U. S. Securities and Exchange Commission
                           Washington, D. C. 20549

                                 FORM 10-QSB

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

          For the quarterly period ended June 30, 2006


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

          For the transition period from _____ to _____

                         Commission File No. 0-33145

                    HEADLINERS ENTERTAINMENT GROUP, INC.
              ------------------------------------------------
               (Name of Small Business Issuer in its Charter)

              Delaware                           84-1195628
     -------------------------------------------------------------------
     (State or Other Jurisdiction of          (I.R.S. Employer I.D. No.)
  incorporation or organization)

                501 Bloomfield Avenue, Montclair, NJ 07042
                ------------------------------------------
                  (Address of Principal Executive Offices)

                 Issuer's Telephone Number: (973) 223-1233

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 [X]   No [ ]

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).     Yes  [ ]  No  [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of
the latest practicable date:
                              August 21, 2006
                              Common Voting Stock: 52,545,535

Transitional Small Business Disclosure Format (check one):   Yes [ ]  No [X]

<PAGE>

PART 1.     FINANCIAL INFORMATION

           Headliners Entertainment Group, Inc. and Subsidiaries
                   Condensed Consolidated Balance Sheet
                               June 30, 2006

Assets
 Current Assets
  Cash                                              $    25,930
  Inventory                                              62,612
  Prepaid expenses                                      121,574
  Assets to be disposed of                              184,533
                                                     ----------
 Total Current Assets                                   394,649

Property and equipment, net                           3,290,942

Goodwill                                                384,063
Intangible assets                                       304,566
Security deposits                                         6,500
                                                     ----------

Total Assets                                          4,380,720
                                                     ==========
Liabilities and Stockholders' Deficit
 Current Liabilities
  Accounts payable and accrued expenses               3,322,820
  Notes payable                                       1,395,225
                                                     ----------
 Total Current Liabilities                            4,718,045
                                                     ----------

Convertible debenture, net of premium                 8,244,346
Fair value of embedded derivative                     2,020,075
                                                     ----------
 Total Liabilities                                   14,982,466

Stockholders' Deficit
 Common stock, authorized 500,000,000 shares,
  $.001 par value, 44,545,580 shares issued
  and outstanding                                        44,546
 Additional paid-in capital                          59,144,747
 Accumulated deficit                                (69,791,039)
                                                     ----------
 Total Stockholders' Deficit                        (10,601,746)
                                                     ----------
Total Liabilities and Stockholders' Deficit         $ 4,380,720
                                                     ==========


See notes to the condensed consolidated financial statements.

<PAGE>                               -2-

          Headliners Entertainment Group, Inc. and Subsidiaries
             Condensed Consolidated Statements of Operations

                               Three Months Ended        Six Months Ended
                                    June 30,                 June 30,
                                2006        2005         2006        2005
                             (Unaudited) (Unaudited)  (Unaudited) (Unaudited)
                             -----------------------  -----------------------
Net Sales                   $2,490,449  $2,342,125  $ 4,365,217  $  2,788,828

Cost of Sales                  858,877     909,849    1,495,002     1,062,539
                            ----------  ----------   ----------    ----------
Gross Profit                 1,631,572   1,432,276    2,870,215     1,726,289

General and Administrative
 expenses
 General and administrative
  expenses                   2,163,370   1,638,721    4,100,122     2,440,292
 Stock based compensation            -           -            -    24,420,000
 Stock issued for consulting
  services                           -     284,301            -    12,646,701
                            ----------  ----------   ----------    ----------
Total General and
 Administrative Expenses     2,163,370   1,923,022    4,100,122    39,506,993
                            ----------  ----------   ----------    ----------
Other Income (Expenses)
 Interest expense             (234,158)   (514,123)    (609,294)     (784,313)
 Interest inc ome                     -      13,333            -        13,333
 Derivative adjustment to
  market                       192,520           -      338,683             -
                            ----------  ----------   ----------    ----------
Total Other Expense            (41,638)   (500,790)    (270,611)     (770,980)
                            ----------  ----------   ----------    ----------

Loss From Continuing
 Operations                   (573,436)   (991,536)  (1,500,518)  (38,551,684)

Discontinued Operations
 Income (Loss) from
  discontinued operations
  (net of tax effect of $0)    (14,669)     61,565       14,745        61,565
 (Loss) on disposal of
  operations (net of tax
  effect of $0)                      -           -     (952,085)            -
                            ----------  ----------   ----------    ----------
 Loss From Discontinued
  Operations                   (14,669)          -     (937,340)            -

