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

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

|   | For                the quarterly period ended September 30, 2007 |
|--------|------------------------------------------------------------------|

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

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| PART                  I                                        FINANCIAL INFORMATION                                                                                         |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                            |   |
| Item                  1.                                     Financial Statements                                                                                                           | 3      |
| Item                  2.                                                      Management’s Discussion and Analysis of                  Financial Condition and Results of Operations  | 18     |
| Item                  3.                                                      Controls and Procedures                                                                                            | 19     |
|                                                                                                                                                                                                                                                                                       |   |
| PART                  II                                    OTHER                  INFORMATION                                                                                                   |   |
|                                                                                                                                                                                                                                                                                       |   |
| Item                  1.                                                      Legal Proceedings                                                                                                  | 20     |
| Item                  2.                                                      Change in Securities                                                                                               | 20     |
| Item                  3.                                    Defaults upon Senior                  Securities                                                                                     | 20     |
| Item                  4.                                    Submission of Matters to a Vote                  of Security                  Holders                                                | 21     |
| Item                  5.                                    Other Information                                                                                                                    | 21     |
| Item                  6.                                                      Exhibits and                  Reports on                  Form 8-K                                       | 21     |

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L 

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|                                                                                  |       | September                30 |                                          |   | March                31 |    |
|---------------------------------------------------------------------------------------|------------|-----------------------------|-----------------------------------------------|--------|-------------------------|---------|
|                                                                                  |       | 2007                        |                                          |   | 2007                    |    |
| ASSETS                                                                                |       |
| Current                                                                               |       |                        |                                          |   |                    |    |
| Cash                                                                                  |       | $                           | 794,387                                       |   |                    | $       | 3,035 |   |
|                                                                                  |       |                        | 794,387                                       |   |                    | $       | 3,035 |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| Total                Assets                                                           |       | $                           | 794,387                                       |   |                    | $       | 3,035 |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| LIABILITIES                                                                           |       |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| Current                                                                               |       |                        |                                          |   |                    |    |   |   |
| Accounts                payable and accrued                liabilities – Note 3 |       | $                           | 11,857                                        |   |                    | $       | 73,613 |   |
| Due                to related parties – Note                3                   |       |                        | -0-                                           |   |                    |    | 12,616 |   |
| Loans                payable to stockholders –                Note 3            |       |                        | -0-                                           |   |                    |    | 16,264 |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| Total                Liabilities                                                      |       |                        | 11,857                                        |   |                    |    | 102,513 |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| STOCKHOLDERS’DEFICIENCY                                                         |       |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |
| Preferred                Stock, $0.0001 par value                                     |       |                        |                                          |   |                    |    |   |   |
|                                                                                  | 20,000,000 |                        | shares                authorized; none issued |   |                    | -       |   |   |   |   |   |
| Common                stock, $0.0001 par value – Note 4                         |       |                        |                                          |   |                    |    |   |   |
|                                                                                  | 50,000,000 |                        | shares                authorized              |   |                    |    |   |   |   |   |   |
|                                                                                  | 33,129,628 |                        | shares                issued                  |   |                    | 3,342   |   |   |   | 3,342 |   |
| Additional                paid-in capital                                             |       |                        | 2,287,205                                     |   |                    |    | 1,385,676 |   |
| Deficit                accumulated during the prior development stage                 |       |                        | (151,117                                      | )      |                    |    | (151,117 | ) |
| Deficit                accumulated during the development stage                       |       |                        | (1,356,900                                    | )      |                    |    | (1,337,379 | ) |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |   |   |   |
|                                                                                  |       |                        |                                          |   |                    | 782,530 |   |   |   | (99,478 | ) |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |   |   |   |
|                                                                                  |       |                        |                                          |   | $                       | 794,387 |   |   | $ | 3,035 |   |
|                                                                                  |       |                        |                                          |   |                    |    |   |   |   |   |   |

