================================================================================

                              U.S. SECURITIES AND
                               EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended December 31, 2005
              ----------------------------------------------------

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

                        For the transition period from to
            --------------------------------------------------------

                        Commission file number 000-50468
            --------------------------------------------------------

                         Azul Studios International Inc.
   --------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

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

            Suite 4500 - 601 Union Street, Seattle, Washington, 98101
   ---------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (206) 262-9545
               --------------------------------------------------
                           (Issuer's telephone number)


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

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of May 31, 2006,  32,423,628 Shares
of common stock, $0.0001 par value, were outstanding.

Transitional small business disclosure format  (check one):  Yes [   ]   No [X]

<page>

                         AZUL STUDIOS INTERNATIONAL INC.

                                   FORM 10-QSB

                                DECEMBER 31, 2005

                                      INDEX


PART I         FINANCIAL INFORMATION..........................................3

Item 1.        Financial Statements...........................................3

Item 2.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations.................15

Item 3.        Controls and Procedures.......................................16

PART II        OTHER INFORMATION.............................................16

Item 1.        Legal Proceedings.............................................16

Item 2.        Change in Securities..........................................16

Item 3.        Defaults upon Senior Securities...............................17

Item 4.        Submission of Matters to a Vote of Security Holders...........17

Item 5.        Other Information.............................................17

Item 6.        Exhibits and Reports on Form 8-K..............................17


                                      -2-

<page>

PART I     FINANCIAL INFORMATION

Item 1.    Financial Statements


                         Azul Studios International Inc.

                          (A Development Stage Company)

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2005

                             (Stated in US Dollars)

                                   (Unaudited)


                                      -3-

<page>

                             SEE ACCOMPANYING NOTES
                         Azul Studios International Inc.
                          (A Development Stage Company)
                       INTERIM CONSOLIDATED BALANCE SHEETS
                      December 31, 2005 and March 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)
<table>
<caption>
                                                                                     December 31,        March 31,
                                                     ASSETS                              2005               2005
                                                     ------                              ----               ----

                                                                                <c>               <c>
Current
    Cash                                                                           $         1,539   $        4,721

Equipment - Note 3                                                                           1,117            1,717
                                                                                   ---------------   --------------

                                                                                   $         2,656   $        6,438
                                                                                   ===============   ==============

                                                 LIABILITIES
                                                 -----------
Current
    Accounts payable and accrued liabilities - Notes 5 and 6                       $        30,758   $      180,218
    Due to related parties - Notes 5 and 6                                                   9,292            4,969
                                                                                   ---------------   --------------

                                                                                            40,050          185,187
                                                                                   ---------------   --------------

                                          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
    32,423,628 shares issued (March 31, 2005: 5,576,082)                                     3,242              558
Additional paid-in capital                                                               1,359,622        1,093,831
Deficit accumulated during the prior development stage                                    (151,117)        (151,117)
Deficit accumulated during the development stage                                        (1,249,141)      (1,122,021)
                                                                                   ---------------   --------------

                                                                                           (37,394)        (178,749)
                                                                                   ---------------   --------------

                                                                                   $         2,656   $        6,438
                                                                                   ===============   ==============
</table>

                             SEE ACCOMPANYING NOTES

                                      -4-

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
              for the three and nine months ended December 31, 2005
                and 2004, and for the period April 1, 2000 (Date
                         of Commencement of Development
                           Stage) to December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)
<table>
<caption>
                                                                                                                 April 1, 2000
                                                                                                                   (Date of
                                                                                                                 Commencement
                                                                                                                of Development
                                                  Three months ended                 Nine months ended             Stage) to
                                                      December 31,              December 31,     December 31,     December 31,
                                                2005             2004             2005             2004             2005
                                                ----             ----             ----             ----             ----

