| þ | QUARTERLY  REPORT  PURSUANT  TO  SECTION      13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT  OF  1934 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For      the quarterly period ended September 30,      2007 |
|--------|-------------------------------------------------------------|

| o | TRANSITION  REPORT  PURSUANT  TO  SECTION      13 OR 15(d) OF THE SECURITIES      EXCHANGE  ACT  OF  1934 |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For      the transition period      from  ________________to___________________ |
|--------|-------------------------------------------------------------------------------------------|

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| Washington                           |   | 98-0206033               |
|--------------------------------------|--------|--------------------------|
| (State      or other jurisdiction of |   | (IRS      Employer       |
| incorporation      or organization)  |   | Identification      No.) |

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| Item      1.                      Financial      Statements                                                                             | 3      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Item      2.                      Management’s      Discussion and Analysis of Financial Condition and Results of      Operations | 21     |
| Item      3.                      Controls      and Procedures                                                                          | 22     |
|                                                                                                                                                                                                                                                  |   |
| PART      II                      OTHER      INFORMATION                                                                                | 23     |
|                                                                                                                                                                                                                                                  |   |
| Item      1.                      Legal      Proceedings                                                                                | 23     |
| Item      2.                      Change      in Securities                                                                             | 23     |
| Item      3.                      Defaults      upon Senior Securities                                                                  | 23     |
| Item      4.                      Submission      of Matters to a Vote of Security Holders                                              | 23     |
| Item      5.                      Other      Information                                                                                | 23     |
| Item      6.                      Exhibits      and Reports on Form 8-K                                                                 | 24     |

----

----

|                                                         |       | September      30 |                                |   | March      31 |    |
|--------------------------------------------------------------|------------|-------------------|-------------------------------------|--------|---------------|---------|
|                                                         |       | 2007              |                                |   | 2007          |    |
| ASSETS                                                       |       |
|                                                         |       |              |                                |   |          |    |
| Current                                                      |       |              |                                |   |          |    |
| Cash                                                         |       | $                 | 794,387                             |   |          | $       | 3,035 |   |
|                                                         |       |              | 794,387                             |   |          | $       | 3,035 |   |
|                                                         |       |              |                                |   |          |    |   |   |
|                                                         |       |              |                                |   |          |    |   |   |
| Total      Assets                                            |       | $                 | 794,387                             |   |          | $       | 3,035 |   |
|                                                         |       |              |                                |   |          |    |   |   |
| LIABILITIES                                                  |       |
|                                                         |       |              |                                |   |          |    |   |   |
| Current                                                      |       |              |                                |   |          |    |   |   |
| Accounts payable and accrued      liabilities – Note 3 |       | $                 | 11,857                              |   |          | $       | 73,613 |   |
| Due to related parties – Note      3                   |       |              | -0-                                 |   |          |    | 12,616 |   |
| Loans payable to stockholders –      Note 3            |       |              | -0-                                 |   |          |    | 16,264 |   |
|                                                         |       |              |                                |   |          |    |   |   |
| Total      Liabilities                                       |       |              | 11,857                              |   |          |    | 102,513 |   |
|                                                         |       |              |                                |   |          |    |   |   |
| STOCKHOLDERS’ DEFICIENCY                               |       |
|                                                         |       |              |                                |   |          |    |   |   |
| Preferred      Stock, $0.0001 par value                      |       |              |                                |   |          |    |   |   |
|                                                         | 20,000,000 |              | shares      authorized; none issued |   |          | -       |   |   |   |   |   |
| Common      stock, $0.0001 par value – Note 4          |       |              |                                |   |          |    |   |   |
|                                                         | 50,000,000 |              | shares      authorized              |   |          |    |   |   |   |   |   |
|                                                         | 33,129,628 |              | shares      issued                  |   |          | 3,342   |   |   |   | 3,342 |   |
| Additional      paid-in capital                              |       |              | 2,287,205                           |   |          |    | 1,385,676 |   |
| Deficit      accumulated during the prior development stage  |       |              | (151,117                            | )      |          |    | (151,117 | ) |
| Deficit      accumulated during the development stage        |       |              | (1,356,900                          | )      |          |    | (1,337,379 | ) |
|                                                         |       |              |                                |   |          |    |   |   |   |   |   |
|                                                         |       |              |                                |   |          | 782,530 |   |   |   | (99,478 | ) |
|                                                         |       |              |                                |   |          |    |   |   |   |   |   |
|                                                         |       |              |                                |   | $             | 794,387 |   |   | $ | 3,035 |   |
|                                                         |       |              |                                |   |          |    |   |   |   |   |   |

