|United StatesSecurities and Exchange
      CommissionWashington, D.C. 20549www.sec.gov
|--------------------------------------------------------------------------------------



|FORM 10-QSB
|-----------

[X]
QUARTERLY REPORT UNDER SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the
Quarterly Period EndedJune 30, 2005

****Commission File Number:
000-50411



CARTOONACQUISITION, INC.



|(Exact Name of Registrant asSpecified in its
    Charter)
|---------------------------------------------------------

Delaware
    
    20-0269287(State of Incorporation)
    
    (I.R.S. Employer Identification
      Number)




|One East Main StreetSuite 610Rochester, New York
      14614-1880(Address of Principal Executive
  Offices)
|-----------------------------------------------------------------------------------------------------------



|(585) 495-9923(Registrant's Telephone Number, including
      Area Code)Telecopier (585) 495-9923Electronic Mail:cartooninvestors@rochester.rr.com
|--------------------------------------------------------------------------------------------------------------------------------------------------

Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days Yes (2)X No ( 1)X

Indicate
by check mark whether the Registrant is a shell company (as defined 12b-2 of the
Exchange Act): Yes X

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Check
whether the Registrant filed all documents and reports required to be filed by
Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___ No ___



|APPLICABLE ONLY TO CORPORATE
  ISSUERS
|--------------------------------------

State the
number of shares outstanding of each of the issuers classes of common equity,
as of the latest practicable date: Common Stock, par value $ 0.0001 per share,
200,001

Transitional
Small Business Disclosure Format (Check one): Yes No X



---

APPLICABLE DISCLOSURES AND DISCLAIMERS.

This Report is a Quarterly Report for the
quarterly period ended June 30, 2005 and filed with the U. S. Securities and
Exchange Commission (the "Commission") on Form 10-QSB (this "Report") and
contains summaries of the material terms of prospective plans of operation and
the unaudited financial condition of the Registrant, which the Registrant
believes to be accurate. Such summaries are qualified in their entirety by
reference to any such documents. The Registrant has stated all of the material
facts necessary for the Commission and the public to make an informed decision
pertinent to the matters subject and to the disclosures herein by amendment
made.

INTEGRATED REPORTS TO SECURITY HOLDERS.

This information required by Form 10-QSB and
contained in this Report also contains certain information that was required to
be delivered to shareholders of the Registrant, but was not, and that is being
integrated herein pursuant to the Commission's rules and regulations. The
Registrant has met the requirements of General Instruction "D" of Form 10-QSB
for integrating reports to security holders herein, and, the Registrant has
identified the appropriate sections of this Report, accordingly, to identify
such integrated information. Because all of the integrated information satisfies
the requirements of the applicable items and/or instructions of Form 10-QSB, the
information to the Registrant's security holders is included in this Report and
is being filed electronically herewith. No further paper filing covering any of
the integrated information shall be filed separately with the
Commission.

THE
SHAREHOLDER AND CORPORATE ACTIONS DESCRIBED IN THIS REPORT HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE U. S.

SECURITIES AND EXCHANGE COMMISSION. FURTHER, THE COMMISSION HAS NOT
PASSED UPON THE FAIRNESS OR MERITS NEITHER OF THE

SUBJECT
SHAREHOLDER ACTIONS, NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS REPORT.

ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

Moreover, because this Report contains information
to the Registrant's security holders that, ordinarily, is required to be
contained in an additional or independent report to security holders, the
Registrant is notifying its security holders of the location of additional
information, pursuant to Regulation 14A and/or Regulation 14C.

To the Registrant's security holders, please take
note: The Registrant is subject to the reporting requirements of section 13(a)
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 electronic address for which iswww.sec.gov.

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 pertaining to information to security holders integrated
in this Report, to the extent the Registrant possesses such information or to
the extent the Registrant can acquire such information without unreasonable
effort or unreasonable expense, in order to verify the accuracy of the
information

- ii
-

---

contained
in this Report to any of its shareholders. The Registrant encourages its
shareholders to contact it; if electronically, tocartooninvestors@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, which is first written on the cover hereof. (The
Registrant cannot assure the public that its electronic mail (e-mail) address
will remain active or available for any period subsequent to the filing date of
this Report.)

NOTICE
OF EVENTS TO BE REPORTED AND TIME FOR FILING OF REPORT.

This Report contains information on the Registrant
as of the date and for the period ended on the cover hereof, as amended, except
for information contained in other reports, writings, filings, or schedules,
that may be incorporated herein by reference thereto, which the Registrant
guarantees to be accurate as of the dates of each such respective report,
writing, filing, or schedule.

Furthermore, the Registrant is disclosing
information in this Report for then current events that occurred during the
quarterly period ended June 30, 2005. These events were required to be disclosed
and reported on Form 8-K as they occurred during the calendar quarter ended June
30, 2005, but were not reported. Consequently, pursuant to Item 5(a) of Form
10-QSB, the Registrant is disclosing these events in this Report.

MATERIALS INCORPORATED BY REFERENCE.

Prior to the filing of this Report by the
Registrant, the Registrant filed certain information with the Commission under
the cover of Form 10-QSB, for the quarterly period ended on September 30, 2004
(and which was reported to and filed with the Commission on November 2, 2005).
The Registrant incorporates all of the information contained in said Form 10-QSB
herein, including all exhibits and schedules therein, by reference
thereto.



|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 events
that, individually or collectively, represent a fundamental change in the
information contained in this Report on Form 10-QSB for the period in question,
and (b) to 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.

NO
REVIEW BY THE COMMISSION.

The Registrant's corporate and financial
information presented in this Report have not been approved or disapproved by
the Commission. Further, the Commission has not passed upon the fairness or
merits neither of the subject transactions, nor upon the accuracy or adequacy of
the information contained in this Report, nor in any schedule, exhibit, or
supplement annexed hereto or incorporated herein by reference thereto.  Any
representation to the contrary is unlawful.

- iii
-

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|PART I  FINANCIAL
INFORMATION
|------------------------------

Certain statements contained in this Quarterly
Report for the quarterly period ended June 30, 2005 on Form 10-QSB (the
"Report"), including, without limitation, statements containing the words
"anticipates", "expects", "hopeful", and words of similar import, constitute
"forward-looking" statements. The Registrant cautions readers to not place undue
reliance on these forward-looking statements. The Registrant's actual results
could differ materially from those statements from those anticipated in these
forward-looking statements for many reasons, including certain risks associated
with the Registrant, its securities, and its prospective or future business
purpose or plan of operations, and that are described or set forth in this
Report, and in other documents the Registrant files with the U. S. Securities
and Exchange Commission (the "Commission"), which includes this Report, and all
amendments hereof.



|Item
      1. Financial Statements.
|-----------------------------------

The accompanying unaudited financial statements
have been prepared in accordance with the instructions on Form 10-QSB and in
Regulation S-X (applicable to non-asset-backed, small business issuers), and do
not include all of the information and footnotes that may be necessary for a
complete presentation and evaluation of the Registrant's financial position,
results of operations, cash flows, and stockholders' deficit, in conformity with
generally accepted accounting principles. In the opinion of the Registrant's
sole officer and director, all adjustments considered necessary for a fair
presentation of the results of operation and financial position of the
Registrant have been included and all such adjustments are of a normal recurring
nature. The operating results for the three months ended June 30, 2005 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2005.

Please Note:Due to certain formatting impediments relating to
the Commission's "HTML Tag" requirements, which are required in formatting to
transmit documents over the EDGAR system, the Registrant was incapable, without
significant unreasonable effort and expense, of underscoring certain balance
line and other line-item entries in the financial tables below. However, the
Registrant does certify the figures to be true, complete, and correct, and the
remaining information to be accurate, with the exception of the omission of
certain underscoring. (All sums in parentheses are negative or indicate a
deficiency, unless otherwise indicated, or as provided by the context or
construction of the entry.)

CARTOON ACQUISITION,
      INC.INDEX TO FINANCIAL
      STATEMENTSDescription of Financial Item
    
    Report Page
      No.Index to Financial Statements
    
    4Balance Sheet (June 30, 2005 (Unaudited) and
      December 31, 2004)
    
    5Statements of Cash Flows
      (Unaudited)
    
    6Statements of Operations
      (Unaudited)
    
    7Notes to Financial Statements
    
    8


- 1
-

---



|CARTOON ACQUISITION,
      INC.
|-------------------------------



|(A Development Stage Company)Balance
  Sheet
|--------------------------------------------

June 30,
      2005(Unaudited)
    
    
    
    December 31,
      2004ASSETSCurrent
      AssetsCash and Cash Equivalents
    
    
    
    $
    
    
    
    -
    
    $
    
    -Prepaid Expense
    
    
    
    
    
    
    
    25
    
    
    
    155Total Current
      AssetsOther Assets
    
    
    
    
    
    
    
    0
    
    
    
    0TOTAL ASSETS
    
    
    
    $
    
    
    
    25
    
    $
    
    155


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current
      LiabilitiesAccounts Payable and Accrued Expenses
    
    $
    
    8,123
    
    $
    
    50Note Payable
    
    
    
    2,000
    
    
    
    -Total Current
      Liabilities
    
    
    
    10,123
    
    
    
    50Stockholders' Equity
      (Deficiency)Preferred Stock, $0.0001 par value; 20,000,000
      sharesAuthorized, 0 shares issued and outstanding
    
    
    
    -
    
    
    
    -Common Stock, $0.0001 par value; 100,000,000Shares
      authorized, 200,001 shares issued andOutstanding
    
    
    
    20
    
    
    
    20Additional Paid-in Capital
    
    
    
    399
    
    
    
    399Deficit Accumulated during the Development Stage
    
    
    
    (10,517)
    
    
    
    (314)Total Stockholders' Equity
      (Deficiency)
    
    
    
    (10,098)
    
    
    
    105TOTAL LIABILITIES AND
      STOCKHOLDERS'EQUITY
      (DEFICIENCY)
    
    $
    
    25
    
    $
    
    155


- 2
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CARTOON ACQUISITION,
      INC.(A Development Stage Company)Statements of Cash
      Flows(Unaudited)CumulativeDuring theDevelopmentStage(September25, 2003Six Months
      Ended
    
    
    
    
    
    to June 30,June 30,
    
    
    
    
    
    2005)2005
    
    2004Cash Flows from Operating
      ActivitiesNet Loss
    
    $
    
    (10,203)
    
    $
    
    (75)
    
    $
    
    (10,517)Services Rendered for Common
      Stock
    
    
    
    -
    
    
    
    20
    
    
    
    144Changes in Operating Assets and
      Liabilities:Prepaid
      Expense
    
    
    
    130
    
    
    
    (185)
    
    
    
    (25)Accounts Payable and
      Accrued Expenses
    
    
    
    8,073
    
    
    
    (35)
    
    
    
    8,123Net Cash Provided by (Used
      in) OperatingActivities
    
    
    
    (2,000)
    
    
    
    (275)
    
    
    
    (2,275)Cash Flows from Reinvesting
      Activities
    
    
    
    -
    
    
    
    -
    
    
    
    -Cash Flows from Financing
      ActivitiesNote Payable
    
    
    
    2,000
    
    
    
    -
    
    
    
    2,000Company Expenditure Paid
      by CompanyAttorney
    
    
    
    -
    
    
    
    275
    
    
    
    275Net Cash Provided by (Used
      in) FinancingActivities
    
    
    
    2,000
    
    
    
    275
    
    
    
    2,275Net Increase (Decrease) in Cash
    
    
    
    -
    
    
    
    -
    
    
    
    -Cash and Cash Equivalents, Beginning
      ofPeriod
    
    $
    
    -
    
    $
    
    -
    
    $
    
    -Cash and Cash Equivalents, End of
      Period
    
    $
    
    -
    
    $
    
    -
    
    $
    
    -Supplemental Disclosures of Cash
      FlowInformation:Interest Paid
    
    $
    
    -
    
    $
    
    -
    
    $
    
    -Income Taxes
      Paid
    
    $
    
    -
    
    $
    
    -
    
    $
    
    -(See Notes to Financial
      Statements.)


- 3
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CARTOON ACQUISITION,
      INC.(A Development Stage Company)Statements of
      Operations(Unaudited)Three Months
      Ended
    
    Six Months
      EndedJune 30,
    
    June 30,CumulativeDuring
      theDevelopmentStage(September25,2003to June
      30,2005
    
    2004
    
    2005
    
    2004
    
    
    
    2005Revenue
    
    $
    
    - $
    
    - $
    
    - $
    
    -
    
    $
    
    -Expenses:General andAdministrative
    
    
    
    7,630
    
    60
    
    10,203
    
    75
    
    
    
    10,517Total Expenses
    
    
    
    7,630
    
    60
    
    10,203
    
    75
    
    
    
    10,517Net Loss
    
    $
    
    (7,630) $
    
    (60) $
    
    (10,203) $
    
    (75)
    
    $
    
    (10,517)Net Loss per Share,Basic and
      Diluted
    
    
    
    (0.04)
    
    (0.00)
    
    (0.05)
    
    (0.00)Weighted AverageNumber of
      CommonShares
      Outstanding,Basic and
      Diluted
    
    
    
    200,001
    
    100,001
    
    200,001
    
    50,001(See Notes to Financial
      Statements.)