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|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   | April                1,                2000 |          |
|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|------------|--------|------------------------------------------------|--------|-----------|------------------------------|--------|--------|------------|--------|--------|---------------------------------------------|---------------|
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   | (Date                of                     |          |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   | Commencement                                |          |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   | of                Development               |          |
|                                                                                             |   | Three                months                ended |       |   | Six                months                ended |   |      | Stage)                to     |   |
|                                                                                             |   | September                30,                     |       |   | September                30,                   |   |      | September                30, |   |
|                                                                                             |   | 2006                                             |       |   | 2007                                           |   |      | 2006                         |   |   | 2007       |   |   | 2007                                        |          |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |
| Expenses                                                                                         |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |
| Advertising                and promotion                                                         |   | $                                                | -          |   |                                           | $      | -0-       |                         |   | $      | -          |   |   | $                                           | -0-           |   |   | $ | 44,692 |   |
| Amortization                                                                                     |   |                                             | -          |   |                                           |   | -0-       |                         |   |   | 171        |   |   |                                        | -0-           |   |   |   | 21,551 |   |
| Audit                and accounting fees                                                         |   |                                             | 4,642      |   |                                           |   | 6,530     |                         |   |   | 10,612     |   |   |                                        | 12,500        |   |   |   | 147,427 |   |
| Bank                charges and interest                                                         |   |                                             | 30         |   |                                           |   | -         |                         |   |   | 63         |   |   |                                        | 50            |   |   |   | 85,412 |   |
| Consulting                fees –                                                           |   |                                             | 7,500      |   |                                           |   | 46,161    |                         |   |   | 15,000     |   |   |                                        | 77,828        |   |   |   | 578,309 |   |
| Salary                and Wages                                                                  |   |                                             | -          |   |                                           |   | 35,998    |                         |   |   | -          |   |   |                                        | 35,998        |   |   |   | 152,448 |   |
| Legal                fees                                                                        |   |                                             | -          |   |                                           |   | 13,781    |                         |   |   | (6,000     | )      |   |                                        | 16,645        |   |   |   | 107,243 |   |
| Office,                telephone and                miscellaneous                                |   |                                             | 1,986      |   |                                           |   | 10,251    |                         |   |   | 6,242      |   |   |                                        | 14,058        |   |   |   | 176,965 |   |
| Software                research and                development                                  |   |                                             | -          |   |                                           |   | -0-       |                         |   |   | -          |   |   |                                        | -0-           |   |   |   | 66,410 |   |
| Transfer                agent fees                                                               |   |                                             | (125       | )      |                                           |   | -0-       |                         |   |   | -          |   |   |                                        | 125           |   |   |   | 6,109 |   |
| Travel                                                                                           |   |                                             | -          |   |                                           |   | 1,910     |                         |   |   | -          |   |   |                                        | 3,262         |   |   |   | 83,218 |   |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Loss                before other items                                                           |   |                                             | (14,033    | )      |                                           |   | (114,631  | )                            |   |   | (26,088    | )      |   |                                        | (160,466      | ) |   |   | (1,469,784 | ) |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Other                items:                                                                      |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Write-off                of equipment                                                            |   |                                             | -          |   |                                           |   | 1,691     |                         |   |   | 756        |   |   |                                        | 1,691         |   |   |   | (4,964 | ) |
| Loss                on disposal of equipment                –                              |   |                                             | -          |   |                                           |   | -         |                         |   |   | -          |   |   |                                        | -             |   |   |   | (2,217 | ) |
|      (Gain)                on disposition of Azul Studios Property SL   |   |                                             | -          |   |                                           |   |      |                         |   |   | (11,384    | )      |   |                                        |          |   |   |   | (11,384 | ) |
| Write                off of loan due from                3rdParties                              |   |                                             | -          |   |                                           |   | -0-  |                         |   |   | 1,129      |   |   |                                        | 142,636  |   |   |   | 143,765 |   |
| Foreign                currency                adjustments                                       |   |                                             | -          |   |                                           |   | -         |                         |   |   | 251        |   |   |                                        | -0-           |   |   |   | (1,702 | ) |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
|                                                                                             |   |                                             |       |   |                                           |   | (1,691)-  |                         |   |   | (9,248     | )      |   |                                        | (140,945      | ) |   |   | (17,429 | ) |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Net                loss for the period                                                           |   | $                                                | (14,033    | )      |                                           | $      | (116,322  | )                            |   | $      | (16,840    | )      |   | $                                           | (19,521       | ) |   | $ | (1,346,286 | ) |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Basic                and diluted loss per                share                                   |   | $                                                | (0.00      | )      |                                           | $      | (0.01     | )                            |   | $      | (0.00      | )      |   | $                                           | (0.02         | ) |   |   |   |   |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |
| Weighted                average number of shares                outstanding for the period  |   |                                             | 32,423,628 |   |                                           |   | 5,576,082 |                         |   |   | 32,423,628 |   |   |                                        | 5,576,082     |   |   |   |   |   |
|                                                                                             |   |                                             |       |   |                                           |   |      |                         |   |   |       |   |   |                                        |          |   |   |   |   |   |

