**U.S.      SECURITIES AND EXCHANGE COMMISSION**

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**FORM        10-QSB**

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|   | [X]     QUARTERLY  REPORT  PURSUANT  TO  SECTION                13 OR 15(d) OF THE SECURITIES |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | EXCHANGE  ACT  OF  1934 |
|--------|-------------------------------------------------------|

|   | For                the quarterly period ended September 30,                2006 |
|--------|---------------------------------------------------------------------------------|

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**Modern      City Entertainment Inc. **

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

**8551      Sunrise Boulevard, Suite 210, Ft. Lauderdale, Florida, 33322 **

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**MODERN      CITY ENTERTAINMENT INC.**

**FORM      10-QSB**

**SEPTEMBER      30, 2006**

**INDEX**

| **PART                I                 FINANCIAL                INFORMATION**                                                                                                                       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                      |   |
| Item                  1.                                    Financial Statements                                                                                                           | 3      |
| Item                  2.                                    Management’s Discussion and Analysis of Financial Condition                  and                  Results of Operations  | 16     |
| Item                  3.                                    Controls and Procedures                                                                                                        | 17     |
|                                                                                                                                                                                                                                                                                      |   |
| **PART                  II                OTHER                  INFORMATION **                                                                                                                      |   |
|                                                                                                                                                                                                                                                                                      |   |
| Item                  1.                                                      Legal Proceedings                                                                                            | 18     |
| Item                  2.                                    Change in Securities                                                                                                           | 18     |
| Item                  3.                                    Defaults upon Senior                  Securities                                                                               | 18     |
| Item                  4.                                    Submission of Matters to a Vote of Security                  Holders                                                           | 18     |
| Item                  5.                                    Other Information                                                                                                              | 18     |
| Item                  6.                                    Exhibits and Reports on Form 8-K                                                                                               | 19     |

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**PART      1                      FINANCIAL INFORMATION**

**Item      1.                                Financial      Statements**

**MODERN      CITY ENTERTAINMENT, INC.**

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**MODERN      CITY ENTERTAINMENT, INC.**

|                                                                                  |           | **September                30** | ** **                                          | ** ** | **March                31** | ** ** |
|---------------------------------------------------------------------------------------|----------------|---------------------------------|-----------------------------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                            | ** **     | **2006**                        | ** **                                          | ** ** | **2006**                    |       |
|                                                                                  |           |                            |                                                |       |                        |       |
| Current                                                                               |           |                            |                                                |       |                        |       |
| Cash                                                                                  |           | $                               | (11                                                 | )          |                        | $          | 1,108 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
| Equipment–                Note 3                                                |           |                            | -                                                   |       |                        |       | 926 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
|                                                                                  |           | $                               | (11                                                 | )          |                        | $          | 2,034 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
| **LIABILITIES**                                                                       |           |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
| Current                                                                               |           |                            |                                                |       |                        |       |   |   |
| Accounts                payable and accrued                liabilities – Note 7 |           | $                               | 43,454                                              |       |                        | $          | 62,888 |   |
| Due                to related parties – Note                7                   |           |                            | 35,599                                              |       |                        |       | 11,610 |   |
| Loans                payable to stockholders –                Note 4            |           |                            | 16,115                                              |       |                        |       | 5,875 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
|                                                                                  |           |                            | 95,168                                              |       |                        |       | 80,373 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
| **STOCKHOLDERS’                DEFICIENCY**                                     |           |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
| Preferred                Stock, $0.0001 par value                                     |           |                            |                                                |       |                        |       |   |   |
| ** **                                                                            | **20,000,000** |                            | shares                authorized; none issued       |       |                        | -          |   |   |   | - |   |
| Common                stock, $0.0001 par value – Note 5                         |           |                            |                                                |       |                        |       |   |   |
| ** **                                                                            | **50,000,000** |                            | shares                authorized                    |       |                        |       |   |   |   |   |   |
| ** **                                                                            | **32,423,628** |                            | shares                issued (2005: 5,576,082) |       |                        | 3,242      |   |   |   | 3,242 |   |
| Additional                paid-in capital                                             |           |                            | 1,360,776                                           |       |                        |       | 1,360,776 |   |
| Deficit                accumulated during the prior development stage                 |           |                            | (151,117                                            | )          |                        |       | (151,117 | ) |
| Deficit                accumulated during the development stage                       |           |                            | (1,308,080                                          | )          |                        |       | (1,291,240 | ) |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
|                                                                                  |           |                            | (95,179                                             | )          |                        |       | (78,339 | ) |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |
|                                                                                  |           | $                               | (11                                                 | )          |                        | $          | 2,034 |   |
|                                                                                  |           |                            |                                                |       |                        |       |   |   |