- 4
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|CARTOON ACQUISITION,
      INC.
|-------------------------------

(A
Development Stage Company)

Notes
to Financial Statements

For the
Three and Six Months Ended June 30, 2005 and 2004 and For the Period September
25, 2003 (Inception) to June 30, 2005 (Unaudited)

NOTE 1
- INTERIM FINANCIAL STATEMENTS

The unaudited financial statements as of June 30,
2005 and for the three and six months ended June 30, 2005 and 2004 and for the
period September 25, 2003 (inception) to June 30, 2005 have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with instructions to Form 10-QSB. In the
opinion of management, the unaudited financial statements have been prepared on
the same basis as the annual financial statements and reflect all adjustments,
which include only normal recurring adjustments, necessary to present fairly the
financial position as of June 30, 2005 and the results of operations and cash
flows for the periods ended June 30, 2005 and 2004. The financial data and other
information disclosed in these notes to the interim financial statements related
to these periods are unaudited. The results for the three and six month period
ended June 30, 2005 are not necessarily indicative of the results to be expected
for any subsequent quarter of the entire year ending December 31, 2005. The
balance sheet at December 31, 2004 has been derived from the audited financial
statements at that date.

Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to the Securities and Exchange Commissions rules and
regulations. These unaudited financial statements should be read in conjunction
with our audited financial statements and notes thereto for the year ended
December 31, 2004 as included in our report on Form 10-KSB.



|NOTE 2 - ORGANIZATION
|---------------------

Cartoon Acquisition, Inc. (the Company) was
incorporated in the State of Delaware on September 25, 2003. The Company has no
products or services; the Company is seeking a business to merge with or
acquire.

On May 4, 2004, the Company effected a reverse
stock split of 1 share for each 1,240,000 shares held, thereby decreasing the
number of issued and outstanding common shares from 1,240,000 to 1. All
references to shares and per share amounts in the accompanying financial
statements have been presented to retroactively reflect this reverse
split.



|NOTE 3 - BASIS OF
PRESENTATION
|------------------------------

The Company has been presented as a development
stage enterprise in accordance with Statement of Financial Accounting Standards
(SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.
Since inception, the Companys activities have been limited to organizational
efforts and making filings with the Securities and Exchange Commission (SEC).

At June 30, 2005, the Company had negative working
capital and a stockholders deficiency of $10,098. For the period September 25,
2003 (inception) to June 30, 2005, the Company incurred net losses of $10,517.
Further, the Company failed to timely file periodic reports with the SEC
subsequent to

- 5
-

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its
filing of its Registration Statement on Form 10-SB on October 3, 2003. These
factors create uncertainty as to the Companys ability to continue as a going
concern. The Company is making efforts to acquire a business with assets and
operations. However, there is no assurance that the Company will be successful
in accomplishing this objective. The financial statements do not include any
adjustments that might be necessary should the Company be unable to continue as
a going concern.



|NOTE 4 - NOTE PAYABLE
|---------------------

The note
payable does not bear interest and was due on or before July 29,
2005.



|NOTE 5  INCOME TAXES
|---------------------

No provision for income taxes has been recorded
since the Company has incurred net losses since inception.



| | At June
      30, 2005, deferred tax assets consist
of:
| | -------------------------------------------------------

|Net operating loss
      carryforward |  | $ |  | 3,576   |  |   |  |  
|------------------------------------- |  | - |  | ------- |  | - |  | -
|Less valuation
      allowance        |  |   |  | (3,576) |  |   |  |  
|                                     
|Net                                   |  |   |  |         |  | $ |  | -

Based on
managements present assessment, the Company has not yet determined it to be
more likely than not that a deferred tax asset of $3,576 attributable to the
future utilization of the $10,517 net operating loss carryforward as of June 30,
2005 will be realized. Accordingly, the Company has provided a 100% allowance
against the deferred tax asset in the financial statements at June 30, 2005. The
Company will continue to review this valuation allowance and make adjustments as
appropriate. The net operating loss carryforward expires in years 2023, 2024,
and 2025 in the amounts of $185, $130, and $10,202, respectively.

Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Therefore, the amount available to offset future taxable
income may be limited.



|NOTE 6 - CONTINGENCY
|--------------------

On January 25, 2005, the Companys sole officer
and director resigned as officer and director and sold 185,000 of the 200,000
shares of Company common stock owned by him to an unrelated third party for a
promissory note in the amount of $100,000. This promissory note does not bear
interest, was due on or before August 24, 2005, and is secured by the 185,000
shares of Company common stock.



|NOTE 7  SUBSEQUENT
EVENTS
|--------------------------

On August 5, 2005, the Company formed a wholly
owned subsidiary incorporated in the State of New York named Rochester Pasta and
Sports, Inc. ("RPS").

On November 1, 2005, the Company executed a letter
of intent with Diamine Tech Group, Inc. ("DTG"), a Delaware corporation with
nominal assets and no business. The letter of intent contemplates an Exchange
Agreement whereby the Company and DTG stockholders exchange shares resulting in
DTGs stockholders receiving a total of approximately $55,555 of non-interest
bearing promissory notes due 120 days from the closing and 7.5% of the total
issued and outstanding shares of the combined

- 6
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company.
The Exchange Agreement must be agreed upon by DTGs board of directors and
stockholders and would be subject to satisfaction of certain conditions
precedent to closing. The Companys purpose in consummating this transaction is
to add a sufficient number of stockholders in order to ease regulatory approval
of the quotation of its common stock on an electronic quotation system such as
the OTC Bulletin Board.

Item
2. Managements Discussion and Analysis or Plan of Operations.

Some of the statements made in Part I, Item 2 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.

2.1. Plan
of Operation.

Cartoon Acquisition, Inc. was formed and organized
under the General Corporation Law of Delaware under the laws of the State of
Delaware on September 25, 2003 (the "Registrant"). Subsequently, the Registrant
registered its common voting equity securities, namely, its common stock, par
value $0.0001 per share, on Form 10-SB, pursuant to and in accordance with the
requirements of Section 12(g) of the Securities Exchange Act of 1934 (the
"Exchange Act"). That certain Registration Statement became effective by lapse
of time 60 days after the date on which it was filed with the
Commission.

On January 25, 2005, Randolph S. Hudson entered
into a stock purchase agreement exempt from the Commission's registration
requirements as a private securities transaction with James W. Margulies, then
the Registrant's sole officer, sole director, and principal
shareholder-in-supermajority. Mr. Hudson issued a non-interest bearing note,
which was due on March 24, 2005. Subsequently, Mr. Margulies informally extended
the due-date of that certain note to August 24, 2005, which, upon its
satisfaction, will represent the payment-in-full for Mr. Hudson's purchase of
185,000 shares, or approximately 92.5%, of the total issued and outstanding
common voting equity securities of the Registrant. In the event Mr. Hudson does
not timely pay Mr. Margulies said sum on or before said date, Mr. Margulies may
reclaim Mr. Hudson's shares in the Registrant in accordance with the terms and
conditions enumerated in that certain pledge and security agreement that was
issued by Mr. Hudson of even date with that certain stock purchase agreement,
or, Mr. Margulies, at his sole discretion, may extend the term beyond such
date.

- 7
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No other source of funds was utilized by Mr.
Hudson to acquire his shares in the Registrant and no funds were obtained or
utilized from any commercial lending sources or established banking institutions
to consummate the stock sale and purchase transaction described hereinabove.
More importantly, the transaction does not rely on any funds, monies, or assets
of the Registrant to satisfy Mr. Hudson's indebtedness to Mr.
Margulies.

Following Mr. Hudson's purchase of the 185,000
shares of the Registrant's common stock, and among other things, Mr. Hudson made
certain statements to the Commission and to the public following his purchase of
the Registrant's common stock from Mr. Margulies. (A complete account of Mr.
Hudson's statements was memorialized in his Schedule 13D report, which was filed
with the Commission on March 28, 2005 and that, is available to be viewed on the
Commission's website,www.sec.govand contained
in the Registrant's file therewith.)

In said report, Mr. Hudson stated, among other
things, that he intended to promulgate the Registrant's principal objectives
with regard to its overall development (as the result of his purchase of the
controlling interest-in-supermajority of the Registrant's common stock) as
follows:

|(i)  | to
      fortify the equity of the existing shareholders by marketing the
      Registrant as a suitable candidate to enter into a qualified business
      combination;                           
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) | to
      engage the Registrant in a suitable transaction, whereby, it would become
      engaged in an ongoing business and, thus, enhancing the existing
      shareholders' equity positions, and
|    

(iii)      to remedy the Registrant's
delinquent filings under its reporting obligations to the Commission.

In conclusion on the matter of Mr. Hudson's
transaction, on the date he acquired his interest in the Registrant, Mr. Hudson
stated: no additional securities were to be acquired by, or promised to, any
other person or entity pursuant to his transaction with Mr. Margulies; he had no
intention to compel or influence the Registrant's Board of Directors and/or
shareholders to modify its capital structure or dividend policy; he had no
intention to compel or influence the Registrant to change or modify its business
or corporate structure (with the exception of pursuing a business combination,
share exchange, or the acquisition of an asset); and he had no intention to
compel or influence the Registrant to amend its Certificate of Incorporation or
to amend its Bylaws to impede the acquisition of control of the Registrant by
any person or entity (with the single exception of informing the Commission and
the public of the statutory self-executing, anti-takeover provisions set forth
in the General Corporation Law of Delaware, under which statute the Registrant
may rely on effecting the prevention of any such action in the
future).

As of the date of this Report, the Registrant has
not issued any class of its securities, either in equity or in debt, or any debt
instruments, that are quoted on any electronic intermediary or other quotation
system or that trade on any national or regional exchange, domestically or
abroad.

Presently, without external assistance, the
Registrant does not have any cash or credit with which it may continue in its
development, and, the Registrant must rely on its sole officer and director and
his immediate family for financial support. For the Registrant to be able to
fulfill any segment of Mr. Hudson's ambitious development objectives (for
the

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Registrant), the Registrant will need to obtain extremely favorable
capital or credit accommodations in moderate amounts from risk investors. In
other words, the Registrant, or its principal shareholder, will have to promise
high returns to a sophisticated individual or qualified entity in order to
obtain favorable loan facilities or to induce any sophisticated investor or
qualified entity to purchase shares in the Registrant. Moreover, the Registrant
will be unable to guarantee that it will ever be capable of repaying any credit
accommodation and the Registrant will be unable to guarantee, or to otherwise
remotely assure any investor that the Registrant's stock, either in debt or in
equity, will ever have any monetary value (or, if the Registrant's stock will
attain any value, that the Registrant may not be capable of sustaining any such
value). Therefore, it is the opinion of the Registrant's sole officer and
director that the Registrant must continue to rely on the contributions from
both he and his immediate family in order to continue the Registrant's
development, or until he is able to locate and qualify any such prospective
investor or lender, either or both scenarios will be required for at least the
12-month period following the date of this Report.

While the Registrant's development has been slowed
by its lack of any substantial outside capital, its progress has been steady,
although in ways barely noticeable to the public (and, most likely, to the
Commission). For the period covered by this Report, Mr. Hudson was able to rely
on a private company named Heritage Limited LLC, for a certain modest cash
contribution and to provide that company's guaranty to certain of the
Registrant's creditors, in order to induce them to perform work or services for
the Registrant on a billable basis. In addition, the Registrant has had to rely
extensively on Mr. Hudson and his immediate family for non-interest bearing
loans to continue in its ongoing development and administration.

In pursuance of the Registrant's overall
development objectives, the Registrant is unable to rely on conventional methods
of research and development with respect to its developmental objectives.
Firstly, in the matter of the Registrant seeking to pursue its previously stated
business purpose of seeking to effect a business combination, or, otherwise to
purchase an asset, the Registrant must rely on the intuition of its sole officer
and director and his capability (or lack thereof) to evaluate prospective
candidates and make a final determination of which candidate would be best
suited for the Registrant. (There are no formulae or matrices by which to
evaluate anyspecificcandidate, other than the traditional methods, which are to
evaluate any candidate's due-diligence and financial information to determine
the target candidate's character and integrity, in respect of the candidate's
pecuniary requirements in comparison to the Registrant's capability to perform
fiscally on its obligations and promises.) Secondly, if the Registrant were to
consider positioning itself for sale under a reverse merger to an existing
company seeking to become publicly traded, again, there are no traditional or
contemporary methods by which to gauge the marketplace or to prepare for such an
event, other than for the Registrant to become fully compliant with the laws of
the State of Delaware and with the rules and regulation of the Commission with
regard to its formation, organization, and continuing corporate
administration.

Pursuant to the requirements of the applicable
paragraphs enumerated within Section 13(a) of the Exchange Act, the Registrant
is required to provide certain information about significant acquisitions
including audited financial statements of the acquired company. In the event the
Registrant did merge or acquire a business opportunity, the successor company
will be subject to the Registrant's obligations to the Commission under Section
13(a) of the Securities Exchange Act of 1934. This is commonly referred to as a
"back door registration." A back door registration occurs when a non-reporting
company becomes the successor of a reporting company by merger, consolidation,
or an exchange of the principal number of shares of the respective constituent's
and proponent's securities. Pursuant to the

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Commission's rules and regulations, this type of event requires the
successor company to provide current information on Form 8-K, within two days of
the succession, in kind the same information that is required to be contained in
a registration statement (under which the Registrant was qualified to register
its securities), including audited andpro formafinancial statements. Accordingly, the Registrant
may incur additional expense to conduct due-diligence and present the required
information for the business opportunity in any required report. In addition,
the Commission may elect to conduct a full review of the successor company and
may issue substantive comments on the sufficiency of disclosure related to the
business opportunity. The pecuniary liability for such audited financial
statements would be the responsibility of the target company. The additional
time and costs that may be incurred by some potential target companies to
prepare such financial statements may significantly delay or essentially
preclude the consummation of an otherwise desirable acquisition by the
Registrant. Acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Securities Exchange Act of 1934 are applicable
to such transactions and to the Registrant in general.

