|UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549www.sec.gov
|--------------------------------------------------------------------------------



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

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



|For
      the Quarterly Period EndedSeptember 30, 2004
      ****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)




|Suite 90014 Franklin StreetRochester, New York 14604(Address of Principal Executive Offices)
      ( 585 ) 495-6907(Registrant's Telephone Number, including Area
      Code)
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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 Section12, 13 or15(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, 1 Share

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

---



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

Certain statements contained in this Quarterly Report 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 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 (applicable to non-asset-backed, small
business issuers), and, therefore, 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 senior executive management, 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 September 30, 2004 are not necessarily indicative of the
results that can be expected for the year ending December 31, 2004.



|CARTOON ACQUISITION, INC.(A Development Stage Company)Index to Financial
Statements
|-----------------------------------------------------------------------------------



|Page
|----

Financial Statements:Balance Sheets as of September 30, 2004(unaudited) and December 31, 2003
    
    F-2Statements of Operations for the threeand
      nine months ended September 30, 2004and
      for the period September 25, 2003(date of inception) to September 30, 2004(unaudited)
    
    F-3Statements of Cash Flows for the ninemonths ended September 30, 2004 andfor
      the period September 25, 2003(date of inception) to September 30, 2004(unaudited)
    
    F-4Notes to Financial Statements
    
    F-5


---

CARTOON ACQUISITION, INC.(A Development Stage Company)Balance SheetsDecemberSeptember 30,
    
    
    
    31,2004
    
    
    
    2003(Unaudited)AssetsCurrent
      assets:Cash and cash
      equivalents
    
    $
    
    -
    
    $
    
    -Prepaid
      expense
    
    
    
    170
    
    
    
    -Total current
      assets
    
    
    
    170
    
    
    
    -Other
      assets
    
    
    
    -
    
    
    
    -Total
      assets
    
    $
    
    170
    
    $
    
    -Liabilities and Stockholders'
      Equity(Deficiency)Current
      liabilities:Accounts payable
      and accrued expenses
    
    $
    
    38
    
    $
    
    60Total current
      liabilities
    
    
    
    38
    
    
    
    60Other
      liabilities
    
    
    
    -
    
    
    
    -Total
      liabilities
    
    
    
    38
    
    
    
    60Stockholders'
      equity (deficiency):Preferred stock,
      $.0001 par value; 20,000,000sharesauthorized, 0
      shares issued and outstanding
    
    
    
    -
    
    
    
    -Common stock,
      $.0001 par value; 100,000,000sharesauthorized,
      issued and outstanding 200,001and 1 shares,
      respectively
    
    
    
    20
    
    
    
    -Additional
      paid-in capital
    
    
    
    399
    
    
    
    124


---

Deficit
      accumulated during the developmentstage
    
    
    
    (287)
    
    
    
    (184)Total
      stockholders' equity (deficiency)
    
    
    
    132
    
    
    
    (60)Total liabilities
      and stockholders' equity(deficiency)
    
    $
    
    170
    
    $
    
    -See Notes to
      Financial Statements.


---

CARTOON ACQUISITION, INC.(A Development Stage Company)Statements of Operations(Unaudited)CumulativeDuring theThreeNine Months
    
    
    
    Months
    
    
    
    DevelopmentEnded
    
    
    
    Ended
    
    
    
    StageSeptember
    
    
    
    September30,
    
    
    
    30,
    
    
    
    (September 25, 2003to September 30,2004
    
    
    
    2004
    
    
    
    2004)Revenues
    
    $
    
    -
    
    $
    
    -
    
    $
    
    -Expenses:General and
      administrative
    
    
    
    103
    
    
    
    28
    
    
    
    287Total
      expenses
    
    
    
    103
    
    
    
    28
    
    
    
    287Net
      loss
    
    $
    
    (103)
    
    $
    
    (28)
    
    $
    
    (287)Net loss per
      share, basic and diluted
    
    $
    
    (0.00)
    
    $
    
    (0.00)Weighted average
      number of commonshares
      outstanding, basic and diluted
    
    
    
    100,001
    
    
    
    200,001


---

CARTOON ACQUISITION, INC.(A Development Stage Company)Statements of Cash Flows(Unaudited)Nine Months
    
    
    
    Cumulative Duringthe DevelopmentEnded
    
    
    
    StageSeptember
    
    
    
    (September 25, 200330,
    
    
    
    to2004
    
    
    
    September 30, 2004)Cash flows from
      operating activities:Net
      loss
    
    $
    
    (103)
    
    $
    
    (287)Services rendered
      for common stock
    
    
    
    20
    
    
    
    144Changes in
      operating assets and liabilities:Prepaid
      expense
    
    
    
