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 June 30, 2004
                  --------------------------------------------

     [ ] 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.)

                22344 NE 31st Street, Sammamish, Washington 98074
                -------------------------------------------------
                    (Address of principal executive offices)

                                 (206) 910-2687
                         -------------------------------
                           (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 August 31 2004, 9,901,304 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

                                  JUNE 30, 2004

                                      INDEX


PART I         FINANCIAL INFORMATION...........................................1

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

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations............................11

Item 3.        Controls and Procedures........................................12


PART II        OTHER INFORMATION..............................................12


Item 1.        Legal Proceedings..............................................12

Item 2.        Change in Securities...........................................12

Item 3.        Defaults upon Senior Securities................................13

Item 4.        Submission of Matters to a Vote of Security Holders............13

Item 5.        Other Information..............................................13

Item 6.        Exhibits and Reports on Form 8-K...............................13



<PAGE>

PART I          FINANCIAL INFORMATION

Item 1.    Financial Statements



                         AZUL STUDIOS INTERNATIONAL INC.

                          (A Development Stage Company)

                          INTERIM FINANCIAL STATEMENTS

                                  June 30, 2004

                             (Stated in US Dollars)

                                   (Unaudited)
                                    ---------

<PAGE>

                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                             INTERIM BALANCE SHEETS
                        June 30, 2004 and March 31, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                    ---------

<TABLE>
<CAPTION>
                                                                               June 30,            March 31,
                                                     ASSETS                      2004                 2004
                                                     ------                      ----                 ----
<S>                                                                       <C>                <C>
Current
   Cash                                                                    $        36,059    $         5,241
   Prepaid expenses                                                                    270                  -
                                                                            --------------     --------------
                                                                                    36,329              5,241
Capital assets - Note 3                                                              5,632              9,182
                                                                            --------------     --------------
                                                                           $        41,961    $        14,423
                                                                            ==============     ==============

                                                   LIABILITIES
                                                   -----------
Current
   Accounts payable and accrued liabilities - Note 6                       $        46,962    $       104,648
   Due to related parties - Note 6                                                   1,155              1,155
   Loans payable to stockholders - Note 4                                          273,995            101,995
                                                                            --------------     --------------
                                                                                   322,112            207,798
                                                                            ==============     ==============

                                             STOCKHOLDERS' DEFICIENCY
                                             ------------------------
Preferred Stock, $0.0001 par value
  20,000,000 shares authorized; none issued and outstanding                              -                  -
Common stock, $0.0001 par value - Note 5
  100,000,000 shares authorized
  9,901,304 shares issued and outstanding at June 30, 2004
   and March 31, 2004                                                                  990                990
Additional paid-in capital                                                         780,684            780,684
Deficit accumulated during the prior development stage                       (     151,117)     (     151,117)
Deficit accumulated during the development stage                             (     910,708)     (     823,932)
                                                                             --------------     --------------
                                                                             (     280,151)     (     193,375)
                                                                             --------------     --------------
                                                                           $        41,961    $        14,423
                                                                             ==============     ==============
</TABLE>


                             SEE ACCOMPANYING NOTES

<PAGE>


                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                        INTERIM STATEMENTS OF OPERATIONS
               for the three months ended June 30, 2004 and 2003,
 and for the period April 1, 2000 (Date of Commencement of Development Stage) to
                                  June 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                    ---------
<TABLE>
<CAPTION>>
                                                                                                   April 1, 2000
                                                                                                   (Date of Com-
                                                                                                   mencement of
                                                                                                    Development
                                                                     Three months ended              Stage) to
                                                                          June 30,                   June 30,
                                                                  2004               2003              2004
                                                                  ----               ----              ----
<S>                                                        <C>               <C>                <C>
Expenses
   Advertising and promotion                                $          1,557  $          4,222   $         28,923
   Audit and accounting fees - Note 6                                  8,277             6,103             62,680
   Bank charges and interest                                             306                40             83,065
   Consulting fees - Note 6                                           27,000            20,000            380,781
   Depreciation                                                          625               888             19,189
   Investor relations and marketing fees - Note 6                     18,135                               42,635
   Legal fees - Note 6                                                 8,500             4,000             48,517
   Office, telephone and miscellaneous - Note 6                       11,766             7,010             97,903
   Software research and development                                       -                 -             66,410
   Transfer agent fees                                                   315               200              3,310
   Travel                                                              8,078             4,603             71,809
                                                              --------------    --------------    ---------------
Loss before other items                                               84,559            47,066            905,222
                                                              ==============    ==============    ===============
Other items:
   Write-off of intangible assets                                          -                 -       (      1,325)
   Loss on disposal of capital assets - Note 3                (        2,217)                -       (      2,217)
   Loss on foreign exchange                                                -                 -       (      1,944)
                                                              --------------    --------------    ----------------
                                                                           -                 -       (      5,486)
                                                              --------------    --------------    ----------------
Net loss for the period                                     $  (      86,776) $  (      47,066)  $  (     910,708)
                                                              ==============    ==============    ================
Basic and diluted loss per share                            $  (        0.01) $  (        0.01)
                                                              ==============    ==============
Weighted average number of shares outstanding
 for the period                                                    9,901,304         9,160,062
                                                              ==============    ==============
</TABLE>


