UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE QUARTERLY PERIOD ENDED
JUNE 30, 2008
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the transition period from ____________ to ____________.
Commission
File Number 001-33711
SP
ACQUISITION HOLDINGS, INC.
(Exact
name of Registrant as specified in its charter)
Delaware
|
20-8523583
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
Incorporation
or organization)
|
Identification
Number)
|
|
|
590
MADISON AVENUE, 32nd
FLOOR
NEW
YORK, NY
|
10022
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number including area code: (212) 520-2300
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes
x
No
o
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer,” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act). (Check
one):
Large
accelerated filer o Accelerated
filer o Non-accelerated
filer x
Smaller
reporting company o
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
x
No
o
There
were 54,112,000 shares of the Registrant’s Common Stock, par value $.001,
outstanding on August 13, 2008.
SP
ACQUISITION HOLDINGS, INC.
FORM
10-Q
Quarter
ended June
30, 2008
TABLE
OF CONTENTS
|
|
|
Page
|
|
PART
I
|
|
|
|
FINANCIAL
INFORMATION
|
|
|
Item
1.
|
Condensed
Financial Statements:
|
|
|
|
Condensed
Balance Sheets as of June 30, 2008 (unaudited) and December 31,
2007
|
|
4
|
|
Condensed
Statements of Operations (unaudited) for the three months ended
June 30,
2008 and 2007, for the six months ended June 30, 2008 and for the
period
from February
14, 2007 (inception) through June 30, 2007 and for the period from
February 14,
2007 (inception) through June 30, 2008
|
|
5
|
|
Condensed
Statements of Cash Flows (unaudited) for the six months ended June
30,
2008 and
2007, and for the period from February 14, 2007 (inception) through
June
30, 2008
|
|
6
|
|
Condensed
Statements of Stockholders’ Equity for the period February 14, 2007
(inception)
through December 31, 2007 and for the six months ended June 30,
2008
(unaudited)
|
|
7
|
|
Notes
to Condensed Financial Statements
|
|
8
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
17
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
19
|
Item
4.
|
Controls
and Procedures
|
|
20
|
|
|
|
|
|
PART
II
|
|
|
|
OTHER
INFORMATION
|
|
|
Item
1.
|
Legal
Proceedings
|
|
20
|
Item
1A.
|
Risk
Factors
|
|
20
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
21
|
Item
3.
|
Defaults
Upon Senior Securities
|
|
21
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
|
21
|
Item
5.
|
Other
Information
|
|
21
|
Item
6.
|
Exhibits
|
|
21
|
Signatures
|
22
|
Exhibit
Index
|
|
23
|
Certifications
|
|
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
report, and the information incorporated by reference in it, include “forward
looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, (the “Exchange Act”). Our forward-looking statements include, but are
not limited to, statements regarding our or our management’s expectations,
hopes, beliefs, intentions or strategies regarding the future. In addition,
any
statements that refer to projections, forecasts or other characterizations
of
future events or circumstances, including any underlying assumptions, are
forward-looking statements. The words “anticipates,” “believe,” “continue,”
“could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predicts,” “project,” “should,” “would” and similar expressions
may identify forward-looking statements, but the absence of these words does
not
mean that a statement is not forward-looking. Forward-looking statements in
this
report may include, for example, statements about our:
|
· |
ability
to complete our initial business
combination;
|
|
· |
success
in retaining or recruiting, or changes required in, our officers,
key
employees or directors following our initial business
combination;
|
|
· |
officers
and directors allocating their time to other businesses and potentially
having conflicts of interest with our business or in approving our
initial
business combination, as a result of which they would then receive
expense
reimbursements;
|
|
· |
potential
ability to obtain additional financing to complete a business
combination;
|
|
· |
ability
of our officers and directors to generate a number of potential investment
opportunities;
|
|
· |
potential
change in control if we acquire one or more target businesses for
stock;
|
|
· |
our
public securities’ potential liquidity and trading; listing or delisting
of our securities from the American Stock Exchange or the ability
to have
our securities listed on the American Stock Exchange following our
initial
business combination;
|
|
· |
use
of proceeds not held in the trust account or available to us from
interest
income on the trust account balance;
or
|
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.
PART
1. FINANCIAL INFORMATION
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
CONDENSED
BALANCE SHEETS
|
|
June
30,
2008
|
|
December
31,
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
2,643,895
|
|
$
|
1,317,688
|
|
Trust
account, interest available for working capital and taxes:
|
|
|
|
|
|
|
|
Cash
and cash equivalents held in trust account, interest
available
for working capital and taxes
|
|
|
105,567
|
|
|
989,183
|
|
Accrued
interest receivable
|
|
|
157,214
|
|
|
469,705
|
|
Total
trust account, interest available for working capital and
taxes
|
|
|
262,781
|
|
|
1,458,888
|
|
Accounts
receivable other
|
|
|
—
|
|
|
26,323
|
|
Prepaid
expenses
|
|
|
103,507
|
|
|
108,024
|
|
Total
current assets
|
|
|
3,010,183
|
|
|
2,910,923
|
|
Deferred
