**SECURITIES AND EXCHANGECOMMISSION**

**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, 2007.**                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                               |       |                                                                                          |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                               |       | **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:******000-51444**

**Arcade AcquisitionCorp.**

(Exact name ofregistrant as specified in its charter) 

| **Delaware**                                                     |   | **20-8348580**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization) |   | (I.R.S. Employer  Identification No.) |

 

**62 La Salle Road, Suite 304**

**West Hartford, CT 06107**

(Address ofPrincipal Executive Offices including zip code)

**(860) 236-0929**

(Registrant’sTelephone Number, Including Area Code)

Indicate by check mark whether theRegistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.

Yes   x      No   o

Indicate by check mark whether theregistrant is an accelerated filer (as defined on Rule 12b-2 of the ExchangeAct). Yes   o      No   x

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

There were 10,500,000 shares of theRegistrant’s Common Stock issued and outstanding on August 10, 2007. 

 

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**ArcadeAcquisition Corp.**

**(a corporationin the development stage)**

**Index to Form 10-Q**
| ** **   | ** ** | ** **                                                                                          | **Page No** |
|--------------|------------|-----------------------------------------------------------------------------------------------------|-------------|
| **Part I.**  | ** ** | **Financial Information**                                                                           | 3           |
| ** **   |       |                                                                                                |        |
| ** **   |       | Item  1. Financial Statements (unaudited)                                                           | 3           |
|         |       |                                                                                                |        |
|         |       | Balance  Sheet                                                                                      | 3           |
|         |       |                                                                                                |        |
|         |       | Statements  of Operations                                                                           | 4           |
|         |       |                                                                                                |        |
|         |       | Statement of Stockholders’ Equity                                                              | 5           |
|         |       |                                                                                                |        |
|         |       | Statements  of Cash Flows                                                                           | 6           |
|         |       |                                                                                                |        |
|         |       | Notes to Interim Financial Statements                                                               | 7           |
|         |       |                                                                                                |        |
|         |       | Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 14          |
|         |       |                                                                                                |        |
|         |       | Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                 | 16          |
|         |       |                                                                                                |        |
|         |       | Item 4. Controls and Procedures                                                                     | 17          |
| ** **   | ** ** | ** **                                                                                          |        |
| **Part II.** | ** ** | **Other Information**                                                                               | 17          |
| ** **   |       |                                                                                                |        |
| ** **   |       | Item  1. Legal Proceedings                                                                          | 17          |
|         |       |                                                                                                |        |
|         |       | Item  1A. Risk Factors                                                                              | 17          |
|         |       |                                                                                                |        |
|         |       | Item 2. Unregistered Sales of Equity Securities and  Use of Proceeds                                | 17          |
|         |       |                                                                                                |        |
|         |       | Item 3. Defaults Upon Senior Securities                                                             | 17          |
|         |       |                                                                                                |        |
|         |       | Item 4. Submission of Matters to a Vote of Security  Holders                                        | 17          |
|         |       |                                                                                                |        |
|         |       | Item  5. Other Information                                                                          | 17          |
|         |       |                                                                                                |        |
|         |       | Item 6.  Exhibits                                                                                   | 18          |
|         |       |
| SIGNATURES   | 19         |
|         |       |

** **

2

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**PART I - FINANCIALINFORMATION**

**Item 1** — FINANCIAL STATEMENTS

**ARCADEACQUISITION CORP.**

**(acorporation in the development stage)**

**BALANCE SHEET**

(unaudited)