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|                                                                                                                 |   |                                           |    |   |   |   |
|----------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|---------|--------|--------|--------|
|                                                                                                                 |   |                                           |    |   |   |   |
|                                                                                                                 |   |                                           |    |   |   |   |
|                                                                                                                 |   |                                           |    |
|                                                                                                                 |   | Six                months                ended |    |
|                                                                                                                 |   | September                30,                   |    |
|                                                                                                                 |   | 2006                                           |    |   | 2007   |   |
|                                                                                                                 |   |                                           |    |   |   |   |
| Cash                flows used in Operating                Activities                                                |   |                                           |    |   |   |   |
| Net                loss for the period                                                                               |   | $                                              | (16,840 | )      |   | $      | (19,521 | ) |
| Add                items not involving                cash:                                                          |   |                                           |    |   |   |   |   |   |
| Amortization                                                                                                         |   |                                           | 171     |   |   |   | 410 |   |
| Donated                interest                                                                                      |   |                                           | -       |   |   |   | - |   |
| Write-off                of equipment                                                                                |   |                                           | 756     |   |   |   | - |   |
| Loss                on disposal of                equipment                                                          |   |                                           | -       |   |   |   | - |   |
|         Gain                on disposal of Azul Studios Property SL          |   |                                           | (11,384 | )      |   |   | 13,199 | ) |
|         Write                off loan due from ASPSL                         |   |                                           | 942     |   |   |   |   |   |
|         Foreign                currency adjustment                           |   |                                           | 214     |   |   |   |   |   |
| Changes                in non-cash working                capital item    related to operations: |   |                                           |    |   |   |   |   |   |
| Accounts                payables and accrued                liabilities                                              |   |                                           | (8,579  | )      |   |   | 61,756 |   |
|           Increase                in amounts due to related party  |   |                                           | 23,989  |   |   |   | 12,616 |   |
|                                                                                                                 |   |                                           | (10,731 | )      |   |   | (41,352 | ) |
|                                                                                                                 |   |                                           |    |   |   |   |   |   |
| Cash                Flows used in Investing                Activity                                                  |   |                                           |    |   |   |   |   |   |
| Acquisition                of equipment                                                                              |   |                                           | -       |   |   |   | - | ) |
|                                                                                                                 |   |                                           |    |   |   |   |   |   |
| Cash                Flows provided by Financing                Activities                                            |   |                                           |    |   |   |   |   |   |
| Increase                in loan payable to                stockholders                                               |   |                                           | 10,240  |   |   |   | - |   |
| Increase                in convertible                debenture                                                      |   |                                           | -       |   |   |   | - |   |
| Proceeds                from common stock                subscriptions                                               |   |                                           | -       |   |   |   | 750,000 |   |
|      Net                cash decrease from disposition of ASPSL                             |   |                                           | (628    | )      |   |   | - | ) |
|                                                                                                                 |   |                                           | 9,612   |   |   |   | 750,000 |   |
| Decrease                in cash during the                period                                                     |   |                                           | (1,119  | )      |   |   | (791,352 | ) |
| Cash,                beginning of the                period                                                          |   |                                           | 1,108   |   |   |   | 3,035 |   |
| Cash,                end of the period                                                                               |   | $                                              | (11     | )      |   | $      | 794,387 | ) |
| Supplementary                disclosure of cash                flow information                                      |   |                                           |    |   |   |   |   |   |
| Cash                paid for:                                                                                        |   |                                           |    |   |   |   |   |   |
| Interest                                                                                                             |   | $                                              | 63      |   |   | $      | 263 |   |

