified holding company with
interests in a variety of businesses, from June 2000 until April 2007. Mr.
Kassan has previously served as a director of American Magnetics Corporation,
Damon Corporation, Puroflow Incorporated, Tandycrafts Inc., United Industrial
Corporation and U.S. Diagnostic Labs, Inc. Mr. Kassan graduated from
Northeastern University with a B.S. in Accounting. He earned a J.D. from
Brooklyn Law School and an LLM in Taxation from New York University School of
Law. Mr. Kassan is a Certified Public Accountant.




John McNamara, Managing Director-Head Capital
Markets and investment professional of Steel Partners LLC — Mr. McNamara
has been associated with Steel Partners LLC a global management firm, and its
affiliates since May 2006. Mr. McNamara currently serves as a director of the
Fox and Hound Restaurant Group, an entertainment restaurant group, since April
2008, SL Industries, Inc., a designer and manufacturer of power electronics,
power motion equipment, power protection equipment, and teleprotection and
specialized communication equipment, since May 2008 and WHX Corporation, a
holding company, since February 2008. He served as a director and the CEO of a
predecessor entity of WebFinancial L.P., a diversified holding company with
interests in a variety of businesses from June 2008 to December 2008. From 1995
until April 2006 Mr. McNamara served in various capacities at Imperial Capital,
an investment banking firm, where his last position was Managing Director and
Partner. As a member of Imperial Capital’s Corporate Finance Group, he provided
advisory services for middle market companies in the areas of mergers and
acquisitions, restructurings and financings. From 1988 to 1995, Mr. McNamara
held various positions with Bay Banks, Inc., a commercial bank, where he served
in lending and work-out capacities. Mr. McNamara graduated from Ithaca College
with a B.S. in Economics.




4


John J. Quicke, Managing Director and operating
partner of Steel Partners LLC — Mr. Quicke has been associated with Steel
Partners LLC, a global management firm, and its affiliates since September 2005.
Mr. Quicke has served as a director of Adaptec, Inc., a storage solutions
provider, since December 2007. He has served as a director of Collins
Industries, Inc., a subsidiary of BNS Holding, Inc., a manufacturer of school
buses, ambulances and terminal trucks, since October 2006.  He has
served as Chairman of the Board of NOVT Corporation, a former developer of
advanced medical treatments for coronary and vascular disease, from January 2008
and served as President and Chief Executive Officer of NOVT from April 2006 to
November 2006. He has served as a director of WHX Corporation, a holding
company, since July 2005 and as a Vice President since October
2005.  He served as a director of Angelica Corporation, a provider of
health care linen management services, from August 2006 to July 2008. Mr. Quicke
served as a director of Layne Christensen Company, a provider of products and
services for the water, mineral construction and energy markets, from October
2006 to June 2007. Mr. Quicke served as a director, President and Chief
Operating Officer of Sequa Corporation, a diversified industrial company, from
1993 to March 2004, and Vice Chairman and Executive Officer of Sequa from March
2004 to March 2005. As Vice Chairman and Executive Officer of Sequa, Mr. Quicke
was responsible for the Automotive, Metal Coating, Specialty Chemicals,
Industrial Machinery and Other Product operating segments of the company. From
March 2005 to August 2005, Mr. Quicke occasionally served as a consultant to
Steel Partners II, L.P. and explored other business opportunities. Mr. Quicke
graduated from the University of Missouri with a B.S. in Business
Administration. He is a Certified Public Accountant and a member of the
AICPA.




Joshua Schechter, Managing Director and investment
professional of Steel Partners LLC — Mr. Schechter has been associated
with Steel Partners LLC, a global management firm, and its affiliates since June
2001. Mr. Schechter has been a director of Aderans Holdings Ltd., a manufacturer
of hair care products, since August 2008. He served as a director of Jackson
Products, Inc., a safety products manufacturer, from February 2004 to December
2007 and WHX Corporation, a holding company, from July 2005 to February
2008.  Mr. Schechter from 1998 to 2001 held various positions in the
Corporate Finance Group of Imperial Capital LLC, an investment banking firm.
From 1997 to 1998, he was an Analyst with Leifer Capital Inc., an investment
bank. From 1996 to 1997, Mr. Schechter was a Tax Consultant at Ernst & Young
LLP. Mr. Schechter previously served as a director of Puroflow Incorporated. Mr.
Schechter graduated from the University of Texas, Austin with both a B.B.A. in
Accounting and a Master of Professional Accounting.





Luke Wiseman, Managing Director and investment
professional of Steel Partners (UK) Limited — Mr. Wiseman has been
associated with Steel Partners (UK) Limited, the London based research
subsidiary of an affiliate of Steel Partners LLC, since April 2005. He has
certain responsibilities related to the firm’s European investments. Since
September 2006 he has served as a non-executive director of API plc, a packaging
materials manufacturer.  Mr. Wiseman has served as director of
Barbican Group Holdings, a property and casualty insurance and reinsurance
company, since November 2007. From October 2000 to April 2005, Mr. Wiseman was
an Analyst and Portfolio Manager at Carlson Capital, a Hedge Fund, where he
managed an equity long/short portfolio of European consumer and industrial
stocks. From 1998 to 2000, he was an Analyst with Donaldson Lufkin and Jenrette
in London in equity research covering European retail stocks. From 1995 to 1998,
Mr. Wiseman served in the European equity sales group of UBS Securities in
London. From 1991 to 1994, he was with Tayrich Ltd., a privately owned
commercial carpet distributor in the United Kingdom, where he served as a Board
Member and was responsible for developing sales in continental Europe. From 1989
to 1991, he was with the Institutional Sales, European Markets area, of Morgan
Stanley. From 1986 to 1988, he was with Hoare Govette, a brokerage firm in
London where he worked in institutional equity sales. From December 2005 to
September 2006 he was a non-executive director of Nettec plc.




5


Effecting
a Business Combination




General




We are
not presently engaged in, and we will not engage in, any operations for an
indefinite period of time. While substantially all of the net proceeds of our
initial public offering are allocated to completing an initial business
combination, the proceeds are not otherwise designated for more specific
purposes. Accordingly, there is no current basis for shareholders to evaluate
the specific merits or risks of one or more target businesses at the time of
your investment. If we engage in an initial business combination with a target
business using our capital stock or debt financing to fund the combination,
proceeds from our initial public offering, the sale of the additional founder’s
warrants and the sale of the co-investment units will then be used to undertake
additional acquisitions or to fund the operations of the target business on a
post-combination basis. We may engage in an initial business combination with a
company that does not require significant additional capital but is seeking a
public trading market for its shares, and which wants to merge with an already
public company to avoid the uncertainties associated with undertaking its own
public offering. These uncertainties include time delays, compliance and
governance issues, significant expense, a possible loss of voting control, and
the risk that market conditions will not be favorable for an initial public
offering at the time its initial public offering is ready to be commenced. We
may seek to effect a business combination with more than one target business,
although our limited resources may serve as a practical limitation on our
ability to do so.




We
have not identified a target business




We are
currently in the process of identifying and evaluating targets for a potential
transaction. We have not entered into any definitive business combination
agreement.




Subject
to the requirement that a target business or businesses have a fair market value
of at least 80% of the sum of the balance in the trust account plus the proceeds
of the co-investment (excluding deferred underwriting discounts and commissions
of approximately $17.3 million) at the time of our initial business combination,
we have virtually unrestricted flexibility in identifying and selecting one or
more prospective target businesses. Accordingly, there is no current basis for
shareholders to evaluate the possible merits or risks of the target business
with which we may ultimately complete our initial business combination. Although
our management will assess the risks inherent in a particular target business
with which we may combine, we cannot assure you that this assessment will result
in our identifying all risks that a target business may encounter. Furthermore,
some of those risks may be outside of our control, meaning that we can do
nothing to control or reduce the chances that those risks will adversely impact
a target business.




6


Sources
of target businesses




We expect
that our principal means of identifying potential target businesses will be
through the extensive contacts and relationships of our officers and directors
and Steel Partners. While our officers are not required to commit to our
business on a full-time basis and our directors have no commitment to spend any
time in identifying or performing due diligence on potential target businesses,
our officers and directors believe that the relationships they have developed
over their careers and their access to Steel Partners professionals will
generate a number of potential business combination opportunities that will
warrant further investigation. Various unaffiliated parties, such as private
equity sponsors, management teams of public and private companies, investment
bankers, commercial bankers, brokers, attorneys, accountants and investors
throughout the United States, Asia and Europe and similar sources, may also
bring potential target businesses to our attention.




We may
pay fees or compensation to third parties for their efforts in introducing us to
potential target businesses that we have not previously identified. Such fees or
compensation may be calculated as a percentage of the dollar value of the
transaction and/or may involve monthly retainer payments. We will seek to
negotiate the lowest reasonable percentage fee consistent with the
attractiveness of the opportunity and the alternatives, if any, that are then
available to us. Payment of finder’s fees is customarily tied to completion of a
transaction. Although it is possible that we may pay finder’s fees in the case
of an uncompleted transaction, we consider this possibility to be extremely
remote. In no event will we pay any of our officers or directors or any entity
with which they or we are affiliated, including Steel Partners, any finder’s fee
or other compensation for services rendered to us prior to or in connection with
the consummation of an initial business combination, other than reimbursement
for out-of-pocket expenses, including travel expenses, and an aggregate of
$10,000 per month for office space, secretarial and administrative services. In
addition, none of our officers or directors or any entity with which they are
affiliated, including Steel Partners, will receive any finder’s fee, consulting
fees or any similar fees from any person or entity in connection with any
initial business combination involving us other than any compensation or fees
that may be received for any services provided following such initial business
combination.




Selection
of a target business and structuring of a business combination




Subject
to the requirement that our initial business combination must be with a target
business with a fair market value that is at least 80% of the sum of the balance
in the trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of such initial business combination, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target
business. We will only consummate a business combination in which we become the
controlling shareholder of the target. The key factors that we will rely on in
determining controlling shareholder status would be our acquisition of at least
51% of the voting equity interests of the target company and control of the
majority of any governing body of the target company. We will not consider any
transaction that does not meet such criteria. In addition, we will not enter
into our initial business combination with any entity in which any of our
officers, directors or Steel Partners or its affiliates has a financial
interest.




In
evaluating a prospective target business, our management will consider a variety
of criteria and guidelines, including the following:


·
              financial condition and results
      of operations;
 
 ·
              growth
      potential;
 
 ·
              brand recognition and
      potential;
 
 7
  ·
              experience and skill of
      management and availability of additional
  personnel;
 
 ·
              capital
      requirements;
 
 ·
              stage of development of the
      business and its products or
services;
 
 ·
              existing distribution
      arrangements and the potential for
  expansion;
 
 ·
              degree of current or potential
      market acceptance f the products or
  services;
 
 ·
              proprietary aspects of products
      and the extent of intellectual property or other protection for products
      or formulas;
 
 ·
              impact of regulation on the
      business;
 
 ·
              seasonal sales fluctuations and
      the ability to offset these fluctuations through other business
      combinations, introduction of new products, or product line
      extensions;
 
 ·
              costs associated with effecting
      the business combination;
 
 ·
              industry leadership,
      sustainability of market share and attractiveness of market sectors in
      which target business
participates;
 
 ·
              degree to which Steel Partners
      professionals have investment and operating experience and have had
      success in the target business’s industry;
  and
  ·
                macro competitive dynamics in the
      industry within which each company
  competes.


These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular initial business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management to our business objective. In evaluating a prospective target
business, we expect to conduct an extensive due diligence review which will
encompass, among other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers, inspection of
facilities, as well as review of financial and other information which will be
made available to us.




The time
required to select and evaluate a target business and to structure and complete
the initial business combination, and the costs associated with this process,
are not currently ascertainable with any degree of certainty. We expect that due
diligence of prospective target businesses will be performed by some or all of
our officers, directors and Steel Partners professionals. We may engage market
research firms or third-party consultants to assist us with performing due
diligence and valuations of the target company. Any costs incurred with respect
to the identification and evaluation of a prospective target business with which
a potential or initial business combination is not ultimately completed will
result in our incurring losses and will reduce the funds we can use to complete
an initial business combination.




Fair
market value of target business or businesses and determination of offering
amount




The
initial target business or businesses with which we combine must have a
collective fair market value equal to at least 80% of the sum of the balance in
the trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of such initial business combination. Accordingly, there is no limitation
on our ability to raise funds privately or through loans that would allow us to
acquire a target business or businesses with a fair market value considerably
greater than 80% of the sum of the balance in the trust account plus the
proceeds of the co-investment (excluding deferred underwriting discounts and
commissions as described above) at the time of our initial business combination.
If we acquire less than 100% of one or more target businesses in our initial
business combination, the aggregate fair market value of the portion or portions
we acquire must equal at least 80% of the sum of the balance in the trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions as described above) at the time of such initial
business combination. The fair market value of a portion of a target business
will be calculated by multiplying the fair market value of the entire business
by the percentage of the target business we acquire. We may seek to consummate
our initial business combination with a target business or businesses with a
collective fair market value in excess of the balance in the trust account.
However, we would need to obtain additional financing to consummate such an
initial business combination, and there is no assurance we would be able to
obtain such financing.




8


In
determining the size of our initial public offering, our management concluded,
based on their collective experience, that the size of our initial public
offering, together with the proceeds from the sale of the additional founder’s
warrants and the sale of the co-investment units, will provide us with
sufficient equity capital to execute our business plan. We believe that this
amount of equity capital, plus our ability to finance an acquisition using stock
or debt in addition to the cash held in the trust account, will give us
substantial flexibility in selecting an acquisition target and structuring our
initial business combination. This belief is not based on any research,
analysis, evaluations, discussions, or compilations of information with respect
to any particular investment or any such action undertaken in connection with
our organization. We cannot assure you that our belief is correct, that we will
be able to successfully identify acquisition candidates, that we will be able to
obtain any necessary financing or that we will be able to consummate a
transaction with one or more target businesses whose fair market value,
collectively, is equal to at least 80% of the sum of the balance in the trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million) at the time of the
initial business combination.




In
contrast to many other blank check companies that must combine with one or more
target businesses that have a fair market value equal to 80% or more of the
acquiring company’s net assets, we will not combine with a target business or
businesses unless the fair market value of such entity or entities meets a
minimum valuation threshold of 80% of the sum of the amount in the trust account
plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million). We have used this
criterion to provide investors and our officers and directors with greater
certainty as to the fair market value that a target business or businesses must
have in order to qualify for our initial business combination. The determination
of net assets requires an acquiring company to have deducted all liabilities
from total assets to arrive at the balance of net assets. Given the ongoing
nature of legal, accounting, stockholder meeting and other expenses that will be
incurred immediately before and at the time of an initial business combination,
the balance of an acquiring company’s total liabilities may be difficult to
ascertain at a particular point in time with a high degree of certainty.
Accordingly, we have determined to use the valuation threshold of 80% of the sum
of the amount in the trust account plus the proceeds of the co-investment
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million) for the fair market value of the target business or businesses
with which we combine so that our officers and directors will have greater
certainty when selecting, and our investors will have greater certainty when
voting to approve or disapprove, a proposed initial business combination with a
target business or businesses that such target business or businesses will meet
the minimum valuation criterion for our initial business
combination.




9


Our board
of directors will perform its own valuations and analyses in seeking to
determine that the target has a fair market value of at least 80% of the sum of
the balance in the trust account plus the proceeds of the co-investment
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million) at the time of the proposed business combination. Whether or not
the fair market value of a target business or businesses is in excess of 80% of
the sum of the proceeds in the trust account plus the proceeds of the
co-investment will be determined by our board of directors based upon standards
generally accepted by the financial community, such as actual and potential
gross margins, the values of comparable businesses, earnings and cash flow, and
book value. The board of directors will make its valuation assessment based on
all relevant information available at the time, which may differ on a
case-by-case basis depending on the specific nature of the target and the
structure of the transaction, including the projected performance of the target
based on its potential under our business plan (as determined based upon
standards generally accepted by the financial community, as well as the criteria
discussed under “Selection of a target business and structuring of a business
combination” above). Accordingly, we cannot predict at this time the precise
information that the board of directors intends to provide to stockholders
regarding the valuation of a particular target, other than whether it meets the
80% threshold criterion. If our board is not able to determine independently
that the target business has a sufficient fair market value to meet the
threshold criterion, we will obtain an opinion in that regard from an
unaffiliated, independent investment banking firm which is a member of the
Financial Industry Regulatory Authority, Inc. We expect that any such opinion
would be included in our proxy soliciting materials furnished to our
stockholders in connection with the stockholder vote on our initial business
combination, and that such independent investment banking firm will be a
consenting expert. Although management has not consulted with any investment
banker in connection with such an opinion, it is possible that the opinion would
only be able to be relied upon by our board of directors and not by our
stockholders. We will need to consider the cost in making a determination as to
whether to hire an investment bank that will allow our stockholders to rely on
its opinion, and will do so unless the cost is substantially (approximately
$50,000) in excess of what it would be otherwise. In the event that we obtain an
opinion that we and the investment banker believe cannot be relied on by our
stockholders, we will include disclosure in the proxy statement providing
support for that belief. While our stockholders might not have legal recourse
against the investment banking firm in such case, the fact that an independent
expert has evaluated, and passed upon, the fairness of the transaction is a
factor our stockholders may consider in determining whether or not to vote in
favor of the potential business combination. We will not be required to obtain
an opinion from an investment banking firm as to the fair market value of the
business if our board of directors independently determines that the target
business or businesses has sufficient fair market value to meet the threshold
criterion. In addition, if our board of directors has informed stockholders that
it believes that a target business meets the 80% threshold criterion, the board
will provide stockholders with valuations or quantify the value of any target.
Further, in the event that we issue shares in order to acquire a target and such
issuance causes the investors in our initial public offering to collectively
become minority stockholders, we will not be required to obtain an opinion or
independently opine on whether the transaction is fair to our stockholders.
However, any such issuance shall not affect the requirement that a majority of
the shares of common stock voted by our public stockholders must approve any
initial business combination.




Lack
of business diversification




While we
may seek to effect business combinations with more than one target business, our
initial business combination must involve one or more target businesses whose
collective fair market value meets the criteria discussed above at the time of
such initial business combination. Consequently, we expect to complete only a
single initial business combination, although this may entail a simultaneous
combination with several operating businesses. At the time of our initial
business combination, we may not be able to acquire more than one target
business because of various factors, including complex accounting or financial
reporting issues. For example, we may need to present pro forma financial
statements reflecting the operations of several target businesses as if they had
been combined historically.




10


A
simultaneous combination with several target businesses also presents logistical
issues, such as the need to coordinate the timing of negotiations, proxy
statement disclosure and closings. In addition, if conditions to closings with
respect to one or more of the target businesses are not satisfied, the fair
market value of the businesses could fall below the required fair market value
threshold described above.




Accordingly,
while it is possible that our initial business combination may involve more than
one target business, we are more likely to choose a single target business if
all other factors appear equal. This means that for an indefinite period of
time, the prospects for our success may depend entirely on the future
performance of a single target business. Unlike other entities that have the
resources to complete business combinations with multiple entities in one or
several industries, it is probable that we will not have the resources to
diversify our operations and mitigate the risks of being in a single line of
business. By consummating our initial business combination with only a single
entity, our lack of diversification may subject us to negative economic,
competitive and regulatory developments, in the particular industry in which we
operate after our initial business combination.




If we
complete our initial business combination structured as a merger in which the
consideration is our stock, we could have a significant amount of cash available
to make subsequent add-on acquisitions.




Limited
ability to evaluate the target business’s management




We will
independently evaluate the quality and experience of the existing management of
a target business and will make an assessment as to whether or not they should
be replaced on a case-by-case basis. As an example, a company in weak financial
condition may be experiencing difficulties because of its capitalization and not
because of its operations, in which case operating management may not need to be
replaced.




Although
we intend to closely scrutinize the management of a prospective target business
when evaluating the desirability of effecting an initial business combination
with that business, we cannot assure you that our assessment of the target
business’s management will prove to be correct. In addition, we cannot assure
you that management of the target business will have the necessary skills,
qualifications or abilities to manage a public company. Furthermore, the future
role of our officers and directors, if any, in the target business cannot
presently be stated with any certainty. While it is possible that one or more of
our officers and directors will remain associated in some capacity with us
following our initial business combination, a final determination of their
continued involvement with the business upon completion of an initial business
combination will be made jointly with our board of directors and based on the
facts and circumstances at the time. The goal of our board of directors will be
to ensure that they select the best management team to pursue our business
strategy. If they determine that the incumbent management of an acquired
business should be replaced and that one or more of our officers and directors
is the best available replacement, it is possible that some of our officers or
directors will devote some or all of their efforts to our affairs subsequent to
our initial business combination.




Following
our initial business combination, we may seek to recruit additional managers to
supplement the incumbent management of the target business. We cannot assure you
that we will have the ability to recruit additional managers, or that additional
managers will have the requisite skills, knowledge or experience necessary to
enhance the incumbent management.




Opportunity
for stockholder approval of business combination




Prior to
the completion of our initial business combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
transaction is such as would not ordinarily require stockholder approval under
applicable state law. At the same time, we will submit to our stockholders for
approval a proposal to amend our amended and restated certificate of
incorporation to permit our continued corporate existence if the initial
business combination is approved and consummated. The quorum required to
constitute this meeting, as for all meetings of our stockholders in accordance
with our bylaws, is a majority of our issued and outstanding common stock
(whether or not held by public stockholders). We will consummate our initial
business combination only if the required number of shares are voted in favor of
both the initial business combination and the amendment to extend our corporate
life. If a majority of the shares of common stock voted by the public
stockholders are not voted in favor of a proposed initial business combination,
we may continue to seek other target businesses with which to effect our initial
business combination until October 10, 2009, the date that is 24 months from the
date of our final prospectus. In connection with seeking stockholder approval of
our initial business combination, we will furnish our stockholders with proxy
solicitation materials prepared in accordance with the Exchange Act, which,
among other matters, will include a description of the operations of the target
business and audited historical financial statements of the target business
based on United States generally accepted accounting principles.




11


In
connection with the stockholder vote required to approve our initial business
combination, 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 our company, have agreed to vote all of their founder’s shares
either for or against a business combination, as determined by the totality of
the public stockholder vote. SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker and each of our officers and
directors have also agreed that if it, he or she acquires shares of common
stock, it, he or she will vote all such acquired shares in favor of our initial
business combination. Any such purchases of common stock will be based solely
upon the judgment of such person or entity (and may be made to impact the
shareholder vote to approve a business combination) and are expected to be
effected through open market purchases or privately negotiated transactions. As
a result, neither SP Acq LLC, Steel Partners II, L.P. nor any of our officers or
directors will be able to exercise the conversion rights with respect to any of
our shares that it, he or she may acquire. However, with the exception of the
co-investment none of SP Acq LLC, Steel Partners II, L.P., our officers or our
directors has indicated to us any intent to purchase our securities. We believe
that SP Acq LLC, Steel Partners II, L.P. and our officers and directors will
often be in possession of material non-public information about us that will
restrict their ability to make purchases of our securities. We will proceed with
our initial business combination only if a quorum is present at the
stockholders’ meeting and, as required by our amended and restated certificate
of incorporation, a majority of the shares of common stock voted by the public
stockholders are voted, in person or by proxy, in favor of our initial business
combination and stockholders owning no more than 30% of the shares sold in our
initial public offering (minus one share) vote against the business combination
and exercise their conversion rights. Under the terms of the Company’s amended
and restated certificate of incorporation, this provision may not be amended
without the unanimous consent of the Company’s stockholders prior to
consummation of an initial business consummation. Even though the validity of
unanimous consent provisions under Delaware law has not been settled, neither we
nor our board of directors will propose any amendment to this 30% threshold, or
support, endorse or recommend any proposal that stockholders amend this
threshold (subject to any fiduciary obligations our management or board may
have). In addition, we believe we have an obligation in every case to structure
our initial business combination so that up to 30% of the shares sold in our
initial public offering (minus one share) may be converted to cash by public
stockholders exercising their conversion rights and the business combination
will still go forward. Provided that a quorum is in attendance at the meeting,
in person or by proxy, a failure to vote on the initial business combination at
the stockholders’ meeting will have no outcome on the transaction. Voting
against our initial business combination alone will not result in conversion of
a stockholder’s shares into a pro rata share of the trust account. In order to
convert its shares, a stockholder must have also exercised the conversion rights
described below.