Net Loss                   $  (588,105) $ (929,971) $(2,437,858) $(38,490,119)
                            ==========   =========   ==========   ===========

Earnings (Loss) per share  $     (0.02) $    (0.07) $     (0.05) $      (5.12)
                            ==========   =========   ==========   ===========
Earnings (Loss) Per Share
 From Continuing
 Operations                $     (0.02) $    (0.07) $     (0.05) $      (5.12)
                            ==========   =========   ==========   ===========
Earnings (Loss) Per Share
 From Discontinued
 Operations                $         -  $        -  $         -  $          -
                            ==========   =========   ==========   ===========

Weighted Average Number of
 Common Shares Outstanding  36,321,428  13,528,730   32,994,324     7,512,136
                            ==========   =========   ==========   ===========

See notes to the condensed consolidated financial statements.

<PAGE>                               -3-

            Headliners Entertainment Group, Inc. and Subsidiaries
               Condensed Consolidated Statements of Cash Flows

                                               Six Months Ended
                                                   June 30,
                                               2006          2005
                                           --------------------------
Net Cash Provided by (Used) in Operating
 Activities                                  $   16,983  $  (951,624)
                                              ---------   ----------
Cash Flows from Investing Activities
 Issuance of note receivable                          -     (400,000)
 Purchase of fixed assets                      (273,011)    (217,160)
 Purchase of LLC's, net of $74,200
  cash acquired                                       -   (1,325,800)
                                              ---------   ----------
 Net Cash Used in Investing Activities         (273,011)  (1,942,960)
                                              ---------   ----------
Cash Flows From Financing Activities
 Proceeds from promissory notes                       -    2,927,500
 Repayment of notes payable                    (247,100)     (25,000)
 Proceeds from notes payable                    500,000       50,000
                                             ----------   ----------
 Net Cash Provided by Financing Activities      252,900    2,952,500
                                             ----------   ----------

Net Increase (Decrease) in Cash                  (3,128)      57,916

Cash at Beginning of Period                      29,058       29,058
                                             ----------   ----------
Cash at End of Period                       $    25,930  $    86,974
                                             ==========   ==========

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

During the six months ended June 30, 2006, the Company issued 10,440,991
 shares of common stock upon the conversion of $127,009 of convertible
 debentures.

During the six months ended June 30, 2005, the Company issued a $4,500,000
 promissory note in exchange for $427,500 in cash and the extinguishment of
 an outstanding obligation of $3,025,000.  Additionally, a discount on the
 note of $1,047,500 was recorded.

During the six months ended June 30, 2005, the Company issued a $3,000,000
 promissory note in exchange for $2,500,000 in cash and a discount of $500,000.

During the six months ended June 30, 2005, the Company acquired all of the
 rights, title and interest in six limited liability companies.  In connection
 with the acquisition, the Company, assumed $337,549 of accounts payable and
 accrued expenses, issued notes payable aggregating $793,435 and issued common
 stock valued at $301,565.

During the six months ended June 30, 2005, the Company issued 1,700,000 for
 $2,877,000 of prepaid consulting services.


See notes to the condensed consolidated financial statements.

<PAGE>                               -4-

            Headliners Entertainment Group, Inc. and Subsidiaries
           Notes to the Condensed Consolidated Financial Statements
                          Six Months Ended June 30, 2006
                                 (Unaudited)

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements have been
     prepared in accordance with generally accepted accounting
     principles for interim financial information and with the
     instructions to Item 310 of Regulation S-B.  Accordingly, they do
     not include all of the information and footnotes required by
     generally accepted accounting principles for complete financial
     statements.  In the opinion of management, all adjustments
     (consisting of normal recurring accruals) considered necessary for
     a fair presentation have been included.  Operating results for the
     six months ended June 30, 2006 are not necessarily indicative of
     the results that may be expected for the year ended December 31,
     2006.  The unaudited condensed financial statements should be read
     in conjunction with the consolidated financial statements and
     footnotes thereto included in the Company's annual report on Form
     10-KSB for the year ended December 31, 2005.

