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

                     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 September 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 November 14, 2004,  11,152,164
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

                               SEPTEMBER 30, 2004

                                      INDEX

<table>
<caption>

            <c>                                                                                                 <c>
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
</table>

<page>

PART I          FINANCIAL INFORMATION

Item 1.    Financial Statements




                         Azul Studios International Inc.

                          (A Development Stage Company)

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 2004

                             (Stated in US Dollars)

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

<page>

                             SEE ACCOMPANYING NOTES
                         Azul Studios International Inc.
                          (A Development Stage Company)
                       INTERIM CONSOLIDATED BALANCE SHEETS
                      September 30, 2004 and March 31, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                   -----------
<table>
<caption>

                                                                                    September 30,         March 31,
                                      ASSETS                                            2004                2004
                                      ------                                            ----                ----

                                                                               <c>                   <c>
Current
   Cash                                                                           $        48,580    $         5,241
   Prepaid expenses                                                                         5,945                  -
                                                                                    -------------        -----------
                                                                                           54,525              5,241
Capital assets - Note 3                                                                     5,127              9,182
                                                                                    -------------        -----------
                                                                                  $        59,652    $        14,423
                                                                                    =============        ===========

                                   LIABILITIES
                                   -----------
Current
   Accounts payable and accrued liabilities - Note 6                              $        32,180    $       104,648
   Due to related parties - Note 6                                                          1,155              1,155
   Loans payable to stockholders - Notes 4, 5 and 6                                        70,000            101,995
                                                                                     ------------        -----------
                                                                                          103,335            207,798
                                                                                     ------------        -----------

                            STOCKHOLDERS' DEFICIENCY
                            ------------------------
Preferred Stock, $0.0001 par value
  20,000,000 shares authorized; none issued                                                     -                  -
Common stock, $0.0001 par value - Note 5
  100,000,000 shares authorized
  Issued shares: September 30, 2004: 11,152,164 ; March 31, 2004: 9,901,304                 1,115                990
Additional paid-in capital                                                              1,093,274            780,684
Deficit accumulated during the prior development stage                              (     151,117)     (     151,117)
Deficit accumulated during the development stage                                    (     986,955)     (     823,932)
                                                                                     ------------        ------------
                                                                                    (      43,683)     (     193,375)
                                                                                     ------------        ------------
                                                                                  $        59,652    $        14,423
                                                                                     ============        ============
</table>


                             SEE ACCOMPANYING NOTES

<page>


                         Azul Studios International Inc.
                          (A Development Stage Company)
                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
     for the three months and six months ended September 30, 2004 and 2003,
  and for the period April 1, 2000 (Date of Commencement of Development Stage)
                  to September 30, 2004 (Stated in US Dollars)
                                   (Unaudited)
                                   -----------
<table>
<caption>
                                                                                                             April 1, 2000
                                                                                                             (Date of Com-
                                                                                                             mencement of
                                                                                                             Development
                                                    Three months ended                 Six months ended       Stage) to
                                                       September 30,                     September 30,       September 30,
                                                   2004             2003           2004             2003           2004
                                                   ----             ----           ----             ----           ----

                                               <c>          <c>             <c>              <c>              <c>
Expenses
   Advertising and promotion                  $       4,507  $       1,069   $      6,064  $        5,291   $       33,430
   Audit and accounting fees - Note 6                 7,796          7,019         16,073          13,122           70,476
   Bank charges and interest                            308             36            614              76           83,373
   Consulting fees - Note 6                          21,500         30,000         48,500          50,000          402,281
   Depreciation                                         505            778          1,130           1,666           19,694
   Investor relations and marketing fees - Note 6    12,090              -         30,225               -           54,725
   Legal fees - Note 6                                7,806          6,067         16,306          10,067           56,323
   Office, telephone and miscellaneous - Note 6      15,186         10,380         26,952          17,390          113,089
   Software research and development                      -              -              -               -           66,410
   Transfer agent fees                                2,115            475          2,430             675            5,425
   Travel                                             4,434            607         12,512           5,210           76,243
                                                -----------     ----------     ----------      ----------        ---------
Loss before other items                              76,247         56,431        160,806         103,497          981,469
                                                -----------     ----------     ----------      ----------        ---------
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                       $  (   76,247) $  (   56,431)  $  ( 163,023) $  (   103,497)  $  (   986,955)
                                                 ==========     ==========     ==========      ==========         =========
Basic and diluted loss per share              $  (     0.01) $  (     0.01)  $  (    0.02) $  (      0.01)
                                                 ==========     ==========     ==========      ==========
Weighted average number of shares outstanding
 for the period                                   9,914,900      9,751,304      9,908,139       9,351,850
                                                 ==========      =========     ==========      ==========
</table>