12


Conversion
rights




At the
time we seek stockholder approval of our initial business combination, we will
offer our public stockholders the right to have their shares of common stock
converted to cash if they vote against the business combination and the business
combination is approved and completed. Stockholders who wish to exercise their
conversion rights must (i) vote against the business combination, (ii) demand
that the company convert their shares into cash, (iii) continue to hold their
shares through the closing of the business combination and (iv) then deliver
their shares to our transfer agent. In lieu of delivering their certificate,
shareholders may deliver their shares to the transfer agent electronically using
Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System. The
actual per-share conversion price will be equal to the aggregate amount then on
deposit in the trust account (before payment of deferred underwriting discounts
and commissions and including accrued interest, net of any income taxes payable
on such interest, which shall be paid from the trust account, and net of
interest income of up to $3.5 million previously released to us to fund our
working capital requirements), calculated as of two business days prior to the
consummation of the proposed initial business combination, divided by the number
of shares sold in our initial public offering. The per-share conversion price is
expected to be approximately $9.87, or $0.13 less than the per-unit offering
price of $10.00. A public stockholder may request conversion at any time after
the mailing to our stockholders of the proxy statement and prior to the vote
taken with respect to a proposed initial business combination at a meeting held
for that purpose, but the request will not be granted unless the stockholder
votes against our initial business combination and our initial business
combination is approved and completed. If stockholders vote against our initial
business combination but do not properly exercise their conversion rights, such
stockholders will not be able to convert their shares of common stock into cash
at the conversion price. Additionally, we may require public stockholders,
whether they are a record holder or hold their shares in “street name,” to
either tender their certificates to our transfer agent at any time through the
vote on the business combination or to deliver their shares to the transfer
agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal
At Custodian) System, at the holder’s option. The proxy solicitation materials
that we will furnish to stockholders in connection with the vote for any
proposed business combination will indicate whether we are requiring
stockholders to satisfy such certification and delivery requirements.
Accordingly, a stockholder would have from the time we send out our proxy
statement through the vote on the business combination (which we intend would be
a minimum interval of 20 days) to tender his shares if he wishes to seek to
exercise his conversion rights. This time period varies depending on the
specific facts of each transaction. However, as the delivery process can be
accomplished by the stockholder, whether or not he is a record holder or his
shares are held in “street name,” in a matter of hours by simply contacting the
transfer agent or his broker and requesting delivery of his shares through the
DWAC System, we believe this time period is sufficient for an average investor.
However, because we do not have any control over this process, it may take
significantly longer than we anticipated. Traditionally, in order to perfect
conversion rights in connection with a blank check company’s business
combination, a holder could simply vote against a proposed business combination
and check a box on the proxy card indicating such holder was seeking to convert.
After the business combination was approved, the company would contact such
stockholder to arrange for him to deliver his certificate to verify ownership.
As a result, the stockholder then had an “option window” after the consummation
of the business combination during which he could monitor the price of the stock
in the market. If the price rose above the conversion price, he could sell his
shares in the open market before actually delivering his shares to the company
for cancellation. Thus, the conversion right, to which stockholders were aware
they needed to commit before the stockholder meeting, would survive past the
consummation of the business combination until the converting holder delivered
his certificate. For the avoidance of any doubt we will not allow the
traditional method of conversion for a blank check company. The requirement for
physical or electronic delivery prior to the meeting ensures that a converting
holder’s election to convert is irrevocable once the business combination is
approved. There is a nominal cost associated with the above-referenced tendering
process and the act of certificating the shares or delivering them through the
DWAC system. The transfer agent will typically charge the tendering broker $35
and it would be up to the broker whether or not to pass this cost on to the
converting holder. However, this fee would be incurred regardless of whether or
not we require holders seeking to exercise conversion rights to tender their
shares prior to the meeting — the need to deliver shares is a requirement of
conversion regardless of the timing of when such delivery must be effectuated.
Accordingly, assuming a business combination is approved, the exercise of
conversion rights would not result in any increased cost to shareholders when
compared to the traditional process. However, if a business combination is not
approved, shareholders will have incurred additional costs that they would not
have otherwise incurred as a result of having already converted their
shares.




13


Any
request for conversion, once made, may be withdrawn at any time up to the vote
taken with respect to the proposed business combination. Furthermore, if a
stockholder delivered his certificate for conversion and subsequently decided
prior to the meeting not to elect conversion, he may simply request that the
transfer agent return the certificate (physically or electronically). It is
anticipated that the funds to be distributed to stockholders entitled to convert
their shares who elect conversion will be distributed promptly after completion
of a business combination. Public stockholders who obtained their stock in the
form of units and who subsequently convert their stock into their pro rata share
of the trust account will still have the right to exercise the warrants that
they received as part of the units. We will not complete our proposed initial
business combination if public stockholders owning 30% or more of the shares
sold in our initial public offering exercise their conversion
rights.




In
connection with a vote on our initial business combination, public stockholders
may elect to vote a portion of their shares for and a portion of their shares
against the initial business combination. If the initial business combination is
approved and consummated, public stockholders who elected to convert the portion
of their shares voted against the initial business combination will receive the
conversion price with respect to those shares and may retain any other shares
they own.




We expect
the conversion price to be approximately $9.87 per share. As this amount is
lower than the $10.00 per unit offering price and it may be less than the market
price of a share of our common stock on the date of conversion, there may be a
disincentive to public stockholders to exercise their conversion
rights.




If a vote
on an initial business combination is held and the business combination is not
approved, we may continue to try to consummate an initial business combination
with a different target until October 10, 2009. If the initial business
combination is not approved or completed for any reason, then public
stockholders voting against our initial business combination who exercised their
conversion rights would not be entitled to convert their shares of common stock
into a pro rata share of the aggregate amount then on deposit in the trust
account. Those public stockholders would be entitled to receive their pro rata
share of the aggregate amount on deposit in the trust account only in the event
that the initial business combination they voted against was duly approved and
subsequently completed, or in connection with our dissolution and
liquidation.




Liquidation
if no business combination




Our
amended and restated certificate of incorporation provides that we will continue
in existence only until October 10, 2009. If we consummate our initial business
combination prior to that date, we will seek to amend this provision in order to
permit our continued existence. If we have not completed our initial business
combination by that date, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating pursuant to Section 278 of
the Delaware General Corporation Law. Because of this provision in our amended
and restated certificate of incorporation, no resolution by our board of
directors and no vote by our stockholders to approve our dissolution would be
required for us to dissolve and liquidate. Instead, we will notify the Delaware
Secretary of State in writing on the termination date that our corporate
existence is ceasing, and include with such notice payment of any franchise
taxes then due to or assessable by the state.




14


We will
continue to seek to consummate an initial business combination until October 10,
2009. If we are unable to complete a business combination, we will automatically
dissolve and as promptly as practicable thereafter adopt a plan of distribution
in accordance with Section 281(b) of the Delaware General Corporation Law.
Section 278 provides that our existence will continue for at least three years
after its expiration for the purpose of prosecuting and defending suits, whether
civil, criminal or administrative, by or against us, and of enabling us
gradually to settle and close our business, to dispose of and convey our
property, to discharge our liabilities and to distribute to our stockholders any
remaining assets, but not for the purpose of continuing the business for which
we were organized. Our existence will continue automatically even beyond the
three-year period for the purpose of completing the prosecution or defense of
suits begun prior to the expiration of the three-year period, until such time as
any judgments, orders or decrees resulting from such suits are fully executed.
Section 281(b) will require us to pay or make reasonable provision for all
then-existing claims and obligations, including all contingent, conditional, or
unmatured contractual claims known to us, and to make such provision as will be
reasonably likely to be sufficient to provide compensation for any then-pending
claims and for claims that have not been made known to us or that have not
arisen but that, based on facts known to us at the time, are likely to arise or
to become known to us within 10 years after the date of dissolution. Under
Section 281(b), the plan of distribution must provide for all of such claims to
be paid in full or make provision for payments to be made in full, as
applicable, if there are sufficient assets. If there are insufficient assets,
the plan must provide that such claims and obligations be paid or provided for
according to their priority and, among claims of equal priority, ratably to the
extent of legally available assets. Any remaining assets will be available for
distribution to our stockholders.




We expect
that all costs and expenses associated with implementing our plan of
distribution, as well as payments to any creditors, will be funded from amounts
remaining out of the $100,000 of proceeds held outside the trust account and
from the $3.5 million in interest income on the balance of the trust account
that may be released to us to fund our working capital requirements. However, if
those funds are not sufficient to cover the costs and expenses associated with
implementing our plan of distribution, to the extent that there is any interest
accrued in the trust account not required to pay income taxes on interest income
earned on the trust account balance, we may request that the trustee release to
us an additional amount of up to $75,000 of such accrued interest to pay those
costs and expenses. Should there be no such interest available or should those
funds still not be sufficient, SP Acq LLC and Mr. Lichtenstein have agreed to
reimburse us for our out-of-pocket costs associated with our dissolution and
liquidation, excluding any special, indirect or consequential costs, such as
litigation, pertaining to the dissolution and liquidation.




Upon its
receipt of notice from counsel that our existence has terminated, the trustee
will commence liquidating the investments constituting the trust account and
distribute the proceeds to our public stockholders. SP Acq LLC, Steel Partners
II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have waived
their right to participate in any liquidation distribution with respect to the
founder’s shares. As the proceeds from the sale of the co-investment units will
not be received by us until immediately prior to our consummation of a business
combination, these proceeds will not be deposited into the trust account and
will not be available for distribution to our public stockholders in the event
of a dissolution and liquidation. Additionally, if we do not complete an initial
business combination and the trustee must distribute the balance of the trust
account, the underwriters have agreed to forfeit any rights or claims to their
deferred underwriting discounts and commissions then in the trust account, and
those funds will be included in the pro rata liquidation distribution to the
public stockholders. There will be no distribution from the trust account with
respect to any of our warrants, which will expire worthless if we are
liquidated, and as a result purchasers of our units will have paid the full unit
purchase price solely for the share of common stock included in each
unit.




15


The
proceeds deposited in the trust account could, however, become subject to claims
of our creditors that are in preference to the claims of our stockholders, and
we therefore cannot assure you that the actual per-share liquidation price will
not be less than approximately $9.87, the conversion price based upon restricted
amounts held in trust at December 31, 2008. Although prior to completion of our
initial business combination, we will seek to have all third parties (including
any vendors or other entities we engage) and any prospective target businesses
enter into valid and enforceable agreements with us waiving any right, title,
interest or claim of any kind in or to any monies held in the trust account,
there is no guarantee that they will execute such agreements. We have not
engaged any such third parties or asked for or obtained any such waiver
agreements at this time. It is also possible that such waiver agreements would
be held unenforceable, and there is no guarantee that the third parties would
not otherwise challenge the agreements and later bring claims against the trust
account for monies owed them. If a target business or other third party were to
refuse to enter into such a waiver, we would enter into discussions with such
target business or engage such other third party only if our management
determined that we could not obtain, on a reasonable basis, substantially
similar services or opportunities from another entity willing to enter into such
a waiver. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and will not seek recourse
against the trust account for any reason.




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. To the extent that SP Acq LLC refuses to
indemnify us for a claim we believe should be indemnified, our officers and
directors by virtue of their fiduciary obligation will be obligated to bring a
claim against SP Acq LLC to enforce such indemnification. Based on the
representation as to its accredited investor status (as such term is defined in
Regulation D under the Securities Act), we currently believe that SP Acq LLC is
capable of funding its indemnity obligations, even though we have not asked it
to reserve for such an eventuality. We cannot assure you, however, that it would
be able to satisfy those obligations.




Under
Delaware law, creditors of a corporation have a superior right to stockholders
in the distribution of assets upon liquidation. Consequently, if the trust
account is liquidated and paid out to our public stockholders shares prior to
satisfaction of the claims of all of our creditors, it is possible that our
stockholders may be held liable for third parties’ claims against us to the
extent of the distributions received by them.




If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us that is not dismissed, the proceeds held in the trust account could
be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders. To the extent any bankruptcy claims deplete the trust
account, we cannot assure you that we will be able to return at least
approximately $9.87 per share to our public stockholders.




16


A public
stockholder will be entitled to receive funds from the trust account only in the
event that we do not consummate an initial business combination or if the
stockholder converts its shares into cash after voting against an initial
business combination that is actually completed by us and exercising its
conversion rights. In no other circumstances will a stockholder have any right
or interest of any kind to or in the trust account. Prior to our completing an
initial business combination or liquidating, we are permitted to have released
from the trust account only (i) interest income to pay income taxes on interest
income earned on the trust account balance and (ii) interest income earned of up
to $3.5 million to fund our working capital requirements.




Certificate
of Incorporation




Our
amended and restated certificate of incorporation sets forth certain provisions
designed to provide certain rights and protections to our stockholders prior to
the consummation of a business combination, including that:




·
              prior to the consummation of our
      initial business combination, we shall submit the initial business
      combination to our stockholders for
  approval;
 
 ·
              we may consummate our initial
      business combination if approved by a majority of the shares of common
      stock voted by our public stockholders at a duly held stockholders
      meeting, and public stockholders owning up to 30% of the shares (minus one
      share) sold in our initial public offering vote against the business
      combination and exercise their conversion
  rights;
 
 ·
              if a proposed initial business
      combination is approved and consummated, public stockholders who exercised
      their conversion rights and voted against the initial business combination
      may convert their shares into cash at the conversion price on the closing
      date of the initial business
combination;
 
 ·
              if our initial business
      combination is not consummated by October 10, 2009, then our existence
      will terminate and we will distribute all amounts in the trust account
      (except for such amounts as are paid to creditors or reserved for payment
      to creditors in accordance with Delaware law) and any net assets remaining
      outside the trust account on a pro rata basis to all of our public
      stockholders;
 
 ·
              we may not consummate any other
      business combination, merger, capital stock exchange, asset acquisition,
      stock purchase, reorganization or similar transaction prior to our initial
      business combination;
 
 ·
              prior to our initial business
      combination, we may not issue additional stock that participates in any
      manner in the proceeds of the trust account, or that votes as a class with
      the common stock sold in our initial public offering on a business
      combination;
 
 ·
              our audit committee shall monitor
      compliance on a quarterly basis with the terms of our initial public
      offering and, if any noncompliance is identified, the audit committee is
      charged with the immediate responsibility to take all action necessary to
      rectify such noncompliance or otherwise cause compliance with the terms of
      our initial public offering;
and
 
 ·
              the audit committee shall review
      and approve all payments made to our officers, directors and our and their
      affiliates, other than the payment of an aggregate of $10,000 per month to
      Steel Partners, Ltd. for office space, secretarial and administrative
      services, and any payments made to members of our audit committee will be
      reviewed and approved by our board of directors, with any interested
      director abstaining from such review and
  approval.




17


Our
amended and restated certificate of incorporation requires that prior to the
consummation of our initial business combination we obtain unanimous consent of
our stockholders to amend these provisions. However, the validity of unanimous
consent provisions under Delaware law has not been settled. A court could
conclude that the unanimous consent requirement constitutes a practical
prohibition on amendment in violation of the stockholders’ statutory rights to
amend the corporate charter. In that case, these provisions could be amended
without unanimous consent, and any such amendment could reduce or eliminate the
protection these provisions afford to our stockholders. However, we view all of
the foregoing provisions as obligations to our stockholders (subject to any
fiduciary obligations our management or board may have). In addition, we believe
we have an obligation in every case to structure our initial business
combination so that not less than 30% of the shares sold in our initial public
offering (minus one share) have the ability to be converted to cash by public
stockholders exercising their conversion rights and the business combination
will still go forward




Competition




In
identifying, evaluating and selecting a target business for our initial business
combination, we may encounter intense competition from other entities having a
business objective similar to ours, including other blank check companies,
private equity groups and leveraged buyout funds, as well as operating
businesses seeking acquisitions. Many of these entities are well established and
have extensive experience identifying and effecting business combinations
directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us. While we
believe there are numerous potential target businesses with which we could
combine, our ability to acquire larger target businesses will be limited by our
available financial resources. This inherent limitation gives others an
advantage in pursuing the acquisition of a target business.
Furthermore:




·
              our obligation to seek
      stockholder approval of our initial business combination or obtain
      necessary financial information may delay the completion of a
      transaction;
 
 ·
              our obligation to convert into
      cash shares of common stock held by our public stockholders who vote
      against the initial business combination and exercise their conversion
      rights may reduce the resources available to us for an initial business
      combination;
 
 ·
              our outstanding warrants and the
      future dilution they potentially represent may not be viewed favorably by
      certain target businesses;
and
 
 ·
              the requirement to acquire an
      operating business that has a fair market value equal to at least 80% of
      the sum of the balance of the trust account plus the proceeds of the
      co-investment at the time of the acquisition (excluding deferred
      underwriting discounts and commissions of approximately $17.3 million)
      could require us to acquire the assets of several operating businesses at
      the same time, all of which sales would be contingent on the closings of
      the other sales, which could make it more difficult to consummate the
      business combination.




Any of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination.




18


Employees




We
currently have three officers. These individuals are not our employees and are
not obligated to devote any specific number of hours to our business and intend
to devote only as much time as they deem necessary to our business. We do not
expect to have any full-time employees prior to the consummation of a business
combination.




ITEM 1A.   Risk
Factors




An
investment in our securities involves a high degree of risk. You should consider
carefully all of the material risks described below, together with the other
information contained in this report before making a decision to invest in our
securities. If any of the following events occur, our business, financial
condition and operating results may be materially adversely affected. In that
event, the trading price of our securities could decline, and you could lose all
or part of your investment. This report also contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of specific
factors, including the risks described below.




We
may proceed with a business combination if public stockholders owning less than
30% of the shares sold in our initial public offering properly exercise their
conversion rights. This requirement may make it easier for us to have a business
combination approved over stockholder dissent.




When we
seek stockholder approval of a business combination or any extension of the time
period within which we must complete our business combination, we will offer
each public stockholder the right to have his, her or its shares of common stock
converted to cash if the stockholder votes against the business combination or
extension and the business combination is approved and consummated or the
extension is approved. We will consummate the business combination only if the
following two conditions are met: (i) a majority of the shares of common stock
voted by the public stockholders are voted in favor of the business combination
and (ii) public stockholders owning less than 30% of the shares sold in our
initial public offering cumulatively vote against the business combination or an
extension of the time period within which we must consummate our business
combination and exercise their conversion rights. There can be no assurance that
any converting stockholder will receive an amount that is equal to or more than
his, her or its full invested amount.




We
are a development stage company with no operating history and no revenues, and
you have no basis on which to evaluate our ability to achieve our business
objective.




We are a
recently incorporated development stage company with no operating results to
date. Because we lack an operating history, you have no basis on which to
evaluate our ability to achieve our business objective of completing an initial
business combination with one or more target businesses, as described in this
report. We are currently in the process of evaluating and identifying
prospective target businesses concerning an initial business combination but may
be unable to complete an initial business combination. We will not generate any
revenues from operating activities until, at the earliest, after completing an
initial business combination. We cannot assure you as to when, or if, an initial
business combination will occur. If we expend all of the $100,000 in proceeds
from our initial public offering not held in trust and interest income earned of
up to $3.5 million on the balance of the trust account that may be released to
us to fund our working capital requirements in seeking an initial business
combination, but fail to complete such an initial combination, we may never
generate any operating revenues.




19


We
may not be able to consummate our initial business combination, in which case we
would be forced to dissolve and liquidate.




We must
complete our initial business combination with one or more target businesses
that have a fair market value of at least 80% of the sum of the amount held in
our trust account at the time of the initial business combination plus the
proceeds of the co-investment at the time of our initial business combination
(excluding deferred underwriting discounts and commissions of approximately
$17.3 million). If we fail to consummate a business combination, we will be
forced to dissolve and liquidate. We may not be able to find suitable target
businesses within the required time frame. In addition, our negotiating position
and our ability to conduct adequate due diligence on any potential target may be
reduced as we approach the deadline for the consummation of an initial business
combination.




If
we liquidate before concluding an initial business combination, our public
stockholders will receive less than $10.00 per share on distribution of trust
account funds and our warrants will expire worthless.




If we are
unable to complete an initial business combination and must liquidate our
assets, the per-share liquidation distribution will be less than $10.00 because
of the expenses of our initial public offering, our general and administrative
expenses and the planned costs of seeking an initial business combination.
Furthermore, our outstanding warrants are not entitled to participate in a
liquidation distribution and the warrants will therefore expire worthless if we
liquidate before completing an initial business combination; and as a result
purchasers of our units will have paid the full unit purchase price solely for
the share of common stock included in each unit.




An
effective registration statement must be in place in order for a warrant holder
to be able to exercise the warrants.




No
warrants will be exercisable and we will not be obligated to issue shares of
common stock upon exercise of warrants by a holder unless, at the time of such
exercise, we have an effective registration statement under the Securities Act
covering the shares of common stock issuable upon exercise of the warrants and a
current prospectus relating to them is available. Although we have undertaken in
the warrant agreement, and therefore have a contractual obligation, to use our
best efforts to have an effective registration statement covering shares of
common stock issuable upon exercise of the warrants from the date the warrants
become exercisable and to maintain a current prospectus relating to that common
stock until the warrants expire or are redeemed, and we intend to comply with
our undertaking, we cannot assure you that we will be able to do so. Our initial
founder’s warrants are identical to the warrants sold in our initial public
offering except that (i) they only become exercisable after our consummation of
our initial business combination if and when the last sales price of our common
stock exceeds $14.25 per share for any 20 trading days within a 30 trading day
period beginning 90 days after such business combination and (ii) they are
non-redeemable. Our additional founder’s warrants are identical to the warrants
sold in our initial public offering except that they are non-redeemable. Our
co-investment warrants are identical to the warrants sold in our initial public
offering except that they will be non-redeemable. Holders of warrants may not be
able to exercise their warrants, the market for the warrants may be limited and
the warrants may be deprived of any value if there is no effective registration
statement covering the shares of common stock issuable upon exercise of the
warrants or the prospectus relating to the common stock issuable upon the
exercise of the warrants is not current. In such event, the holder of a unit
will have paid the entire unit purchase price for the common stock contained in
the unit as the warrant will be worthless. Holders of warrants will not be
entitled to a cash settlement for their warrants if we fail to have an effective
registration statement or a current prospectus available relating to the common
stock issuable upon exercise of the warrants, and the holders’ only remedies in
such event will be those available if we are found by a court of law to have
breached our contractual obligation to them by failing to do so.




20


An
investor will only be able to exercise a warrant if the issuance of common stock
upon such exercise has been registered or qualified or is deemed exempt under
the securities laws of the state of residence of the holder of the
warrants.




No
warrants will be exercisable and we will not be obligated to issue shares of
common stock unless the common stock issuable upon such exercise has been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of the warrants. Because the exemptions from
qualification in certain states for resales of warrants and for issuances of
common stock by the issuer upon exercise of a warrant may be different, a
warrant may be held by a holder in a state where an exemption is not available
for issuance of common stock upon an exercise and the holder will be precluded
from exercise of the warrant. Nevertheless, we expect that resales of the
warrants as well as issuances of common stock by us upon exercise of a warrant
may be made in every state because at the time that the warrants become
exercisable (following our completion of an initial business combination), we
expect to either continue to be listed on a national securities exchange, which
would provide an exemption from registration in every state, or we would
register the warrants in every state (or seek another exemption from
registration in such states). To the extent an exemption is not available, we
will use our best efforts to register the underlying common stock in all states
where the holders of our warrants reside. Accordingly, we believe holders in
every state will be able to exercise their warrants as long as our prospectus
relating to the common stock issuable upon exercise of the warrants is current.
However, we cannot assure you of this fact. As a result, the warrants may be
deprived of any value, the market for the warrants may be limited and the
holders of warrants may not be able to exercise their warrants and they may
expire worthless if the common stock issuable upon such exercise is not
qualified or exempt from qualification in the jurisdictions in which the holders
of the warrants reside.




You
will not be entitled to protections normally afforded to investors in blank
check companies.




Since the
net proceeds of our initial public offering are intended to be used to complete
a business combination with a target business that has not been identified, we
may be deemed a “blank check” company under the United States securities laws.
However, because upon the consummation of our initial public offering we had net
tangible assets in excess of $5 million and at that time filed a Form 8-K with
the SEC that included an audited balance sheet demonstrating this fact, the SEC
has taken the position that we are exempt from Rule 419 under the Securities Act
which is designed to protect investors in blank check companies. Accordingly,
our public stockholders will not receive the benefits or protections of Rule
419. Among other things, this means we will have a longer period of time to
complete a business combination in some circumstances than do companies subject
to Rule 419. Moreover, offerings subject to Rule 419 would prohibit the release
of any interest earned on funds held in the trust account to us unless and until
the funds in the trust account were released to us in connection with our
consummation of an initial business combination.