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|                                                                         |   |                         |       |   |                     |   |   |        |   |   | Deficit                     |   |   |        |     |   |   |   |
|------------------------------------------------------------------------------|--------|------------------------------|------------|--------|--------------------------|--------|--------|-------------|--------|--------|-----------------------------|--------|--------|-------------|----------|--------|--------|--------|
|                                                                         |   |                         |       |   |                     |   |   | Accumulated |   |   | Deficit                     |   |   |        |     |
|                                                                         |   |                         |       |   |                     |   |   |        |   |   | During                prior |   |   | Accumulated |     |   |   |   |
|                                                                         |   | Note                5        |       |   | Additional               |   |   | Development |   |   | During                the   |   |   |        |     |
|                                                                         |   | Common                Shares |       |   | Paid-in                  |   |   | Stage       |   |   | Development                 |   |   |        |     |
|                                                                         |   | Number                       |       |   | Par                Value |   |   | Capital     |   |   | (Note                1)     |   |   | Stage       |     |   | Total  |   |
|                                                                         |   |                         |       |   |                     |   |   |        |   |   |                        |   |   |        |     |   |   |   |
| Balance                April 1, 2007                                         |   |                         | 32,523,628 |   |                     |   | 3,252  |        |   |   | 1,385,766                   |   |   |        | (151,117 | )      |   |   | (1,337,379 | ) |   |   | (99,478 | ) |
| Capital                stock subscribed for cash at $0.25 per share          |   |                         | 606,000    |   |                     |   | 90     |        |   |   | 151,439                     |   |   |        |     |   |   |   |   |   |   |   | 151,529 |   |
| Proceeds                from Stock Transaction-Shares to be issued           |   |                         |       |   |                     |   |   |        |   |   | 750,000                     |   |   |        |     |   |   |   |   |   |   |   | 750,000 |   |
| Net                income (loss) for the six months ended September 30, 2007 |   |                         | -          |   |                     |   | -      |        |   |   | -                           |   |   |        | -        |   |   |   | (19,521 | ) |   |   | (19,521 | ) |
|                                                                         |   |                         |       |   |                     |   |   |        |   |   |                        |   |   |        |     |   |   |   |   |   |   |   |   |   |
| Balance,                September 30, 2007                                   |   |                         | 33,129,628 |   |                     |   | 3,342  |        |   |   | 2,287,205                   |   |   |        | (151,117 | )      |   |   | (1,203,361 | ) |   |   | 782,530 |   |
|                                                                         |   |                         |       |   |                     |   |   |        |   |   |                        |   |   |        |     |   |   |   |   |   |   |   |   |   |