 
| ** **                                                                                                                                                            | ** ** | **June 30, 2007** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
|                                                                                                                                                                  |       |                        |       |
| **ASSETS**                                                                                                                                                            | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                            | ** ** | ** **                  | ** ** |
| **Current assets,**cash                                                                                                                                               |       | $                           | 266,811    |   |
|                                                                                                                                                                  |       |                        |       |
| **Other  assets,**cash held in Trust Fund                                                                                                                             | ** ** | 68,188,436                  | ** ** |
|                                                                                                                                                                  |       |                        |       |
|                                                                                                                                                                  |       |                        |       |
|                                                                                                                                                                  |       | $                           | 68,455,247 |   |
|                                                                                                                                                                  |       |                        |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                        | ** ** | ** **                  | ** ** |
| ** **                                                                                                                                                            | ** ** | ** **                  | ** ** |
| **Current liabilities**                                                                                                                                               | ** ** | ** **                  | ** ** |
| Accrued expenses                                                                                                                                                      |       | $                           | 51,277     |   |
| Income taxes  payable                                                                                                                                                 |       | 123,873                     |       |
|                                                                                                                                                                  |       |                        |       |
| Total current  liabilities                                                                                                                                            |       | 175,150                     |       |
|                                                                                                                                                                  |       |                        |       |
| **Long-term  liabilities,**deferred underwriters’ fee                                                                                                            |       | 1,690,500                   |       |
|                                                                                                                                                                  |       |                        |       |
| **Common stock, subject to  possible redemption, 2,587,499 shares at redemption value**                                                                               |       | 20,350,492                  |       |
|                                                                                                                                                                  |       |                        |       |
| **Commitments and contingencies**                                                                                                                                     | ** ** | ** **                  | ** ** |
|                                                                                                                                                                  |       |                        |       |
| **Stockholders’ equity**                                                                                                                                         | ** ** | ** **                  | ** ** |
| Preferred stock,  $.0001 par value; 1,000,000 shares authorized; none issued                                                                                          |       | —                      |       |
| Common stock,  $.0001 par value, authorized 39,000,000 shares; 10,500,000 shares issued and  outstanding, (including 2,587,499 shares subject to possible redemption) |       | 1,051                       |       |
| Additional  paid-in capital                                                                                                                                           |       | 46,033,880                  |       |
| Retained  earnings accumulated during development stage                                                                                                               |       | 204,174                     |       |
|                                                                                                                                                                  |       |                        |       |
| Total  stockholders’ equity                                                                                                                                      |       | 46,239,105                  |       |
|                                                                                                                                                                  |       |                        |       |
|                                                                                                                                                                  |       | $                           | 68,455,247 |   |

 

See accompanying notes tointerim financial statements.

3

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**ARCADEACQUISITION CORP.**

**(acorporation in the development stage)**

**STATEMENTS OF OPERATIONS**

(unaudited)
| ** **                                                                   | ** ** | **For the three   months ended   June 30, 2007** | ** ** | **For the period   January 30, 2007  (date of inception)  to June 30, 2007** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                   | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| **Revenues**                                                                 |       | $                                                                                   | —     |                                                                                                                           | $          | — |   |
| ** **                                                                   | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| **Formation,  general and adminstrative expenses**                           |       | 20,896                                                                              |       | 24,185                                                                                                                         |       |
|                                                                         |       |                                                                                |       |                                                                                                                           |       |
| **Loss  from operations**                                                    |       | (20,896                                                                             | )          | (24,185                                                                                                                        | )          |
|                                                                         |       |                                                                                |       |                                                                                                                           |       |
| **Other  income (expense)**                                                  | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| Interest and dividend income                                                 |       | 354,238                                                                             |       | 354,443                                                                                                                        |       |
| Interest expense                                                             |       | (1,569                                                                              | )          | (2,211                                                                                                                         | )          |
| ** **                                                                   | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| **Income  before provision for income taxes**                                |       | 331,773                                                                             |       | 328,047                                                                                                                        |       |
| ** **                                                                   | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| **Provision  for income taxes**                                              |       | 123,873                                                                             |       | 123,873                                                                                                                        |       |
| ** **                                                                   | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                     | ** ** |
| **Net  income**                                                              |       | $                                                                                   | 207,900    |                                                                                                                           | $          | 204,174 |   |
|                                                                         |       |                                                                                |       |                                                                                                                           |       |
| **Weighted  average number of common shares outstanding, basic and diluted** |       | 5,591,667                                                                           |       | 4,090,232                                                                                                                      |       |
|                                                                         |       |                                                                                |       |                                                                                                                           |       |
| **Net  income per common share, basic and diluted**                          |       | $                                                                                   | 0.04       |                                                                                                                           | $          | 0.05 |   |

 

See accompanying notes tointerim financial statements.

4

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**ARCADE ACQUISITION CORP.**

**(acorporation in the development stage)**

** **

**STATEMENT OF STOCKHOLDERS’ EQUITY**

(unaudited)