21


Under
Delaware law, a court could invalidate the requirement that certain provisions
of our amended and restated certificate of incorporation be amended only by
unanimous consent of our stockholders; amendment of those provisions could
reduce or eliminate the protections they afford to our
stockholders.




Our
amended and restated certificate of incorporation contains certain requirements
and restrictions that will apply to us until the consummation of our initial
business combination. Specifically, our amended and restated certificate of
incorporation provides, among other things, that:




·
              prior to the consummation of our
      initial business combination, we shall submit the initial business
      combination to our stockholders for
  approval;
 
 ·
              we may consummate our initial
      business combination if approved by a majority of the shares of common
      stock voted by our public stockholders at a duly held stockholders
      meeting, and public stockholders owning up to 30% of the shares (minus one
      share) sold in our initial public offering vote against the business
      combination and exercise their conversion
  rights;
 
 ·
              if a proposed initial business
      combination is approved and consummated, public stockholders who exercised
      their conversion rights and voted against the initial business combination
      may convert their shares into cash at the conversion price on the closing
      date of the initial business
combination;
 
 ·
              if our initial business
      combination is not consummated by October 10, 2009, then our existence
      will terminate and we will distribute all amounts in the trust account
      (except for such amounts as are paid to creditors or reserved for payment
      to creditors in accordance with Delaware law) and any net assets remaining
      outside the trust account on a pro rata basis to all of our public
      stockholders;
 
 ·
              we may not consummate any other
      business combination, merger, capital stock exchange, asset acquisition,
      stock purchase, reorganization or similar transaction prior to our initial
      business combination;
 
 ·
              prior to our initial business
      combination, we may not issue additional stock that participates in any
      manner in the proceeds of the trust account, or that votes as a class with
      the common stock sold in our initial public offering on a business
      combination;
 
 ·
              our audit committee shall monitor
      compliance on a quarterly basis with the terms of our initial public
      offering and, if any noncompliance is identified, the audit committee is
      charged with the immediate responsibility to take all action necessary to
      rectify such noncompliance or otherwise cause compliance with the terms of
      our initial public offering;
and
 
 ·
              the audit committee shall review
      and approve all payments made to our officers, directors and our and their
      affiliates, other than the payment of an aggregate of $10,000 per month to
      Steel Partners, Ltd. for office space, secretarial and administrative
      services, and any payments made to members of our audit committee will be
      reviewed and approved by our board of directors, with any interested
      director abstaining from such review and
  approval.




22


Our
amended and restated certificate of incorporation requires that prior to the
consummation of our initial business combination we obtain unanimous consent of
our stockholders to amend these provisions. However, the validity of unanimous
consent provisions under Delaware law has not been settled. A court could
conclude that the unanimous consent requirement constitutes a practical
prohibition on amendment in violation of the stockholders’ statutory rights to
amend the corporate charter. In that case, these provisions could be amended
without unanimous consent, and any such amendment could reduce or eliminate the
protection these provisions afford to our stockholders. However, we view all of
the foregoing provisions as obligations to our stockholders (subject to any
fiduciary obligations our management or board may have). In addition, we believe
we have an obligation in every case to structure our initial business
combination so that not less than 30% of the shares sold in our initial public
offering (minus one share) have the ability to be converted to cash by public
stockholders exercising their conversion rights and the business combination
will still go forward.




If
third parties bring claims against us, or if we go bankrupt, the proceeds held
in trust could be reduced and the per-share liquidation price received by you
will be less than approximately $9.87 per share.




Our
placing of funds in the trust account may not protect those funds from
third-party claims against us. Although prior to completion of our initial
business combination, we will seek to have all third parties (including any
vendors or other entities we engage) and any prospective target businesses enter
into valid and enforceable agreements with us waiving any right, title, interest
or claim of any kind in or to any monies held in the trust account, there is no
guarantee that they will execute such agreements. It is possible that such
waiver agreements would be held unenforceable and there is no guarantee that the
third parties would not otherwise challenge the agreements and later bring
claims against the trust account for monies owed them. In addition, there is no
guarantee that such entities will agree to waive any claims they may have in the
future as a result of, or arising out of, any negotiations, contracts or
agreements with us and will not seek recourse against the trust account for any
reason. Accordingly, the proceeds held in trust could be subject to claims that
would take priority over the claims of our public stockholders and, as a result,
the per-share liquidation price could be less than approximately $9.87, the
conversion price based upon restricted amounts held in trust at December 31,
2008. SP Acq LLC and Mr. Lichtenstein have agreed that they 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 business target. However, the agreement
entered into by SP Acq LLC and Mr. Lichtenstein 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 and
Mr. Lichtenstein, such as shareholders and other claimants who are not parties
in contract with us who file a claim for damages against us. To the extent that
SP Acq LLC and Mr. Lichtenstein refuse to indemnify us for a claim we believe
should be indemnified, our officers and directors by virtue of their fiduciary
obligations will be obligated to bring a claim against SP Acq LLC and Mr.
Lichtenstein to enforce such indemnification. Based on representations as to its
status as an accredited investor (as such term is defined in Regulation D under
the Securities Act), we currently believe that SP Acq LLC and Mr. Lichtenstein
are capable of funding their indemnity obligations, even though we have not
asked them to reserve for such an eventuality. We cannot assure you, however,
that they would be able to satisfy those obligations.




23


In
addition, if we are forced to file a bankruptcy case or an involuntary
bankruptcy case is filed against us that is not dismissed, the proceeds held in
the trust account could be subject to applicable bankruptcy law, and may be
included in our bankruptcy estate and subject to the claims of third parties
with priority over the claims of our stockholders. To the extent any bankruptcy
claims deplete the trust account, we cannot assure you that we will be able to
return at least approximately $9.87 per share to our public
stockholders.




Since
we have not yet selected a particular industry or any target business with which
to complete our initial business combination, you will be unable to currently
ascertain the merits or risks of the industry or business in which we may
ultimately operate.




We may
consummate an initial business combination with a company in any industry we
choose and we are not limited to any particular industry or type of business.
Accordingly, there is no current basis for you to evaluate the possible merits
or risks of the particular industry in which we may ultimately operate or the
target business or businesses with which we may ultimately enter an initial
business combination. Although the members of our management team will evaluate
the risks inherent in a particular target business, we cannot assure you that we
will properly ascertain or assess all of the significant risks present in that
target business. Even if we properly assess those risks, some of them may be
outside of our control or ability to affect. We also cannot assure you that an
investment in our securities will not ultimately prove to be less favorable our
public stockholders than a direct investment, if an opportunity were available,
in a target business.




Our
stockholders may be held liable for third parties’ claims against us to the
extent of distributions received by them following our dissolution.




Our
amended and restated certificate of incorporation provides that we will continue
in existence only until October 10, 2009. If we consummate our initial business
combination prior to that date, we will seek to amend this provision to permit
our continued existence. If we have not completed our initial business
combination by that date, our corporate existence will cease except for the
purposes of winding up our affairs and liquidating pursuant to Section 278 of
the Delaware General Corporation Law. Under the Delaware General Corporation
Law, stockholders may be held liable for claims by third parties against a
corporation to the extent of distributions received by those stockholders in a
dissolution. However, if the corporation complies with certain procedures
intended to ensure that it makes reasonable provision for all claims against it,
the liability of stockholders with respect to any claim against the corporation
is limited to the lesser of such stockholder’s pro rata share of the claim or
the amount distributed to the stockholder. In addition, if the corporation
undertakes additional specified procedures, including a 60-day notice period
during which any third-party claims can be brought against the corporation, a
90-day period during which the corporation may reject any claims brought, and an
additional 150-day waiting period before any liquidation distributions are made
to stockholders, any liability of stockholders would be barred with respect to
any claim on which an action, suit or proceeding is not brought by the third
anniversary of the dissolution (or such longer period directed by the Delaware
Court of Chancery). While we intend to adopt a plan of distribution making
reasonable provision for claims against the company in compliance with the
Delaware General Corporation Law, we do not intend to comply with these
additional procedures, as we instead intend to distribute the balance in the
trust account to our public stockholders as promptly as practicable following
termination of our corporate existence. Accordingly, any liability our
stockholders may have could extend beyond the third anniversary of our
dissolution. We cannot assure you that any reserves for claims and liabilities
that we believe to be reasonably adequate when we adopt our plan of dissolution
and distribution will suffice. If such reserves are insufficient, stockholders
who receive liquidation distributions may subsequently be held liable for claims
by creditors of the company to the extent of such distributions.




24


We
depend on the limited funds available outside of the trust account and a portion
of the interest earned on the trust account balance to fund our search for a
target business or businesses and to complete our initial business
combination.




Of the
net proceeds of our initial public offering, $100,000 was available to us
initially outside the trust account to fund our working capital requirements. We
depend on sufficient interest being earned on the proceeds held in the trust
account to provide us with the additional working capital we will need to
identify one or more target businesses and to complete our initial business
combination. While we are entitled to have released to us for such purposes
interest income of up to a maximum of $3.5 million, a substantial decline in
interest rates may result in our having insufficient funds available with which
to structure, negotiate or close an initial business combination. In such event,
we could seek to borrow funds or raise additional investments from our officers
and directors or others to operate, although our officers and directors are
under no obligation to advance funds to, or to invest in, us. If we have
insufficient funds available, we may be forced to liquidate.




Because
of our limited resources and the significant competition for business
combination opportunities we may not be able to consummate an attractive initial
business combination.




We expect
to encounter intense competition from other entities having a business objective
similar to ours, including venture capital funds, leveraged buyout funds,
private equity funds and public and private companies (including blank check
companies like ours). Many of these entities are well established and have
extensive experience in identifying and effecting business combinations directly
or through affiliates. Many of these competitors possess greater technical,
human and other resources than we do and our financial resources will be
relatively limited when contrasted with those of many of these competitors.
While we believe that there are numerous potential target businesses that we
could acquire our ability to compete in acquiring certain sizable target
businesses will be limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing the acquisition of
certain target businesses. In addition, the fact that only a limited number of
blank check companies have completed a business combination may be an indication
that there are only a limited number of attractive target businesses available
to such entities or that many privately held target businesses may not be
inclined to enter into business combinations with publicly held blank check
companies like ours. Further:




·
              our obligation to seek
      shareholder approval of a business combination may materially delay the
      consummation of a
transaction;
 
 ·
              our obligation to convert into
      cash up to 30% of the shares of common stock held by public stockholders
      (minus one share) in certain instances may materially reduce the resources
      available for a business combination;
and
 
 ·
              our outstanding warrants, and the
      future dilution they potentially represent, may not be viewed favorably by
      certain target
businesses.




Any of
these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination. We cannot assure you that we will be able to
successfully compete for an attractive business combination. Additionally,
because of these factors, we cannot assure you that we will be able to
effectuate a business combination within the required time periods. If we are
unable to find a suitable target business within the required time periods, we
will be forced to liquidate.




25


We
may be unable to obtain additional financing if necessary to complete our
initial business combination or to fund the operations and growth of a target
business, which could compel us to restructure or abandon a particular business
combination.




We
believe that the net proceeds of our initial public offering, the sale of the
founder’s units and the sale of the additional founder’s warrants and the
proceeds we will receive from the sale of the co-investment units will be
sufficient to allow us to consummate our initial business combination. However,
because we have no oral or written agreements or letters of intent to engage in
a business combination with any entity, we cannot assure you that we will be
able to complete our initial business combination or that we will have
sufficient capital with which to complete a combination with a particular target
business. If the net proceeds of our initial public offering, and the sale of
the additional founder’s warrants and the proceeds we will receive from the sale
of the co-investment units are not sufficient to facilitate a particular
business combination because:




·
              of the size of the target
      business;
 
 ·
              the offering proceeds not in
      trust and funds available to us from interest earned on the trust account
      balance are insufficient to fund our search for and negotiations with a
      target business; or
 
 ·
              the amount of cash that we will
      have available to be used as consideration in connection with our initial
      business combination will be directly affected by the amount of cash we
      must use to convert into cash the number of shares of common stock owned
      by public stockholders who elect to exercise their conversion
      rights,




we will
be required to seek additional financing. We cannot assure you that such
financing will be available on acceptable terms, if at all. If additional
financing is unavailable to consummate a particular business combination, we
would be compelled to restructure or abandon the business combination and seek
an alternative target business.




In
addition, it is possible that we could use a portion of the funds not in the
trust account (including amounts we borrowed, if any) to make a deposit, down
payment or fund a “no-shop” provision with respect to a particular proposed
business combination, although we do not have any current intention to do so. In
the event that we were ultimately required to forfeit such funds, and we had
already used up the funds allocated to due diligence and related expenses in
connection with the aborted transaction, we could be left with insufficient
funds to continue searching for, or conduct due diligence with respect to, other
potential target businesses.




Even if
we do not need additional financing to consummate an initial business
combination, we may require additional capital — in the form of debt, equity, or
a combination of both — to operate or grow any potential business we may
acquire. There can be no assurance that we will be able to obtain such
additional capital if it is required. If we fail to secure such financing, this
failure could have a material adverse effect on the operations or growth of the
target business. Other than the co-investment, none of our officers or directors
or any other party is required to provide any financing to us in connection
with, or following, our initial business combination.




26


If
we issue capital stock or convertible debt securities to complete our initial
business combination, your equity interest in us could be reduced or there may
be a change in control of our company.




Our
amended and restated certificate of incorporation authorizes the issuance of up
to 200,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of preferred stock, par value $0.001 per share. There are 84,776,000
authorized but unissued shares of our common stock available for issuance (after
appropriate reservation for the issuance of shares upon full exercise of our
outstanding warrants, including the initial founder’s warrants and the
additional founder’s warrants), and all of the shares of preferred stock
available for issuance. Upon consummation of the co-investment, there will be
78,776,000 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of shares upon full
exercise of our outstanding warrants, including the initial founder’s warrants,
the additional founder’s warrants and the co-investment warrants). We have no
other commitments to date to issue any additional securities. We may issue a
substantial number of additional shares of our common stock or may issue
preferred stock, or a combination of both, including through convertible debt
securities, to complete an initial business combination. Our issuance of
additional shares of common stock or any preferred stock:


·
              may significantly reduce your
      equity interest in us;
 
 ·
              will likely cause a change in
      control if a substantial number of our shares of common stock are issued,
      which may among other things limit our ability to use any net operating
      loss carry forwards we have, and may result in the resignation or removal
      of our officers and directors;
and
 
 ·
              may adversely affect the
      then-prevailing market price for our common
  stock.




The value
of your investment in us may decline if any of these events occur.




If
we issue debt securities to acquire or finance a target business, our liquidity
may be adversely affected and the combined business may face significant
interest expense.




We may
elect to enter into a business combination that requires us to issue debt
securities as part of the purchase price for a target business. If we issue debt
securities, such issuances may result in an increase in interest expense for the
post-combination business and may adversely affect our liquidity in the event
of:




·
              a default and foreclosure on our
      assets if our operating cash flow after a business combination were
      insufficient to pay principal and interest obligations on our
      debt;
 
 ·
              an acceleration, which could
      occur even if we are then current in our debt service obligations if the
      debt securities have covenants that require us to meet certain financial
      ratios or maintain designated reserves, and such covenants are breached
      without waiver or
renegotiation;
 
 ·
              a required immediate payment of
      all principal and accrued interest, if any, if the debt securities are
      payable on demand; or
 
 ·
              our inability to obtain any
      additional financing, if necessary, if the debt securities contain
      covenants restricting our ability to incur
      indebtedness.




27


SP
Acq LLC, Steel Partners II, L.P. and our Directors collectively own
approximately 20% of our shares of common stock and may influence certain
actions requiring a stockholder vote.




SP Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker collectively own approximately 20% of our issued and outstanding shares
of common stock (and together with its affiliate Steel Partners II, L.P., SP Acq
LLC will own approximately 24.2% of our issued and outstanding shares of common
stock upon consummation of the co-investment). SP Acq LLC, Steel Partners II,
L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed, in
connection with the stockholder vote required to approve our initial business
combination, to vote all of their founder’s shares either for or against the
initial business combination as determined by the totality of the stockholder
vote and each of them together with our officers and directors has agreed that
if it, he or she acquires additional shares of common stock, it, he or she will
vote all such acquired shares in favor of our initial business combination.
Accordingly, shares of common stock owned by SP Acq LLC, Steel Partners II, L.P.
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker will not have the same
voting or conversion rights as our public stockholders with respect to a
potential initial business combination, and none of SP Acq LLC, Steel Partners
II, L.P., nor any of our officers or directors will be able to exercise the
conversion rights with respect to any of our shares that it, he or she may
acquire. Any purchases of stock will be based solely upon the judgment of such
person or entity (and may be made to impact the shareholder vote to approve a
business combination) and are expected to be effected through open market
purchases or privately negotiated transactions. However, with the exception of
the co-investment none of SP Acq LLC, Steel Partners II, L.P., our officers or
our directors has indicated to us any intent to purchase our securities We
believe that SP Acq LLC, Steel Partners II, L.P. and our officers and directors
will often be in possession of material non-public information about us that
will restrict their ability to make purchases of our securities.




Some
of our current officers and directors may resign upon consummation of our
initial business combination.




Our
ability to effect our initial business combination successfully will be largely
dependent upon the efforts of our officers and directors. However, while it is
possible that some of our officers and directors will remain associated with us
in various capacities following our initial business combination, some of them
may resign and some or all of the management of the target business may remain
in place.




We
may have only limited ability to evaluate the management of the target
business.




We may
have only limited ability to evaluate the management of the target business.
Although we intend to closely scrutinize the management of a prospective target
business in connection with evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of management will prove
to be correct. These individuals may be unfamiliar with the requirements of
operating a public company and the securities laws, which could increase the
time and resources we must expend to assist them in becoming familiar with the
complex disclosure and financial reporting requirements imposed on U.S. public
companies, including the requirement to maintain an effective system of internal
controls. This could be expensive and time-consuming and could lead to various
regulatory issues that may adversely affect the price of our stock.




We
may seek to effect our initial business combination with one or more privately
held companies, which may present certain challenges to us, including the lack
of available information about these companies.




In
pursuing our acquisition strategy, we may seek to effect our initial business
combination with one or more privately held companies. By definition, very
little public information exists about these companies, and we could be required
to make our decision on whether to pursue a potential initial business
combination on the basis of limited information.




28


We
will not be required to obtain an opinion from an investment banking firm as to
the fair market value of a proposed business combination if our board of
directors independently determines that the target business has sufficient fair
market value and it is possible that any opinion that we obtain would only be
able to be relied upon by our board of directors and not by our
stockholders.




The
initial target business that we acquire must have a fair market value equal to
at least 80% of the sum of the balance in the trust account plus the proceeds of
the co-investment (excluding deferred underwriting discounts and commissions of
approximately $17.3 million) at the time of our initial business combination.
There is no limitation on our ability to raise funds privately or through loans
that would allow us to acquire a target business or businesses with a fair
market value in an amount considerably greater than 80% of the sum of the
balance in the trust account plus the proceeds of the co-investment (excluding
deferred underwriting discounts and commissions as described above) at the time
of our initial business combination. Other than the co-investment, we have not
had any preliminary discussions, nor have any plans, agreements or commitments,
with respect to financing arrangements with any third party. The fair market
value of such business will be determined by our board of directors based on all
relevant information available at the time, which may differ on a case-by-case
basis depending on the specific nature of the target and the structure of the
transaction, including the projected performance of the target based on its
potential under our business plan (as determined in part upon standards
generally accepted by the financial community). If our board is not able to
independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment
banking firm which is a member of the Financial Industry Regulatory Authority,
Inc. with respect to the satisfaction of such criteria. We expect that any such
opinion would be included in our proxy solicitation materials furnished to our
stockholders in connection with the stockholder vote on our initial business
combination, and that such independent investment banking firm will be a
consenting expert. Although management has not consulted with any investment
banker in connection with such an opinion, it is possible that the opinion would
only be able to be relied upon by our board of directors and not by our
stockholders. We will need to consider the cost in making a determination as to
whether to hire an investment bank that will allow our stockholders to rely on
its opinion, and will do so unless the cost is substantially (approximately
$50,000) in excess of what it would be otherwise. In the event that we obtain an
opinion that we and the investment banker believe cannot be relied on by our
stockholders, we will include disclosure in the proxy statement providing
support for that belief. While our stockholders might not have legal recourse
against the investment banking firm in such case, the fact that an independent
expert has evaluated, and passed upon, the fairness of the transaction is a
factor our stockholders may consider in determining whether or not to vote in
favor of the potential business combination. We will not be required to obtain
an opinion from an investment banking firm as to the fair market value of the
business if our board of directors independently determines that the target
business or businesses has sufficient fair market value to meet the threshold
criteria. In addition, if our board of directors has informed stockholders that
it believes that a target business meets the 80% threshold criterion, the board
will provide stockholders with valuations or quantify the value of any target.
Further, in the event that we issue shares in order to acquire a target and such
issuance causes our public stockholders to collectively become minority
stockholders, we will not be required to obtain an opinion or independently
opine on whether the transaction is fair to our stockholders.




We
may require stockholders who wish to convert their shares in connection with a
proposed business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise their conversion
rights prior to the deadline for exercising their rights.




We may
require public stockholders who wish to convert their shares in connection with
a proposed business combination to either tender their certificates to our
transfer agent at any time prior to the vote taken at the stockholder meeting
relating to such initial business combination or to deliver their shares to the
transfer agent electronically using the Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock
certificate, a stockholder’s broker and/or clearing broker, DTC and our transfer
agent will need to act to facilitate this request. It is our understanding that
stockholders should generally allot at least two weeks to obtain physical
certificates from the transfer agent. However, because we do not have any
control over this process or over the brokers or DTC, it may take significantly
longer than two weeks to obtain a physical stock certificate. While we have been
advised that it takes a short time to deliver shares through the DWAC System, we
cannot assure you of this fact. Accordingly, if it takes longer than we
anticipate for stockholders to deliver their shares, stockholders who wish to
convert may be unable to meet the deadline for exercising their conversion
rights and thus may be unable to convert their shares. In addition, there is a
nominal cost associated with the above-referenced tendering process and the act
of certificating the shares or delivering them through the DWAC system. The
transfer agent will typically charge the tendering broker $35 and it would be up
to the broker whether or not to pass this cost on to the converting
holder.




29


We
may compete with investment vehicles of Steel Partners for access to Steel
Partners.




Certain
of the entities comprising Steel Partners sponsor and currently manage various
investment vehicles, and may in the future sponsor or manage additional
investment vehicles which, in each case, could result in us competing for access
to the benefits that we expect our relationship with Steel Partners to provide
to us.




We
expect to rely upon our access to Steel Partners investment professionals in
completing an initial business combination.




We expect
that we will depend, to a significant extent, on our access to the investment
professionals of Steel Partners and the information and deal flow generated by
Steel Partners investment professionals in the course of their investment and
portfolio management activities to identify and complete our initial business
combination. Consequently, the departure of a significant number of the
investment professionals of Steel Partners, could have a material adverse effect
on our ability to consummate an initial business combination.




Members
of our management team and our directors are and may in the future become
affiliated with entities engaged in business activities similar to those
intended to be conducted by us, and may have conflicts of interest in allocating
their time and business opportunities.




Members
of our management and our directors may in the future become affiliated with
other entities including other blank check companies engaged in business
activities similar to those intended to be conducted by us. As a result, members
of our management team may become aware of business opportunities that may be
appropriate for presentation to us as well as the other entities with which they
are or may be affiliated. Moreover, members of our management team are not
obligated to expend a specific number of hours per week or month on our
affairs.




30


Our
business opportunity right of first review agreement with Mr. Lichtenstein and
Steel Partners II GP LLC (formerly Steel Partners, L.L.C.), does not apply to
companies targeted for acquisition by any business in which Steel Partners II,
L.P. directly or indirectly has an investment.




