United States

Securities and Exchange Commission Washington, D.C. 20549
www.sec.gov

FORM 8-K CURRENT REPORT

Pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934

Date of This Report: January 26, 2005

CARTOON ACQUISITION, INC.

(Exact Name of Registrant as Specified in its
Charter)

Delaware

(State of Incorporation)

000-50411

(Commission File Number)

20-0269287

(Federal Employer I.D. No.)

Suite 900

14
Franklin Street

Rochester, New York 14604-1506

(Street Address of Principal Executive Office)

(585) 495-6907

(Registrant's Telephone Number Including Area
Code)

Telecopier: (585) 486-1288

E-Mail: cartooninvestors@rochester.rr.com

Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the Registrant under
any of the following provisions:

[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)

[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a -12)

[ ]
Pre-commencement communications

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pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d
-2(b))

[
] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e -4(c))

The Registrant is submitting this Form 8-K filing to report current
and extraordinary events in accordance with Section 13 or 15(d) of the
Securities Exchange Act of 1934 and to report non-public information required to
be disclosed by Regulation FD.

APPLICABLE DISCLOSURES AND DISCLAIMERS.

This current Report filed with the U. S. Securities and Exchange
Commission (the "Commission") on Form 8-K (this "Report") and contains summaries
of the material terms of certain transactions, events, and prospective plans of
operation, all which the Registrant believes to be accurate; however, reference
is made to the appurtenant writings, copies of which are available at the
Registrant's office, or that are contained in an exhibit annexed hereto and made
a part hereof by reference thereto. (Such summaries are qualified in their
entirety by reference to any such exhibits.)

NOTICE OF EVENTS BEING REPORTED AND TIME FOR FILING OF
REPORT.

This Report contains information applicable to the Registrant as of
the date stated on the cover hereof. However, regrettably, because the
Registrant needed to undergo a period of transition to become acquainted with
its new senior executive management (and the new management's styles and
techniques), because the Registrant needed to undergo a period adjustment to
establish and enact administrative procedures and systems of administrative
operations that were absent prior to January 25, 2005, and, due to the
Registrant experiencing a transitory pecuniary limitation that, otherwise, would
have permitted the expedient delivery of this Report to

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the Commission, it may be determined the events contained in this
Report were not timely reported.

The Registrant considers the information in this Report to be
"filed" under the Securities Exchange Act of 1934; the Commission and the public
are encouraged to refer to the section and item of this Report identified as
"Section 9 - Financial Statements and Exhibits" to determine which exhibits, or
portions of exhibits, are intended to be deemed "filed" rather than furnished
pursuant to Instruction B.2 of Form 8-K.

The Registrant has identified certain risks that it may encounter
or that may affect the holders of its common voting equity securities;
therefore, the Registrant is identifying these risks in the appropriate sections
of this Report.

The Registrant is only reporting current events for the period
ended, the date of which is stated hereon; thus, the Registrant is only
providing information for the applicable sections and items of this report,
without mention of or reference to any other sections or items required by Form
8-K.

NOTICE OF APPLICATION OF GENERAL RULES AND REGULATIONS.

Where permitted or as may be applicable, the Registrant has elected
to report the information contained in this filing using the alternate options
available to "small business issuers" under the rules and regulations stated in
Regulation S-B. The Registrant is not the issuer of "asset-backed" securities,
and is not subject to the rules and regulation enumerated in Regulation
AB.

FURTHER UNDERTAKINGS.

The Registrant, for the events that occurred during the period
described herein, further agrees (a) to timely file an amendment or amendments
that reflect a change or changes in the facts or

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events that, individually or collectively, represent a fundamental
change in the information contained in this Report and (b) include any other
information that may be pertinent to the events described in this Report and
obtained by the Registrant on a date beyond the date of this Report.

AVAILABLE INFORMATION.

The Registrant is subject to the reporting requirements of section
13(a) or section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, is obligated to file current,
quarterly, annual, and transitional reports, proxy statements, and other
information with the Commission, and is obligated to deliver copies of certain
reports and filings by mail to its shareholders and to certain other parties, as
required by Federal securities laws. Such reports, proxy statements, and other
filings may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of said materials may be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or from the Commission's Web site, the address of which
is www.sec.gov .

The specific information contained in this Report has been
accumulated, compiled, and presented in accordance with the requirements set
forth in 17 CFR 243.100 and 17 CFR 243.101.

The Registrant shall permit its shareholders to ask questions of
and receive answers from the Registrant concerning any aspect of the information
contained in this Report, and, if necessary, to obtain additional information,
to the extent the Registrant possesses such information or to the extent the
Registrant can acquire such information without

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unreasonable effort or unreasonable expense, in order to verify the
accuracy of the information contained in this Report to any of its shareholders.
The Registrant encourages its shareholders to contact it; if electronically, to
cartooninvestors@rochester.rr.com, or, if by mail, to its mailing address, which
is Post Office Box 202, Wyoming, New York 14591-0202, or to the address of its
principal executive office.



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SECTION 2 - FINANCIAL INFORMATION.

ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL
ACTIVITIES.