In any business combination, share exchange, or
asset acquisition between the Registrant and any third party, federal and state
tax consequences will likely be major considerations to all parties concerned.
Such transactions may be structured to result in "tax-free" treatment to all of
the concerned parties. The Registrant, for its part, intends to structure such
business opportunities in a manner that will minimize the federal and state tax
consequences of both the Registrant and the target entity; however, there can be
no assurance that the business opportunity will meet the statutory requirements
of a "tax-free" reorganization (which is actually only a tax deferred
transaction) or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes, which may have an adverse
financial effect on the Registrant, and on the Registrant's shareholders,
depending on its fiscal position on the closing date of any such
transaction.

The Registrant does not anticipate that a
secondary trading market for its securities will develop in any state until a
business opportunity is consummated and until such date the Registrant is no
longer classified as a "blank check" company either by its report filed with the
Commission or by the Commission independent of any action by the Registrant, or,
if at all.

The Registrant, by itself, does not intend to
undertake any further offering of its securities, either debt or equity, until
such time it successfully consummates a business combination. Furthermore, the
Registrant has no plans to conduct a "blank check" offering under the Securities
Act of 1933 (the "Securities Act").

In view of the Registrant's principal objectives
at this time - to aggressively pursue its development to effect a business
combination, a share exchange, or to purchase an asset that represents an
ongoing business - the Registrant does not expect to purchase or otherwise to
acquire any assets that would resemble a plant or any type of furnishings,
fixtures, or equipment. The Registrant's use of its principal shareholder's
office is satisfactory for the present.

During the quarterly period for the quarter ended
June 30, 2005, the Registrant was contemplating a merger and/or share exchange
with a company named Mercosur Telephone & Telegraph Co., Inc., a Delaware
corporation ("Mercosur"), the transaction for which Mr.

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Hudson
was in the process of negotiating with Mercosur's principal stockholder,
Financial Technology Research Corporation of Colorado ("Fintek"). Under the
original plan, Mr. Hudson, acting severally from the Registrant purchased
approximately 90.6% of the issued and outstanding shares of Mercosur's common
stock. It was then Mr. Hudson's intent to effect a merger and/or share exchange
between Mercosur and the Registrant. However, upon further prudent review of
Mercosur's operating history and results of operation, not only did Mr. Hudson
not further entertain the idea of combining Mercosur with the Registrant, he
rescinded the transaction between himself and Mercosur's principal shareholder.
Therefore, the Registrant continues to seek a qualified candidate with which to
effect a business combination or from which it may acquire a qualified
asset.

The Registrant does not expect any significant
changes to the number of persons, contractors, or consultants in its employ.
Presently, the Registrant employs no one person (perhaps, other than Mr. Hudson,
who, as the sole officer of the Registrant in various positions, may be
considered to be an employee of the Registrant under the rules and regulations
of the General Corporation Law of Delaware, as amended, or other similar
employment laws or laws promulgated by the Delaware Legislature on matters
affecting bodies corporate). During the period covered by this Report, the
Registrant has engaged a certifying accountant and is represented by Mr.
Hudson's (non-securities) counsel. Mr. Hudson, the Registrant's sole officer and
director anticipates that the only additional four professional or
business-related firms the Registrant must employ are one additional
PCAOB-certified public accountant (to fulfill the Registrant's requirements
under the Commission's recently-adopted rules governing accounting by reporting
companies), one stock transfer agent and/or shareholder services company, one
investor relations firm, and, lastly, one broker-dealer who is qualified to
serve as the Registrant's principal market maker. The Registrant's sole
principal executive officer expects the Registrant to engage the services of the
individuals or firms to fill the above positions no later than December 31,
2005.

In conclusion, the principal elements of the
Registrant's plan of operation are to expeditiously file all of the remaining
reports the Registrant is obligated to file with the Commission in accordance
with Section 13(a) of the Securities Exchange Act and to aggressively pursue the
consummation of a qualified business combination or the acquisition of a
qualified asset, including all acts or activities therewith
associated.

2.2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

From the date of the Registrant's inception
to-date, the Registrant has been dormant principally because it was incapable of
arranging and obtaining sufficient capital or credit accommodations to pursue
its stated business objective: to effect a business combination with a qualified
entity or, otherwise, to acquire a qualified asset that is the subject of an
ongoing business enterprise. Consequently, the Registrant did not experience any
administrative or operational activities from September 25, 2003 until January
25, 2005. In retrospection of the Registrant's most recent two calendar years,
because the Registrant was dormant and received no income from operations or
borrowings, the Registrant's sole officer and director is incapable of offering
quantitative or qualitative analysis of the Registrant's financial
condition.

On January 25, 2005, Randolph S. Hudson, now the
Registrant's sole officer, sole director, and principal stockholder, purchased
185,000 shares, or approximately 92.5%, of the Registrant's common
stock.

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As a part of Mr. Hudson's program to develop the
Registrant, it has been necessary for the Registrant (a) to prepare and file its
delinquent reports (under Section 13(a) of the Exchange Act, (b) evaluate
prospective business combination candidates, (c) provide the Registrant with
adequate, although minimal, capital to continue its business development, (d) to
secure adequate credit accommodations or interim financings to permit the
Registrant to pursue its overall development objectives, and (e) to evaluate
qualified business combination candidates and candidates that otherwise may
offer to sell operating assets to the Registrant.

However, notwithstanding Mr. Hudson's
determination, from April 1, 2005 through the end of the period covered by this
Report, the Registrant, independent of any outside, or third party, sources of
capital or credit accommodations, has been independently incapable of satisfying
its cash requirements, with the exception of short-term interest-free borrowings
from Mr. Hudson (or advances to the Registrant in the form of disbursements made
for purchases or prepayments on its behalf), in order to proceed with its plan
of operation. To a far lesser extent, the Registrant has been able to rely on
certain third-party providers (persons known or introduced to Mr. Hudson) to
advance funds to the Registrant in order for it to continue in its development
objectives.

While evaluating qualified business combination
candidates and prospective operating asset sales, the Registrant came upon an
opportunity, whereby, Mr. Hudson was able to acquire a Delaware corporation,
Mercosur Telephone & Telegraph Co., Inc. ("Mercosur"). Following that stage,
it was Mr. Hudson's intent to cause to become effective a merger and/or share
exchange between the Registrant and Mercosur. By approaching the business
combination in this manner - where Mr. Hudson controlled the Registrant and the
target - it was Mr. Hudson's thinking, aside from the certain relationship
issues that would arise from the consummation of the transaction, that it would
eliminate considerable costs relative to required shareholder mailings,
distributions, and the like to more shareholders than would ordinarily be
required, thereby, limiting or minimizing the dilution to the Registrant's
existing shareholders. However, after more closely inspecting Mercosur's
due-diligence information, he learned that Mercosur's formation, organization,
and stated business activity would not serve the best interests of the
Registrant. Subsequently, Mr. Hudson rescinded his agreement to purchase
Mercosur from its principal shareholder, Financial Technology Research
Corporation of Colorado ("Fintek").

Because the Registrant did not satisfactorily
consummate the transaction with Mercosur described hereinabove, the Registrant
will, once again, seek to effect a business combination with a qualified entity,
to effect a share exchange with a qualified entity or individual, or to acquire
the assets of a qualified ongoing business.

In doing so, the Registrant will not limit its
search for a business opportunity to any specific business, industry, or
geographical location (other than to state that such transaction will be
concluded for a corporation, asset, or business located within the contiguous
United States). Depending on the qualification of any given business
opportunity, the Registrant may participate in virtually any kind of business.
The Registrant's sole officer and director anticipates the Registrant will
participate in only one potential business opportunity, as it has no assets and
extremely limited financial resources. To-date, the Registrant has not developed
any criteria for the selection of business opportunities. However, the
Registrant's sole officer and director will not select or enter into an asset
acquisition, merger, or share exchange agreement with a prospective candidate,
unless such candidate can provide audited financial statements and comply with
all of the Commission's reporting requirements. The Registrant's sole officer
and director will have complete discretion in selecting an
appropriate

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business
opportunity for the Registrant, or for any subsidiary to be formed and organized
to conduct business for the Registrant.

Available business opportunities may exist in many
different industries, any of which could be in various stages of development.
Accordingly, comparative investigation and analysis of such business
opportunities is difficult and complex. The Registrant does not and will not
have any capital to attract the owners of business opportunities who desire
significant cash or other assets.

However, in contrast to the speculation of the
Registrant engaging in an ongoing business (through a business combination,
stock purchase, or asset acquisition) the Registrant's sole officer and director
believes that an opportunity may exist, whereby, the Registrant would be
acquired by a private company that does not wish to incur the cost and time
involved in an initial public offering or registration as a fully reporting
public company, however, that does desire its securities to be quoted on an
electronic or intermediary quotation system or to have its securities traded on
a regional or national exchange. The principal shareholders or owners of such
business opportunities will, however, incur significant legal and accounting
costs associated with the Commission's and with various state's securities
transaction reporting requirements, in addition to the legal cost of ancillary
agreements and other documents. The Exchange Act specifically requires that any
business opportunity candidate comply with all applicable reporting
requirements, including filing reports to disclose material events, periodic
reports, quarterly reports, and annual reports, most of which must be
accompanied by audited financial statements. The Registrant believes that there
is a demand by non-public corporations for shell corporations that are publicly
held registered companies. The Registrant's sole officer and director further
believes that demand for "shell" corporations has increased dramatically from
the date the Commission imposed stringent requirements on blank check companies
pursuant to Regulation 419 of the Act. The foregoing regulation has
substantially decreased the number of "blank check" offerings filed with the
Commission and, as a result, has stimulated an increased demand for these
so-called "shell" corporations. However, there is no assurance that the
foregoing assumption is accurate or correct. In conclusion, however, the
Registrant's sole officer and director has not conducted market research and is
not aware of any market data that would support any such perceived benefits for
a business opportunity owner.

The Registrant's plan of operations will be
conducted through the efforts of its principal shareholder, sole officer, and
sole director, Randolph S. Hudson, and, thus, will not require any additional
funds. It is anticipated that Mr. Hudson will furnish the Registrant with
business opportunity candidates. The Registrant has not, and does not, plan to
use any notices or advertisements in its search for business opportunities. Mr.
Hudson, on a case-by-case basis, will investigate specific business
opportunities and negotiate, hire an attorney, and draft and execute all
pertinent agreements, disclosure documents, and other instruments. Mr. Hudson
anticipates using his private attorney, Stephen D. Rogoff, of Rochester, New
York, for all of these functions, except for securities and securities-related
transactions, areas in which Mr. Rogoff does not customarily practice. The
Registrant will not be able to expend a significant amount of funds on a
complete and exhaustive investigation. Moreover, the Registrant may not discover
certain adverse factors regarding such a business opportunity due to its limited
business experience in such matters.

The Registrant will incur nominal expenses in
implementing its business plan, which will be paid out-of-pocket by its present
sole officer and director as interest-free loans to the Registrant, or, which
may be paid-out by certain individuals or entities whom or which may

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extend
credit accommodations to the Registrant under favorable terms and conditions.
However, the Registrant expects that repayment of these loans will be derived
solely from consummation of a business opportunity or from the sale of all or a
portion of Mr. Hudson's securities in the Registrant. The repayment of any loans
made to the Registrant will not impede, or be made conditional in any manner to,
consummation of a business opportunity. Mr. Hudson will loan money to the
Registrant, or arrange for loans to the Registrant by qualified third parties,
on an as-needed basis. Presently, if any such funds were required by the
Registrant, there would be no limit on the amount of monies he or they,
respectively, will loan the Registrant.

Prior to making a decision in a business
opportunity, the Registrant plans to obtain written materials regarding the
business opportunity including, a description of products, services, and that
company's history; management resumes; financial information; available
projections with related assumptions; evidence of existing patents, trademarks,
service marks, or rights thereto and of the foregoing; present and proposed
forms of compensation to management; a description of present and required
facilities; an analysis of risk and competitive conditions; and other relevant
information.

Further, prior to the identification and
qualification of a business opportunity, the Registrant has no plans, proposals,
arrangements, or understandings with respect to the sale or issuance of
additional securities. Because the Registrant is in possession of virtually no
assets and has extremely limited, if non-existent, resources, the Registrant's
sole officer and director anticipates that for the Registrant to consummate any
such asset acquisition, stock purchase, merger, or share exchange, the
Registrant will be required to issue shares of its authorized but unissued
common stock as the sole consideration for any such venture, and, it is
anticipated that any securities issued in any such acquisition, business
combination, or share exchange would be issued in reliance upon an exemption
from registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of any prospective transaction,
the Registrant may agree to register all or a part of such securities
immediately after the acquisition, business opportunity, or share exchange is
consummated or on a specified date thereafter. If such registration occurs, (of
which there can be no assurance) it will be undertaken by the surviving entity
after the Registrant has successfully consummated an acquisition, stock
purchase, merger, or share exchange, and after it is no longer considered to be
a "blank check" company.

