UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-K




x   
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For
the fiscal year ended May 31, 2008




o   
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
transition period from ________________ to ________________




Commission
File No.: 000-52054




FUEGO
ENTERTAINMENT, INC.


(Name of
small business issuer in its charter)







Nevada
            20-2078925(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)





8010
      NW 156 St
              Miami
      Lakes, FL 33016(Address,
      including zip code, of principal executive
  offices)




Issuer’s
telephone number: (305)
823-9999





Securities
registered under Section 12(b) of the Exchange Act: None




Securities
registered under Section 12(g) of the Exchange Act:




Common Stock,
Par Value $.001 Per Share


(Title of
class)





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.     xYes     oNo





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.     x





State
issuer’s revenues for its most recent fiscal year.     $559,214




On May
31, 2008 the registrant had 39,476,020sharesof Common Stock,
(0.001par value per share) issued and outstanding.  As of May 31, 2008
the aggregate market value of the voting common equity held by non-affiliates of
the registrant was approximately $3,744,005based on the
closing trade reported on the OTC
Bulletin Board. Shares of common stock held by each officer and director and by
each person who owns five percent or more of the outstanding common stock have
been excluded from this calculation as such persons may be considered to be
affiliated with the Company.




Documents
incorporated by reference: None




Transitional
Small Business Disclosure Format: Yes  ̈
No x




1




FUEGO
ENTERTAINMENT, INC.




Index
to


Annual
Report of Form 10-K


For the
Period Ended May 31, 2008




Part
      I
            
            PageItem
      1
            Description
      of Business
            3Item
      2
            Description
      of Property
            5Item
      3
            Legal
      Proceedings
            5Item
      4
            Submission
      of Matters to a Vote of Security Holders
            5Part
      IIItem
      5
            Market
      for Common Equity and Related Stockholder Matters
            5Item
      6
            Management's
      Discussion and Analysis of Financial Condition or Plan of
      Operation
            7Item
      7
            Financial
      Statements
            12Item
      8
            Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure
            33Item
      8A
            Controls
      and Procedures
            33Part
      IIIItem
      9
            Directors,
      Executive Officers, Promoters and Control Persons; Compliance With Section
      16(a) of the Exchange Act
            34Item
      9B
            Complience
      with Section 16(a) of the Exchange Act
            35Item
      10
            Executive
      Compensation
            35Item
      11
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            35Item
      12
            Certain
      Relationships and Related Transactions
            36Item
      13
            Exhibits
            36Item
      14
            Principal
      Accountants Fees and Services
            3637SignaturesCertifications







2




PART
I
 
 
 ITEM 1.  
DESCRIPTION OF BUSINESS.
 
 Corporate
Background
 
 Fuego
Entertainment, Inc. (“Fuego”, “the Company”, “we”,”our”, or “us”) was originally
incorporated under the laws of the State of Nevada on December 30, 2004 as
"Durango Entertainment, Inc." On March 15, 2005, we filed a Certificate of
Amendment with the Nevada Secretary of State changing our name to "Fuego
Entertainment, Inc."
 
 Current
Business Operations
 
 We are
engaged in the directing, production, marketing, and distribution of
entertainment products, including feature and short films, documentaries,
television shows, music, and tour productions. We produce CD, DVD, filmed and
television content. We have launched a music division, Fuego Entertainment Music
International (FEMI) that produces, markets and distributes music content
through traditional distribution channels and also through digital
downloads.  This division remains in the development stage. We have
created a publishing division, Fuego Entertainment Publishing Group (FMP), to
manage, market, promote, and commercially exploit music compositions. This
business segment remains in the development stage.
 
 We also
provide a limited amount of such management, marketing, and public relations
services to the entertainment industry and the amount of such services provided
is increasing.
 
 We were
founded by our President, Hugo M. Cancio, who had spent the previous five years
successfully owning and operating Ciocan Entertainment & Music Group,
(Ciocan) our affiliate and a record label a film production company that
produces Cuban and world entertainment and is well-known throughout the Latino
Market - both in Latin America and the U.S.  Fuego was formed in order
to cross over into mainstream America with some of Ciocan's Latin music and film
products as well as to produce music, films, and television programs geared
toward the English speaking markets.  It is our intention to reach both
markets at the same time, as well as further European markets where Latin music
is very popular. We have entered into an agreement with Ciocan to license,
produce and distribute certain Ciocan products. Ciocan has not, does not
now, nor does it intend to, conduct any business operations of any kind in
Cuba.
 
 Distribution
and Publishing
 
 Fuego at
the present time has two feature film products in distribution and several
additional products that are in pre-production stages. Once these additional
products are completed we intend to make contact with several distributors
around the world with whom Mr. Cancio has conducted business via Ciocan. Ciocan
and Hugo Cancio have contacts with distributors in Spain, France, Italy,
Germany, England, Portugal, Japan, China and the U.S.  Ciocan's largest
distribution products are music CD's. Fuego has also engaged in the fast growing
market of digital distribution of entertainment products. The Company currently
has agreements with three major distributors: Koch Entertainment, The Orchard
and IODA.
 
 The
method Fuego uses to select clients is by traveling to the shows and conventions
related to music product distributions such as MIDEM, BILLBOARDS, film and
television shows, and conventions such as MIPCOM NATPE as well as the already
established film festivals around the world such as: Cannes, Berlin, Miami, and
Sundance.
 
 Out-sourcing
process: We send products to established distributors (distributors that are
well established in the market with whom Ciocan and our President have done
business with) on payment credit terms for established credit-approved accounts,
and cash on delivery to those we consider new clients. We have a no return
policy.
  3
   
 We have
acquired publishing rights to music compositions managed by Sun Flower
Publishing from which we may receive royalties for products sold as well as
for songs played on radio and television which are licensed for soundtracks. We
have executed a licensing agreement with Ciocan whereby Fuego has licensed the
Ciocan music library for the payment of a 25% royalty based on net
sales.
 
 Advertising and
Promotional Services
 
 In terms
of advertising and promoting our products, we currently use freelance
individuals and marketing firms to assist with this function. However, we are in
the process of investigating the possibility of bringing this function in-house
in the near future as revenues permit. We have used and will continue to use on
a project-to-project basis the services of F&F Media Corp. This corporation
distributes information to the local and international media pertaining to our
artists’ new releases or events, organizes the interviews for various markets,
and promotes our concert shows in order to enhance ticket sales.
 