                             SEE ACCOMPANYING NOTES

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
                  INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
             for the six months ended September 30, 2004 and 2003,
  and for the period April 1, 2000 (Date of Commencement of Development Stage)
                              to September 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                  ------------
<table>
<caption>
                                                                                                  April 1, 2000
                                                                                                  (Date of Com-
                                                                                                  mencement of
                                                                                                   Development
                                                                     Six months ended               Stage) to
                                                                      September 30,               September 30,
                                                                  2004              2003               2004
                                                                  ----              ----               ----

                                                         <c>                  <c>              <c>
Cash flows used in Operating Activities
  Net loss for the period                                  $  (     163,023)  $  (     103,497) $  (     986,955)
  Add items not involving cash:
   Depreciation                                                       1,130              1,666            19,694
   Write-off of intangible assets                                         -                  -             1,325
   Loss on disposal of capital assets                                 2,217                  -             2,217
  Changes in non-cash working capital items related to
   operations:
   Prepaid expenses                                           (       5,945)                 -     (       5,945)
   Accounts payable and accrued liabilities                   (       1,760)            63,397           277,927
                                                              --------------     -------------     --------------
                                                              (     167,381)     (      38,434)    (     691,737)
                                                              --------------     -------------     --------------
Cash Flows used in Investing Activity
   Acquisition of capital assets                                          -                  -     (      16,447)
                                                              --------------     -------------     --------------
Cash Flows provided by Financing Activities
   Increase in loans payable to stockholders                        210,720              5,000           363,496
   Increase in convertible debenture                                      -                  -           278,114
   Proceeds from common stock subscriptions                               -             35,000            35,000
                                                              -------------      -------------      -------------
                                                                    210,720             40,000           676,610
                                                              -------------      -------------      -------------

Increase (decrease) in cash during the period                        43,339              1,566     (      31,574)

Cash, beginning of the period                                         5,241                  -            80,154
                                                              -------------      -------------      -------------
Cash, end of the period                                    $         48,580   $          1,566  $         48,580
                                                              =============      =============      =============
Supplementary disclosure of cash flow information
Cash paid for:
     Interest                                              $              -   $              -  $            620
                                                              =============      =============      =============
     Income taxes                                          $              -   $              -  $              -
                                                              =============      =============      =============
</table>
Non-cash transactions - Notes 3, 4 and 5

                             SEE ACCOMPANYING NOTES

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
  for the period September 23, 1996 (Date of Inception) to September 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
                                                              ------     ---------  -------       --------   -----          -----

                                                      <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 year ended March 31, 2000                         -            -          -     ( 151,117)       -     ( 151,117)

Balance, March 31, 2000                                     5,146,500         515      3,008     ( 151,117)       -     ( 147,594)

                                                                                                                       .../Cont'd.
</table>


                             SEE ACCOMPANYING NOTES

<page>

                         Azul Studios International Inc.
                          (A Development Stage Company)
  CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the period September  23, 1996 (Date of Inception) to September 30, 2004
                             (Stated in US Dollars)
                                   (Unaudited)
                                   -----------

                                                                       Continued
<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
                                                              ------     ---------  -------       --------   -----          -----