On January 25, 2005, James W. Margulies, then the Registrant's
senior executive officer and sole director resigned as the result of a
contractual obligation that resulted from the effect of a private securities
transaction, whereby Randolph S. Hudson purchased approximately 92.5% of the
Registrant's issued and outstanding common voting equity securities. (The
transaction between Mr. Margulies and Mr. Hudson, and the transaction's affect
upon the Registrant's shareholders, is more fully described in "Section 3 -
Securities and Trading Markets, Item 3.03 Material Modifications to Rights of
Security Holders" and in "Section 5 - Corporate Governance and Management, Item
5.01 Changes in Control of Registrant" hereinbelow. In addition, the Registrant
has annexed certain exhibits to this Report, the index to which may be located
in "Section 9 -Financial Statements and Exhibits, Item 9.01 (c) Financial
Statements and Exhibits". Mr. Margulies' resignation is further discussed in
"Section 5 -Corporate Governance and Management, Item 5.02 Departure of
Directors or Principal Officers; Election of Directors; Appointment of Principal
Officers" hereunder.) The Registrant does not consider the accounting
determinations that bound Mr.

Margulies' resignation to be

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categorized as becoming subject to the definition of a plan of
termination described in paragraph 8 of FASB Statement of Financial Accounting
Standards No. 146 (Accounting for Costs Associated with Exit or Disposal
Activities); nevertheless, the Registrant will clarify Mr. Margulies'
entitlements hereinbelow.

Facts. The Registrant has not registered, nor does it sponsor or
cosponsor, any type or form of stock option plan, stock incentive plan, employee
compensation plan, employee incentive plan, or other comparable plans under
which it would compensate employees, either on a current or deferred basis.
Heretofore, the Registrant has not filed any registration statement with the
Commission on Form S-8, or otherwise, for any compensation or award plan or
program. Moreover,

a. Mr. Margulies was not entitled to receive any compensation for
his employment as the sole officer of the Registrant, nor was Mr. Margulies
entitled to receive any stipend or payment for his service to the Registrant by
serving on its Board of Directors.

b. Mr. Margulies was not entitled to receive shares of (i) any
common voting equity securities in the Registrant or (ii) any debt securities,
convertible or otherwise, of the Registrant, for his employment by, or for his
services rendered to, the Registrant.

c. Mr. Margulies did also professionally represent the

Registrant as its General Counsel, for which he claimed no payment
or other compensation was due him by the Registrant.



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Consequently, the Registrant does not expect to incur any direct or
indirect financial obligations as the result of Mr. Margulies'
departure.

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SECTION 3 - SECURITIES AND TRADING MARKETS.

ITEM 3.03. MATERIAL MODIFICATIONS TO RIGHTS OF SECURITY
HOLDERS.

Some of the statements made in Item 3.03 of this Report may be
deemed to be "forward-looking statements", as that term is defined in Section
27A of the Securities Act of 1933 (15 U.S.C. 77z-2) and in Section 21E of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-5), which are referred to as
"statutory safe harbor" provisions. Forward-looking statements are not
historical facts; rather, forward-looking statements are based upon the opinions
and estimates of the Registrant's management at the time such statements are
made. Every forward-looking statement is subject to inherent risks and
uncertainties that could cause the actual results to differ materially from the
plans, projections, or expectations expressed or implied by such statement at
the time the statement was made. The Registrant cautions the public not to place
undue influence on these forward-looking statements, which speak only as of the
date they were made and may not have been updated in further filings, schedules,
or reports required to be filed with the Commission, or with any other body
government.

Certain statements contained in this section of this Report may
infer an impression of optimism about the Registrant's beliefs and expectations,
expressed through words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates", "contemplates", "prospective", "attempt",
"proposed", and similar expressions or terms, identify forward looking
statements.

A. Purchase of Supermajority Interest in the Registrant by Randolph
S. Hudson.

Although the constituent instruments defining the rights of the
holders of the Registrant's registered common

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voting equity securities have not, as of the date hereof, been
materially modified, and, although the rights evidenced by the Registrant's
registered common voting equity securities (which common voting equity
securities constitute the entire and single class of common stock the Registrant
is authorized to issue) have not, as of the date hereof, been materially limited
or qualified by the issuance or modification of any other class of the
Registrant's registered common voting equity securities. The Registrant's
shareholders and the public should be aware that a private securities
transaction that effectuated the change-in-control of the Registrant may impair,
or otherwise limit, in the overall, the action or actions, or the attempt to
act, by the Registrant's existing shareholders, or prospective investors, as
follows, except by any act or action by the Registrant's shareholders that may
be offset by litigation or by an action that could be categorized those acts or
actions promulgated by persons or entities exercising their rights as
dissenters' (which rights are enumerated in the



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General Corporation Law of Delaware; Delaware being the domestic
jurisdiction that enfranchised the Registrant).

Notwithstanding the Registrant's statements made hereinabove, on
January 25, 2005, Randolph S. Hudson purchased approximately 92.5% of the
Registrant's common stock from the Registrant's former principal shareholder,
James W. Margulies.

As the result of said purchase by Mr. Hudson, the Registrant is
informing its shareholders and prospective investors of the following
prospective risks that may be associated with the ownership of Registrant's
shares of common stock, from the date following Mr. Hudson's acquisition of
approximately 92.5% of the Registrant's common stock:

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RISKS ASSOCIATED WITH THE REGISTRANT, GENERALLY.

Expectation of Substantial Future Losses. The Registrant expects to
incur substantial further losses in the near future due to significant costs
associated with its ongoing business organization and development, including
costs associated with the prospective or definitive acquisition of any new
business enterprise or by evaluating and entering into a prospective or
definitive business combination. The Registrant can make no assurance that its
operations, if any, will ever generate sufficient revenues to fund its
evaluation or continuation of its, yet unrealized, operations, or that it will
ever generate positive cash flow from its operations, or that it will attain or
thereafter sustain profitability in any future period.