 Our
future plan is to hire an in-house marketing and promotions manager in order to
execute our marketing and promotions campaigns. This includes TV, radio,
billboards, and sidewalk bench ads in key markets such as Miami, Los Angeles,
New York and Puerto Rico. The
company will also put in motion a national marketing and promotional campaign,
that will include nationaltelevision and radio
adsto annouce itsmusic retail websiteFuegomio.com For the past
seven (7) years, Mr. Cancio has developed relationships with the local and
international media and media outlets. This will help us in bringing our
advertising and marketing functions in-house. Our goal is to bring these
services in-house within the near term if our revenues permit. It is
management's belief that this will have a positive effect in our business
operation as it will allow us to advertise, market and promote our artists,
projects and services from within. We estimate that $100,000 a year in extra
revenue will permit us to accomplish this goal. Management believes that our
likelihood of earning this additional revenue in the near term is favorable,
though there can be no assurance that we will earn such revenues within this
stated time frame. Our failure to earn this additional revenue could negatively
impact our ability to bring advertising and marketing functions
in-house.
 
 Target
Markets
 
 It is our
intent to offer entertainment products that appeal to both the Hispanic/Latin
and English-speaking markets. We intend to offer a wide selection of hip-hop,
rap, pop, and contemporary music as well as films encompassing the documentary
and reality television genre - thereby crossing all age groups, sexes, income
levels, and races.
  
 Advertising
and Marketing Strategy
 
 In terms
of marketing the end products to the consumer, we intend to utilize a variety of
methods, including radio, television, print advertising, public relations
efforts, and press mention, depending on the project. By bringing the marketing
functions in-house, we will be able to further penetrate the marketplace and
increase its brand awareness as well as generate incremental revenues.
Currently, we are not conducting any specific sales and marketing
campaigns.
 
 Sales
Strategy
 
 We have
already developed strong relationships with the channels of distribution for the
products and we work with reputable distributors to place the products within
retail and various music stores. We are now also engaged in the digital
distribution of music and video content and have executed distribution
agreements with Digital Music Group, Inc. and Vidzone. We also keep in close
contact with various radio stations, television producers, and newspaper editors
to inform them as to our progress.
 
 Employees
  4
  We do not
employ any persons on a full-time or on a part-time basis, we do, however, have
several people working on behalf of the company as independent contractors. Hugo
M. Cancio is our President, Chief Executive Officer, Chief Financial Officer and
Secretary. Mr. Cancio is responsible for all of our day-to-day operations. Other
services are provided by outsourcing and consulting and special purpose
contracts.
 
 We intend
to increase the number of our employees over the next year by one to two
employees: one who will be responsible for internal bookkeeping and accounting
issues, and another who will serve as an executive assistant to Mr. Cancio. Our
current strategy is to outsource where possible because it is management's
belief that this strategy, at our current level of development, gives us access
to the best services available, leads to lower overall costs, and provides us
the most flexibility for our business operations. For the time being Fuego will
outsource the following services: Cameraman, assistant producer or producers,
editors, sound technicians, advertising and marketing services.
 
 
 ITEM 2.  
DESCRIPTION OF PROPERTY.
 
 We lease
our principal office space located at 8010 NW 156 St., Miami Lakes, Florida,
33016 on a month to month basis from a related party. Total rent expense for the
year ended May 31, 2008 and 2007 was $19,200 and $15,083, respectively. On
September 30, 2006, the Company terminated its shared lease of office facilities
and office equipment for $750 a month, on a month to month basis, including
utilities and insurance. Fuego’s President/CEO contributed the fair value of an
office in home at $1,600 a month, on a month to month basis, including utilities
and insurance.
 
 
 ITEM 3.   LEGAL
PROCEEDINGS.
 
 Other
than what is disclosed in this section, we were not a party to any legal
proceedings during the reporting period, and we know of no legal proceedings
pending or threatened or judgments entered against any director or officer of
the Company in their capacity as such.
 In the
matter of the Miami case of Apple Corp Vs. Hugo Cancio and Fuego Entertainment,
Apple filed suit against Fuego for/and an injunction preventing Fuego from
releasing  music tracks from The Beatles and other artist recorded in
the 1960’s at the Start Club in Hamburg, Germany.   Fuego filed a
motion to dismiss as a matter of law. Currently The parties are negotiating in
good faith a settlement agreement. We expect to finalize this agreement
shortly
  Subsequent
Events
 In the
matter of Fuego Entertainment, Inc Vs. Var Growth Corporation and Barry Davis
and Ice Cold Stocks,  Fuego filed a lawsuit against this individuals for
money damages and for injunctive relief as to shares issued to the Defendants
but allegedly not earned. In July, 2008, the case was settled out of court via
private agreement and the lawsuit dismissed. Fuego agreed to drop all legal
action against Var Growth.  Var Growth retained 400,000 shares of
Fuego stock and Var Growth returned 475,000 shares of Fuego
stock.
 
 In the
Nevada case in the matter of Fuego Entertainment, Inc Vs. Nicole Durr and
Viashow Inc., Fuego filed a lawsuit against these organizations and individuals
associated with an allegation that the Defendants failed to pay necessary
royalties to Fuego and that the Defendants failed to conduct a full five-city
schedule of the Havana Night Club show. The show originally appeared in Miami,
FL and was scheduled to appear in New York, New Jersey, Chicago, Dallas, Houston
and or California.  The Defendants failed to run any of these shows.
The case is not yet
set for a hearing.  The parties entered into initial settlement
negotiations.  There is no resolution of the case as of the date of
this filing.
 
 ITEM 4.  
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 None
  5
  PART II
 
 
 ITEM 5.   MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
 Principal
Market or Markets
  Our
common stock is listed on the Over-the-Counter Electronic Bulletin Board. Our
trading symbol is “FUGO.OB.”
 
 The
following table sets forth the high and low bid prices of the Company's common
stock for each quarter shown, as provided by the NASDAQ Trading and Market
Services Research Unit. Quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not represent actual
transactions.
   FISCAL
      YEAR  2008
              
              HIGH
              
              
              LOWQuarter Ended
      August 31, 2007
              
              $
              .34
              
              
              $
              0.23Quarter Ended
      November 30, 2007
              
              $
              0.35
              
              
              $
              0.30Quarter Ended
      February 28, 2008
              
              $
              0.269
              
              
              $
              0.20Quarter Ended
      May 31, 2008
              
              $
              0.25
              
              
              $
              0.25
  Approximate
Number of Common Stock Holders
 
 As of May
31, 2008, we had 39,476,020 shares of common stock outstanding, held by
approximately 52 shareholders.
 
 Dividend
Policy
 
 We have
never declared or paid cash dividends on our common stock and anticipate that
future earnings, if any, will be retained for development of our
business.
 