----

|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   | April 1,    2000  |          |
|--------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|-----------|------------------|--------|--------|------------|--------|--------|-------------------|---------------|
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   | (Date of          |          |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   | Commencement      |          |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   | of    Development |          |
|                                                                                 |   | Three months      ended |       |   | Six months      ended |   |      | Stage) to        |   |
|                                                                                 |   | September    30,        |       |   | September    30,      |   |      | September    30, |   |
|                                                                                 |   | 2006                    |       |   | 2007                  |   |      | 2006             |   |   | 2007       |   |   | 2007              |          |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |
| Expenses                                                                             |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |
| Advertising and      promotion                                                       |   | $                       | -          |   |                  | $      | -0-       |             |   | $      | -          |   |   | $                 | -0-           |   |   | $ | 44,692 |   |
| Amortization                                                                         |   |                    | -          |   |                  |   | -0-       |             |   |   | 171        |   |   |              | -0-           |   |   |   | 21,551 |   |
| Audit and accounting      fees                                                       |   |                    | 4,642      |   |                  |   | 6,530     |             |   |   | 10,612     |   |   |              | 12,500        |   |   |   | 147,427 |   |
| Bank charges and      interest                                                       |   |                    | 30         |   |                  |   | -         |             |   |   | 63         |   |   |              | 50            |   |   |   | 85,412 |   |
| Consulting fees      –                                                         |   |                    | 7,500      |   |                  |   | 46,161    |             |   |   | 15,000     |   |   |              | 77,828        |   |   |   | 578,309 |   |
| Salary and Wages                                                                     |   |                    | -          |   |                  |   |      |             |   |   | -          |   |   |              | 35,998        |   |   |   | 152,448 |   |
| Legal fees                                                                           |   |                    | -          |   |                  |   | 13,781    |             |   |   | (6,000     | )      |   |              | 16,645        |   |   |   | 107,243 |   |
| Office, telephone and      miscellaneous                                             |   |                    | 1,986      |   |                  |   | 10,251    |             |   |   | 6,242      |   |   |              | 14,058        |   |   |   | 176,965 |   |
| Software research and      development                                               |   |                    | -          |   |                  |   | -0-       |             |   |   | -          |   |   |              | -0-           |   |   |   | 66,410 |   |
| Transfer agent      fees                                                             |   |                    | (125       | )      |                  |   | -0-       |             |   |   | -          |   |   |              | 125           |   |   |   | 6,109 |   |
| Travel                                                                               |   |                    | -          |   |                  |   | 1,910     |             |   |   | -          |   |   |              | 3,262         |   |   |   | 83,218 |   |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Loss before other      items                                                         |   |                    | (14,033    | )      |                  |   | (114,631  | )                |   |   | (26,088    | )      |   |              | (160,466      | ) |   |   | (1,469,784 | ) |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Otheritems:                                                                          |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Write-off of      equipment                                                          |   |                    | -          |   |                  |   | 1,691     |             |   |   | 756        |   |   |              | 1,691         |   |   |   | (4,964 | ) |
| Loss on disposal of equipment      –                                           |   |                    | -          |   |                  |   | -         |             |   |   | -          |   |   |              | -             |   |   |   | (2,217 | ) |
|      (Gain)      on disposition of Azul Studios Property SL |   |                    | -          |   |                  |   |      |             |   |   | (11,384    | )      |   |              |          |   |   |   | (11,384 | ) |
| Write off of loan due from      3rd Parties                                          |   |                    | -          |   |                  |   | -0-  |             |   |   | 1,129      |   |   |              | 142,636  |   |   |   | 143,765 |   |
| Foreign currency      adjustments                                                    |   |                    | -          |   |                  |   | -         |             |   |   | 251        |   |   |              | -0-           |   |   |   | (1,702 | ) |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
|                                                                                 |   |                    |       |   |                  |   | (1,691)-  |             |   |   | (9,248     | )      |   |              | (140,945      | ) |   |   | (17,429 | ) |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Net loss for the      period                                                         |   | $                       | (14,033    | )      |                  | $      | (116,322  | )                |   | $      | (16,840    | )      |   | $                 | (19,521       | ) |   | $ | (1,346,286 | ) |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Basic and diluted loss per      share                                                |   | $                       | (0.00      | )      |                  | $      | (0.01     | )                |   | $      | (0.00      | )      |   | $                 | (0.02         | ) |   |   |   |   |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |
| Weighted average number of shares      outstanding for the period               |   |                    | 32,423,628 |   |                  |   | 5,576,082 |             |   |   | 32,423,628 |   |   |              | 5,576,082     |   |   |   |   |   |
|                                                                                 |   |                    |       |   |                  |   |      |             |   |   |       |   |   |              |          |   |   |   |   |   |