                             SEE ACCOMPANYING NOTES

<PAGE>

                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                        INTERIM STATEMENTS OF CASH FLOWS
               for the three months ended June 30, 2004 and 2003,
 and for the period April 1, 2000 (Date of Commencement of Development Stage) to
                                  June 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                    ---------

<TABLE>
<CAPTION>
                                                                                                  April 1, 2000
                                                                                                  (Date of Com-
                                                                                                  mencement of
                                                                                                   Development
                                                                    Three months ended              Stage) to
                                                                         June 30,                   June 30,
                                                                  2004              2003               2004
                                                                  ----              ----               ----
<S>                                                       <C>                <C>               <C>
Cash flows used in Operating Activities
  Net loss for the period                                  $  (      86,776)  $  (      47,066) $  (     910,708)
  Add items not involving cash:
   Depreciation                                                         625                888            19,189
   Loss on disposal of capital assets                                 2,217                  -             2,217
   Write-off of intangible assets                                         -                  -             1,325
  Changes in non-cash working capital items related to operations:
   Prepaid expenses                                           (         270)                 -     (         270)
   Accounts payable and accrued liabilities                          13,022             11,600           292,709
                                                              --------------     --------------    --------------
                                                              (      71,182)     (      34,578)    (     595,538)
                                                              --------------     --------------    --------------
Cash Flows used in Investing Activity
   Acquisition of capital assets                                          -                  -     (      16,447)
                                                              --------------     --------------    --------------
Cash Flows provided by Financing Activities
   Increase in loans payable to stockholders                        102,000                  -           254,776
   Increase in convertible debenture                                      -                  -           278,114
   Proceeds from common stock subscriptions                               -             35,000            35,000
                                                              --------------     --------------    --------------
                                                                    102,000             35,000           567,890
                                                              --------------     --------------    --------------

Increase (decrease) in cash during the period                        30,818                422     (      44,095)

Cash, beginning of the period                                         5,241                  -            80,154
                                                              --------------     --------------    --------------
Cash, end of the period                                    $         36,059   $            422  $         36,059
                                                              ==============     ==============    ==============
Supplementary disclosure of cash flow information Cash paid for:
     Interest                                              $              -   $              -  $            620
                                                              ==============     ==============    ==============
     Income taxes                                          $              -   $              -  $              -
                                                              ==============     ==============    ==============
</TABLE>
Non-cash transactions - Notes 3 and 4



                             SEE ACCOMPANYING NOTES

<PAGE>

                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                      STATEMENT OF STOCKHOLDERS' DEFICIENCY
     for the period September 23, 1996 (Date of Inception) to June 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                    ---------
<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                            Accumulated       Deficit
                                                                                          During prior to   Accumulated
                                                          Common Shares      Additional    Development       During the
                                                       ------------------      Paid-in        Stage         Development
                                                        Number  Par Value      Capital       (Note 1)          Stage         Total
                                                        ------  ---------      -------       --------          -----         -----
<S>                                                <C>          <C>       <C>            <C>              <C>           <C>
Stock issued for cash at - $0.10 per share               1,000   $      1  $          99  $           -  $           -  $      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
  - $0.001 per share                                 1,045,500        104            941              -              -       1,045
Net loss for the period                                      -          -              -              -              -           -
                                                    ----------    -------    -----------     ----------    -----------  ----------
Balance, March 31, 1997                              1,046,500        105          2,112              -              -       2,217
Cash contributed by a director                               -          -            100              -              -         100
Stock issued for "Humates" license at a fair
 market value of
  - $0.001 per share                                   100,000         10             90              -              -         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                              1,146,500        115          2,648              -              -       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                              1,146,500        115          2,808              -              -       2,923
Capital stock issued for cash at $0.0001 per share   6,000,000        600              -              -              -         600
Cancelled shares                                   ( 2,000,000)    (  200)           200              -              -           -
Net loss for the period ended March 31, 2000                 -          -              -   (    151,117)             -  (  151,117)
                                                   -----------    -------   ------------    -----------    -----------  ----------
Balance, March 31, 2000                              5,146,500        515          3,008   (    151,117)             -  (  147,594)
</TABLE>

                                                                     .../Cont'd.