 Recent
Sales of Unregistered Securities
 
 During
the fiscal year ended May 31, 2008, we issued a total of
1,924,667  shares of our common stock to our stockholders for a total
purchase price of $351,000.  In addition, during this period we issued
412,000 shares in the form of compensation and 525,000 shares to reduce our
debt. .
 
 Fiscal
year 2008
 Proceeds
from the sales of securities were $12,300 for the sale of 83,000 common shares
at $0.15 per share, $64,400 for the sale of 541,667 common shares at $0.12 and
$274,300 for the sale of 1,300,000 common shares at $0.212 per
share.
 
 The
company recorded $272,079 for share-based compensation for services rendered in
the current fiscal year.  The company issued 412,000 common shares at
a price ranging from $0.12 to $0.28 per share.
 
 The
Company issued 525,000 common shares in order to reduce debt of
$78,225.  The price per share was $0.15.
 
 In fiscal
year 2007, the Company issued 875,000 common shares at $0.15 for compensation
for services to be rendered over a one year period from the date of issuance
thereof. However, of those, 475,000 was subsequently cancelled.
 
 In 2008
the Company adopted an incentive stock option plan for its employees and
consultants.  Such plan allows us to register up to 1,000,000 common
shares each year pursuant to the plan.  In January 2008 we issued
525,000 stock options to the Officers and Directors of the Company, of which
250,000 was issued to our CEO.  In April and May, 2008, the Company
issued an additional 315,000 stock options to its outside professional
consultants and advisors including accountants, lawyers and public relations
contractor.
  6
  
 Subsequent
Event
 
 In the
first quarter of 2009, stock options for 275,000 common shares held by former
directors listed above  were cancelled as the vesting schedule had not
been achieved by the former directors of the Company.   The
Company will report income of $137,500 associated with the
reclassification.
 
 
 ITEM 6.  
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
 
 The
following discussion is intended to provide an analysis of the Company’s
financial condition and Plan of Operation and should be read in conjunction with
the Company’s financial statements and the notes thereto set forth herein. The
matters discussed in this section that are not historical or current facts deal
with potential future circumstances and developments. The Company’s actual
results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below.
 
 Plan
of Operation
 
 We have
been in operation for forty one months as of May 31, 2008. Our efforts during
that period have largely been to generate cash flows from operations and cash
flow from the sales of our common shares. The majority of these cash flows were
applied towards, production costs of and the investment in a series of shows,
including Havana Nights.
 
 Since
inception, we have sold music CD’s representing the majority of our music
revenue. In the current fiscal year we created a music business segment named
Fuego Entertainment Music International (FEMI) the purpose of which is to sell
our music content under this name.
  Since
launching FEMI, we expanded our music and video catalog, by signing new
artists, and acquiring music masters containing over 890 music tracks. This
library has been significantly increased in 2008 as discussed later in this
section. We have also expanded our marketing and distribution capabilities and
enhanced sales in the process.  We executed an agreement Digital Music
Group, Inc, one of the leaders in the digital distribution of entertainment
product. We also executed an agreement with UK digital distributor Vidzone. Must
recently we executed a publishing agreement with Ediciones Musicales Clippers.
On March 1, 2007 we retained the services of Adolfo Fernandez, a prestigious
publicist from F&F Media Group. Mr. Fernandez's firm represents companies
such as WEA Music, Sony BMG, Televisa Group, Univision Music Group, EMI US
Latin, EMI Music Colombia, Venemusic, Fonosound, Grupo Origin, Warner Music
Latina, and others. Mr. Fernandez has worked with many artists such as Andrea
Bocelli, Ricky Martin, Alejandro Sanz, Mark Anthony, Shakira, Gilberto
Santarosa, Jennifer Lopez, and others.
  In
January, 2008, We formed a new music division, Echo-Fuego Music, in a joint
venture with legendary music producer and promoter Jeffrey Collins. His music
catalog of more than 2,000 tracks and 15 artists previously under the Echo-Vista
label will be merged into the new joint venture, with a majority stake owned by
Fuego Entertainment. Mr. Collins will manage the joint venture which plans to
release at least two albums per month over the next five years featuring artists
such as KRS-One, Father MC, Ahmir, Marcus Allen, Eriq J'Mar, Don Connor,
NoXcuse, Ram Squad,Jeff Maddox, DJ No-Rap, Culture, Meekie Renee, C.W., World
Carnival, Colonel Abrams, La Velle and The L.C.D.'s. The joint venture
Echo-Fuego is actively seeking to sign exciting new artists. The joint venture
new releases and existing music catalog is distributed by Koch
Entertainment.
 
 Secondly,
we have focused on the creation and development of our four filming projects.
Three of the four projects are documentaries titled One Million Millionaires,
Gold in Ecuador and Counterfeit Conspiracy. The fourth project is a reality
television series titled The Trader. Our four filming projects, all in the
development stage, cost $45,509, after recorded impairment, as of May 31,
2008.  The work in progress includes script development, principal
photography, sound engineering, personnel, such as a cameraman, producer and
assistant producer, location permits, filming insurance, equipment rental travel
and hotel accommodations and crew meals. No general and administrative costs
were capitalized.
  7
   
 Operating
expenses for fiscal year 2008 were principally for selling, general and
administrative expenses, the major components of which was stock based
compensation costs of $498,806 (of which $137,500 was reversed in the first
quarter 2009).
 
 We do not
anticipate incurring more than $10,000 in additional costs with respect to our
four filming projects prior to their completion. In general, our filming
projects are in final stages of development. We have no plans to engage in any
more in house productions until we have completed the four current projects that
we have undertaken to complete, thereby reducing the possibility of incurring
further significant costs. Until our in process production filming projects are
completed, we believe we can sustain our cash flows through sales of our music,
television and film content, publishing revenues and work for hire such as the
sale of corporate videos, from consulting services, and from the sale of our
common stock should our expected cash flows in the next 12 months require
it.  However, there is no guarantee that our cash flow requirements
will exceed the amount of funds received from the sale of securities or the cash
flow generated from our current operation activities.
 
 Our
minimum expected cash flows to continue our current level of operations during
the next 12 months is approximately $350,000, however up to $650,000 would be
needed to pursue our goals during that period. These additional funds would be
needed to license products from other parties and properly market, promote and
distribute them, including our own projects presently in process. To date our
revenues have been largely generated from sales of our music content and
advertisement revenues.
 
 A portion
or all of our capital requirements may be achieved from the sale of securities
owned by us in Beverage Plus AG, a Swiss Corporation to be listed on the
Frankfurt Stock Exchange in the very near future.  Its Trading Ticker
Symbol is 1Bi.  The amount of capital available depends on a number of
variables including the liquidity and price in the market of its securities. We
own in excess of 500,000 common shares and Beverage Plus indicates that the
shares will soon open for trading in the Open Market at Euros 2.25 per share
(approximately USD 3.20 per share). Until such trading commences, the shares are
treated by us as non-marketable securities. If the additional $350,000 described
earlier in this paragraph is not raised, we may be unable to continue
operations.
 