                                       <c>           <c>                <c>             <c>               <c>
Expenses
 Advertising and promotion                  $        331  $         5,540  $        2,984   $        11,604  $        44,692
 Amortization                                        190              478             600             1,608           21,018
 Audit and accounting fees - Note 5                5,216            7,321          16,094            23,394          101,891
 Bank charges and interest                            89              277             335               891           84,105
 Consulting fees - Note 5                          9,000           24,700          42,000            73,200          486,981
 Investor relations and marketing fees
 - Note 5                                          6,090           12,365          28,270            42,590          107,450
 Legal fees - Note 5                               5,978            6,000          19,544            22,306           89,386
 Office, telephone and miscellaneous
 - Note 5                                          5,505           16,988          15,700            43,940          153,114
 Software research and development                     -                -               -                 -           66,410
 Transfer agent fees                                   -                -             198             2,430            6,123
 Travel                                                -            1,607           1,416            14,119           79,956
                                          ---------------  ---------------  --------------   ---------------  ---------------

Loss before other items                          (32,399)         (75,276)       (127,141)         (236,082)      (1,241,126)
                                          ---------------  ---------------  --------------   ---------------  ---------------

Other items:
  Write-off of equipment                               -           (2,686)              -            (2,686)          (4,011)
  Loss on disposal of equipment                        -                 -               -            (2,217)          (2,217)
  Gain (loss) on foreign exchange                     90               383              21               383           (1,787)
                                          ---------------   ---------------  --------------   ---------------  ---------------

                                                      90           (2,303)             21            (4,520)          (8,015)
                                          ---------------  ---------------  --------------   ---------------  ---------------

Net loss for the period                      $   (32,309) $       (77,579) $     (127,120)  $      (240,602) $    (1,249,141)
                                          ===============  ===============  ==============   ===============  ===============

Basic and diluted loss per share             $     (0.01) $         (0.01) $        (0.02)  $         (0.05)
                                          ===============  ===============  ==============   ===============

Weighted average number of shares
 outstanding for the period                    5,867,903        5,576,082       5,673,709         5,162,161
                                          ===============  ===============  ==============   ===============
</table>



                             SEE ACCOMPANYING NOTES

                                      -5-

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
              for the nine months ended December 31, 2005 and 2004,
                     and for the period April 1, 2000 (Date
                         of Commencement of Development
                           Stage) to December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)
<table>
<caption>
                                                                                                                 April 1, 2000
                                                                                                                   (Date of
                                                                                                                 Commencement
                                                                                                                of Development
                                                                                  Nine months ended               Stage) to
                                                                                      December 31,                December 31,
                                                                                2005              2004                2005
                                                                                ----              ----                ----

                                                                        <c>             <c>                <c>
Cash flows used in Operating Activities
  Net loss for the period                                                  $     (127,120)  $      (240,602)  $     (1,249,141)
  Add items not involving cash:
   Amortization                                                                       600             1,608             21,018
   Write-off of equipment                                                               -             2,686              4,011
   Loss on disposal of equipment                                                        -             2,217              2,217
  Changes in non-cash working capital items related to operations:
   Prepaid expenses                                                                     -              (594)                 -
   Payables and accrued liabilities                                               114,351            19,314            469,161
                                                                           ---------------   ---------------   ----------------

                                                                                  (12,169)         (215,371)          (752,734)
                                                                           ---------------   ---------------   ----------------

Cash Flows used in Investing Activity
   Acquisition of capital assets                                                        -                 -            (16,447)
                                                                           ---------------   ---------------   ----------------

Cash Flows provided by Financing Activities
    Increase in amount due to related parties                                       8,987             4,666             13,956
    Increase in loans payable to stockholders                                                          210,720            363,496
    Increase in convertible debenture                                                   -                 -            278,114
    Proceeds from common stock subscriptions                                                                 -             35,000
                                                                           ---------------   ---------------   ----------------

                                                                                    8,987           215,386            690,566
                                                                           ---------------   ---------------   ----------------

    Increase (decrease) in cash during the period                                  (3,182)               15            (78,615)

    Cash, beginning of the period                                                   4,721             5,241             80,154
                                                                           ---------------   ---------------   ----------------

    Cash, end of the period                                                $        1,539   $         5,256   $          1,539
                                                                           ===============   ===============   ================

    Supplementary disclosure of cash flow information Cash paid for:
    Interest                                                               $            -   $             -   $            620
                                                                           ===============   ===============   ================
</table>
Non-cash transactions - Notes 4 and 5