                             SEE ACCOMPANYING NOTES
<PAGE>
                                                                       Continued

                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                      STATEMENT OF STOCKHOLDERS' DEFICIENCY
     for the period September 23, 1996 (Date of Inception) to June 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                    ---------

<TABLE>
<CAPTION>

                                                                                             Deficit
                                                                                            Accumulated       Deficit
                                                                                          During prior to   Accumulated
                                                          Common Shares      Additional    Development       During the
                                                       ------------------      Paid-in        Stage         Development
                                                        Number  Par Value      Capital       (Note 1)          Stage         Total
                                                        ------  ---------      -------       --------          -----         -----

<S>                                                <C>          <C>       <C>            <C>              <C>           <C>
Balance, March 31, 2000 (forward)                    5,146,500        515          3,008   (    151,117)             -   ( 147,594)
Net loss for the year ended March 31, 2001                   -          -              -              -   (    432,637)  ( 432,637)
                                                    ----------    -------   ------------  -------------    -----------   ----------
Balance, March 31, 2001                              5,146,500        515          3,008   (    151,117)  (    432,637)  ( 580,231)
Net loss for the year ended March 31, 2002                   -          -              -              -   (    105,220)  ( 105,220)
                                                    ----------    -------   ------------  -------------    -----------   ----------
Balance, March 31, 2002                              5,146,500        515          3,008   (    151,117)  (    537,857)  ( 685,451)
Capital stock subscribed pursuant to debt
 settlement agreements                                 458,997         46        114,153              -              -     114,199
Capital stock subscribed pursuant to
 conversion of debentures                            2,445,807        244        611,208              -              -     611,452
Net loss for the year ended March 31, 2003                   -          -              -              -   (     54,557)  (  54,557)
                                                    ----------    -------   ------------   ------------     ----------   ----------
Balance, March 31, 2003                              8,051,304        805        728,369   (    151,117)  (    592,414)  (  14,357)
Balance, March 31, 2003 (forward)                    8,051,304        805        728,369   (    151,117)  (    592,414   (  14,357)
Capital stock subscribed at $0.01 per share
 pursuant to settlement  of debts agreements         1,000,000        100          9,900              -              -      10,000
Capital stock subscribed for cash
  - at $0.05 per share                                 700,000         70         34,930              -              -      35,000
Capital stock subscribed pursuant to loan
 settlement agreement,
 valued at $0.05 per share                             150,000         15          7,485              -              -       7,500
Net loss for the year ended March 31, 2004                   -          -              -              -   (    231,518)  ( 231,518)
                                                    ----------    -------   ------------   ------------    -----------   ----------
Balance, March 31, 2004                              9,901,304        990        780,684   (    151,117)  (    823,932)  ( 193,375)
Net loss for the three months ended June 30, 2004            -          -              -              -   (     86,776)  (  86,776)
                                                    ----------    -------   ------------   ------------    -----------  -----------
Balance, June 30, 2004                               9,901,304   $    990  $     780,684  $(    151,117) $(    910,708) $( 280,151)
                                                    ==========    =======   ============   =============   ===========  ===========
</TABLE>

Par value and additional paid-in  capital have  been  retroactively adjusted for
changes in par value due to the merger. (Note 1)


                             SEE ACCOMPANYING NOTES
<PAGE>


                         AZUL STUDIOS INTERNATIONAL INC.
                          (A Development Stage Company)
                    NOTES TO THE INTERIM FINANCIAL STATEMENTS
                                  June 30, 2004
                             (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  shareholders  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  shareholders  of  the  Company
              approved an amendment to the articles of the Company  changing its
              name to Equinta  Corp. On April 10, 2000 the  shareholders  of the
              Company  approved a change to the articles of the Company changing
              its name to Courier  Corps Inc. On May 16,  2000 the  shareholders
              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.  Currently,  the  Company has no
              business operations or source of revenue.