tax assets - non current
|
|
|
—
|
|
|
125,406
|
|
Total
current assets
|
|
|
3,010,183
|
|
|
3,036,329
|
|
|
|
|
|
|
|
|
|
Non
current assets
|
|
|
|
|
|
|
|
Trust
account, restricted
|
|
|
|
|
|
|
|
Cash
and cash equivalents held in trust account
|
|
|
425,909,120
|
|
|
425,909,120
|
|
Accrued
interest receivable
|
|
|
370,117
|
|
|
—
|
|
Trust
account, restricted
|
|
|
426,279,237
|
|
|
425,909,120
|
|
Total
Assets
|
|
$
|
429,289,420
|
|
$
|
428,945,449
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
10,669
|
|
$
|
449,194
|
|
Note
payable to affiliate
|
|
|
—
|
|
|
250,000
|
|
Advances
payable to affiliate
|
|
|
1,504
|
|
|
26,818
|
|
Interest
payable to affiliate
|
|
|
—
|
|
|
9,435
|
|
Accrued
expenses
|
|
|
100,685
|
|
|
96,915
|
|
Taxes
payable
|
|
|
186,375
|
|
|
808,278
|
|
Other
payables - deferred underwriters’ fee
|
|
|
17,315,840
|
|
|
17,315,840
|
|
Total
Current Liabilities
|
|
|
17,615,073
|
|
|
18,956,480
|
|
|
|
|
|
|
|
|
|
Common
stock, subject to possible conversion, 12,986,879 shares at conversion
value:
|
|
|
127,772,726
|
|
|
127,772,726
|
|
|
|
|
|
|
|
|
|
Deferred
interest, attributable to common stock subject to possible
conversion
|
|
|
111,035
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies:
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value; 1,000,000 authorized, none issued
|
|
|
—
|
|
|
—
|
|
Common
stock, $.001 par value, 200,000,000 shares authorized; 41,125,121
shares
issued and outstanding (excluding 12,986,879 shares subject to possible
conversion)
|
|
|
41,125
|
|
|
41,125
|
|
Additional
paid-in capital
|
|
|
280,597,790
|
|
|
280,708,825
|
|
Retained
earnings accumulated during the development stage
|
|
|
3,151,671
|
|
|
1,466,293
|
|
Total
Stockholders’ Equity
|
|
|
283,790,586
|
|
|
282,216,243
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
429,289,420
|
|
$
|
428,945,449
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
CONDENSED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
the Three Months Ended
June
30, 2008
|
|
For
the Three Months Ended
June
30, 2007
|
|
For
the Six Months Ended
June
30, 2008
|
|
For
the Period from February 14, 2007 (inception) to June 30,
2007
|
|
For
the Period from February 14, 2007 (inception) to June 30,
2008
|
|
Formation
and operating costs
|
|
$
|
301,765
|
|
$
|
132
|
|
$
|
499,229
|
|
$
|
25,568
|
|
$
|
763,602
|
|
Loss
from operations
|
|
|
(301,765
|
)
|
|
(132
|
)
|
|
(499,229
|
)
|
|
(25,568
|
)
|
|
(763,602
|
)
|
Interest
income - Trust
|
|
|
1,700,797
|
|
|
—
|
|
|
4,341,829
|
|
|
—
|
|
|
7,286,222
|
|
Interest
income - other
|
|
|
11,950
|
|
|
—
|
|
|
25,427
|
|
|
—
|
|
|
31,507
|
|
Interest
expense
|
|
|
(3,021
|
)
|
|
(3,185
|
)
|
|
(6,146
|
)
|
|
(3,185
|
)
|
|
(15,581
|
)
|
Income
(loss) before tax
|
|
|
1,407,961
|
|
|
(3,317
|
)
|
|
3,861,881
|
|
|
(28,753
|
)
|
|
6,538,546
|
|
Provision
for income taxes
|
|
|
(698,507
|
)
|
|
—
|
|
|
(2,176,503
|
)
|
|
—
|
|
|
(3,386,875
|
)
|
Net
income (loss)
|
|
|
709,454
|
|
|
(3,317
|
)
|
|
1,685,378
|
|
|
(28,753
|
)
|
|
3,151,671
|
|
Deferred
interest, attributable to common stock subject to possible
conversion
|
|
|
231,809
|
|
|
—
|
|
|
(111,035
|
)
|
|
—
|
|
|
(111,035
|
)
|
Net
income (loss) attributable to common stock
|
|
$
|
941,263
|
|
$
|
(3,317
|
)
|
$
|
1,574,343
|
|
$
|
(28,753
|
)
|
$
|
3,040,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) attributable to common stock per common share, basic
and
diluted
|
|
$
|
0.02
|
|
$
|
(0.00
|
)
|
$
|
0.04
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding - excluding shares subject
to
possible conversion, basic and diluted
|
|
|
41,125,121
|
|
|
10,000,000
|
|
|
41,125,121
|
|
|
10,000,000
|
|
|
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
CONDENSED
STATEMENTS OF CASH FLOWS
|
|
For
the Six Months ended June 30,
2008
|
|
For
the Period from February 14,
2007
(inception) to
June
30, 2007
|
|
For
the Period from February 14,
2007
(inception) to June 30, 2008
|
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
$
|
1,685,378
|
|
$
|
(28,753
|
)
|
$
|
3,151,671
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax asset and valuation allowance
|
|
|
125,406
|
|
|
—
|
|
|
—
|
|
Changes
in asset and liability accounts:
|
|
|
|
|
|
|
|
|
|
|
Accrued
interest receivable
|
|
|
(57,626
|
)
|
|
—
|
|
|
(527,331
|
)
|
Other
receivable
|
|
|
26,323
|
|
|
—
|
|
|
—
|
|
Prepaid
expenses
|
|
|
4,517
|
|
|
—
|
|
|
(103,507
|
)
|
Accounts
payable
|
|
|
(438,525
|
)
|
|
—
|
|
|
10,669
|
|
Advances
payable to affiliate
|
|
|
(25,314
|
)
|
|
26,818
|
|
|
1,504
|
|
Interest
payable to affiliate
|
|
|
(9,435
|
)
|
|
3,185
|
|
|
—
|
|
Accrued
expenses
|
|
|
3,770
|
|
|
(1,250
|
)
|
|
100,685
|
|
Income
taxes payable
|
|
|
(621,903
|
)
|
|
—
|
|
|
186,375
|
|
Net
cash generated in operating activities
|
|
|
692,591
|
|
|
—
|
|
|
2,820,066
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents held in trust account,
interest available for working capital
and taxes
|
|
|
883,616
|
|
|
—
|
|
|
(105,567
|
)
|
Trust
account restricted
|
|
|
—
|
|
|
—
|
|
|
(425,909,120
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
883,616
|
|
|
—
|
|
|
(426,014,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of founder’s units
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
Proceeds
from issuance of additional founder’s warrants
|
|
|
—
|
|
|
—
|
|
|
7,000,000
|
|
Proceeds
from note payable to affiliate
|
|
|
—
|
|
|
250,000
|
|
|
250,000
|
|
Repayment
of note payable to affiliate
|
|
|
(250,000
|
)
|
|
—
|
|
|
(250,000
|
)
|
Proceeds
from initial public offering
|
|
|
—
|
|
|
—
