**SECURITIES AND EXCHANGECOMMISSIONWASHINGTON, D.C. 20549**

**FORM 10-Q/A**

**AMENDMENT NO. 1**
| **ý** | ** ** | **Quarterly Report  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of  1934** |
|------------|------------|---------------------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                              |
| ** ** | ** ** | **For the quarterly period ended March 31,  2006.**                                                |

 

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

 

**Commission File Number: 000-51444**

**Stone Arcade Acquisition Corporation(Exact name of registrant as specified in its charter)**
| **Delaware**                                                    | **20-2699372**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State or Other Jurisdiction of

Incorporation or Organization) | (I.R.S. Employer

Identification No.) |

 

**c/o Stone-Kaplan Investments, LLC, One NorthfieldPlaza, Suite 480Northfield, IL 60093**(Address of Principal Executive Offices including zip code)

**(847) 441-0929**(Registrant’s Telephone Number, Including Area Code)

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.

Yes ý Noo

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated fileror a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
| Large Accelerated Filer o |   | Accelerated  Filer o |   | Non-Accelerated  Filer ý |
|---------------------------|--------|----------------------|--------|-------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).   Yes ý No o

There were 25,000,000shares of the Registrant’s Common Stock issued and outstanding on May 12,2006.

 

 

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**EXPLANATORY NOTE**

This Amendment No. 1 on Form 10-Q/A(“Form 10-Q/A”) to the Company’s Quarterly Report on Form 10-Q forthe period ended March 31, 2006, initially filed with the Securities andExchange Commission on May 12, 2006 (the “Original Filing”), reflects changesto the notes to the financial statements relating to the exercise provisions ofthe Company’s warrants. This Form 10-Q/A amends and restates (i) Item 1.Financial Statements.  In addition, the OriginalFiling has been amended to contain currently dated certifications from theCompany’s Chief Executive Officer and Chief Financial Officer, as required bySections 302 and 906 of the Sarbanes-Oxley Act (See Exhibits 31 and32).

Except to the extent modified or updated, theforegoing items have not been amended to reflect other events occurring afterthe Original Filing or to modify or update those disclosures affected bysubsequent events. Other events occurring after the filing of the OriginalFiling or other disclosures necessary to reflect subsequent events have beenaddressed in the Company’s reports filed with the Securities and ExchangeCommission subsequent to the filing of the Original Filing.

**Stone Arcade Acquisition Corporation Index toForm 10-Q/A**

**TABLE OFCONTENTS**
| PART I.  - FINANCIAL INFORMATION      |   |
|--------------------------------------------|--------|
|                                       |   |
| Item 1. - FINANCIAL STATEMENTS (UNAUDITED) |   |
|                                       |   |
|                                       |   |
| PART II. -  OTHER INFORMATION         |   |
|                                       |   |
| Item 6. - EXHIBITS                         |   |
|                                       |   |
| SIGNATURES                                 |   |

 

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**PART I. —FINANCIAL INFORMATION**