** **

**For the period January 30, 2007 (dateof inception) to June 30, 2007**

 
| ** **                                                                                                                                                                             | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Retained   Earnings  Accumulated  During   Development** | ** ** | **Total  Stockholders’** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|----------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                                                             | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **Capital**                                                          | ** ** | **Stage**                     | ** ** | **Equity** | ** ** |
| ** **                                                                                                                                                                             | ** ** | ** **            | ** ** | ** **              | ** ** | ** **                                                           | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Common shares issued to  existing shareholders on February 13, 2007 at $0.013 per share                                                                                                |       | 1,875,000             |       | $                       | 188        |                                                                 | $          | 24,812                        |       | $ | — |   | $ | 25,000 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Proceeds from issuance  of 2,000,000 warrants at $1 per warrant on May 23, 2007                                                                                                        |       |                  |       |                    |       | 2,000,000                                                            |       |                          |       | 2,000,000 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Sale of 7,500,000 units  on May 25, 2007 at a price of $8 per unit, net of underwriters’ discount and  offering costs (including 2,249,999 shares subject to possible redemption) |       | 7,500,000             |       | 750                     |       | 55,919,024                                                           |       |                          |       | 55,919,774 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Common stock subject to  possible redemption, 2,249,999 shares                                                                                                                         |       |                  |       |                    |       | (17,744,994                                                          | )          |                          |       | (17,744,994 | ) |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Proceeds from issuance  of an option to the underwriters on May 25, 2008                                                                                                               |       |                  |       |                    |       | 100                                                                  |       |                          |       | 100 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Sale of 1,125,000 units  on June 7, 2007 at a price of $8 per unit, net of underwriters’ discount and  offering costs (including 337,500 shares subject to possible redemption)   |       | 1,125,000             |       | 113                     |       | 8,440,438                                                            |       |                          |       | 8,440,551 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Common stock subject to  possible redemption, 337,500 shares                                                                                                                           |       |                  |       |                    |       | (2,605,500                                                           | )          |                          |       | (2,605,500 | ) |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| Net income                                                                                                                                                                             |       |                  |       |                    |       |                                                                 |       | 204,174                       |       | 204,174 |   |
|                                                                                                                                                                                   |       |                  |       |                    |       |                                                                 |       |                          |       |   |   |
| **Balances, June 30, 2007**                                                                                                                                                            |       | 10,500,000            |       | $                       | 1,051      |                                                                 | $          | 46,033,880                    |       | $ | 204,174 |   | 46,239,105 |   |
|                                                                                                                                                                                        |            |                       |            |                         |            |                                                                      |            |                               |            |  |  |  |  |  |  |

 

See accompanying notes tointerim financial statements. 

5

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**ARCADE ACQUISITION CORP.**

**(acorporation in the development stage)**

** **

**STATEMENTS OF CASH FLOWS**

(unaudited)
| ** **                                                                                | ** ** | **For the three   months ended   June 30, 2007** | ** ** | **For the period   January 30, 2007   (date of inception)  to June 30, 2007** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                                | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                           | ** ** | ** ** |
| **Cash  flows from operating activities**                                                 | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                           | ** ** | ** ** |
| Net income                                                                                |       | $                                                                                   | 207,900    |                                                                                                                                 | $          | 204,174    |   |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:        |       |                                                                                |       |                                                                                                                                 |       |       |
| Increase (decrease) in cash attributable to changes  in operating assets and liabilities: |       |                                                                                |       |                                                                                                                                 |       |       |
| Accrued expenses                                                                          |       | 6,203                                                                               |       | 8,045                                                                                                                                |       |       |
| Income taxes  payable                                                                     |       | 123,873                                                                             |       | 123,873                                                                                                                              |       |       |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Net  cash provided by operating activities**                                            |       | 337,976                                                                             |       | 336,092                                                                                                                              |       |       |
| ** **                                                                                | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                           | ** ** | ** ** |
| **Cash  used in investing activities,**cash held in Trust Account                         |       | (68,188,436                                                                         | )          | (68,188,436                                                                                                                          | )          |       |
| ** **                                                                                | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                           | ** ** | ** ** |
| **Cash  flows from financing activities**                                                 |       |                                                                                |       |                                                                                                                                 |       |       |
| Proceeds from notes payable, stockholders                                                 |       | 75,000                                                                              |       | 225,000                                                                                                                              |       |       |
| Repayment of notes payable, stockholders                                                  |       | (225,000                                                                            | )          | (225,000                                                                                                                             | )          |       |
| Proceeds from issuance of common stock                                                    |       | —                                                                              |       | 25,000                                                                                                                               |       |       |
| Proceeds from issuance of warrants                                                        |       | 2,000,000                                                                           |       | 2,000,000                                                                                                                            |       |       |
| Gross proceeds from public offering                                                       |       | 69,000,000                                                                          |       | 69,000,000                                                                                                                           |       |       |
| Payments for underwriters’ discount and offering  cost                               |       | (2,735,683                                                                          | )          | (2,905,945                                                                                                                           | )          |       |
| Proceeds from issuance of option                                                          |       | 100                                                                                 |       | 100                                                                                                                                  |       |       |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Net  cash provided by financing activities**                                            |       | 68,114,417                                                                          |       | 68,119,155                                                                                                                           |       |       |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Net  increase in cash**                                                                 |       | 263,957                                                                             |       | 266,811                                                                                                                              |       |       |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Cash,**beginning of period                                                              |       | 2,854                                                                               |       | —                                                                                                                               |       |       |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Cash,**end of period                                                                    |       | $                                                                                   | 266,811    |                                                                                                                                 | $          | 266,811    |   |   |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| **Supplemental  schedule of non-cash financing activities:**                              | ** ** | ** **                                                                          | ** ** | ** **                                                                                                                           | ** ** | ** ** |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| Accrued offering  costs                                                                   |       | $                                                                                   | 43,230     |                                                                                                                                 | $          | 43,230     |   |   |
|                                                                                      |       |                                                                                |       |                                                                                                                                 |       |       |
| Deferred underwriters’  fees                                                         |       | $                                                                                   | 1,690,500  |                                                                                                                                 | $          | 1,690,500  |   |   |

 

See accompanying notes tointerim financial statements. 