2.   GOING CONCERN

     The accompanying condensed consolidated financial statements have
     been prepared on a going concern basis, which contemplates the
     realization of assets and the satisfaction of liabilities and
     commitments in the normal course of business.  As reflected in the
     condensed consolidated financial statements, the Company has
     incurred recurring net losses from operations, and accumulated
     deficit, and recurring negative cash flows from operations.
     Further, at June 30, 2006, current liabilities exceed current
     assets by $4,323,396 and total liabilities exceed total assets by
     $10,601,746.  These factors all raise substantial doubt about the
     ability of the Company to continue as a going concern.

     Management's plan in regard to the going concern issues is to
     raise capital through the sale of the Company's stock.  In
     addition, the Company is focusing on developing a significant
     number of clubs to achieve an efficient level of operations.

3.   NOTES PAYABLE
     On February 2, 2006, the Company issued a promissory note in the
     amount of $360,000 in exchange for $300,000 in cash. The note has
     been discounted by $60,000, bears interest at 18% per annum and is
     due in 18 monthly payments of $20,000 beginning April 1, 2006. The
     Company issued 2,000,000 common shares to the note holder as an
     inducement to make the loan. The shares were valued at $0.08 per
     share, the value on the date they were issued and were recorded as
     deferred financing fees. The deferred financing fees and the
     discount are being amortized over the life of the loan. As
     collateral for the note, the Company has placed 7,500,000 common
     shares in an escrow account.

4.   DISCONTINUED OPERATIONS
     During the quarter ended June 30, 2006, the Company decided to
     cease operations at its Jackson, Mississippi location due to
     declining sales and costly rents. The Company began operations in
     Jackson, Mississippi on April 1, 2005.  For the six  months ended
     June 30, 2006, the discontinued operations generated sales of
     $518,269 and operating income of $29,414.

<PAGE>                               -5-

            Headliners Entertainment Group, Inc. and Subsidiaries
          Notes to the Condensed Consolidated Financial Statements
                        Six Months Ended June 30, 2006
                                 (Unaudited)

5.   BUSINESS COMBINATIONS

     On March 29, 2005, the Company entered into a Consolidated
     Acquisition Agreement with Paul Butler and JHF Property Holdings,
     LLC ("JHF").  Pursuant to the Consolidated Acquisition Agreement,
     effective March 31, 2005,  the Company acquired all of the rights,
     title and interest in five limited liability companies and the
     right to receive the net income of a sixth limited liability
     company.  The Consolidated Acquisition Agreement, provided for the
     Company to acquire ownership of the sixth limited liability
     company at a future date.  Each of the limited liability companies
     operates an entertainment complex consisting of a dance club and
     other facilities, one each in Cincinnati, Kansas City, Tucson,
     Jackson, Louisville and Omaha.

     In accordance with the Consolidated Acquisition Agreement, the
     Company and JHF commenced development of a comedy club utilizing the
     Rascals trademark in Hampton, VA.  JHF was responsible for
     supervising the development and construction of the club for a fee
     and the Company retained all of the rights, title and interest in
     the club.

     The consideration paid to JHF for the acquisition of the five
     limited liability companies, the right to receive the net income
     of the sixth limited liability company and the development and
     construction of the Hampton, VA comedy club consisted of
     $3,675,000 in cash payments, a 0% convertible debenture due on
     March 31, 2008 in the principal amount of $5,000,000 and 7,000
     shares of the Company's common stock.

     Additionally, the Consolidated Acquisition Agreement contained
     provisions under which, JHF would manage the seven properties.  In
     consideration for the management services, the Company issued
     common stock with a market value of $2,300,000 to JHF.  The
     Company has committed that if the proceeds realized by JHF from
     selling the shares are less than $2,300,000, the Company will
     issue additional shares until JHF realizes $2,300,000.
     Additionally, the Company agreed to make weekly cash payments to
     JHF for their management services.

     On July 22, 2005, the Company entered into a Settlement Agreement
     with JHF Property Holdings, LLC, Paul Butler, Jon B. Field and Jon
     H. Field (collectively, "JHF").  The Settlement Agreement settled
     a lawsuit that the Company had brought against JHF alleging fraud
     and breach of contract.  The Settlement Agreement contained the
     following provisions, which amended the terms under which the
     Company acquired the six limited liability companies and have been
     recorded in the accompanying financial statements effective April
     1, 2005:

     1.  The Company's ownership of the limited liability companies
         that own the six dance clubs has been acknowledged.

     2.  The Company assigned to JHF all of its interest in the comedy
         club built in Hampton, VA.

     3.  JHF surrendered the $5,000,000 convertible debenture issued to
         them pursuant to the Consolidated Acquisition Agreement.