|
|
|
432,896,000
|
|
Payment
of offering costs
|
|
|
—
|
|
|
(76,915
|
)
|
|
(14,082,484
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
(250,000
|
)
|
|
198,085
|
|
|
425,838,516
|
|
Net
increase in cash
|
|
|
1,326,207
|
|
|
198,085
|
|
|
2,643,895
|
|
Cash
at the beginning of the period
|
|
|
1,317,688
|
|
|
—
|
|
|
—
|
|
Cash
at the end of the period
|
|
$
|
2,643,895
|
|
$
|
198,085
|
|
$
|
2,643,895
|
|
Supplemental
disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
Deferred
offering costs
|
|
$
|
—
|
|
$
|
372,456
|
|
$
|
—
|
|
Accrual
of deferred underwriters’ discount
|
|
$
|
—
|
|
$
|
—
|
|
$
|
17,315,840
|
|
Cash
payments for federal, state and local income taxes
|
|
$
|
2,673,000
|
|
$
|
—
|
|
$
|
3,200,500
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
STATEMENT
OF STOCKHOLDERS’ EQUITY
|
|
Common
Stock
Shares
|
|
Common
Stock
Amount
|
|
Additional
Paid-in Capital
|
|
Retained
Earnings Accumulated During the Development Stage
|
|
Total
Stockholders’ Equity
|
|
Proceeds
from founder’s units issued on March 22, 2007
|
|
|
11,500,000
|
|
$
|
11,500
|
|
$
|
13,500
|
|
$
|
-
|
|
$
|
25,000
|
|
Proceeds
from issuance of 40,000,000 units, net of underwriters’ commissions and
offering expenses of $29,030,049 on October 16, 2007
|
|
|
40,000,000
|
|
|
40,000
|
|
|
370,929,951
|
|
|
—
|
|
|
370,969,951
|
|
Net
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
|
|
|
—
|
|
|
7,000,000
|
|
Proceeds
from issuance of 3,289,600 units, net of underwriters’ commissions and
offering expenses of $2,368,275 on October 31, 2007
|
|
|
3,289,600
|
|
|
3,290
|
|
|
30,524,435
|
|
|
—
|
|
|
30,527,725
|
|
Net
proceeds subject to possible conversion of 986,880 shares
|
|
|
(986,880
|
)
|
|
(987
|
)
|
|
(9,571,749
|
)
|
|
—
|
|
|
(9,572,736
|
)
|
Common
stock forfeited by founders on October 31, 2007
|
|
|
(677,600
|
)
|
|
(678
|
)
|
|
678
|
|
|
—
|
|
|
—
|
|
Net
income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,466,293
|
|
|
1,466,293
|
|
Balances
at December 31, 2007
|
|
|
41,125,121
|
|
|
41,125
|
|
|
280,708,825
|
|
|
1,466,293
|
|
|
282,216,243
|
|
Deferred
interest, attributable to common stock subject to possible
conversion
|
|
|
—
|
|
|
—
|
|
|
(111,035
|
)
|
|
—
|
|
|
(111,035
|
)
|
Net
income attributable to common stockholders (unaudited)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,685,378
|
|
|
1,685,378
|
|
Balances
at June 30, 2008 (unaudited)
|
|
|
41,125,121
|
|
$
|
41,125
|
|
$
|
280,597,790
|
|
$
|
3,151,671
|
|
$
|
283,790,586
|
|
The
accompanying notes are an integral part of these condensed financial
statements.
SP
ACQUISITION HOLDINGS, INC.
(a
corporation in the development stage)
NOTES
TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE
A — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND INTERIM FINANCIAL
INFORMATION
SP
Acquisition Holdings, Inc. (a corporation in the development stage) (the
“Company”) was incorporated in Delaware on February 14, 2007. The Company was
formed to acquire one or more businesses or assets through a merger, capital
stock exchange, asset acquisition, stock purchase or other similar business
combination (“Business Combination”). The Company has neither engaged in any
operations nor generated revenue 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 Business
Combination or the liquidation of the Company. As of June 30, 2008, the balance
in the Trust account was $426,014,687 (which includes $105,567 of funds to
be
transferred to the operating account for the payment of taxes) and interest
receivable on trust assets was $527,331 of which $157,214 will be transferred
to
the operating account for the payment of taxes. The $262,781 has been classified
on the June 30, 2008 unaudited balance sheet as cash and cash equivalents held
in trust account, interest available for working capital and taxes. Through
June
30, 2008, the Trust has released $3,500,000 of interest income to the Company.
Through June 30, 2008, the Company had paid a total of $3,200,500 in taxes,
of
which $3,153,324 has been reimbursed by the Trust and the balance was funded
from working capital. The Company intends to seek reimbursement of the balance
of the taxes from the Trust.
The
placing of funds in the Trust may not protect those funds from third party
claims against the Company. Although the Company will seek to have all vendors
and service providers (which would include any third parties we engaged to
assist us in any way in connection with our search for a target business) and
prospective target businesses execute agreements with the Company waiving any
right, title, interest or claim of any kind in or to any monies held in the
Trust, there is no guarantee that they will execute such
agreements.
SP
Acq
LLC has agreed that it will be liable to the Company if and to the extent claims
by third parties reduce the amounts in the trust account available for payment
to our stockholders in the event of a liquidation and the claims are made by
a
vendor for services rendered, or products sold, to us, or by a prospective
target business. A “vendor” refers to a third party that enters into an
agreement with us to provide goods or services to us. However, the agreement
entered into by SP Acq LLC specifically provides for two exceptions to the
indemnity given: there will be no liability (1) as to any claimed amounts owed
to a third party who executed a legally enforceable waiver, or (2) as to any
claims under our indemnity of the underwriters of our initial public offering
against certain liabilities, including liabilities under the Securities Act.