**Item 1. — FINANCIAL STATEMENTS (UNAUDITED)**

**Stone Arcade Acquisition Corporation(a development stage company)Condensed Balance Sheet**
| ** **                                                                                                                                                                                  | ** ** | **March 31** | ** **  | **December 31** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|-------------|----------------------|------------|
| ** **                                                                                                                                                                                  | ** ** | **2006**          | ** **  | **2005**             | ** ** |
| ** **                                                                                                                                                                                  | ** ** | **(unaudited)**   | ** **  | ** **           | ** ** |
| **Assets**                                                                                                                                                                                  | ** ** | ** **        | ** **  | ** **           | ** ** |
| Current assets:                                                                                                                                                                             |       |              |        |                 |       |
| Cash                                                                                                                                                                                        |       | $                 | 2,614,317   |                 | $          | 2,157,611 |   |
| Cash and investments, held in trust                                                                                                                                                         |       | 112,574,790       |        | 111,965,034          |       |
| Prepaid expenses                                                                                                                                                                            |       | 77,325            |        | 128,875              |       |
| Total current assets                                                                                                                                                                        |       | 115,266,432       |        | 114,251,520          |       |
| Deferred income taxes                                                                                                                                                                       |       | 126,676           |        | 74,161               |       |
| Total assets                                                                                                                                                                                |       | $                 | 115,393,108 |                 | $          | 114,325,681 |   |
|                                                                                                                                                                                        |       |              |        |                 |       |
| **Liabilities and Stockholders’ Equity**                                                                                                                                               | ** ** | ** **        | ** **  | ** **           | ** ** |
| Current liabilities:                                                                                                                                                                        |       |              |        |                 |       |
| Accrued expenses                                                                                                                                                                            |       | $                 | 613,580     |                 | $          | 156,405 |   |
| Deferred income taxes                                                                                                                                                                       |       | 9,351             |        | 90,521               |       |
| Total current liabilities                                                                                                                                                                   |       | 622,931           |        | 246,926              |       |
|                                                                                                                                                                                        |       |              |        |                 |       |
| Common stock, subject to possible redemption —  3,998,000 shares                                                                                                                       |       | 22,159,715        |        | 22,159,715           |       |
| Deferred interest attributable to common stock  subject to possible redemption (net of taxes of $177,790)                                                                                   |       | 345,121           |        | 189,462              |       |
|                                                                                                                                                                                        |       | 22,504,836        |        | 22,349,177           |       |
|                                                                                                                                                                                        |       |              |        |                 |       |
| Commitments and contingencies (Note E)                                                                                                                                                      |       |              |        |                 |       |
|                                                                                                                                                                                        |       |              |        |                 |       |
| 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             |        | 2,500                |       |
| Additional paid-in capital                                                                                                                                                                  |       | 91,098,761        |        | 91,098,761           |       |
| Income accumulated during the development stage                                                                                                                                             |       | 1,164,080         |        | 628,317              |       |
| Total stockholders’ equity                                                                                                                                                             |       | 92,265,341        |        | 91,729,578           |       |
| Total liabilities and stockholders’ equity                                                                                                                                             |       | $                 | 115,393,108 |                 | $          | 114,325,681 |   |

 

*See notes to condensed unauditedfinancial statements.*

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**Stone ArcadeAcquisition Corporation(a development stage company)Condensed Statement of Operations (unaudited)**
| ** **                                                                                         | ** ** | ** **            | ** ** | **Accumulated**   | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                                                                         | ** ** | **Three**             | ** ** | **Inception**     | ** ** |
| ** **                                                                                         | ** ** | **Months Ended** | ** ** | **Through**       | ** ** |
| ** **                                                                                         | ** ** | **March 31**     | ** ** | **March 31** | ** ** |
| ** **                                                                                         | ** ** | **2006**              | ** ** | **2006**          | ** ** |
| Cost and expenses:                                                                                 |       |                  |       |              |       |
| Operating expenses                                                                                 |       | $                     | 154,457    |              | $          | 375,557 |   |
|                                                                                               |       |                  |       |              |       |
| Other income:                                                                                      |       |                  |       |              |       |
| Bank interest                                                                                      |       | 27,235                |       | 51,359            |       |
| Interest income                                                                                    |       | 1,179,830             |       | 2,615,864         |       |
| Total other income                                                                                 |       | 1,207,065             |       | 2,667,223         |       |
| Income before provision for income taxes:                                                          |       | 1,052,608             |       | 2,291,666         |       |
|                                                                                               |       |                  |       |              |       |
| Provision for income taxes:                                                                        |       |                  |       |              |       |
| Current                                                                                            |       | 494,871               |       | 899,790           |       |
| Deferred                                                                                           |       | (133,685              | )          | (117,325          | )          |
| Total provision for income taxes                                                                   |       | 361,186               |       | 782,465           |       |
| Net income                                                                                         |       | 691,422               |       | 1,509,201         |       |
|                                                                                               |       |                  |       |              |       |
| Deferred interest, net of taxes, attributable to  common stock subject to possible redemption      |       | (155,659              | )          | (345,121          | )          |
| Net income allocable to holders of non-redeemable  common stock                                    |       | $                     | 535,763    |              | $          | 1,164,080 |   |
|                                                                                               |       |                  |       |              |       |
| Weighted-average number of shares outstanding:                                                     |       |                  |       |              |       |
| Basic                                                                                              |       | 25,000,000            |       | 17,800,000        |       |
| Diluted                                                                                            |       | 28,768,116            |       | 19,783,764        |       |
|                                                                                               |       |                  |       |              |       |
| Earnings per share:                                                                                |       |                  |       |              |       |
| Basic                                                                                              |       | $                     | 0.03       |              | $          | 0.08 |   |
| Diluted                                                                                            |       | $                     | 0.02       |              | $          | 0.08 |   |
|                                                                                               |       |                  |       |              |       |
| Weighted-average number of shares outstanding  exclusive of shares subject to possible redemption: |       |                  |       |              |       |
| Basic                                                                                              |       | 21,002,000            |       | 15,241,280        |       |
| Diluted                                                                                            |       | 24,770,116            |       | 17,225,044        |       |
|                                                                                               |       |                  |       |              |       |
| Earnings per share exclusive shares and related  deferred interest subject to possible redemption: |       |                  |       |              |       |
| Basic                                                                                              |       | $                     | 0.03       |              | $          | 0.08 |   |
| Diluted                                                                                            |       | $                     | 0.02       |              | $          | 0.07 |   |
|                                                                                               |       |                  |       |              |       |