The issuance of substantial additional securities
and their potential sale into any trading market which may develop in the
Registrant's securities (if any) may have a depressive effect on the future
value of its securities, if such a market develops, of which there is no
assurance. The completion of any asset acquisition, stock purchase, merger, or
share exchange, which utilizes the Registrant's common voting equity securities,
will result in a significant issuance of shares and cause the Registrant's
present stockholders ownerships to become diluted. Until a specific business
combination opportunity arises, the Registrant cannot estimate the percentage of
dilution to its present shareholders, as the result of any such, yet,
unidentified transaction.

Alternatively, although in pursuance of the
Registrant's overall ongoing development, the Registrant's sole officer and
director anticipates the Registrant to begin to "position" itself during the
calendar third quarter of 2005. These prepositioning efforts may include
additional administrative development and internal organization, the formation
of one or more subsidiaries, and the securitization of one or more capital or
credit accommodations (all

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of which
would be completed in a manner consistent with the Registrant's statements
hereinabove).

Regretfully, other than by the consummation of any
business combination or the actual acquisition of any operating asset, it is
difficult for the Registrant's sole officer and director to subject the
Commission and the public to conjecture about the Registrant's future
development, especially, in terms of the Registrant's liquidity following any
such transaction, including the availability of any capital or credit
accommodations available to the Registrant as the result of any such
transaction, and the quantitative or qualitative aspects of any significant
levels of income or loss that would or would not be incurred as the result of
the Registrant's future operations, if any.

Lastly, the Registrant's sole officer and director
is not able to forecast any material changes in the Registrant's financial
condition as the result of any such, as yet unknown and unidentified, event,
other than to state the Registrant is expected to continue to incur substantial
losses (which will contribute to a significant deficiency in shareholders'
equity) until after it successfully consummates a business combination or
otherwise acquires an operating asset; and, most likely, the Registrant will not
be able to demonstrate a profit or positive shareholders' equity at that
time.

In conclusion, it is the Registrant's objective to
aggressively pursue its development objectives (as are stated hereinabove this
section 2.2) and to continue seeking a qualified business combination candidate
or the acquisition of an operating asset or assets, all the while continuing to
extend the scope of its corporate administration by facilitating a strong
internal corporate organization with exacting controls and
procedures.



| | 2.3.
      Off-balance Sheet Arrangements.
| | ------------------------------------------

As of the date of this Report, the Registrant does
not classify any liability or obligation as an off-balance sheet arrangement,
and, as of the date of this Report, the Registrant's sole officer and director
does not foresee the need to enter into a transaction within the forthcoming
3-month period, which transaction could be classified as an off-balance sheet
transaction.



|Item
      3. Controls and Procedures.
|--------------------------------------

The response required by the Registrant to Item 3
of Part I of Form 10-QSB is not required in this Report.



|PART II - OTHER
INFORMATION
|---------------------------



|Item
      1. Legal Proceedings.
|--------------------------------

During the period being reported herein, the
Registrant was not a party to any legal action or proceeding, nor was any such
action or proceeding threatened against the Registrant.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

The response required by the Registrant to Item 2
of Part II of Form 10-QSB is not required in this Report.

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|Item
      3. Defaults upon Senior Securities.
|----------------------------------------------

The response required by the Registrant to Item 3
of Part II of Form 10-QSB is not required in this Report.

Item
4. Submission of Matters to a Vote of Security Holders.

Some of the statements made in Part II, Item 4 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.

For the quarterly period ended June 30, 2005, the
Registrant did not submit any matters to a formal vote by security holders;
rather, the Registrant's principal shareholder, Randolph S. Hudson, who
beneficially owns approximately 92.5% of the Registrant's common stock, did
cause the Registrant to effect certain corporate actions by his written consent
by less than the unanimous vote of the shareholders in lieu of a meeting;
whereby (i) the shareholders elected and appointed a new PCAOB-qualified
certifying accountant to serve the Registrant, (ii) the shareholders appointed a
firm to serve as its stock transfer agent, and (iii) the shareholders authorized
a merger and/or share exchange to occur between the Registrant and Mercosur
Telephone & Telegraph Co., Inc. The actions by written consent in lieu of a
meeting were approved on May 10, 2005. The shareholder actions were required by
Delaware Corporate Law and Federal Securities Laws in order to effect and
implement the resolutions adopted by the Registrant's Board of Directors, which
body acted by its unanimous written consent in lieu of a meeting on April 6,
2005.

There were no settlements required to be made
between the Registrant and any other participant (as defined in Rule 14a-11 of
Regulation A under the Exchange Act), which terminated any solicitation subject
to Rule 14a-11.

No proxies were solicited from the Registrant's
shareholders and, as the result of the written consent by the Registrant's
principal shareholder; there was no solicitation in opposition to the
shareholders' nominee who was elected by the shareholders' action.

The Registrant must report that certain matters
were submitted to a vote of security holders during the period covered by this
Report; however, due to the Registrant's dilemmas in regard to its organization,
administration, and limitation on fiscal resources, the Registrant was unable to
timely file the required

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schedule
to confirm the occurrence of certain corporate actions that were effected by the
Registrant's shareholders by written consent in lieu of a meeting.

Consequently, as required pursuant to the
Commission's rules and regulations, the Registrant is disclosing these matters
herein this item fourth of Part II of this Form 10-QSB, as follows:

|4.1. | INFORMATION REQUIRED BY ITEMS OF SCHEDULE 14A. a. Date, Time,
      and Place Information.
|---- | ------------------------------------------------------------------------------------------
|    

A letter was to have been furnished to the holders
of record of the common stock of the Registrant on or about May 10, 2005, to
inform them of certain corporate actions that ordinarily would have been
considered to be a submission of matters to a vote of security holders, which
were approved by the less than the unanimous vote of the Registrant's
shareholders, who acted by written consent without a meeting on May 10, 2005
(the "Shareholder Actions").

A call for the Shareholder Actions was made by the
Registrant's principal beneficial owner, Randolph S. Hudson, who owns 185,000
shares (or approximately 92.5%) of the Registrant's issued and outstanding
stock, and was based upon Federal and Delaware Laws that require the vote of
shareholders in order to effect and implement actions adopted by the
Registrant's Board of Directors, the body of which acted by the unanimous
written consent of directors in lieu of a meeting on April 6, 2005.

Mr. Hudson fixed the Record Date at the close of
business on May 5, 2005 for shareholders entitled to notice about the
Shareholder Actions that ordinarily would have become effective on May 30,
2005.

The Registrant was incapable of complying with the
reporting requirements set forth in Schedule 14(c), in that the Registrant's
said compliance could not have been performed without significant unreasonable
and undue effort and without significant undue and unreasonable expense by the
Registrant; specifically, (1) the Registrant failed to notify the Commission on
either Schedule 14A or Schedule 14C of the events described hereinabove and (2)
the Registrant failed to timely file either a Schedule 14A or Schedule 14C with
the Commission for the events described hereinabove.



| | b.
      Dissenter's Right of Appraisal.
| | ----------------------------------------

Under the applicable provisions of the General
Corporation Law of Delaware, the Registrant's shareholders were not entitled to
exercise dissenter's rights of appraisal in connection with the Shareholder
Actions that are the subject of this item fourth.

c.
Interest of Certain Persons in Matters to be Acted Upon.

Although no direct solicitation was made, as the
Shareholder Actions were made by written consent by less than the unanimous vote
of shareholders, it could be construed by the public that the Shareholder
Actions were incited by an implied solicitation by Mr. Hudson. If it were
determined or established that any such solicitation did occur, such
solicitation would not have been subject to Rule 14a-12(c) (17 CFR 240.14a
-12(c)).

Mr. Hudson has been the Registrant's sole officer
and director of the Registrant from January 25, 2005. No other person who stood
for election or consideration to serve as a director or officer

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of the
Registrant was involved in the Shareholder Actions and there was no
participation of any person who was an associate of Mr. Hudson's or of any
person who was considered to serve or who stood for election to the Registrant's
Board of Directors or executive office.

There exists no relationship or other affiliation
between Mr. Hudson and any party whom or which was favored by the Shareholder
Actions. Mr. Hudson determined the services offered by the persons or firms that
were appointed to serve the Registrant as the result of the Shareholder Actions
were competitively priced and the terms for the payment for such services or the
consideration and costs incurred for the transaction to become payable by the
Registrant to such persons or firms was reasonable and common in the ordinary
course.

It should be noted that the component of the
Shareholder Actions regarding the merger and/or share exchange with Mercosur did
create a certain relationship, in that Mr. Hudson was the principal
shareholder-in-supermajority of Mercosur (the constituent in that transaction)
and Mr. Hudson is the principal shareholder-in-supermajority of the Registrant,
which could suggest to some that Mr. Hudson was favoring his interests by
promulgating the transaction between the two companies. In fact, Mr. Hudson was
not scheduled to receive any part of the consideration offered by the Registrant
to the shareholders of Mercosur, and, Mr. Hudson was not eligible to receive any
pecuniary benefits as the result of that transaction, had it been
consummated.

In any event, had the Registrant delivered notice
to its shareholders, as it was required to do on Schedule 14C, and another
shareholder of the Registrant resolved to oppose the endorsement of the Board of
Directors to favor the transaction, and, if a subsequent vote of the
Registrant's shareholders was to have occurred at a special meeting of the
Registrant's shareholders, Mr. Hudson's votes in favor of the transaction would
have predominated as the result of his percentage of stock ownership in the
Registrant; thus resulting in the approval of the alleged dubious shareholder
action by Mr. Hudson in regard to Mercosur.

d. Voting
Securities and Principal Holders Thereof.

On May 10, 2005, Mr. Hudson, acting in pursuance
of the objectives set forth in Section 228 of the General Corporation Law of
Delaware (8 Del. C. § 228), took action as the principal stockholder of the
Registrant to undertake an action by the shareholders; whereby (1) the
shareholders authorized the appointment of a new PCAOB-qualified certifying
accountant to serve the Registrant, (2) the shareholders authorized the
appointment of a stock transfer agent to serve the Registrant, and (3) the
shareholders authorized a merger and/or share exchange transaction to occur
between the Registrant and Mercosur Telephone & Telegraph Co., Inc., a
Delaware corporation (the "Shareholder Actions") (as such plan is more fully
described hereinabove).

In pursuance of the aforesaid objectives, Mr.
Hudson fixed the record date for shareholders entitled to notice of the
Shareholder Actions at May 5, 2005 (the "Record Date"), and proceeded to take
shareholder action by written consent in lieu of a meeting. The Registrant's
total issued and outstanding shares as of the Record Date were 200,001 shares,
all of which were entitled to vote. The Shareholder Actions became effective by
the affirmative written consent of the holder of 185,000 shares of the
Registrant's common stock. The Registrant does not have provisions for
cumulative voting in its Certificate of Incorporation or in its
Bylaws.

A shareholder action by written consent in lieu of
a meeting is permitted by Section 228 of the General Corporation Law of
Delaware.

- 18
-

---

The authorized Shareholder Actions required the
approval of a majority of the holders of the Registrant's common stock entitled
to vote in order to become effective.

|1) | The
      General Corporation Law of Delaware requires that a majority of
      shareholder votes eligible to be cast in any election is required and
      constitutes a quorum for the purpose of passing the measures upon which
      the shareholders acted by written consent (8 Del. C. § 216(1)). (Mr.
      Hudson's percentage ownership in the Registrant constituted a plurality of
      eligible votes cast by written consent in favor of these
      proposals.)
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  

There was not a meeting of the Registrant's
shareholders and none was required under the statutes of the General Corporation
Law of Delaware applicable to shareholder actions by written consent.

The
following tables set forth the information required by Item 403 of Regulation
S-B.

The first table indicates the names of persons
known to the small business issuer to be the beneficial owners of more than five
per cent (5%) of the Registrant's common voting equity securities, its common
stock:

Amount and Nature
    
    PercentTitle of Class
    
    Name and Address of Beneficial
      Owner
    
    of Beneficial
      Owner
    
    of
      ClassCommon
    
    Randolph S.
      HudsonPost Office Box
      103
    
    185,000 Shares,Wyoming, New York
      14591-0103
    
    Beneficial Owner
    
    92.5%Common
    
    James W.
      MarguliesSuite 25030100 Chagrin
      Boulevard
    
    15,000 Shares,Pepper Pike, Ohio
      44124-5777
    
    Beneficial Owner
    
    7.4999%


The
following table sets forth the security ownership of the Registrant's
management:

Amount and Nature
    
    PercentTitle of Class
    
    Name and Address of Beneficial
      Owner
    
    of Beneficial
      Owner
    
    of
      ClassCommon
    
    Randolph S.
      HudsonPost Office Box
      103
    
    185,000 Shares,Wyoming, New York
      14591-0103
    
    Beneficial Owner
    
    92.5%Common
    
    Total for All Officers and
      Directors
    
    185,000
    
    92.5%




| | Changes
      in Control.
| | -------------------------

On January 25, 2005, a change in control of the
Registrant occurred. Fundamentally, Randolph S. Hudson entered into a common
stock purchase agreement, dated January 25, 2005 (that "Stock Purchase
Agreement"), with James W. Margulies of Pepper Pike, Ohio. 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 under a certain
promissory note, of even date with that Stock Purchase Agreement (that "Note").
In addition, Mr. Hudson

- 19
-

---

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.