Furthermore, there could be claims from parties other than vendors, third
parties with which we entered into a contractual relationship or target
businesses that would not be covered by the indemnity from SP Acq LLC, such
as
shareholders and other claimants who are not parties in contract with us who
file a claim for damages against us.
The
Company, after signing a definitive agreement for the acquisition of a target
business, will submit such transaction for stockholder approval. In the event
that 30% or more of the outstanding stock (excluding, for this purpose, those
shares of common stock issued prior to the Offering) vote against the Business
Combination and exercise their conversion rights described below, the Business
Combination will not be consummated. Public stockholders voting against a
Business Combination will be entitled to convert their stock into a pro rata
share of the Trust (including the additional 4% of the gross proceeds payable
to
the underwriters upon the Company’s consummation of a Business Combination),
including any interest earned (net of taxes payable and the amount distributed
to the Company to fund its working capital requirements) on their pro rata
share, if the Business Combination is approved and consummated. However, voting
against the Business Combination alone will not result in election to exercise
a
stockholder’s conversion rights. A stockholder must also affirmatively exercise
such conversion rights at or prior to the time the Business Combination is
voted
upon by the stockholders. All of the Company’s stockholders prior to the
Offering, and all of the officers and directors of the Company have agreed
to
vote all of the shares of the Company stock held by them in accordance with
the
vote of the majority in interest of all other stockholders of the
Company.
In
the
event the Company does not consummate a Business Combination on or before
October 10, 2009, the proceeds held in the Trust, including the unpaid portion
of the underwriters’ commission (See Note D) will be distributed to the
Company’s public stockholders (excluding SP Acq LLC, Steel Partners II, L.P. and
Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S.
Nicholas Walker, each a director of the Company), to the extent of their
pre-Offering stock holdings.
These
unaudited interim condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of
America for interim financial information and with the instructions to Form
10-Q. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a
fair presentation have been included. The operating results for the interim
periods presented are not necessarily indicative of the results to be expected
for any other interim period or for the full year.
These
unaudited interim condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company’s
December 31, 2007 Annual Report on Form 10-K, filed on March 26, 2008. The
accounting policies used in preparing these unaudited condensed financial
statements are consistent with those described in the audited financial
statements included in the Company’s December 31, 2007 Form 10-K.
NOTE
B — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
1. Development
Stage Company:
The
Company complies with the reporting requirements of SFAS No. 7, “Accounting and
Reporting by Development Stage Enterprises.”
As
indicated in the accompanying unaudited interim condensed financial statements,
the Company has incurred substantial organizational, legal, accounting and
offering costs in the pursuit of its financing plans and expects to incur
additional costs in pursuit of its acquisition plans. As of June 30, 2008,
the
Company had cash on hand of $2,643,895 as well as $426,014,687 of cash and
cash
equivalents in the Trust. Under terms of the investment management trust
agreement, up to $3,500,000 of interest may be released to the Company in such
amounts and such intervals as we request, subject to availability. At June
30,
2008, $3,500,000 of Trust interest has been released to the Company. Management
has reviewed its cash requirements as of June 30, 2008 and believes that its
cash on hand, along with the funds available to it from the interest income
from
the Trust is sufficient to cover its expenses for the next twelve
months.
As
discussed in Note D, the note with Steel Partners Ltd. has a due date of
December 31, 2007. Steel Partners Ltd. has confirmed on May 7, 2008 that the
note is not in default and that the payment may be made on or before December
31, 2008. On June 27, 2008, the note was paid in full.
There
is
no assurance that the Company’s plan to complete a Business Combination will be
successful.
2. Cash
and cash equivalents:
The
Company considers investments with a maturity of three months or less when
purchased to be cash equivalents.
3. Common
Stock and Unit Dividends:
Each
share of common stock has one vote. As discussed in Note F, on August 8, 2007,
the Company declared a unit dividend of 0.15 units for each unit outstanding
and
on September 4, 2007 declared a unit dividend of one third of a unit for each
unit outstanding. All of the unit holders agreed to transfer their units due
them with respect to these dividends to SP Acq LLC. Such stock dividends are
presented as if they were stock splits and presented retroactively each period
presented. All unit amounts outstanding reflect such dividends, except for
weighted average shares outstanding as discussed in Note B-4.
4. Net
Income (loss) Per Common Share:
The
Company follows the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 128, “Earnings Per Share”. In accordance with SFAS No. 128,
earnings per common share amounts (“Basic EPS”) is computed by dividing earnings
by the weighted average number of common shares outstanding for the period.
Common shares subject to possible conversion of 12,986,879 shares have been
excluded from the calculation of basic earnings per share since such shares,
if
redeemed, only participate in their pro rata shares of the trust earnings.
Such
earnings are deducted from earnings available to common stockholders. Earnings
per common share amounts, assuming dilution (“Diluted EPS”), gives effect to
dilutive options, warrants and other potential common stock outstanding during
the period. SFAS No. 128 requires the presentation of both Basic EPS and Diluted
EPS on the face of the statements of operations. The effect of the 61,112,000
outstanding Warrants issued in connection with the Public Offering and the
Private Placement described in Note A has not been considered in diluted
earnings per share calculation since the exercise of the Warrants are contingent
upon the occurrence of future events, and therefore, not includable in the
calculation of diluted earning per share in accordance with SFAS
128.
The
Company reclassified certain prior period amounts to conform to the current
period’s presentation. The Company reclassified amounts held in trust from
current assets to long-term assets with the exception of amounts held in trust
that are available for current operations of the Company. These classifications
have no effect on the results reported for the year ended December 31,
2007.
|
6. |
Concentration
of Credit Risk:
|
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times,
exceeds the Federal Depository Insurance coverage of $100,000 and the Securities
Investor Protection Corporation insures balances up to $500,000. As of June
30,
2008, the Company had $429,258,581 in cash and cash equivalents which exceeded
Federally insured 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.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
|
9. |
Trust
Account-Restricted:
|
The
Company considers the restricted portion of the funds held in the Trust Account
to be a non-current asset. A current asset is one that is reasonably expected
to
be used to pay current liabilities, such as accounts payable or short-term
debt
or to pay current operating expenses, or will be used to acquire other current
assets. Since the acquisition of a business is principally considered to be
for
long-term purpose, with long-term assets such as property and tangibles
typically being a major part of the acquired assets, the Company has reported
the funds anticipated to be used in the acquisition as a non-current
asset.
