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**SECURITIES        AND EXCHANGE COMMISSION **

**WASHINGTON,        D.C. 20549 **

**FORM        10-Q **

| ý | **Quarterly                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange                  Act of                  1934****For                  the quarterly period ended September 30,                  2005.** |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o  | **Report                  Pursuant to Section 13 or 15(d) of the Securities Exchange Act                  of                  1934**F**or                  the transition period from to                  .** |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Commission        File Number: **
**000-51444**

**Stone        Arcade Acquisition Corporation**

| **Delaware**                                                                                    |   | **20-2699372**                                                        |
|-------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
| (State                  or Other Jurisdiction ofIncorporation                  or Organization) |   | (I.R.S.                  EmployerIdentification                  No.) |

**/o        Stone-Kaplan Investments, LLC, One Northfield Plaza, Suite        480**

**Northfield,        IL 60093**

**(847)        441-0929**

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**Stone        Arcade Acquisition Corporation Index to Form 10-Q **

|  **Part                  I.**  |  **Financial                  Information**                                                                                            |  1  |
|-------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                |  Item                  1. Financial Statements (unaudited)                                                                             |  1  |
|                                |  Balance                  Sheet                                                                                                        |  1  |
|                                |  Statements                  of Operations                                                                                             |  2  |
|                                |  Statement                  of Stockholders’ Equity                                                                              |  3  |
|                                |  Statement                  of Cash Flows                                                                                              |  4  |
|                                |  Notes                  to Financial Statements                                                                                        |  5  |
|                                |  Item                  2. Management’s Discussion and Analysis of Financial Condition and Results                  of Operations |  8  |
|                                |  Item                  3. Quantitative and Qualitative Disclosures About Market Risk                                                   |  9  |
|                                |  Item                  4. Controls and Procedures                                                                                      |  10 |
|  **Part                  II.** |  **Other                  Information**                                                                                                |  10 |
|                                |  Item                  1. Legal Proceedings                                                                                            |  10 |
|                                |  Item                  2. Unregistered Sales of Equity Securities and Use of                  Proceeds                                 |  10 |
|                                |  Item                  3. Defaults Upon Senior Securities                                                                              |  10 |
|                                |  Item                  4. Submission of Matters to a Vote of Security Holders                                                          |  10 |
|                                |  Item                  5. Other Information                                                                                            |  10 |
|                                |  Item                  6. Exhibits                                                                                                     |  10 |
|  SIGNATURES                    |  11                                                                                                                                    |

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**PART        I - FINANCIAL INFORMATION**

