UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-Q


(MarkOne)


x
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2009o
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period from  to





Commission File Number: 000-50468





Modern City Entertainment, Inc.


(Exact name of registrant as specified in its charter)





Washington

98-0206033(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
  1815 Griffin Road, Suite 207, Fort Lauderdale, Florida

33004(Address of principal executive offices)

(Zip Code)


305-970-4898


(Registrant’s telephone number, including area code)





(Former name, former address and former fiscal year, if changed since last report)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.





Large accelerated filer    o
Accelerated filer      oNon-accelerated filer      o
Smaller reporting company     x


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


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PART I – FINANCIAL INFORMATION





Item 1.  Financial Statements





MODERN CITY ENTERTAINMENT INC.Condensed Consolidated Balance SheetsMarch 31, 2009 and December 31, 20082009


2008ASSETSCurrent AssetsCash

$
449,402


$
486,972Total current assets


449,402



486,972Property & equipment, net of accumulateddepreciation


1,099



1,184Prepaid production costs


96,363



96,363Total Assets

$
546,864


$
584,519LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent LiabilitiesAccounts payable and accrued expenses

$
115,789


$
140,434Total current liabilities


115,789



140,434Stockholders’ EquityPreferred Stock, $0.0001 par value20,000,000 shares authorized; none issued


-



-Common stock, $0.0001 par value; 50,000,000 shares authorizedand
23,051,993  and34,753,428 issued and outstanding respectively


2,298



2,298Additional paid-in capital


944,400



944,400Accumulated Deficit


(87,577)



(74,567)Deficit accumulated during the development stage


(428,046)



(428,046
)Total stockholders’ equity


431,075



444,085Total Liabilities and Stockholders’ Equity

$
546,864


$
584,519The accompanying notes are an integral part of these financial statements





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MODERN CITY ENTERTAINMENT INC.Condensed Consolidated Statements of OperationsFor the three months ended March 31,2009


2008Revenues

$
-


-ExpensesPayroll expenses


11,843



11,788Professional fees


3,750



21,315Bank charges


-



29Travel, meals and entertainment


-



268Depreciation expense


85



-Office expenses


1,365



5,371Total  expenses


17,043



38,771Other Income (Expense)Interest Income


4033



-Net Loss

$
(13,010)


$
(38,771)Loss per share –basic and diluted

$
(0.003
)

$
(0.001
)Weighted average number of shares outstanding-basic and diluted


23,051,993



34,753,439The accompanying notes are an integral part of these financial statements





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MODERN CITY ENTERTAINMENT, INC.


Condensed Consolidated Statements of Cash Flows


For the three months ended March 31,





2009


2008Cash flows used in operating activitiesNet loss

$
(  13,010)


$
(  38,771)Add items not involving cash:Depreciation


85



-Changes in non-cash working capital item related
to operations:Accounts payable and accrued expenses


(24,645)



46,045Net cash used in operating activities


(  37,570)



7,274Cash flows used in investing activitiesPurchase of stock from Azul Shareholders


-



(150,000)Net cash used in investing activities


-



(150,000)Cash flows provided by financing activities(Decrease) in amount due to related party


-



(   12,616)(Decrease) in loan payable to stockholders


-



(16,284)Net cash used in financing activities


-



(28,900)(Decrease) increase in cash during the period


(37,570)



(171,626)Cash, beginning of the period


486,972



757,906Cash, end of the period

$
449,402


$
586,280Supplementary disclosure of cash flow informationCash paid for:Interest

$
-


$
-The accompanying notes are an integral part of these financial statements





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MODERN CITY ENTERTAINMENT, INC.


NOTES TO FINANCIAL STATEMENTS








Note 1                      Nature and Continuance of Operations




Modern City Entertainment, Inc. (formerly Azul Studios International Inc.) (the “Company”) was incorporated on September 23, 1996 under the laws of the State of Texas as Alvin Consulting Inc.  On July 15, 1999, the stockholders of the Company approved a merger with a newly incorporated company in the State of
Washington and the surviving company, Realty Technologies Inc., operates under the laws of the State of Washington.  On August 12, 1999 stockholders of the Company approved an amendment to the articles of the Company changing its name to Equinta Corp.  On April 10, 2000, the stockholders of the Company approved a change to the articles of the Company changing its name to Courier Corps Inc.  On May 16, 2000, the stockholders the Company approved a change in the name of the Company
to eCourierCorps Inc.  On March 12, 2004, the Company changed its name to Azul Studios International Inc. and adopted a business plan to develop a group of boutique hotels catering to the professional photographers and film artists.  In July 2004 the Company incorporated Azul Studios Properties S.L., in Barcelona, Spain, a wholly-owned subsidiary.  The Company also incorporated a wholly-owned corporation, Azul Media Inc., in the State of Washington on March 8, 2005.  The
Company intended to develop a group of professional photographic studios in select locales around the world.  On June 29, 2006, the Company sold all of the issued and outstanding shares of its wholly-owned subsidiary, Azul Studios Property, S.L..  On February 28, 2007, the Company agreed to acquire Modern City Entertainment LLC (“MCE”), a Miami based development stage independent movie company, which is in the business of acquiring, producing and distributing feature films internationally.  Currently
the Company has no revenue.