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**MODERN      CITY ENTERTAINMENT, INC.**

|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       | **April                1, 2000**  | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|------------|-------------------------------------|------------|------------|----------------------------------|------------|------------|------------|------------|------------|-----------------------------------|------------|
| ** **                                                                                      | ** ** | ** **                            | ** ** | ** ** | ** **                          | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | **(Date                of**       | ** ** |
| ** **                                                                                      | ** ** | ** **                            | ** ** | ** ** | ** **                          | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Commencement**                  | ** ** |
| ** **                                                                                      | ** ** | ** **                            | ** ** | ** ** | ** **                          | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | **of                Development** | ** ** |
| ** **                                                                                      | ** ** | **Three                months ended** | ** ** | ** ** | **Six                months ended** | ** ** | ** ** | **Stage)                to**     | ** ** |
| ** **                                                                                      | ** ** | **September                30,**      | ** ** | ** ** | **September                30,**    | ** ** | ** ** | **September                30,** | ** ** |
| ** **                                                                                      | ** ** | **2006**                              | ** ** | ** ** | **2005**                            | ** ** | ** ** | **2006**                         | ** ** | ** ** | **2005**   | ** ** | ** ** | **2006**                          |       |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |
| Expenses                                                                                        |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |
| Advertising                and                promotion                                         |       | $                                     | -          |       |                                | $          | 271        |                             |       | $          | -          |       |       | $                                 | 2,653      |   |   | $ | 44,692 |   |
| Amortization                                                                                    |       |                                  | -          |       |                                |       | 192        |                             |       |       | 171        |       |       |                              | 410        |   |   |   | 21,380 |   |
| Audit                and accounting fees –                Note 5                          |       |                                  | 4,642      |       |                                |       | 3,092      |                             |       |       | 10,612     |       |       |                              | 10,878     |   |   |   | 134,927 |   |
| Bank                charges and                interest                                         |       |                                  | 30         |       |                                |       | 89         |                             |       |       | 63         |       |       |                              | 246        |   |   |   | 85,362 |   |
| Consulting                fees – Note                5                                    |       |                                  | 4,500      |       |                                |       | 15,000     |                             |       |       | 9,000      |       |       |                              | 33,000     |   |   |   | 500,481 |   |
| Investor                relations and                marketing fees – Note 5              |       |                                  | 3,000      |       |                                |       | 10,090     |                             |       |       | 6,000      |       |       |                              | 22,180     |   |   |   | 116,450 |   |
| Legal                fees – Note                5                                         |       |                                  | -          |       |                                |       | 5,975      |                             |       |       | (6,000     | )          |       |                              | 13,566     |   |   |   | 90,598 |   |
| Office,                telephone and                miscellaneous – Note 5                |       |                                  | 1,986      |       |                                |       | 4,882      |                             |       |       | 6,242      |       |       |                              | 10,195     |   |   |   | 162,907 |   |
| Software                research and                development                                 |       |                                  | -          |       |                                |       | -          |                             |       |       | -          |       |       |                              | -          |   |   |   | 66,410 |   |
| Transfer                agent                fees                                               |       |                                  | (125       | )          |                                |       | 50         |                             |       |       | -          |       |       |                              | 198        |   |   |   | 5,984 |   |
| Travel                                                                                          |       |                                  | -          |       |                                |       | -          |                             |       |       | -          |       |       |                              | 1,416      |   |   |   | 79,956 |   |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
| Loss                before other items                                                          |       |                                  | (14,033    | )          |                                |       | (39,641    | )                                |       |       | (26,088    | )          |       |                              | (94,742    | ) |   |   | (1,309,147 | ) |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
| Other                items:                                                                     |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
| Write-off                of equipment – Note                3                             |       |                                  | -          |       |                                |       | -          |                             |       |       | 756        |       |       |                              | -          |   |   |   | (3,255 | ) |
| Loss                on disposal of equipment –                Note 3                      |       |                                  | -          |       |                                |       | -          |                             |       |       | -          |       |       |                              | -          |   |   |   | (2,217 | ) |
|      (Gain)                on disposition of Azul Studios Property SL  |       |                                  | -          |       |                                |       |       |                             |       |       | (11,384    | )          |       |                              |       |   |   |   | (11,384 | ) |
|       Write                off of loan due from ASPSL             |       |                                  | -          |       |                                |       |       |                             |       |       | 1,129      |       |       |                              |       |   |   |   | 1,129 |   |
| Foreign                currency                adjustments                                      |       |                                  | -          |       |                                |       | -          |                             |       |       | 251        |       |       |                              | (69        | ) |   |   | (1,702 | ) |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
|                                                                                            |       |                                  |       |       |                                |       | -          |                             |       |       | (9,248     | )          |       |                              | (69        | ) |   |   | (17,429 | ) |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
| Net                loss for the period                                                          |       | $                                     | (14,033    | )          |                                | $          | (39,641    | )                                |       | $          | (16,840    | )          |       | $                                 | (94,811    | ) |   | $ | (1,291,718 | ) |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |
| 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  |   |   |   |   |   |
|                                                                                            |       |                                  |       |       |                                |       |       |                             |       |       |       |       |       |                              |       |   |   |   |   |   |