Speculative Nature of the Registrant's Prospective Future Business.
The success of the Registrant's organization and development, beyond the date of
this Report, and of any proposed plan or plans of operation, will depend largely
on the type of operation or operations, the then financial condition of the
Registrant, and then the integrity, capability, and character of the individuals
who are, or will be, appointed to serve as members of the Registrant's senior
executive management. While the Registrant's present Chief Executive Officer
intends to engage in the business purpose stated in the Registrant's most recent
registration statement, there can be no assurance that the Registrant will be
successful in conducting any such stated business, business purpose, or business
objective. Furthermore, in the event the Registrant elects to complete a
business combination, or similar non-bankruptcy reorganization (with or without
the proceeds from any future sale of any of its securities or debt instruments),
the success of the Registrant's operations may be dependent upon its senior
executive

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management's capability to secure capital or credit accommodations
from another individual, from a group of individuals, from an entity, or from a
combination of entities; any such possibility would subject the Registrant to
higher debt levels, the possibility of the encumbrance of all or part of the
Registrant's assets or properties (if it were to own or



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to let any assets or properties), and numerous other factors, the
results of which would be unpredictable and beyond the Registrant's control. The
merits of the Registrant's undertakings must be evaluated in respect of the
uncertainties and complexities that may exist or be apparent in an early stage
development company with non-existent or extremely limited capital
resources.

The Registrant Does Not Anticipate Paying Dividends. The Registrant
has not paid any dividends to the holders of its common stock from the date of
its incorporation. Moreover, the Registrant does not anticipate disbursing a
dividend to the holders of its common voting equity securities during the
12-month period following the date of this Report.

The Registrant May Issue Shares for the Acquisition of its
Properties; The Registrant May Not Survive a Business Combination; Issuance of
Future Shares May Dilute Value of Stockholders' Stock. The Registrant's
Certificate of Incorporation authorizes the issuance of a maximum of 100,000,000
shares of common stock, $0.0001 par value per share, and 20,000,000 shares of
preferred stock, $0.0001 par value per share. As of the date hereof, there are
200,001 shares of common stock outstanding and no shares of preferred stock
outstanding. The Registrant may issue substantial numbers of shares of either
its common voting equity securities or debt securities, or both, to pursue one
or more business opportunities, to effect a business

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combination with one or more entities, or to enhance its assets.
Such, or other, future issuance of all or part of the remaining authorized
common stock may result in substantial dilution in the percentage of the
Registrant's common stock then held by the Registrant's existing shareholders.
Moreover, any common stock issued in the future may be valued on an arbitrary
basis by the Registrant's senior executive management. The issuance of the
Registrant's shares for future acquisitions may have the effect of diluting the
value of shares held by its shareholders, and might have an adverse effect on
any future market trading in the Registrant's securities. Moreover, if the

Registrant's senior executive management were to deem it necessary,
for whatever reason, to increase the Registrant's stated authorized capital,
such further dilution would have a greater effect upon the Registrant's
shareholders, as is described hereinabove, except, in addition to the potential
dilution described hereinabove, such added stated capital and resultant dilution
may cause some shareholders to own one or fewer shares, as the result of the
collective effect of the prospective future events described
hereinabove.

The Registrant's Management and Supermajority Shareholder, on a
Preferential Basis, May Authorize One or More Anti-Dilution Agreements to Favor
Certain Shareholders or Group of Shareholders. The holder-in-supermajority of
the Registrant's common stock, Randolph S. Hudson, may direct the Registrant's
Board of Directors to enter into each of one or more anti-dilution agreements
with each of one or more of the Registrant's current or future shareholders,
depending on the rights and preferences associated



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with their shares and under the relative terms governing the
subscription for their shares in the

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Registrant. If this were to occur, or, if Mr. Hudson was to
organize current or future shareholders to vote in accord with him under a
voting trust or other form of voting agreement, each of the then existing
minority shareholders, or each of the other shareholders whom or which would not
be a party to any such anti-dilution or voting agreements, may have to acquiesce
to Mr. Hudson's choice on the Registrant's plan of action, or they may have to
acquiesce to the voting group's plan or plans of action without being able to
input their suggestions for any plan for the Registrant's future
development.

The Registrant's Ability to Implement any Future Business Plan. The
Registrant's present business plan, modeled from the business purpose it last
stated in its most recently filed Form 10-SB Registration Statement, is to
effect a business combination with one or more qualified entities and/or to
identify and enter into a suitable business transaction with one or more
entities. The success of the

Registrant's ability to effect its business plan, and its
capability to develop an operating-stage business, whereby, it would be required
to timely implement its entire plan of operations in its selected field of
business would require an effective planning and management process. The
Registrant expects that it will need to improve and expand its financial and
managerial controls, reporting systems, and operating procedures. If the
Registrant experiences delays or cost overruns in implementing these systems,
or, if these systems are not as effective as the Registrant anticipated they
would be, the Registrant could experience significant material and adverse
difficulties and effects.