----

|                                                                                                      |   |                  |    |   |   |   |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------|---------|--------|--------|--------|
|                                                                                                      |   |                  |    |   |   |   |
|                                                                                                      |   |                  |    |   |   |   |
|                                                                                                      |   |                  |    |
|                                                                                                      |   | Six months      ended |    |
|                                                                                                      |   | September    30,      |    |
|                                                                                                      |   | 2006                  |    |   | 2007   |   |
|                                                                                                      |   |                  |    |   |   |   |
| Cash flows used in Operating      Activities                                                              |   |                  |    |   |   |   |
| Net loss for the      period                                                                              |   | $                     | (16,840 | )      |   | $      | (19,521 | ) |
| Add items not involving      cash:                                                                        |   |                  |    |   |   |   |   |   |
| Amortization                                                                                              |   |                  | 171     |   |   |   | 410 |   |
| Donated      interest                                                                                     |   |                  | -       |   |   |   | - |   |
| Write-off of      equipment                                                                               |   |                  | 756     |   |   |   | - |   |
| Loss on disposal of      equipment                                                                        |   |                  | -       |   |   |   | - |   |
|         Gain      on disposal of Azul Studios Property SL         |   |                  | (11,384 | )      |   |   | 13,199 | ) |
|         Write      off loan due from ASPSL                        |   |                  | 942     |   |   |   |   |   |
|         Foreign      currency adjustment                          |   |                  | 214     |   |   |   |   |   |
| Changes in non-cash working      capital item    related to      operations:          |   |                  |    |   |   |   |   |   |
| Accounts payables and accrued      liabilities                                                            |   |                  | (8,579  | )      |   |   | 61,756 |   |
|           Increase      in amounts due to related party |   |                  | 23,989  |   |   |   | 12,616 |   |
|                                                                                                      |   |                  | (10,731 | )      |   |   | (41,352 | ) |
|                                                                                                      |   |                  |    |   |   |   |   |   |
| Cash Flows used in Investing      Activity                                                                |   |                  |    |   |   |   |   |   |
| Acquisition of      equipment                                                                             |   |                  | -       |   |   |   | - | ) |
|                                                                                                      |   |                  |    |   |   |   |   |   |
| Cash Flows provided by Financing      Activities                                                          |   |                  |    |   |   |   |   |   |
| Increase in loan payable to      stockholders                                                             |   |                  | 10,240  |   |   |   | - |   |
| Increase in convertible      debenture                                                                    |   |                  | -       |   |   |   | - |   |
| Proceeds from common stock      subscriptions                                                             |   |                  | -       |   |   |   | 750,000 |   |
|      Net      cash decrease from disposition of ASPSL                            |   |                  | (628    | )      |   |   | - | ) |
|                                                                                                      |   |                  | 9,612   |   |   |   | 750,000 |   |
| Decrease in cash during the      period                                                                   |   |                  | (1,119  | )      |   |   | (791,352 | ) |
| Cash, beginning of the      period                                                                        |   |                  | 1,108   |   |   |   | 3,035 |   |
| Cash, end of the      period                                                                              |   | $                     | (11     | )      |   | $      | 794,387 | ) |
| Supplementary disclosure of cash      flow information                                                    |   |                  |    |   |   |   |   |   |
| Cash paid    for:                                                                                         |   |                  |    |   |   |   |   |   |
| Interest                                                                                                  |   | $                     | 63      |   |   | $      | 263 |   |