     4.  The Company's agreement with JHF to manage the clubs has been
         terminated.

<PAGE>                               -6-

             Headliners Entertainment Group, Inc. and Subsidiaries
            Notes to the Condensed Consolidated Financial Statements
                         Six Months Ended June 30, 2006
                                 (Unaudited)

5.  BUSINESS COMBINATIONS (Continued)

     5.  All of the Company's payment obligations under the
         Consolidated Acquisition Agreement have been terminated.  In
         lieu thereof, the Company agreed to pay to JHF: (a) five
         weekly payments of $74,687 (totaling $373,435), commencing on
         August 3, 2005; and (b) twenty-eight weekly payments of
         $15,000 (totaling $420,000) commencing on September 7, 2005.

     The aggregate acquisition price was $4,770,000, which included
     cash in the amount of $3,675,000, 777,000 shares of the Company's
     common stock valued at $301,565 (which represents the proceeds
     realized by JHF from the sale of stock issued to them and issuance
     of notes payable to JHF aggregating $793,435.)

     The Results of Operations for the six acquired limited liability
     companies are included in the consolidated financial statements
     since April 1, 2005.  Following are proforma amounts assuming that
     the acquisition was made on January 1, 2005:

                                                 For the Six Months Ended
                                                      June 30, 2005
                                                 ------------------------

         Net Sales                                    $  6,388,190

         Net Loss                                     $(38,397,145)

         Loss Per Share From Continuing Operations           (5.11)

     The transaction was accounted for as an acquisition of the six
     limited liability companies under the purchase method of
     accounting in accordance with Statement of Financial Accounting
     Standards No. 141, Business Combinations.  Under the purchase
     method of accounting, the total purchase price is allocated to the
     net tangible and intangible assets acquired by the Company in
     connection with the transaction, based on their fair values as of
     the completion of the transaction.  The excess cost over the net
     tangible and identifiable intangible assets is allocated to
     goodwill.  The preliminary purchase price allocation is subject to
     finalization of the intangible asset.

6    SUBSEQUENT EVENT - TERMINATION OF MANAGEMENT AGREEMENT

     On August 18, 2006 the Company agreed to terminate the Management
     Agreement under which the Company has managed the restaurant,
     comedy club and dance club facility owned by Rascals Montclair,
     Inc. in Montclair, New Jersey.  The Company also assigned to
     Rascals Montclair, Inc. the collection of tape recordings known as
     the "Rascals Library."  In consideration of the Company's
     agreement to terminate the Management Agreement and assign the
     Rascals Library, Rascals Montclair agreed to hold the Company
     harmless from liability for the $360,000 Note made in February
     2006 (See: Note 3), for the debt incurred in purchasing the liquor
     license for the Montclair facility, for unpaid sales taxes and for
     unpaid payroll taxes.

     The majority owners of Rascals Montclair are trusts owned by the
     families of Eduardo Rodriguez and Michael Margolies, the members
     of the Company's Board of Directors.  In connection with the
     termination of the Management Agreement, Mr. Margolies surrendered
     his interest in Rascals Montclair.  Mr. Rodriguez and the Company
     agreed to terminate Mr. Rodriguez' employment as Chief Executive
     Officer, and to terminate his employment agreement, which provided
     for payment of $250,000 per year until 2014.  The Company will pay
     $75,000 to  Mr. Rodriguez as severance pay.  Mr. Rodriguez also
     resigned from the Company's Board of Directors, and transferred to
     Mr. Margolies, for a nominal sum, the shares of the Company's
     Series B Preferred Stock that he owned.

<PAGE>                               -7-

     Forward-looking Statements

     This Report contains certain forward-looking statements regarding
Headliners Entertainment Group, its business and financial prospects.  These
statements represent Management's present intentions and its present belief
regarding the Company's future.  Nevertheless, there are numerous risks and
uncertainties that could cause our actual results to differ from the results
suggested in this Report.  A detailed discussion of some of the risks that may
cause such a difference has been set forth in the Company's Annual Report on
Form10-KSB for the year ended December 31, 2005 in the section numbered "Item
6" under the heading "Risk Factors that May Affect Future Results."  Among the
more significant factors are:

     1. We have obligations to Cornell Capital Partners in excess of
        $8,000,000.  The greater portion of that debt is likely to be
        satisfied by our issuance of a large quantity of our common stock.