    (170)
    
    
    
    (170)Accounts payable
      and accrued expenses
    
    
    
    (22)
    
    
    
    38Net cash provided
      by (used in) operating activities
    
    
    
    (275)
    
    
    
    (275)Cash flows from
      investing activities
    
    
    
    -
    
    
    
    -Cash flows from
      financing activities:Company
      expenditure paid byCompany
      attorney
    
    
    
    275
    
    
    
    275Net cash provided
      by (used in)financing
      activities
    
    
    
    275
    
    
    
    275Net increase
      (decrease) in cash
    
    
    
    -
    
    
    
    -Cash and cash
      equivalents, beginning of period
    
    
    
    -
    
    
    
    -Cash and cash
      equivalents, end of period
    
    $
    
    -
    
    $
    
    -Supplemental
      disclosures of cash flow information:Interest
      paid
    
    $
    
    -
    
    $
    
    -Income taxes
      paid
    
    $
    
    -
    
    $
    
    -


---



|See Notes to
      Financial Statements.
|----------------------------------------

CARTOON
ACQUISITION, INC.

(A Development
Stage Company)

Notes to Financial
Statements

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

NOTE 1  INTERIM
FINANCIAL STATEMENTS

The unaudited financial
statements as of September 30, 2004 and for the three and nine months ended
September 30, 2004 and for the period September 25, 2003 (inception) to
September 30, 2004 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
September 30, 2004 and the results of operations and cash flows for the three
month and nine month periods ended September 30, 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 month and nine
month period ended September 30, 2004 are not necessarily indicative of the
results to be expected for any subsequent quarter of the entire year ending
December 31, 2004. The balance sheet at December 31, 2003 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 period September 25, 2003 (inception) to December 31, 2003 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 filing a Registration Statement on
Form 10-SB with the Securities and Exchange Commission (SEC).

At September 30, 2004,
the Company had working capital and stockholders equity of $132. For the period
September 25, 2003 (inception) to September 30, 2004, the Company incurred net
losses of $287. Further, the Company failed to timely file periodic reports with
the SEC subsequent to 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 
      STOCKHOLDERS EQUITY
|-----------------------------------

In September 2003, the
Company issued 1 share of its common stock to its sole officer and director for
services valued at $124.

In March 2004, the
Companys attorney paid a $275 expenditure on behalf of the Company. The Company
has reflected this expenditure as an increase in additional paid-in
capital.

On May 14, 2004, the
Companys sole stockholder, officer and director resigned as officer and
director and the Companys attorney was elected sole officer and director. Also,
on May 14, 2004, the Companys new sole officer and director acquired 200,000
shares of common stock from the Company for services valued at $20.



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

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

|At September 30,
      2004, deferred tax assets consist of: |  |  
|------------------------------------------------------------ |  | -
|Net operating
      loss carryforward                        |  | $
|Less valuation
      allowance                               |  |  
|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 $98 attributable to the future utilization of
the $287 net operating loss carryforward as of September 30, 2004 will be
realized. Accordingly, the

---

Company has provided a
100% allowance against the deferred tax asset in the financial statements at
September 30, 2004. The Company will continue to review this valuation allowance
and make adjustments as appropriate. The net operating loss carryforward expires
in years 2023 and 2024 in the amounts of $184 and $103, 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 
      SUBSEQUENT EVENTS
|--------------------------------

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, is due on or before August 24, 2005, and
is secured by the 185,000 shares of Company common stock.

---

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 Company'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 Company 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 Company'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.

The
Company was formed to identify and effect a business combination with a
qualified entity. A combination will normally take the form of a merger,
stock-for-stock exchange, or stock-for-assets exchange (the "business
combination"). Historically, in most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended. No assurances can be given that the Company will be successful
in locating or negotiating with any target business.

The
Company has not restricted its search for any specific kind of businesses, and
it may acquire a business which is in its preliminary or development stage,
which is already in operation, or in essentially any stage of its business life.
It is impossible to predict the status of any business in which the Company may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which the Company may offer.

In
implementing a structure for a particular business acquisition, the Company may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity.

It
is anticipated that any securities issued in any such business combination would
be issued in reliance upon exemption from registration under applicable Federal
and state securities laws. In some circumstances, however, as a negotiated
element of its transaction, the Company may agree to register all or a part of
such securities as part of the business combination or at specified times
thereafter.