----

|                                                               |   |               |       |   |       |   |   |        |   |   | Deficit           |   |   |        |     |   |   |   |
|--------------------------------------------------------------------|--------|--------------------|------------|--------|------------|--------|--------|-------------|--------|--------|-------------------|--------|--------|-------------|----------|--------|--------|--------|
|                                                               |   |               |       |   |       |   |   | Accumulated |   |   | Deficit           |   |   |        |     |
|                                                               |   |               |       |   |       |   |   |        |   |   | During      prior |   |   | Accumulated |     |   |   |   |
|                                                               |   | Note      5        |       |   | Additional |   |   | Development |   |   | During      the   |   |   |        |     |
|                                                               |   | Common      Shares |       |   | Paid-in    |   |   | Stage       |   |   | Development       |   |   |        |     |
|                                                               |   | Number             |       |   | ParValue   |   |   | Capital     |   |   | (Note 1)          |   |   | Stage       |     |   | Total  |   |
|                                                               |   |               |       |   |       |   |   |        |   |   |              |   |   |        |     |   |   |   |
| Balance      April 1, 2007                                         |   |               | 32,523,628 |   |       |   | 3,252  |        |   |   | 1,385,766         |   |   |        | (151,117 | )      |   |   | (1,337,379 | ) |   |   | (99,478 | ) |
| Capital      stock subscribed for cash at $0.25 per share          |   |               | 606,000    |   |       |   | 90     |        |   |   | 151,439           |   |   |        |     |   |   |   |   |   |   |   | 151,529 |   |
| Proceeds      from Stock Transaction-Shares to be issued           |   |               |       |   |       |   |   |        |   |   | 750,000           |   |   |        |     |   |   |   |   |   |   |   | 750,000 |   |
| Net      income (loss) for the six months ended September 30, 2007 |   |               | -          |   |       |   | -      |        |   |   | -                 |   |   |        | -        |   |   |   | (19,521 | ) |   |   | (19,521 | ) |
|                                                               |   |               |       |   |       |   |   |        |   |   |              |   |   |        |     |   |   |   |   |   |   |   |   |   |
| Balance,      September 30, 2007                                   |   |               | 33,129,628 |   |       |   | 3,342  |        |   |   | 2,287,205         |   |   |        | (151,117 | )      |   |   | (1,203,361 | ) |   |   | 782,530 |   |
|                                                               |   |               |       |   |       |   |   |        |   |   |              |   |   |        |     |   |   |   |   |   |   |   |   |   |

----

|   | These      financial statements have been prepared in accordance with generally      accepted accounting principles applicable to a going concern, which      assumes that the Company will be able to meet its obligations and continue      its operations for its next fiscal year.  Realization values may      be substantially different from carrying values as shown and these      financial statements do not give effect to adjustments that would be      necessary to the carrying values and classification of assets and      liabilities should the Company be unable to continue as a going      concern.  At September 30, 2007, the Company had not yet      achieved profitable operations, has accumulated losses of $1,356,900 since      its inception, but has working capital of $794,387 but expects to incur      further losses in the development of its business, all of which casts      doubt about the Company’s ability to continue as a going      concern.  The Company’s ability to continue as a going concern      is dependent upon its ability to generate future profitable operations      and/or to obtain the necessary financing to meet its obligations and repay      its liabilities arising from normal business operations when they come      due.  Management considers that the Company will be able to      obtain additional funds by equity financing and/or related party advances,      however there is no assurance of additional funding being      available.   |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The      financial statements of the Company have been prepared in accordance with      accounting principles generally accepted in the United States of      America.  Because a precise determination of many assets and      liabilities is dependent upon future events, the preparation of financial      statements for a period necessarily involves the use of estimates which      have been made using careful judgement.  Actual results may vary      from these estimates. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      financial statements have, in management’s opinion, been properly prepared      within the framework of the significant accounting policies summarized      below: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company complies with FAS No. 7 for its characterization of the Company as      development stage. |
|--------|-------------------------------------------------------------------------------------------------------------|