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.

Following Mr. Hudson's purchase of the
Registrant's Common Stock, Mr. Margulies retained 15,000 shares, or
approximately 7.499%, 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 the
Pledge Agreement 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.



|e.
      Independent Public Accountants.
|----------------------------------------

Although no solicitation was made by any party,
certain shareholder actions were performed by the written consent of the less
unanimous vote of the Registrant's shareholders (the "Shareholder Actions") on
May 10, 2005 to ratify the unanimous resolution of the Registrant's Board of
Directors, which acted by unanimous written consent on April 6, 2005; whereby
the Shareholder Actions, the Registrant elected and appointed Michael T. Studer
CPA, P.C. of Freeport, New York ("Studer") to serve as the Registrant's Public
Company Accounting Oversight Board ("PCAOB") qualified certifying accountant.
The appointment of Studer shall remain effective until it is voluntarily or
involuntarily terminated, until it resigns, unless it does

- 20
-

---

not stand
for reelection if called to do so, or by operation of law. (A facsimile of the
Studer Engagement Letter is attached as an exhibit hereto.)

Prior to the appointment of Studer, the Registrant
utilized the services of Berger Apple & Associates, Ltd. of Beachwood, Ohio,
although, the Registrant's sole director prior to Mr. Hudson's election,
nominated Liebman, Goldberg & Drogin LLC to serve as the Registrant's
certifying accountant. On or about July 2, 2004, then the Registrant's sole
Director, James W. Margulies, adopted a corporate action by written consent in
lieu of a meeting; whereby, Mr. Margulies caused the Registrant to engage the
firm of Liebman Goldberg & Drogin LLP as the Registrant's independent
auditors, to have become effective on July 2, 2004. The reason for this action
was brought about by the fact that Berger Apple was not PCAOB-qualified, and, on
or about July 2, 2004, the Registrant notified the Commission on Form 8-K that
Berger Apple resigned because it was not a PCAOB-qualified auditor.
Subsequently, Berger Apple notified the Commission in a letter dated July 6,
2004 of certain facts relative to its resignation. (A representative copy of
that letter is attached as Exhibit 17.1 hereof.)

Mr. Margulies, the Registrant's former sole
director, was of the opinion that his action was necessary in that the
Registrant's existing (previous) certifying accountant, Berger Apple, was
dismissed because the firm was not registered in accordance with the Public
Company Accounting Oversight Board ("PCAOB"), the registration of which is
required by the Commission's rules and regulations, and, without selecting a
qualified replacement, the Registrant may have been hindered or prevented in its
pursuit of its business objectives by the Commission.

Berger Apple did not provide a report with respect
to the financial statements for the year ended December 31, 2003. However,
Berger Apple's report on the financial statements with respect to the period
from inception to September 30, 2003, filed with the Registrant's Registration
Statement on Form 10-SB, contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or accounting
principle. In addition, during the year ended December 31, 2003 and through July
2, 2004, there have been no disagreements with Berger Apple on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Berger Apple, would have caused it to make reference thereto in its report on
the financial statements for such year.

Subsequently, the Registrant's sole director, by
his action by written consent in lieu of a meeting, engaged Liebman Goldberg
& Drogin LLP as the Registrant's certifying accountant, which was to have
become effective on July 2, 2004. However, from the date of the Registrant's
formation and organization in September 2003 and during the subsequent interim
period prior to the engagement of Liebman Goldberg & Drogin LLP, the
Registrant did not consult with Liebman Goldberg & Drogin LLP on any matter
related to (i) the application of accounting principles to a specified
transaction, either completed or proposed, (ii) the type of audit opinion that
might be rendered on the Registrant's financial statements, or (iii) any matter
that was either the subject of a disagreement or a reportable event, and no
report or advice, either oral or written, was received by the Registrant from
Liebman Goldberg & Drogin LLP on any such matter.

On or about April 5, 2005, Randolph S. Hudson the
sole director serving on the Registrant's Board of Directors approved the
engagement of the accounting firm of Michael T. Studer, CPA, P.C., of Freeport,
New York to serve as the Registrant's certifying accountant ("Studer").
Subsequently, then the Registrant's principal shareholder, Mr. Hudson, performed
a corporate action, which was adopted by the written consent of the holders of
approximately 92.5% of the

- 21
-

---

Registrant's common voting equity securities; whereby, he appointed
Studer to serve as the Registrant's certifying accountant.

It was Mr. Hudson's understanding that the firm of
Liebman Goldberg & Drogin LLP, although previously appointed to serve as the
Registrant's certifying accountant, (i) never performed any work or services for
the Registrant, (ii) was not owed money by the Registrant for the performance of
any work or services, and (iii) was never formally engaged, as would customarily
be evident by the execution and delivery by the Registrant of an engagement
letter.

Therefore, Mr. Hudson, in reliance of his
examination of the information theretofore submitted to him for his review, did
not consider the firm of Liebman Goldberg & Drogin LLP to actually have been
engaged to serve as the Registrant's certifying accountant, as it did not
perform any work or services for the Registrant.

The Registrant has been delinquent in its
reporting obligations pursuant to section 13(a) of the Securities Exchange Act
of 1934 (the "Exchange Act"), however, in any event, as subsequent reports and
filings will demonstrate, the Registrant did not engage in any business
activities that otherwise would cause the Registrant to rely on any opinion, or
lack thereof, by Liebman Goldberg & Drogin LLP with respect to the
Registrant's statements of financial condition during the period of that firm's
conceptualized representation of the Registrant.

Based upon information and belief, and, after
reviewing all of the Registrant's records and other information available to the
senior executive management of the Registrant on the date this Report was
compiled and presented to the Commission and to the public, for the quarterly
period ended June 30, 2005, the Registrant responds to Item 9 of Schedule 14A,
as follows:



|Audit
      Fees.
|-----------------

During and for each of the two calendar years
prior to the date of this Report, no professional service fees were billed by
the Registrant's principal accountancy firm for any services rendered to the
Registrant in regard to the review or auditing of any financial or financially
related information submitted by the Registrant from the date of the
Registrant's inception to-date. The Registrant's then certifying accountant
(Berger Apple) elected to not bill the Registrant for its professional services,
due to the principal fact the Registrant was a start-up "blank check" company
with no assets, no then current income, and no immediate prospect for
income.



|Audit-Related Fees.
|-------------------

During and for each of the two calendar years
prior to the date of this Report, the Registrant has not been billed for
assurance and related services by the Registrant's principal certifying
accountant (Berger Apple) related to the performance of the audit or review of
the Registrant's financial information.



|Tax
      Fees.
|---------------

During and for each of the two calendar years
prior to the date of this Report, the Registrant has not been billed for
professional services rendered by the Registrant's principal certifying
accountant (Berger Apple) for tax compliance, tax advice, or tax
planning.



|All Other
      Fees.
|---------------------

- 22
-

---

During and for each of the two calendar years
prior to the date of this Report, the Registrant has not been billed for any
products or services rendered by the Registrant's principal certifying
accountant (Berger Apple).



|Audit
      Committee Policies.
|-------------------------------

As at December 31, 2004, the Registrant did not
establish a formal audit committee; moreover, there was no other body
established by the Registrant's Board of Directors or senior executive
management to give pre-approvals or to, otherwise, establish policies and
procedures related to the subject matter of the types described in paragraph
(c)(7)(i) of Rule 2-01 of Regulation S-X.

However, Randolph S. Hudson, the Registrant's
principal shareholder after January 25, 2005, did establish an audit committee.
The audit committee's sole member is Mr. Hudson, who also serves as the
Registrant's sole officer and director. Consequently, as the result of the
recent establishment (that being during the first calendar quarter of 2005) of
the audit committee, the Audit Committee had no meetings during the last
calendar year.

The principal function of the Audit Committee is
to make certain that all of the Registrant's financial records are accurate,
true, and complete, prior to the release of the Registrant's financial
information to its PCAOB-certified general accountant and PCAOB-certified
certifying accountant. In addition, the Audit Committee is responsible for
making certain that the Registrant maintains adequate controls for the
administration of all of the Registrant's financial books and records, including
the entries for all material and non-material financial and financially related
transactions of the Registrant.

For the period covered by this Report, the Audit
Committee has not reviewed and discussed the audited financial statements with
the Registrant's senior executive management, because during this period there
were no audited statements of financial condition to review; the Audit Committee
has not discussed the matters required to be discussed by SAS 61 with its
certifying accountant; the Audit Committee has received the written disclosures
and the letter from its certifying accountant required by the Independence
Standards Board Standard No. 1, however, it has received such written
disclosures and the letter on a later date (because the Registrant changed its
certifying accountant and because the Registrant prepared its reviewed
statements of financial condition for the period covered by this Report on a
date beyond this period); and, lastly, although on a later date (because the
Registrant changed its certifying accountant and because the Registrant prepared
its reviewed statements of financial condition for the period covered by this
Report on a date beyond this period), the Audit Committee recommended to the
Board of Directors that the reviewed statements of financial condition be
included in the Registrant's quarterly report for the period ended June 30, 2005
and that the audited statements of financial condition be included in the
Registrant's annual report on Form 10-KSB for the calendar year ended December
31, 2004.

The Audit Committee is comprised of Randolph S.
Hudson, who also serves as the Registrant's sole director and sole
officer.

As of the date and for the period covered by this
Report, the Audit Committee does not have a written charter.

Because Mr. Hudson is the Registrant's sole
officer and director, he is not independent; and, the Registrant, within the
nine-month period following the date of this Report, intends to
appoint

- 23
-

---

an
independent person to serve on the Registrant's Audit Committee or on the
Registrant's Board of Directors, until such date the Registrant is prepared to
effect either a business combination, asset acquisition, or stock purchase
transaction. It is the determination of the Registrant's Board of Directors,
chiefly, because of the Registrant's extremely limited financial resources, that
it would be difficult to engage a person or persons who would be capable of
performing such functions, independent of their ownership in the Registrant,
without the Registrant's capability to properly compensate any such person or
persons.

It is important for the Registrant to state, for
the two calendar years preceding the date of this Report, had this Report been
timely filed, the Registrant did not pay any fees related to its accounting or
to audit its statements of financial condition; however, the Registrant, on a
later date, did compensate its newly elected certifying accountant the sum of
$2,000 to prepare the Registrant's audited reports for the two calendar years
preceding the date on the cover of this Report, although outside of the
periphery of the information required to be submitted in and covered by this
Report, had this Report been filed in a timely manner. Consequently, for the two
calendar years prior to the date on the cover of this Report, the applicability
of the apportionment of services described in each of items 9(e)(2) through
9(e)(4) of Schedule 14A is not applicable.

Allocation of Time to Registrant's Accounting by Accountants and
Non-Accountants.

During the Registrant's most recent calendar year,
its principal certifying accountant (Studer) has expended significantly more
time to perform audit and/or review services than has any officer, director, or
consultant to the Registrant; therefore, less than 50% of all allocated time (a)
to cause to prepare or (b) to actually audit and/or review the Registrant's
financial condition was expended by a person or persons other than by the
Registrant's principal certifying accountant.

f.
Mergers, Consolidations, Acquisitions, and Similar Matters.

On April 6, 2005, the Registrant's Board of
Directors acted by written consent by less than the unanimous vote of
shareholders to approve a merger and/or share exchange between the Registrant
and Mercosur Telephone & Telegraph Co., Inc., a Delaware corporation
("Mercosur"). Subsequently, on May 10, 2005, the Registrant's shareholders,
acting by written consent by the less than unanimous vote of shareholders in
lieu of a meeting ratified the Board of Directors' prior actions, one of which
was to approve a merger and/or share exchange between the Registrant and
Mercosur.

Originally, the Registrant's sole officer and
director purchased approximately 90.6% of the common stock of Mercosur as an
investment and later thought his purchase of the Mercosur stock, and of his
control-in-supermajority of Mercosur, would be better utilized as a vehicle by
which the Registrant could quicken its ongoing business development. It was Mr.
Hudson's intent to cause the Registrant to enter into a merger and/or share
exchange transaction with Mercosur. Thus, Mr. Hudson conducted the Shareholder
Actions, whereby Mr. Hudson, acting as the Registrant's principal shareholder,
ratified the Board of Directors' actions, one of which was to approve the merger
and/or share exchange between the Registrant and Mercosur.

However, after a more careful inspection of
Mercosur's plan of operations, and, after Mercosur's former principal
shareholder, Financial Technology Research Corporation of Colorado ("Fintek"),
defaulted under its agreement with Mr. Hudson, and which was subsequently
rescinded, the Registrant did not consummate the merger and/or share exchange
with Mercosur.

- 24
-

---



|Consequently, as the merger and/or share exchange transaction
      was approved by theRegistrant's Board of Directors and shareholders but never
      consummated, no response to theinformation requested by Item 14 of Schedule
      14A is required to be submitted by the Registranthereunder.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

g. Other
Proposed Action.

(1) Appointment of Stock Transfer
Agent.

On April 6, 2005, the Registrant's Board of
Directors acted by written consent by less than the unanimous vote of
shareholders to nominate and appoint a stock transfer agent to serve the
Registrant. Subsequently, on May 10, 2005, the Registrant's shareholders, acting
by written consent by the less than unanimous vote of shareholders in lieu of a
meeting ratified the Board of Directors' prior action and approved the
appointment of an initial stock transfer agent to serve the
Registrant.