                             SEE ACCOMPANYING NOTES

                                      -6-

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
                 INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS'
              DEFICIENCY for the period September 23, 1996 (Date of
                         Inception) to December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)
<table>
<caption>
                                                                                          Deficit
                                                                                         Accumulated     Deficit
                                                                                         During prior  Accumulated
                                                              Note 4          Additional  Development   During the
                                                           Common Shares       Paid-in      Stage      Development
                                                     ----------------------
                                                        Number    Par Value    Capital    (Note 1)       Stage         Total
                                                        ------    ---------    -------    --------       -----         -----

                                                <c>           <c>        <c>         <c>        <c>            <c>
Stock issued for cash      - at $0.20 per share            500   $        -   $     100   $       -   $           -   $      100
Cash contributed by a director                               -            -         100           -               -          100
Additional paid-in capital for
organizational  expenses incurred by a director on
behalf of the Company                                        -            -         972           -               -          972
Stock issued for "The Source" license at
fair market value of
                           - at $0.002 per share       522,750           52         993           -               -        1,045
Net loss for the period                                      -            -          -            -               -            -
                                                   ------------- ----------- ----------- -----------   ------------- ------------

Balance, March 31, 1997                                523,250           52       2,165           -               -        2,217
Cash contributed by a director                               -            -         100           -               -          100
Stock issued for "Humates" license
at a fair market value of
                            - at $0.002 per share       50,000            5          95           -               -          100
Additional paid-in capital for organizational
expenses incurred by a director on behalf of
the Company                                                  -            -         346           -               -          346
Net loss for the year ended March 31, 1998                   -            -           -           -               -            -
                                                   ------------- ----------- ----------- -----------   ------------- ------------

Balance, March 31, 1998                                573,250           57       2,706           -               -        2,763
Additional paid-in capital for organizational
expenses incurred by a director on behalf of
the Company                                                  -            -         160           -               -          160
Net loss for the year ended March 31, 1999                   -            -           -           -               -            -
                                                   ------------- ----------- ----------- -----------   ------------- ------------

Balance, March 31, 1999                                573,250           57       2,866           -               -        2,923
Capital stock issued for cash at $0.0002 per share   3,000,000          300         300           -               -          600
Cancelled shares                                    (1,000,000)        (100)        100           -               -            -
Net loss for the year ended March 31, 2000                   -            -           -    (151,117)              -     (151,117)
                                                  -------------- ----------- ----------- -----------   ------------- ------------

Balance, March 31, 2000                              2,573,250          257       3,266    (151,117)              -     (147,594)
</table>
                                                                        ./cont'd

                             SEE ACCOMPANYING NOTES

                                      -7-

<page>

                         AZUL STUDIOS INTERNATIONAL INC.               Continued
                          (A Development Stage Company)
                 INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS'
              DEFICIENCY for the period September 23, 1996 (Date of
                         Inception) to December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)

<table>
<caption>
                                                                                          Deficit
                                                                                         Accumulated     Deficit
                                                                                         During prior  Accumulated
                                                              Note 4          Additional  Development   During the
                                                           Common Shares       Paid-in      Stage      Development
                                                     ----------------------
                                                        Number    Par Value    Capital    (Note 1)       Stage         Total
                                                        ------    ---------    -------    --------       -----         -----

                                                <c>           <c>        <c>         <c>        <c>            <c>

Balance, March 31, 2000 (forward)                    2,573,250          257       3,266     (151,117)            -     (147,594)
Net loss for the year ended March 31, 2001                   -            -           -            -      (432,637)    (432,637)
                                                  -------------- ----------- ------------ ------------ ------------- -----------

Balance, March 31, 2001                              2,573,250          257       3,266     (151,117)     (432,637)    (580,231)
Net loss for the year ended March 31, 2002                   -            -           -            -      (105,220)    (105,220)
                                                  -------------- ----------- ------------ ------------ ------------- -----------

Balance, March 31, 2002                              2,573,250          257       3,266     (151,117)     (537,857)    (685,451)
Capital stock subscribed pursuant to debt
settlement agreements                                  229,499           23     114,176            -             -      114,199
Capital stock subscribed pursuant to
conversion of debentures                             1,222,903          122     611,330            -             -      611,452
Net loss for the year ended March 31, 2003                   -            -           -            -       (54,557)     (54,557)
                                                  -------------- ----------- ------------ ------------ ------------- -----------