 In the
prior fiscal year we recently entered into a 10 year licensing agreement
with our affiliated company (by common ownership by our President) Ciocan
Entertainment Music Group, LLC, ("Ciocan") for their music library catalogue.
This library consists of 33 finished albums (over 300 tracks) by 8 different
artists who are exclusively recording with Ciocan for the release of other
future projects. Ciocan has marketed the catalogue to the Latin market, but we
plan to penetrate the non-Hispanic markets and develop the current marketing
efforts within the Latin base. We plan to develop live productions for artists
we intend to sign. The agreement to license Ciocan's music requires us to pay a
royalty of 25% of the net sales proceeds quarterly from sales which commitment
we were unable to honor due to inadequate cash flows during fiscal years 2007
and 2008.   A portion of the license rights we acquired are to
the multi-media releases of a popular film he owns and produced in Cuba called
Zafiros Locura Azul (Sapphire Blue Madness). The President and CEO of the
Company own 100% of the rights to this film which has never been distributed or
commercialized. We acquired from Mr. Hugo Cancio the right to market, promote,
and distribute the film in all formats: Theatrical release, Television, cable,
DVD. This is part of a 10 year licensing agreement in which Fuego Entertainment
will keep 75% of the net revenues generated. There was no payment of any kind
involved in the transaction.  We will account for all sales and
costs on a gross basisfor the above agreements
in accordance with the criteria set forth in Emerging Issues Task Force
Abstract Issue No. 99-19, since we will be responsible for all production
and distribution costs and expenses, and have full discretion in selecting
suppliers and product specifications. If there are no net proceeds after one
year, all rights revert to the producer.
  We are
currently in the final stages of post-production for our three documentaries and
developing a reality show, a direct response to the current trend in primetime
television. Development costs incurred for these projects to date have been
minimal and it is not our intention to exceed an additional $10,000 in total. To
date, these projects have not generated any revenues.
  8
   
 Additional
sources of income may include projects where we will also act as an agent and
contract organization for certain entertainment projects that are
fully-developed by others. These services may include marketing, distribution,
principal photography, development, pre- and post-production, introductory
services, and many others that are within our realm of expertise. To date, we
currently do not have any agreements or projects whereby we act as an
agent.
 
 For the
past twelve months, we have continued to generate revenues by engaging in the
sales of our music CD’s. Although we continued to work on our television
projects, our main focus was shifted to our music business segment Fuego
Entertainment Music International (FEMI), and Fuego Publishing Group
(FPG).
 
 Fuego
executed a licensing agreement with Tota Productions, a music and video
production company located in Torino, Italy, that produces Spanish Hip Hop and
Pop artists from Europe.
  We have
generated revenues from sales of our music, television and film content,
publishing revenues and work for hire such as the production of corporate videos
and consulting services. It is our intention to continue offering these types of
services as they incur no material costs or expenses by the Company, since all
costs are paid for by the clients. Prior to fiscal year 2008, we generated
revenues by providing consulting services to companies that are in need of
reaching the US Hispanic/ Latino Markets with their products or services.
Consulting services do not incur material costs or expenses since such services
are provided solely by Mr. Cancio. We will continue seeking these consulting
activities in order to generate revenues.
 
 After May
31, 2008, we executed a new deal with The Orchard (ORCD - News), a global
leader in digital music and entertainment, to add more than 1.1 million tracks
from The Orchard's catalog to the digital download store www.FuegoMio.com. The
addition of The Orchard music catalog, which includes one of the largest and
best Latin music offerings available, will increase the total tracks available
for sale on the Fuego music store to about 2.5 million tracks. In addition to
the hundreds of thousands of songs spanning nearly every genre, The Orchard will
deliver a diverse offering of Latin artist tracks by the likes of Daddy Yankee,
Joan Sebastian, Hector Lavoe, Antonio Aguilar, Willie Colon, Cuisillos, Ivy
Queen.
 
 We
also executed an agreement with IODA, the global leader in digital
distribution, marketing, and technology solutions for the independent music and
film industry, the Company will be adding more than one million music tracks and
over two thousand video and film titles to our FuegoMio.com music and video
retail store. The addition of more than one million music tracks and over two
thousand video and film titles from IODA is an important step in Fuego
Entertainment's commitment to becoming one of the largest music and video
digital retail stores. Through Fuego's new digital retail music store, www.FuegoMio.com, the
Company will be providing high quality digital audio content. As IODA continues
to grow its music, film and video catalogs, it is expected that Fuego will
continue to receive new releases.
 
 Results
of Operations for the Fiscal Year ended May 31, 2008
  Revenues
  In 2007,
our revenues were $184,243 and included 146,793 in revenue from music
sales.  In 2008, our revenues are $559,214, consisting of $127,555 in
revenue from music sales and $431,659 in advertising revenue from our
website.  The advertising revenue was received in the form of common
shares of Beverage Plus AG, a Swiss Corporation (ISIN: CH0038503253 & WKN:
A0NJNV).  This Company has received its stock ticker symbol of 1Bi
assigned by the Frankfurt Stock Exchange.  According to Beverage Plus,
BP anticipates the listing of its stock in the very near future with a opening
price of approximately Euros 2.25 (USD 3.20 at the prevailing exchange rate).
Beverage Plus provides no assurances as to the liquidity of its shares in the
marketplace or whether this opening price will be sustained in the
market.
  9
  Although
we operated for a full 12 months this year, we were unable to maintain the same
level of revenues from music sales that we achieved in the prior year. Last year
the company was involved in several revenue producing activities, work for hire
such as filming music and corporate videos. We were also in the process of
launching several television projects, filming TV shows and licensing other
entertainment related content. However, since we were unable to secure suitable
financing to continue with the television endeavors, we had to postponed
indefinitely the development of all of our television projects and focus and
depend on the creation of our music division in order to generate revenues.
Although the company had several financing offers, our ability to close the
financing opportunities depended on our stock price. The results of not securing
suitable financing was the cancellation of the management and development
agreement with our affiliate Fuego Entertainment Media Group, the loss of
prospective programming revenues and profitability, and the incurrence of
additional expenses to regroup our efforts in order to continue business
operations.
  The
company, from inception, has engaged in a series of diverse entertainment
projects and will continue to seek projects of this nature. The company engaged
in three to four projects per period. All music projects are completed and
expected to continue generating revenue in the future.
 