**FINANCIAL        STATEMENTS (UNAUDITED)**

**Stone        Arcade Acquisition Corporation**

**Balance        Sheet**

|                                                                                                                                                                                                                                                         |   |                                    |        |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-------------|
|                                                                                                                                                                                                                                                         |   | **September                  30, 2005** |        |
| **ASSETS**                                                                                                                                                                                                                                                   |   |                                    |        |
| **Current                  assets:**                                                                                                                                                                                                                         |   |                                    |        |
| Cash                                                                                                                                                                                                                                                         |   | $                                       | 2,263,930   |   |
| Cash                  and cash equivalents, held in trust                                                                                                                                                                                                    |   |                                    | 111,276,341 |   |
| Prepaid                  insurance                                                                                                                                                                                                                           |   |                                    | 171,500     |   |
| Other                  prepaid expenses                                                                                                                                                                                                                      |   |                                    | 8,925       |   |
| **Total                  assets**                                                                                                                                                                                                                            |   | $                                       | 113,720,696 |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                              |   |                                    |        |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Current                  liabilities:**                                                                                                                                                                                                                    |   |                                    |        |   |
| Accrued                  expenses                                                                                                                                                                                                                            |   | $                                       | 61,154      |   |
| Accrued                  income taxes                                                                                                                                                                                                                        |   |                                    |        |   |
| Current                                                                                                                                                                                                                                                      |   |                                    | 71,725      |   |
| Deferred                                                                                                                                                                                                                                                     |   |                                    | 61,345      |   |
|                                                                                                                                                                                                                                                         |   |                                    | 133,070     |   |
| **Total                  current liabilities**                                                                                                                                                                                                               |   |                                    | 194,224     |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Commitments                  and Contingencies:**                                                                                                                                                                                                          |   |                                    |        |   |
| Common                  stock, subject to possible redemption - 3,998,000 shares                                                                                                                                                                             |   |                                    | 22,159,715  |   |
| Deferred                  interest attributable to common stock subject to possible redemption                  (net                  of taxes of $28,705)                                                                                                   |   |                                    | 55,721      |   |
| **Total                  Commitments and Contingencies**                                                                                                                                                                                                     |   |                                    | 22,215,436  |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Total                  Liabilities**                                                                                                                                                                                                                       |   |                                    | 22,409,660  |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Stockholders’                  Equity:**                                                                                                                                                                                                             |   |                                    |        |   |
| Preferred                  stock — $.0001 par value; 1,000,000 shares authorized; 0 shares issued                  and                  outstanding                                                                                                    |   |                                    |        |   |
| Common                  stock—$.0001 par value, 175,000,000 shares authorized; 25,000,000 shares                  issued and outstanding (including 3,998,000 shares of common stock                  subject                  to possible redemption) |   |                                    | 2,500       |   |
| Additional                  paid-in capital                                                                                                                                                                                                                  |   |                                    | 91,105,946  |   |
| Income                  accumulated during the development stage                                                                                                                                                                                             |   |                                    | 202,590     |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Total                  stockholders’ equity**                                                                                                                                                                                                        |   |                                    | 91,311,036  |   |
|                                                                                                                                                                                                                                                         |   |                                    |        |   |
| **Total                  liabilities and stockholders’ equity**                                                                                                                                                                                        |   | $                                       | 113,720,696 |   |

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**Stone        Arcade Acquisition Corporation**

**Unaudited        Statements of Operations**

|                                                                                                                                                                              |   |                                                         |       | **April                    15, 2005**     |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|-------------------------------------------|--------|
|                                                                                                                                                                              |   | **July                    1, 2005**                          |       | *(Date                    of Inception)*  |   |
|                                                                                                                                                                              |   | **Through**                                                  |       | **Through**                               |   |
|                                                                                                                                                                              |   | **September                    30,                    2005** |       | **September                    30, 2005** |   |
| Cost                    and expenses                                                                                                                                              |   |                                                         |       |                                      |   |
| Operating                    expenses                                                                                                                                             |   | $                                                            | 37,799     |                                      | $      | 38,799 |   |
|                                                                                                                                                                              |   |                                                         |       |                                      |   |   |   |
| Other                    income                                                                                                                                                   |   |                                                         |       |                                      |   |   |   |
| Bank                    interest                                                                                                                                                  |   |                                                         | 7,839      |                                      |   | 7,839 |   |
| Interest                    on cash and cash equivalents held in trust                                                                                                            |   |                                                         | 422,341    |                                      |   | 422,341 |   |
| Total                    other income                                                                                                                                             |   |                                                         | 430,180    |                                      |   | 430,180 |   |
|                                                                                                                                                                              |   |                                                         |            |                                      |   |  |   |
| **Income                    before provision for income taxes**                                                                                                                   |   |                                                         | 392,381    |                                      |   | 391,381 |   |
| Provision                    for income taxes                                                                                                                                     |   |                                                         |       |                                      |   |   |   |
| Current                                                                                                                                                                           |   |                                                         | 71,725     |                                      |   | 71,725 |   |
| Deferred                                                                                                                                                                          |   |                                                         | 61,345     |                                      |   | 61,345 |   |
| Total                    provision for income taxes                                                                                                                               |   |                                                         | 133,070    |                                      |   | 133,070 |   |
| **Net                    income**                                                                                                                                                 |   |                                                         | 259,311    |                                      |   | 258,311 |   |
|                                                                                                                                                                              |   |                                                         |       |                                      |   |   |   |
| Deferred                    interest, net of taxes, attributable to common stock subject                    to possible                    redemption                             |   |                                                         | (55,721    | )                                         |   | (55,721 | ) |
|                                                                                                                                                                              |   |                                                         |       |                                      |   |   |   |
| **Net                    income allocable to holders of non-redeemable common                    stock**                                                                          |   | $                                                            | 203,590    |                                      | $      | 202,590 |   |
|                                                                                                                                                                              |   |                                                         |       |                                      |   |   |   |
| **Earnings                    per share -basic and diluted**                                                                                                                      |   | $                                                            | .02        |                                      | $      | .02 |   |
| **Weighted                    average number of shares outstanding exclusive of shares subject                    to                    possible redemption-- basic and diluted** |   |                                                         | 12,305,261 |                                      |   | 9,030,262 |   |