As
discussed in Note A, the Trust Account is invested in T Bills with a 30 day
maturity as of June 30, 2008 and December 31, 2007, respectively.
The
Company complies with SFAS 109, “Accounting for Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts, based on enacted tax laws
and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary,
to
reduce deferred tax assets to the amount expected to be realized.
On
February 14, 2007, the Company adopted the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
prescribes a recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken or expected to
be
taken in a tax return and also provides guidance on derecognition,
classification, interest and penalties, accounting in interim period, disclosure
and transition.
|
11. |
Share-based
compensation:
|
|
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
May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be
used
in the preparation of financial statements of nongovernmental entities that
are
presented in conformity with generally accepted accounting principles in the
United States. It is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, “The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles”. The adoption of this statement is not expected to have a material
effect on the Company’s financial position, statement of operations or cash
flows.
Management
does not believe that any other recently issued, but not yet effective
accounting standards if currently adopted would have a material effect on the
financial statements.
NOTE
C — INITIAL PUBLIC OFFERING
On
October 16, 2007 the Company sold to the public an aggregate of 40,000,000
units
at a price of $10.00. Each unit consists of one share of the Company’s common
stock, $0.001 par value, and one redeemable common stock purchase warrant.
On
October 31, 2007, the underwriters exercised a portion and cancelled the balance
of their over-allotment option granted in connection with the Offering and
consummated the sale of an additional 3,289,600 units at a price of
$10.00.
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 June 30,
2008
and December 31, 2007, respectively, the remaining underwriting commitment
of
$17,315,840 is included as Other Payables - deferred underwriters’
fee.
NOTE
D — RELATED PARTY TRANSACTIONS
SP
Acq
LLC purchased 11,500,000 of the Company’s founder’s units, each consisting of
one common share and one warrant to purchase a common share, for a price of
$25,000 in a private placement. The units are identical to those sold in the
Offering, except that SP Acq LLC, Steel Partners II, L.P., and Messrs.
Bergamo, LaBow, Lorber, Toboroff and Walker agreed to vote their founder’s
shares in the same manner as a majority of the public stockholders who vote
at
the special or annual meeting called for the purpose of approving the Company’s
Business Combination. As a result, they will not be able to exercise conversion
rights with respect to the founder’s shares if the Company’s Business
Combination is approved by a majority of its public stockholders. The founder’s
shares included therein will not participate with the common stock included
in
the units sold in the Offering in any liquidating distribution. The founder’s
units, including the founder’s shares and initial founder’s warrants may not be
sold or transferred until at least one year after the completion of a Business
Combination.
The
founder’s units included up to 1,500,000 units that were subject to forfeiture
by SP Acq LLC to the extent that the underwriters’ over-allotment option was not
exercised or was exercised in part such that the holders of the Company’s
founder’s units would collectively own 20% of the Company’s units after
consummation of the Offering and exercise or expiration of the over-allotment
option (assuming none of the holders of our founder’s units purchase units in
the Offering). On October 31, 2007, in connection with the partial exercise
of
the over-allotment option, 677,600 founder’s units were forfeited to the Company
and cancelled.
The
Company has issued warrants to purchase 11,500,000 common shares at $7.50 per
share as part of the founder’s units in connection with its initial
capitalization on March 22, 2007 (“initial founder’s warrants”). On October 31,
2007, in connection with the partial exercise of the underwriters’
over-allotment option, 677,600 initial founder’s warrants were forfeited to the
Company and cancelled.
Additionally,
pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
LLC has sold a total of 500,000 founder’s units to certain directors of the
Company.
SP
Acq
LLC, pursuant to an agreement dated March 22, 2007, also sold to its affiliate
Steel Partners II, L.P. a portion of its founder’s units, with the final number
of units to be determined based on the number of units sold in the Offering
once
the underwriters’ over-allotment option was exercised or expired. As of October
16, 2007 upon the closing of the Offering, Steel Partners II, L.P. owned 662,791
founder’s units. On October 31, 2007, the underwriters exercised a portion of
their over-allotment option and SP Acq LLC sold an additional 6,197 of its
founders units to Steel Partners II, L.P., bringing Steel Partners II, L.P.
ownership to 668,988 units.
On
March
28, 2007 the Company issued a $250,000 unsecured promissory note to Steel
Partners, Ltd., an affiliate of SP Acq LLC and the Company. This note bears
interest at a rate of 5% per annum, is unsecured and principal and interest
payments were due on December 31, 2007. Interest payable of $15,581 has been
accrued on this note through June 27, 2008, at which time the note and accrued
interest were repaid in full.
Advances
payable of $1,504 and $26,818 at June 30, 2008 and December 31, 2007,
respectively, relate to certain costs paid by Steel Partners, Ltd. on behalf
of
the Company. The Company intends to repay such advances and thus such amounts
are reflected as a liability to affiliate. None of the officers and directors
of
the Company received compensation for their services to the
Company.
The
Company presently occupies office space provided by Steel Partners, Ltd. Steel
Partners, Ltd. has agreed that, until the acquisition of a target business
by
the Company, it will make such office space, as well as certain office,
administrative and secretarial services, available to the Company, as may be
required by the Company from time to time. The Company has agreed to pay Steel
Partners, Ltd. $10,000 per month for such services. Services commenced on
October 16, 2007. The Company has incurred and paid $60,000 and $25,000 for
such
services through June 30, 2008 and December 31, 2007, respectively.