|   | The      Company reports the impairment of long-lived assets and certain      identifiable intangibles in accordance with FAS No. 144, “Accounting for      the Impairment of Long-lived Assets”.  Certain long-lived assets      held by the Company are reviewed for impairment whenever assets or changes      in circumstances indicate the carrying amount of an asset may not be      recoverable.  Accordingly, an impairment loss is recognized in      the year it is determined. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company’s financial instruments consist primarily of cash, accounts      payable and accrued expenses, and debt.  The carrying amounts of      such financial instruments approximate their respective estimated fair      value due to the short-term maturities and approximate market interest      rates of these instruments.  The estimated fair value is not      necessarily indicative of the amounts the Company would realize in a      current market exchange or from future earnings or cash    flows. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | and      liabilities and their respective tax bases.  Deferred tax assets      and liabilities are measured using enacted tax rates expected to apply to      taxable income in the years in which those temporary differences are      expected to be recovered or settled.  When necessary, a      valuation allowance is recorded to reduce tax assets to an amount for      which realization is more likely than not.  The effect of      changes in tax rates is recognized in the period in which the rate change      occurs. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Effective      December 31, 2006, we adopted FIN 48, “Accounting for Uncertainty in      Income Taxes.” FIN 48 clarifies the accounting for uncertainty in      income taxes recognized in financial statements in accordance with SFAS      No. 109, “Accounting for      Income Taxes.” FIN 48 prescribes a recognition threshold and      measurement attribute for the financial statement recognition and      measurement of a tax position taken or expected to be taken in a tax      return. FIN 48 requires that we determine whether the benefit of our tax      positions is more likely than not to be sustained upon audit, based on the      technical merits of the tax position. For tax positions that are more      likely than not to be sustained upon audit, we recognize the greatest      amount of the benefit that is more likely than not to be sustained in our      consolidated condensed financial statements. For tax positions that are      not more likely than not to be sustained upon audit, we do not recognize      any portion of the benefit in our condensed consolidated financial      statements. The provisions of FIN 48 also provide guidance on      derecognition, classification, interest and penalties, accounting in      interim periods, and disclosure. Our policy for interest and penalties      under FIN 48, related to income tax exposures was not impacted as a result      of the adoption of the recognition and measurement provisions of FIN 48.      Therefore, we continue to recognize interest and penalties as incurred      within “income taxes”      in our condensed consolidated statements of operations, when      applicable. There was no change to our accumulated deficit as of December      31, 2006 as a result of the adoption of the recognition and measurement      provisions of FIN 48. We did identify certain potential liabilities that      would have met the pre FIN 48 accruals criteria, discussed above, and      therefore recorded the adjustment through our income tax provision in the      current period, as it      was not material to any periodsimpacted. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Equipment      is recorded at cost.  Amortization is provided using the      declining balance method at the followingrates: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

| Computer      equipment | 30% |
|-------------------------|-----|
| Computer software       | 40% |
| Office equipment        | 30% |
| Office furniture        | 20% |