See        notes        to unaudited financial statements 

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**Stone        Arcade Acquisition Corporation**

**Unaudited        Statements of Stockholders’ Equity** 

|                                                                                                                                                                                                                                |   |                              |       |        |   |            |   |  **Income**                |        |      |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|-------------|--------|-----------------|--------|---------------------------------|-------------|-----------|--------|
|                                                                                                                                                                                                                                |   |                              |       |        |   |            |   | **(Loss)**                      |        |      |   |
|                                                                                                                                                                                                                                |   |                              |       |        |   |            |   | **Accumulated**                 |        |      |   |
|                                                                                                                                                                                                                                |   |                              |       |        |   | **Additional**  |   | **During                  the** |        |      |   |
|                                                                                                                                                                                                                                |   | **Common                  Stock** |       | **Paid-In** |   | **Development** |   |                            |        |
|                                                                                                                                                                                                                                |   | **Shares**                        |       | **Amount**  |   | **Capital**     |   | **Stage**                       |        | **Total** |   |
| **Balance                  — April 15, 2005**                                                                                                                                                                            |   |                              | -          |        |   | -               |   |                            | -           |      |   | - |   |   | - |   |
| **(date                  of inception**)                                                                                                                                                                                            |   |                              |       |        |   |            |   |                            |        |      |   |   |   |   |   |   |
| Initial                  capital from founding stockholders                                                                                                                                                                         |   |                              | 5,000,000  |        | $      | 500             |   | $                               | 24,500      |      |   |   |   | $$ | 25,000 |   |
| Net                  loss for the period                                                                                                                                                                                            |   |                              |       |        |   |            |   |                            |        |      |   | (1,000 | ) |   | (1,000 | ) |
| **Balance-June                  30, 2005**                                                                                                                                                                                          |   |                              | 5,000,000  |        |   | 500             |   |                            | 24,500      |      |   | (1,000 | ) |   | 24,000 |   |
| Sale                  of 20,000,000 units (including 3,998,000 shares of common stock                  subject to                  possible redemption), net of underwriters’ discount and offering                  expenses |   |                              | 20,000,000 |        |   | 2,000           |   |                            | 113,241,161 |      |   |   |   |   | 113,243,161 |   |
| Reclassification                  as a result of 3,998,000 shares of common stock being subject to                  possible                  redemption                                                                            |   |                              |       |        |   |            |   |                            | (22,159,715 | )         |   |   |   |   | (22,159,715 | ) |
| Net                  income for the period                                                                                                                                                                                          |   |                              |       |        |   |            |   |                            |        |      |   | 203,590 |   |   | 203,590 |   |
| **Balance—September                  30, 2005**                                                                                                                                                                               |   |                              | 25,000,000 |        | $      | 2,500           |   | $                               | 91,105,946  |      | $      | 202,590 |   | $ | 91,311,036 |   |

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**Stone        Arcade Acquisition Corporation**