Balance, March 31, 2003                              4,025,652          402     728,772     (151,117)     (592,414)     (14,357)
Capital stock subscribed at $0.02 per share
pursuant to debt settlement agreements                 500,000           50       9,950            -             -       10,000
Capital stock subscribed for cash
           - at $0.10 per share                        350,000           35      34,965            -             -       35,000
Capital stock subscribed pursuant to debt
settlement agreement, valued
           - at $0.10 per share                         75,000            8       7,492            -             -        7,500
Net loss for the year ended March 31, 2004                   -            -           -            -      (231,518)    (231,518)
                                                  -------------- ----------- ------------ ------------ ------------- -----------

Balance, March 31, 2004                              4,950,652          495     781,179     (151,117)     (823,932)    (193,375)
Capital  stock and warrants  issued  pursuant
to debt  settlement agreement
- Note 4   - at $0.50 per share                        625,430           63     312,652            -             -      312,715
Net loss for the year ended March 31, 2005                   -            -           -            -      (298,089)    (298,225)
                                                  -------------- ----------- ------------ ------------ ------------- -----------

Balance, March 31, 2005                              5,576,082          558   1,093,831     (151,117)   (1,122,021)    (178,749)
</table>
                                                                        /cont'd

                             SEE ACCOMPANYING NOTES

                                      -8-

<page>

                         AZUL STUDIOS INTERNATIONAL INC.               Continued
                          (A Development Stage Company)
                 INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS'
              DEFICIENCY for the period September 23, 1996 (Date of
                         Inception) to December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)


<table>
<caption>
                                                                                          Deficit
                                                                                         Accumulated     Deficit
                                                                                         During prior  Accumulated
                                                              Note 4          Additional  Development   During the
                                                           Common Shares       Paid-in      Stage      Development
                                                     ----------------------
                                                        Number    Par Value    Capital    (Note 1)        Stage         Total
                                                        ------    ---------    -------    --------        -----         -----

                                                <c>           <c>        <c>         <c>        <c>            <c>


Balance, March 31, 2005 (forward)                    5,576,082          558    1,093,831     (151,117)  (1,122,021)  (178,749)
Capital stock issued to settle debts
                 - at 0.01 per share                26,847,546        2,684      265,791            -            -    268,475
Net loss for the six months ended
December 31, 2005                                            -            -            -            -     (127,120)  (127,120)
                                                  -------------- ------------ ----------- ------------ ------------ ----------

Balance, December 31, 2005                          32,423,628   $    3,242  $ 1,359,622   $ (151,117) $(1,249,141)  $(37,394)
                                                  ============== ============ =========== ============ ============ ==========
</table>
 Par value and additional paid-in capital have been retroactively adjusted for
                changes in par value due to the merger (Note 1).

                                      -9-

                             SEE ACCOMPANYING NOTES

<page>


                         Azul Studios International Inc.
                          (A Development Stage Company)
             NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2005
                             (Stated in US Dollars)
                                   (Unaudited)

Note 1        Nature and Continuance of Operations
              ------------------------------------
              Azul Studios  International  Inc. (the "Company") was incorporated
              on  September  23,  1996  under  the laws of the State of Texas as
              Alvin  Consulting  Inc. On July 15, 1999, the  stockholders of the
              Company approved a merger with a newly incorporated company in the
              State of Washington and the surviving company, Realty Technologies
              Inc.,  operates  under  the laws of the  State of  Washington.  On
              August 12, 1999  stockholders of the Company approved an amendment
              to the articles of the Company  changing its name to Equinta Corp.
              On April 10,  2000,  the  stockholders  of the Company  approved a
              change to the articles of the Company changing its name to Courier
              Corps Inc. On May 16, 2000, the  stockholders the Company approved
              a change in the name of the Company to eCourierCorps Inc. On March
              12,   2004,   the  Company   changed  its  name  to  Azul  Studios
              International  Inc. and adopted a business plan to develop a group
              of boutique hotels catering to the professional  photographers and
              film artists. In July, 2004 the Company  incorporated Azul Studios
              Properties S.L., in Barcelona, Spain, a wholly-owned subsidiary to
              hold the property that the Company intends to acquire in Spain and
              to operate  the Azul  Studios  facility  to be  developed  in that
              country. The Company also incorporated a wholly-owned corporation,
              Azul Media Inc., in the State of Washington on March 8, 2005.  The
              Company  intends to develop a group of  professional  photographic
              studios in select locales around the world. Currently, the Company
              has no revenue.