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**MODERN      CITY ENTERTAINMENT, INC.**

|                                                                                                                 |       |                                |       |       |                              |       |       | **April                1, 2000** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|------------|-----------------------------------|------------|------------|----------------------------------|------------|
| ** **                                                                                                           | ** ** | ** **                          | ** ** | ** ** | ** **                        | ** ** | ** ** | **(Date                of**      | ** ** |
| ** **                                                                                                           | ** ** | ** **                          | ** ** | ** ** | ** **                        | ** ** | ** ** | **Commencement**                 | ** ** |
| ** **                                                                                                           | ** ** | ** **                          | ** ** | ** ** | **of                Development** | ** ** |
| ** **                                                                                                           | ** ** | **Six                months ended** | ** ** | ** ** | **Stage)                to**      | ** ** |
| ** **                                                                                                           | ** ** | **September                30,**    | ** ** | ** ** | **September                30,**  | ** ** |
| ** **                                                                                                           | ** ** | **2006**                            | ** ** | ** ** | **2005**                          | ** ** | ** ** | **2006**                         |       |
|                                                                                                                 |       |                                |       |       |                              |       |       |                             |       |
| Cash                flows used in Operating Activities                                                               |       |                                |       |       |                              |       |       |                             |       |
| Net                loss for the                period                                                                |       | $                                   | (16,840    | )          |                              | $          | (94,811    | )                                |       | $ | (1,308,080 | ) |
| Add                items not involving                cash:                                                          |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Amortization                                                                                                         |       |                                | 171        |       |                              |       | 410        |                             |       |   | 21,380 |   |
| Donated                interest                                                                                      |       |                                | -          |       |                              |       | -          |                             |       |   | 1,154 |   |
| Write-off                of                equipment                                                                 |       |                                | 756        |       |                              |       | -          |                             |       |   | 4,767 |   |
| Loss                on disposal of                equipment                                                          |       |                                | -          |       |                              |       | -          |                             |       |   | 2,217 |   |
|         Gain                on disposal of Azul Studios Property SL          |       |                                | (11,384    | )          |                              |       | -          |                             |       |   | (11,384 | ) |
|         Write                off loan due from ASPSL                         |       |                                | 942        |       |                              |       |       |                             |       |   | 942 |   |
|         Foreign                currency adjustment                           |       |                                | 214        |       |                              |       |       |                             |       |   | 214 |   |
| Changes                in non-cash working                capital item    related to operations: |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Accounts                payables and accrued                liabilities                                              |       |                                | (8,579     | )          |                              |       | 86,954     |                             |       |   | 492,712 |   |
|           Increase                in amounts due to related party  |       |                                | 23,989     |       |                              |       | 3,288      |                             |       |   | 40,263 |   |
|                                                                                                                 |       |                                | (10,731    | )          |                              |       | (7,447     | )                                |       |   | (755,815 | ) |
|                                                                                                                 |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Cash                Flows used in Investing Activity                                                                 |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Acquisition                of                equipment                                                               |       |                                | -          |       |                              |       | -          |                             |       |   | (16,447 | ) |
|                                                                                                                 |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Cash                Flows provided by Financing Activities                                                           |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Increase                in loan payable to                stockholders                                               |       |                                | 10,240     |       |                              |       | -          |                             |       |   | 379,611 |   |
| Increase                in convertible                debenture                                                      |       |                                | -          |       |                              |       | -          |                             |       |   | 278,114 |   |
| Proceeds                from common stock                subscriptions                                               |       |                                | -          |       |                              |       | -          |                             |       |   | 35,000 |   |
|      Net                cash decrease from disposition of ASPSL                             |       |                                | (628       | )          |                              |       | -          |                             |       |   | (628 | ) |
|                                                                                                                 |       |                                | 9,612      |       |                              |       | 3,288      |                             |       |   | 692,097 |   |
| Decrease                in cash during the period                                                                    |       |                                | (1,119     | )          |                              |       | (4,159     | )                                |       |   | (80,165 | ) |
| Cash,                beginning of the period                                                                         |       |                                | 1,108      |       |                              |       | 4,721      |                             |       |   | 80,154 |   |
| Cash,                end of the period                                                                               |       | $                                   | (11        | )          |                              | $          | 562        |                             |       | $ | (11 | ) |
| Supplementary                disclosure of cash flow information                                                     |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Cash                paid for:                                                                                        |       |                                |       |       |                              |       |       |                             |       |   |   |   |
| Interest                                                                                                             |       | $                                   | 63         |       |                              | $          | 263        |                             |       | $ | 85,362 |   |