 Cost
of Production  - Filming and Music
 
 Filming
production costs are incurred based on the amounts billed to us from outside
vendors who aid in the filming, production, and editing of our films. Our music
production costs are recognized using an allocation per album based on the going
rate of production foreign and domestically. The reproduction costs of the
albums are incurred by our customers and past along to us in the form of a
reduction to the accounts receivable balance for the respective
customer.
 
 Operating
Expenses
  .
 The
current year's operating expenses increased slightly. Our total expenses for the
periods ending May 31, 2008 and 2007 were 984,564 (which includes stock based
compensation expense of 498,806) and 711,633, respectively.  The
Company recorded a reserve for bad debt in the amount of $0 and $89,975 for the
periods ended 2008 and 2007, respectively.
 
 The
majority of the accounts payable for operating expenses as of May 31, 2008, are
past due on the basis of their terms.
 
 
 Results
of Operations for the Fiscal Year ended May 31, 2008, Compared to prior Fiscal
Year ended May 31, 2007
 
 Revenues
and Cost of Filming and Music
 
 The
Company's major revenue source has shifted from filming based to music based. As
a result, in the prior year ended May 31, 2007, filming revenue represented 80%
of all revenues generated and music revenue producing projects had not yet been
entered into. In the current year ended May 31, 2008, filming revenues
represented  0% of total revenues. Related costs of filming, as a
percentage of revenue would be much higher if the President/CEO's efforts were
geared more toward the production of films. As a direct result of the attention
given to generating revenues from music sales, production costs for this revenue
stream are significantly higher.
 
 Operating
Expenses
 
 The
current year's operating activities were more involved since they included the
stock based compensation of $498,806. Of this amount, $137,500 was recaptured as
income in the first quarter 2009 as certain stock options granted to our former
directors were not vested per the agreements. Other selling, general and
administrative expenses were $310,206 in 2008.  In the prior year,
development expenses incurred towards the effort to determine the viability of a
Puerto Rico television station of $97,146 and the non recoverability of an
Affiliation Agreement of $50,000  were incurred. Other selling,
general and administrative expenses of the current year were in line with the
level of expenses incurred in the prior year.
  10
     Liquidity
and Capital Resources
 
 The
Company has a deficit in working capital at year end, is delinquent in the
filing of its income tax returns, and is past due on the majority of its
accounts payable. It has no line of credit or other outside financing sources
presently to enable it to finance exist operations, and is dependent on its
music sales and the occasional planned sales of its investment in securities in
Beverage Plus AG for current cash flows. Accordingly, it is presently seeking
financing to continue in existence. Up to the date of this report, the Company
is primarily dependent on its President/CEO for all revenue generating
opportunities as well as on-going cash flow requirements.
 
 Material
Commitments
 
 We have
no material commitments as at the date of this registration
statement.
 
 Purchase
of Significant Equipment
 
 We do not
intend to purchase any significant equipment during the next twelve (12)
months.
 
 Recent
Accounting Pronouncements
 
 In
December 2004, the FASB issued SFAS 123R, Share Based Payments. SFAS 123R is
applicable to transactions in which an entity exchanges its equity instruments
for goods and services. It focuses primarily on transactions in which an entity
obtains employee services in share-based payment transactions. SFAS No. 123R
supersedes the intrinsic value method prescribed by APB No. 25, requiring that
the fair value of such equity instruments be recorded as an expense as services
are performed. Prior to SFAS 123R, only certain pro forma disclosures of
accounting for these transactions at fair value were required. SFAS 123R will be
effective for the first quarter 2006 financial statements, and permits varying
transition methods including retroactive adjustment of prior periods or
prospective application beginning in 2006. The Company adopted SFAS 123R using
the modified prospective method effective January 1, 2006. Under this transition
method the Company will begin recording stock option expense prospectively,
beginning with that date.




11




ITEM 7.  
FINANCIAL STATEMENTS




FUEGO
ENTERTAINMENT, INC. AND AFFILIATE




TABLE
OF CONTENTS





PageConsolidated
      Financial Statements:Report
      of Independent Registered Public Accounting Firm as of May 31,
      2008
            13Report
      of Independent Registered Public Accounting Firm as of May 31,
      2007
            14Balance
      Sheets as of May 31, 2008 and 2007
            15Statements
      of Operations for the years ended May 31, 2008 and 2007
            16Statements
      of Cash Flows for the years ended May 31, 2008 and 2007
            17Statements
      of Stockholders' Equity (Deficit) for the years ended May 31, 2008 and
      2007
            18-19Notes
      to Financial Statements
            20









12







MOORE
& ASSOCIATES, CHARTERED
 ACCOUNTANTS AND
ADVISORS
 PCAOB
REGISTERED
 
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
the Board of Directors
 Fuego
Entertainment Inc.
   We
have audited the accompanying consolidated balance sheet of Fuego Entertainment
Inc. and Affiliate as of May 31, 2008, and the related consolidated statements
of operations, stockholders’ equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
  We
conduct our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States).  Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
  In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Fuego Entertainment Inc. and
Affiliate as of May 31, 2008, and the related consolidated statements of
operations, stockholders’ equity and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 2
to the financial statements, the Company sustained significant losses in the
last two years, and has deficits in working capital and stockholders’ equity as
of May 31, 2008. These factors raise substantial doubt about its ability to
continue as a going concern.  Management’s plans concerning these
matters are also described in Note 2.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
  /s/
Moore & Associates, Chartered
  Moore
& Associates Chartered
 Las
Vegas, Nevada
 September
12, 2008





2675 S. Jones Blvd. Suite
109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501






13




REPORT
OFINDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  To
the Board of Directors and Stockholders
 FUEGO
ENTERTAINMENT, INC.
 Miami,
Florida
  We have
audited the accompanying balance sheet of FUEGO ENTERTAINMENT, INC.(a
Nevada corporation) as of May 31, 2007, and the related statements of
operations, stockholders’ equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audit.
  We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our
opinion.
  In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of FUEGO ENTERTAINMENT, INC.as
of May 31, 2007, and the results of its operations and cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.
  The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 2 of the Notes to
financial statements, the Company has incurred significant losses during the two
year period ended May 31, 2007, has a significant deficit in working capital and
in Stockholders’ equity.  Its ability to continue as a going concern
is dependent upon its ability to develop additional sources of capital, and/or
achieve profitable operations.  These conditions raise substantial
doubt about its ability to continue as a going concern.  Management’s
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
   /s/ Braverman International, P.C.
 Braverman
International, P.C.
 Prescott,
Arizona
 August
17, 2007