SP
Acq
LLC purchased, in a private placement on October 16, 2007, 7,000,000 additional
founder’s warrants at a price of $1 per warrant (an aggregate purchase price of
$7,000,000) directly from the Company and not as part of the Offering. The
purchase price of these additional founder’s warrants has been determined by the
Company to be the fair value of such warrants as of the October 16, 2007
purchase date. An aggregate of 500,000 additional founder’s warrants were sold
by SP Acq LLC to certain directors.
In
addition, Steel Partners II, L.P., has entered into an agreement with the
Company requiring it to purchase 3,000,000 units (“co-investment units”) at a
price of $10 per unit (an aggregate price of $30,000,000) from the Company
in a
private placement that will occur immediately prior to the Company’s
consummation of a Business Combination. These private placement units will
be
identical to the units sold in the Offering. It has also agreed that these
units
will not be sold, transferred, or assigned until at least one year after the
completion of the Business Combination. In the event that Steel Partners II,
L.P. does not purchase the co-investment units, SP Acq LLC, Steel Partners
II,
L.P. and the directors who purchased founder’s units have agreed to surrender
and forfeit its founder’s units and additional founder’s warrants to the
Company, provided however that such surrender and forfeiture will not be
required if SP Acq LLC purchases the co-investment units. In such event, Steel
Partners II, L.P. has agreed to transfer its founder’s units to SP Acq LLC. None
of the co-investment units have been issued by the Company as of June 30, 2008
or December 31, 2007.
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 June
30, 2008 or December 31, 2007.
NOTE
F — UNIT DIVIDENDS
Effective
August 8, 2007, the Board of Directors of the Company declared a unit dividend
to the holders of record. The dividend consisted of 0.15 units for each
outstanding share of common stock and totaled 1,125,000 units. Effective
September 4, 2007, the Board of Directors of the Company declared a unit
dividend to the holders of record. The dividend consisted of one third of a
unit
for each outstanding share of common stock and totaled 2,875,000 units. All
of
the unit holders agreed to transfer their units due them with respect to these
dividends to SP Acq LLC.
NOTE
G — WARRANTS
The
following table presents warrants outstanding:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
Initial
Founder’s Warrants
|
|
|
10,822,400
|
|
|
10,822,400
|
|
Additional
Founder’s Warrants
|
|
|
7,000,000
|
|
|
7,000,000
|
|
Public
Warrants
|
|
|
43,289,600
|
|
|
43,289,600
|
|
Total
|
|
|
61,112,000
|
|
|
61,112,000
|
|
Initial
founder’s warrants are not redeemable while held by SP Acq LLC or its permitted
transferees and the exercisability of initial founder’s warrants are subject to
certain additional restrictions. Each initial founder’s warrant entitles the
holder to purchase from the Company one share of common stock at an exercise
price of $7.50 only in the event that the last sale price of the common stock
is
at least $14.25 per share for any 20 trading days within a 30 trading day period
beginning 90 days after a Business Combination. If the Company is unable to
deliver registered shares of common stock to the holder upon exercise of the
warrants during the exercise period, there will be no cash settlement of the
warrants and the warrants will expire worthless.
Additional
founder’s warrants entitle the holder to purchase from the Company one share of
common stock at an exercise price of $7.50 for each warrant commencing on the
completion of a Business Combination with a target business, and expire five
years from the date of the prospectus. SP Acq LLC has also agreed that the
warrants purchased by it will not be sold or transferred until after the
completion of a Business Combination, and will be non-redeemable so long as
they
are held by the Company’s founders or their permitted transferees. Additionally,
pursuant to the Director’s Purchase Agreement dated as of June 25, 2007, SP Acq
LLC sold 500,000 of such initial founder’s warrants to certain directors on
October 16, 2007.
Public
warrants entitle the holder to purchase from the Company one share of common
stock for each warrant at an exercise price of $7.50 commencing on the later
of
(a) one year from the date of the final prospectus for the Offering or (b)
the
completion of a Business Combination with a target business, and will expire
five years from the date of the prospectus. The warrants are redeemable at
the
option of the Company at a price of $0.01 per warrant upon 30 days prior notice
after the warrants become exercisable, only in the event that the last sale
price of the common stock is at least $14.25 per share for any 20 trading days
within a 30 trading day period ending on the third business day prior to the
date on which notice of redemption is given. If the Company is unable to deliver
registered shares of common stock to the holder upon exercise of the warrants
during the exercise period, there will be no cash settlement of the warrants
and
the warrants will expire worthless.
As
disclosed in Note D, the initial founder’s warrants and additional founder’s
warrants have certain restrictions and may be surrendered or forfeited under
certain circumstances.
Pursuant
to a registration rights agreement between the Company and SP Acq LLC, Steel
Partners II, L.P. and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker,
the
holders of our founder’s units, founder’s shares and initial founder’s warrants
and shares issuable upon exercise thereof will be entitled to certain
registration rights at any time commencing three months prior to the date that
they are no longer subject to transfer restrictions.
NOTE
H — TAXES ON INCOME
Deferred
tax assets reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial statement purposes
and
the amounts used for income tax purposes. During the six-months ended June
30,
2008, the Company recorded a full valuation allowance for its deferred tax
assets, as the Company determined that it no longer met the more likely than
not
realization criteria of FAS 109.
The
Company has paid a total of $3,200,500 since inception in estimated tax payments
for federal, New York State and City income taxes.
The
difference between the provision for income taxes and the amounts computed
by
applying the federal statutory income taxes to the income before tax is due
to
state and local taxes, and due to the increase in the deferred tax valuation
allowance.