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**MODERN      CITY ENTERTAINMENT, INC.**

|                                                                |       |                             |       |       |                         |       |       |            |       |       | **Deficit**                     | ** ** | ** ** | ** **      | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------------------------|------------|------------|-----------------|------------|------------|---------------------------------|------------|------------|-----------------|------------|------------|------------|------------|
| ** **                                                          | ** ** | ** **                       | ** ** | ** ** | ** **                   | ** ** | ** ** | **Accumulated** | ** ** | ** ** | **Deficit**                     | ** ** | ** ** | ** **      | ** ** |
| ** **                                                          | ** ** | ** **                       | ** ** | ** ** | ** **                   | ** ** | ** ** | ** **      | ** ** | ** ** | **During                prior** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                          | ** ** | **Note                5**        | ** ** | ** ** | **Additional**               | ** ** | ** ** | **Development** | ** ** | ** ** | **During                the**   | ** ** | ** ** | ** **      | ** ** |
| ** **                                                          | ** ** | **Common                Shares** | ** ** | ** ** | **Paid-in**                  | ** ** | ** ** | **Stage**       | ** ** | ** ** | **Development**                 | ** ** | ** ** | ** **      | ** ** |
| ** **                                                          | ** ** | **Number**                       | ** ** | ** ** | **Par                Value** | ** ** | ** ** | **Capital**     | ** ** | ** ** | **(Note                1)**     | ** ** | ** ** | **Stage**       | ** ** | ** ** | **Total**  |       |
|                                                                |       |                             |       |       |                         |       |       |            |       |       |                            |       |       |            |       |       |       |       |
| Balance,                April 1, 2006                               |       |                             | 32,423,628 |       |                         |       | 3,242      |            |       |       | 1,360,776                       |       |       |            | (151,117   | )          |       |       | (1,291,240 | ) |   |   | (78,339 | ) |
| Net                loss for the six months ended September 30, 2006 |       |                             | -          |       |                         |       | -          |            |       |       | -                               |       |       |            | -          |       |       |       | (16,840 | ) |   |   | (16,840 | ) |
|                                                                |       |                             |       |       |                         |       |       |            |       |       |                            |       |       |            |       |       |       |       |   |   |   |   |   |   |
| Balance,                September 30, 2006                          |       |                             | 32,423,628 |       |                         |       | 3,242      |            |       |       | 1,360,776                       |       |       |            | (151,117   | )          |       |       | (1,308,080 | ) |   |   | (95,179 | ) |