Reliance on Key Personnel. The Registrant's future success will
greatly depend on the significant participation of Randolph S. Hudson, the
Registrant's key senior executive officer, and the Registrant may need to hire
or retain other professional,

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technical, operations, and administrative personnel, all of whom
will be hired, engaged, or retained by Mr. Hudson. The Registrant's future
success also will depend on the Registrant's ability to expand, integrate, and
retain its management team. Moreover, recruiting and retaining skilled personnel
is highly competitive. If the Registrant fails to retain, hire, and integrate
qualified employees, professionals, and consultants, the Registrant would not be
able to maintain and expand its future operations, if any then may exist.
Moreover, it is the

Registrant's opinion that, should Mr. Hudson be unable to serve on
the Registrant's Board of Directors, and, should Mr. Hudson be unable to remain
employed as the Registrant's Chief Executive Officer, the Registrant's current
and future business objectives will not be timely or satisfactorily
realized.

Supermajority Control by Principal Stockholder. As of January 25,
2005, Randolph S. Hudson became the Registrant's principal shareholder by
purchasing approximately 92.5% of the Registrant's issued and outstanding common
stock under a private securities transaction with James W.



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Margulies. As long as he holds the number-in-supermajority of the
shares of the Registrant's outstanding common stock, he will be able to elect
the Registrant's entire Board of Directors and to remove any director, with or
without cause and without calling a special meeting. Any shareholders or
prospective investors of the Registrant will not be able to affect the outcome
of any shareholder vote. As a result, Mr. Hudson will control all matters
affecting the Registrant, including: (i) the composition of the Registrant's
Board of Directors and, through it, any determination with respect to the
Registrant's business direction and policies, including the appointment and
removal of its senior executive officers; (ii) the

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allocation of business opportunities and resources that may be
suitable for the Registrant; (iii) any determinations with respect to future
mergers or other future business combinations; (iv) the Registrant's acquisition
or disposition of assets; (v) the Registrant's financing objectives; (vi) the
disposition of any matter relating to dividends, which may be entitled to
holders of the Registrant's common stock; and (vii) determinations with respect
to the Registrant's tax returns.

RISKS ANALOGOUS WITH FUTURE ACQUISITIONS BY THE
REGISTRANT.

Factors beyond the Registrant's Control. The Registrant anticipates
that a part of its plan of operations will rely on the acquisition of one or
more qualified entities and will rely on the Registrant to enter into one or
more business combinations. If the Registrant does conclude one or more
acquisitions and/or business combinations, numerous conditions beyond the
Registrant's control may substantially affect the success of any such
acquisitions or business combinations.

No Shareholder Vote on Selection of Target Companies for
Acquisition or for Development. The Registrant's minority shareholders will not
have an opportunity to evaluate the specific merits or risks of any prospective
acquisition or prospective business combination proposed to the Registrant's
Board of Directors by the Registrant's Chief Executive Officer. As a result,
shareholders and future investors will be dependent on the judgment of Randolph
S. Hudson, the Registrant's current Chief Executive Officer, in connection with
the selection of the prospective business assets to be acquired or developed by
the Registrant and with the selection of one or more candidates with which the
Registrant may amalgamate. There can be no assurance that the determinations
ultimately made by Mr. Hudson will permit the Registrant to achieve its desired
or desirable

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business objectives. The number of businesses that the Registrant
can acquire, the number of business combinations the Registrant can effect, and
the diversification of such companies or businesses will, in the near and long
terms, be dependent on the amount of capital accommodations or structured credit
facilities, or both, the Registrant will be able to secure in a manner that will
not cause the Registrant to be adjudged insolvent or to promulgate a
determination by any qualified third-party that the Registrant is materially
under-capitalized.



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RISKS ANALOGOUS WITH THE ACQUISITION AND OPERATION OF ANY ONGOING
BUSINESS.

Although the Registrant is not presently engaged in any ongoing
business, from which it derives any revenues and income, it is the intention of
the Registrant's newly elected Chief Executive Officer, Randolph S. Hudson, to
effect one or more business combinations with one or more suitable candidates
and/or to start-up a new business or to acquire an existing business.
Consequently, the Registrant's shareholders and future investors should be aware
of the following certain risks, in the minimum, the Registrant expects to
encounter when engaging in any new or ongoing business that it may start-up or
acquire.

The Registrant Has No Operating History In Operating any Business
and its Present Management's Business Experience is Limited to Certain Types of
Operations. If the Registrant entered any business enterprise, either a start-up
or business with a pre-existing base of operations, and, either in its name or
through one or more subsidiaries it may form for that purpose, it would have no
operating history in conducting any ongoing business enterprise. The
Registrant's shareholders and prospective investors should consider the lack of
historical financial and operating information

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available on which to base their evaluation of the Registrant's
future performance. Because the Registrant presently owns no assets, has no cash
or other forms of capital reserves, and has limited or no access to credible
credit accommodations, the Registrant would be at a significant disadvantage to
establish a business or to continue in any ongoing business concern. Further,
the Registrant's shareholders and prospective investors should consider the
inherent risks, exposures, and difficulties that are frequently encountered by
small, struggling companies during their pre-operating stages of development.

The Registrant's intentions to pursue its
current, stated business purpose, and/or to engage in a startup or ongoing
business transaction, will require substantial expenditures, either from paid-in
capital or from suitable credit accommodations from credible funding sources.
The Registrant cannot assure its shareholders and prospective investors that it
will be able to raise sufficient capital, or to secure adequate financings, to
fund and/or to develop its objectives' prospects. Further, the Registrant cannot
assure its shareholders or prospective investors that any prospective business
opportunity, when so acquired, will be able to develop and retain consumer
demand or that such prospects will be remain fiscally sound and successful while
being owned and/or operated by the Registrant. Even under the best possible
scenario, the Registrant cannot assure its shareholders or prospective investors
that it will be able to generate sufficient revenues to offset the costs related
to any such acquisition or business combination, including the Registrant's own
general, administrative, and executive expenses. Thus, even



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if
the Registrant's plan would evolve, and could be implemented, ultimately, it may
be unsuccessful and

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unable to continue operations in any business.