14





FUEGO
      ENTERTAINMENT, INC. AND AFFILIATECONSOLIDATED
      BALANCE SHEETSMay
      31,
              
              
              May
      31,2008
              
              
              2007ASSETSCURRENT
      ASSETSCash
              
              
              $
              7,754
              
              
              $
              -Account
      receivable-trade, less allowancefor
      doubtful accounts of $90,000
              
              
              100,323
              
              
              
              29,308Federal
      Income tax refund receivable
              
              
              -
              
              
              
              12,115Total
      Current Assets
              
              
              108,077
              
              
              
              41,423EQUIPMENT,
      less accumulated depreciationof
      $27,172 and $14,272 respectively
              
              
              31,666
              
              
              
              39,145OTHER
      ASSETSMusic
      Albums (Echo-Fuego)
              
              
              480,000
              
              
              
              -Beverage
      Plus AG
              
              
              425,000
              
              
              
              -Production
      costs-Video
              
              
              45,509
              
              
              
              95,941Production
      costs-Music
              
              
              50,047
              
              
              
              -Deposit
      on music library
              
              
              14,500
              
              
              
              14,500Web
      portal
              
              
              11,329
              
              
              
              -Logo,
      less accumulated amortizationof
      $1,710 and $1,170 respectively
              
              
              990
              
              
              
              1,530Total
      Other Assets
              
              
              1,027,375
              
              
              
              111,971$
              1,167,118
              
              
              $
              192,540LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
              
              $
              38,222
              
              
              $
              24,092Accounts
      payable - related parties
              
              
              99,586
              
              
              
              83,518Accrued
      interest - related parties
              
              
              63,953
              
              
              
              17,646Income
      taxes payable
              
              
              3,870
              
              
              
              15,985Payroll
      tax liabilities
              
              
              5,193
              
              
              
              -Other
      liabilities
              
              
              6,347
              
              
              
              3,906Total
      Current Liabilities
              
              
              217,171
              
              
              
              151,806Long-Term
      DebtNotes
      payable - related parties
              
              
              281,549
              
              
              
              263,893Total
      Liabilities
              
              
              498,720
              
              
              
              415,699COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY (DEFICIT)Common
      stock, par value $.001, 75,000,000shares
      authorized, 39,476,020 and 36,639,353 sharesissued
      and outstanding, respectively
              
              
              39,477
              
              
              
              36,640Additional
      Paid in capital
              
              
              1,032,968
              
              
              
              454,905Deferred
      charge
              
              
              
              -
              
              
              
              (122,979
              )Paid
      in capital-stock options
              
              
              233,027
              
              
              
              -Subscriptions
      payable
              
              
              45,000
              
              
              
              -Noncontrolling
      interest in affiliate
              
              
              354,243
              
              
              
              -Accumulated
      deficit
              
              
              (1,036,317
              )
              
              
              (591,724
              )Total
      Stockholders' Equity (Deficit)
              
              
              668,398
              
              
              
              (223,158
              )$
              1,167,118
              
              
              $
              192,540SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


15




FUEGO
      ENTERTAINMENT, INC AND AFFILIATECONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the Years EndedMay
      31, 2008
              
              
              May
      31, 2007REVENUESMusicMusic
      sales, net
              
              $
              127,555
              
              
              $
              146,793Advertising,
      web site
              
              
              431,659
              
              
              
              -Filming
              
              
              -
              
              
              
              30,550Consulting
              
              
              -
              
              
              
              6,900Total
      Revenues
              
              
              559,214
              
              
              
              184,243COSTS
      AND EXPENSESCost
      of musicRoyalties
      - related party
              
              
              2,844
              
              
              
              38,857Production
      costs
              
              
              107,101
              
              
              
              24,819Cost
      of filming
              
              
              -
              
              
              
              5,000Affiliation
      agreements
              
              
              -
              
              
              
              50,000Selling,
      general and administrative:Provision
      for bad debts
              
              
              -
              
              
              
              89,975Compensation
      - stock based and contributed
              
              
              498,806
              
              
              
              169,083Other
              
              
              310,206
              
              
              
              205,143TV
      development
              
              
              -
              
              
              
              97,146Interest
      expense - related parties
              
              
              51,443
              
              
              
              17,646Interest
      expense - other
              
              
              723
              
              
              
              1,342Depreciation
      and amortization
              
              
              13,441
              
              
              
              12,622Total
      costs and expenses
              
              
              984,564
              
              
              
              711,633(Loss)
      before income taxes
              
              
              (425,350
              )
              
              
              (527,390
              )Income
      tax expense (benefit)
              
              
              -
              
              
              
              (21,832
              )Income
      (Loss) Before Minority Interest
              
              
              (425,350
              )
              
              
              (505,558
              )Less
      Minority Interest in Affiliates earnings
              
              
              (19,243
              )
              
              
              -NET
      (LOSS)
              
              $
              (444,593
              )
              
              $
              (505,558
              )EARNINGS
      (LOSS) PER SHARE - BASIC
              
              $
              (0.01
              )
              
              $
              (0.01
              )WEIGHTED
      AVERAGE NUMBER OFCOMMON
      SHARES OUTSTANDING - BASIC
              
              
              38,171,853
              
              
              
              35,625,161*  less
      than $.01 per shareSEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


16





FUEGO
      ENTERTAINMENT, INC. AND AFFILIATECONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years EndedMay
      31, 2008
              
              
              May
      31, 2007OPERATING
      ACTIVITIESNet
      (loss)
              
              $
              (444,593
              )
              
              $
              (505,558
              )Adjustments
      to reconcile net (loss) to net cash used byoperating
      activitiesContributed
      services
              
              
              80,950
              
              
              
              60,925Depreciation
      and amortization
              
              
              13,440
              
              
              
              12,622Stock
      based compensation
              
              
              417,856
              
              
              
              128,583Changes
      in operating assets and liabilitiesAccounts
      receivable
              
              
              (71,014
              )
              
              
              (24,308
              )Accrued
      federal Income tax refund receivable
              
              
              12,115
              
              
              
              (12,115
              )Accounts
      payable
              
              
              30,200
              
              
              
              81,809Accrued
      interest - related parties
              
              
              46,307
              
              
              
              17,646Income
      taxes payable
              
              
              (12,115
              )
              
              
              (9,717
              )Payroll
      tax liabilities
              
              
              5,193
              
              
              
              -Other
      current liabilities
              
              
              2,441
              
              
              
              2,276Production
      costs-Music
              
              
              385
              
              
              
              (2,510
              )Deferred
      revenue
              
              
              (6,659
              )
              
              
              -NET
      CASH (USED BY) OPERATING ACTIVITIES
              
              
              74,506
              
              
              
              (250,347
              )INVESTING
      ACTIVITIESInvestment
      in Beverage Plus AG
              