----

|   | The      carrying value of the Company’s financial instruments, consisting of cash      and accounts payable and accrued liabilities approximate their fair value      due to the short term maturity of such instruments.  Due to      related parties and loans payable to stockholders also approximate fair      value. Unless otherwise noted, it is management’s opinion that the Company      is not exposed to significant interest, currency or credit risks arising      from these financial instruments. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company accounts for convertible debt as required by APB Opinion No. 14      “Accounting for Convertible Debt and Debt Issued with Stock Purchase      Warrants”. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company      adopted  SFAS  No.  123R,      "Accounting  for Stock-Based Compensation".  This      statement requires a      public  entity  to  measure  the      cost      of  employee  services  received  in      exchange for an award      of equity  instruments  based      on the grant-date fair value of the award (with limited exceptions). That      cost will be recognized over the period      during which an      employee is required to  provide  service. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company has a stock-based compensation plan, which is described in Note      5.  Under this plan, all stock based payments to non-employees      are accounted for using a fair value based method of      accounting.  No compensation expense is recognized when the      stock options are granted to employees or      directors.  Consideration received from employees, directors or      consultants on exercise of stock options is credited to share      capital.  If stock is repurchased from employees, directors or      consultants, the excess of the consideration paid over the carrying amount      of the stock is charged to deficit.  On the granting of stock      options to employees or directors the Company has elected to provide pro      forma disclosure on their fairvalue. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company’s previously wholly-owned subsidiary, Azul Studios Property S.L.      (disposed of on September 29, 2006), translates amounts from its      functional currency, Euro, to the reporting currency, United States      dollars, in accordance with FAS No. 52, “Foreign Currency      Translation”.  At each balance sheet date, recorded balances      that are denominated in a currency other than US dollars are adjusted to      reflect the current exchange rate which may give rise to a foreign      currency translation adjustment accounted for as a separate component of      stockholder’s deficiency and included in comprehensive loss.  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Monetary      assets and liabilities are translated into the functional currency at the      exchange rate in effect at the end of the period.  Non-monetary      assets and liabilities are translated at the exchange rate prevailing when      the assets were acquired or the liabilities assumed.  Revenues      and expenses are translated at the rate approximating the rate of exchange      on the transaction date.  All exchange gains and losses are      included in the determination of net loss for the  year. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|   | The      Company’s previously wholly-owned subsidiary, Azul Studios Property S.L.      (disposed of on September 29, 2006), translates amounts from its      functional currency, Euro, to the reporting currency, United States      dollars, in accordance with FAS No. 52, “Foreign Currency      Translation”.  At each balance sheet date, recorded balances      that are denominated in a currency other than US dollars are adjusted to      reflect the current exchange rate which may give rise to a foreign      currency translation adjustment accounted for as a separate component of      stockholder’s deficiency and included in comprehensive    loss. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Monetary      assets and liabilities are translated into the functional currency at the      exchange rate in effect at the end of the period. Non-monetary assets and      liabilities are translated at the exchange rate prevailing when the assets      were acquired or the liabilities assumed. Revenues and expenses are      translated at the rate approximating the rate of exchange on the      transaction date. All exchange gains and losses are included in the      determination of net loss for theyear. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | On      May 18, 2007, the Board of Directors, Compensation committee approved a      stock option plan for the Company which provides for the allocation of      options to purchase up to 2,100,000 common shares of the      Company.  The Board of Directors also approved the issuance of      options to two directors and one consultant to acquire, in aggregate up to      1,000,000 common shares of the Company at $0.25 per share.  The      options have a term of five years expiring in May 2012.  The      option plan is subject to approval by the directors and stockholders of      the Company. |
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|   | The      Company does not record compensation expense on the granting of stock      options to employees.  In accordance with FAS No. 123R      “Share-Based Payment”, disclosure of pro forma net loss and net loss per      share is required and is calculated by determining the fair value of the      options using fair value option pricing models.  The Company has      determined the fair value of vested employee stock options using the fair      value method. |
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|   | At      September 30, 2007, 312,715 share purchase warrants are      outstanding.  Each warrant entitles the holder to purchase an      additional common share of the Company at $0.50 per share until September      30, 2007. |
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|   | The      following table summarizes the significant components of the Company’s      future tax assets: |
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                            | 2007                                                                                         | 2006                                                                                         |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                            |                                                                                         |                                                                                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Future      tax assets                          |                                                                                         |                                                                                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Non-capital loss      carry-forward             | $398,290                                                                                     | $512,320                                                                                     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | Valuation      allowance for deferred tax asset | (398,290)                                                                                    | (512,320)                                                                                    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                            |                                                                                         |                                                                                         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                            | $               - | $               - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                            |                                                                                         |                                                                                         |   |
| The      Company accounts for income taxes using SFAS No. 109, “Accounting for      Income Taxes,” Which requires recognition of deferred tax liabilities and      assets for expected future tax consequences of events that have been      included in the financial statements or tax returns.  Under this      method, deferred tax liabilities and assets are determined based on the      difference between the financial statement and tax basis of assets and      liabilities using enacted tax rates in effect for the year in which the      differences are expected to reverse.  A valuation allowance is      recorded for deferred tax assets if it is more likely that not that some      portion or all of the deferred tax assets will not be      realized. |