We have
entered into a business opportunity right of first review agreement with Mr.
Lichtenstein and Steel Partners II GP LLC (formerly Steel Partners, L.L.C.) that
provides that from the date of our initial public offering until the earlier of
the consummation of our initial business combination or our liquidation in the
event we do not consummate an initial business combination, we will have a right
of first review with respect to business combination opportunities of Steel
Partners relating to companies that are not publicly traded on a stock exchange
or over-the-counter market with an enterprise value of between $300 million and
$1.5 billion. However, this right of first review does not apply to companies
targeted for acquisition by any businesses in which Steel Partners II, L.P.
directly or indirectly has an investment (including Steel Partners Japan
Strategic Fund (Offshore), L.P. or businesses headquartered in or organized
under the laws of China. Currently, members of our management team are officers
or directors of the following entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment: Adaptec, Inc., BNS Holding, Inc.,
Collins Industries, Inc., CoSine Communications, Inc., Del Global Technologies
Corp., Gateway Industries, Inc., GenCorp, Inc., Nathan’s Famous Inc., NOVT
Corporation, Point Blank Solutions, Inc., Rowan Companies, Inc., SL Industries,
Inc., Vector Group Ltd., WebBank, WebFinancial L.P. and WHX Corporation. In
addition, such members of our management team could in the future become
officers or directors of other entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment. Due to those existing and future
affiliations, members of our management team and our directors may have
fiduciary obligations to present potential business opportunities to those
entities prior to presenting them to us which could cause additional conflicts
of interest. Accordingly, members of our management team may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented.




We
may use resources in researching acquisitions that are not consummated, which
could materially and adversely affect subsequent attempts to effect our initial
business combination.




We expect
that the investigation of each specific target business and the negotiation,
drafting, and execution of relevant agreements, disclosure documents, and other
instruments will require substantial management time and attention and
substantial costs for accountants, attorneys, and others. If a decision is made
not to complete a specific business combination, the costs incurred up to that
point for the proposed transaction likely would not be recoverable. Furthermore,
even if an agreement is reached relating to a specific target business, we may
fail to consummate the transaction for any number of reasons, including reasons
beyond our control, such as that 30% or more of our public stockholders vote
against the transaction and opt to convert their stock into a pro rata share of
the trust account even if a majority of our stockholders approve the
transaction. Any such event will result in a loss to us of the related costs
incurred, which could materially and adversely affect subsequent attempts to
consummate an initial business combination.




Because
the founder’s shares will not participate in liquidation distributions by us, SP
Acq LLC, directors and our management team may have a conflict of interest in
deciding if a particular target business is a good candidate for an initial
business combination.




SP Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker have waived their right to receive distributions with respect to the
founder’s shares if we liquidate because we fail to complete a business
combination. Those shares of common stock and all of the warrants owned by SP
Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker will be worthless if we do not consummate our initial business
combination. Since Mr. Lichtenstein may be deemed the beneficial owner of shares
held by SP Acq LLC and Steel Partners II, L.P., he may have a conflict of
interest in determining whether a particular target business is appropriate for
us and our stockholders. This ownership interest may influence his motivation in
identifying and selecting a target business and timely completing an initial
business combination.




31


The
exercise of discretion by our officers and directors in identifying and
selecting one or more suitable target businesses may result in a conflict of
interest when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our stockholders’ best
interest.




Our
officers’ and directors’ interests in obtaining reimbursement for any
out-of-pocket expenses incurred by them may lead to a conflict of interest in
determining whether a particular target business is appropriate for an initial
business combination and in the public stockholders’ best interest.




Unless we
consummate our initial business combination, our officers and directors and
Steel Partners and its employees will not receive reimbursement for any
out-of-pocket expenses incurred by them to the extent that such expenses exceed
the amount of available proceeds not deposited in the trust account and the
amount of interest income from the trust account up to a maximum of $3.5 million
that may be released to us as working capital. These amounts are based on
management’s estimates of the funds needed to finance our operations until the
consummation of our initial business combination and to pay expenses in
identifying and consummating our initial business combination. Those estimates
may prove to be inaccurate, especially if a portion of the available proceeds is
used to make a down payment in connection with our initial business combination
or pay exclusivity or similar fees or if we expend a significant portion in
pursuit of an initial business combination that is not consummated. Our officers
and directors may, as part of any business combination, negotiate the repayment
of some or all of any such expenses. If the target business’s owners do not
agree to such repayment, this could cause our management to view such potential
business combination unfavorably, thereby resulting in a conflict of interest.
The financial interest of our officers and directors and Steel Partners could
influence our officers’ and directors’ motivation in selecting a target business
and therefore there may be a conflict of interest when determining whether a
particular business combination is in the stockholders’ best interest. In
addition, the proceeds we receive from the co-investment (as well as the
proceeds of our initial public offering not being placed in the trust account or
the income interest earned on the trust account balance) may be used to repay
the expenses for which our directors may negotiate repayment as part of our
initial business combination.




We
will probably complete only one business combination with the proceeds of our
initial public offering and the sale of the additional founder’s warrants and
the co-investment units, meaning our operations will depend on a single
business.




The net
proceeds from our initial public offering and the sale of the additional
founder’s warrants provided us with approximately $408,497,676 that we may use
to complete our initial business combination ($438,497,676 after the
consummation of the co-investment). Our initial business combination must be
with a target business or businesses with a fair market value of at least 80% of
the sum of the balance in the trust account plus the proceeds of the
co-investment at the time of such business combination (excluding deferred
underwriting discounts and commissions of approximately $17.3 million). We may
not be able to acquire more than one target business because of various factors,
including the existence of complex accounting issues and the requirement that we
prepare and file pro forma financial statements with the SEC that present
operating results and the financial condition of several target businesses as if
they had been operated on a combined basis. Additionally, we may encounter
numerous logistical issues if we pursue multiple target businesses, including
the difficulty of coordinating the timing of negotiations, proxy statement
disclosure and closings. We may also be exposed to the risk that our inability
to satisfy conditions to closing with one or more target businesses would reduce
the fair market value of the remaining target businesses in the combination
below the required threshold of 80% of the sum of the amount held in our trust
account plus the proceeds of the co-investment (excluding deferred underwriting
discounts and commissions of approximately $17.3 million). Due to these added
risks, we are more likely to choose a single target business with which to
pursue a business combination than multiple target businesses. Unless we combine
with a target business in a transaction in which the purchase price consists
substantially of common stock and/or preferred stock, it is likely we will
complete only our initial business combination with the proceeds of our initial
public offering and the sale of the additional founder’s warrants and the
co-investment units. Accordingly, the prospects for our success may depend
solely on the performance of a single business. If this occurs, our operations
will be highly concentrated and we will be exposed to higher risk than other
entities that have the resources to complete several business combinations, or
that operate in diversified industries or industry segments.




32


If
we do not conduct an adequate due diligence investigation of a target business
with which we combine, we may be required subsequently to take write downs or
write-offs, restructuring, and impairment or other charges that could have a
significant negative effect on our financial condition, results of operations
and our stock price, which could cause you to lose some or all of your
investment.




In order
to meet our disclosure and financial reporting obligations under the federal
securities laws, and in order to develop and seek to execute strategic plans for
how we can increase the profitability of a target business, realize operating
synergies or capitalize on market opportunities, we must conduct a due diligence
investigation of one or more target businesses. Intensive due diligence is time
consuming and expensive due to the operations, accounting, finance and legal
professionals who must be involved in the due diligence process. We may have
limited time to conduct such due diligence due to the provision in our
Certificate of Incorporation that we complete our initial business combination
by October 10, 2009. Even if we conduct extensive due diligence on a target
business with which we combine, we cannot assure you that this diligence will
uncover all material issues relating to a particular target business, or that
factors outside of the target business and outside of our control will not later
arise. If our diligence fails to identify issues specific to a target business
or the environment in which the target business operates, we may be forced to
write-down or write-off assets, restructure our operations, or incur impairment
or other charges that could result in our reporting losses. Even though these
charges may be non-cash items and not have an immediate impact on our liquidity,
the fact that we report charges of this nature could contribute to negative
market perceptions about us or our common stock. In addition, charges of this
nature may cause us to violate net worth or other covenants to which we may be
subject as a result of assuming pre-existing debt held by a target business or
by virtue of our obtaining post-combination debt financing.




Our
outstanding warrants may adversely affect the market price of our common stock
and make it more difficult to effect our initial business
combination.




The units
sold in our initial public offering included warrants to purchase 43,289,600
shares of common stock. SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker collectively hold warrants to purchase an
aggregate of 17,822,400 shares of our common stock (comprising the shares of
stock purchasable upon exercise of the 10,822,400 initial founder’s warrants and
the shares of common stock purchasable upon exercise of the 7,000,000 additional
founder’s warrants), and upon consummation of the co-investment Steel Partners
II, L.P. will hold an additional 3,000,000 co-investment warrants to purchase
shares of our common stock. If we issue common stock to complete our initial
business combination, the potential issuance of additional shares of common
stock on exercise of these warrants could make us a less attractive acquisition
vehicle to some target businesses. This is because exercise of any warrants will
increase the number of issued and outstanding shares of our common stock and
reduce the value of the shares issued to complete our initial business
combination. Our warrants may make it more difficult to complete our initial
business combination or increase the purchase price sought by one or more target
businesses. Additionally, the sale or possibility of the sale of the shares
underlying the warrants could have an adverse effect on the market price for our
common stock or our units, or on our ability to obtain other financing. If and
to the extent these warrants are exercised, you may experience dilution to your
holdings.




33


The
grant of registration rights to SP Acq LLC, Steel Partners II, L.P. and certain
of our directors may make it more difficult to complete our initial business
combination, and the future exercise of such rights may adversely affect the
market price of our common stock.




Pursuant
to an agreement we have entered into, (i) SP Acq LLC, Steel Partners II, L.P.
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker can demand that we
register the resale of the founder’s units, the founder’s shares and the initial
founder’s warrants, and the shares of common stock issuable upon exercise of the
initial founder’s warrants, (ii) SP Acq LLC and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker can demand that we register the additional founder’s
warrants and the shares of common stock issuable upon exercise of the additional
founder’s warrants and (iii) Steel Partners II, L.P. can demand that we register
the resale of the co-investment units, the co-investment shares and the
co-investment warrants and the shares of common stock issuable upon exercise of
the co-investment warrants. The registration rights will be exercisable with
respect to the founder’s units, the founder’s shares, the initial founder’s
warrants and shares of common stock issuable upon exercise of such warrants, the
co-investment units, the co-investment shares and co-investment warrants and
shares of common stock issuable upon exercise of such warrants at any time
commencing three months prior to the date on which the relevant securities are
no longer subject to transfer restrictions, and with respect to the additional
founder’s warrants and the underlying shares of common stock at any time after
the execution of a definitive agreement for an initial business combination. We
will bear the cost of registering these securities. If SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker
exercise their registration rights in full, there will be an additional
13,822,400 shares of common stock (including 3,000,000 co-investment shares) and
up to 20,822,400 shares (including 3,000,000 shares issuable upon the exercise
of co-investment warrants) of common stock issuable on exercise of the warrants
eligible for trading in the public market. The registration and availability of
such a significant number of securities for trading in the public market may
have an adverse effect on the market price of our common stock. In addition, the
existence of the registration rights may make our initial business combination
more costly or difficult to conclude. This is because the stockholders of the
target business may increase the equity stake they seek in the combined entity
or ask for more cash consideration to offset the negative impact on the market
price of our common stock that is expected when the securities owned by SP Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker are registered.




If
adjustments are made to the warrants, you may be deemed to receive a taxable
distribution without the receipt of any cash.




U.S.
holders of units or warrants may, in certain circumstances, be deemed to have
received distributions includible in income if adjustments are made to the
warrants, even though holders would have not received any cash or property as a
result of such adjustments. In certain circumstances, the failure to provide for
such an adjustment may also result in a constructive distribution to you. In
addition, non-U.S. holders of units or warrants may, in certain circumstances,
be deemed to have received a distribution subject to U.S. federal withholding
tax requirements.




34


If
we are deemed to be an investment company, we must meet burdensome compliance
requirements and restrictions on our activities, which may increase the
difficulty of completing a business combination.




If we are
deemed to be an investment company under the Investment Company Act of 1940 (the
“Investment Company Act”), the nature of our investments and the issuance of our
securities may be subject to various restrictions. These restrictions may make
it difficult for us to complete our initial business combination. In addition,
we may be subject to burdensome compliance requirements and may have
to:


·
              register as an investment
      company;
 
 ·
              adopt a specific form of
      corporate structure; and
 
 ·
              report, maintain records and
      adhere to voting, proxy, disclosure and other
      requirements.




We do not
believe that our principal activities will subject us to the Investment Company
Act. In this regard, our agreement with the trustee states that proceeds in the
trust account will be invested only in “government securities” and one or more
money market funds, selected by us, which invest principally in either
short-term securities issued or guaranteed by the United States having a rating
in the highest investment category granted thereby by a recognized credit rating
agency at the time of acquisition or tax exempt municipal bonds issued by
governmental entities located within the United States. This investment
restriction is intended to facilitate our not being considered an investment
company under the Investment Company Act. If we are deemed to be subject to the
Investment Company Act, compliance with these additional regulatory burdens
would increase our operating expenses and could make our initial business
combination more difficult to complete.




The
loss of Mr. Lichtenstein could adversely affect our ability to complete our
initial business combination.




Our
ability to consummate a business combination is dependent to a large degree upon
Mr. Lichtenstein. We believe that our success depends on his continued service
to us, at least until we have consummated a business combination. Due to his
ownership of SP Acq LLC and his relationship with Steel Partners II, L.P., Mr.
Lichtenstein has incentives to remain with us. Nevertheless, we do not have an
employment agreement with him, or key-man insurance on his life. He may choose
to devote his time to other affairs, or may become unavailable to us for reasons
beyond his control, such as death or disability. The unexpected loss of his
services for any reason could have a detrimental effect on us.




The
NYSE Alternext US may delist our securities, which could limit investors’
ability to transact in our securities and subject us to additional trading
restrictions.




While our
securities are currently listed on the NYSE Alternext US, we cannot assure you
that our securities will continue to be listed. Additionally, it is likely that
the NYSE Alternext US would require us to file a new initial listing application
and meet its initial listing requirements, as opposed to its more lenient
continued listing requirements, at the time of our initial business combination.
We cannot assure you that we will be able to meet those initial listing
requirements at that time.




If the
NYSE Alternext US does not list our securities, or subsequently delists our
securities from trading, we could face significant consequences,
including:




·
              a limited availability for market
      quotations for our
securities;
 
 35
  ·
              reduced liquidity with respect to
      our securities;
 
 ·
              a determination that our common
      stock is a “penny stock,” which will require brokers trading in our common
      stock to adhere to more stringent rules and possibly result in a reduced
      level of trading activity in the secondary trading market for our common
      stock;
 
 ·
              limited amount of news and
      analyst coverage for our company;
and
 
 ·
              a decreased ability to issue
      additional securities or obtain additional financing in the
      future.




In
addition, we would no longer be subject to NYSE Alternext US rules, including
rules requiring us to have a certain number of independent directors and to meet
other corporate governance standards.




If
we acquire a target business with operations located outside the United States,
we may encounter risks specific to other countries in which such target business
operates.




If we
acquire a company that has operations outside the United States, we will be
exposed to risks that could negatively impact our future results of operations
following our initial business combination. The additional risks we may be
exposed to in these cases include, but are not limited to:




·
              tariffs and trade
      barriers;
 
 ·
              regulations related to customs
      and import/export matters;
 
 ·
              tax issues, such as tax law
      changes and variations in tax laws as compared to the
      U.S.;
 
 ·
              cultural and language
      differences;
 
 ·
              foreign exchange
      controls;
 
 ·
              crime, strikes, riots, civil
      disturbances, terrorist attacks and
wars;
 
 ·
              deterioration of political
      relations with the United States;
and
 
 ·
              new or more extensive
      environmental
regulation.




Foreign
currency fluctuations could adversely affect our business and financial
results.




In
addition, a target business with which we combine may do business and generate
sales within other countries. Foreign currency fluctuations may affect the costs
that we incur in such international operations. It is also possible that some or
all of our operating expenses may be incurred in non-U.S. dollar currencies. The
appreciation of non-U.S. dollar currencies in those countries where we have
operations against the U.S. dollar would increase our costs and could harm our
results of operations and financial condition.




36


Because
we must furnish our stockholders with target business financial statements
prepared in accordance with and reconciled to U.S. generally accepted accounting
principles, we will not be able to complete an initial business combination with
some prospective target businesses unless their financial statements are first
reconciled to U.S. generally accepted accounting principles.




The
federal securities laws require that a business combination meeting certain
financial significance tests include historical and/or pro forma financial
statement disclosure in periodic reports and proxy materials submitted to
stockholders. Our initial business combination must be with a target business
that has a fair market value of at least 80% of the sum of the balance in the
trust account plus the proceeds of the co-investment (excluding deferred
underwriting discounts and commissions of approximately $17.3 million) at the
time of our initial business combination. We will be required to provide
historical and/or pro forma financial information to our stockholders when
seeking approval of a business combination with one or more target businesses.
These financial statements must be prepared in accordance with, or be reconciled
to, U.S. generally accepted accounting principles, or GAAP, and the historical
financial statements must be audited in accordance with the standards of the
Public Company Accounting Oversight Board (United States), or PCAOB. If a
proposed target business, including one located outside of the U.S., does not
have financial statements that have been prepared in accordance with, or that
can be reconciled to, U.S. GAAP and audited in accordance with the standards of
the PCAOB, we will not be able to acquire that proposed target business. These
financial statement requirements may limit the pool of potential target
businesses with which we may combine.




ITEM 1B.   Unresolved Staff
Comments




Not
applicable




ITEM 2.   Properties




We
currently maintain our executive offices at 590 Madison Avenue, 32nd Floor, New
York, New York 10022. The cost for this space is included in the $10,000
per-month fee described above that Steel Partners, Ltd. charge us for office
space, administrative services and secretarial support from the consummation of
our initial public offering until the earlier of our consummation of a business
combination or our liquidation. Prior to the consummation of our initial public
offering, Steel Partners, Ltd. provided us with office space, administrative
services and secretarial support at no charge. We believe, based on rents and
fees for similar services in the New York City metropolitan area, that the fee
that will be charged by Steel Partners, Ltd. is at least as favorable as we
could have obtained from an unaffiliated person. We consider our current office
space adequate for our current operations.




ITEM 3.   Legal
Proceedings




None




ITEM 4.   Submission of Matters to a Vote of
Security Holders




Not
applicable.


37




PART
II


ITEM 5.   Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities




Our
equity securities trade on the NYSE Alternext US. Each of our units consists of
one share of common stock and one warrant and trades on the NYSE Alternext US
under the symbol “DSP.U.” On November 2, 2007, the warrants and common stock
underlying our units began to trade separately on the NYSE Alternext US under
the symbols “DSP.WS” and “DSP,” respectively. Each warrant entitles the holder
to purchase one share of our common stock at a price of $7.50 commencing on the
consummation of a business combination, provided that there is an effective
registration statement covering the shares of common stock underlying the
warrants in effect. The warrants expire on October 10, 2012, unless earlier
redeemed.




The
following table sets forth, for the calendar quarters indicated, the high and
low sales price of our units, common stock and warrants as reported on the NYSE
Alternext US.





Units
                  
                  
                  Common Stock
                  
                  
                  WarrantsHigh
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  LowFourth
      Quarter of year ended December 31, 2007 (from October 10,
      2007)
                  
                  $
                  10.20
                  
                  
                  $
                  9.76
                  
                  
                  $
                  9.25
                  
                  
                  $
                  9.00
                  
                  
                  $
                  1.00
                  
                  
                  $
                  0.85First
      Quarter of year ended December 31, 2008
                  
                  
                  10.25
                  
                  
                  
                  9.78
                  
                  
                  
                  9.34
                  
                  
                  
                  9.10
                  
                  
                  
                  0.94
                  
                  
                  
                  0.56Second
      Quarter of year ended December 31, 2008
                  
                  
                  9.95
                  
                  
                  
                  9.70
                  
                  
                  
                  9.37
                  
                  
                  
                  9.11
                  
                  
                  
                  0.75
                  
                  
                  
                  0.54Third
      Quarter of year ended December 31, 2008
                  
                  
                  9.95
                  
                  
                  
                  9.02
                  
                  
                  
                  9.44
                  
                  
                  
                  9.10
                  
                  
                  
                  0.60
                  
                  
                  
                  0.26Fourth
      Quarter of year ended December 31, 2008
                  
                  $
                  9.50
                  
                  
                  $
                  8.77
                  
                  
                  $
                  9.29
                  
                  
                  $
                  8.60
                  
                  
                  $
                  0.30
                  
                  
                  $
                  0.05





Holders
of Common Equity




On March
9, 2009, there were eight holders of record of our common stock, one holder of
record of our units and eight holders of record of our warrants. Such numbers do
not include beneficial owners holding shares, warrants or units through nominee
names.




Dividends




Except
for the unit dividend of 0.15 units for each unit outstanding that was effected
on August 8, 2007 and the unit dividend of one-third of a unit for each
unit that was outstanding that was effected on September 4, 2007, we have
not paid any dividends on our common stock to date and we do not intend to pay
cash dividends prior to the consummation of a business combination. After we
complete our initial business combination, the payment of dividends will depend
on our revenues and earnings, if any, capital requirements and general financial
condition. The payment of dividends after our initial business combination will
be within the discretion of our then-board of directors. Our board of directors
currently intends to retain any earnings for use in our business operations and,
accordingly, we do not anticipate the board declaring any dividends in the
foreseeable future.




Recent
Sales of Unregistered Securities




None





Securities
Authorized for Issuance under Equity Compensation Plans




We have
no compensation plans under which equity securities are authorized for
issuance.


38




Use
of Proceeds from our Initial Public Offering




On
October 16, 2007, we closed our initial public offering of 40,000,000 units
with each unit consisting of one share of common stock and one warrant, each to
purchase one share of our common stock at a price of $7.50 per share. On
October 31, 2007, the underwriters purchased an additional 3,289,600 units
pursuant to an over-allotment option. All of the units registered were sold at
an offering price of $10.00 per unit and generated gross proceeds of
$432,896,000. The securities sold in our initial public offering were registered
under the Securities Act of 1933 on a registration statement on Form S-1 (No.
333-142696). The SEC declared the registration statement effective on
October 10, 2007. UBS Investment Bank acted as sole bookrunning manager and
representative of Ladenburg Thalmann & Co. Inc. and Jefferies &
Company.




We
received net proceeds of $426,909,120 from our initial public offering
(including proceeds from the exercise by the underwriters of their
over-allotment option). Of those net proceeds, approximately $17,315,840 is
attributable to the deferred underwriters’ discount. We retained $1,000,000 of
the proceeds to pay offering expenses and for working capital purposes and
deposited $425,909,120 into the Trust account. The funds in the Trust account
will be part of the funds distributed to our public stockholders in the event we
are unable to complete a business combination. Unless and until a business
combination is consummated, and except for a portion of the interest earned on
the funds in the Trust account that is available to the Company, the proceeds
held in the Trust account will not be available to us. The net proceeds
deposited into the Trust account remain on deposit in the Trust account and
earned $9,320,699 in interest through December 31, 2008. Pursuant to the terms
of the investment management trust agreement, $3,500,000 of Trust interest
income has been released to the Company for working capital through December 31,
2008. Through December 31, 2008, the Company has paid a total of $4,525,000 in
taxes, of which the $4,525,000 has been reimbursed by the Trust.  The
balance in the Trust account plus restricted cash not held in trust at December
31, 2008 was $427,314,154.




39


ITEM 6.   Selected Financial
Data




The
following table summarizes the relevant financial data for our business and
should be read with our financial statements, which are included in this
report.