              The Company is currently a  development  stage  company as defined
              under Statement of Financial  Accounting  Standards ("FAS") No. 7.
              As required for development stage  enterprises,  the statements of
              operations and cash flows include a total of all expenditures from
              the Date of Commencement of the Development  Stage (April 1, 2000)
              to  December  31,  2005.  Prior  to  April 1,  2000,  the  Company
              developed and sold the rights to a web based internet  application
              in the real estate industry.

              These  financial  statements have been prepared in accordance with
              generally  accepted  accounting  principles  applicable to a going
              concern prepared on a going concern basis,  which assumes that the
              Company  will be able to meet its  obligations  and  continue  its
              operations for its next twelve months.  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.  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. At December 31, 2005, the
              Company  had  not  yet   achieved   profitable   operations,   has
              accumulated  losses  of  $1,400,258  since  its  inception,  has a
              working capital deficiency of $38,511 and expects to incur further
              losses in the  development  of its  business,  all of which  casts
              substantial  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 has no formal
              plan in place to  address  this  concern  but  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.

                                      -10-

<page>

Azul Studios International Inc.
(A Development Stage Company)
Notes to the Interim Consolidated Financial Statements
December 31, 2005
(Stated in US Dollars)
(Unaudited) - Page 2
 ---------



Note 2        Basis of Presentation
              ---------------------
              The  accompanying   consolidated financial  statements include the
              accounts of Azul Studios International  Inc. and its  wholly-owned
              subsidiaries, Azul Studios  Property  S.L. and Azul Media Inc. All
              significant  intercompany  balances  and  transactions  have  been
              eliminated.

              The  accompanying   unaudited   interim   consolidated   financial
              statements  have been prepared by the Company in  conformity  with
              generally accepted  accounting  principles of the United States of
              America.  Certain  information and footnote  disclosures  normally
              included  in  financial  statements  prepared in  accordance  with
              generally  accepted  accounting  principles,  however,  have  been
              condensed or omitted  pursuant to the rules and regulations of the
              Securities and Exchange Commission.  In the opinion of management,
              all  adjustments  (consisting  of  normal  recurring  adjustments)
              considered  necessary for a fair  presentation have been included.
              The results of operations for interim  periods are not necessarily
              indicative  of the  results to be expected  for the entire  fiscal
              year ending March 31, 2006.  These  interim  financial  statements
              should  be  read  in  conjunction   with  the  audited   financial
              statements for the years ended March 31, 2005 and 2004 included in
              the  Company's  Form  10-KSB  as  filed  with the  Securities  and
              Exchange Commission.

Note 3        Equipment
<table>
<caption>
                                                                                 December 31, 2005
                                                                 --------------------------------------------------
                                                                                   Accumulated
                                                                      Cost         Depreciation          Net
           
                                                  <c>              <c>              <c>
            Computer equipment                                   $           -    $           -    $           -
            Computer software                                              544              511               33
            Office equipment                                             2,778            2,390              388
            Office furniture                                             3,772            3,076              969
                                                                 -------------    -------------    -------------

                                                                 $       7,094    $       5,977    $       1,117
                                                                 =============    =============    =============


                                                                                  March 31, 2005
                                                                 --------------------------------------------------
                                                                                    Accumulated
                                                                      Cost         Depreciation          Net

            Computer equipment                                   $      17,167    $      17,167    $           -
            Computer software                                              544              497               47
            Office equipment                                             2,778            2,282              496
            Office furniture                                             3,772            2,598            1,174
                                                                 -------------    -------------    -------------

                                                                 $      24,261    $      22,544    $       1,717
                                                                 =============    =============    =============
</table>
                                      -11-

<page>

Azul Studios International Inc.
(A Development Stage Company)
Notes to the Interim Consolidated Financial Statements
December 31, 2005
(Stated in US Dollars)
(Unaudited) - Page 3
 ---------

Note 4        Capital Stock
              -------------
              Effective  December 30, 2005, the Company reverse split its issued
              common stock on the basis of one new share for two old shares. The
              number of shares  referred to in these  financial  statements  has
              been restated  wherever  applicable to give retroactive  effect to
              the reverse stock splits.  Accordingly  the issued and outstanding
              shares of common stock of the Company was reduced from  11,152,164
              to 5,576,082, and the Articles of Incorporation of the Company was
              amended to reduce  the  authorized  shares of common  stock of the
              Company from 100,000,000 to 50,000,000.