                                                      <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)
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)
Capital stock issued to settle stockholder loans            1,250,860         125    312,590             -        -       312,715
Net loss for the six months ended September 30, 2004                -           -          -             - (163,023)    ( 163,023)
                                                           ----------   ----------  --------    ----------  --------    ----------
Balance, September 30, 2004                                11,152,164  $    1,115 $1,093,274  $ ( 151,117)$(986,955) $  (  43,683)
                                                           ==========   ==========  ========    ==========  ========    ==========
</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 CONSOLIDATED FINANCIAL STATEMENTS
                               September 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.   In  July,  2004  the  Company
              incorporated Azul Studios Properties S.L., in Barcelona,  Spain, a
              wholly-owned  subsidiary  to hold the  property  that the  company
              intends  to  acquire  in Spain  and to  operate  the Azul  Studios
              facility  to be  developed  in that  country.  The  Company 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  September  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 September 30, 2004, the Company has a working capital
              deficiency  of  $48,810.  Of the  company's  current  liabilities,
              $92,673  are due to  stockholders,  officers  and  affiliates  and
              accordingly,  the working  capital for trade creditors is $43,863.
              As at September  30,  2004,  the Company has  accumulated  a total
              deficit  of  $1,138,072  since  inception  and has yet to  achieve
              profitable  operations.  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. These
              financial  statements do not include any adjustments to the amount
              and classification of assets and liabilities that may be necessary
              should the Company be unable to continue as a going concern.

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

              The accompanying  consolidated  financial  statements  include the
              accounts of Azul Studios  International  Inc. and its wholly-owned
              subsidiary Azul Studios Property S.L. All significant intercompany
              balances and transactions have been eliminated.

<page>

Note 2        Basis of Presentation - (cont'd)
              ---------------------

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

Note 3        Capital Assets
              --------------
<table>
<caption>
                                                                                                    March 31,
                                                            September 30, 2004                         2004
                                             -------------------------------------------------    ---------------
                                                               Accumulated
                                                  Cost         Depreciation         Net                Net
                                                  ----         ------------         ---                ---
            
                               <c>           <c>                 <c>                 <c>
            Computer equipment               $      17,167    $      14,249   $       2,918       $       3,503
            Computer software                          544              482              62                  79
            Office equipment                         2,778            2,182             596                 799
            Office furniture                         3,772            2,221           1,551               4,801
                                               -----------     ------------       ---------          ----------
                                             $      24,261    $      19,134   $       5,127       $       9,182
                                               ===========     ============       =========          ==========
</table>

              During  the six months  ended  September  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  - Note 5
              -----------------------------

              During the three months  ended  September  30,  2004,  the Company
              received additional loans from a stockholder totalling $108,720.

              During  the six months  ended  September  30,  2004,  the  Company
              settled Stockholder loans aggregating  $312,715 by the issuance of
              1,250,860  units at $0.25 per unit.  Each unit is comprised of one
              share of common  stock of the Company and one half  warrant.  Each
              warrant  entitles  the holder to purchase  one  additional  common
              share of the Company at $0.25 per full share until  September  30,
              2007.

              As  at  September  30,  2004,  the  remaining  loan  payable  to a
              stockholder  is  unsecured,   non-interest  bearing  and  have  no
              specific terms of repayment.

<page>

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

              Changes in Securities
              ---------------------

              During the six months ended September 30, 2004, the Company agreed
              to issue 1,250,860  shares of Common Stock and 625,430 warrants to
              settle  stockholder  loans  aggregating  $312,715  (Note 4).  Each
              warrant  entitles  the holder to purchase  one  additional  common
              share of the Company at $0.25 per share until  September 30, 2007.
              In connection with the issuance,  the Company  allocated $8,736 of
              the proceeds to the warrants based on the fair value of $0.014 per
              warrant.  The  value  of the  warrant  was  determined  using  the
              Black-Scholes  option  pricing  model  with  a 0%  Volatility,  0%
              dividend  yield,  2.92% risk free rate, and the  underlying  stock
              valued at $0.243 per share.

              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 Board of
              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 September 30, 2004,  62,500 of
              these options were exercisable.