Statement of Income Data:
                    
                    For the yearendedDecember 31,2008
                    
                    
                    For the periodfromFebruary 14,2007(date ofinception) toDecember 31,2007Formation
      and operating costs
                    
                    $
                    1,052,648
                    
                    
                    $
                    264,373Loss
      from operations
                    
                    
                    (1,052,648
                    )
                    
                    
                    (264,373
                    )Interest
      income
                    
                    
                    6,413,995
                    
                    
                    
                    2,950,473Interest
      expense
                    
                    
                    6,146
                    
                    
                    
                    9,435Income
      before income taxes
                    
                    
                    5,355,201
                    
                    
                    
                    2,676,665Provision
      for income taxes
                    
                    
                    (3,156,565
                    )
                    
                    
                    (1,210,372
                    )Net
      income
                    
                    
                    2,198,636
                    
                    
                    
                    1,466,293Deferred
      interest, attributable to common stock subject to possible
      conversion
                    
                    
                    (421,510
                    )
                    
                    
                    —Net
      income attributable to common stock
                    
                    $
                    1,777,126
                    
                    
                    $
                    1,466,293Net
      income per common share, basic and diluted
                    
                    $
                    0.04
                    
                    
                    $
                    0.09Shares
      used in computing net income per share, basic and diluted
                    
                    
                    41,125,121
                    
                    
                    
                    17,245,726







Balance Sheet Data:
                    
                    As ofDecember 31,2008
                    
                    
                    As ofDecember 31,2007Working
      capital (1)
                    
                    $
                    2,189,291
                    
                    
                    $
                    1,270,283Total
      assets
                    
                    
                    429,776,214
                    
                    
                    
                    428,945,449Total
      liabilities
                    
                    
                    17,588,609
                    
                    
                    
                    18,956,480Value
      of common stock which may be redeemed for cash at conversion
      value
                    
                    
                    127,772,726
                    
                    
                    
                    127,772,726Deferred
      interest, attributable to common stock subject to possible
      conversion
                    
                    
                    421,510
                    
                    
                    
                    —Stockholders’
      equity
                    
                    
                    283,993,369
                    
                    
                    
                    282,216,243





(1)
              Does
      not include deferred underwriters’ fee of $17,315,840 which will be paid
      from amounts held in trust only upon the consummation of a business
      combination.





ITEM 7.   Management’s Discussion and Analysis
of Financial Condition and Results of Operations




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.




40


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;
 
 ·
              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.




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 year ended December 31, 2008 was $2,198,636,
which consisted of $ 6,413,995 in interest income, partially offset by
$1,052,648 in loss from operations, $6,146 in interest expense and $3,156,565 in
income taxes and capital based taxes.  Net income for the period from
February 14, 2007 (inception) through December 31, 2007 was $1,466,293, which
consisted of $2,950,473 in interest income, partially offset by $264,373 in
formation and operating expenses, $9,435 in interest expense and $1,210,372 in
taxes on income.  Net income for the period from February 14, 2007
(inception) through December 31, 2008 was $3,664,929, which consisted of
$9,364,468 in interest income partially offset by $1,317,021 in formation and
loss from operations, $15,581 in interest expense and $4,366,937 in taxes on
income. Through December 31, 2008, we did not engage in any significant
operations.  Our entire activity from inception through December 31,
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 $1,095,604 and underwriting discounts and commissions of
$30,302,720, together (ii) with $7,000,000 from SP Acq LLC’s investment in the
additional founder’s warrants, were $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. Due to the unavailability of short-term U.S.
Treasury Bills because of the dislocation in the financial markets, as of
December 31, 2008, assets of $426,754,319 held in the Trust account were held in
a 100% FDIC guaranteed non-interest bearing account at JP Morgan Chase Bank,
N.A.  On January 12, 2009, $426,744,177 of the assets held in the
Trust were invested in U.S. Treasury Bills, bearing a per annum interest rate of
0.04% which matured on March 5, 2009. On March
5, 2009, $426,459,219 of the assets held in the Trust were invested in U.S.
Treasury Bills, bearing a per annum interest rate of 0.21% and maturing on May
7, 2009.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.




41


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 $3.5 million 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
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.





Critical
Accounting Policies





The Company’s significant accounting
policies are more fully described in Note B to the 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 judgment by management.  As a
result, the 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 the determination of
certain estimates.  During the year ended December 31, 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 SFAS 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 7A.   Quantitative and Qualitative
Disclosures About Market Risk




As of
December 31, 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 December 31, 2008, the balance in the trust
account was $426,754,319. 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. Due to
the unavailability of short-term U.S. Treasury Bills because of the dislocation
in the financial markets, as of December 31, 2008, assets in the Trust account
of $426,754,319 were held in a 100% FDIC guaranteed non-interest bearing account
at JP Morgan Chase Bank, N.A. On January 12, 2009, $426,744,177 of the assets
held in the Trust were invested in U.S. Treasury Bills, bearing a per annum
interest rate of 0.04%, which matured on March 5, 2009. On March 5, 2009,
$426,459,219 of the assets held in the Trust were invested in U.S. Treasury
Bills, bearing a per annum interest rate of 0.21% and maturing on May 7, 2009. A
one percentage point change in the interest rate received on our cash of
$426,754,319 at December 31, 2008 would result in an increase or decrease of up
to approximately $1,000,000 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 2009 or additional actions the Company could
undertake in response to changes in interest rates.




42


ITEM 8.   Financial Statements and
Supplementary Data




Report of Independent Registered
Public Accounting Firm


To the
Board of Directors and Stockholders


SP
Acquisition Holdings, Inc.





We have
audited the accompanying balance sheets of SP Acquisition Holdings, Inc. (a
corporation in the development stage) as of December 31, 2008 and 2007, and
the related statements of operations, stockholders’ equity and cash flows for
the year ended December 31, 2008, for the period from February 14, 2007
(inception) to December 31, 2007, and for the period from February 14, 2007
(inception) to December 31, 2008. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, such financial statements present fairly, in all material respects, the
financial position of SP Acquisition Holdings, Inc. (a corporation in the
development stage) as of December 31, 2008 and 2007, and its results of
operations and cash flows for the year ended December 31, 2008, for the period
from February 14, 2007 (inception) to December 31, 2007, and for the period from
February 14, 2007 (inception) to December 31, 2008, in conformity with
accounting principles generally accepted in the United States of
America.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of SP Acquisition
Holdings, Inc.'s (a corporation in the development stage) internal control over
financial reporting as of December 31, 2008, based on criteria established
in “Internal Control — Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated March
10, 2009 expressed an unqualified opinion thereon.




/s/ J.H.
Cohn LLP




March 10,
2009




43


SP
ACQUISITION HOLDINGS, INC.
 (a
corporation in the development stage)
  BALANCE
SHEETS
 
 December
      31,
                                          2008
                                        
                                        
                                        December
      31,
                                          2007Current assets
      :Cash
      and cash equivalents
                                        
                                        $
                                        2,431,303
                                        
                                        
                                        $
                                        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
                                        
                                        
                                        —
                                        
                                        
                                        
                                        989,183Accrued
      interest receivable
                                        
                                        
                                        —
                                        
                                        
                                        
                                        469,705Total
      trust account, interest available for working capital and
      taxes
                                        
                                        
                                        —
                                        
                                        
                                        
                                        1,458,888Trust
      account attributable to deferred underwriter’s fee,
    restricted
                                        
                                        
                                        17,315,840
                                        
                                        
                                        
                                        17,315,840Other
      receivable
                                        
                                        
                                        —
                                        
                                        
                                        
                                        26,323Prepaid
      expenses
                                        
                                        
                                        30,757
                                        
                                        
                                        
                                        108,024Total
      current assets
                                        
                                        
                                        19,777,900
                                        
                                        
                                        
                                        20,226,763Non current assets:Cash
      and cash equivalents, restricted
                                        
                                        
                                        429,194
                                        
                                        
                                        
                                        —Trust
      account, restrictedCash
      and cash equivalents held in Trust account
                                        
                                        
                                        409,438,479
                                        
                                        
                                        
                                        408,593,280Tax
      overpayment due to Trust account
                                        
                                        
                                        130,641
                                        
                                        
                                        
                                        —Trust
      account, restricted
                                        
                                        
                                        409,569,120
                                        
                                        
                                        
                                        408,593,280Deferred
      tax assets
                                        
                                        
                                        —
                                        
                                        
                                        
                                        125,406Total
      assets
                                        
                                        $
                                        429,776,214
                                        
                                        
                                        $
                                        428,945,449Current liabilities
      :Accounts
      payable
                                        
                                        $
                                        22,743
                                        
                                        
                                        $
                                        449,194Note
      payable to affiliate
                                        
                                        
                                        —
                                        
                                        
                                        
                                        250,000Advances
      payable to affiliate
                                        
                                        
                                        5,132
                                        
                                        
                                        
                                        26,818Interest
      payable to affiliate
                                        
                                        
                                        —
                                        
                                        
                                        
                                        9,435Accrued
      expenses
                                        
                                        
                                        223,588
                                        
                                        
                                        
                                        96,915Income
      taxes payable
                                        
                                        
                                        21,306
                                        
                                        
                                        
                                        808,278Other
      payables - deferred underwriters’ fee
                                        
                                        
                                        17,315,840
                                        
                                        
                                        
                                        17,315,840Total
      current liabilities
                                        
                                        
                                        17,588,609
                                        
                                        
                                        
                                        18,956,480Common
      stock, subject to possible conversion, 12,986,879 shares at conversion
      value:
                                        
                                        
                                        127,772,726
                                        
                                        
                                        
                                        127,772,726Deferred
      interest, attributable to common stock subject to possible
      conversion
                                        
                                        
                                        421,510
                                        
                                        
                                        
                                        —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; 54,112,000 shares
      issued and outstanding (including 12,986,879 shares subject to possible
      conversion)
                                        
                                        
                                        41,125
                                        
                                        
                                        
                                        41,125Additional
      paid-in capital
                                        
                                        
                                        280,287,315
                                        
                                        
                                        
                                        280,708,825Retained
      earnings accumulated during the development stage
                                        
                                        
                                        3,664,929
                                        
                                        
                                        
                                        1,466,293Total
      stockholders’ equity
                                        
                                        
                                        283,993,369
                                        
                                        
                                        
                                        282,216,243Total
      liabilities and stockholders’ equity
                                        
                                        $
                                        429,776,214
                                        
                                        
                                        $
                                        428,945,449
 
 The
accompanying notes are an integral part of these financial
statements.
  44
  SP
ACQUISITION HOLDINGS, INC.
 (a
corporation in the development stage)
  STATEMENTS
OF INCOME
  For the Year
                              Ended
                              December 31,
                              2008
                            
                            
                            For the Period
                              from February 14,
                              2007 (inception) to
                              December 31,
                              2007
                            
                            
                            For the Period
                              from February 14,
                              2007 (inception) to
                              December 31,
                              2008Formation
      and operating costs
                            
                            $
                            1,052,648
                            
                            
                            $
                            264,373
                            
                            
                            $
                            1,317,021Loss
      from operations
                            
                            
                            (1,052,648
                            )
                            
                            
                            (264,373
                            )
                            
                            
                            (1,317,021
                            )Interest
      income – Trust
                            
                            
                            6,376,306
                            
                            
                            
                            2,944,393
                            
                            
                            
                            9,320,699Interest
      income - other
                            
                            
                            37,689
                            
                            
                            
                            6,080
                            
                            
                            
                            43,769Interest
      expense
                            
                            
                            (6,146
                            )
                            
                            
                            (9,435
                            )
                            
                            
                            (15,581
                            )Income
      before income taxes
                            
                            
                            5,355,201
                            
                            
                            
                            2,676,665
                            
                            
                            
                            8,031,866Provision
      for income taxes
                            
                            
                            (3,156,565
                            )
                            
                            
                            (1,210,372
                            )
                            
                            
                            (4,366,937
                            )Net
      income
                            
                            
                            2,198,636
                            
                            
                            
                            1,466,293
                            
                            
                            
                            3,664,929Deferred
      interest, attributable to common stock subject to possible
      conversion
                            
                            
                            (421,510
                            )
                            
                            
                            —
                            
                            
                            
                            (421,510
                            )Net
      income attributable to common stock
                            
                            $
                            1,777,126
                            
                            
                            $
                            1,466,293
                            
                            
                            $
                            3,243,419Net
      income attributable to common stock per common share, basic and
      diluted
                            
                            $
                            0.04
                            
                            
                            $
                            0.09Weighted
      average number of common shares outstanding - excluding shares subject to
      possible conversion, basic and diluted
                            
                            
                            41,125,121
                            
                            
                            
                            17,245,726
 
 The
accompanying notes are an integral part of these financial
statements.
  45
 
 SP
ACQUISITION HOLDINGS, INC.
 (a
corporation in the development stage)
  STATEMENTS
OF CASH FLOWS
  For the Year ended
                                      December 31,
                                      2008
                                    
                                    
                                    For the Period from
                                      February 14,
                                      2007 (inception) to
                                      December 31, 2007
                                    
                                    
                                    For the Period
                                      from February
                                      14,
                                      2007 (inception) to
                                      December 31,
                                      2008Cash
      flows from operating activities:Net
      income
                                    
                                    $
                                    2,198,636
                                    
                                    
                                    $
                                    1,466,293
                                    
                                    
                                    $
                                    3,664,929Adjustments
      to reconcile net income to net cash provided by operating
      activities:Deferred
      tax assets
                                    
                                    
                                    125,406
                                    
                                    
                                    
                                    (125,406
                                    )
                                    
                                    
                                    -Changes
      in operating asset and liability accounts:Accrued
      interest receivable
                                    
                                    
                                    469,705
                                    
                                    
                                    
                                    (469,705
                                    )
                                    
                                    
                                    -Other
      receivable
                                    
                                    
                                    26,323
                                    
                                    
                                    
                                    (26,323
                                    )
                                    
                                    
                                    -Prepaid
      expenses
                                    
                                    
                                    77,267
                                    
                                    
                                    
                                    (108,024
                                    )
                                    
                                    
                                    (30,757
                                    )Accounts
      payable
                                    
                                    
                                    (42,460
                                    )
                                    
                                    
                                    65,203
                                    
                                    
                                    
                                    22,743Advances
      payable to affiliate
                                    
                                    
                                    (21,686
                                    )
                                    
                                    
                                    26,818
                                    
                                    
                                    
                                    5,132Interest
      payable to affiliate
                                    
                                    
                                    (9,435
                                    )
                                    
                                    
                                    9,435
                                    
                                    
                                    
                                    -Accrued
      expenses
                                    
                                    
                                    126,673
                                    
                                    
                                    
                                    96,915
                                    
                                    
                                    
                                    223,588Income
      taxes payable
                                    
                                    
                                    (786,972
                                    )
                                    
                                    
                                    808,278
                                    
                                    
                                    
                                    21,306Net
      cash provided by operating activities
                                    
                                    
                                    2,163,457
                                    
                                    
                                    
                                    1,743,484
                                    
                                    
                                    
                                    3,906,941Cash
      flows from investing activities:Cash
      and cash equivalents, restricted
                                    
                                    
                                    (429,194
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (429,194
                                    )Cash
      and cash equivalents held in Trust account, interest available for working
      capital and taxes
                                    
                                    
                                    989,183
                                    
                                    
                                    
                                    (989,183
                                    )
                                    
                                    
                                    -Trust
      account, restricted
                                    
                                    
                                    (975,840
                                    )
                                    
                                    
                                    (425,909,120
                                    )
                                    
                                    
                                    (426,884,960
                                    )Net
      cash used in investing activities
                                    
                                    
                                    (415,851
                                    )
                                    
                                    
                                    (426,898,303
                                    )
                                    
                                    
                                    (427,314,154
                                    )Cash
      flows from financing activities:Proceeds
      from issuance of founder’s units
                                    
                                    
                                    -
                                    
                                    
                                    
                                    25,000
                                    
                                    
                                    
                                    25,000Proceeds
      from issuance of additional founder’s warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    7,000,000
                                    
                                    
                                    
                                    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
                                    
                                    
                                    -
                                    
                                    
                                    
                                    432,896,000
                                    
                                    
                                    
                                    432,896,000Payment
      of offering costs
                                    
                                    
                                    (383,991
                                    )
                                    
                                    
                                    (13,698,493
                                    )
                                    
                                    
                                    (14,082,484
                                    )Net
      cash provided by (used in) financing activities
                                    
                                    
                                    (633,991
                                    )
                                    
                                    
                                    426,472,507
                                    
                                    
                                    
                                    425,838,516Net
      increase in cash and cash equivalents
                                    
                                    
                                    1,113,615
                                    
                                    
                                    
                                    1,317,688
                                    
                                    
                                    
                                    2,431,303Cash
      and cash equivalents at the beginning of the period
                                    
                                    
                                    1,317,688
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Cash
      and cash equivalents at the end of the period
                                    
                                    $
                                    2,431,303
                                    
                                    
                                    $
                                    1,317,688
                                    
                                    
                                    $
                                    2,431,303Supplemental
      disclosure of non-cash financing activities:Deferred
      offering costs included in accounts payable
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    383,991
                                    
                                    
                                    $
                                    383,991Accrual
      of deferred underwriters’ discount
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    17,315,840
                                    
                                    
                                    $
                                    17,315,840Cash
      payments for Federal, state and local income taxes
                                    
                                    $
                                    3,997,500
                                    
                                    
                                    $
                                    527,500
                                    
                                    
                                    $
                                    4,525,000
 
 The
accompanying notes are an integral part of these financial
statements.
  46
 
 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’
                          EquityProceeds
      from founder’s units issued at $0.003 per unit on March 22,
      2007
                        
                        
                        7,500,000
                        
                        
                        $
                        7,500
                        
                        
                        $
                        17,500
                        
                        
                        $
                        —
                        
                        
                        $
                        25,000Unit
      dividend of 0.15 units issued for each outstanding share of common stock
      declared on August 8, 2007
                        
                        
                        1,125,000
                        
                        
                        
                        1,125
                        
                        
                        
                        (1,125
                        )
                        
                        
                        —
                        
                        
                        
                        —Unit
      dividend of one third of a unit issued for each outstanding share of
      common stock declared on September 4, 2007
                        
                        
                        2,875,000
                        
                        
                        
                        2,875
                        
                        
                        
                        (2,875
                        )
                        
                        
                        —
                        
                        
                        
                        —Proceeds
      from issuance of 40,000,000 units, net of underwriters’ commissions and
      offering expenses of $29,030,049 at $10.00 per unit 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 at $10.00 per unit 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
                        )Founder’s
      Units forfeited on October 31, 2007
                        
                        
                        (677,600
                        )
                        
                        
                        (678
                        )
                        
                        
                        678Net
      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
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        (421,510
                        )
                        
                        
                        —
                        
                        
                        
                        (421,510
                        )Net
      income
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        2,198,636
                        
                        
                        
                        2,198,636Balances
      at December 31, 2008
                        
                        
                        41,125,121
                        
                        
                        $
                        41,125
                        
                        
                        $
                        280,287,315
                        
                        
                        $
                        3,664,929
                        
                        
                        $
                        283,993,369
 
 The
accompanying notes are an integral part of these financial
statements.
  47
 
 SP
Acquisition Holdings, Inc.
 (a
corporation in the development stage)
  Notes
to Financial Statements
  NOTE
A — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
  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 October 10, 2007. The Company consummated the Offering on
October 16, 2007 and recorded proceeds of $370,969,951, net of the underwriters’
discount 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’ fee 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 Initial
Business Combination or the liquidation of the Company. As of December 31, 2008,
the balance in the Trust account plus restricted cash and cash equivalents not
held in the Trust account was $427,314,154. Through December 31, 2008, the Trust
has released $3,500,000 of interest income to the Company and the Company has
paid a total of $4,525,000 in taxes of which $4,525,000 has been reimbursed by
the Trust.
  48
  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 common stock to cash at a
per share conversion price equal to the aggregate amount then in the Trust
account (before payment of deferred underwriters fees and including interest,
net of any income taxes payable on such interest, which shall be paid from the
Trust, and net of interest income of up to $3.5 million earned on the Trust
balance previously released to the Company to fund working capital
requirements), 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
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, 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.
  49
  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 financial statements, the Company has incurred
substantial organizational, legal, accounting and offering costs in the pursuit
of its financing and acquisition plans and expects to incur additional costs in
pursuit of its acquisition plans. As of December 31, 2008, the Company had cash
on hand of $2,431,303 as well as an aggregate of $427,314,154 of funds held in
Trust and restricted cash and cash equivalents. 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 December 31, 2008, $3,500,000 of Trust interest has been
released to the Company. Management has reviewed its cash requirements as of
December 31, 2008 and believes that its cash on hand, along with the funds
available to it from the interest income from the Trust (See Note A) is
sufficient to cover its expenses for the next twelve months.
 
 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 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
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 have been excluded
from the calculation of basic earnings per share since such shares, if redeemed,
only participate in their pro rata share of the trust earnings. Earnings per
common share amounts, assuming dilution (“Diluted EPS”), gives effect to
dilutive 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. In accordance with SFAS No. 128,
the Company has not considered the effect of its 61,112,000 outstanding Warrants
in the calculation of diluted earnings per share since the exercise of the
Warrants is contingent upon the occurrence of future events.
  50
  5.  
Reclassification:
  The
Company reclassified certain prior amounts to conform to the current periods
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 currently available for current operations of the
Company.  These reclassifications had 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.
  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.  
Cash and
Cash Equivalents-Restricted:
  Pursuant
to the terms of the investment management trust agreement, The Company is
permitted to have released from the Trust account interest income to pay income
taxes on interest income earned on the Trust account balance.  As of
December 31, 2008, the Company transferred excess amounts from the Trust account
totaling $429,194 for the payment of Federal estimated taxes due on January 15,
2009.  These amounts are reflected as cash and cash equivalents,
restricted in the accompanying balance sheet.
 
 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 tangible assets 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.
  10.  
Income
Taxes:
  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.
  51
 
 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.
  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
December 2007, the FASB issued Statement No.160, “Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51,” (“SFAS
160”). SFAS 160 establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary (previously referred to as minority
interests). SFAS 160 also requires that a retained noncontrolling interest upon
the deconsolidation of a subsidiary be initially measured at its fair value.
Upon adoption of SFAS 160, the Company would be required to report any
noncontrolling interests as a separate component of stockholders’ equity. The
Company would also be required to present any net income allocable to
noncontrolling interests and net income attributable to the stockholders of the
Company separately in its statements of operations. SFAS 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. SFAS 160 requires retroactive adoption of the
presentation and disclosure requirements for existing minority interests. All
other requirements of SFAS 160 shall be applied prospectively. SFAS 160 would
have an impact on the presentation and disclosure of the noncontrolling
interests of any non wholly-owned businesses acquired in the
future.
 