     2. We lack the capital necessary to expand our operations, and must
        rely on the sale of equity to obtain the necessary funds.

     3. We have never operated profitably for any significant period of
        time, and may continue to report net losses.

     Because these and other risks may cause Headliners' actual results to
differ from those anticipated by Management, the reader should not place undue
reliance on any forward-looking statements that appear in this Report.

     Readers should also take note that Headliners will not necessarily make any
public announcement of changes affecting these forward-looking statements,
which should be considered accurate on this date only.

     Results of Operations

     From its founding in 1984 through 2001, Headliners' business consisted
entirely of the operation of  stand-alone restaurant/comedy club facilities:
two in New Jersey from the 1980s until 2003/2004  and one that we operated in
Miami, Florida for only a year.  In the years since 2002 we have substantially
changed the nature of our operations.  We have began to develop alternative
locations for Rascals' comedy by organizing hotel-based clubs and by granting
licenses to utilize the name "Rascals."  We also began to develop multiple
channels of distribution for the comedic entertainment produced in our clubs,
such as online distribution, home video sales and pay-per-view sales.

     The most dramatic example of our expanding operations is our acquisition
at the end of March 2005 of six dance clubs that operate under one of the
followings trade names: "Banana Joe's,""Margarita Mama's," "Red Cheetah,"
"Parrot Beach" or "Cactus Cafe."   Commencing on April 1, 2005 we have
consolidated the financial results of the clubs with our other operations on
our financial statements.  This has resulted in a significant increase in our
revenues, from $2,788,828 in the six months of 2005 to $4,365,217 in the first
six months of 2006.

<PAGE>                              -8-

     We have also altered our use of the Rascals trademark over the past
several years, by expanding into new venues.  We replaced the two restaurant-
club locations that we have operated since the 1980s with a restaurant and
Rascals Comedy Club that opened in Montclair NJ in June 2004.  In addition, we
have been actively pursuing opportunities to situate Rascals Comedy Clubs in
hotels and entertainment venues, where a large, pre-existing clientele can be
converted into customers of our club. During the first half of 2006 we owned
and operated two Rascals Comedy Clubs:

     -  Rascals Montclair.  To replace our West Orange and Ocean restaurant-
        clubs, in June 2004 we opened a 13,000 square foot restaurant and
        comedy club in Montclair, New Jersey.  The restaurant and bar in our
        Montclair facility seats 150, and the showroom seats 400.  The
        property is owned by a separate corporation organized by members of
        Headliners' management.  However, that corporation had a contract
        with Headliners under which we managed the facility and paid all of
        its expenses, and in return the corporation assigned all of the
        revenues from the Montclair operation to Headliners. In March 2006
        we opened a Red Cheetah dance club at the same location.

     -  Rascals Cherry Hill.  We are now realizing approximately $22,000 per
        month in revenue from our Cherry Hill hotel-based operation, which
        commenced operations in December 2002.  Although this sales level is
        far lower than the levels we maintained in West Orange or Ocean, we
        generate it with only one full-time and three part-time employees
        (compared to dozens at our restaurant-club combinations).  So we are
        realizing an average monthly profit in Cherry Hill of approximately
        $13,000.

     In July 2006 we opened a third Rascals in Baltimore, Maryland.  However
in August 2006 we terminated the agreement under which we managed Rascals
Montclair, effective on September 1, 2006.  So for the remainder of the year
our comedy club operations will consist of the Baltimore facility and the
Cherry Hill facility.  Our primary source of revenue, therefore, will be our
three remaining dance clubs.

     The revenue and gross profit figures reported for the first six months
of 2006 exclude the results for three of the dance clubs we purchased in March
as well as the results of the Rascals Comedy Club that we opened at the
Palisades Center in May 2005.  Three of these clubs were closed near the end
of 2005.  The fourth, our dance club in Jackson Mississippi, was closed in
April 2006.  The results from those four operations, therefore, have been
reported as "discontinued operations" on our Statements of Operations.  A net
loss of $937,340 from the operations of those clubs and the disposal of their
facilities contributed to our overall net loss for the six months ended June
30, 2006.

     The transitions in our business plan have resulted in a marked disparity
between revenues and expenses.  During the first six months of 2006 we
incurred general and administrative expenses totaling $4,100,122, which
exceeded our gross profit by $1,229,907.  This represented an improvement over
the first six months of 2005, however.  The improvement is primarily due to
the fact that during the earlier quarter we issued stock to pay expenses with
a market value of $37,066,701.  In order to achieve profitability, however, we
will have to increase our revenue to a level that will sustain our overhead.