              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 were
              granted there would be no effect on pro forma loss.

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

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

<page>

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

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

              During the six  months  ended  September  30,  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.  The vesting period on the options  commences the
              date of the initial  meeting of the  Advisory  Board.  The Company
              considers it  appropriate to measure the fair value of the options
              using the stock price and other measure assumptions on the date of
              the initial  meeting of the Advisory  Board.  As of September  30,
              2004, no such meeting has been held, and the options have not been
              valued.

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

              a)  Amounts paid or accrued to  directors  of the Company,  former
                  directors  of the  Company and  related  companies  in which a
                  director is a partner or associate are as follows:
<table>
<caption>
                                                                                        Six Months ended
                                                                                         September 30,
                                                                                     2004              2003
                                                                                     ----              ----
                  
                                                           <c>                 <c>
                  Accounting fees                                              $       10,423    $       11,622
                  Consulting fees                                                      36,000            50,000
                  Investor relation fees                                               24,000                 -
                  Legal fees                                                           12,000            10,000
                  Office, telephone and miscellaneous                                  13,934             7,104
                                                                                -------------      ------------
                                                                               $       96,357    $       78,726
                                                                                =============      ============
</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
                  September 30, 2004 is $21,518 (March 31, 2004: $86,550) due to
                  a director of the Company, a company in which a director is an
                  associate and a former director of the Company.

              c)  Amounts  due to  related  parties of $1,155  (March 31,  2004:
                  $1,155) are owing to a  stockholder  and a former  director of
                  the Company and are non-interest  bearing,  unsecured and have
                  no specific terms of repayment.

              d)  Loans  payable to a  stockholder  of $70,000 (March  31, 2004:
                  $101,995)  are  non-interest  bearing,  unsecured  and have no
                  specific terms of repayment.

<page>


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

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

BUSINESS  DEVELOPMENT

During the quarter and to date the Company has  continued  to devote its efforts
into  establishing  a new business  comprised of developing  boutique  hotels in
select locations in the world catering to the professional  photographer or film
artist. The company has been focused upon securing equity and debt financing and
has  viewed a number  of  properties  in Ibiza,  Spain.  To date,  no  operating
revenues have been  generated.  The  Company's  operations to date have consumed
substantial  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  September 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.

In July 2004 the Company  incorporated Azul Studios Properties SL, in Barcelona,
Spain, a wholly-owned  subsidiary to hold the property that the company  intends
to acquire in Spain and to operate the Azul Studios  facility to be developed in
that country.

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 six months ended  September  30, 2004 the Company  incurred a loss of
$163,023,  compared with a loss of $103,497 for the corresponding  period of the
prior fiscal year.  This increase in the net loss  reflects  primarily the costs

<page>

associated with the Company's growing efforts in seeking  investment capital and
in developing  the Azul business  initiative.  The Company's  expenses  incurred
during this period include the  incorporation  and  administrative  costs of its
wholly-owned  subsidiary  Azul  Studios  Property,  S.L.  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 six months ended  September 30, 2004 were
comprised  of loans  provided  to the Company by  existing  shareholders  in the
amount of $210,720.

LIQUIDITY  AND  CAPITAL  RESOURCES

As at September  30,  2004,  the Company had $48,580 in cash,  as compared  with
$5,241 in cash at March 31,  2004.  The  increase  was due to loans  provided by
existing shareholders.  At September 30, 2004, the Company had a working capital
deficiency of $48,810.  However,  $92,673 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 $43,863.

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 September,  2004, the Company settled Stockholder loans aggregating  $312,715
by the issuance of 1,250,860  units at $0.25 per unit. Each unit is comprised of
one share of common  stock of the Company  and one half  warrant.  Each  warrant
entitles the holder to purchase one share of the Company's Common Stock at $0.25
per share.  The warrants expire in three years.  The issuances were exempt under
Regulation S of the Securities Act of 1933.

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. As of September 30, 2004,  62,500 of these options
were 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

<page>

B. Reports on Form 8-K

None.
                                   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: January 6, 2005