Negotiations with a target company will likely focus on the
percentage of the Company which the target company shareholders would acquire in
exchange for their shareholdings. Although the terms of such agreements cannot
be predicted, generally such agreements will require certain representations and
warranties of the parties thereto, will specify certain events of default, will
detail the terms of closing and the conditions which must be satisfied by the
parties prior to and after such closing and will include miscellaneous other
terms. Any merger or acquisition effected by the Company can be expected to have
a significant dilutive effect on the percentage of shares held by the Company's
shareholders at such time. Moreover, any acquisition by a qualified business
combination, or otherwise, would require the Company to enter into one or more
material agreements, and, more likely that not, would impose significant
fiscal

---

and
performance obligations on the Company, all of which would be required to be
reported by the Company to the Commission.



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

Some of the statements made in Part I, Item 3 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 Company'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 Company 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 Company'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.

The
Company (or the "Registrant") has one class of securities registered under the
Securities Exchange Act of 1934 (the "Exchange Act"); namely, the Company's
common stock, par value $0.0001 per share. The Company is not an "asset-backed"
issuer, as that term is defined in 17 CFR 229.1101. Also, the Company does not
have any securities registered, nor any offering pending or contemplated, under
the Securities Act of 1933 or the Investment Company Act of 1940 with the
Commission.

Prior to the actual filing date hereof, the Registrant did fail to
timely file all of its reports to the Commission, which were required to be
filed by the Registrant pursuant to section 13(a) or section 15(d) of the
Exchange Act. The Registrant attributes its delinquency in that regard to (a)
extreme limitations on its fiscal capabilities due to its lack of development
and engagement in an ongoing business enterprise (and, further in that extent,
because the Registrant was incapable of securing capital or credit
accommodations to permit it to conduct its operations), (b) unpredictability
with regard to its senior executive management's capability to have performed
its duties on a full-time or part-time basis in order to properly have
administered its affairs (to include the Company's incapability to hire and
retain qualified support and technical personnel), and (c) the Registrant's
inability to effectively (without undue effort and/or unreasonable expense)
gather, assemble, prepare, and disseminate the required information.

On
or about January 25, 2005, with the principal objective of aggressively pursuing
the Company's development, Randolph S. Hudson purchased approximately 92.5% of
the Registrant's common voting equity securities from James W. Margulies under a
private securities transaction. Although Mr. Hudson's administration of the
Company has been plagued by many of the same obstacles and circumstances as were
experienced by the Company's prior management and shareholders (surrounding the
Company's delinquent reporting and tardy development), it was and remains Mr.
Hudson's principal objectives to (a) timely remedy the Registrant's delinquent
filings with the Commission and (b) immediately undertake his aggressive pursuit
to develop the Company.

In
addition to the Company's dilemmas, from the date the Company was required to
file its initial reports, the Federal legislature has adopted, revised, or
amended certain Federal securities laws, which the Commission is actively
enforcing in order to prevent acts of frauds that were demonstrated by some
of

---

this nation's largest companies, which, in turn, caused great harm
and financial loss the investing public. Some of these laws contained in the
Code of Federal Regulations, include the Sarbanes-Oxley Act of 2002, Regulation
S-X (which governs accounting issues applicable to reporting companies), the
strict rules applicable to the Public Company Accounting Oversight Board (the
"PCAOB", which governs the Company's non-certifying and certifying accountants),
and a host of other changes to those laws and to the U. S. Code applicable to
securities and commodities markets. All of the government's actions, and, of
primary concern - all of the more stringent and more actively policies of the
Commission, have created significant new reporting impositions on public
companies to improve financial accounting, corporate reporting, and personal
accountability by a public company's senior executive officers.

Consequently, prior to Mr. Hudson's purchase of that certain
percentage of the Company's stock (as was briefly described hereinabove, and
which was previously reported by Mr. Hudson on this Schedule 13D filing), and,
for the other reasons set forth hereinabove, the Company did not have adequate,
or had minimal, disclosure controls and procedures in place. Historically, in
times past, a Company's system of "checks and balances" would have been
routinely handles by its certifying accountant; however, because the Company was
not actively engaged in its operations, and for the other reasons mentioned
hereinabove, the Company's then certifying accountant was neither reviewing nor
preparing the Company's statements of financial conditions.

Fortunately, because the Company has been dormant, in the opinion
of the Company's present Chief Executive Officer (who is also the Company's
Chief Financial Officer) the Company's lack or exercise of disclosure controls
and procedures did not cause any material effect on any information, which was
either prepared then or that is being prepared and submitted on this
date.