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|   | These                financial statements have been prepared in accordance with generally                accepted accounting principles applicable to a going concern, which                assumes that the Company will be able to meet its obligations and                continue                its operations for its next fiscal year. Realization values may be                substantially different from carrying values as shown and these financial                statements do not give effect to adjustments that would be necessary                to                the carrying values and classification of assets and liabilities                should                the Company be unable to continue as a going concern. At September                30,                2007, the Company had not yet achieved profitable operations, has                accumulated losses of $1,356,900 since its inception, but has working                capital of $794,387 but expects to incur further losses in the development                of its business, all of which casts doubt about the Company’s ability to                continue as a going concern.  The Company’s ability to continue                as a going concern is dependent upon its ability to generate future                profitable operations and/or to obtain the necessary financing to                meet its                obligations and repay its liabilities arising from normal business                operations when they come due.  Management considers that the                Company will be able to obtain additional funds by equity financing                and/or                related party advances, however there is no assurance of additional                funding being available.   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | The                financial statements of the Company have been prepared in accordance                with                accounting principles generally accepted in the United States of                America.                Because a precise determination of many assets and liabilities is                dependent upon future events, the preparation of financial statements                for                a period necessarily involves the use of estimates which have been                made                using careful judgement. Actual results may vary from these estimates. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                financial statements have, in management’s opinion, been properly prepared                within the framework of the significant accounting policies summarized                below: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company complies with FAS No. 7 for its characterization of the Company                as                development stage. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company reports the impairment of long-lived assets and certain                identifiable intangibles in accordance with FAS No. 144, “Accounting for                the Impairment of Long-lived Assets”.  Certain long-lived assets                held by the Company are reviewed for impairment whenever assets or                changes                in circumstances indicate the carrying amount of an asset may not                be                recoverable.  Accordingly, an impairment loss is recognized in                the year it is determined. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The                Company’s financial instruments consist primarily of cash, accounts                payable and accrued expenses, and debt.  The carrying amounts of                such financial instruments approximate their respective estimated                fair                value due to the short-term maturities and approximate market interest                rates of these instruments.  The estimated fair value is not                necessarily indicative of the amounts the Company would realize in                a                current market exchange or from future earnings or cash flows. |
|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | Effective                December 31, 2006, we adopted FIN 48, “Accounting for                Uncertainty in                Income Taxes.” FIN 48 clarifies the accounting for uncertainty in                income taxes recognized in financial statements in accordance with                SFAS                No. 109, “Accounting for                Income Taxes.” FIN 48 prescribes a recognition threshold and                measurement attribute for the financial statement recognition and                measurement of a tax position taken or expected to be taken in a                tax                return. FIN 48 requires that we determine whether the benefit of                our tax                positions is more likely than not to be sustained upon audit, based                on the                technical merits of the tax position. For tax positions that are                more                likely than not to be sustained upon audit, we recognize the greatest                amount of the benefit that is more likely than not to be sustained                in our                consolidated condensed financial statements. For tax positions that                are                not more likely than not to be sustained upon audit, we do not recognize                any portion of the benefit in our condensed consolidated financial                statements. The provisions of FIN 48 also provide guidance on                derecognition, classification, interest and penalties, accounting                in                interim periods, and disclosure. Our policy for interest and penalties                under FIN 48, related to income tax exposures was not impacted as                a result                of the adoption of the recognition and measurement provisions of                FIN 48.                Therefore, we continue to recognize interest and penalties as incurred                within “income taxes”                in our condensed consolidated statements of operations, when                applicable. There was no change to our accumulated deficit as of                December                31, 2006 as a result of the adoption of the recognition and measurement                provisions of FIN 48. We did identify certain potential liabilities                that                would have met the pre FIN 48 accruals criteria, discussed above,                and                therefore recorded the adjustment through our income tax provision                in the                current period, as it                was not material to any periods impacted. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Computer                  equipment |   |   | 30 | % |
|-------------------------------------|--------|--------|----|---|
| Computer                  software  |   |   | 40 | % |
| Office                  equipment   |   |   | 30 | % |
| Office                  furniture   |   |   | 20 | % |