 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.
  52
  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.
  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. Of
this fee, $12,000,000 and $986,880 were paid at the closing of the Offering and
over-allotment 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 December 31,
2008, 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 subject to the terms
of the Founder’s Unit Purchase Agreement (the “Purchase Agreement”) date March
30, 2007 and the Founder’s Unit Adjustment Agreement (the “Adjustment
Agreement”) dated August 8, 2007, 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.
  The
agreements referred to above provide for the Founders to maintain a 20% interest
in the Company after taking into consideration the number of units ultimately
sold in the initial public offering (“IPO”). In order for the founders to hold
the number of shares necessary to maintain a 20% interest in the Company,
677,600 units were forfeited and cancelled on the date of the IPO, leaving the
founders with 10,822,400 or 20% of 54,112,000 units outstanding at that time.
The Company accounted for the transaction employing the price associated with
the original sale because in the opinion of management, the adjustment in the
number of shares was contemplated in the Purchase Agreement and Adjustment
Agreement entered into prior to the IPO.
  The
Company has issued warrants to purchase 11,500,000 common shares at $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.
  53
  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 was due on December 31, 2007. Steel Partners Ltd. confirmed on May 7,
2008 that the promissory note was not in default and that the payment may be
made on or before December 31, 2008. Interest payable of $15,581 had been
accrued on this note through June 27, 2008, at which time the note and accrued
interest were paid in full.
  Advances
payable of $5,132 and $26,818 at December 31, 2008 and 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
repaid the advance on January 8, 2009.
  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 that commenced on October 16,
2007. The Company has incurred $120,000 and $25,000 for such services through
December 31, 2008 and 2007, respectively, of which $60,000 and $25,000 are
included in accrued expenses at December 31, 2008 and 2007,
respectively.  The Company remitted payment of $60,000 to Steel
Partners, Ltd on January 8, 2009.
  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.
  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
their 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 December 31, 2008.
  54
  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
December 31, 2008.
  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:
  December 31,
                          2008
                        
                        
                        December 31,
                          2007Initial
      Founder’s Warrants
                        
                        
                        10,822,400
                        
                        
                        
                        10,822,400Additional
      Founder’s Warrants
                        
                        
                        7,000,000
                        
                        
                        
                        7,000,000Public
      Warrants
                        
                        
                        43,289,600
                        
                        
                        
                        43,289,600Totals
                        
                        
                        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
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. The warrants will not be
exercisable and the Company will not be obligated to issue shares of common
stock upon exercise of the warrants by a holder unless, at the time of such
exercise, an effective registration statement under the Securities Act covering
the shares of common stock issuable upon exercise of the warrants and a current
prospectus relating to them is available. Although the Company has undertaken in
the warrant agreement, and therefore has a contractual obligation, to use its
best efforts to have an effective registration statement covering shares of
common stock issuable upon exercise of the warrants from the date the warrants
become exercisable and to maintain a current prospectus relating to that common
stock until the warrants expire or are redeemed, and the Company intends to
comply with its undertaking, the Company cannot assure you that it will be able
to do so. 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.
  55
  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 — INCOME TAXES
  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 and consist of the
following:
  12/31/2008
                            
                            
                            12/31/2007Deferred
      tax assetsStart
      up and organization costs
                            
                            $
                            630,352
                            
                            
                            $
                            125,406Total
      deferred tax asset
                            
                            
                            630,352
                            
                            
                            
                            125,406Less:
      valuation allowance
                            
                            
                            (630,352
                            )
                            
                            
                            —Net
      deferred tax assets
                            
                            $
                            —
                            
                            
                            $
                            125,406
 
 The
difference between the provision for income taxes and the amounts computed by
applying the Federal statutory income taxes to the income before tax are
explained below:
  12/31/2008
                        
                        
                        12/31/2007Tax
      at Federal statutory rate
                        
                        
                        34.0
                        %
                        
                        
                        34.0
                        %State
      and local taxes, net of Federal benefit
                        
                        
                        11.7
                        %
                        
                        
                        11.2
                        %Change
      in valuation allowance
                        
                        
                        13.2
                        %
                        
                        
                        —
                        %Provision
      for taxes
                        
                        
                        58.9
                        %
                        
                        
                        45.2
                        %
 
 The
provision for income taxes consists of the following:
  12/31/2008
                                  
                                  
                                  12/31/2007CurrentFederal
                                  
                                  $
                                  1,739,494
                                  
                                  
                                  $
                                  831,812State
      and local
                                  
                                  
                                  1,291,665
                                  
                                  
                                  
                                  503,966Total
      current tax expense
                                  
                                  
                                  3,031,159
                                  
                                  
                                  
                                  1,335,778DeferredFederal
                                  
                                  
                                  93,094
                                  
                                  
                                  
                                  (93,094
                                  )State
      and local
                                  
                                  
                                  32,312
                                  
                                  
                                  
                                  (32,312
                                  )Total
      deferred tax expense (benefit)
                                  
                                  
                                  125,406
                                  
                                  
                                  
                                  (125,406
                                  )Total
      provision for income taxes
                                  
                                  $
                                  3,156,565
                                  
                                  
                                  $
                                  1,210,372
 
 Deferred
tax assets and liabilities are computed for temporary differences between the
financial statement and tax bases of assets and liabilities based on enacted tax
laws and rates applicable to the periods in which the temporary 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.
  56
  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”). The
Company has identified its federal tax return and its state and city tax returns
in New York as “major” tax jurisdictions, as defined. As per FIN 48, the Company
has evaluated its tax positions and has determined that there are no uncertain
tax positions requiring recognition in the Company’s financial statements. Since
the Company was incorporated on February 14, 2007 the evaluation was performed
for the period from inception through December 31, 2008. The Company believes
that its income tax positions and deductions would be sustained on audit and
does not anticipate any adjustments that would result in a material change to
its financial position. There were no unrecognized tax benefits as of December
31, 2008. The Company has had no tax examinations since its inception, February
14, 2007.
  The
Company’s policy for recording interest and penalties associated with audits is
to record such items as a component of income tax expense. There were no amounts
accrued for penalties or interest as of or during the period from February 14,
2007 (inception) through December 31, 2008. The Company does not expect its
unrecognized tax benefit position to change during the next twelve months and is
currently unaware of any issues that could result in significant payments,
accruals or material deviations from its position. The adoption of the
provisions of FIN 48 did not have a material impact on the Company’s financial
position, results of operations and cash flows.
  NOTE
I — UNAUDITED QUARTERLY FINANCIAL RESULTS
  Quarterly Financial Information:
                                
                                For the Quarter
                                  ended
                                  March 31, 2008
                                
                                
                                For the
                                  Quarterended
                                  June 30,2008
                                
                                
                                For the Quarter
                                  ended September
                                  30,2008
                                
                                
                                For the Quarter
                                  ended December
                                  31, 2008Formation
      and operating costs
                                
                                $
                                197,464
                                
                                
                                $
                                301,765
                                
                                
                                $
                                344,539
                                
                                
                                $
                                208,880Loss
      from operations
                                
                                
                                ( 197,464
                                )
                                
                                
                                (301,765
                                )
                                
                                
                                (344,539
                                )
                                
                                
                                (208,880
                                )Interest
      income
                                
                                
                                2,654,509
                                
                                
                                
                                1,712,747
                                
                                
                                
                                1,716,871
                                
                                
                                
                                329,868Interest
      expense
                                
                                
                                (3,125
                                )
                                
                                
                                (3,021
                                )
                                
                                
                                -
                                
                                
                                
                                -Income
      before income taxes
                                
                                
                                2,453,920
                                
                                
                                
                                1,407,961
                                
                                
                                
                                1,372,332
                                
                                
                                
                                120,988(Provision)
      credit for income taxes
                                
                                
                                (1,477,996
                                )
                                
                                
                                (698,507
                                )
                                
                                
                                (1,088,526
                                )
                                
                                
                                108,464Net
      income
                                
                                
                                975,924
                                
                                
                                
                                709,454
                                
                                
                                
                                283,806
                                
                                
                                
                                229,452Deferred
      interest, attributable to common stock subject to possible
      conversion
                                
                                
                                (342,844
                                )
                                
                                
                                231,809
                                
                                
                                
                                (179,249
                                )
                                
                                
                                (131,226
                                )Net
      income attributable to common stock
                                
                                $
                                633,080
                                
                                
                                $
                                941,263
                                
                                
                                $
                                104,557
                                
                                
                                $
                                98,226Net
      income per common share, basic and diluted
                                
                                $
                                0.02
                                
                                
                                $
                                0.02
                                
                                
                                $
                                0.00
                                
                                
                                $
                                0.00Shares
      used in computing net income per share, basic and diluted
                                
                                
                                41,125,121
                                
                                
                                
                                41,125,121
                                
                                
                                
                                41,125,121
                                
                                
                                
                                41,125,121
  Quarterly Financial Information:
                          
                          For the Period
                            from February
                            14, 2007
                            (inception) to
                            March 31, 2007
                          
                          
                          For the
                            Quarter ended
                            June 30, 2007
                          
                          
                          For the Quarter
                            ended September
                            30, 2007
                          
                          
                          For the Quarter
                            ended December
                            31, 2007Formation
      and operating costs
                          
                          $
                          25,436
                          
                          
                          $
                          132
                          
                          
                          $
                          11,250
                          
                          
                          $
                          227,555Loss
      from operations
                          
                          
                          ( 25,436
                          )
                          
                          
                          (132
                          )
                          
                          
                          (11,250
                          )
                          
                          
                          (227,555
                          )Interest
      income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,950,473Interest
      expense
                          
                          
                          -
                          
                          
                          
                          (3,185
                          )
                          
                          
                          (3,125
                          )
                          
                          
                          (3,125
                          )Income
      (loss) before income taxes
                          
                          
                          (25,436
                          )
                          
                          
                          (3,317
                          )
                          
                          
                          (14,375
                          )
                          
                          
                          2,719,793Provision
      for income taxes
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,210,372
                          )Net
      income (loss)
                          
                          $
                          (25,436
                          )
                          
                          $
                          (3,317
                          )
                          
                          $
                          (14,375
                          )
                          
                          $
                          1,509,421Net
      income (loss) per common share, basic and diluted
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.00
                          )
                          
                          $
                          0.04Shares
      used in computing net income (loss) per share, basic and
      diluted
                          
                          
                          10,000,000
                          
                          
                          
                          10,000,000
                          
                          
                          
                          10,000,000
                          
                          
                          
                          35,202,526
  57
 
 NOTE
J — SUBSEQUENT EVENT
 
 On
February 10, 2009, SP Acquisition Holdings, Inc. (the “Company”) received a
letter (the “Letter”) from the Corporate Compliance Department of NYSE Alternext
US LLC (the “Exchange”), notifying the Company that it is below certain of the
Exchange’s continued listing standards in that it had failed to hold an annual
meeting of stockholders in 2008, in violation of Section 704 of the NYSE
Alternext US LLC Company Guide (the “Company Guide”).  The Company
submitted a plan to the Exchange on March 10, 2009 advising the Exchange of
actions it has taken or will take that will bring the Company into compliance
with Section 704 of the Company Guide (the “Plan”).
 
 If the
Exchange determines that the Company has made a reasonable demonstration in the
Plan of its ability to regain compliance with all applicable continued listing
standards by August 11, 2009, or such date as the Exchange allows (the
“Deadline”), the Exchange will accept the Plan and the Company will remain
listed.  The Company anticipates that it will be able to regain
compliance with Section 704 of the Company Guide by the Deadline.
 
 ITEM 9.   Changes and Disagreements with
Accountants on Accounting and Financial Disclosure
  On
January 6, 2009, the Company dismissed Grant Thornton LLP (“Grant Thornton”) as
its independent registered public accounting firm, effective immediately. The
decision to dismiss Grant Thornton was approved by the Company’s Audit
Committee.
  The
reports of Grant Thornton on the financial statements of the Company for the
period from February 14, 2007 (date of inception) to March 31, 2007, the
cumulative period from February 14, 2007 (date of inception) to October 16, 2007
and the cumulative period from February 14, 2007 (date of inception) to December
31, 2007 did not contain any adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principle.
  From
February 14, 2007 (date of inception) to December 31, 2007 and through January
6, 2009, there were no disagreements with Grant Thornton on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to the satisfaction of Grant Thornton,
would have caused them to make reference thereto in their reports on the
financial statements for such years.
  On
January 7, 2008, Grant Thornton advised the Company that it believed the Company
had a material weakness in that the Company's internal control structure had an
operational failure whereby the Company did not properly record the stock that
is redeemable outside the control of the Company as mezzanine
equity.
  The
Company inadvertently omitted disclosure of this redemption feature in the
October 16, 2007 financial statements.  Accordingly, on January 8,
2008, the Company filed an amended Current Report on Form 8-K (the “Amended
Report”) with SEC, amending the original Current Report on Form 8-K, filed with
the SEC on October 23, 2007, to reclassify the redeemable common stock on the
Company’s balance sheet and statement of stockholders’ equity at October 16,
2007 and to add disclosure of this feature to the notes to the financial
statements. The Company filed the Amended Report to conform the Company's
financial statements with S-X Regulation 5.08, consistent with other blank check
companies with similar business plans.  The redemption feature of the
Company’s common stock had been fully disclosed in its Prospectus, dated October
10, 2007, and subsequently in its Quarterly Report on Form 10-Q for the quarter
ended September 30, 2007, filed with the SEC on November 16, 2007.
  From
February 14, 2007 (date of inception) to December 31, 2007 and through January
6, 2009, there were no “reportable events” as that term is described in Item
304(a)(1)(v) of Regulation S-K, other than as indicated above.
  As
a result of the filing of the Amended Report as described above, the Company
augmented its internal controls over financial reporting and reported the
following in Item 9A of its 2007 Annual Report on Form 10-K filed on March 27,
2008:
  ...other
than certain augmentation of the company's internal controls over financial
reporting in connection with the company becoming a public company, including
supplementing the reporting and review processes with respect to applicable
United States generally accepted accounting principles and SEC rules, there has
been no changes to the company's internal controls which has materially
affected, or is reasonably likely to materially affect, the company's internal
control over financial reporting.
  On
January 6, 2009, the Company engaged J.H. Cohn LLP (“J.H. Cohn”) as the
Company's independent registered public accountant. The engagement of J.H. Cohn
was approved by the Audit Committee of the Company's Board of
Directors.
  From
February 14, 2007 (date of inception) to December 31, 2007 and through January
6, 2009, the Company did not consult with J.H. Cohn with respect to either (i)
the application of accounting principles to a specified transaction, either
completed or proposed; (ii) the type of audit opinion that might be rendered on
the Company's financial statements; or (iii) any matter that was either the
subject of disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or
a reportable event (as defined in Item 304(a)(1)(v) of Regulation
S-K).
  ITEM 9A.   Controls and
Procedures
  We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in our periodic filings with the SEC under the Exchange
Act, including this report, is recorded, processed, summarized and reported on a
timely basis. These disclosure controls and procedures include controls and
procedures designed to ensure that information required to be disclosed under
the Exchange Act is accumulated and communicated to our management on a timely
basis to allow decisions regarding required disclosure. Management, including
our chief executive officer and chief operating officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined under Rules 13a-15(e) and 15(d)-15(e) of the Exchange
Act) as of December 31, 2008. Based upon that evaluation, management has
concluded that our disclosure controls and procedures were effective as of the
end of the period covered by this report.
  58
  Management’s
Annual Report on Internal Control over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. As defined in Exchange Act Rule 13a-15(f),
internal control over financial reporting is a process designed by, or under the
supervision of, our principal executive officer and principal financial officer
and effected by our Board of Directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we carried out an
evaluation of the effectiveness of our internal control over financial reporting
as of December 31, 2008 based on the criteria in “Internal Control - Integrated
Framework” issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Based upon this evaluation, our management concluded that
our internal control over financial reporting was effective as of December 31,
2008.  There were no changes in our internal control over financial
reporting during the quarter ended December 31, 2008 that have materially
affected, or are reasonably likely to affect our internal control over financial
reporting.
 
 J.H. Cohn
LLP, the independent registered public accounting firm that audited our
financial statements included in this Annual Report on Form 10-K, has also
audited the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2008 as stated in their report included
herein.
 
 Report of
Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
 To the
Board of Directors and Stockholders
 SP
Acquisition Holdings, Inc.
 
 We have
audited SP Acquisition Holdings, Inc. 's  (a corporation in the
development stage) internal control over financial reporting as of
December 31, 2008, based on criteria established in “Internal Control — Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
SP Acquisition Holdings, Inc.'s (a corporation in the development stage)
management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting
based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
  A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles in the United States of America. A
company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles in the
United States of America, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 In our
opinion, SP Acquisition Holdings, Inc. (a corporation in the development
stage) maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2008 based on the criteria
established in “Internal Control —Integrated Framework”
issued by the Committee of the Sponsoring Organizations of the Treadway
Commission.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the balance sheets of SP Acquisition Holdings,
Inc.'s (a corporation in the development stage) as of December 31, 2008 and
2007, and the related statements of operations, stockholders’ equity and cash
flows for the year ended December 31, 2008, for the period from February 14,
2007 (inception) to December 31, 2007, and for the period from February 14, 2007
(inception) to December 31, 2008 and our report dated  March 10,
2009  expressed an unqualified opinion.
 
 /s/ J. H.
Cohn LLP
  March 10,
2009
  59
 
 ITEM 9B.   Other
Information
  Not
applicable.
  PART
III
  ITEM 10.   Directors, Executive Officers and
Corporate Governance
  Directors
and Executive Officers
  Our
directors and executive officers as of the date of this report are as
follows:
  Name
                    
                    Age
                    
                    Position(s)Warren
      G. Lichtenstein
                    
                    43
                    
                    Chairman
      of the Board of Directors, President and Chief Executive
      OfficerJack
      L. Howard
                    
                    46
                    
                    Chief
      Operating Officer and SecretaryJames
      R. Henderson
                    
                    51
                    
                    Executive
      Vice PresidentAnthony
      Bergamo
                    
                    62
                    
                    DirectorRonald
      LaBow
                    
                    74
                    
                    DirectorHoward
      M. Lorber
                    
                    60
                    
                    DirectorLeonard
      Toboroff
                    
                    76
                    
                    DirectorS.
      Nicholas Walker
                    
                    54
                    
                    Director
 
 Warren G. Lichtenstein, Chairman of the Board of Directors,
President and Chief Executive Officer — Mr. Lichtenstein has been our
Chairman of the Board, President and Chief Executive Officer since February
2007. Mr. Lichtenstein co-founded Steel Partners II, L.P. in 1993. He has been
Managing Member since 1996 of Steel Partners II GP LLC, which is the General
Partner of Steel Partners II, L.P. Steel Partners II Master Fund L.P. and
WebFinancial L.P. (“WebFinancial”). He is Chief Executive Officer of Steel
Partners LLC, a global management firm, which is the Investment Manager to Steel
Partners II, L.P. and Steel Partners II Master Fund L.P. He is also a Co-Founder
of Steel Partners Japan Strategic Fund (Offshore), L.P., a private investment
partnership investing in Japan, and Steel Partners China Access I LP, a private
equity partnership investing in China. Mr. Lichtenstein has served as a director
of GenCorp Inc., a technology-based manufacturer of aerospace and defense
products and systems with a real estate business segment, since March 2008. He
has been a director (formally Chairman of the Board) of SL Industries, Inc., a
designer and manufacturer of power electronics, power motion equipment, power
protection equipment, and teleprotection and specialized communication
equipment, since January 2002 and served as Chief Executive Officer from
February 2002 to August 2005. He has served as Chairman of the Board of WHX
Corporation, a holding company, since July 2005. He served as a director of
WebFinancial’s predessor entitiy, a diversified holding company with interests
in a variety of businesses, from 1996 to June 2005, as Chairman and Chief
Executive Officer from December 1997 to June 2005 and as President from December
1997 to December 2003. Prior to the formation of Steel Partners II, L.P. in
1993, Mr. Lichtenstein co-founded Steel Partners, L.P., an investment
partnership, in 1990 and co-managed its business and operations. From 1988 to
1990, Mr. Lichtenstein was an acquisition/arbitrage analyst with Ballantrae
Partners, L.P., which invested in risk arbitrage, special situations, and
undervalued companies. From 1987 to 1988, he was an analyst at Para Partners,
L.P., a partnership that invested in arbitrage and related situations. Mr.
Lichtenstein has previously served as a director of the following companies:
Alpha Technologies Group, Inc. (Synercom Technology), Aydin Corporation
(Chairman), BKF Capital Group Inc., CPX Corp. (f/k/a CellPro, Incorporated), ECC
International Corporation, Gateway Industries, Inc., KT&G Corporation, Layne
Christensen Company, PLM International, Inc. Puroflow Incorporated, Saratoga
Beverage Group, Inc., Synercom Technology, Inc., TAB Products Co., Tandycrafts
Inc., Tech-Sym Corporation, United Industrial Corporation (Chairman) and U.S.
Diagnostic Labs, Inc. Mr. Lichtenstein graduated from the University of
Pennsylvania with a B.A. in Economics.
  Jack L. Howard, Chief Operating Officer and
Secretary — Mr. Howard was a Director from February 2007 until June 2007,
was Vice-Chairman from February 2007 until August 2007 and has been our
Secretary since February 2007. Since June 2007, he has been our Chief Operating
Officer. Mr. Howard co-founded Steel Partners II, L.P. in 1993. He has been a
registered principal of Mutual Securities, Inc., a FINRA registered
broker-dealer since 1989. He is the President of Steel Partners LLC, a global
management firm. He has been associated with Steel Partners LLC and its
affiliates since December 2003. Mr. Howard has been a director of WHX
Corporation, a holding company, since July 2005. He has served as a director of
NOVT Corporation, a former developer of advanced medical treatments for coronary
and vascular disease, since April 2006. He has been a director of CoSine
Communications, Inc., a holding company, since July 2005. He has been a director
of BNS Holding, Inc., a holding company that owns the majority of Collins
Industries, Inc., a manufacturer of school buses, ambulances and terminal
trucks, since June 2004. He has been a director of Adaptec, Inc., a storage
solutions provider, since December 2007. Mr. Howard served as Chairman of the
Board of a predecessor entity of WebFinancial L.P., a diversified holding
company with interests in a variety of businesses, from June 2005 to December
2008, as a director since 1996 and its Vice President since 1997. From 1997 to
May 2000, he also served as Secretary, Treasurer and Chief Financial Officer of
WebFinancial.  He served as Chairman of the Board and Chief Executive
Officer of Gateway Industries, Inc., a provider of database development and web
site design and development services, from February 2004 to April 2007 and as
Vice President from December 2001 to April 2007. From 1984 to 1989, Mr. Howard
was with First Affiliated Securities, a NASD broker dealer. Mr. Howard has
previously served as a director of Scientific Software-Intercomp, Inc., Pubco
Corporation and Investors Insurance Group, Inc. Mr. Howard graduated from the
University of Oregon with a B.A. in Finance. He currently holds the securities
licenses of Series 7, Series 24, Series 55 and Series 63.
  60
  James R. Henderson, Executive Vice President —
Mr. Henderson has been our Executive Vice President since February 2007. Mr.
Henderson is a Managing Director and operating partner of Steel Partners LLC, a
global management firm. He has been associated with Steel Partners LLC and its
affiliates since August 1999. He has served as a director (currently Chairman of
the Board) of GenCorp Inc., a technology-based manufacturer of aerospace and
defense products and systems with a real estate business segment, since March,
2008.  Mr. Henderson has served as a director of Point Blank Solutions
(currently the Chairman of the Board), a manufacturer and provider of bullet,
fragmentation and stab resistant apparel, since August 2008. Mr. Henderson
served as Chief Executive Officer of a predecessor entity of WebFinancial L.P.,
a diversified holding company with interests in a variety of businesses, from
June 2005 to April 2008, was President and Chief Operating Officer, from
November 2003 to April 2008 and was the Vice President of Operations from
September 2000 through December 2003.  He has served as Chief
Executive Officer of WebBank, a wholly-owned subsidiary of WebFinancial from
November 2004 to May 2005, and from October 2008. He has served as a director of
BNS Holding, Inc., a holding company that owns the majority of Collins
Industries, Inc., a manufacturer of school buses, ambulances and terminal
trucks, since June 2004. He has served as a director (currently Chairman of the
Board) of Del Global Technologies Corp., a designer and manufacturer of medical
imaging and diagnostic systems, since November 2003. He has served as a director
of SL Industries, Inc., a designer and producer of proprietary advanced systems
and equipment for the power and data quality industry, since January 2002. Mr.
Henderson served as a director of Angelica Corporation, a provider of healthcare
linen management services, from August 2006 to August 2008.  Mr.
Henderson has served as President of Gateway Industries, Inc., a provider of
database development and web site design and development services, from December
2001 to April 2008. He served as a director of ECC International Corp., a
manufacturer and marketer of computer-controlled simulators for training
personnel to perform maintenance and operator procedures on military weapons,
from December 1999 to September 2003 and as acting Chief Executive Officer from
July 2002 to March 2003. From January 2001 to August 2001, he served as
President of MDM Technologies, Inc., a direct mail and marketing company. From
1996 to 1999, Mr. Henderson was employed in various positions with Aydin
Corporation, a defense electronics manufacturer, which included a tenure as
President and Chief Operating Officer. From 1980 to 1996, Mr. Henderson was
employed with Unisys Corporation, an e-business solutions provider. Mr.
Henderson has previously served as a director of Tech-Sym Corporation. Mr.
Henderson graduated from the University of Scranton with a B.S. in
Accounting.
  Anthony Bergamo, Director — Mr. Bergamo has
been a Director since July 2007. He has held various positions with MB Real
Estate, a property management company based in New York City and Chicago, since
April 1996, including the position of Vice Chairman since May 2003. Mr. Bergamo
served as managing director with Milstein Hotel Group, a hotel operator, from
April 1996 until July 2007. He has also served as the Chief Executive Officer of
Niagara Falls Redevelopment, LLC, a real estate development company, since
August 1998. Mr. Bergamo was a director of Lone Star Steakhouse & Saloon,
Inc., an owner and operator of restaurants, from May 2002 until December 2006,
at which time such company was sold to a private equity fund. At the time of
such sale, Mr. Bergamo was the Chairman of the Audit Committee of Lone Star
Steakhouse & Saloon, Inc. He has also been a director since 1995, a Trustee
since 1986 and currently is Chairman of the Audit Committee of Dime Community
Bancorp. Mr. Bergamo is also the Founder of the Federal Law Enforcement
Foundation, a foundation that provides economic assistance to both federal and
local law enforcement officers suffering from serious illness and to communities
recovering from natural disasters, and has served as its Chairman since 1988.
Mr. Bergamo serves on the New York State Commission for Sentencing Reform, is a
Board Member of New York Offtrack Betting Corporation and serves on the New York
State Judicial Screening Committee. He earned a BS in history from Temple
University, and a JD from New York Law School. He is admitted to the New York,
New Jersey, Federal Bars, US Court of Appeals and the US Supreme
Court.
  61
  Ronald LaBow, Director — Mr. LaBow has been
a Director since June 2007. He has served as President of Stonehill Investment
Corp., an investment fund, since February 1990. Mr. LaBow currently is the
President of WPN Corp., a financial consulting company, and is a director of BKF
Capital Group, Inc. From January 1991 to February 2004, Mr. LaBow served as
Chairman of the Board of WHX Corporation, a holding company. He earned a BS from
University of Illinois, an MS from Columbia University School of Business, an
LLB from New York Law School and a Master of Law from New York University Law
School. He is admitted to the bar of the state of New York.
  Howard M. Lorber, Director — Mr. Lorber has
been a Director since June 2007. Mr. Lorber has served as the Executive Chairman
of Nathan’s Famous Inc. since January 2007 and prior to that served as its
Chairman from 1987 until December 2006 and as its Chief Executive Officer from
November 1993 until December 2006. Also, Mr. Lorber has been the President and
Chief Executive Officer of Vector Group Ltd. since January 2006 and has served
as a director since January 2001. Mr. Lorber served as the President and Chief
Operating Officer of Vector Group Ltd. from January 2001 until January 2006. Mr.
Lorber was President, Chief Operating Officer and a Director of New Valley
Corporation from November 1994 until its merger with Vector Group in December
2005. For more than the past five years, Mr. Lorber has been a stockholder and a
registered representative of Aegis Capital Corp. Mr. Lorber served as Chairman
of the Board of Ladenburg Thalmann Financial Services, the parent of Ladenburg
Thalmann & Co. Inc., one of the underwriters of our initial public offering,
from May 2001 until July 2006 when he became Vice-Chairman, in which capacity he
currently serves. Mr. Lorber currently serves as a director of United Capital
Corp., a real estate investment and diversified manufacturing
company.
  Leonard Toboroff, Director — Mr. Toboroff has
been a Director since June 2007. Mr. Toboroff has served as a Vice Chairman of
the Board of Allis-Chalmers Energy Inc., a provider of products and services to
the oil and gas industry, since May 1988 and served as Executive Vice President
from May 1989 until February 2002. Mr. Toboroff is also a director of Engex
Corp., a closed-end mutual fund from 2003.  He has been a director of
NOVT Corporation, a former developer of advanced medical treatments for coronary
and vascular disease since April 2006.  He served as a director and
Vice President of Varsity Brands, Inc. (formerly Riddell Sports Inc.), a
provider of goods and services to the school spirit industry, from April 1998
until it was sold in September 2003. Mr. Toboroff had been an Executive Director
of Corinthian Capital Group, LLC, a private equity fund, from October 2005 to
December 2008.  He has previously served as a director of American
Bakeries Co., Ameriscribe Corporation and Saratoga Spring Water Co. Mr. Toboroff
is a graduate of Syracuse University and The University of Michigan Law
School.
 