 

6

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**ARCADE ACQUISITION CORP.**

(a corporation inthe development stage)

**Notes to Interim Financial Statements**

**NOTE A—BASIS OF PRESENTATION**

The accompanying unaudited condensed financialstatements as of June 30, 2007, and for the period January 30, 2007 (date ofinception) to June 30, 2007, and for the quarter ended June 30, 2007, have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial information and with theinstructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, theydo not include all of the information and footnotes required by accountingprinciples generally accepted in the United States of America for completefinancial statements. In the opinion of management, all adjustments (consistingof normal recurring accruals) considered necessary for a fair presentation havebeen included. Operating results for the interim period presented are notnecessarily indicative of the results to be expected for any other interim periodor for the full year.

**NOTE B—DESCRIPTION OF ORGANIZATION AND BUSINESSOPERATIONS**

Arcade Acquisition Corp. (a corporation in the development stage) (the “Company”)was incorporated in Delaware on January 30, 2007. The Company was formed toacquire, through a merger, asset acquisition, stock exchange or other similarbusiness combination, an operating business (“Business Combination”). As ofJune 30, 2007, the Company has neither acquired an entity nor engaged in anyoperations. The Company is considered to be in the development stage as definedin Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting By DevelopmentStage Enterprises”, and is subject to the risks associated withactivities of development stage companies. The Company has selected December 31as its calendar year-end.

The registration statement for the Company’s initial public offering(the “Public Offering”) was declared effective on May 21, 2007.  The Company completed a private placement(the “Private Placement”) on May 23, 2007 and received gross proceeds of$2,000,000.  The Company consummated thePublic Offering on May 25, 2007 and received gross proceeds of $60,000,000. TheCompany’s management has broad discretion with respect to the specificapplication of the net proceeds of the Private Placement and the PublicOffering of Units (as defined in Note D) (collectively, the “Offering”)although substantially all of the net proceeds of the Offering are intended tobe generally applied toward consummating a Business Combination. Furthermore,there is no assurance that the Company will be able to successfully effect aBusiness Combination. An amount equal to approximately 98.3%  of the gross proceeds (98.6% prior to the exerciseof the underwriters’ over-allotment option) has been placed in a trust account(the “Trust Account”). The Trust Account is invested in U.S. “governmentsecurities,” defined as any Treasury Bill issued by the United Statesgovernment having a maturity of one hundred and eighty (180) days or less ormoney market funds meeting the conditions specified in Rule 2a-7 under theInvestment Company Act of 1940, until the earlier of (i) the consummation of aBusiness Combination or (ii) the distribution of the Trust Account as describedbelow. The remaining proceeds, plus up to $2 million of income earned on fundsin the Trust Account, may be used to pay for business, legal and accounting duediligence on prospective acquisitions and continuing general and administrativeexpenses.

7

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**NOTE B — DESCRIPTION OF ORGANIZATION AND BUSINESSOPERATION (continued)**

The Company, after signing a definitive agreement for the acquisitionof a target business, will submit such transaction for stockholder approval. Inthe event that 30% or more of the outstanding stock (excluding, for thispurpose, those shares of common stock issued prior to the Public Offering) voteagainst the Business Combination and elect to exercise their redemption rights,the Business Combination will not be consummated. In the event a Business Combinationis consummated, public stockholders voting against a Business Combination willbe entitled to redeem their stock for a pro rata share of the aggregate amountof cash then on deposit in the Trust Account, including their pro rata portionof the deferred underwriting discount and any interest earned on and held inthe Trust Account, net of income taxes payable on such interest income.However, voting against the Business Combination alone will not constitute anelection to exercise a stockholder’s redemption rights. All of the Company’sstockholders prior to the Public Offering, including all of the directors andofficers of the Company, have agreed to vote all of the shares of common stockheld by them in accordance with the vote of the majority in interest of allother stockholders of the Company.

In the event that holders of more than 20% but less than 30% of theshares of common stock sold in the Public Offering elect to redeem theirshares, the Company’s initial stockholders have agreed to forfeit, on a prorata, basis and return to us for cancellation, that number of shares (up to amaximum of 234,375) that will result in them owning collectively no more than23.81% of the Company’s outstanding common stock immediately prior to theconsummation of such Business Combination after giving effect to the redemption(without taking into account any shares that they may acquire in theaftermarket). If any such shares are forfeited, the financial statementssubsequent to such forfeiture would reflect a decrease in total sharesoutstanding.