|   | Effective      December 31, 2006, we adopted FIN 48, “Accounting for Uncertainty in      Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income      taxes recognized in financial statements in accordance with SFAS No. 109,      “Accounting for Income Taxes.” FIN48 prescribes a recognition threshold      and measurement attribute for the financial statement recognition and      measurement of a tax position taken or expected to be taken in a tax      return.  FIN 48 requires that we determine whether the benefit      of our tax positions is more likely than not to be sustained upon audit,      based on the technical merits of the tax position.  For tax      positions that are more likely than not to be sustained upon audit, we      recognize the greatest amount of the benefit that is more likely than not      to be sustained in our consolidated condensed financial      statements.  For tax positions that are not more likely than not      to be sustained upon audit, we do not recognize any portion of the benefit      in our condensed consolidated financial statements.  The      provisions of FIN48 also provide guidance on derecognition,      classification, interest and penalties, accounting in interim periods, and      disclosure.  Our policy for interest and penalties under FIN 48,      related to income tax exposures was not impacted as a result of the      adoption of the recognition and measurement provisions of FIN      48.  Therefore, we continue to recognize interest and penalties      as incurred within “income taxes” in our condensed consolidated statements      of operations, when applicable.  There was no change to our      accumulated deficit as of December 31, 2006 as a result of the adoption of      the recognition and measurement provisions of FIN 48.  We did      identify certain potential liabilities that would have met the pre FIN 48      accruals criteria, discussed above, and therefore recorded the adjustment      through our income tax provision in the current period, as it was not      material to any periods impacted. |
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|   | As      at September 30, 2007, the Company has accumulated non-capital losses      totaling approximately $1,356,900, which are available to reduce taxable      income in future taxation years.  These losses expire beginning      in 2017.  The potential benefit of these losses, if any, has not      been recorded in the financialstatements. |
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| a)   | On      August 10, 2007 the Company completed upon an additional private placement      of 2,008,000 shares at a price of $0.25 per share with aggregate proceeds      of $502,000 pursuant to a regulation 506 exemption from      registration. |
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| b)   | On      August 11, 2007 the Company completed upon additional private placement of      shares at a price of $1.00 per share with aggregate proceeds of $37,000      pursuant to a regulation 506 exemption from  registration. |
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| 31.1 | CERTIFICATION      PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO      SECTION 302      OF THE SARBANES-OXLEY ACT OF      2002 |
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| 32.1 | CERTIFICATION      PURSUANT TO 18 U.S.C. SECTION 1350, AS      ADOPTED PURSUANT TO SECTION      906 OF THE SARBANES-OXLEY ACT OF  2002 |
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|                    | Modern      City Entertainment Inc. |                                                        |
|-------------------------|-------------------------------------|-------------------------------------------------------------|
|                    |                                |                                                        |   |
| Date:      May 30, 2008 | By:                                 | /s/ William      Erfurth      |   |
|                    |                                | William      Erfurth               |   |
|                    |                                | President      and Director                                 |   |
|                    |                                |                                                        |   |

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