Future Activity; Risks of Passive Ownership. The Registrant, either
on its own or by and through one or more wholly owned subsidiaries formed for
such purpose, intends to engage in business by acquiring an existing business
enterprise (either as an asset acquisition or as the result of a business
combination) or by starting up a new business. If the Registrant engages in any
business by and through a subsidiary, substantially all of that subsidiary's
prospective gross revenues can be expected to be derived from its operations, as
distinguished from any operations that may be conducted directly by the
Registrant.

Under any system or plan of operation through a subsidiary, wholly
owned or otherwise, the Registrant's shareholders and prospective investors
should be aware of the fact that any such subsidiary, most likely, would operate
under a different and independent system of management from the Registrant,
possibly employing officers and electing directors different from those serving
the Registrant. Moreover, the subsidiary will be required to maintain separate
and distinct administrative and operation's structures, which would subject the
subsidiary to its own significant expenses - prior to its obligation to disburse
its net revenues to the Registrant - which, in turn would apply the funds in a
manner consistent with its senior executive management's decisions. If the
subsidiary agreed to pay a part of its revenues to the Registrant under some
type of expense sharing or administrative allocation method, the likelihood of
two significant and adverse events could occur: firstly, the allocation to the
Registrant by the subsidiary may cause the subsidiary to end up short on its
accounts and unable to timely discharge its liabilities and obligations, and,
secondly, the allocation that could become payable to the Registrant may not
meet the

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Registrant's immediate administrative and executive liabilities and
obligations.

Alternatively, the Registrant could enter into
one or more joint ventures with one or more individuals or entities, each of
whom or which would represent a part of the ownership of any such asset or
business. The

Registrant's shareholders and prospective investors should be aware
that a participant in a joint venture operation, or the holder of a joint
venture interest, typically has no independent administrative or operational
authority regarding the day-to-day workings of any such joint venture.
Therefore, unless the Registrant, or a subsidiary that would be formed for such
purpose, would be able to secure and enforce certain extraordinary rights under
the joint venture or partnership operating and/or management agreement(s), it
can be expected the Registrant may not be able to exercise any decision-making
authority regarding development and operation of the assets or business in which
it may have an interest.



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Thus, in conclusion, the Registrant's strategy of having others
operate properties in which it operates through a subsidiary or in which would
retain a passive (joint venture or partnership) interest, may put the
Registrant, or any prospective operating subsidiary, at risk of being subjected
to the decisions of third-parties regarding all basic operating matters,
including the administration and operation of the Registrant, and, of a more
pressing concern, the contractual liability, and obligatory matters that would
directly and indirectly materially affect the Registrant. While the Registrant
would make every effort to secure contractual rights that would permit it to
protect and defend its assets and business, if it were ever to acquire any such
assets or business, there can be no assurance that such rights would be
sufficient or that the

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Registrant, or its contemplated operating subsidiary, would be
successful in achieving timely or favorable results.

In addition to its reliance on Mr. Hudson, as is stated
hereinabove, the Registrant will need to rely on Mr. Hudson, and upon the aid of
others with whom or with which Mr. Hudson has made, or will make, satisfactory
arrangements, to provide the Registrant with capital or credit accommodations in
the foreseeable future, on the terms and under the conditions the Registrant's
remaining shareholders may disagree to or oppose. [For a more detailed
description of the Hudson Stock Purchase transaction, refer to "Section 5 -
Corporate Governance and Management Item 5.01 Changes in Control of the
Registrant". Also, you may inspect the actual documents related to the Hudson
Stock Purchase transaction, which are annexed as Exhibit 99.1, Exhibit 99.2, and
Exhibit 99.3 hereof.]

The Registrant must further disclose the prospect of a subsequent
change in control in the event Mr. Hudson defaulted in finality under his
obligations to Mr. Margulies.

B. Effect of Rescission andReversion. If Mr. Hudson defaulted on his
obligation to Mr. Margulies, and did not timely remedy said default, then
ownership of Mr. Hudson's approximately 92.5% of the Registrant's common stock
would revert to Mr. Margulies.

Consequently, Mr. Margulies, would, once again, own 99.99% of the
Registrant's issued and outstanding shares of common stock and would be in a
position to control most major events relative to the Registrant, including,
among other things, his ability to elect directors, fire and hire officers,
change the business purpose of the Registrant, and other equally measured
actions. Moreover, all of the planning prepared by Mr. Hudson, and any
liabilities,

---

obligations, and correlating expenses the Registrant has or will
incur in connection with Mr. Hudson's plan of operation, will be for
naught.

SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT.



|ITEM 5.01. CHANGES IN CONTROL OFREGISTRANT.
|-------------------------------------------



|-9-
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On January 25, 2005, a change in control of the Registrant
occurred. Fundamentally, Randolph S. Hudson, an individual principally residing
in the State of New York, did enter into that certain Common Stock Purchase
Agreement, dated January 25, 2005 (that "Stock Purchase Agreement"), with James
W. Margulies of Pepper Pike, Ohio. [A facsimile of that Stock Purchase Agreement
is annexed as Exhibit 99.1 hereof.] Under the terms of that Stock Purchase
Agreement, Mr. Hudson purchased 185,000 shares, or approximately 92.5%, of the
Registrant's common voting equity securities (the Registrant's "Common Stock")
for $100,000, which was to be paid in accordance with the terms of a certain
promissory note, of even date with that Stock Purchase Agreement (that "Note").
[A facsimile of that Note is annexed as Exhibit 99.2 hereof.] In addition, Mr.
Hudson secured his obligation to Mr.

Margulies by delivering that certain Pledge and Security Agreement,
dated January 25, 2005 (that "Pledge Agreement") to Mr. Margulies as part of the
closing documents for the transaction. [A facsimile of that Pledge Agreement is
annexed as Exhibit 99.3 hereof.]

Mr. Hudson claims beneficial ownership of the Registrant's Common
Stock described hereinabove; he is not a member of any voting trust or similar
group, whereby, in the company of other shareholders, he would not vote in any
manner on any given issue; he has the sole power to vote, or to direct the vote,
and the sole power to dispose of, or to direct the

---

disposition of, his 185,000 shares of the Registrant's Common
Stock. There are no persons or entities that share Mr. Hudson's power to vote,
nor that may direct the power to vote, nor that hold power to dispose of, nor
that direct the power to dispose of, any of the shares of the Registrant's
Common Stock that he claims to beneficially own.

The source of the funding used by Mr. Hudson is that of his
personal obligation; and, no commercial, or other traditional banking, sources
of financing or credit accommodations were used in consummating the transaction;
moreover, Mr. Hudson did not act on behalf of any third party, nor will any
third party directly pay Mr. Hudson's obligation to Mr. Margulies.

Prior to Mr. Hudson's purchase of the Registrant's Common Stock,
Mr. Margulies owned 99.99% of the Registrant's Common Stock, and served the
Registrant as its sole director, President, Secretary, and Treasurer. As a
condition to Mr. Hudson and Mr. Margulies entering into that Stock Purchase
Agreement, among other things, Mr. Margulies was required to tender his
resignation to the Registrant's Board of Directors and shareholders, which
resignation became effective on January 25, 2005. [Mr. Margulies' resignation
and Mr. Hudson's subsequent election to serve on the Registrant's Board of
Directors and his appointment as the Registrant's President, Secretary, and
Treasurer, are more fully described in "Item 5.02 Departure of Directors or
Principal Officers; Election of Directors; Appointment of Principal Officers"
hereinbelow. In addition, a copy of Mr. Margulies' resignation is annexed as
Exhibit 99.4 hereof.]



|-10-
|----

Following Mr. Hudson's purchase of the Registrant's Common Stock,
Mr. Margulies retained 15,000 shares, or approximately 7.5%, of the Registrant's
Common Stock. No voting

---

agreement nor other arrangement exists between Mr. Hudson and Mr.
Margulies with respect to voting their respective shares of the Registrant's
Common Stock, nor is any such arrangement anticipated to occur in the near
future.

However, the Registrant notifies its shareholders, any prospective
investors, and the public that should Mr. Hudson fail to satisfy his obligation
to Mr. Margulies under the terms of that Note by default not remedied, or,
should Mr. Hudson default under the terms of that Note and should Mr. Margulies
not forbear the obligation by agreeing to revised terms satisfactory to both he
and Mr. Hudson, then, Mr. Margulies may proceed against the collateral
identified in that Pledge Agreement; namely, the 185,000 shares of the
Registrant's Common Stock. Under this scenario, depending on the manner in
which, and with whom, Mr. Margulies proceeded to realize the collateral under
that Pledge Agreement, a change in control of the Registrant would
occur.

Mr. Hudson understands that his obligation, beyond the date of his
purchase of the Registrant's Common Stock, requires him to perform further
undertakings regarding his ownership of the Common Stock. To that extent, Mr.
Hudson, acting individually, and as a shareholder of the Registrant, intends to
timely comply with all of the Commission's rules and regulations limited to the
applicable disclosures required and associated with his beneficial ownership of
the Registrant's Common Stock.

ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION
OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.

Resignation of James W. Margulies. On January 25, 2005, Randolph S.
Hudson purchased 185,000 shares, or approximately 92.5%, of the Registrant's
common voting equity securities (the Registrant's "Common

---

Stock") from James W. Margulies, who, prior to that date owned
200,000 shares, or approximately 99.99%, of the Registrant's Common Stock. [The
specific terms of the stock purchase transaction are more fully described in
"Section 5.01 Changes in Control of Registrant" hereinabove.]

As a condition contained in that certain
Common Stock Purchase Agreement (that "Stock Purchase Agreement"), Mr. Margulies
agreed to resign his position as the sole Director and his positions as
President, Secretary, and Treasurer of the Registrant, which collective
resignations became effective on January 25, 2005. [A facsimile of that Stock
Purchase Agreement is annexed as Exhibit 99.1 hereof. Furthermore, a facsimile
of Mr. Margulies' resignation is annexed as Exhibit 99.4 hereof.]
Consequentially, Mr. Margulies' resignation was not the result of an involuntary
termination, nor was his resignation the result of any disagreement between him
and the Registrant. Lastly, as his resignation was as the result of a



|-11-
|----

contractual obligation under a private securities transaction, his
choice was not of that to stand for reelection.