              
              (425,000
              )
              
              
              -Investment
      in Music Albums (Echo-Fuego)
              
              
              (480,000
              )
              
              
              -Noncontrolling
      interest in affiliate
              
              
              354,243
              
              
              
              -Web
      portal
              
              
              (11,329
              )
              
              
              -Deposit
      on music library
              
              
              -
              
              
              
              (14,500
              )Purchase
      of equipment
              
              
              (5,422
              )
              
              
              (17,697
              )NET
      CASH (USED BY) INVESTING ACTIVITIES
              
              
              (567,508
              )
              
              
              (32,197
              )FINANCING
      ACTIVITIESProceeds
      from sale of common stock
              
              
              353,050
              
              
              
              18,500Stock
      options
              
              
              6,300
              
              
              
              -Common
      stock subscription payable
              
              
              45,000
              
              
              
              -Common
      stock issued for debt reduction
              
              
              78,750
              
              
              
              -Proceeds
      from notes payable - related parties
              
              
              148,470
              
              
              
              278,675Repayments
      of notes payable - related parties
              
              
              (130,814
              )
              
              
              (14,783
              )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              500,756
              
              
              
              282,392NET
      INCREASE (DECREASE) IN CASH
              
              
              7,754
              
              
              
              (152
              )CASH,
      BEGINNING OF YEAR
              
              
              -
              
              
              
              152CASH,
      END OF YEAR
              
              $
              7,754
              
              
              $
              --
              
              
              
              -SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIESCommon
      Stock Issued for Future Consulting Services
              
              $
              -
              
              
              $
              131,250Common
      Stock Issued for Debt Reduction
              
              $
              78,750
              
              
              $
              7,200SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS


17




FUEGO
      ENTERTAINMENT, INC. AND AFFILIATECONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)For
      the Years Ended May 31, 2008 and 2007Paid-in
      capital
              
              
              
              
              
              NoncontrollingCommon
      Stock
              
              
              Paid-in
              
              
              Stock
              
              
              Subscriptions
              
              
              Interest
      in
              
              
              Deferred
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Capital
              
              
              Options
              
              
              Payable
              
              
              Affiliate
              
              
              Charge
              
              
              (Deficit)
              
              
              TotalBalance,
      May 31,  2006
              
              
              34,959,562
              
              
              $
              34,960
              
              
              $
              118,398
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (86,166
              )
              
              $
              67,192Proceeds
      from sale of common stock for$.18
      per share
              
              
              102,778
              
              
              
              103
              
              
              
              18,397
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              18,500Stock
      based compensation$.12
      per share
              
              
              25,000
              
              
              
              25
              
              
              
              2,975
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,000$.15
      per share
              
              
              60,000
              
              
              
              60
              
              
              
              8,940
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              9,000$.18
      per share
              
              
              488,013
              
              
              
              488
              
              
              
              87,354
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              87,842$.23
      per share
              
              
              89,000
              
              
              
              89
              
              
              
              20,381
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              20,470Stock
      Issued for debt reduction$.18
      per share
              
              
              40,000
              
              
              
              40
              
              
              
              7,160
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              7,200Stock
      Issued for future services$.15
      per share
              
              
              875,000
              
              
              
              875
              
              
              
              130,375
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (122,979
              )
              
              
              
              
              
              
              8,271Contributed
      services
              
              
              
              
              
              
              
              
              
              
              60,925
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              60,925Net
      (loss) for the year
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (505,558
              )
              
              
              (505,558
              )Balance,
      May 31,  2007
              
              
              36,639,353
              
              
              
              36,640
              
              
              
              454,905
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (122,979
              )
              
              
              (591,724
              )
              
              
              (223,158
              )Proceeds
      from sale of common stock for$.15
      per share
              
              
              83,000
              
              
              
              83
              
              
              
              12,367
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,450$.12
      per share
              
              
              541,667
              
              
              
              542
              
              
              
              64,458
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              65,000$.212
      per share
              
              
              1,300,000
              
              
              
              1,300
              
              
              
              274,300
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              275,600Stock
      based compensation$.28
      per share
              
              
              100,000
              
              
              
              100
              
              
              
              27,900
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              28,000$.15
      per share
              
              
              207,000
              
              
              
              207
              
              
              
              30,843
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              31,050$.17
      per share
              
              
              5,000
              
              
              
              5
              
              
              
              845
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              850$.12
      per share
              
              
              100,000
              
              
              
              100
              
              
              
              11,900
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12,000Stock
      Issued for debt reduction$.15
      per share
              
              
              525,000
              
              
              
              525
              
              
              
              78,225
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              78,750Stock
      based compensation canceled
              
              
              (25,000
              )
              
              
              (25
              )
              
              
              (3,725
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,750
              )





18




CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -
continued


FUEGO
      ENTERTAINMENT, INC. AND AFFILIATECONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)For
      the Years Ended May 31, 2008 and 2007Paid-in
      capital
                
                
                
                
                
                NoncontrollingCommon
      Stock
                
                
                Paid-in
                
                
                Stock
                
                
                Subscriptions
                
                
                Interest
      in
                
                
                Deferred
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Capital
                
                
                Options
                
                
                Payable
                
                
                Affiliate
                
                
                Charge
                
                
                (Deficit)
                
                
                TotalStock
      options
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                233,027
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                233,027Amortization
      of deferred charges
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                122,979
                
                
                
                
                
                
                
                122,979Contributed
      services
                
                
                
                
                
                
                
                
                
                
                80,950
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                80,950Subscriptions
      payable
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                45,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                45,000Noncontrolling
      interest in affiliate
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                354,243
                
                
                
                
                
                
                
                
                
                
                
                354,243Net
      (loss) for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (444,593
                )
                
                
                (444,593
                )Balance,
      May 31,  2008
                
                
                39,476,020
                
                
                $
                39,477
                
                
                $
                1,032,968
                
                
                $
                233,027
                
                
                $
                45,000
                
                
                $
                354,243
                
                
                $
                -
                
                
                $
                (1,036,317
                )
                
                $
                668,398SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS




19
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES TO FINANCIAL
STATEMENTS









1.
              NATURE
      OF BUSINESS
  Fuego
Entertainment, Inc. (the “Company”,”Fuego”.”we”,”our” or “us”) was formed on
December 30, 2004 as a Florida corporation and is primarily engaged in the
directing, production, marketing, and distribution of entertainment products,
including feature and short films, documentaries, television shows, music, and
tour productions. We also provide management, marketing, and public relations
services to the entertainment industry.  In January, 2008 Fuego
announced it formed a new music division, Echo-Fuego Music Group, LLC, in a
joint venture with legendary music producer and promoter Jeffrey Collins. His
music catalog of more than 2,000 tracks and 15 artists previously under the
Echo-Vista label will be merged into the new joint venture, with a majority
stake owned by Fuego.During the year ended May 31, 2008 the majority of revenues earned were
earned from the sale of musical tracks and advertising revenue on our website
www.fuegoentertainment.net.
 