Originally, the Registrant's Board of Directors
had considered National Stock Transfer, Inc. of Salt Lake City, Utah
("National"). However, without passing on the merits of National's attributes or
faults, after a close inspection of National's history, affiliation with other
companies similarly situated to the Registrant, and of National's overall
prominence within the shareholder services and/or stock transfer industry, it
was the decision of the Registrant's sole officer and director on June 26, 2005,
to not appoint National to serve as the Registrant's stock transfer agent. (A
facsimile of the Registrant's notification to involuntarily terminate the
services of National is attached hereto as Exhibit 10.1 and made a part hereof
by reference thereto.) The Registrant permitted National to comment on the
Registrant's actions; however, as of actual date this Report was filed with the
Commission, the Registrant is not in receipt of any reply from National in this
regard.)

Subsequently, the Registrant engaged the series of
Olde Monmouth Stock Transfer Co., Inc. of Atlantic Highlands, New Jersey to
serve as the Registrant's stock transfer agent and/or shareholder services
company. The Registrant relied on the prior actions by written consent of its
Board of Directors and on the prior Shareholder Actions to elect and appoint
Olde Monmouth to serve as the Registrant's stock transfer agent.



|h. Voting
      Procedures.
|---------------------------

The authorized Shareholder Actions required the
approval of a certain percentage of the holders of the Registrant's common
stock, respectively, in order to become effective.



| | 1) The
      General Corporation Law of Delaware requires that majority of shareholder
      voteseligible to be cast in any election is required and
      constitutes a quorum for the purpose ofpassing the measures in regard to the items
      upon which the shareholders acted (8 Del. C.§ 216(1). Mr. Hudson's percentage
      ownership in the Registrant constituted a plurality ofeligible votes cast by
      written consent in favor of these
proposals.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

i.
Delivery of Documents to Security Holders Sharing an Address.

The Registrant will be delivering a copy of this
Report to two shareholders who share the same address, James W. Margulies and
Tom Daniels.

- 25
-

---

The Registrant will mail two letters, addressed
and delivered to each shareholder separately to each shareholder named above in
regard to that certain shareholder letter.

This Report and the information contained herein
and required by Schedule 14A and/or Schedule 14C indicates that shareholders may
request additional information from the Registrant by mail, which should be
addressed to its executive office, to its mailing address, or, electronically,
to its e-mail address.

The Registrant is providing its address and
telephone number in this Report, in order for the shareholders to be able to
contact or otherwise communicate with the Registrant independent of one
another.

This Report provides information on how each of
the aforementioned shareholders, who share an address, may obtain further
information from the Commission with respect to the Registrant's required
filings therewith.

4.2.
STATEMENT THAT PROXIES WERE NOT SOLICITED.

The following statement appears prominently in
this Report that is being mailed to the Registrant's shareholders:

"THE
COMPANY IS NOT ASKING FOR YOUR PROXY STATEMENT OR WRITTEN CONSENT AND YOU ARE
NOT REQUESTED TO SEND THE COMPANY A PROXY STATEMENT OR WRITTEN
CONSENT."

|4.3. | INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE
      ACTED UPON.
|---- | -------------------------------------------------------------------------------
|    

There existed a direct substantial interest by
Randolph S. Hudson, by his ownership of approximately 92.5% of the Registrant's
common voting equity securities, in the matter that was acted upon by the
Shareholder Actions, which were effected by the written consent of less than the
unanimous approval of the Registrant's shareholders.

Mr. Hudson was the principal shareholder of
Mercosur Telephone & Telegraph Co., Inc. ("Mercosur") and is the principal
shareholder of the Registrant, when he acted by written consent by less than the
unanimous vote of shareholders in lieu of a meeting; whereby, Mr. Hudson
approved the merger and/or share exchange between Mercosur and the
Registrant.



|4.4.
      PROPOSALS BY SECURITY HOLDERS.
|-----------------------------------------

No security holders submitted a written proposal
to the Registrant prior to the corporate actions taken by the principal
shareholder of the Registrant by written consent in lieu of a meeting on any
matter, specifically, on the corporate actions subject hereof.

4.5.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS.

The Registrant will be delivering the required
notification to shareholders, in the form a facsimile of this Report, to two
shareholders who share the same address, James W. Margulies and Tom
Daniels.

- 26
-

---

In pursuance of the rules set forth in Regulation
14A, and although delinquent, the Registrant will mail two notifications on
March 16, 2006, addressed and delivered to each shareholder under separate cover
to each shareholder named above, to provide them with the information of the
Shareholder Actions that took place on May 10, 2005, and which are more fully
described elsewhere in this Report.

The Registrant will provide its address and
telephone number on that certain notification, in order for the shareholders to
be able to contact or otherwise communicate with the Registrant independent of
one another.

That certain notification that will be provided to
the shareholders will contain information on the method by which each of the
aforementioned shareholders may obtain further information from the Registrant
and from the Commission with respect to the Registrant's filings.

The Registrant is subject to the reporting
requirements of section 13(a) 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 electronic address
for which iswww.sec.gov.

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 pertaining to information to security holders integrated
in this Report, to the extent the Registrant possesses such information or to
the extent the Registrant can acquire such information without 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, tocartooninvestors@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, which is first written on the cover hereof. (The
Registrant cannot assure the public that its electronic mail (e-mail) address
will remain active or available for any period subsequent to the filing date of
this Report.)



|Item
      5. Other Information
|-------------------------------

Some of the statements made in Item 5 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.

- 27
-

---

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.

|5.1. | NOTIFICATION OF PROSPECTIVE RISKS TO SHAREHOLDERS OF THE
      REGISTRANT.
|---- | --------------------------------------------------------------------------
|    
|     | A.                                                                        
|    
|     | B.                                                                        
|    
|     | C.                                                                        
|    
|     |                                                                           
|    
|     |                                                                           
|    
|5.2. | Entry into a Material Definitive Agreement.                               
|    
|     | A.                                                                        
|    

- 28
-

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The information provided in this Item 5.2(A) of
Section 5 of this Report is being provided in response to 1.02 of Form 8-K, as
follows:

Background. On or about May 14, 2005, the Registrant's sole officer
and director determined the Registrant required the services of a qualified and
licensed stock transfer agent and/or shareholder services company. Although this
concern was scheduled to be addressed on a later date, because the Registrant
was expecting to consummate a merger and/or share exchange transaction with
Mercosur Telephone & Telegraph Co., Inc., the Registrant's sole officer and
director, Randolph S. Hudson, determined that it would best serve the interests
of the Registrant to retain a qualified stock transfer agent in order to process
and administer the exchange of what then would be certificates that would have
been required to be issued to approximately 200 stockholders, which resulted
from the prospective combination between the Registrant and Mercosur.

Overview
of Transaction. On or about May 14, 2005, the Registrant delivered an
application and certain information pertaining to the Registrant's shareholders
to National, for National serving as the Registrant's stock transfer agent
and/or shareholder services company. Certain aspects of the information the
Registrant provided to National was non-public in nature; specifically, its list
of shareholders. Otherwise, the agreement between the Registrant and National
required the Registrant to pay National, in arrears, for services generally
recognized as stock transfer and/or shareholder services,i.e.,the issuance of delivery of stock
certificates to shareholders, the maintenance of the Registrant's stock transfer
ledger, and other issues related to the notification of certain shareholder
issues to be delivered to the Registrant's shareholders at the request and
direction of the Registrant's Board of Directors.

Associated Risks. There were two risks associated with the
Registrant's entry into a material contract with National, both of which were to
the Registrant. The first risk was that of the Registrant's capability to pay
National for its services; whereby, if the Registrant was incapable or otherwise
unable to remit all or a portion of its account in a manner satisfactory to
National, National may have withdrawn its services on the Registrant's behalf,
or may have delayed or prolonged the required issuance or exchange of the
Registrant's securities. Secondly, if National was to be engaged in a
controversy with either the Commission or other body regulatory, and such
controversy was in regard to the integrity of National and the services it
offered to public companies, such controversy may have hindered or delayed
National's capability or ability to issue, transfer, or exchange the
Registrant's securities.

Creation
of Direct Financial Obligation. By engaging National, the Registrant was subject
to a direct financial obligation, whereby it would have been billed for monthly
and "per-item" services by National following the dates on which National
provided its services to the Registrant.



|B. Olde
      Monmouth Stock Transfer Co., Inc.
|-----------------------------------------------

The information provided in this Item 5.2(B) of
Section 5 of this Report is being provided in response to 1.02 of Form 8-K, as
follows:

Background. On or about June 25, 2005, the Registrant's sole
officer and director determined the Registrant required the services of a
qualified and licensed stock transfer agent and/or shareholder services company.
This concern was scheduled to be addressed on a previous date, because the
Registrant was expecting to consummate a merger and/or share exchange
transaction with Mercosur Telephone & Telegraph Co., Inc. ("Mercosur"), and,
in pursuance of that transaction, which was later rescinded by Mr. Hudson and,
consequently, by the Registrant, the Registrant

- 29
-

---

previously entered into a service agreement with National Stock
Transfer, Inc., of Salt Lake City, Utah ("National"). However, as at June 25,
2005, the Registrant's sole officer and director, Randolph S. Hudson, without
passing on the merits of National's attributes or faults, determined that it
would not best serve the interests of the Registrant to retain National, and,
therefore, nominated Olde Monmouth Stock Transfer Co., Inc. of Atlantic
Highlands, New Jersey ("Olde Monmouth") to serve as the Registrant's stock
transfer agent and/or shareholder services company, to serve in that position
until its voluntary or involuntary termination or until it no longer served the
Registrant by operation of law.

Overview
of Transaction. On or about June 25, 2005, the Registrant delivered an
application and certain information pertaining to the Registrant's shareholders
to Olde Monmouth, for the purpose of National serving as the Registrant's stock
transfer agent and/ort shareholder services company. Certain aspects of the
information the Registrant provided to Olde Monmouth was non-public in nature;
specifically, its list of shareholders. Otherwise, the agreement between the
Registrant and Olde Monmouth required the Registrant to pay Olde Monmouth, in
arrears, for services generally recognized as stock transfer and/or shareholder
services,i.e.,the issuance of delivery of stock certificates to shareholders,
the maintenance of the Registrant's stock transfer ledger, and other issues
related to the notification of certain shareholder issues to be delivered to the
Registrant's shareholders at the request and direction of the Registrant's Board
of Directors.

Associated Risks. There are two risks associated with the
Registrant's entry into a material contract with Olde Monmouth, both of which
were to the Registrant's capabilities and performance. The first risk was that
of the Registrant's capability to pay Olde Monmouth for its services, as the
Registrant was experiencing continued cash-flow difficulties and lacked the
necessary capital or credit accommodations to continue its ongoing business
development; whereby, if the Registrant was incapable or otherwise unable to
remit all or a portion of its account in a manner satisfactory to Olde Monmouth,
Olde Monmouth might withdraw its services on the Registrant's behalf, or Olde
Monmouth may have delayed or prolonged the required issuance or exchange of the
Registrant's securities in a manner timely required by the Commission's rules or
regulations or by the rules and regulations of the National Association of
Securities dealers ("NASD"). Secondly, if Olde Monmouth was to become engaged in
a controversy with either the Commission or other body regulatory, and such
controversy was in regard to the integrity of Olde Monmouth's formation,
organization, or the conduct of its business activities (in regard to their
services to public companies), such controversy may hinder or delay Olde
Monmouth's capability or ability to issue, transfer, or exchange the
Registrant's securities.

Creation
of Direct Financial Obligation. By engaging Olde Monmouth, the Registrant is
subject to a direct financial obligation, whereby it is being billed for monthly
and "per-item" services by Olde Monmouth following the dates on which Olde
Monmouth will provide its services to the Registrant.



|C. Roy C.
      Hopkins' Finder's Agreement.
|--------------------------------------------

The information provided in this Item 5.2(C) of
Section 5 of this Report is being provided in response to 1.01 of Form 8-K, as
follows:

Background. On May 1, 2005, the Registrant entered into a finder's
agreement with Roy C. Hopkins of Rochester, New York; whereby, Mr. Hopkins's
services were engaged to assist the Registrant to locate and identify suitable
qualified business combination candidates or qualified candidates, the assets of
which the Registrant could acquire.

- 30
-

---

Overview
of Transaction. In addition to standardized terms and provisions, the finder's
agreement between the Registrant and Mr. Hopkins provided the Registrant would
compensate Mr. Hopkins a commission in various amounts, depending on the
aggregate value of any transaction that Mr. Hopkins introduced to the Registrant
and that the Registrant consummated. The percentages of Mr. Hopkins'
entitlements respective to the aggregate value of any transaction the Registrant
successfully consummated are as follows: (a) 2.5% (two and one-half of one
percent) of all or part of the first $250,000.00 of aggregate consideration; (b)
2% (two percent) of all or part of the next $500,000.00 of aggregate
consideration; (c) 1.5% (one and one-half of one percent) of all or part of the
next $250,000.00 of aggregate consideration; and (d) 1% (one percent) of all or
part of the remainder, or remaining balance, of the aggregate consideration.
Furthermore, Mr. Hopkins was entitled to receive his commission in cash or in
the securities of the Registrant, at his discretion. In any event, if the
Registrant does not satisfactorily consummate any transaction that is introduced
by Mr. Hopkins prior to December 31, 2005, then, and in such case, (a) the
finder's agreement between Mr. Hopkins and the Registrant will expire upon its
own terms and (b) the Registrant will owe Mr. Hopkins a "best-efforts" fee in
the amount of $5,000. (A facsimile of that certain finder's agreement between
the Registrant and Mr. Hopkins is annexed as Exhibit 10.2 hereof.)