On April 27, 2007, the Company changed its name to Modern City Entertainment, Inc.





The Company was a development stage company as defined under Statement of Financial Accounting Standards (“FAS”) No. 7 through the year ended December 31, 2007.  Prior to April 1, 2000, the Company developed and sold the rights to a web based internet application in the real estate industry.  During
2008, the company commenced incurring production costs related to the production of the aforementioned screenplay.





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 March 31, 2009, the Company had not yet achieved profitable operations, has accumulated losses of approximately $500,000 since its recapitalization, 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.





Note 2                       Summary of Significant Accounting Policies





BASIS OF PRESENTATION





The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K.  They may not include all information and footnotes required by United
States generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2008included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission.  The unaudited interim consolidated financial statements should be read in conjunction with those financial
statements included in the Form 10-K.  In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made.  Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009.


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Principles of Consolidation





The consolidated financial statements included the accounts of the Company and its wholly-owned subsidiary, Azul Media Inc.  All significant inter-company transactions and balances have been eliminated on consolidation.




Impairment of Long-lived Assets





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.





Income Taxes





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.





Basic and Diluted Loss Per Share





The Company reports basic loss per share in accordance with the FAS No. 128, “Earnings Per Share”.  Basic loss per share is computed using the weighted average number of shares outstanding during the period.  Diluted loss per share includes the potentially dilutive effect of outstanding debt and stock
options which are convertible into common shares.  Diluted loss per share has not been provided as it would be anti-dilutive.





Property and Equipment





Property and equipment are stated at cost.  Depreciation is provided over the estimated useful lives of the related assets using the straight-line method.




Financial Instruments





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.





Stock-based Compensation





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.


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Revenue Recognition and Production Costs





The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition.” and also adheres to AICPA Statement of Position 00-2 "Accounting by Producers or Distributors of Films" which specifically addresses the film industry. SOP 00-2 states that an entity should
recognize revenue from a sale or licensing arrangement of a film when all of the following conditions are met:





a.
Persuasive evidence of a sale of licensing arrangement with a customer exists


b.
The film is complete and, in accordance with the terms of the arrangement, has been delivered or is available for immediate and unconditional delivery.


c.
The license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale.


d.
The arrangement fee is fixed or determinable.


e.
Collection of the arrangement fee is reasonably assured.





Production costs incurred are capitalized and will be recognized as expenses when the related revenue is recognized.





Reclassification




Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.




New Accounting Pronouncement





In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162.  SFAS No. 168 establishes the FASB Accounting Standards Codification as the
source of authoritative accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States.  This SFAS is effective for our year-end ending on December 31, 2009.  This SFAS is not expected to have a material impact on our consolidated financial position, results of operations, and cash flows.





Note 3                      Property and Equipment





The Company’s property and equipment are as follows:





March 31, 2009AccumulatedCost


Depreciation


NetComputer equipment

$
1,690


$
592


$
1,099





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  December 31, 2008AccumulatedCost


Depreciation


NetComputer equipment

$
1,690


$
507


$
1,183


Depreciation expense for the quarters ended March 31, 2009 and 2008 was $85 and $0, respectively.





Note 4                      Income Taxes





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


March 31

December 31,2009

2008Future tax assetsNon-capital loss carry-forward

$
579,800

$
575,400Valuation allowance for deferred tax asset


(579,800
))

(575,400
)$
-

$
-




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 March 31, 2009 and December 31, 2008, the Company has accumulated non-capital losses totaling approximately $1,539,000 and $1,526,000, respectively, which are available to reduce taxable income in future taxation years.  These losses expire beginning in 2017.  The potential benefit of these losses, if any,
has not been recorded in the financial statements.