----

|   | The                carrying value of the Company’s financial instruments, consisting of cash                and accounts payable and accrued liabilities approximate their fair                value                due to the short term maturity of such instruments.  Due to                related parties and loans payable to stockholders also approximate                fair                value. Unless otherwise noted, it is management’s opinion that the Company                is not exposed to significant interest, currency or credit risks                arising                from these financial instruments. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company accounts for convertible debt as required by APB Opinion                No. 14                “Accounting for Convertible Debt and Debt Issued with Stock Purchase                Warrants”. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company                adopted  SFAS  No.  123R,                "Accounting  for Stock-Based Compensation".  This                statement requires a                public  entity  to  measure  the                cost                of  employee  services  received  in                exchange for                an                award of equity  instruments  based                on the grant-date fair value of the award (with limited exceptions).                That                cost will be recognized                over the period                during which                an                employee is required to provide  service. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company has a stock-based compensation plan, which is described in                Note 5.                Under this plan, all stock based payments to non-employees are accounted                for using a fair value based method of accounting. No compensation                expense                is recognized when the stock options are granted to employees or                directors. Consideration received from employees, directors or consultants                on exercise of stock options is credited to share capital. If stock                is                repurchased from employees, directors or consultants, the excess                of the                consideration paid over the carrying amount of the stock is charged                to                deficit. On the granting of stock options to employees or directors                the                Company has elected to provide pro forma disclosure on their fair                value. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                Company’s previously wholly-owned subsidiary, Azul Studios Property S.L.                (disposed of on September 29, 2006), translates amounts from its                functional currency, Euro, to the reporting currency, United States                dollars, in accordance with FAS No. 52, “Foreign Currency                Translation”.  At each balance sheet date, recorded balances                that are denominated in a currency other than US dollars are adjusted                to                reflect the current exchange rate which may give rise to a foreign                currency translation adjustment accounted for as a separate component                of                stockholder’s deficiency and included in comprehensive loss. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|   | Monetary                assets and liabilities are translated into the functional currency                at the                exchange rate in effect at the end of the period. Non-monetary assets                and                liabilities are translated at the exchange rate prevailing when the                assets                were acquired or the liabilities assumed. Revenues and expenses are                translated at the rate approximating the rate of exchange on the                transaction date. All exchange gains and losses are included in the                determination of net loss for the year. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  | The                Company’s previously wholly-owned subsidiary, Azul Studios Property S.L.                (disposed of on September 29, 2006), translates amounts from its                functional currency, Euro, to the reporting currency, United States                dollars, in accordance with FAS No. 52, “Foreign Currency                Translation”.  At each balance sheet date, recorded balances                that are denominated in a currency other than US dollars are adjusted                to                reflect the current exchange rate which may give rise to a foreign                currency translation adjustment accounted for as a separate component                of                stockholder’s deficiency and included in comprehensive loss. |
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|  | Monetary                assets and liabilities are translated into the functional currency                at the                exchange rate in effect at the end of the period. Non-monetary assets                and                liabilities are translated at the exchange rate prevailing when the                assets                were acquired or the liabilities assumed. Revenues and expenses are                translated at the rate approximating the rate of exchange on the                transaction date. All exchange gains and losses are included in the                determination of net loss for the year. |
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|   | On                May 18, 2007, the Board of Directors, Compensation committee approved                a                stock option plan for the Company which provides for the allocation                of                options to purchase up to 2,100,000 common shares of the Company.                The                Board of Directors also approved the issuance of options to two directors                and one consultant to acquire, in aggregate up to 1,000,000 common                shares                of the Company at $0.25 per share. The options have a term of five                years                expiring in May 2012. The option plan is subject to approval by the                directors and stockholders of the Company. |
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|   | The                Company does not record compensation expense on the granting of stock                options to employees. In accordance with FAS No. 123R “Share-Based                Payment”, disclosure of pro forma net loss and net loss per share is                required and is calculated by determining the fair value of the options                using fair value option pricing models.  The Company has                determined the fair value of vested employee stock options using                the fair                value method. |
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|   | At                September 30, 2007, 312,715 share purchase warrants are outstanding.                Each                warrant entitles the holder to purchase an additional common share                of the                Company at $0.50 per share until September 30, 2007. |
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|   | The                following table summarizes the significant components of the Company’s                future tax assets: |
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|                                                         |   | 2007   |     |   | 2006   |   |
|--------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                         |   |   |     |   |   |   |
| Future                tax assets                             |   |   |     |   |   |   |
| Non-capital                loss                carry-forward |   | $      | 398,290  |   |   | $      | 512,320 |   |
| Valuation                allowance for deferred tax asset    |   |   | (398,290 | )      |   |   | (512,320 | ) |
|                                                         |   |   |     |   |   |   |   |   |
|                                                         |   | $      | -        |   |   | $      | - |   |
|                                                         |   |   |     |   |   |   |   |   |