Associated Risks. The Registrant is not able to identify any risks
associated with the transaction between the Registrant and Mr. Hopkins, with the
exception of the risk of prospective litigation, in the event the Registrant is
incapable or otherwise unable to properly compensate Mr. Hopkins in accordance
with the terms of that certain finder's agreement dated May 1, 2005.

Creation
of Direct Financial Obligation. The Registrant will incur a direct financial
obligation under the Hopkins' transaction in one of two ways: firstly, if the
Registrant consummates a business combination or acquires an asset that was
introduced to the Registrant by Mr. Hopkins, the Registrant will, within a
limited period of time, owe Mr. Hopkins a respective percentage, payable in cash
or in stock of the Registrant, of the aggregate value of the respective
transaction; secondly, if the Registrant does not conclude a transaction with a
qualified party to whom or to which Mr. Hopkins introduced the Registrant by
December 31, 2005, the Registrant will owe Mr. Hopkins the sum of $5,000,
without any further obligation on the part of the Registrant to Mr. Hopkins in
this regard.



|5.3.
      Termination of a Material Definitive
Agreement.
|----------------------------------------------------------

The responses provided under the various
subsections of this Item 5.3 of Section 5 of this Report are being provided to
serve as the respective responses to Item 1.02 of Form 8-K, a report of which
was to have been filed by the Registrant during the quarterly period being
reported hereunder and required to be included as a part of this Report, as
follows:



| | A.
      National Stock Transfer, Inc.
| | --------------------------------------

On or about May 14, 2005, the Registrant's sole
officer and director determined the Registrant required the services of a
qualified and licensed stock transfer agent and/or shareholder services company.
Although this concern was scheduled to be addressed on a later date, because the
Registrant was expecting to consummate a merger and/or share exchange
transaction with Mercosur Telephone & Telegraph Co., Inc., the Registrant's
sole officer and director, Randolph S. Hudson, determined that it would best
serve the interests of the Registrant to retain a qualified stock transfer agent
in order to process and administer the exchange of what then would be
certificates that would have been required to be issued to approximately 200
stockholders, which resulted from the prospective combination between the
Registrant and Mercosur. On or about

- 31
-

---

May 14,
2005, the Registrant delivered an application and certain information pertaining
to the Registrant's shareholders to National, for the purpose of National
serving as the Registrant's stock transfer agent and/ort shareholder services
company. Certain aspects of the information the Registrant provided to National
was non-public in nature; specifically, its list of shareholders. Otherwise, the
agreement between the Registrant and National required the Registrant to pay
National, in arrears, for services generally recognized as stock transfer and/or
shareholder services,i.e.,the issuance of delivery of stock certificates to shareholders,
the maintenance of the Registrant's stock transfer ledger, and other issues
related to the notification of certain shareholder issues to be delivered to the
Registrant's shareholders at the request and direction of the Registrant's Board
of Directors. By engaging National, the Registrant was subject to a direct
financial obligation, whereby it would have been billed for monthly and
"per-item" services by National following the dates on which National provided
its services to the Registrant.

After some weeks of reviewing National's
due-diligence information, and without passing on the merits of Nationals'
attributes or faults, it was the decision of the Registrant's sole officer and
director that the Registrant discontinue and terminate National's services with
the Registrant. To that extent, the Registrant's sole officer and director,
under cover of his personal letterhead, delivered a notice to National's offices
in Salt Lake City, Utah, whereby he informed National of his decision to
terminate or to otherwise discontinue National's engagement by the Registrant.
(A facsimile of that letter is annexed as Exhibit 10.1 hereof.)

Prospective Litigation. As the result of the decision by the
Registrant's sole officer and director to terminate or to otherwise discontinue
National's representation of the Registrant as its stock transfer agent and/or
shareholder services provider, the Registrant, and the Registrant's sole officer
and director, may be subject to litigation; whereby, (a) National may threaten
or commence legal action against the Registrant and/or the Registrant's sole
officer and director for failure to satisfactorily perform under the terms of
National's stock transfer agreement, or (b) Precious Investments, LLC, a Utah
limited liability company ("Precious"), which offered to compensate National on
the Registrant's behalf, may be required to compensate National, in which case,
Precious may threaten or commence legal proceedings against the Registrant in
order to recover any such payments required by it to be made to
National.

As of theactualfiling date hereof, the Registrant has received no
notice from National or from Precious as to any statement of account that
reflects a balance owing to National, and, the Registrant has received no notice
from National or Precious as to the threat or commencement of any litigation
against it by either National or Precious.

Termination of Direct Financial Obligation. As of June 26, 2005,
with the exception of a contingent liability for any prospective litigation that
may be threatened or commenced against the Registrant by National or by Precious
and discussed hereinabove, the Registrant's sole officer and director deem that
there was no further direct financial obligation on the part of the Registrant
to National or to Precious with regard to this former liability.

5.4.
Material Modification to Rights of Security Holders.

Ordinarily, the rights of security holders would
be modified in the event of a merger and/or share exchange transaction that was
approved by the Registrant's shareholders. However, although the Registrant's
shareholders did approve a merger and/or share exchange between the Registrant
and Mercosur Telephone & Telegraph Co., Inc. ("Mercosur"), the Registrant
did not consummate the transaction; therefore the rights of the Registrant's
security holders remain unchanged from those stated in prior reports.

- 32
-

---



|5.5.
      Changes in Registrant's Certifying
Accountant.
|---------------------------------------------------------

The responses provided under the various
subsections of this Item 5.5 of Section 5 of this Report are being provided to
serve as the respective responses to Item 1.02 of Form 8-K, one or more
submissions of which were required to have been filed but not by the Registrant
during the quarterly period being reported hereunder. Consequently, the
Registrant is including this information as a part of this Report in accordance
with the Commission's rules and regulations, as follows:



| | A.
      Election of Studer.
| | ----------------------------

Certain shareholder actions were performed by the
written consent of the less unanimous vote of the Registrant's shareholders (the
"Shareholder Actions") on May 10, 2005 to ratify the unanimous resolution of the
Registrant's Board of Directors, which acted by written consent on April 6,
2005; whereby, by the Shareholder Actions, the Registrant elected and appointed
Michael T. Studer CPA, P.C. of Freeport, New York ("Studer") to serve as the
Registrant's Public Company Accounting Oversight Board ("PCAOB") qualified
certifying accountant. The appointment of Studer shall remain effective until it
is voluntarily or involuntarily terminated, until it resigns, unless it does not
stand for reelection if called to do so, or by operation of law. (A facsimile of
the Studer Engagement Letter is attached as an exhibit hereto.)

Prior to the appointment of Studer, the
Registrant's previous certifying accountant, the firm of which actually
performed work or services for the Registrant, was Berger Apple &
Associates, Ltd. of Beachwood, Ohio. (It should be noted the Registrant's
previous sole director, James W. Margulies, nominated Liebman, Goldberg &
Drogin LLC ("Liebman Goldberg") to serve as the Registrant's certifying
accountant, and, although such engagement was authorized by the required
shareholder actions and reported to the Commission on a Form 8-K Current Report,
the Registrant never formally elected and appointed Liebman Goldberg to serve as
the Registrant's certifying accountant, and Liebman Goldberg never performed any
work or services for the Registrant.

The principal reason for the nomination, election,
and appointment of Studer, was by the fact that Berger Apple was not
PCAOB-qualified, and, on or about July 2, 2004, the Registrant notified the
Commission on Form 8-K that Berger Apple resigned because it was not a
PCAOB-qualified auditor. Subsequently, Berger Apple notified the Commission in a
letter dated July 6, 2004 whereunder it informed the Commission of certain facts
relative to its resignation. (A representative copy of that letter is attached
as Exhibit 17.1 hereof.)

Berger Apple did not provide a report with respect
to the financial statements for the year ended December 31, 2003. However,
Berger Apple's report on the financial statements with respect to the period
from inception to September 30, 2003, filed with the Registrant's Registration
Statement on Form 10-SB, contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or accounting
principle. In addition, during the year ended December 31, 2003 and through July
2, 2004, there have been no disagreements with Berger Apple on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Berger Apple, would have caused it to make reference thereto in its report on
the financial statements for such year.



| | B.
      Resignation of Berger Apple.
| | -------------------------------------

- 33
-

---

On or about July 6, 2004, the firm of Berger Apple
& Associates, Ltd. of Beachwood, Ohio ("Berger Apple") delivered its
resignation to the Registrant and, subsequently on or about that date, delivered
a letter to the Commission, whereby it informed the Commission that Berger Apple
agreed with the statements made by the Registrant in that certain Form 8-K
Current Report, which the Registrant filed with Commission on or about July 2,
2004, and whereby it informed the Commission that there was no basis to agree or
disagree with certain statements made by the Registrant in that Form 8-K. (A
copy of this initial resignation by Berger Apple to the Commission is contained
as Exhibit 17.1 hereof.)

The principal reason for Berger Apple's
termination, was by the fact Berger Apple was not PCAOB-certified, the
qualification of which by a certifying accountant is requirement of the
Commission's rules and regulations respective to public company certifying
accountants.

Following a change in control of the Registrant,
the Registrant's newly elected senior executive officer, Randolph S. Hudson,
who, at the time, was unfamiliar with the prior actions of the Registrant's
former shareholder, requested a letter of resignation from Berger Apple, so that
he may engage a new certifying accountant to serve the Registrant. Consequently,
on or about June 15, 2005, Berger Apple delivered a different letter of
resignation, which states it became effective on January 1, 2004. (A copy of
that (conflicting) letter of resignation is contained as Exhibit 17.2
hereof.)

In any event, Berger Apple did not perform any
work or services for the Registrant from the date it prepared the Registrant's
audit, which was included in its Form 10-SB Registration Statement.

|5.6. | Other Events.                                                                               
|---- | --------------------------------------------------------------------------------------------
|    
|     | A.
      Conflicting Accounts of the Registrant's Certifying Accountant's
      Resignation.
|    

On or about April 5, 2005, the Registrant's Board
of Directors approved the engagement of the accounting firm of Michael T.
Studer, C. P. A., of Freeport, New York to serve as the Registrant's certifying
accountant ("Studer"). Subsequently, the Registrant's principal shareholder
performed a corporate action, which was adopted by the written consent of the
holders of approximately 92.5% of the Registrant's common voting equity
securities; whereby, he appointed Studer to serve as the Registrant's certifying
accountant.

It was the understanding of the Registrant's
principal shareholder, who acquired approximately 92.5% of the Registrant's
common voting equity securities in a private securities transaction (which was
heretofore reported on Schedule 13D and on Form 8-K), that the firm of Liebman
Goldberg & Drogin LLP, albeit appointed to serve as the Registrant's
certifying accountant, (i) never performed any work or services for the
Registrant, (ii) was not owed money by the Registrant for the performance of any
work or services, and (iii) was never formally engaged, as would customarily be
evident by the execution and delivery by the Registrant of an engagement
letter.

Therefore, the Registrant's new principal
shareholder from January 25, 2005, Randolph S. Hudson, who also serves the
Registrant as its sole director, in reliance of his examination of the
information theretofore submitted to him for his review, did not consider the
firm of Liebman Goldberg & Drogin LLP to actually have been engaged to serve
as the Registrant's certifying accountant, as it did not perform any work or
services for the Registrant.

- 34
-

---

The Registrant has been delinquent in its
reporting obligations pursuant to section 13(a) of the Securities Exchange Act
of 1934 (the "Exchange Act"), however, in any event, as subsequent reports and
filings will demonstrate, the Registrant did not engage in any business
activities that otherwise would cause the Registrant to rely on any opinion, or
lack thereof, by Liebman Goldberg & Drogin LLP with respect to the
Registrant's statements of financial condition during the period of that firm's
alleged representation of the Registrant.

The Registrant must inform the Commission and the
public: From the date when the Registrant's current principal shareholder,
Randolph S. Hudson, acquired approximately 92.5% of the Registrant's common
voting equity securities, Mr. Hudson's intention was and remains, among other
things, to organize the Registrant's business and affairs and to remedy the
Registrant's delinquent reporting obligations. In the process of accomplishing
his objectives (as were previously reported on Schedule 13D), which, in turn,
are the objectives of the Issuer, Mr. Hudson engaged Studer to perform the
Registrant's delinquent and current accounting reports. (This event was to have
been reported on a current report Form 8-K; however, the Registrant, as of the
date hereof, has not filed that report, but it expects to file that report
within 10 days from the date hereof.) In any case, it was Mr. Hudson's opinion
that no resignation letter was required from Liebman Goldberg & Drogin LLP,
because the firm did not actually perform any work or services for the
Registrant.