<PAGE>                              -9-

     In November 2005 we agreed with Cornell Capital Partners to exchange the
convertible debenture then held by Cornell for a new five-year debenture whose
principal amount equals the principal of the surrendered debenture plus
accrued interest.  In connection with the exchange, we issued to Cornell
Capital Partners five year warrants to purchase 10,000,000 shares of our
common stock at $.20 per share.  Because the warrants had a fair value of
$1,460,000 and because the terms of the new debenture included an embedded
derivative, we recognized in 2005 an expense of $3,811,193 as "loss on
extinguishment of debt" arising from this transaction.  During the life of the
warrants, until they are exercised, we will adjust the value of the warrants
to market value at the end of each accounting period.  As a result of that
adjustment, we recognized income of $338,683 in the six month period ended
June 30, 2006.  At the same time, we incurred an "interest expense" of
$609,294 during the six months ended June 30, 2006, most of which was
attributable to the Cornell  debenture.  The debenture carries a stated
interest of 12% per annum.

     Our expenses remain disproportionate to our revenue.  As a result, we
realized a net loss of $2,437,858 for the first six months of 2006, compared
to a net loss of $38,490,119 in the first six months of 2005.  We expect to
continue to incur losses until we are able to reduce our general and
administrative costs to a level that is proportionate to our revenue level.
Our recent termination of the Montclair management agreement is intended to be
a step in that direction.

Liquidity and Capital Resources

     In order to obtain the funds necessary to acquire our six new dance
clubs and construct our facilities in Montclair and the Palisades Center, we
borrowed nearly $10 million from Cornell Capital Partners.  Today our debt to
Cornell Capital Partners totals $8,192,309 plus six months of accrued
interest.  The debt is represented by a Secured Convertible Debenture in that
amount issued on November 17, 2005. Headliners is not required to make any
payment by the Debenture until November 17, 2010, when it will have the option
of satisfying any principal and interest remaining outstanding in cash or with
common stock.  In the meantime, Cornell Capital Partners will have the right
to convert the principal and accrued interest on the Debenture into Headliners
common stock at a conversion price equal to 80% of the market price at the
time of conversion.

     With the proceeds of our sale of debt instruments to Cornell Capital
Partners, we have substantially alleviated our capital commitments.
Nevertheless, in addition to the ongoing expenses of operating its business,
Headliners had accounts payable and accrued expenses of $3,322,820 at June 30,
2006, as well as being obligated on $1,395,225 in notes payable.

     During the first half of 2006 our operations produced only $16,983 in
cash.  However, in the second half of 2005 our operations produced $458,525 in
cash.  The improved cash flow in the second half of 2005 resulted from the
fact that we obtained full managerial control over the six new dance clubs
during the summer of 2005.  We believe that the modest cash flow in the first
six months of 2006 is not indicative of the direction of our operations, but
primarily reflects (a) troubles at our Jackson MS club that were resolved when
we closed the club in April and (b) the seasonality of our business - i.e. the
fact that the first quarter of the year is the slowest period for club
operations.

<PAGE>                               -10-

     Now that we have undisputed control over the new dance clubs, we expect
that the cash flow from those clubs will be sufficient to enable us to sustain
our operations and meet the cash obligations noted above.  We do not expect
that we will require additional capital during the next twelve months, except
in connection with new development projects that we may undertake.  At this
time we have not committed to any specific new development project nor
obtained any financing commitment.

     Once we have passed the current period of rapid expansion, our capital
requirements will be much easier to control.  Once clubs are established, they
either operate profitably or they are closed.  So the capital requirements of
ongoing operations should not be significant.  Our plan is to continue to
expand, but at a pace commensurate with available capital and capital
commitments, either from equity sources or secured lending sources that should
become available once we have a portfolio of assets to offer as collateral.


Off-Balance Sheet Arrangements

     We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial
condition or results of operations.