 

*See notes to condensed unauditedfinancial statements.*

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**Stone ArcadeAcquisition Corporation(a development stage company)Condensed Statement of Cash Flows (unaudited)**
| ** **                                                   | ** ** | ** **            | ** ** | **Accumulated**   | ** ** |
|--------------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|
| ** **                                                   | ** ** | **Three**             | ** ** | **Inception**     | ** ** |
| ** **                                                   | ** ** | **Months Ended** | ** ** | **Through**       | ** ** |
| ** **                                                   | ** ** | **March 31**     | ** ** | **March 31** | ** ** |
| ** **                                                   | ** ** | **2006**              | ** ** | **2006**          | ** ** |
| **Operating activities**                                     | ** ** | ** **            | ** ** | ** **        | ** ** |
| Net income                                                   |       | $                     | 691,422    |              | $          | 1,509,201 |   |
| Changes in:                                                  |       |                  |       |              |       |
| Interest receivable on short-term investments                |       | 238,734               |       | (27,505           | )          |
| Prepaid expenses                                             |       | 51,550                |       | (77,325           | )          |
| Accrued expenses                                             |       | 457,175               |       | 613,580           |       |
| Deferred income taxes                                        |       | (133,685              | )          | (117,325          | )          |
| Net cash provided by operating activities                    |       | 1,305,196             |       | 1,900,626         |       |
|                                                         |       |                  |       |              |       |
| **Investing activities**                                     |       |                  |       |              |       |
| Purchase of US Government Securities held in trust           |       | (451,089,490          | )          | (1,007,854,499    | )          |
| Maturities of US Government Securities held in trust         |       | 450,241,000           |       | 895,307,214       |       |
| Net cash used in investing activities                        |       | (848,490              | )          | (112,547,285      | )          |
|                                                         |       |                  |       |              |       |
| **Cash flows provided by financing activities**              | ** ** | ** **            | ** ** | ** **        | ** ** |
| Proceeds from public offering, net of expenses               |       | —                |       | 113,235,876       |       |
| Proceeds from sale of common stock to founding  shareholders |       | —                |       | 25,000            |       |
| Proceeds from notes payable to stockholders                  |       | —                |       | 200,000           |       |
| Repayment of notes to stockholders                           |       | —                |       | (200,000          | )          |
| Proceeds from issuance of underwriters’option           |       | —                |       | 100               |       |
|                                                         |       | —                |       | 113,260,976       |       |
|                                                         |       |                  |       |              |       |
| Net increase in cash                                         |       | 456,706               |       | 2,614,317         |       |
| Cash — beginning of period                              |       | 2,157,611             |       | —            |       |
| Cash — end of period                                    |       | $                     | 2,614,317  |              | $          | 2,614,317 |   |

 

*See notes to condensed unauditedfinancial statements.*

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**Stone Arcade AcquisitionCorporation(a development stage company)Notes to Condensed Unaudited Financial Statements**

**Note A.   Basis ofPresentation, Use of Estimates and Reclassifications**

The accompanyingunaudited financial statements have been prepared in accordance with U.S.generally accepted accounting principles for interim financial information andwith the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes requiredby generally accepted accounting principles for complete financial statements.In the opinion of management, all normal recurring adjustments considerednecessary for a fair presentation have been included. The results of operationsfor the three month period ended March 31, 2006 are not necessarilyindicative of the results to be expected for the year ending  December 31, 2006.

The condensed balancesheet at December 31, 2005 has been derived from the audited consolidatedfinancial statements at that date but does not include all of the informationand footnotes required by generally accepted accounting principles for completefinancial statements.

 

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**Stone Arcade Acquisition Corporation(a development stage company)Notes to Condensed Unaudited Financial Statements (continued)**

For further information,refer to the financial statements and footnotes thereto included in StoneArcade Acquisition Corporation’s annual report on Form 10-K for the yearended December 31, 2005.