In the event that the Company does not consummate a BusinessCombination by May 21, 2009, our corporate existence will cease and theproceeds held in the Trust Account will be distributed to the Company’s publicstockholders, excluding the initial stockholders to the extent of their initialstock holdings.

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

Development stage company:

The Company complies with the reporting requirements of Statement ofFinancial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting byDevelopment Stage Enterprises.”

Common stock:

On May 15, 2007, the Company effected a 1.2-for-one stock split in theform of a dividend, which resulted in the issuance of an additional 312,500shares to the Company’s stockholders. The Company’s interim financialstatements give retroactive effect to the stock split.

8

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**NOTE C — SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (continued)**

Financial instruments:

The fair value of the Company’s assets and liabilities, which qualifyas financial instruments under SFAS No. 107, “Disclosure About Fair Value ofFinancial Instruments,” approximates the carrying amounts represented in theinterim balance sheet.

Earnings per share:

The Companycomplies with accounting and disclosure requirements of SFAS No. 128, “EarningsPer Share.”  Net income per common shareis computed by dividing net income by the weighted average number of commonshares outstanding for the period, except where the result would beantidilutive. Net income per share of common stock, assuming dilution, reflectsthe maximum potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common stockand would then share in the net income of the Company.  At June 30, 2007, the effect of the11,375,000 warrants (including 2,000,000 outstanding warrants issued inconnection with the Private Placement) have not been considered in the dilutednet income per share since the warrants are contingently exercisable.

Concentration of credit risk:

Financial instruments that potentially subject the Company toconcentrations of credit risk consist of cash accounts in a financialinstitution, which at times, exceeds the Federal depository insurance coverage.The Company has not experienced losses on these accounts and managementbelieves the Company is not exposed to significant risks on such accounts.

Use of estimates:

The preparation of interim financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the interim financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

Deferred offering costs:

The Companycomplies with the requirements of the SEC Staff Accounting Bulletin (SAB) Topic5A—“Expenses of Offering.” Deferred offering costs of approximately $534,000consist principally of legal, accounting, and printing fees incurred throughthe date of the Public Offering (see Note D). These costs, together with the underwriter discount,  were charged to capital upon the completionof the Public Offering.

9

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**NOTE C — SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (continued)**

Preferred stock:

The Company is authorized to issue 1,000,000 shares of preferred stockwith such designations, voting and other rights and preferences as may bedetermined from time to time by the Board of Directors.

Impact of recently issued accounting standard:

In July 2006, the Financial Accounting Standards Board (“FASB”) issuedFinancial Accounting Standards Interpretation No. 48, Accounting forUncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes a recognitionthreshold and measurement process for recording in the the financial statementsuncertain tax positions taken or expected to be taken in a tax return. FIN 48also provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods, disclosures and transitions. TheCompany adopted FIN 48 and has determined that the adoption does not have amaterial impact on the Company’s financial position or results of operations.

Income taxes:

The Company complies with SFAS 109, “Accounting for Income Taxes,”which requires an asset and liability approach to financial accounting andreporting for income taxes. Deferred income tax assets and liabilities arecomputed for differences between the financial statement and tax bases ofassets and liabilities that will result in future taxable or deductibleamounts, based on enacted tax laws and rates applicable to the periods in whichthe differences are expected to affect taxable income. Valuation allowances areestablished, when necessary, to reduce deferred tax assets to the amountexpected to be realized.

**NOTE D—PUBLIC OFFERING**

On May 25, 2007, the Company consummated the sale of 7,500,000 units (“Units”)at a price of $8.00 per Unit in the Public Offering . On June 7, 2007, theunderwriters exercised their over-allotment option and purchased an additional1,125,000 Units at the offering price of $8.00 per Unit.  Each Unit consists of one share of theCompany’s common stock, $0.0001 par value, and one redeemable common stockpurchase warrant (“Warrants”). Each Warrant entitles the holder to purchasefrom the Company one share of common stock at an exercise price of $6.00commencing on the later of (i) May 21, 2008 or (ii) the completion of aBusiness Combination, and expires on May 21, 2011. The Warrants are redeemableat a price of $0.01 per Warrant upon 30 days’ prior notice after the Warrantsbecome exercisable, only in the event that the last sale price of the commonstock is at least $11.50 per share for any 20 trading days within a 30 tradingday period ending on the third business day prior to the date on which noticeof redemption is given. If the Company is unable to deliver registered shares ofcommon stock to the holder upon exercise of Warrants during the exerciseperiod, there will be no cash settlement of the Warrants and the Warrants willexpire worthless.