 S. Nicholas Walker, Director — Mr. Walker has
been a director since June 2007. Mr. Walker is the Chief Executive Officer of
the York Group Limited (“York”) a financial services company. York provides
investment management services and securities brokerage services to
institutional and high net worth individual clients. Mr. Walker has served as
CEO of York since 2000. From 1995 until 2000 Mr. Walker served as Senior Vice
President of Investments of PaineWebber Inc. in New York. From 1982 until 1995,
he served as Senior Vice President of Investments of Prudential Securities Inc.
in New York. From 1977 to 1981 he served as an assistant manager at Citibank NA,
merchant banking group in New York, and from 1976 to 1977 as a syndication
manager with Sumitomo Finance International Limited in London. Mr. Walker served
as a director of the Cronos Group, a leading lessor of intermodal marine
containers, from 1999 until it was sold in July 2007 (Nasdaq symbol “CRNS”). Mr.
Walker holds an M.A. degree in Jurisprudence from Oxford University,
England.
  62
  Number
and Terms of Office of Directors
  Our board
of directors consists of six directors. These individuals will play a key role
in identifying and evaluating prospective acquisition candidates, selecting the
target business, and structuring, negotiating and consummating our initial
business combination. However, none of these individuals has been a principal of
or affiliated with a blank check company that executed a business plan similar
to our business plan and other than Mr. Lorber, none of these individuals is
currently affiliated with any such entity. Nevertheless, we believe that the
skills and expertise of these individuals, their collective access to potential
target businesses, and their ideas, contacts, and acquisition expertise should
enable them to successfully identify and assist us in completing our initial
business combination. However, there is no assurance such individuals will, in
fact, be successful in doing so.
  Executive
Officer Compensation
  None of
our executive officers or directors has received any compensation for service
rendered. After our initial business combination, our executive officers and
directors who remain with us may be paid consulting, management or other fees
from the combined company with any and all amounts being fully disclosed to
stockholders, to the extent then known, in the proxy solicitation materials
furnished to our stockholders. It is unlikely, however, that the amount of such
compensation will be known at the time of a stockholder meeting held to consider
an initial business combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation.
  Director
Independence
  Our board
of directors has determined that Messrs. Bergamo, LaBow, Toboroff and Walker are
“independent directors” as such term is defined in the rules of the NYSE
Alternext US and Rule 10A-3 of the Exchange Act.
  Board
Committees
  Our board
of directors has formed an audit committee and a governance and nominating
committee. Each committee is composed of four directors.
  Audit
Committee
  Our audit
committee consists of Messrs. Bergamo, Toboroff , Walker and LaBow with Mr.
Bergamo serving as chair. As required by the rules of the NYSE Alternext US,
each of the members of our audit committee is able to read and understand
fundamental financial statements, and we consider Mr. Bergamo to qualify as an
“audit committee financial expert” and as “financially sophisticated” as defined
under SEC and NYSE Alternext US rules, respectively. The responsibilities of our
audit committee include:
  ·
                meeting with our management
      periodically to consider the adequacy of our internal control over
      financial reporting and the objectivity of our financial
      reporting;
 
 ·
                appointing the independent
      registered public accounting firm, determining the compensation of the
      independent registered public accounting firm and pre-approving the
      engagement of the independent registered public accounting firm for audit
      and non-audit
services;
  63




·
            overseeing the independent
      registered public accounting firm, including reviewing independence and
      quality control procedures and experience and qualifications of audit
      personnel that are providing us audit
  services;




·
            meeting with the independent
      registered public accounting firm and reviewing the scope and significant
      findings of the audits performed by them, and meeting with management and
      internal financial personnel regarding these
    matters;





·
            reviewing our financing plans,
      the adequacy and sufficiency of our financial and accounting controls,
      practices and procedures, the activities and recommendations of the
      auditors and our reporting policies and practices, and reporting
      recommendations to our full board of directors for
      approval;





·
            establishing procedures for the
      receipt, retention and treatment of complaints regarding internal
      accounting controls or auditing matters and the confidential, anonymous
      submissions by employees of concerns regarding questionable accounting or
      auditing matters;





·
            following the completion of our
      initial public offering, preparing the report required by the rules of the
      SEC to be included in our annual proxy
  statement;





·
            monitoring compliance on a
      quarterly basis with the terms of our initial public offering and, if any
      noncompliance is identified, immediately taking all action necessary to
      rectify such noncompliance or otherwise causing compliance with the terms
      of our initial public offering;
and





·
            reviewing and approving all
      payments made to our officers, directors and affiliates, including Steel
      Partners, Ltd., other than the payment of an aggregate of $10,000 per
      month to Steel Partners, Ltd. for office space, secretarial and
      administrative services. Any payments made to members of our audit
      committee will be reviewed and approved by our board of directors, with
      the interested director or directors abstaining from such review and
      approval.





Governance
and Nominating Committee





Our
governance and nominating committee consists of Messrs. Bergamo, LaBow, Toboroff
and Walker with Mr. LaBow serving as chair. The functions of our governance and
nominating committee include:




·
            recommending qualified candidates
      for election to our board of
directors;





·
            evaluating and reviewing the
      performance of existing
directors;





·
            making recommendations to our
      board of directors regarding governance matters, including our certificate
      of incorporation, bylaws and charters of our committees;
      and





·
            developing and recommending to
      our board of directors governance and nominating guidelines and principles
      applicable to us.




64


Code
of Ethics and Committee Charters





We have
adopted a code of ethics that applies to our officers, directors and employees.
We have filed copies of our code of ethics and our board committee charters as
an exhibit to the registration statement in connection with our initial public
offering. You will be able to review these documents by accessing our public
filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of
ethics will be provided without charge upon request to us. We intend to disclose
any amendments to or waivers of certain provisions of our code of ethics in a
current report on Form 8-K.





Conflicts
of Interest





Investors
should be aware of the following potential conflicts of interest:




·
            Members of our management team
      are not required to commit their full time to our affairs and,
      accordingly, they will have conflicts of interest in allocating management
      time among various business
activities.





·
            The members of our management
      team as well as the entities in Steel Partners may in the future become
      affiliated with entities, including other blank check companies, engaged
      in business activities similar to those we intend to
      conduct.





·
            Our business opportunity right of
      first review agreement does not apply to companies targeted for
      acquisition by any business in which Steel Partners II, L.P. directly or
      indirectly has an investment (including Steel Partners Japan Strategic
      Fund (Offshore), L.P. or businesses headquartered in or organized under
      the laws of China. and accordingly, members of our management team may
      become aware of business opportunities that are not subject to this
      agreement. Currently, members of our management team are officers or
      directors of the following entities in which Steel Partners II, L.P.,
      directly or indirectly, has an investment: Adaptec, Inc., BNS Holding,
      Inc., Collins Industries, Inc., CoSine Communications, Inc., Del Global
      Technologies Corp., Gateway Industries, Inc., GenCorp Inc., Nathan’s
      Famous Inc., NOVT Corporation, Point Blank Solutions, Inc., Rowan
      Companies, Inc., SL Industries, Inc., Vector Group Ltd., WebBank,
      WebFinancial L.P. and WHX Corporation. In addition, such members of our
      management team could in the future become officers or directors of other
      entities in which Steel Partners II, L.P., directly or indirectly, has an
      investment. Due to those existing and future affiliations, members of our
      management team may have fiduciary obligations to present potential
      business opportunities to those entities prior to presenting them to us
      which could cause conflicts of interest. Accordingly, members of our
      management team and our directors may have conflicts of interest in
      determining to which entity a particular business opportunity should be
      presented.





·
            Since Mr. Lichtenstein may be
      deemed the beneficial owner of shares held by SP Acq LLC and Steel
      Partners II, L.P., he may have a conflict of interest in determining
      whether a particular target business is appropriate for us and our
      stockholders. This ownership interest may influence his motivation in
      identifying and selecting a target business and timely completing an
      initial business combination. The exercise of discretion by our officers
      and directors in identifying and selecting one or more suitable target
      businesses may result in a conflict of interest when determining whether
      the terms, conditions and timing of a particular business combination are
      appropriate and in our stockholders’ best
  interest.


65


·
            Unless we consummate our initial
      business combination, our officers and directors and Steel Partners and
      its employees will not receive reimbursement for any out-of-pocket
      expenses incurred by them to the extent that such expenses exceed the
      amount of available proceeds not deposited in the trust account and the
      amount of interest income from the trust account that may be released to
      us as working capital. These amounts were calculated based on management’s
      estimates of the funds needed to finance our operations for 24 months and
      to pay expenses in identifying and consummating our initial business
      combination. Those estimates may prove to be inaccurate, especially if a
      portion of the available proceeds is used to make a down payment in
      connection with our initial business combination or pay exclusivity or
      similar fees or if we expend a significant portion in pursuit of an
      initial business combination that is not consummated. Our officers and
      directors may, as part of any business combination, negotiate the
      repayment of some or all of any such expenses. The financial interest of
      our officers and directors and Steel Partners could influence our
      officers’ and directors’ motivation in selecting a target business, and
      therefore they may have a conflict of interest when determining whether a
      particular business combination is in the stockholders’ best interest.
      Specifically, our officers and directors may tend to favor potential
      initial business combinations with target businesses that offer to
      reimburse any expenses that we did not have the funds to reimburse
      ourselves.





·
            Our officers and directors may
      have a conflict of interest with respect to evaluating a particular
      initial business combination if the retention or resignation of any such
      officers and directors were included by a target business as a condition
      to any agreement with respect to an initial business
      combination.





In
general, officers and directors of a corporation incorporated under the laws of
the State of Delaware are required to present business opportunities to a
corporation if:







·
            the corporation could financially
      undertake the opportunity;





·
            the opportunity is within the
      corporation’s line of business;
and





·
            it would not be fair to the
      corporation and its stockholders for the opportunity not to be brought to
      the attention of the
corporation.





Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board of directors evaluates a particular
business opportunity with respect to the above-listed criteria. We cannot assure
you that any of the above mentioned conflicts will be resolved in our
favor.


66


Each of
our officers and directors has, or may come to have, to a certain degree, other
fiduciary obligations. Members of our management team have fiduciary obligations
to other companies on whose board of directors they presently sit, or may have
obligations to companies whose board of directors they may join in the future.
To the extent that they identify business opportunities that may be suitable for
us or other companies on whose board of directors they may sit, our directors
will honor those fiduciary obligations. Accordingly, they may not present
opportunities to us that come to their attention in the performance of their
duties as directors of such other entities unless the other companies have
declined to accept such opportunities or clearly lack the resources to take
advantage of such opportunities.





We will
not enter into our initial business combination with any entity in which any of
our officers, directors or Steel Partners or its affiliates has a financial
interest.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors
and persons who own more than ten percent of a registered class of our equity
securities to file reports of ownership and changes in ownership with the SEC.
Officers, directors and ten percent stockholders are required by regulation to
furnish us with copies of all Section 16(a) forms they file. Based solely on
copies of such forms received, we believe that, during the year ended December
31, 2008, all filing requirements applicable to our officers, directors and
greater than ten percent beneficial owners were complied with.





ITEM 11.
              Executive
      Compensation





Compensation
Discussion and Analysis





None of
our officers or directors has received any cash compensation for services
rendered. In June 2007, each of our independent directors purchased 100,000
founder’s units for a purchase price of $330, and purchased 100,000 additional
founder’s warrants for an aggregate purchase price of $100,000 upon the
consummation of our initial public offering. However, none of them serve as
officers of ours nor receive any compensation for serving in such role, other
than reimbursement of actual out-of-pocket expenses. As the price paid for the
founder’s units and additional founder’s warrants was fair market value at the
time, we do not consider the value of the units at the offering price to be
compensation. Rather, we believe that because they own such shares, no
compensation (other than reimbursement of out of pocket expenses) is necessary
and such persons agreed to serve in such role without compensation.





We have
agreed to pay Steel Partners, Ltd., an affiliate of Mr. Lichtenstein, a total of
$10,000 per month for office space, administrative services and secretarial
support until the earlier of our consummation of a business combination or our
liquidation. This arrangement is being agreed to by Steel Partners, Ltd. for our
benefit and is not intended to provide Steel Partners, Ltd. compensation in lieu
of a management fee. We believe that such fees are at least as favorable as we
could have obtained from an unaffiliated third party.





Other
than this $10,000 per-month fee, no compensation of any kind, including finder’s
and consulting fees, will be paid to any of our officers or directors, or any of
their respective affiliates, for services rendered prior to or in connection
with a business combination. However, these individuals and SP Acq LLC will be
reimbursed for any out-of-pocket expenses incurred in connection with activities
on our behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. After a business combination, any
of our officers or directors who remain with us may be paid consulting,
management or other fees from the combined company with any and all amounts
being fully disclosed to stockholders, to the extent then known, in the proxy
solicitation materials furnished to our stockholders. It is unlikely the amount
of such compensation will be known at the time of a stockholder meeting held to
consider a business combination, as it will be up to the directors of the
post-combination business to determine executive and director
compensation.


67


Other
than the securities described above and in the section appearing elsewhere in
this Annual Report on Form 10-K entitled “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters”, neither our
officers nor our directors has received any of our equity
securities.





Compensation
Committee Interlocks and Insider Participation





None.





ITEM 12.
              Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters





Principal
stockholders





The
following table sets forth information regarding the direct and indirect
beneficial ownership of our common stock as of March 20, 2008 by:





·
            each beneficial owner of more
      than 5% of our outstanding shares of common
  stock;


·
            each
      of our officers and directors; and


·
            all
      our officers and directors as a
group.





Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them. The following table does not reflect record or
beneficial ownership of the co-investment shares or the initial founder’s
warrants, the additional founder’s warrants, or the co-investment warrants, as
these warrants are not exercisable within 60 days of the date of this
report.




Name and Address of Beneficial Owner (1)
                                              
                                              Number of Shares of Common
                                                Stock Beneficially Owned
                                              
                                              
                                              Approximate Percentage of Outstanding
                                                Common Stock Beneficially OwnedWarren
      G. Lichtenstein (2)(3)
                                              
                                              
                                              10,322,400
                                              
                                              
                                              
                                              19.0
                                              %SP
      Acq LLC
                                              
                                              
                                              9,653,412
                                              
                                              
                                              
                                              17.8
                                              %Steel
      Partners II L.P.
                                              
                                              
                                              668,988
                                              
                                              
                                              
                                              1.2
                                              %Steel
      Partners II GP LLC (3)
                                              
                                              
                                              668,988
                                              
                                              
                                              
                                              1.2
                                              %Steel
      Partners II Master Fund L.P. (3)
                                              
                                              
                                              668,988
                                              
                                              
                                              
                                              1.2
                                              %Steel
      Partners LLC (3)
                                              
                                              
                                              668,988
                                              
                                              
                                              
                                              1.2
                                              %WebFinancial
      L.P. (3)
                                              
                                              
                                              668,988
                                              
                                              
                                              
                                              1.2
                                              %Anthony
      Bergamo (4)
                                              
                                              
                                              109,653
                                              
                                              
                                              
                                              *Ronald
      LaBow (4)
                                              
                                              
                                              109,653
                                              
                                              
                                              
                                              *Howard
      M. Lorber (4)
                                              
                                              
                                              109,653
                                              
                                              
                                              
                                              *Leonard
      Toboroff (4)
                                              
                                              
                                              109,653
                                              
                                              
                                              
                                              *S.
      Nicholas Walker (4)
                                              
                                              
                                              109,653
                                              
                                              
                                              
                                              *Jack
      L. Howard (5)
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —James
      R. Henderson (5)
                                              
                                              
                                              —
                                              
                                              
                                              
                                              —QVT
      Financial LP (6)
                                                1177
      Avenue of the Americas, 9th Floor
                                                New
      York, New York 10036
                                              
                                              
                                              4,856,550
                                              
                                              
                                              
                                              9.0
                                              %HBK
      Investments L.P. (7)
                                                300
      Crescent Court, Suite 700
                                                Dallas,
      Texas, 75201
                                              
                                              
                                              5,351,585
                                              
                                              
                                              
                                              9.9
                                              %Fir
      Tree, Inc. (8)
                                                505
      Fifth Avenue, 23rd Floor
                                                New
      York, New York 10017
                                              
                                              
                                              4,001,000
                                              
                                              
                                              
                                              7.4
                                              %


68





Millennium
      Management LLC (9)
                        666
      Fifth Avenue
                        New
      York, New York 10103
                      
                      
                      6,019,050
                      
                      
                      
                      11.1
                      %Hartz Capital, Inc.(10)
                        400
      Plaza Drive
                        Secaucus,
      New Jersey
                      
                      
                      2,812,416
                      
                      
                      
                      5.2
                      %All
      executive officers and directors as a group
                        (8
      individuals) (2)(3)
                      
                      
                      10,822,400
                      
                      
                      
                      20.0
                      %





*
            Less than one
      percent





(1)
            Unless otherwise indicated, the
      business address of each of the individuals or entities is 590 Madison
      Avenue, 32nd Floor, New York, New York
  10022.





(2)
            Mr. Lichtenstein is the managing
      member of SP Acq LLC and may be considered to have beneficial ownership of
      SP Acq LLC’s interest in us. Mr. Lichtenstein disclaims beneficial
      ownership of any shares in which he does not have a pecuniary
      interest.





(3)
            Steel Partners II Master Fund
      L.P. (“Steel Master”) is the owner of approximately 99% of the limited
      partnership interests in WebFinancial L.P. (“WebFinancial”). WebFinancial
      is the sole limited partner of Steel Partners II, L.P. (“Steel Partners
      II”). Steel Partners LLC (“Partners LLC”) is the manager of WebFinancial,
      Steel Partners II and Steel Master. The general partner of Steel Partners
      II has delegated to Partners LLC the exclusive power to vote and dispose
      of the securities held by Steel Partners II. Warren G. Lichtenstein is the
      manager of Partners LLC. By virtue of these relationships, each of Steel
      Master, Partners LLC, WebFinancial and Mr. Lichtenstein may be deemed to
      beneficially own the shares of common stock of the company owned by Steel
      Partners II. Mr. Lichtenstein disclaims beneficial ownership of any shares
      in which he does not have a pecuniary
  interest.





(4)
            Each of the following persons is
      a member of SP Acq LLC: Anthony Bergamo, Ronald LaBow, Howard M. Lorber,
      Leonard Toboroff and S. Nicholas Walker. Such persons have each been
      granted voting power over the number of shares equal to each of his
      respective percentage ownership in SP Acq LLC multiplied by the number of
      shares owned by SP Acq LLC. Accordingly, each of such persons has been
      attributed 9,653 shares and such shares are also included in the shares
      held by SP Acq LLC.





(5)
            Each of Jack L. Howard and James
      R. Henderson is a member of SP Acq LLC, however, neither of such persons
      has voting or dispositive power over the shares of common stock owned by
      SP Acq LLC. Accordingly, the shares held by SP Acq LLC are not deemed to
      be beneficially owned by either of such
  persons.


69





(6)
            As reported in Amendment No. 2 to
      Schedule 13G filed with the SEC on February 4, 2009, QVT Financial LP
      (“QVT Financial”) is the investment manager for QVT Fund LP (the “Fund”),
      which beneficially owns 4,011,419 shares of common stock, and for
      Quintessence Fund L.P. (“Quintessence”), which beneficially owns 440,586
      shares of common stock. QVT Financial is also the investment manager for a
      separate discretionary account managed for a third party (the “Separate
      Account”), which holds 404,545 shares of common stock. QVT Financial has
      the power to direct the vote and disposition of the common stock held by
      the Fund, Quintessence and the Separate Account. Accordingly, QVT
      Financial may be deemed to be the beneficial owner of an aggregate amount
      of 4,586,550 shares of common stock, consisting of the shares owned by the
      Fund and Quintessence and the Separate Account. QVT Financial GP LLC, as
      General Partner of QVT Financial, may be deemed to beneficially own the
      same number of shares of common stock reported by QVT Financial. QVT
      Associates GP LLC, as General Partner of the Fund and Quintessence, may be
      deemed to beneficially own the aggregate number of shares of common stock
      owned by the Fund and Quintessence, and accordingly, QVT Associates GP LLC
      may be deemed to be the beneficial owner of an aggregate amount of
      4,452,005 shares of common
stock.





(7)
            As reported in Amendment No. 2 to
      Schedule 13G filed with the SEC on February 6, 2009, HBK Investments L.P.
      has delegated discretion to vote and dispose of the Securities to HBK
      Services LLC (“Services”). Services may, from time to time, delegate
      discretion to vote and dispose of certain of the shares to HBK New York
      LLC, a Delaware limited liability company, HBK Virginia LLC, a Delaware
      limited liability company, and/or HBK Europe Management LLP, a limited
      liability partnership organized under the laws of the United Kingdom
      (collectively, the "Subadvisors"). Each of Services and the Subadvisors is
      under common control with HBK Investments
  L.P.





(8)
            As reported in Amendment No. 2 to
      Schedule 13G filed with the SEC on February 10, 2009, Fir Tree SPAC
      Holdings 1, LLC (“SPAC Holdings 1”) and Fir Tree SPAC Holdings 2, LLC
      (“SPAC Holdings 2”) are the beneficial owners of 2,705,600 shares of
      common stock and 1,295,400 shares of common stock, respectively. Fir Tree,
      Inc. may be deemed to beneficially own the shares of common stock held by
      SPAC Holdings 1 and SPAC Holdings 2 as a result of being the investment
      manager of SPAC Holdings 1 and SPAC Holdings
  2.