| The                Company accounts for income taxes using SFAS No. 109, “Accounting for                Income Taxes,” Which requires recognition of deferred tax liabilities and                assets for expected future tax consequences of events that have been                included in the financial statements or tax returns. Under this                method, deferred tax liabilities and assets are determined based                on the                difference between the financial statement and tax basis of assets                and                liabilities using enacted tax rates in effect for the year in which                the                differences are expected to reverse. A valuation allowance is                recorded for deferred tax assets if it is more likely that not that                some                portion or all of the deferred tax assets will not be                realized. |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|  | Effective                December 31, 2006, we adopted FIN 48, “Accounting for Uncertainty in                Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income                taxes recognized in financial statements in accordance with SFAS                No. 109,                “Accounting for Income Taxes.” FIN48 prescribes a recognition threshold                and measurement attribute for the financial statement recognition                and                measurement of a tax position taken or expected to be taken in a                tax                return.  FIN 48 requires that we determine whether the benefit                of our tax positions is more likely than not to be sustained upon                audit,                based on the technical merits of the tax position.  For tax                positions that are more likely than not to be sustained upon audit,                we                recognize the greatest amount of the benefit that is more likely                than not                to be sustained in our consolidated condensed financial                statements.  For tax positions that are not more likely than not                to be sustained upon audit, we do not recognize any portion of the                benefit                in our condensed consolidated financial statements.  The                provisions of FIN48 also provide guidance on derecognition,                classification, interest and penalties, accounting in interim periods,                and                disclosure.  Our policy for interest and penalties under FIN 48,                related to income tax exposures was not impacted as a result of the                adoption of the recognition and measurement provisions of FIN                48.  Therefore, we continue to recognize interest and penalties                as incurred within “income taxes” in our condensed consolidated statements                of operations, when applicable.  There was no change to our                accumulated deficit as of December 31, 2006 as a result of the adoption                of                the recognition and measurement provisions of FIN 48.  We did                identify certain potential liabilities that would have met the pre                FIN 48                accruals criteria, discussed above, and therefore recorded the adjustment                through our income tax provision in the current period, as it was                not                material to any periods impacted. |
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|   | As                at September 30, 2007, the Company has accumulated non-capital losses                totaling approximately $1,356,900, 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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| a)   | On                August 10, 2007 the Company completed upon an additional private                placement                of 2,008,000 shares at a price of $0.25 per share with aggregate                proceeds                of $502,000 pursuant to a regulation 506 exemption from                registration. |
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| b)   | On                August 11, 2007 the Company completed upon additional private placement                of                shares at a price of $1.00 per share with aggregate proceeds of $37,000                pursuant to a regulation 506 exemption from                registration. |
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| 31.1 | Certification                pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 |
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| 32.1 | Certification                pursuant to 18 U.S.C. Section 1350 as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
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|                                 | Modern                City Entertainment Inc. |                                                |
|--------------------------------------|-----------------------------------------------|-----------------------------------------------------|
|                                 |                                          |                                                |   |
| February                    15, 2008 | By:                                           | /s/ William                Erfurth   |   |
|                                 |                                          | William                Erfurth            |   |
|                                 |                                          | President                and Director               |   |
|                                 |                                          |                                                |   |

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