However, the Registrant, acting in accordance with U.S. Federal
securities laws, is (a) providing Mr. Margulies with a copy of the disclosures
it is making herein and (b) requesting Mr. Margulies to furnish the Registrant
with a letter that would have to state whether he agrees or disagrees, and the
specific details of his agreement or disagreement, with the Registrant's
statements hereon, which the Registrant, upon its receipt of Mr. Margulies'
reply, agrees to promptly file with Commission.

Election of Randolph S. Hudson as Director and Appointment as
President,

---

Secretary, and Treasurer. On January 25, 2005, Randolph S. Hudson
purchased 185,000 shares, or approximately 92.5%, of the Registrant's common
voting equity securities (the Registrant's "Common Stock") from James W.
Margulies. [The specific terms of the stock purchase transaction are more fully
described in "Section 5.01 Changes in Control of Registrant" hereinabove.] As a
condition of that transaction, and to not hinder Mr. Hudson's objective to
organize and further develop the Registrant, Mr. Margulies agreed to resign his
positions as the President, Secretary, and Treasurer of the Registrant, which
resignation became effective on January 25, 2005.

In furtherance of that transaction between Messrs. Hudson and
Margulies, a special meeting of the Registrant's Board of Directors was held on
January 25, 2005, whereby, Mr. Hudson was nominated and unanimously elected to
serve on the Registrant's Board of Directors. At that special meeting, the Board
of Directors, again, acting in unanimity, appointed Mr. Hudson to serve in the
positions of the Registrant's President and Chief Executive Officer, and to
fill, in an interim or temporary capacity (the term of such appointment
undetermined by the Registrant's Board of Directors as of the date of this
Report), the positions of Secretary, Chief Administrative Officer, Treasurer,
Chief Financial Officer, and Chief Compliance Officer, pending the Board's
expected ongoing evaluation of qualified candidates and the subsequent
employment of the person or persons that it will employ to fill those positions
on a later date, as the Registrant's business and organization further
develops.

The Registrant and Mr. Hudson have not entered into any formal
employment agreement, and there is no understanding between Mr. Hudson and the
Registrant with regard to his prospective compensation or other remuneration, as
of the date of this Report.

---

Mr. Hudson's present principal occupation is that of a business
consultant and developer and he is the principal of business entities that are
engaged in both commerce and in industry. As of the date of this Report, Mr.
Hudson presently serves as (1) the co-managing senior general partner of Union
First Capital Markets, a de facto New York general partnership, which is
entitled to receive mail at Post Office Box 202, Wyoming, New York 14591 and
that



|-12-
|----

maintains an office at 233 Alexander Street, Second Floor,
Rochester, New York 14607; (2) the sole proprietor of Corporate Strategies and
Logistics, a fictitious business conducted by Mr. Hudson, which is entitled to
receive mail at Post Office Box 202, Wyoming, New York 14591 and that is
entitled to receive mail at 11601 Biscayne Boulevard, Suite 201, North Miami,
Florida 33181, (3) the incorporator, principal organizer, Chairman of the Board,
President, and Chief Executive Officer of Hudson National Financial Corporation,
a de facto Utah corporation, which is entitled to receive mail at Post Office
Box 202, Wyoming, New York 14591, (4) the principal organizer of a prospective
restaurant and bar operation that is proposed to be located at 2205 Buffalo Road
in Gates, New York, and that is scheduled to be owned by a de facto Oklahoma
corporation to be renamed Consumers Hospitality Corporation, which is entitled
to receive mail at Post Office Box 202, Wyoming, New York 14591), (5) the acting
President, Secretary, Treasurer, and Director of Montana Acquisition
Corporation, a United States corporation organized under the laws of the State
of Delaware, entitled to receive mail at Post Office Box 202, Wyoming, New York
14591, and that maintains an office address of 14 Franklin Street, Suite 900,
Rochester. New York 14604, and (6) the acting President, Secretary, Treasurer,
and a Director of Second Mongolian Mining Security Services,

---

Inc., a non-distributing Federal Canadian corporation, the
securities of which are quoted (on an "unsolicited bids" basis) on the
Over-the-Counter Bulletin Board electronic intermediary quotation system in the
United States under the symbol "SEMLF", which is entitled to receive mail at
Post Office Box 202, Wyoming, New York 14591, and that uses a principal
registered office address of One Yonge Street, Suite 1801, Toronto, Ontario M5E
1W7 Canada.

Prior to his associations with the firms stated hereinabove, Mr.
Hudson served as a senior general partner of HNFC Capital Markets and as a
senior general partner of Alliant Corporate Strategies. During the 21 years
prior to his occupations and professional associations stated hereinabove, Mr.
Hudson was engaged as the key principal (or as the managing general partner or
as the controlling shareholder) in the following business ventures: the
ownership and operation of four new and used car dealerships (in California and
in Utah), two auto leasing companies (in California and in Utah), five full
service hotels (in New Mexico, in Texas, in Oklahoma, and in California), 109
restaurants (located throughout the contiguous United States and in Northern
Mexico), three nightclubs (in California, in Utah, and in Nevada), a chain of
convenience stores (in Utah), a chain of stationery and office-supply stores
(located in California), a chain of coin-operated laundry and dry-cleaning
operations (throughout the Intermountain United States), one regional ice cream
manufacturing and distribution facility (in Utah), a chain of retail ice cream
and fountain operations (in Utah, in Nevada, and in California), a chain of
doughnut stores (in California and in Utah), a moderately-sized gold and silver
operation (in Nevada), and, finally, Mr. Hudson owned and personally 412
residential rental units (in Utah and in Washington).