Certain prior periodamounts have been reclassified in order to conform to current yearpresentation.

**Note B.   Organization,Business Operations and Subsequent Events**

Stone Arcade AcquisitionCorporation was incorporated in Delaware on April 15, 2005. The Companywas formed to serve as a vehicle for the acquisition through a merger, capitalstock exchange, asset acquisition, or other similar business combination (BusinessCombination) of an operating business in the paper, packaging, forest productsand related industries. The Company has neither engaged in any operations norgenerated operating revenue. The Company is considered to be in the developmentstage and is subject to the risks associated with activities of developmentstage companies. The Company has selected December 31 as its fiscal yearend.

The registrationstatement for the Company’s initial public offering (the Offering) was declaredeffective on August 15, 2005. The Company consummated the Offering onAugust 19, 2005 and received net proceeds of approximately $113,236,000.The Company’s management has broad discretion with respect to the specificapplication of the net proceeds of the Offering (as described in Note C),although substantially all of the net proceeds of the Offering are intended tobe generally applied toward a Business Combination. Furthermore, there is noassurance that the Company will be able to successfully effect a BusinessCombination. Of the net proceeds, $112,574,790, including interest earned of$2,615,864, less operating expenses and taxes, is being held in a trust account(Trust Fund) and invested in government securities until the earlier of:(i) the consummation of the first Business Combination or (ii) thedistribution of the Trust Fund as described below.

The interest income issubject to additional taxes incurred, but not yet paid, as of March 31,2006. The remaining proceeds may be used to pay for business, legal andaccounting due diligence on prospective business combinations and continuinggeneral and administrative expenses. The Company, after signing a definitiveagreement for the acquisition of a target business, will submit suchtransaction for stockholder approval. In the event that holders of20 percent or more of the shares issued in the Offering vote against theBusiness Combination and elect to redeem their shares, the Business Combinationwill not be consummated. If a majority of the shares voted at the meeting by publicstockholders are voted in favor of the Business Combination and holders of lessthan 20 percent of the shares issued in the Offering vote against theBusiness Combination and elect to have their shares redeemed, the BusinessCombination will be consummated and the shares of such holders will be redeemedat the net offering price, approximately $5.54, plus interest income allocableto such shares, net of income taxes. The number of shares subject to possibleredemption is approximately 3,998,000. At March 31, 2006, the Company hasclassified approximately $22,504,836 of the net proceeds from the Offeringinclusive of interest, but net of taxes, as common stock subject to possibleredemption in the accompanying balance sheet.

In the event that theCompany does not consummate a Business Combination within 18 months fromthe date of the consummation of the Offering, or 24 months from theconsummation of the Offering if certain extension criteria have been satisfied(the Acquisition period), the proceeds held in the Trust Fund will bedistributed to the Company’s public stockholders, excluding the persons whowere stockholders prior to the Offering (the Founding Stockholders) to theextent of their initial stock holdings. However, the Founding Stockholders willparticipate in any liquidation distribution with respect to any shares ofcommon stock they acquired in connection with or following the Offering. In theevent of such distribution, it is likely that the per share value of theresidual assets remaining available for distribution (including Trust Fundassets) will be less than the initial public offering price per share in theOffering (assuming no value is attributed to the Warrants contained in theUnits in the Offering discussed in Note C).

**Note C.   InitialPublic Offering**

On August 19, 2005,the Company sold 20,000,000 units (Units). Each Unit consisted of one share ofthe Company’s common stock, $.0001 par value, and two warrants (Warrants). EachWarrant entitles the holder to purchase from the Company one share of commonstock at an exercise price of $5.00. Each warrant is exercisable on the laterof: (a) the completion of a Business Combination or(b) August 15, 2006, and expires on August 15,

 

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**Stone Arcade Acquisition Corporation(a development stage company)Notes to Condensed Unaudited Financial Statements (continued)**

2009. The Warrants areredeemable at a price of $.01 per Warrant upon 30 days notice after theWarrants become exercisable, only in the event that the last sale price of thecommon stock is at least $8.50 per share for any 20 trading days within a30 trading day period ending on the third business day prior to the dateon which notice of redemption is given.