              The  retroactive  restatement  of  the  issued  common  shares  is
              required  by  the  Securities  and  Exchange   Commission's  Staff
              Accounting Bulletin, Topic 4c.

              Changes in Securities
              ---------------------
              On December  31, 2005,  the Company  issued  26,847,546  shares at
              $0.01  per share to  settle  debts  with  related  parties  of the
              Company.

              Stock Option Plan and Stock-based Compensation
              ----------------------------------------------
              In June 2003, the Board of Directors  approved a stock option plan
              for the  Company  which  provides  for  allocation  of  options to
              purchase up to 375,000 common shares of the Company.  The Board of
              Directors  also  approved the issuance of options to a director to
              acquire up to 125,000  common  shares of the  Company at $0.50 per
              share. The options have a term of ten years expiring in June 2013.
              The option plan is subject to approval by the  stockholders of the
              Company.

              In March 2004,  the Board of  Directors  approved  the issuance of
              options  to a  director  of the  Company  to acquire up to 125,000
              shares of common stock at $0.50 per share. The options vest over a
              period  of two  years  evenly  every 3  months  from  the  date of
              issuance  and once vested may be  exercised  at any time up to ten
              years  expiring in March,  2014. At December 31, 2005,  109,375 of
              these options were exercisable.

              The Company does not record  compensation  expense on the granting
              of stock  options to  employees.  In  accordance  with FAS No. 123
              "Accounting for Stock-based  Compensation" disclosure of pro forma
              net loss and net loss per share is  required  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 minimum  value  method  which does not consider
              volatility of the Company's share price. Had compensation expenses
              for the Company's stock option plan been  determined  based on the
              minimum value method at the date the stock  purchase  options were
              granted there would be no effect on pro forma loss.

                                      -12-

<page>

Azul Studios International Inc.
(A Development Stage Company)
Notes to the Interim Consolidated Financial Statements
December 31, 2005
(Stated in US Dollars)
(Unaudited) - Page 4
 ---------


Note 4        Capital Stock - (cont'd)
              -------------

              Stock Option Plan and Stock-based Compensation - (cont'd)
              ----------------------------------------------

              The fair value for these stock  options was estimated at the grant
              date using the following weighted average assumptions:

                  Expected volatility                                         0%
                  Dividend yield                                              0%
                  Weighted average expected life of stock options         10 yrs
                  Risk-free interest rate                                  4.04%

              During the year ended March 31,  2005,  the Board of  Directors of
              the Company  approved the  formation of an advisory  Board for the
              Company comprised of individuals with backgrounds complimentary to
              the business  plans of the Company.  Each member of that  advisory
              Board  will be  compensated  with  stock  options to acquire up to
              50,000  shares  in  the  common  stock  of  the  Company,  vesting
              quarterly over two years and  exercisable at $0.50 per share.  The
              vesting  period on the options  commences  the date of the initial
              meeting  of  the  Advisory   Board.   The  Company   considers  it
              appropriate  to measure  the fair value of the  options  using the
              stock  price  and  other  measure  assumptions  on the date of the
              initial meeting of the Advisory Board. As of December 31, 2005, no
              such meeting has been held, and the options have not been valued.

              Share Purchase Warrants

              At  December  31,  2005,   312,715  share  purchase  warrants  are
              outstanding.  Each  warrant  entitles  the holder to purchase  one
              additional  common  share of the  company at $0.50 per share until
              September 30, 2007.