-13-

---

Of Mr. Hudson's current or prior business relationships, only
Montana Acquisition Corporation, a Delaware corporation ("Montana"), is required
to file reports pursuant to section 13(a) or section 15(d) of the Exchange Act.
However, Montana, under Mr. Hudson's control and direction, is in the process of
organizing its business and affairs for further development; thus, as of the
date hereof, Montana is delinquent in its reporting obligations to the
Commission and Montana does not trade any of its common voting equity securities
or debt securities on any intermediary quotation system or on any regional,
national, or international exchange or market trading or quotation
system.

No other person, and no other entity, with whom or with which the
Registrant has conducted, or plans on conducting, its business, is related to
Mr. Hudson; specifically, no officer, no director, and no person being
considered to serve as an officer or to become elected as a director is, in any
manner, related to Mr. Hudson.

Certain Relationships and Related Transactions. During the two-year
period prior to the date hereof, the Registrant has been a party to the
following transactions, under which the individual named hereinbelow has had a
direct and indirect material interest, and under which such transactions it
could be asserted that a certain relationship between the named individual and
the Registrant existed under one or more related transactions.

James W. Margulies, acting as the sole Director and as the
President, Secretary, and Treasurer of the Registrant (who also owned 200,000
shares, or approximately 99.99%, of the Registrant's total issued and
outstanding common stock, also served as the Registrant's attorney.

However, during his service as the Registrant's attorney: (a) Mr.
Margulies did not receive any compensation for his services rendered to the
Registrant; (b) Mr. Margulies

---

did not receive any compensation for his employment by the
registrant; (c) Mr. Margulies did not receive any stipends or service fees for
his tenure on the Registrant's Board of Directors; (d) if it was billed, the
total combined invoices for his representation as the Registrant's attorney
would not have exceeded $60,000; and, (e) no members of Mr. Margulies' family
performed any work or services for the Registrant, and were not elected, or
nominated to be elected, to serve on the Registrant's Board of
Directors.

The Registrant has determined that Mr. Margulies was the only
individual with whom the possibility of a certain relationship could exist
during the two-year period prior to the date of this Report.

SECTION 8 - OTHER EVENTS.

ITEM
8.01. OTHER EVENTS.

Some of the statements made in Item 8.01 of this Report may be
deemed to be "forward-looking statements", as that term is defined in Section
27A of the



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|----

Securities Act of 1933 (15 U.S.C. 77z-2) and in Section 21E of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-5), which are referred to as
"statutory safe harbor" provisions. Forward-looking statements are not
historical facts; rather, forward-looking statements are based upon the opinions
and estimates of the Registrant's management at the time such statements are
made. Every forward-looking statement is subject to inherent risks and
uncertainties that could cause the actual results to differ materially from the
plans, projections, or expectations expressed or implied by such statement at
the time the statement was made. The Registrant cautions the public not to place
undue influence on these forward-looking statements, which speak only as of the
date they were

---

made and may not have been updated in further filings, schedules,
or reports required to be filed with the Commission, or with any other body
government.

Certain statements contained in this section of this Report may
infer an impression of optimism about the Registrant's beliefs and expectations,
expressed through words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates", "contemplates", "prospective", "attempt",
"proposed", and similar expressions or terms identify forward looking
statements.

A. NOTIFICATION OF PROSPECTIVE RISK TO SHAREHOLDERS OF THE
REGISTRANT.

Due to certain administrative impediments that were encountered by
the Registrant to prepare and to have timely filed this Report with the
Commission (chiefly, that of a temporary financial hardship endured by the
Registrant), the Registrant does hereby notify its shareholders: Depending on
the Commission's view of the Registrant's late filing hereof, the Commission may
notify the Registrant of its disapproval and may notice the Registrant, or, may
impose a fine or other penalty against the Registrant or against the
Registrant's Chief Executive Officer for said late filing.

The imposition of any fine or penalty would cause a material
adverse effect on the Registrant's current and future financial condition; and,
any formal censure would impede the Registrant's contemplated and orderly future
organization and development.

The Registrant expects to be able to assure the public that all
reports and filings that it is required to file with the Commission under
section 13(a) and section 15(d) of the Exchange Act will begin to be timely
filed during the first month of the third calendar quarter of 2005; and,
thereafter, under Mr. Hudson's control, the Registrant expects that

---

it
will timely file all of its quarterly, annual, transitional, periodic, and
current reports with the Commission.

SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS.

ITEM
9.01. FINANCIAL STATEMENTS AND EXHIBITS.



|C. EXHIBITS.
|------------

The Registrant considers the information contained in each
non-financial exhibit annexed hereto to be "filed" in accordance with the
applicable provisions of the Securities Exchange Act of 1934.

The following is a table of the non-financial exhibits filed with
this Report.

Exhibit No./Description of Exhibit

|99.1 | Hudson Stock
      Purchase Agreement     
|---- | ------------------------------------------
|    
|99.2 | Form of Hudson
      Promissory Note      
|    
|99.3 | Hudson Pledge and
      Security Agreement
|    

99.4
Margulies' Resignation



|SIGNATURES
|----------

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.

Cartoon Acquisition, Inc.,

a
Delaware corporation (the "Registrant")

Dated: January 26, 2005

/s/
Randolph S. Hudson

Randolph S. Hudson

President

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