**Unaudited        Statement of Cash Flows** 

|                                                                             |   |                                     |         |
|----------------------------------------------------------------------------------|--------|------------------------------------------|--------------|
|                                                                             |   | **April                  15, 2005**      |         |
|                                                                             |   | **(Date                  of Inception)** |         |
|                                                                             |   | **through**                              |         |
|                                                                             |   | **September                  30, 2005**  |         |
| **Cash                  flows from operating activities:**                       |   |                                     |         |
| Net                  income                                                      |   | $                                        | 258,311      |   |
| Deferred                  income taxes                                           |   |                                     | 61,345       |   |
| Changes                  in:                                                     |   |                                     |         |   |
| Prepaid                  insurance                                               |   |                                     | (171,500     | ) |
| Other                  prepaid expenses                                          |   |                                     | (8,925       | ) |
| Accrued                  expenses                                                |   |                                     | 61,154       |   |
| Accrued                  income taxes                                            |   |                                     | 71,725       |   |
| Net                  cash provided by operating activities                       |   |                                     | 272,110      |   |
|                                                                             |   |                                     |         |   |
| **Cash                  flows from investing activities:**                       |   |                                     |         |   |
| ** **Cash                  and cash equivalents held in trust               |   |                                     | (111,276,341 | ) |
| ** **Net                  cash used in investing activities                 |   |                                     | (111,276,341 | ) |
| **Cash                  flows from financing activities:**                       |   |                                     |         |   |
| Proceeds                  from public offering, net of expenses of $6,756,839    |   |                                     | 113,243,161  |   |
| Proceeds                  from sale of common stock to founding stockholders     |   |                                     | 25,000       |   |
| Proceeds                  from notes payable to stockholders                     |   |                                     | 200,000      |   |
| Repayment                  of notes to stockholders                              |   |                                     | (200,000     | ) |
| Net                  cash provided by financing activities                       |   |                                     | 113,268,161  |   |
| **Net                  increase in cash**                                        |   |                                     | 2,263,930    |   |
| Cash                  — beginning of period                                |   |                                     | 0            |   |
| **Cash                  — end of period**                                  |   | $                                        | 2,263,930    |   |
|                                                                             |   |                                     |         |   |
| **Supplemental                  disclosure of non-cash activities:**             |   |                                     |         |   |
| Reclassification                  of common stock subject to possible redemption |   | $                                        | 22,159,715   |   |

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**Stone        Arcade Acquisition Corporation**

**Notes        to Unaudited Financial Statements**

**September        30, 2005**

**NOTE        A — ORGANIZATION, BUSINESS OPERATIONS**
**AND        SUBSEQUENT EVENTS**

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**Stone        Arcade Acquisition Corporation**

**Notes        to Unaudited Financial Statements — (Continued)**

**NOTE        B —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Cash        and cash equivalents**

**Earnings        Per Common Share**

**Use        of Estimates**

**Income        taxes**

**NOTE        C — INITIAL PUBLIC OFFERING**

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**Stone        Arcade Acquisition Corporation**

**Notes        to Unaudited Financial Statements — (Continued)**

**NOTE        C — INITIAL PUBLIC OFFERING**
***Continued***

**NOTE        D — NOTES PAYABLE TO STOCKHOLDERS**

**NOTE        E —RELATED PARTY TRANSACTIONS**

**NOTE        F—COMMITMENTS**

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**Stone        Arcade Acquisition Corporation**

**Notes        to Unaudited Financial Statements — (Continued)**

**NOTE        G—FOUNDING STOCKHOLDERS**

**NOTE        H—COMMON STOCK RESERVED FOR ISSUANCE**

**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF        OPERATIONS**

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**QUANTITATIVE        AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

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**CONTROLS        AND PROCEDURES**

**PART        II - OTHER INFORMATION**

**LEGAL        PROCEEDINGS**

**UNREGISTERED        SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**DEFAULTS        UPON SENIOR SECURITIES**

**SUBMISSION        OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**OTHER        INFORMATION**

**EXHIBITS**

| (b) | Exhibits |
|-----|----------|

|  | 31 | Rule                  13a-14(a) Certification of Principal Executive Officer and Principal                  Financial Officer. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------|

|  | 32 | 18                  U.S.C Section 1350 Certification. |
|--|----|-------------------------------------------------------|

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**SIGNATURES**

|                               |                                                               |                                |
|------------------------------------|--------------------------------------------------------------------|-------------------------------------|
|                               | STONE                  ARCADE ACQUISITION CORPORATION              |
|                          |                                                          |                           |
| November                  14, 2005 | By:                                                      | /s/ Roger                Stone |
|                               | Roger                  Stone                                       |
|                               | Chairman                  of the Board and Chief Executive Officer |

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