Note 5        Related Party Transactions - Note 4
              --------------------------

              a)  Amounts paid or accrued to  directors  of the Company,  former
                  directors  of the  Company and  related  companies  in which a
                  director is a partner or associate are as follows:
<table>
<caption>
                                                                                        Nine months ended
                                                                                          December 31,
                                                                                     2005              2004
                                                                                     ----              ----
                 
                                                          <c>               <c>
                  Accounting fees                                              $         6,663   $        14,944
                  Consulting fees                                                       42,000            60,700
                  Investor relation fees                                                28,000            36,000
                  Legal fees                                                            18,000            18,000
                  Office, telephone and miscellaneous                                    5,606            19,300
                                                                               ---------------   ---------------

                                                                               $       100,269   $       148,944
                                                                               ===============   ===============
</table>
                                      -13-

<page>

Azul Studios International Inc.
(A Development Stage Company)
Notes to the Interim Consolidated Financial Statements
December 31, 2005
(Stated in US Dollars)
(Unaudited) - Page 5
 ---------




Note 5        Related Party Transactions - Note 4 - (cont'd)
              --------------------------

              b)  Included in accounts  payable  and accrued  liabilities  as at
                  December 31, 2005 is $100 (March 31, 2005:  $160,079) due to a
                  director of the  Company,  a company in which a director is an
                  associate and companies controlled by a former director of the
                  Company.

              c)  Amounts due to  related  parties  of  $9,292  (March 31, 2005:
                  $4,969) are owing to stockholders and a former director of the
                  Company and are  non-interest  bearing,  unsecured and have no
                  specific terms of repayment.

Note 6        Subsequent Events
              -----------------
              On January 23, 2006 the Company borrowed $5,875 from a shareholder
              of  the  Company.  The Company has agreed that when  the  loan  is
              repaid  that an interest amount equal to 100% of the loan proceeds
              will be  paid.  The  repayment  term is not  fixed.  The  loan  is
              secured by other  shareholders of the  Company to be paid from any
              proceeds that they may receive upon the sale of their shares.



                                      -14-

<page>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

Certain statements contained in this Quarterly Report on Form 10-QSB, including,
without limitation,  statements containing the words "believes, " "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward looking
statements."  You should not place  undue  reliance  on these  forward-  looking
statements. Our actual results could differ materially from those anticipated in
these forward- looking statements for many reasons, including the risks faced by
us described in this  Quarterly  Report and in other  documents we file with the
Securities and Exchange Commission.

BUSINESS  DEVELOPMENT

During the quarter and to date the Company has  continued  to devote its efforts
into  establishing  a new business  comprised of developing  boutique  hotels in
select locations in the world catering to the professional  photographer or film
artist. The company has been focused upon securing equity and debt financing and
has  viewed a number  of  properties  in Ibiza,  Spain.  To date,  no  operating
revenues have been  generated.  The  Company's  operations to date have consumed
substantial amounts of cash. The Company's negative cash flow from operations is
expected to continue and to accelerate in the foreseeable  future as the Company
secures  and  redevelops  it's  initial  property.  Cash  flows  generated  from
financing activities are the current focus of the Company's efforts.

During the quarter ended  December 31, 2005 and to date,  the primary  source of
capital has been loans from existing shareholders.  It is management's intention
to  secure   additional  debt  and  equity  financings  by  way  of  securing  a
conventional  mortgage on the  property it is planning on  acquiring,  debt from
shareholders and through private placements of the Company's common stock.

The Company's  continued  existence as a going  concern is ultimately  dependent
upon its  ability to secure  funding on an ongoing  basis.  The Company has been
seeking  investment  capital for the  acquisition and development of its initial
property,   acquisition  of  equipment,   the  marketing  of  its  business  and
development  of  successful   operations.   The  funding  will  be  required  at
accelerating  rates once the Company becomes  committed to its initial property.
There can be no  assurance  that such  additional  funding  will be available on
acceptable terms, if at all.

FINANCIAL  RESULTS

During the nine months ended  December  31, 2005 the Company  incurred a loss of
$127,120,  compared with a loss of $240,602 for the corresponding  period of the
prior fiscal year. This decrease in the net loss reflects  primarily the limited
ability of the Company to raise  capital and thus limits the  Company's  growing
efforts  in  developing  the Azul  business  initiative.  Much of the  Company's
expenses are  associated  with  administrative  costs and the cost of filing its
quarterly  report and other filings in compliance  with the  requirements of the
Securities and Exchange Commission of the United States after the Company became
a reporting enterprise with the SEC.