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**MODERN      CITY ENTERTAINMENT, INC.**

|   | 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, 2006, the Company had not yet                achieved profitable operations, has accumulated losses of $1,459,197                since                its inception, has a working capital deficiency of $95,179 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 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.   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 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 uses the asset and liability method of accounting for income                taxes                pursuant to FAS, No. 109 “Accounting for Income                Taxes”.  Deferred tax assets and liabilities are recognized for                future tax consequences attributable to differences between the financial                statement carrying amounts of existing assets 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 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 periods                impacted. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 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 fair                value. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company’s previously wholly-owned subsidiary, Azul Studios Property S.L.                (disposed of on June 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                        |       | **2006**   | ** ** |
|-------------------------------------------------------------|------------|------------|------------|
| ** **                                                  | ** ** | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | **Cost**   | ** ** | ** ** | **Amortization** | ** ** | ** ** | **Net** |   |
|                                                        |       |       |       |   |   |   |   |   |   |
| Computer                software                            |       | $          | 544        |   |   | $ | 521 |   |   | $ | 23 |   |
| Office                equipment                             |       |       | 2,778      |   |   |   | 2,450 |   |   |   | 328 |   |
| Office                furniture                             |       |       | 3,772      |   |   |   | 3,367 |   |   |   | 405 |   |
|                                                        |       |       |       |   |   |   |   |   |   |   |   |   |
|                                                        |       | $          | 7,094      |   |   | $ | 6,338 |   |   | $ | 756 |   |
| Write                off of equipment – June 30, 2006 |       |       |       |   |   |   |   |   |   | $ | 756 |   |

|                              |       | **2005**   | ** ** |
|-----------------------------------|------------|------------|------------|
| ** **                        | ** ** | ** ** | ** ** | ** ** | **Accumulated** | ** ** | ** ** | ** ** | ** ** |
| ** **                        | ** ** | **Cost**   | ** ** | ** ** | **Amortization** | ** ** | ** ** | **Net** |   |
|                              |       |       |       |   |   |   |   |   |   |
| Computer                equipment |       | $          | -          |   |   | $ | - |   |   | $ | - |   |
| Computer                software  |       |       | 544        |   |   |   | 503 |   |   |   | 41 |   |
| Office                equipment   |       |       | 2,778      |   |   |   | 2,318 |   |   |   | 460 |   |
| Office                furniture   |       |       | 3,772      |   |   |   | 2,774 |   |   |   | 998 |   |
|                              |       |       |       |   |   |   |   |   |   |   |   |   |
|                              |       | $          | 7,094      |   |   | $ | 5,595 |   |   | $ | 1,499 |   |

|   | During                the six months ended September 30, 2006, the Company disposed of                its                equipment for no proceeds. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 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 March 31, 2006, these options were all                exercisable. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Expected                volatility                             |   |                  | 490    | % |
|----------------------------------------------------------------|--------|-----------------------|--------|---|
| Dividend                yield                                  |   |                  | 0      | % |
| Weighted                average expected life of stock options |   | 10                yrs |   |
| Risk-free                interest rate                         |   |                  | 4.04   | % |