In
conclusion of the aforesaid statements, prior to January 25, 2005, in respect of
the controls and procedures promulgated by 17 CFR 240.13a -15 and 17 CFR 240.15d
-15:

|· | The
      Company did not have adequate internal control over financial reporting
      (as defined in 17 CFR 240.13a-15); and                                                                                                                                                                                                                          
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|· | In
      the absence of full-time senior executive management, the Company was
      unable to effectively evaluate the effectiveness by its senior executive
      management of its controls and procedures for what was to have been its
      quarterly report for this period, on the date this report was originally
      due to have been filed.
| 

Presently (the date on which this Report was actually filed), the
Company's Chief Executive Officer, Randolph S. Hudson, has established full
disclosure controls and procedures. Some of these remedies include the purchase
of professional internal accounting software that operates with multiple systems
of entry that "check and cross-check" entries and the engagement of a
PCAOB-qualified accountant to perform non-certified compilations, prior to
delivering his results to the Company's PCAOB-qualified certifying
accountant.

With specific regard to internal control over financial reporting
by the Registrant and by the Registrant's senior executive officers pursuant to
the sub-sections enumerated in 17 CFR 228.308: (a) The Company has at all times
maintained adequate financial and non-financial records, which fairly and
accurately reflect the dispositions of the assets of the Company, (b) the
Company has at all times been able to provide more than reasonable assurances
that any such financial statements were capable of being prepared under
generally accepted accounting principles and that the receipts and expenditure
of the Company were being made only in accordance with the authorizations of the
senior executive management and by the Company's Board of Directors, and (c) the
Company has at all times been able to provide reasonable assurances regarding
the prevention or timely detection of any unauthorized

---

acquisition, use, or disposition of the Company's assets, any of
which could have caused a material effect on the Company's financial
statements.



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



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

During the period being reported herein, the Company is not a party
to any legal action or proceeding.

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

The
information required by Item 2 of Part II of Form 10-QSB is not applicable to
this Report.



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

The
information required by Item 3 of Part II of Form 10-QSB is not applicable to
this Report.

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

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, he
caused the Registrant to engage the firm of Liebman Goldberg & Drogin LLP as
the Registrant's independent auditors, effective July 2, 2004.

This action was necessitated by the fact that the Registrant's
previous certifying accountant, Berger, Apple & Associates Ltd. Of
Beachwood, Ohio ("Berger Apple"), were 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.



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

Some of the statements made in Item 8.01 of this Report may be
deemed to be "forward-looking statements", as that term is defined in Section
27A of the Securities Act of 1933 (15 U.S.C. 77z-2) and in Section 21E of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-5), which are referred to as
"statutory safe harbor" provisions. Forward-looking statements are not
historical facts; rather, forward-looking statements are based upon the opinions
and estimates of the Registrant's management at the time such statements are
made. Every forward-looking statement is subject to inherent risks and
uncertainties that could cause the actual results to differ materially from the
plans, projections, or expectations expressed or implied by such statement at
the time the statement was made. The Registrant cautions the public not to place
undue influence on these forward-looking statements, which speak only as of the
date they were made and may not have been updated in further filings, schedules,
or reports required to be filed with the Commission, or with any other body
government.

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

A.
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.

MATERIALS INCORPORATED BY REFERENCE.

---

The
Registrant, in reliance of the accurate information contained in that certain
Form 8-K, dated July 2, 2004, incorporates all or part of the information
contained in said Form 8-K herein by reference thereto.

CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.

On
or about July 2, 2005, the Registrant's certifying accountant, Berger, Apple
& Associates Ltd., of Beachwood, Ohio ("Berger Apple"), formally confirmed
the Registrant's statements made in that certain Form 8-K, dated July 2, 2004;
whereby, the Registrant notified its certifying accountant of its dismissal
because the Registrant's certifying accountant because Berger Apple was not
registered with the Public Company Accounting Oversight Board ("PCAOB"), the
registration with which is a requirement of the Commission's rules and
regulations.

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.

SUBSEQUENT EVENTS PRESENTING CONFLICTING INFORMATION.

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.

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

---

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

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



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



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

With the single exception of the Company's Form 8-K Report
disclosed and annexed as an exhibit to Item 6(b) and disclosed hereinbelow,
there are no exhibits being filed with this Report.

99.1 Form 8-K Current Report, dated July 8, 2004



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

There was one report on Form 8-K filed by the Company during the
subject period being reported on this Form 10-QSB.

In
this regard, the Company must acknowledge the facsimile of the Form 8-K that is
being annexed to this Report is a representative copy, which the Company
obtained from other than its original sources; moreover, the exhibit that
accompanies the Form 8-K report is a facsimile of an EDGAR copy of the original
document, as the Company was unable to locate the original copy; however, the
Registrant's Chief Executive Officer certifies the exhibits to be true, correct,
and complete copies of the original documents in every respect.



|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.



|By Order of the Board of Directors:CARTOON ACQUISITION, INC.
|------------------------------------------------------------





|RANDOLPH S. HUDSONChief Executive
      OfficerChief Financial
      Officer
|----------------------------------------------------------------------------

---