Item 3.  Controls and Procedures

     Evaluation of Disclosure Controls and Procedures.  Eduardo Rodriguez,
our Chief Executive Officer and Chief Financial Officer, carried out an
evaluation of the effectiveness of Headliners' disclosure controls and
procedures as of June 30, 2006.  Pursuant to Rule13a-15(e) promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, "disclosure controls and procedures" means controls and other procedures
that are designed to insure that information required to be disclosed by
Headliners in the reports that it files with the Securities and Exchange
Commission is recorded, processed, summarized and reported within the time
limits specified in the Commission's rules.  "Disclosure controls and
procedures" include, without limitation, controls and procedures designed to
insure that information Headliners is required to disclose in the reports it
files with the Commission is accumulated and communicated to our Chief
Executive Officer and Chief Financial Officer as appropriate to allow timely
decisions regarding required disclosure.  Based on his evaluation, Mr.
Rodriguez concluded that Headliners' system of disclosure controls and
procedures was effective as of June 30, 2006 for the purposes described in
this paragraph.

     Changes in Internal Controls.  There was no change in internal controls
over financial reporting (as defined in Rule 13a-15(f) promulgated under the
Securities Exchange Act or 1934) identified in connection with the evaluation
described in the preceding paragraph that occurred during Headliners's second
fiscal quarter that has materially affected or is reasonably likely to
materially affect Headliners's internal control over financial reporting.

<PAGE>                              -11-

PART II   -   OTHER INFORMATION

Item 2.  Changes in Securities and Small Business Issuer Purchase of Equity
Securities

     (c) Unregistered sales of equity securities

     In April 2006 Headliners issued 3,000,000 shares of common stock to
Rosenberg Rich Baker Berman & Co, CPA.  The shares were issued in payment for
bookkeeping and accounting services rendered, and were valued at $25,000,
based on the contract terms between the parties.  The sale was exempt pursuant
to Section 4(2) of the Act since the sale was not made in a public offering
and was made to an entity whose principals had access to detailed information
about Headliners and were acquiring the shares for their own accounts.  There
were no underwriters.

     Between April 1, 2006 and June 30, 2006 Headliners issued a total of
9,545,527 shares of common stock to Cornell Capital Partners LP.  The shares
were issued upon conversion of a debenture in the amount of $77,009.  The sale
was exempt pursuant to Section 4(2) of the Act since the sale was not made in
a public offering and was made to an entity whose principal had access to
detailed information about Headliners and was acquiring the shares for its own
account.  There were no underwriters.

     (e) Purchases of equity securities

     The Company did not repurchase any of its equity securities that were
registered under Section 12 of the Securities Exchange Act during the 2nd
quarter of 2006.

Item 5.   Other Information

     On August 18, 2006 the Company agreed to terminate the Management
Agreement under which the Company has managed the restaurant, comedy club and
dance club facility owned by Rascals Montclair, Inc. in Montclair, New Jersey,
effective on September 1, 2006.  The Company also assigned to Rascals
Montclair, Inc. the collection of tape recordings known as the "Rascals
Library."  In consideration of the Company's agreement to terminate the
Management Agreement and assign the Rascals Library, Rascals Montclair agreed
to hold the Company harmless from liability for the $360,000 Note made in
February 2006, for the debt incurred in purchasing the liquor license for the
Montclair facility, for unpaid sales taxes and for unpaid payroll taxes.

     The majority owners of Rascals Montclair are trusts owned by the
families of Eduardo Rodriguez and Michael Margolies, the members of the
Company's Board of Directors.  In connection with the termination of the
Management Agreement, Mr. Margolies will surrender his interest in Rascals
Montclair.  Mr. Rodriguez and the Company agreed to terminate Mr. Rodriguez'
employment as Chief Executive Officer, and to terminate his employment
agreement, which provided for payment of $250,000 per year until 2014.  The
Company will pay $75,000 to Mr. Rodriguez as severance pay.  Mr. Rodriguez
will also resign from the Company's Board of Directors, and transfer to Mr.
Margolies, for a nominal sum, the shares of the Company's Series B Preferred
Stock that he owned.

Item 6.  Exhibits.

     10-a  Termination of Management Agreement dated August 18, 2006
           between Headliners Entertainment Group, Inc and Rascals
           Montclair, Inc.
     10-b  Separation Agreement dated August 18, 2006 between Eduardo
           Rodriguez and Headliners Entertainment Group, Inc.
     31    Rule 13a-14(a) Certification
     32    Rule 13a-14(b) Certification

<PAGE>                              -12-

                                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.

                            HEADLINERS ENTERTAINMENT GROUP, INC.


Date: August 21, 2006       By:  /s/ Eduardo Rodriguez
                            ------------------------------------------
                            Eduardo Rodriguez, Chief Executive Officer
                             & Chief Financial Officer





<PAGE>                             -13-