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**NOTE E—ACCRUED EXPENSES**

Accrued expenses at June 30, 2007 consist of approximately $43,000related to professional fees incurred in connection with the Offering, $7,000related to D&O insurance and $1,000 for transfer agent fees and otheroperating expenses.

**NOTE F—RELATED PARTY TRANSACTIONS**

On February 5, 2007 and April 4, 2007, the Company issued two unsecuredpromissory notes to an affiliate of the Company’s officers and directors,Arcade Partners, LLC, in the aggregate amount of $225,000. The notes, whichbore interest at 4% per annum, were repaid on May 25, 2007.

On February 13, 2007, the Company issued 1,875,000 shares of commonstock (the “Initial Shares”) for proceeds of $25,000 to the officers anddirectors of the Company and an affiliate of the Company’s officers anddirectors.

The Company has a service agreement with Arcade Partners, LLC, anaffiliate of the Company’s officers and directors, whereby the Company pays amonthly service fee of $7,500. Such fee is to cover general and administrativeservices provided by the affiliate, including office space and utilities.

On May 23, 2007, Arcade Acquisition Investors, LLC, an affiliate of theCompany’s officers and directors, purchased, in the Private Placement,2,000,000 warrants at $1.00 per warrant (the “Insider Warrants”). The aggregateproceeds of the Private Placement of $2,000,000 are being held in the TrustAccount described in Note A. Arcade Acquisition Investors, LLC has agreed thatit will not sell or otherwise transfer the Insider Warrants until after theCompany consummates a Business Combination other than to its members inproportion to their membership interests, which members are subject to the samerestriction on transferability, except in certain limited circumstances.

**NOTE G—COMMITMENTS AND CONTINGENCIES**

The Company paid an underwriting discount of 3.5% of the gross offeringproceeds to the underwriters at the closing of the Public Offering, with anadditional fee of 3.5% of the gross offering proceeds payable upon the Company’sconsummation of a Business Combination. The deferred underwriting discount of$2,415,000 will be forfeited in its entirety in the event there is no BusinessCombination, and is net of $724,500 that is subject to forfeiture in the eventthe maximum possible number of shares entitled to redemption concurrently withthe approval of a Business Transaction are actually redeemed. The underwriterswill not be entitled to any interest accrued on the deferred discount.

The Company soldto the underwriters, for $100, an option to purchase up to a total of 750,000units at a per-unit price of $10.00 that expires on May 21, 2012. The unitsissuable upon exercise of this option are identical to those sold in the PublicOffering except that warrants included in the option have an exercise price of$7.00. The Company has accounted for the fair value of the option, inclusive ofthe receipt of the $100 cash payment, as an expense of the Public Offeringresulting in a charge directly to stockholder’s equity.

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**NOTE G — COMMITMENTS AND CONTINGENCIES (continued)**

The Company has determined, based upon a Black-Scholes model, that thefair value of the option on the date of sale was approximately $2.35 perunit, or approximately $1,760,000 in total, using an expected life of fiveyears, volatility of 32.9% and a risk-free interest rate of 4.81%. Thevolatility calculation of 32.9% was based on the most recent trading dayaverage volatility of a representative sample of 21 blank check companies thatcompleted a business combination and have a sufficient subsequent tradinghistory (the “Sample Companies”). Because the Company did not have a tradinghistory, the Company needed to estimate the potential volatility of its commonstock price, which depends on a number of factors that could not be ascertainedat that time. The Company referred to the average volatility of the SampleCompanies because management believes that the average volatility of suchcompanies is a reasonable benchmark to use in estimating the expectedvolatility of the Company’s common stock post-business combination. Although anexpected life of five years was taken into account for purposes of assigning afair value to the option, if the Company does not consummate a BusinessCombination within the prescribed time period and liquidates, the option wouldbecome worthless.

**NOTE H—INCOME TAXES**

For the periodJanuary 30, 2007 (date of inception) to June 30, 2007 and the three months thenended,  the tax provision consisted ofapproximately $116,000 related to the federal tax provision and approximately$7,900 related to the state tax provision for an aggregate of $123,900.

The Company hasnot begun its trade or business for U.S. tax purposes. Accordingly, it couldnot yet recognize losses for start-up expenditures. As a result, a deferred taxasset of approximately $8,400 at June 30, 2007 was established for thesestart-up expenditures, as well as a fully offsetting valuation allowance.

The effective taxrate differs from the statutory rate for the period presented due to theestablishment of the valuation allowance.