              The Company is currently a  development  stage  company as defined
              under Statement of Financial  Accounting Standards ("SFAS") 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 June 30, 2004.  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 on a going concern
              basis.  As at June 30,  2004,  the Company  has a working  capital
              deficiency  of $285,783.  Of the  company's  current  liabilities,
              $301,836  are due to  stockholders,  officers and  affiliates  and
              accordingly,  the working  capital for trade creditors is $16,053.
              As at June 30,  2004,  the  Company has  accumulated  a deficit of
              $1,061,825 since inception.  Management believes that its expected
              financing will be provided by existing stockholders.  There can be
              no  assurance  that  additional   funding  will  be  available  on
              acceptable  terms, if at all. The Company's ability to continue as
              a  going  concern  is  dependent  upon  its  ability  to  generate
              profitable operations in the future and/or to obtain the necessary
              financing  to meet  its  obligations  and  repay  its  liabilities
              arising from normal business operations when they come due.

Note 2        Basis of Presentation
              ---------------------

              The accompanying  unaudited interim 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, 2005.  These  interim  financial  statements
              should  be  read  in  conjunction   with  the  audited   financial
              statements for the years ended March 31, 2004 and 2003 included in
              the  Company's  Form  10-KSB  as  filed  with the  Securities  and
              Exchange Commission on August 12, 2004.

<PAGE>

Note 3        Capital Assets
              --------------
<TABLE>
<CAPTION>
                                                                                                    March 31,
                                                              June 30, 2004                            2004
                                             -------------------------------------------------    ---------------
                                                               Accumulated
                                                  Cost         Depreciation         Net                Net
                                             ---------------- --------------- ----------------    ---------------
            <S>                              <C>             <C>             <C>                 <C>
            Computer equipment               $      17,167    $      13,990   $       3,177       $       3,503
            Computer software                          544              475              69                  79
            Office equipment                         2,778            2,132             646                 799
            Office furniture                         3,772            2,032           1,740               4,801
                                              ------------     ------------    ------------        ------------
                                             $      24,261    $      18,629   $       5,632       $       9,182
                                              ============     ============    ============        ============
</TABLE>
              During the three months ended June 30, 2004, the Company  disposed
              of office furniture for $708 of trade debt outstanding,  resulting
              in a loss of $2,217.

Note 4        Loans Payable to Stockholders
              -----------------------------

              During the three months ended June 30, 2004, the Company  received
              additional loans from a stockholder totalling $102,000.

              During the three  months  ended June 30,  2004,  $70,000  due to a
              stockholder  that was previously  included in accounts payable was
              reclassified as a loan from that stockholder.

              As at June  30,  2004,  the  loans  payable  to  stockholders  are
              unsecured,  non-interest  bearing  and have no  specific  terms of
              repayment.

Note 5        Capital Stock
              -------------

              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 750,000 common shares of the Company. The directors
              also  approved the issuance of options to a director to acquire up
              to 250,000  common  shares of the Company at $0.25 per share.  The
              options  have a term of ten  years  expiring  in June,  2013.  The
              option  plan is subject to  approval  by the  shareholders  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 250,000
              shares of common stock at $0.25 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 June 30, 2004,  31,250 of these
              options were exercisable.

<PAGE>

Note 5        Capital Stock - (cont'd)
              -------------

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

              The Company does not record  compensation  expense on the granting
              of stock  options to employees.  In  accordance  with SFAS 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 vest
              there would be no effect on pro forma loss.

              The fair value for these stock  options was  estimated at the date
              of vesting 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%

Note 6        Related Party Transactions
              --------------------------

              a)  Amounts paid or accrued to  directors,  former  directors  and
                  related  companies  or  companies  in  which a  director  is a
                  partner or associate are as follows:
<TABLE>
<CAPTION>
                                                                                       Three Months ended
                                                                                            June 30,
                                                                                     2004              2003
                                                                                     ----              ----
                 <S>                                                            <C>                <C>
                 Accounting fees                                               $        4,577    $        6,103
                 Consulting fees                                                       18,000            20,000
                 Investor relation fees                                                12,000                 -
                 Legal fees                                                             6,000             4,000
                 Office, telephone and miscellaneous                                    7,544             2,530
                                                                                -------------     -------------
                                                                               $       48,121    $       32,633
                                                                                =============     =============
</TABLE>

                  These charges are measured by the exchange amount which is the
                  amount agreed upon by the transacting parties.

              b)  Included in accounts  payable  and accrued  liabilities  as at
                  June 30, 2004 is $26,585  (March 31,  2004:  $86,550) due to a
                  director of the Company and a company  controlled  by a former
                  director of the Company.

              c)  Amounts due to related parties are owing to stockholders and a
                  former director of the Company and are  non-interest  bearing,
                  unsecured and have no specific terms of repayment.