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Item 2.  Management’s Discussion and Analysis or Plan of Operation





Overview


Modern City Entertainment, Inc. (formerly Azul Studios International Inc.) (the “Company”) was incorporated on September 23, 1996 under the laws of the State of Texas as Alvin Consulting Inc.  On July 15, 1999, the stockholders of the Company approved a merger with a newly incorporated company in the State of
Washington and the surviving company, Realty Technologies Inc., operates under the laws of the State of Washington.  On August 12, 1999 stockholders of the Company approved an amendment to the articles of the Company changing its name to Equinta Corp.  On April 10, 2000, the stockholders of the Company approved a change to the articles of the Company changing its name to Courier Corps Inc.  On May 16, 2000, the stockholders the Company approved a change in the name of the Company
to eCourierCorps Inc.  On March 12, 2004, the Company changed its name to Azul Studios International Inc. and adopted a business plan to develop a group of boutique hotels catering to the professional photographers and film artists.  In July 2004 the Company incorporated Azul Studios Properties S.L., in Barcelona, Spain, a wholly-owned subsidiary.  The Company also incorporated a wholly-owned corporation, Azul Media Inc., in the State of Washington on March 8, 2005.  The
Company intended to develop a group of professional photographic studios in select locales around the world.  On June 29, 2006, the Company sold all of the issued and outstanding shares of its wholly-owned subsidiary, Azul Studios Property, S.L..  On February 28, 2007, the Company agreed to acquire Modern City Entertainment LLC (“MCE”), a Miami based development stage independent movie company, which is in the business of acquiring, producing and distributing feature films internationally.  Currently
the Company has no revenue.





FOR THE THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2008





The Company‘s net loss from operations decreased approximately 66% to $13,010 during the three months ended March 31, 2009 as compared to $38,771 for the three months ended March 31, 2008.  The primary reason for this was due to the reduction in professional fees and office related expenses.





LIQUIDITY AND CAPITAL RESOURCES





Net cash used in operating activities was $37,570 for the three months ended March 31, 2009 compared to $5,927 for the three months ended March 31, 2008, due to a decrease in net loss for the period.





FORWARD LOOKING STATEMENTS





There are statements in this registration statement that are not historical facts. These “forward-looking statements” can be identified by use of terminology such as “believe,” “hope,” “may,” “anticipate,” “should,”
“intend,” “plan,” “will,” “expect,” “estimate,” “project,” “positioned,” “strategy” and similar expressions. You should be aware that these forward-looking statements are subject to risks and uncertainties that are beyond our control.  For a discussion of these risks, you should read this entire Registration Statement carefully.  Although management believes that the assumptions underlying the forward looking
statements included in this Registration Statement are reasonable, they do not guarantee our future performance, and actual results could differ from those contemplated by these forward looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation
of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements.  In the light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking
statements contained in this Registration Statement will in fact transpire. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We do not undertake any obligation to update or revise any forward-looking statements.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk.




Not applicable.




Item 4A.  Controls and Procedures.




An evaluation was conducted by the registrant’s president of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of December 31, 2008. Based on that evaluation, the president concluded that the registrant’s controls and procedures were effective
as of such date to ensure that information required to be disclosed in the reports that the registrant files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. If the registrant develops new business or engages or hires a chief financial officer or similar financial expert, the registrant intends to review its disclosure controls and procedures.




Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risk associated with such
lack of segregation is low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management may reevaluate this situation as circumstances dictate.




The was no change in the registrant's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or Rule 15d–15 under the Securities Exchange Act of 1934 that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting.




Item 4T. Controls and Procedures.




Reference is made to the response to Item 4 above.


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PART II- OTHER INFORMATION





Item 1.                      Legal Proceedings.





Change in Attorneys





The Company changed attorneys during the quarter ended March 31, 2009 to:




HOWARD H. KAHN, ESQ.


KAHN, CHENKIN & RESNIK, P.L.


1815 GRIFFIN ROAD, SUITE 207


DANIA, FLORIDA 33004


PHONE: (954) 476-7994


FAX: (954) 321-0177





Item 1A.                      Risk Factors.





There are no material changes to the Company’s risk factors as previously reflected in the form 10-K that was filed on June 30, 2009.





Item 2.                      Unregistered Sales of Equity Securities and Use of Proceeds.





a.
N/A


b.
N/A


c.
N/A





Item 3.                      Defaults upon Senior Securities.





N/A





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





None





Item 5.                      Other Information.





None




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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.





Modern City Entertainment Inc.Date: September 1, 2009
By:
/s/ William ErfurthWilliam ErfurthPresident and Director





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