NOTE
I — ADJUSTMENTS RELATED TO PRIOR INTERIM PERIOD
During
the quarter ended June 30, 2008, the Company identified an accounting error
in
its accretion calculation which overstated the deferred interest, net of taxes,
attributable to common stock subject to possible conversion by approximately
$343,000 on our condensed financial statements for the three months ended
March 31, 2008. Had these adjustments been reflected in the quarter ended
March 31, 2008, the deferred interest, net of taxes, attributable to common
stock subject to possible conversion would have been decreased by approximately
$343,000 and net income attributable to common stock would have been increased
by approximately $343,000. There was no impact on the net income/(loss). The
effect of the adjustment, as corrected in the condensed financial statements
for
the three and six months ended June 30, 2008, was to decrease the deferred
interest, net of taxes, attributable to common stock subject to possible
conversion and increase the net income attributable to common stockholders
for
the three and six months ended June 30, 2008 by approximately $343,000. The
adjustments did not have an impact on earnings per share in either the quarter
ended March 31, 2008 or June 30, 2008 or for the six months ended June, 30,
2008. Management believes the impact of the adjustment is not material to
the condensed financial statements taken as a whole based upon management’s
quantitative and qualitative assessment. It was deemed that a restatement of
the
previously filed March 31, 2008 report on Form 10-Q was not
necessary.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward
Looking Statements
All
statements other than statements of historical fact included in this Form 10-Q
including, without limitation, statements under “Management's Discussion and
Analysis of Financial Condition and Results of Operations” regarding our
financial position, business strategy and the plans and objectives of management
for future operation, are “forward looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, as amended (the “Security Act”) and Section 21E of the Securities
Exchange Act of 1934. When used in this Form 10-Q, words such as "anticipate,"
"believe," "plan," "expect," "future," "intend" and similar expressions, as
they
relate to us or our management, identify forward looking statements. Such
forward looking statements are based on the beliefs of management, as well
as
assumptions made by, and information currently available to, our management.
Actual results could differ materially from those contemplated by the forward
looking statements as a result of certain factors detailed in our filings with
the Securities and Exchange Commission. All subsequent written or oral forward
looking statements attributable to us or persons acting on our behalf are
qualified in their entirety by this paragraph.
Overview
We
are a
blank check company organized under the laws of the State of Delaware on
February 14, 2007. We were formed for the purpose of acquiring, through a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more businesses or assets. We consummated our initial public
offering on October 16, 2007. We are currently in the process of evaluating
and
identifying targets for a business combination. We intend to utilize cash from
our initial public offering, our capital stock, debt or a combination of cash,
capital stock and debt, in effecting a business combination. The issuance of
additional shares of our capital stock:
|
·
|
may
significantly reduce the equity interest of our
stockholders;
|
|
·
|
will
likely cause a change in control if a substantial number of our shares
of
common stock are issued, which may affect, among other things, our
ability
to use our net operating loss carry forwards, if any, and may also
result
in the resignation or removal of one or more of our current officers
and
directors; and
|
|
·
|
may
adversely affect prevailing market prices for our common
stock.
|
Similarly,
if we issue debt securities, it could result in:
|
·
|
default
and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay our debt
obligations;
|
|
·
|
acceleration
of our obligations to repay the indebtedness even if we have made
all
principal and interest payments when due if the debt security contained
covenants that require the maintenance of certain financial ratios
or
reserves and any such covenant were breached without a waiver or
renegotiation of that covenant; and
|
|
·
|
our
immediate payment of all principal and accrued interest, if any,
if the
debt security were payable on demand; and our inability to obtain
additional financing, if necessary, if the debt security contained
covenants restricting our ability to do
so.
|
Results
of Operations and Known Trends Or Future Events
We
have
neither engaged in any operations nor generated any revenues to date. We will
not generate any operating revenues until after completion of our initial
business combination, at the earliest. We will continue to generate
non-operating income in the form of interest income on cash and cash
equivalents. Net income for the three months ended June 30, 2008 was $709,454,
which consisted of $1,712,747 in interest income, partially offset by $301,765
in operating expenses, $3,021 in interest expense and $698,507 in taxes on
income. Net loss for the three months ended June 30, 2007 was $3,317, which
consisted of formation and related costs. Net loss for the period from February
14, 2007 (inception) to June 30, 2007 was $28,753, which consisted of formation
and related costs. Net income for the period from February 14, 2007 (inception)
through June 30, 2008 was $3,151,671, which consisted of $7,317,729 in interest
income partially offset by $763,602 in formation and operating expenses, $15,581
in interest expense and $3,386,875 in taxes on income. Through June 30, 2008,
we
did not engage in any significant operations. Our entire activity from inception
through June 30, 2008 was to prepare for our initial public offering and begin
the identification of and negotiations with a suitable business combination
candidate.
The
trustee of the trust account will pay any taxes resulting from interest accrued
on the funds held in the trust account out of the funds held in the trust
account. In addition, we will incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance),
as
well as for due diligence expenses.
Off-Balance
Sheet Arrangements
We
have
never entered into any off-balance sheet financing arrangements and have never
established any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.
Contractual
Obligations
We
do not
have any long term debt, capital lease obligations, operating lease obligations,
purchase obligations or other long term liabilities.
Liquidity
and Capital Resources
The
net
proceeds from (i) the sale of the units in our initial public offering
(including the underwriters’ over-allotment option), after deducting offering
expenses of approximately $1,095,604 and underwriting discounts and commissions
of approximately $30,302,720, together (ii) with $7,000,000 from SP Acq LLC’s
investment in the additional founder’s warrants, were approximately
$408,497,676. We expect that most of the proceeds held in the trust account
will
be used as consideration to pay the sellers of a target business or businesses
with which we ultimately complete our initial business combination. We expect
to
use substantially all of the net proceeds of our initial public offering not
in
the trust account to pay expenses in locating and acquiring a target business,
including identifying and evaluating prospective acquisition candidates,
selecting the target business, and structuring, negotiating and consummating
our
initial business combination. To the extent that our capital stock or debt
financing is used in whole or in part as consideration to effect our initial
business combination, any proceeds held in the trust account as well as any
other net proceeds not expended will be used to finance the operations of the
target business.
We
do not
believe we will need additional financing in order to meet the expenditures
required for operating our business prior to our initial business combination.