<PAGE>

Note 8        Subsequent Events
              -----------------

              Subsequent to June 30, 2004:
a)                The  Company   received   additional  loans  proceeds  from  a
                  stockholder  totalling  $75,000.  The loans  are  non-interest
                  bearing, unsecured and have no specific terms of repayment.

b)                On July 12, 2004 the Company  approved  the  incorporation  of
                  Azul Studios  Properties  SL as 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.

c)                On July  12,  2004  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
                  100,000  shares in the common  stock of the  Company,  vesting
                  quarterly  over two years and  exercisable at a price of $0.25
                  per share.  Since the  formation  of the Advisory  Board,  the
                  Company has engaged a  professional  architect  in Ibiza Spain
                  and a  professional  photographer  for the Board.  The vesting
                  period  on the  options  commences  the  date  of the  initial
                  meeting of the advisory Board.


<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  securing  equity and debt  financing and has been
viewing a number of properties in Ibiza,  Spain. To date, no operating  revenues
have been generated.  The Company's operations to date have consumed substantial
and increasing 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 June 30,  2004 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.

On July  12,  2004  the  Company  approved  the  incorporation  of Azul  Studios
Properties SL as 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.

In addition 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 100,000 shares in
the  common  stock  of  the  Company,  vesting  quarterly  over  two  years  and
exercisable  at a price of $0.25 per share.  Since the formation of the Advisory
Board,  the Company has engaged a  professional  architect  in Ibiza Spain and a
professional  photographer  for the Board.  The  vesting  period on the  options
commences the date of the initial meeting of the advisory Board.

FINANCIAL  RESULTS

During the quarter  ended June 30, 2004 the Company  incurred a loss of $86,776,
compared  with a loss of  $47,066  in the  quarter  ended  June 30,  2003.  This
increase  in the net loss  reflects  primarily  the  costs  associated  with the
Company's  growing efforts in seeking  investment  capital and in developing the

<PAGE>

Azul  business  initiative.  The  increase  in the  Company's  expenses  is also
associated  with 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 quarter were comprised of loans provided to
the Company by existing shareholders in the amount of $102,000.

LIQUIDITY  AND  CAPITAL  RESOURCES

As at June 30, 2004, the Company had $36,059 in cash, as compared with $5,241 in
cash at March 31,  2004.  The  increase  was due to loans  provided  by existing
shareholders.  At June 30, 2004, the Company had a working capital deficiency of
$285,783.  However,  $301,836 of the company's current liabilities were composed
of amounts due to  stockholders,  officers and  affiliates.  Accordingly the net
positive  working  capital  excluding  amounts due to  affiliates  and  existing
stockholders was $16,053.

The Company is currently in the process of  structuring a financing  package for
the  development of its initial  project  comprised of a combination of debt and
equity, to commence operations in Ibiza Spain.


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.

<PAGE>

Item 2.    Change in Securities

In March 2004,  the Board of  Directors  approved  the  issuance of options to a
director of the Company to acquire up to 250,000 shares of common stock at $0.25
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. During the quarter ended June 30, 2004, 31,250 of
these options became exercisable.

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

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

On April 20, 2004,  the Company filed a report on Form 8-K, in which the Company
reported under Item 5 that Mr. Michael Lorenz was appointed to fill a vacancy on
the Board of  Directors.  The Company also  reported that the board of directors
were presented with a business plan for the  development of a business  entitled
Azul Studios.  The business plan envisions developing a group of boutique hotels
catering  to  the  professional   photographer   and  film  artist.   Pending  a
satisfactory  due diligence review of the plan, the Board of Directors agreed to
pass a resolution to adopt the business plan as the business of the Company, and
to change  the name of the  Company  to "Azul  Studios  International  Inc." The
company  reported  that the business  plan was adopted as presented and the name
change was approved by the State of Washington.


<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.


                                         By:/s/ James Vandeberg
                                            ----------------------
                                            James Vandeberg
                                            President & Director

                                            Date: September 29, 2004