The funding of  operations  during the nine months ended  December 31, 2005 were
provided by creditors  of the  Company,  providing  services  unpaid  during the
period aggregating  $114,351. In addition related party loans of $8,987 assisted
with the Company's expenditures.

                                      -15-

<page>

LIQUIDITY  AND  CAPITAL  RESOURCES

As at December 31, 2005, the Company had $1,539 in cash, as compared with $4,721
in cash at March 31,  2005.  At  December  31,  2005,  the Company had a working
capital deficiency of $38,511.  This working capital deficiency balance reflects
the  settlement  of  $268,475  of debts owed by the  Company by the  issuance of
shares  of  the  capital  stock  of  the  Company.   Of  the  company's  current
liabilities,  $9,392  is  due  to  stockholders,  officers  and  affiliates  and
accordingly,  the working capital deficiency for trade creditors is $29,119.  Of
that working capital  deficiency  $8,676 relates to the Company's  subsidiary in
Barcelona,  Spain.  During the period under review the Company has substantially
improved its working capital deficiency position.

Item 3.    Controls and Procedures

Management, including the Company's President, Chief Executive Officer and Chief
Financial  Officer,  has evaluated,  as of the end of the period covered by this
report,  the  effectiveness  of  the  design  and  operation  of  the  Company's
disclosure controls and procedures with respect to the information generated for
use in this report.  Based upon that evaluation,  the management  concluded that
the  disclosure  controls and procedures  were  effective to provide  reasonable
assurances  that  information  required to be disclosed in the reports  filed or
submitted  under the Securities  Exchange Act of 1934, as amended,  is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
rules and forms of the Securities and Exchange Commission.

There have been no changes in the  Company's  internal  control  over  financial
reporting  that  occurred  during the  Company's  last fiscal  quarter that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
Company's internal control over financial reporting.


PART II         OTHER INFORMATION

Item 1.    Legal Proceedings

The  Company  is not a  party  to any  pending  legal  proceedings,  and no such
proceedings are known to be contemplated.  No director,  officer or affiliate of
the Company, and no owner of record or beneficial owner of more than 5.0% of the
securities  of the Company,  or any associate of any such  director,  officer or
security  holder is a party  adverse to the  Company or has a material  interest
adverse to the Company in reference to pending litigation.


Item 2.    Change in Securities

Effective  December 30, 2005, the Company  reverse split its issued common stock
on the basis of one new for two old.  and the Articles of  Incorporation  of the
Company  was  amended to reduce  the  authorized  shares of common  stock of the
Company  from  100,000,000  to  50,000,000.  The  number of shares and the share
prices referred to in this report have been restated wherever applicable to give
retroactive effect on the reverse stock splits.

On December 31, 2005, the Company issued 26,847,546 shares at $0.01 per share to
settle debts with related parties of the Company.

                                      -16-

<page>

Item 3.    Defaults upon Senior Securities

None

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

None

Item 5.    Other Information

None

Item 6.    Exhibits and Reports on Form 8-K

           1 for 2 Reverse Split of Authorized Capital and Unregistered Sales of
           Equity Securities


A. Exhibits

Exhibit No.       Descriptions

31.1            Certification of Chief Executive officer pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002

31.2            Certification of Chief Financial Officer Pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002

32.1            Certification of Chief Executive Officer pursuant to  18  U.S.C.
                Section  1350,  as  Adopted  Pursuant  to  Section  906  of  the
                Sarbanes-Oxley Act of 2002

32.2            Certification of Chief Financial Officer Pursuant to  18  U.S.C.
                Section  1350,  as  Adopted  Pursuant  to  Section  906  of  the
                Sarbanes-Oxley Act of 2002


B. Reports on Form 8-K



                                      -17-

<page>

                                   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.


                                        Azul Studios International Inc.

Date: June 21, 2006                     By:    James Vandeberg
                                               -----------------------------
                                               Name: James Vandeberg
                                               Title: President and Director


Date: June 21, 2006                      By:   Michael Lorenz
                                               -----------------------------
                                               Name: Michael Lorenz
                                               Title: Director