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**NOTE I—REGISTRATION RIGHTS**

The holders of theInitial Shares and the Insider Warrants (and underlying securities), areentitled to certain registration rights. The holders of the majority of the Initial Shares will be entitled tomake up to two demands that the Company register such securities at any timeafter their release from escrow. The  holders of a majority of theInsider Warrants (or underlying securities) are entitled to one demand that theCompany register such securities at any time after the Company consummates abusiness combination.  In addition, suchholders will have certain “piggy-back” registration rights on registrationstatements filed subsequent to the date on which such securities are releasedfrom escrow. On the date of the Public Offering, all of our initialstockholders placed their Initial Shares and Insider Warrants into an escrowaccount maintained by Continental Stock Transfer & Trust Company, acting asescrow agent.  The Initial Shares willnot be released from escrow until one year after the consummation of a BusinessCombination, or earlier if, following a Business Combination, we engage in asubsequent transaction resulting in our stockholders having the right toexchange their shares for cash or other securities or if we liquidate anddissolve.  The Insider Warrants will notbe released from escrow until 30 days after the completion of a BusinessCombination.  The Company will bear theexpenses incurred in connection with the filing of any such registrationstatements.

** **

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**Item 2** - MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

**Forward Looking Statements**

This Quarterly Report on Form 10-Q includes forward-looking statementswithin 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.  We have based these forward-lookingstatements on our current expectations and projections about future events.These forward-looking statements are subject to known and unknown risks,uncertainties and assumptions about us that may cause our actual results,levels of  activity, performance orachievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by suchforward-looking statements.  In somecases, you can identify forward-looking statements by terminology such as “may,”“should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”“continue,” or the negative of such terms or other similar expressions.  Factors that might cause or contribute tosuch a discrepancy include, but are not limited to, those described in ourother Securities and Exchange Commission filings. The following discussionshould be read in conjunction with our Financial Statements and related Notesthereto included elsewhere in this report.

**Overview**

We were formed onJanuary 30, 2007 to serve as a vehicle to effect a merger, capital stockexchange, asset acquisition or other similar business combination with anoperating business.  Our initial BusinessCombination must be with a target business or businesses whose fair marketvalue is at least equal to 80% of our net assets at the time of suchacquisition.  We intend to utilize cashderived from the proceeds of our recently completed Private Placement and PublicOffering, our capital stock, debt or a combination of cash, capital stock anddebt, in effecting a Business Combination.

**CriticalAccounting Policies**

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofexpenses during the reporting period. Actual results could differ from thoseestimates.

InJune 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertaintyin Income Taxes-an Interpretation of SFAS No.109” (“FIN 48”). FIN 48 clarifiesthe accounting for uncertainty in tax positions recognized in a company’sfinancial statements in accordance with SFAS No. 109, “Accounting for IncomeTaxes.” FIN 48 prescribes a recognition threshold and measurement attribute forthe financial statement recognition and measurement of the tax position takenor expected to be taken in a tax return. The Company adopted FIN 48.  The adoption of FIN 48 did not have anyimpact on the accompanying financial statements since we have not identifiedany uncertain tax positions as defined by FIN 48.

Managementdoes not believe that any other recently issued, but not yet effective,accounting standards if currently adopted would have a material effect on theaccompanying financial statements.

**Liquidityand Capital Resources**

On May 25, 2005,we consummated our Public Offering of 7,500,000 units.  Each unit consists of one share of commonstock and one redeemable common stock purchase warrant.  On June 7, 2007, the underwriters exercisedtheir over-allotment option and purchased an additional 1,125,000 Units.  Each 

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Warrant entitles theholder to purchase from us one share of our common stock at an exercise priceof $6.00.  Our common stock and warrantsstarted trading separately as of June 14, 2007.

The net proceeds fromthe sale of our Units (including the underwriters’ over-allotment option) andthe Insider Warrants, after deducting certain offering expenses ofapproximately $2,949,000, including underwriting discounts of approximately$2,415,000, were approximately $68,085,000. Of this amount, $67,835,000 isbeing held in the Trust Account and the remaining proceeds are being heldoutside of the Trust Account. The remaining proceeds, along with up to$2,000,000 in interest earned on the funds in the Trust Account, are availableto be used by us to provide for business, legal and accounting due diligence onprospective acquisitions and continuing general and administrative expenses. Wewill use substantially all of the net proceeds of the Offering to acquire atarget business, including identifying and evaluating prospective acquisitioncandidates, selecting the target business, and structuring, negotiating andconsummating a Business Combination. To the extent that our capital stock isused in whole or in part as consideration to effect a Business Combination, theproceeds held in the Trust Account, as well as any other net proceeds notexpended, will be used to finance the operations of the target business.Including the $2,000,000 in interest available to us, we believe we will havesufficient available funds outside of the Trust Account to operate through May21, 2009, assuming that a Business Combination is not consummated during thattime. We do not believe we will need to raise additional funds in order to meetthe expenditures required for operating our business. However, we may need toraise additional funds through a private offering of debt or equity securitiesif such funds are required to consummate a Business Combination that ispresented to us. We would only consummate such a financing simultaneously withthe consummation of a Business Combination.