----

|   | At                September 30, 2006, 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. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                following table summarizes the significant components of the Company’s                future tax assets: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|                                                        |   | **2006** | ** ** | ** ** | **2005** |   |
|-------------------------------------------------------------|--------|----------|------------|------------|----------|--------|
|                                                        |   |     |       |       |     |   |
| Future                tax assets                            |   |     |       |       |     |   |
| Non-capital                loss                carryforward |   | $        | 480,011    |       |     | $      | 442,786 |   |
| Valuation                allowance for deferred tax asset   |   |     | (480,011   | )          |     |   | (442,786 | ) |
|                                                        |   |     |       |       |     |   |   |   |
|                                                        |   | $        | -          |       |     | $      | - |   |

|   | The                amount taken into income as future tax assets must reflect that portion                of                the income tax loss carry-forwards that is more likely-than-not to                be                realized from future operations.  The Company has chosen to                provide an allowance of 100% against all available income tax loss                carry-forwards, regardless of their time of                expiry. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As                at September 30, 2006, the Company has accumulated non-capital losses                totaling approximately $1,428,638, which are available to reduce                taxable                income in future taxation |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | a) | Amounts                paid or accrued to directors of the Company, former directors and                related                companies or companies in which a director is a partner or associate                are                as follows: |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | **2006** | ** ** | ** ** | **2005** |   |
|-----------------------------------------|--------|----------|------------|------------|----------|--------|
|                                    |   |     |       |       |     |   |
| Accounting                fees          |   | $        | 7,051      |       |     | $      | 4,016 |   |
| Consulting                fees          |   |     | 9,000      |       |     |   | 33,000 |   |
| Donated                interest expense |   |     | -          |       |     |   | - |   |
| Investor                relation fees   |   |     | 6,000      |       |     |   | 22,000 |   |
| Legal                fees               |   |     | (6,000     | )          |     |   | 12,000 |   |
| Office                                  |   |     | 1,739      |       |     |   | 3,358 |   |
|                                    |   |     |       |       |     |   |   |   |
|                                    |   | $        | 17,790     |       |     | $      | 74,374 |   |

----

|   | b) | Included                in accounts payable and accrued liabilities as at September 30, 2006                is                $35,599  (March 31 2006:  $16,718) due to a director                of the Company and a company in which a director of the Company is                an                associate and companies controlled by a former director of the                Company. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

|   | a) | Pursuant                to an Agreement of Purchase and Sale dated June 29, 2006, the Company                sold                all the issued and outstanding shares of its wholly-owned subsidiary,                ASP,                S.L. for $216. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | On                February 28, 2007, a shareholder of the Company entered into an agreement                with the unit holders of MCE, whereby that shareholder tendered 19,071,546                of the common shares held in the Company to be held in trust for                the unit                holders of MCE in exchange for the transfer of 99% of the issued                and                outstanding units of MCE to the Company.  This transaction is                expected to be accounted for as a reverse                acquisition. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c) | Pursuant                to a sale and purchase of shares agreement dated February 28, 2007,                the                Company issued 100,000 shares of its common stock at $0.25 per share                for                total proceeds of $25,000. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d) | On                June 12, 2007, the Company approved the adoption of a 2007 employee                and                director stock option plan for the issuance of up to 2,100,000 options                to                acquire common stock of the Company at a price of $0.25 per                share.  The Company further approved the issuance of 1,000,000                options out of the 2,100,000 to acquire stock, to certain officers                and                directors of the Company at the price of $0.25 per                share. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      2.                      Management’sDiscussion and Analysis of Financial Condition and Results      of      Operations**

**BUSINESS  DEVELOPMENT**

**FINANCIAL  RESULTS**

**LIQUIDITY  AND  CAPITAL  RESOURCES**

----

**Item      3.                      Controls and Procedures**

**Evaluation      of disclosure controls and procedures**

**Changes      in internal controls**

----

**PART      II                                OTHER      INFORMATION**

**Item      1.                      Legal      Proceedings**

**Item      2.                      Change      in Securities**

**Item      3.                      Defaults      upon Senior Securities**

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

**Item      5.                      Other      Information**

----

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

**A.      Exhibits**

| 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 |
|------|----------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURES**

|                                  | Modern              City Entertainment              Inc. |                                  |
|---------------------------------------|----------------------------------------------------------|---------------------------------------|
|                                  |                                                     |                                  |   |
| Date:                  August 6, 2007 | By:                                                      | /s/ William              Erfurth |   |
|                                  |                                                     | William                Erfurth        |   |
|                                  |                                                     | President&              Director  |   |
|                                  |                                                     |                                  |   |

----