However, we will rely on interest earned of up to $3,500,000 on the trust
account to fund such expenditures and, to the extent that the interest earned
is
below our expectation, we may have insufficient funds available to operate
our
business prior to our initial business combination. Moreover, in addition to
the
co-investment we may need to obtain additional financing to consummate our
initial business combination. We may also need additional financing because
we
may become obligated to convert into cash a significant number of shares of
public stockholders voting against our initial business combination, in which
case we may issue additional securities or incur debt in connection with such
business combination. Following our initial business combination, if cash on
hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
Critical
Accounting Policies
The
Company’s significant accounting policies are more fully described in Note B to
the condensed financial statements. However, certain accounting policies are
particularly important to the portrayal of financial position and results of
operations and require the application of significant judgments by management.
As a result, the unaudited interim condensed financial statements are subject
to
an inherent degree of uncertainty. In applying those policies, management used
its judgment to determine the appropriate assumptions to be used in
determination of certain estimates. During the six months ended June 30, 2008,
the Company recorded a full valuation allowance for its deferred tax assets,
as
the Company determined that it no longer met the more likely than not
realization criteria of FAS 109. These estimates are based on the Company’s
historical experience, terms of existing contracts, observance of trends in
the
industry and information available from outside sources, as
appropriate.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest
Rate Sensitivity
As
of
June 30, 2008, our efforts were limited to organizational activities and
activities relating to our initial public offering. Since our initial public
offering, we have been identifying possible acquisition candidates. We have
neither engaged in any operations nor generated any revenues other than interest
income.
Market
risk is a broad term for the risk of economic loss due to adverse changes in
the
fair value of a financial instrument. These changes may be the result of various
factors, including interest rates, foreign exchange rates, commodity prices
and/or equity prices. $418,909,120 of the net Offering proceeds, including
$17,315,840 of the proceeds attributable to the underwriters’ deferred fees from
the Offering, as well as $7,000,000 of the proceeds of the private placement
of
7,000,000 additional founders warrants were placed in a trust account at
JPMorgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust
Company, acting as trustee. As of June 30, 2008, the balance in the trust
account was $426,014,687 (which includes $105,567 of funds to be transferred
to
the operating account for the payment of taxes) and interest receivable on
the
trust account of $527,331 of which $157,214 will be transferred to the operating
account for the payment of taxes. The proceeds held in trust have only been
invested in U.S. Government securities having a maturity of 90 days or less
or
in money market funds which invest principally in either short term securities
issued or guaranteed by the United States or having the highest rating from
recognized credit rating agency or tax exempt municipal bonds issued by
government entities located within the United States or otherwise meeting the
conditions under Rule 2a-7 under the Investment Company Act. Thus, we are
currently subject to market risk primarily through the effect of changes in
interest rates on short-term government securities and other highly rated
money-market instruments. As of June 30, 2008, the effective annualized interest
rate payable on our investment was approximately 1.8%. Assuming no other changes
to our holdings at June 30, 2008, a 1% decrease in the underlying interest
rate
payable on our investment as of June 30, 2008 would result in a decrease of
approximately $ 1.0 million in the interest earned in our investment for the
following 90-day period, and a corresponding decrease in our net increase in
stockholders’ equity resulting from operations, if any, for that period. We do
not believe that the effect of other changes, such as foreign exchange rates,
commodity prices and/or equity prices currently pose significant market risk
for
us.
ITEM
4. CONTROLS AND PROCEDURES
Disclosure
controls and procedures are controls and other procedures that are designed
to
ensure that information required to be disclosed in company reports filed or
submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange Commission’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed
to
ensure that information required to be disclosed in company reports filed or
submitted under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and Chief Operating Officer and
Secretary.
As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive
Officer and Chief Operating Officer and Secretary carried out an evaluation
of
the effectiveness of the design and operation of our disclosure controls as
of
June 30, 2008. Based on their evaluation, they concluded that our disclosure
controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under
the
Exchange Act) were effective.
Our
internal control over financial reporting is a process designed by, or under
the
supervision of, our Chief Executive Officer and our Chief Operating Officer
and
Secretary and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of our
financial reporting and the preparation of our financial statements for external
purposes in accordance with generally accepted accounting principles (United
States). Internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets,
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of our financial statements in accordance with generally
accepted accounting principles (United States), and that our receipts and
expenditures are being made only in accordance with the authorization of our
board of directors and management, and provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use of disposition
of our assets that could have a material effect on our financial
statements.
During
the most recently completed fiscal quarter, there has been no change in our
internal control over financial reporting that has materially affected, or
is
reasonably likely to materially affect, our internal control over financial
reporting other than the Company engaged an
outside accounting firm to
assist
management in the financial reporting process.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
1A. RISK FACTORS
Factors
that could cause our actual results to differ materially form those in this
report are any of the risks described in our December 31, 2007 Form 10-K filed
with the SEC. Any of these factors could result in significant or material
adverse effect on our results of operations or financial condition. Additional
risk factors not presently known to us or that we currently deem immaterial
may
also impair our business or results of operations.
As
of
August 13, 2008 there have been no material changes to the risk factors
disclosed in our December 31, 2007 Form 10-K, filed with the SEC, except we
may
disclose changes to such factors or disclose additional factors from time to
time in our future filings with the SEC.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
An
index
of exhibits filed as part of this Report is on page 23.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
SP
Acquisition Holdings, Inc.
|
|
|
|
|
By: |
/s/ Warren
G. Lichtenstein |
|
Warren
G. Lichtenstein
Chairman,
President and Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
|
|
|
SP
Acquisition
Holdings, Inc. |
|
|
|
|
By: |
/s/ Jack
L.
Howard |
|
Jack
L. Howard
Chief
Operating Officer and Secretary
(Principal
Financial Officer and Principal Accounting
Officer)
|
Dated: August 14, 2008 |
|
EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
31.1
|
|
Certification
of Principal Executive Officer, pursuant to Rule 13a -14 and 15d-14
of the
Securities Exchange Act of 1934.
|
|
|
|
31.2
|
|
Certification
of Principal Financial and Principal Accounting Officer, pursuant
to Rule
13a-14 and 15d-14 of the Securities Exchange Act of
1934
|
|
|
|
32.1
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
32.2
|
|
Certification
Principal Financial and Principal Accounting Officer pursuant to
18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act
of 2002
|