In connection with theOffering, the Company paid the underwriters an underwriting discount offive percent of the gross proceeds of the Offering. The Company alsoissued for $100 an option to the representative of the underwriters to purchaseup to a total of 1,000,000 units at a price of $7.50 per unit. The units issuableupon the exercise of this option are identical to those offered in theprospectus, except that the exercise price of the warrants included in theunderwriters’ purchase option is $6.25. This option is exercisable commencingon the later of the consummation of a business combination or one year from thedate of the Offering, expires five years from the date of the Offering, andmay be exercised on a cashless basis. The option may not be sold,transferred, assigned, pledged or hypothecated until August 16, 2006.However, the option may be transferred to any underwriter and selecteddealer participating in the Offering and their bona fide officers or partners.

The underwriters’purchase option and the Warrants (including the warrants underlying theunderwriters’ option) will be exercisable only if at the time of exercise acurrent registration statement covering the underlying securities is effectiveor, in the opinion of counsel, not required, and if the securities arequalified for sale or exempt from qualification under the applicable statesecurities laws of the exercising holder. The Company is obligated to use its best efforts to maintain aneffective registration statement during the term of the option and the Warrants;however, it may be unable to do so. Holders of the option and the Warrants are not entitled to receive a netcash settlement or other settlement in lieu of physical settlement if thecommon stock underlying the Warrants, or securities underlying the option, asapplicable, are not covered by an effective registration statement.  Accordingly, the Warrants, which do not havea cashless exercise provision, may expire unexercised and worthless if acurrent registration statement covering the common stock is not effective.

The holders of the optionhave demand and piggy-back registration rights under the Securities Act forperiods of five and seven years, respectively, from the date of the Offeringwith respect to registration of the securities directly and indirectly issuableupon exercise of the option. The exercise price and number of units issuableupon exercise of the option may be adjusted in certain circumstances,including issuances of a stock dividend, recapitalization, reorganization,merger or consolidation. However, the option will not be adjusted for issuancesat a price below its exercise price.

The Company hasestimated, based upon a Black Scholes model, that the fair value of thepurchase option on the date of sale was approximately $980,000. The Companyaccounted for this purchase option, inclusive of the receipt of the $100 cashpayment, as an expense of the Offering resulting in a charge directly tostockholders’ equity. Accordingly there was no impact in the Company’sfinancial position or results of operations except for the recording of the$100 proceeds from the sale.

In accordance with acommitment entered into in connection with the Offering, the FoundingStockholders have purchased 3,500,000 warrants in the public marketplace. Theyhave further agreed that warrants purchased by them or their affiliates willnot be sold or transferred until the completion of a Business Combination.

**Note D. Related-PartyTransactions**

The Company has agreed topay Stone-Kaplan Investments, LLC, an entity where certain of the Founding Stockholdersserve in executive capacities, an administrative fee of $7,500 per month foroffice space and general and administrative services from August 15, 2005through the acquisition date of a target business. Stone-Kaplan Investments LLChas agreed to pay a portion of the aforementioned administration fee to ArcadePartners LLC, a company where certain of the Founding Stockholders serve inexecutive capacities. From time to time the Company retains the services ofWhite Oak Aviation, a company solely owned by certain Founding Stockholders.For the quarter ended March 31, 2006, the amount paid to this entity was$22,500.

The Founding Stockholdershave agreed with the Company and the underwriters that if the Companyliquidates prior to the consummation of a Business Combination, they will bepersonally liable to pay debts and obligations to vendors that are owed moneyby the Company for services rendered or products sold to us in excess of thenet proceeds not held in the trust account at that time.

 

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**Stone Arcade Acquisition Corporation(a development stage company)Notes to Condensed Unaudited Financial Statements (continued)**

**Note E. Commitmentsand Contingencies**

The Company has engagedthe representative of the underwriters to act as its investment banker inconnection with a Business Combination. The Company has agreed to pay therepresentative a cash fee of $1,200,000 at the closing of the BusinessCombination for assisting the Company in structuring and negotiating the termsof the transaction.

**Note F. CommonStock Reserved for Issuance**

At March 31, 2006,43,000,000 shares of common stock were reserved for issuance upon exercise ofwarrants and the underwriter’s option.

 

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**PART II. —OTHER INFORMATION**

**Item 6. — 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**

In accordance withthe requirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|                         | STONE ARCADE  ACQUISITION CORPORATION |
|-------------------------|---------------------------------------|
|                    |                                  |   |
|                    |                                  |   |
| December 12,  2006 | By:                                   | /s/ Roger  Stone |   |
|                    |                                  | Roger Stone |
|                    |                                  | Chairman of the  Board and Chief Executive Officer |

 

 

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