(9)
            As reported in Amendment No. 1 to
      Schedule 13G filed with the SEC on November 3, 2008, Integrated Core
      Strategies (US) LLC, a Delaware limited liability company (“Integrated
      Core Strategies”), may be deemed to be the beneficial owner of 4,815,650
      shares of common stock. Millenco LLC, a Delaware limited liability company
      (“Millenco”) (formerly known as Millenco, L.P.), may be deemed to be the
      beneficial owner of 1,203,400 shares of common stock. Millennium
      Management LLC, a Delaware limited liability company (“Millennium
      Management”), is the manager of Millenco, and consequently may be deemed
      to have shared voting control and investment discretion over shares owned
      by Millenco. Millennium Management is also the general partner of
      Integrated Holding Group LP, a Delaware limited partnership (“Integrated
      Holding Group”), which is the managing member of Integrated Core
      Strategies and consequently may be deemed to have shared voting control
      and investment discretion over shares owned by Integrated Core Strategies.
      Israel A. Englander (“Mr. Englander”) is the managing member of Millennium
      Management. As a result, Mr. Englander may be deemed to have shared voting
      control and investment discretion over shares deemed to be beneficially
      owned by Millennium
Management.





(10)
            As reported in Schedule 13G filed
      with the SEC on August 27, 2008, Hartz Capital, Inc., is the manager of
      Hartz Capital Investments, LLC. Each of Hartz Capital, Inc. and Hartz
      Capital Investments, LLC may be deemed to beneficially own 2,812,416
      shares of common stock.





Upon the
sale of the co-investment units, SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker will collectively own approximately
24.2% of our issued and outstanding shares of common stock, which could permit
them to effectively influence the outcome of all matters requiring approval by
our stockholders at such time, including the election of directors and approval
of significant corporate transactions, following the consummation of our initial
business combination.


70


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 Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker have agreed to surrender and forfeit their founder’s units to us;
provided that such surrender and forfeiture will not be required if SP Acq LLC
purchases such co-investment units. In such event, Steel Partners II, L.P. has
agreed to transfer its founder’s units to SP Acq LLC.





SP Acq
LLC is a holding company founded to form our company and hold an investment in
the founder’s securities. Subject to the terms of its operating agreement, SP
Acq LLC may distribute the initial founder’s securities to its members at any
time, subject further to the transfer and other restrictions applicable to
permitted transferees described below and to applicable federal and state
securities laws.





Transfer
Restrictions





SP Acq
LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker have agreed not to sell or transfer the founder’s units and the founder’s
shares and initial founder’s warrants (including the common stock to be issued
upon the exercise of the initial founder’s warrants) for a period of one year
from the date we consummate our initial business combination and SP Acq LLC and
Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed not to sell or
transfer the additional founder’s warrants (including the common stock to be
issued upon the exercise of the additional founder’s warrants) until after we
complete our initial business combination, except in each case to permitted
transferees who agree to be subject to the same transfer restrictions and in the
case of the founder’s shares, waive their right to participate in any
liquidation distribution if we fail to consummate an initial business
combination and agree to vote in accordance with the majority of shares of
common stock voted by the public stockholders in connection with our initial
business combination and in the case of the founder’s units (including the
founder’s shares and initial founder’s warrants) agree to surrender and forfeit
such securities in the event that Steel Partners II, L.P. or SP Acq LLC fails to
purchase the co-investment units; provided that such surrender and forfeiture
will not be required if SP Acq LLC purchases such co-investment units. Steel
Partners II, L.P. has agreed not to sell or transfer the co-investment units and
the co-investment warrants or the co-investment shares until one year after we
complete our initial business combination except to permitted transferees who
agree to be bound by such transfer restrictions. We refer to these agreements
with SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber,
Toboroff and Walker and their permitted transferees as a “lock-up
agreement.”





The
permitted transferees under the lock-up agreements are our officers, directors
and employees and other persons or entities associated or affiliated with Steel
Partners II, L.P. or Steel Partners, Ltd. (other than, in the case of Steel
Partners II, L.P. and SP Acq LLC, their respective limited partners or members
in their capacity as limited partners or members). Any transfer to a permitted
transferee will be in a private transaction exempt from registration under the
Securities Act, pursuant to Section 4(i) thereof.





During
the lock-up period, SP Acq LLC, Steel Partners II, L.P. and Messrs. Bergamo,
LaBow, Lorber, Toboroff and Walker and any permitted transferees to whom they
transfer shares of common stock will retain all other rights of holders of our
common stock, including, without limitation, the right to vote their shares of
common stock (except for the voting agreement described above with respect to
the initial business combination) and the right to receive cash dividends, if
declared. If dividends are declared and payable in shares of common stock, such
dividends will also be subject to the lock-up agreement. If we are unable to
effect our initial business combination and liquidate, SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have
waived the right to receive any portion of the liquidation proceeds with respect
to the founder’s shares. Any permitted transferees to whom the founder’s shares
are transferred will also agree to waive that right.


71


ITEM 13.
              Certain Relationships, Related
      Transactions and Director
Independence





On March
22, 2007, SP Acq LLC, which is controlled by Mr. Lichtenstein, purchased
11,500,000 of our units. On June 25, 2007, a total of 500,000 founder’s units
were sold by SP Acq LLC to Anthony Bergamo, Ronald LaBow, Howard M. Lorber,
Leonard Toboroff and S. Nicholas Walker, each a director of the company, in
private transactions subject to the succeeding sentence. Pursuant to the
purchase agreement dated March 30, 2007, SP Acq LLC has agreed to sell 662,791
founder’s units to Steel Partners II, L.P., an affiliate of SP Acq
LLC.





On August
8, 2007, we declared a unit dividend of 0.15 units for each outstanding share of
common stock. On September 4, 2007, we declared a unit dividend of one-third of
a unit for each outstanding share of common stock. Pursuant to an adjustment
agreement we entered with SP Acq LLC, Steel Partners II, L.P. and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker each of whom agreed to assign their
right to receive the additional founder’s units they received pursuant to the
dividend to SP Acq LLC. 667,600 of these additional founder’s units were
subsequently forfeited by SP Acq LLC in connection with the exercise of the
underwriters’ over-allotment option so that the holders of our founder’s units
maintained collective ownership of 20% of our units.





Pursuant
to the terms of the agreement with Steel Partners II, L.P., in the event that
Steel Partners II, L.P. does not purchase the co-investment units SP Acq LLC has
entered into an agreement with us requiring it to purchase the co-investment
units. In such event, Steel Partners II, L.P. will transfer its founder’s units
to SP Acq LLC. Pursuant to the terms of the purchase agreements with Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker, SP Acq LLC may repurchase the
founder’s units owned by Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker in
the event of their resignation or removal for cause from our Board of
Directors.





The
founder’s units are identical to those sold in our initial public offering,
except that:




·
            SP Acq LLC, Steel Partners II,
      L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed
      to vote all of their founder’s shares either for or against a business
      combination as determined by the public stockholders who vote at the
      special or annual meeting called for the purpose of approving our initial
      business combination;





·
            SP Acq LLC, Steel Partners II,
      L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed
      that the founder’s shares included therein will not participate with the
      common stock included in the units sold in our initial public offering in
      any liquidating
distribution;





·
            the initial founder’s warrants
      included therein will:




·
            only become exercisable after our
      consummation of our initial business combination if and when the last
      sales price of our common stock exceeds $14.25 per share for any 20
      trading days within a 30 trading day period beginning 90 days after such
      business combination; and





·
            be non-redeemable so long as they
      are held by SP Acq LLC or its permitted transferees, including Steel
      Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker;
      and




·
            the founder’s units (including
      the founder’s shares and initial founder’s warrants) will be forfeited in
      the event that Steel Partners II, L.P. or SP Acq LLC fails to purchase the
      co-investment units.


72


On March
22, 2007, SP Acq LLC entered into an agreement with us to purchase 5,250,000
warrants at a price of $1.00 per warrant, upon the consummation of the offering.
Subsequent to this agreement, Messrs. Bergamo, LaBow, Lorber, Toboroff and
Walker agreed that they would purchase a total of 500,000 of the additional
founder’s warrants from SP Acq LLC. On October 4, 2007, SP Acq LLC agreed to
purchase an additional 1,750,000 additional founder’s warrants at a price of
$1.00 per warrant immediately prior to our initial public offering resulting in
an aggregate purchase of 7,000,000 additional founder’s warrants. We believe the
purchase price of $1.00 per warrant for the additional founder’s warrants
represented the fair value of such warrants on the date of purchase and
accordingly no compensation expense has been recognized with respect to the
issuance of the additional founder’s warrants. The $7.0 million of proceeds from
the investment in the 7,000,000 additional founder’s warrants has been placed in
the trust account pending our completion of an initial business combination. If
we do not complete such an initial business combination, then the $7.0 million
will be part of the liquidation distribution to our public stockholders, and the
additional founder’s warrants will expire worthless. The additional founder’s
warrants are non-redeemable so long as they are held by SP Acq LLC or its
permitted transferees.





On March
22, 2007, Steel Partners II, L.P. agreed to invest $30.0 million in us in the
form of co-investment units at a price of $10.00 per unit. Steel Partners II,
L.P. is obligated to purchase such co-investment units from us immediately prior
to the consummation of our initial business combination. The co-investment units
are identical to those sold in the offering except that the co-investment
warrants included therein will be non-redeemable so long as they are held Steel
Partners II, L.P. or its permitted transferees.





In the
event that Steel Partners II, L.P. is unable to consummate the co-investment
when required to do so, SP Acq LLC, Steel Partners II, L.P., Anthony Bergamo,
Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker have
agreed to surrender and forfeit their founder’s units to us; provided that such
surrender and forfeiture will not be required if SP Acq LLC purchases such
co-investment units.





We will
also enter into an agreement with each of SP Acq LLC, Steel Partners II, L.P.,
and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker granting them the right
to demand that we register the resale, (i) in the case of SP Acq LLC, Steel
Partners II, L.P., and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker, of
the founder’s units, the founder’s shares, the initial founder’s warrants and
the shares of common stock underlying the initial founder’s warrants,
(ii) in the case of SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff
and Walker, the additional founder’s warrants and the shares of common stock
underlying the additional founder’s warrants, and (iii) in the case of
Steel Partners II, L.P., the co-investment units, co-investment shares and
co-investment warrants and the shares of common stock underlying the
co-investment warrants, with respect to the founder’s units, the founder’s
shares, the initial founder’s warrants and shares of common stock issuable upon
exercise of such warrants, the co-investment units, the co-investment shares and
the co-investment warrants and shares issuable upon exercise of such warrants at
any time commencing three months prior to the date on which they are no longer
subject to transfer restrictions, and with respect to all of the additional
founder’s warrants and the underlying shares of common stock, at any time after
the execution of a definitive agreement for an initial business combination. We
will bear the expenses incurred in connection with the filing of any such
registration statements.


73




As of December 31, 2007, Steel
Partners, Ltd., had loaned us a total of $250,000 evidenced by a promissory
note, which was used to pay a portion of the expenses of our initial public
offering and our organization. This note bears interest at 5%, compounded
semi-annually and was to be paid in full by December 31, 2008. This loan was
made to us by Steel Partners, Ltd. because SP Acq LLC was recently formed and
has limited capital. On June 27, 2008, the note was paid in full.




We have
agreed to pay Steel Partners, Ltd. a monthly fee of $10,000 for office space and
administrative services, including secretarial support. This fee commenced upon
the completion of our initial public offering. We believe that such fees are at
least as favorable as we could have obtained from an unaffiliated third
party.





We will
reimburse our officers, directors and affiliates, including Steel Partners and
its employees, for any reasonable out-of-pocket business expenses incurred by
them in connection with certain activities on our behalf such as identifying and
investigating possible target businesses and business combinations. Subject to
availability of proceeds not placed in the trust account and interest income of
up to $3.5 million on the balance in the trust account, there is no limit on the
amount of out-of-pocket expenses that could be incurred. Our audit committee
will review and approve all payments made to our officers, directors and
affiliates, including Steel Partners, other than the payment of an aggregate of
$10,000 per month to Steel Partners, Ltd. for office space, secretarial and
administrative services, and any payments made to members of our audit committee
will be reviewed and approved by our board of directors, with the interested
director or directors abstaining from such review and approval. To the extent
such out-of-pocket expenses exceed the available proceeds not deposited in the
trust account and interest income of up to $3.5 million on the balance in the
trust account, such out-of-pocket expenses would not be reimbursed by us unless
we consummate an initial business combination.





Members
of our management team may become aware of business opportunities that may be
appropriate for presentation to us as well as the other entities with which they
are or may be affiliated. We have entered into a business opportunity right of
first review agreement with Mr. Lichtenstein and Steel Partners II GP LLC
(formerly Steel Partners, L.L.C.), which provides that from the date of our
initial public offering until the earlier of the consummation of our initial
business combination or our liquidation in the event we do not consummate an
initial business combination, we will have a right of first review with respect
to business combination opportunities of Steel Partners relating to companies
that are not publicly traded on a stock exchange or over-the-counter market with
an enterprise value of between $300 million to $1.5 billion, excluding companies
targeted for acquisition by any business in which Steel Partners II, L.P.
directly or indirectly has an investment (including Steel Partners Japan
Strategic Fund (Offshore), L.P.) or businesses headquartered in or organized
under the laws of China. Currently, members of our management team are officers
or directors of the following entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment: Adaptec, Inc., BNS Holding, Inc.,
Collins Industries, Inc., CoSine Communications, Inc., Del Global Technologies
Corp., Gateway Industries, Inc., GenCorp Inc., Nathan’s Famous Inc., NOVT
Corporation, Point Blank Solutions, Inc., Rowan Companies, Inc., SL Industries,
Inc., Vector Group Ltd., WebBank, WebFinancial L.P. and WHX Corporation. In
addition, such members of our management team could in the future become
officers or directors of other entities in which Steel Partners II, L.P.,
directly or indirectly, has an investment. Due to those existing and future
affiliations, members of our management team may have fiduciary obligations to
present potential business opportunities to those entities prior to presenting
them to us which could cause conflicts of interest. In addition, our directors
and officers may in the future become affiliated with entities, including other
blank check companies, engaged in activities similar to those intended to be
conducted by us. Accordingly, members of our management team and our directors
may have conflicts of interest in determining to which entity a particular
business opportunity should be presented.


74


Other
than reimbursable out-of-pocket expenses, including travel expenses, payable to
our officers and directors and Steel Partners II, L.P. and an aggregate of
$10,000 per month paid to Steel Partners, Ltd. for office space, secretarial and
administrative services, no compensation or fees of any kind, including finder’s
and consulting fees or any other forms of compensation, including but not
limited to stock options, will be paid to any of our officers or directors or
their affiliates.





ITEM 14.
              Principal Accounting Fees and
      Services





Grant
Thornton acted as our principal accountant for the fiscal year ended December
31, 2007, and the quarters ended March 31, 2008, June 30, 2008 and September 30,
2008. J.H. Cohn audited our financial statements as of and for the two years
ended December 31, 2008 and 2007 and rendered their unmodified opinion dated
March 10, 2009.




Audit Fees




The
aggregate fees billed for professional services rendered by Grant Thornton for
the year ended December 31, 2007 were $290,000, consisting of audit fees of
$135,000 and fees related to reviews of our Form S-1 Registration Statement and
related filings of $155,000. The aggregate fees billed for professional services
rendered by Grant Thornton for the fiscal year ended December 31, 2008 consisted
of audit fees of $97,500. The aggregate fees billed by J.H. Cohn for
professional services rendered for the audit of our annual financial statements
set forth in our Annual Report on Form 10-K for fiscal years ended December 31,
2008 and 2007 were $80,000.




Audit-Related
Fees




We did
not receive audit-related services from Grant Thornton or J.H. Cohn that are not
reported as Audit Fees for the years ended December 31, 2008 or
2007.




Tax
Fees




The
aggregate fees billed for professional services for tax compliance, tax advice
and tax planning by Grant Thornton for the years ended December 31, 2008 and
2007 amounted to approximately $40,055 and $0, respectively. J.H. Cohn did not
provide nor is expected to provide any professional services for tax compliance,
tax advice and tax planning for the years ended December 31, 2008 and
2007.




All
Other Fees




We did
not receive products and services provided by Grant Thornton or J.H. Cohn, other
than those discussed above, for the years ended December 31, 2008 and
2007.




Pre-Approval
Policy




Since our
audit committee was not formed until October 2007, the audit committee did not
pre-approve all of the foregoing services, although any services rendered prior
to the formation of our audit committee were approved by our board of directors.
Since the formation of our audit committee, and on a going-forward basis, the
audit committee has and will pre-approve all auditing services and permitted
non-audit services to be performed for us by Grant Thornton and J.H. Cohn,
including the fees and terms thereof (subject to the de minimus exceptions for
non-audit services described in the Exchange Act which are approved by the audit
committee prior to the completion of the audit). The audit committee may form
and delegate authority to subcommittees of the audit committee consisting of one
or more members when appropriate, including the authority to grant pre-approvals
of audit and permitted non-audit services, provided that decisions of such
subcommittee to grant pre-approvals shall be presented to the full audit
committee at its next scheduled meeting. Anthony Bergamo, the Chairman of our
Audit Committee, approved certain tax services that were performed by Grant
Thornton for the fiscal year ended 2007.


75


Pre-Approval
Policy





Since our
audit committee was not formed until October 2007, the audit committee did not
pre-approve all of the foregoing services, although any services rendered prior
to the formation of our audit committee were approved by our board of directors.
Since the formation of our audit committee, and on a going-forward basis, the
audit committee has and will pre-approve all auditing services and permitted
non-audit services to be performed for us by Grant Thornton, including the fees
and terms thereof (subject to the de minimus exceptions for
non-audit services described in the Exchange Act which are approved by the audit
committee prior to the completion of the audit). The audit committee may form
and delegate authority to subcommittees of the audit committee consisting of one
or more members when appropriate, including the authority to grant pre-approvals
of audit and permitted non-audit services, provided that decisions of such
subcommittee to grant pre-approvals shall be presented to the full audit
committee at its next scheduled meeting. Anthony Bergamo, the Chairman of our
Audit Committee, approved certain tax services to be performed by Grant
Thornton.





PART
IV





ITEM 15.
              Exhibits and Financial
      Statement Schedules




(a)
            The following documents are filed
      as a part of this Report:




1.
            Financial
      Statements:





Report of
Independent Registered Public Accounting Firm





Balance
Sheet





Statement
of Operations





Statement
of Stockholders’ Equity





Statement
of Cash Flows





Notes to
Financial Statements




2.
            Financial Statement
      Schedule(s)





All
schedules are omitted for the reason that the information is included in the
financial statements or the notes thereto or that they are not required or are
not applicable.




(b)
            Exhibits





We hereby
file as part of this Annual Report on Form 10-K the Exhibits listed in the
attached Exhibit Index. Exhibits which are incorporated herein by reference can
be inspected and copied at the public reference facilities maintained by the
SEC, 100 F Street, N.E., Room 1580, Washington D.C. 20549. Copies of such
material can also be obtained from the Public Reference Section of the SEC, 100
F Street, N.E., Washington, D.C. 20549, at prescribed rates.


76


(c)
            Financial Statement
      Schedules





All
schedules are omitted for the reason that the information is included in the
financial statements or the notes thereto or that they are not required or are
not applicable.




Exhibit No.
              
              Description3.1
              
              Amended
      and Restated Certificate of Incorporation (7)3.2
              
              Form
      of Bylaws (1)4.1
              
              Specimen
      Unit Certificate (3)4.2
              
              Specimen
      Common Stock Certificate (3)4.3
              
              Amended
      and Restated Warrant Agreement by and between the Registrant and
      Continental Stock Transfer & Trust Company (6)4.4
              
              Form
      of Warrant Certificate (1)10.1
              
              Form
      of Letter Agreement by and among the Registrant, SP Acq LLC and Steel
      Partners II, L.P. (5)10.2
              
              Form
      of Letter Agreement by and among the Registrant and each of the directors
      and executive officers of the Registrant (6)10.3
              
              Initial
      Founder’s Securities Purchase Agreement, dated as of March 22, 2007, by
      and between the Registrant and SP Acq LLC (1)10.4
              
              Founder’s
      Units Purchase Agreement, dated as of March 30, 2007, by and among the
      Registrant, SP Acq LLC and Steel Partners II, L.P. (4)10.5
              
              Form
      of Co-Investment Unit Purchase Agreement between the Registrant and Steel
      Partners II, L.P. (1)10.6
              
              Form
      of Registration Rights Agreement by and between the Registrant and the
      founder (4)10.7
              
              Form
      of Indemnity Agreement by and between the Registrant and each of its
      directors and executive officers (4)10.8
              
              Form
      of Investment Management Trust Agreement by and between the Registrant and
      Continental Stock Transfer & Trust Company (7)10.9
              
              Form
      of Right of First Review Agreement by and among the Registrant and Warren
      Lichtenstein and Steel Partners, L.L.C. (4)10.10
              
              Form
      of Letter Agreement between SP Acq LLCs, the Registrant and each of
      Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S.
      Nicholas Walker (2)10.11
              
              Escrow
      Agreement by and between the Registrant and SP Acq LLC
  (4)10.12
              
              Adjustment
      Agreement by and among the Registrant, SP Acq LLC, Steel Partners II, L.P.
      and each of Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard
      Toboroff and S. Nicholas Walker (5)14
              
              Form
      of Code of Conduct and Ethics (1)24.1
              
              Powers
      of Attorney31.1
              
              Principal
      Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              
              Principal
      Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              
              Principal
      Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              
              Principal Financial
      Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.99.1
              
              Form
      of Charter of Audit Committee (1)99.2
              
              Form
      of Charter of Governance and Nominating Committee
  (1)




77




(1)
            Incorporated by reference to the
      corresponding exhibit filed with the Registration Statement on Form S-1
      (File No. 333-142696) with the SEC on May 8,
  2007.





(2)
            Incorporated by reference to the
      corresponding exhibit filed with Amendment No. 1 to the Registration
      Statement on Form S-1 (File No. 333-142696) filed with the SEC on June 28,
      2007.





(3)
            Incorporated by reference to the
      corresponding exhibit filed with Amendment No. 2 to the Registration
      Statement on Form S-1 (File No. 333-142696) filed with the SEC on August
      10, 2007.





(4)
            Incorporated by reference to the
      corresponding exhibit filed with Amendment No. 3 to the Registration
      Statement on Form S-1 (File No. 333-142696) filed with the SEC on
      September 14, 2007.





(5)
            Incorporated by reference to the
      corresponding exhibit filed with Amendment No. 4 to the Registration
      Statement on Form S-1 (File No. 333-142696) filed with the SEC on
      September 28, 2007.





(6)
            Incorporated by reference to the
      corresponding exhibit filed with Amendment No. 5 to the Registration
      Statement on Form S-1 (File No. 333-142696) filed with the SEC on October
      5, 2007.





(7)
            Incorporated by reference to the
      corresponding exhibit (with respect to Exhibit 3.1) and 10.1 (with respect
      to Exhibit 10.8) filed with the Current Report on Form 8-K filed with the
      SEC on October 23, 2007.


78


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) 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.
  LichtensteinName:
                Warren
      G. LichtensteinTitle:
                Chairman,
      President and Chief Executive
Officer





POWER
OF ATTORNEY





KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Warren G. Lichtenstein and Jack L. Howard as true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC granting unto said attorney-in-fact and agent
the full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as to all intents
and purposes as either of them might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their substitute, may
lawfully do or cause to be done by virtue hereof.




Signature
              
              Title
              
              Date/s/ Warren G. Lichtenstein
              
              
              
              March
      10, 2009Warren
      G. Lichtenstein
              
              Chairman,
      President and Chief Executive Officer (Principal Executive
      Officer)/s/ Jack L. Howard
              
              
              
              March
      10, 2009Jack
      L. Howard
              
              Chief
      Operating Officer and Secretary (Principal Financial Officer and Principal
      Accounting Officer)/s/ Anthony BergamoAnthony
      Bergamo
              
              Director
              
              March
      10, 2009/s/ Howard M. LorberHoward
      M. Lorber
              
              Director
              
              March
      10, 2009/s/ Leonard ToboroffLeonard
      Toboroff
              
              Director
              
              March
      10, 2009/s/ S. Nicholas WalkerS.
      Nicholas Walker
              
              Director
              
              March
      10, 2009/s/ Ronald LaBowRonald
      LaBow
              
              Director
              
              March
      10, 2009




79