Moreover, as the result of Mr. Hudson's efforts on
behalf of the Registrant, with regard to remedying the Registrant's delinquent
reports (and subsequent to his acquisition of approximately 92.5% of the
Registrant's common stock), he was not in possession of the actual original
letter to the Registrant from Berger Apple. Consequently, Mr. Hudson requested
Berger Apple to provide the Registrant with (as it turns out, another) letter of
resignation. However, the letter (which is annexed as an exhibit hereto) states
that Berger Apple resigned as the Registrant's certifying accountant as of
January 1, 2004; thus, the information the Registration provided to the
Commission on Form 8-K, dated July 8, 2004, contradicts the new information
contained in the letter that the Registrant is providing herewith.

In conclusion, it is the opinion of the
Registrant's principal executive officer, this contradictory information is
attributable to (1) Berger Apple's not having performed any accountancy services
for the Registrant from the date of its registration statement on Form 10-SB,
(2) the Registrant's new principal executive officer did not have full and
complete original records of the Registrant from which to formulate his decision
by asking Berger Apple to deliver a copy of its original letter of resignation,
and (3) by the fact that Berger Apple - regardless of the actual date of its
resignation - perform any work or services for the Registrant from the date that
firm prepared the statements of financial condition which were delivered
together with the Registrant's Registration Statement on Form 10-SB.
Specifically, to that extent, although the Commission and the public may
perceive contradictory thoughts resulting from the irregularities associated
with the two Berger Apple letters of resignation discussed herein, from the
perspective of the principal executive officer of the Registrant, Berger Apple's
work for the Registrant was complete on September 30, 2003.

B.
Certain Relationships and Related Transactions.

During the period covered by this Report, the
Registrant determined that the following transactions could be deemed to cover
certain relationships, as that term and the related transactions, are defined in
Item 404 of Regulation S-B (17 CFR 228.404) . For the period of this Report, the
Registrant is not a subsidiary of any parent company, nor does the Registrant
own the stock in any company that may be considered its subsidiary.

- 35
-

---

|1. | On
      or about May 15, 2005, the Registrant borrowed $2,000 under a non-interest
      bearing promissory note from Heritage LTD LLC of Salt Lake City, Utah
      ("Heritage"), which is to become payable on or about July 29, 2005. The
      loan facility was granted to the Registrant, so the Registrant could
      retain its new certifying accountant, Michael T. Studer, CPA, P. C. of
      Freeport, New York. In addition, Heritage also introduced the Registrant's
      principal shareholder, sole officer, and sole director, Randolph S.
      Hudson, to Financial Technology Research Corporation of Colorado
      ("Fintek"), which sold Mr. Hudson a 90.6% interest in Mercosur Telephone
      & Telegraph Co., Inc. ("Mercosur"), and which is the subject of
      certain parts of this Report. (It should be noted: because Mr. Hudson
      rescinded the transaction with Fintek in regard to his purchase of shares
      in Mercosur, Heritage is not entitled to any fee or other compensation in
      this regard.) Separately from the Registrant, Heritage and the
      Registrant's principal shareholder, sole officer, and sole director, Mr.
      Hudson, are considering entering into a transaction, whereby Mr. Hudson,
      acting as the principal shareholder, sole officer, and sole director of
      another company that is subject to the reporting requirements of Section
      15(d) of the Securities Exchange Act of 1934, and which is named Montana
      Acquisition Corporation, on Montana's behalf, is deliberating the
      acquisition of what will be the acquisition of the principal asset of
      Montana from Heritage. Consequently, the Registrant deems these facts to
      comprise a certain relationship under the definition of that phrase set
      forth in Regulation S-B.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  

The Registrant does not deem Heritage, or each of
any of its managing members, to be promoters, as that term is defined in the
Commission's rules and regulations.

The terms of the transactions the Registrant
entered into with Heritage were on commercially reasonable terms, or terms more
favorable to the Registrant than commercially reasonable terms, however, the
Registrant's Board of Directors did not solicit competitive bids from any other
party with regard to the money loaned or to the introduction of any third party
to the Registrant by Heritage.

|2. | During the calendar second quarter of 2005, the Registrant
      utilized the services of Union First Capital Markets, a New York general
      partnership ("Union First"). The Registrant's principal shareholder, sole
      officer, and sole director, Randolph S. Hudson, as of the date of this
      Report, was a general partner of Union First, together with Roy C.
      Hopkins, the partnership's remaining general partner. Under that certain
      transaction with Union First, the Registrant is obligated to pay Union for
      its fees billed to the Registrant for services rendered, whereby Union
      First prepared, formatted, and transmitted certain of the Registrant's
      filings over the EDGAR system during March 2005. The Registrant's Board of
      Directors did not solicit competitive bids from any other individual or
      entity to prepare, format, and transmit such documents, however, the fee
      billed to the Registrant by Union First was competitive and represented
      commercially reasonable fees for such services by other non-related
      individuals or entities. In addition, the Registrant entered into a
      finder's agreement with Mr. Hopkins, whereunder that agreement Mr. Hopkins
      agreed to locate and identify suitable and qualified candidates that could
      enter into a business combination with the Registrant, or otherwise where
      the Registrant could purchase the qualified candidate's assets, in
      exchange for a commission to become payable to Mr. Hopkins by the
      Registrant. While the Registrant did not solicit competitive bids from any
      other party, the Registrant deems the transaction to be fair and the terms
      to be commercially reasonable in comparison to the terms of other
      individuals or entities that could have performed similar work or provided
      similar services to the Registrant.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  

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The Registrant does not deem Mr. Hopkins or Union
First to be promoters, as that term is defined in the Commission's rules and
regulations.

3. On or
about May 15, 2005, the Registrant entered into a contract with National Stock
Transfer, Inc., a Utah corporation ("National"); whereby, National was to
furnish the Registrant with stock transfer and/or shareholder services in
exchange for a fee to be paid to it by the Registrant. In the course of that
transaction, Precious Investments, LLC, a Utah limited liability company
("Precious") offered to pay a retainer to National, in order for National to
have provided its services to the Registrant. While the Registrant terminated
its agreement with National, it should be noted that a certain relationship
could exist between Precious and the Registrant in that Precious, although a
separate and distinct entity under the laws of the State of Utah that govern the
formation and organization of limited liability companies, is related by a
common marital community, by the fact that Precious' managing member is related
by marriage to the managing member of Heritage LTD LLC, a Utah limited liability
company ("Heritage"), which is subject to this item of this Report as a party
with which the Registrant has a certain relationship.

As of the date hereof, the Registrant has not
engaged in any other transaction with Precious, nor does the Registrant's
principal shareholder, sole officer, and sole director, Randolph S. Hudson,
anticipate that Precious and the Registrant will enter into any material
definitive agreements within the 12-month period following the date of this
Report.

Otherwise, during the two-year period prior to the
date of this Report the following transactions occurred, whereby, certain
relationships were considered to exist by the Registrant and that were reported
on one or more reports or schedules, which were previously submitted to the
Commission:

Although the Registrant has not and does not
intend to enter into any transactions with its senior executive management, or
nominees for such positions, it should be noted: for the calendar year ended
December 31, 2004, the Registrant utilized the offices of Margulies &
Levinson LLP, the law firm of which James W. Margulies, the Registrant's sole
officer and director, is the principal, as its executive office address. There
was no rent charged the Registrant by Margulies & Levinson for such
use.

Furthermore, Mr. Margulies 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 (other than the 200,000 shares of the Registrant's common stock
valued at $20); (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.

Although the Registrant has not and does not
intend to enter into any transactions with its senior executive management, or
nominees for such positions, it should be noted: for the quarterly period ended
June 30, 2005, the Registrant utilized the office of the Law Offices of Stephen
D. Rogoff, Esq., the law firm that represents Randolph S. Hudson, the
Registrant's principal stockholder, sole officer, and director, the use of which
is without charge or expense to the Registrant, provided, however, only for the
period that Mr. Hudson remains the principal shareholder of the
Registrant.

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The Registrant issued 200,000 restricted shares of
its common stock to James W. Margulies, its former President, Treasurer,
Secretary, and sole director for his services rendered in the formation and
organization of the Registrant, which was valued at $20. Other than this
transaction, the Registrant has not entered into transactions with any other
promoters.

Mr. Margulies originally acquired his shares with
the intent to hold the shares for investment purposes and not with a view to
further resale or distribution, except as permitted under exemptions from
registration requirements under applicable securities laws. That mean that he
would be unable to sell such securities either unless they are either registered
with the Commission and with comparable agencies in the state where he resides,
or that would be exempt from registration. The most widely used exemption from
registration requirements is provided by the Commission's Rule 144, which
requires a one year holding period prior to resale, and limits the quantities of
securities that can be sold during any 90-day period.

On or about January 25, 2005, Randolph S. Hudson
entered into a private securities transaction with James W. Margulies, the
Registrant's former principal shareholder, sole officer, and director, whereby,
Mr. Hudson purchased 185,000 shares, or approximately 92.5%, of the Registrant's
common stock. Initially, Mr. Hudson acquired his shares with the intent to hold
the shares for investment purposes and not with a view to further resale or
distribution, except as would be permitted under an exemption from registration
requirements under applicable securities laws. That means that he would be
unable to sell such securities either unless they are registered with the
Commission and with a comparable agency in the state where he resides, or that
such shares would be exempt from further registration. The most widely used
exemption from registration requirements is provided by the Commission's Rule
144, which requires a one year holding period prior to resale, and limits the
quantities of securities that can be sold during any 90-day period.

The Registrant's currently serving sole officer
and director, Mr. Hudson, is involved in other business activities and may, in
the future become involved in other business opportunities. If a specific
business opportunity becomes available, Mr. Hudson may face a conflict in
selecting between the Registrant and his other business interests, some of which
may be required to be performed for other reporting companies. The Registrant
has not formulated a policy for the resolution of such conflicts.

The Registrant is not aware of any other
transaction that could be deemed to comprise a certain relationship or related
transaction, as those phrases are defined in Item 404 of Regulation
S-B.



|Item
      6. Exhibits and Reports on Form
8-K.
|-----------------------------------------------

The Registrant considers the information in this
Report, and contained in each schedule and exhibit to be "filed" under the
definition associated with said term under the Securities Exchange Act of
1934.

In addition, the Commission and the public should
be aware the Registrant is incorporating certain of its other filings herein by
reference thereto; namely, the Registrant is incorporating its Form 10-QSB
Quarterly Report for the quarterly period ended September 30, 2004
herein.



|(a)
      Exhibits
|------------------

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The
following is a list of exhibits being filed with this Report.

|10.1 | (Involuntary) Letter of Termination to National Stock
      Transfer, Inc.                    
|---- | ----------------------------------------------------------------------------------------------
|    
|10.2 | Finder's Agreement between the Registrant and Roy C.
      Hopkins                            
|    
|13   | Form 10-QSB for Quarterly Period Ended September 30,
      2004                               
|    
|13.1 | Form 10-QSB 09/30/2004 Exhibit 99.1 Form 8-K Report dated
      July 2, 2004                  
|    
|13.2 | Form 10-QSB 09/30/2004 Exhibit 99.1.1 Form 8-K Exhibit 16.1
      Resignation Of Accountant   
|    
|13.3 | Form 10-QSB 09/30/2004 Exhibit 99.1(a) Form 8-K Exhibit
      Second Resignation of Accountant
|    
|13.4 | Form 10-QSB 09/30/2004 Exhibit 99.906 Chief Executive
      Officer's "906" Certification     
|    
|13.5 | Form 10-QSB 09/30/2004 Exhibit 99.CERT Certification by
      Principal Executive Officer     
|    
|13.6 | Form 10-QSB 09/30/2004 Exhibit 99.906 Chief Financial
      Officer's "906" Certification     
|    
|13.7 | Form 10-QSB 09/30/2004 Exhibit 99.CERT Certification by
      Principal Financial Officer     
|    
|16.1 | Engagement Letter of Michael T. Studer CPA, P.C.                                              
|    
|17.1 | Resignation of Berger Apple (CPA) dated July 6, 2004                                          
|    
|17.2 | (Conflicting) Resignation of Berger Apple (CPA) dated June
      15, 2005                     
|    
|31.1 | Principal Executive Officer's Rule 13a-14(a)/15d-14(a)
      Certification                    
|    
|31.2 | Principal Financial Officer's Rule 13a-14(a)/15d-14(a)
      Certification                    
|    
|32.1 | Chief Executive Officer's Rule 13a-14(b)/15d-14(b)
      Certification                        
|    
|32.2 | Chief Financial Officer's 13a-14(b)/15d-14(b)
      Certification                             
|    
|99.1 | Fintek-Hudson Stock Purchase Agreement                                                        
|    
|99.2 | Hudson's Pledge Agreement to Fintek                                                           
|    
|99.3 | Hudson's (Non-Negotiable Form of) Note to Fintek                                              
|    
|99.4 | Hudson's Rescission of Fintek-Hudson Stock Purchase
      Agreement                           
|    



|(b)
      Reports on Form 8-K.
|------------------------------

There were no reports filed on Form 8-K by the
Registrant during the period covered by this Report or on any other date for
events that occurred within the period covered by this Report.However, the Registrant is furnishing the
information on events that ordinarily would have had to be reported on Form 8-K
herein in accordance with the Commission's rules and regulations.

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|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 thereunto duly authorized.

Dated:
March 15, 2006 for the Quarterly Period Ended June 30, 2005.

By Order
of the Board of Directors:

****CARTOON ACQUISITION, INC.



RANDOLPH
S. HUDSONChief Executive OfficerChief Financial Officer

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