**Results of Operations forthe period January 30, 2007 (date of inception) to June 30, 2007**

For the period from January 30, 2007 (dateof inception) through June 30, 2007, we had net income of $204,174, derivedfrom interest income less operating expenses.

Commencing on May 21,2007 and ending upon the acquisition of a target business, we began incurring afee of $7,500 per month for office space and certain other additional servicesfrom Arcade Partners, LLC, an affiliate of our executive officers anddirectors.  In addition, on February 5, 2007and April 4, 2007, pursuant to two promissory notes, we borrowed an aggregateamount of $225,000 from Arcade Partners, LLC. The notes, which bore interest at4% per annum, were repaid on May 25, 2007.

**Off Balance-SheetArrangements**

Warrants issued inconjunction with our Public Ofering are equity-linked derivatives and,accordingly, represent off-balance sheet arrangements,  The Warrants meet the scope exception inparagraph 11(a) in SFAS No. 133 “Accounting for Devrivative Instruments and Hedging Activities” and, accordingly,are not accounted for as equity.

**Contractual Obligations**

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

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**Item 3**. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

Market risk is thesensitivity of income to changes in interest rates, foreign exchanges,commodity prices, equity prices, and other market-driven rates or prices. Weare not presently engaged in and, if a suitable business target is notidentified by us prior to the prescribed liquidation date of the Trust Account,we may not engage in, any substantive commercial business. Accordingly, we arenot and, until such time as we consummate a Business Combination, we will notbe, exposed to risks associated with foreign exchange rates, commodity prices,equity prices or other market-driven rates or prices. The net proceeds of the Offeringheld in the Trust Account have been invested only in money market funds meetingcertain conditions under Rule 2a-7 promulgated under the Investment Company Actof 1940. Given our limited risk in our exposure to money market funds, we donot view the interest rate risk to be significant.

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**Item4.** CONTROLS ANDPROCEDURES

An evaluation of theeffectiveness of our disclosure controls and procedures as of June 30, 2007 wasmade under the supervision and with the participation of our management,including our chief executive officer and our principal financial officer.Based on that evaluation, management concluded that our disclosure controls andprocedures are effective as of the end of the period covered by this report toensure that information required to be disclosed by us in reports that we fileor submit under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in Securities andExchange Commission rules and forms.

During the mostrecently completed fiscal quarter, there has been no significant change in ourinternal control over financial reporting that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

**PART II - OTHERINFORMATION**

**Item 1.** LEGAL PROCEEDINGS

None.

**Item 1A.** RISKFACTORS

Inaddition to the other information set forth in this report, you shouldcarefully consider the factors discussed in the section titled ‘‘Risk Factors’’in our Prospectus on Form 424(b)(3), filed on May 22, 2007, which couldmaterially affect our business, financial condition or future results. Therisks described in our Prospectus are not the only risks facing our Company.Additional risks and uncertainties not currently known to us or that wecurrently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operating results.

**Item 2.** UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS

InMay 2007, we completed the Private Placement and the Public Offering.  The total net proceeds of the Offering(including the subsequent exercise of the underwriters’ over-allotment option)were approximately $68,085,000, of which approximately $67,835,000 is beingheld in the Trust Account.  Through June30, 2007, approximately $24,000 of net proceeds were used for operatingexpenses, including the $7,500 monthly fee to Arcade Partners, LLC and D&Oinsurance.

**Item 3.** DEFAULTS UPON SENIOR SECURITIES

None

**Item 4.** SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS

None

**Item 5**. OTHER INFORMATION

None

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**Item 6**. EXHIBITS
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                           |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                      |
| 31.1        |       | Certification of the Chief Executive Officer  (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities  Exchange Act, as amended.                                                                                       |
|        |       |                                                                                                                                                                                                                                      |
| 31.2        |       | Certification of the Chief Financial Officer and  (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities  Exchange Act, as amended.                                                                                   |
|        |       |                                                                                                                                                                                                                                      |
| 32.1        |       | Certification of the Chief Executive Officer  (Principal Executive Officer) and Chief Financial Officer (Principal  Financial Officer) pursuant to 18 U.S.C. 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002. |

 

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**SIGNATURES**

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized. 
|                 | ARCADE ACQUISITION CORP. |
|-----------------|--------------------------|
|            |                     |   |
| August 13, 2007 | By:                      | /s/Jonathan Furer |
|            |                     | Jonathan Furer |
|            |                     | Chairman of the Board  and Chief Executive Officer |
|                 |                          |  |  |

** **

** **

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