 2.
              SIGNIFICANT
      ACCOUNTING POLICIES
  GOING
CONCERN
 Our
financial statements have been presented on the basis that it is a going
concern, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Our ability to continue in
existence is dependent on its ability to develop additional sources of capital,
or achieve profitable operations. We sustained significant losses in the last
two years, and we have deficits in working capital as of May 31, 2008, and 2007
as well as a stockholders’ deficit as of May 31, 2007. Our financial position at
those dates and presently is of great concern to us and our investors, however,
management’s plan is to obtain additional capital and to to continue to develop,
market and distribute musical tracks through Fuego and its new joint venture,
Echo-Fuego Music Group, LLC. The accompanying financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 
 BASIS
OF PRESENTATION
 Our
consolidated financial statements include the accounts of Fuego Entertainment,
Inc. and its majority-owned limited liability company, Echo-Fuego Music Group,
LLC.  All significant intercompany accounts and transactions have been
eliminated in the consolidation.
 
 Minority
interest represents the minority partner’s, Jeffrey Collins (Echo-Vista, Inc.)
49% ownership interest in Echo-Fuego Music Group, LLC.
 
 These
consolidated financial statements reflect the use of significant accounting
policies, as described below and elsewhere in the notes to the financial
statements, and are prepared in accordance with accounting principles generally
accepted in the United States of America. The fiscal year end of the Company is
May 31.
 
 
 REVENUE
RECOGNITION
 
 Advertising
Revenue
 In
January 2008, Fuego entered into a Stock Subscription Agreement with Beverage
Plus, Inc. relating to an equity investment of 400,000 common shares for an
amount of $300,000 in Beverage Plus, Inc., a Nevada Corporation. Subsequently,
Beverage Plus, Inc. exchanged all of its issued and outstanding shares to
Beverage Plus AG (f/k/a Europäisches Getränk AG), a Swiss corporation holding
company and Beverage Plus is now owned by the Beverage Plus
AG.  Beverage Plus AG is scheduled to complete its registration with
the Frankfurt Stock Exchange (“FSE”) to be listed with the trading symbol 1Bi
(one B letter i) assigned by the FSE for trading on the open market in
September, 2008.
 
 The
purchase price of $300,000 is equal to the fair market value of in-kind
consideration in the form of marketing assistance and the placement of a
marketing banner and link to the Beverage Plus  web site on www.fuegoentertainment.net
website for a period of no less than 90 days.
  20
 
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES TO FINANCIAL
STATEMENTS
  2.
                SIGNIFICANT
      ACCOUNTING POLICIES -
      continued
 Another
Stock Subscription Agreement with Beverage Plus AG relating to an equity
investment of 108,516 common shares for an amount of $75,000 was executed on
February 22, 2008 for additional advertisement exposure on www.fuegoentertainment.net
website for a period of 75 days.
 
 Another
Stock Subscription Agreement with Beverage Plus AG relating to an equity
investment of 72,343 common shares for an amount of $50,000 was executed on
March 1, 2008 for additional advertisement exposure on www.fuegoentertainment.net
website for a period of 66 days.
 
 Music
Revenue
 Revenue
from the sale of music is recognized when our distributors notify us that they
have shipped to their wholesale and retail outlets, the CDs (compact disks) we
approved for their manufacture from master copies we provided to their
manufacturing sources.
 
 Cost
of Music Revenue
 In the
past our president, through his ownership of Ciocan Entertainment and Music
Group, LLC, “Ciocan”, has had extensive experience selling CDs to a number of
domestic and foreign music distributors, some of whom we now sell
to.  We do not manufacture our own CDs.  Instead, we provide
master copies to approved manufacturers for their release of the CDs to their
customers who are our distributors and who incur and are responsible to pay for
all reproduction costs and eventually bill us for such costs.
 
 The CD
costs incurred by our distributors relating to the CD sales recognized are
initially estimated by us based on the production costs documented by them, and
are charged to cost of music revenue and credited to a temporary liability
account (for unearned distributor credits) until such time as the distributor’s
credit is approved by us. Upon approval, the credit to their account is applied
and the temporary liability account is reduced for only CDs sold, and any
difference between actual cost and estimated cost is adjusted out at that time.
For financial presentation purposes, the temporary liability account balance has
been treated as an offset (a contra account) to accounts receivable as if the
unearned credits by the distributor had been applied or recognized by
us.
 
 Other
 Revenue
from the sale of film,  television programming rights and license
arrangements is or will be recognized only when persuasive evidence of a sale or
arrangement with a customer exists, the project or sale is complete, the
contractual delivery arrangements have been satisfied, the license period has
commenced if applicable, the arrangement fee is fixed or determinable,
collection of the arrangement fee is reasonably assured, and other conditions as
specified in the respective agreements have been met.
 
 Revenue
from production services for third parties is recognized when the production is
completed and delivered. All associated production costs are deferred and
charged against income when the film is delivered and the related revenue is
recognized.
  Fees for
other services, such as consulting provided to third parties, are recognized as
revenues when the services are performed and there is reasonable assurance of
collection.
  Cash
received in advance of meeting the revenue recognition criteria described above
is recorded as deferred revenue.
 
 ALLOWANCE
FOR DOUBTFUL ACCOUNTS
 We
estimated the collectability of our trade accounts receivable. In order to
assess the collectability of these receivables, the Company monitors the current
creditworthiness of each customer and analyzes the balances aged beyond the
customer's credit terms. Theses evaluations may indicate a situation in which a
certain customer cannot meet its financial obligations due to deterioration of
its financial viability, credit ratings or bankruptcy. The allowance
requirements are based on currents facts and are reevaluated and adjusted as
additional information is received. Trade accounts receivable are subject to an
allowance for collection when it is probable that the balance will not be
collected. As of May 31, 2008, allowances totaled $90,000, the majority of which
relates to the Italian music distributor. This was necessary as the original
terms of payment by the two largest distributors had been exceeded. This amount
could be adjusted in the near term based on eventual collections, if received.
Accounts are written off when collection efforts have been exhausted and there
is no likelihood of collection.
  21
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES TO FINANCIAL
STATEMENTS
  2.
                SIGNIFICANT ACCOUNTING POLICIES - continued
 
 ADVERTISING
EXPENSES
 Advertising
costs are expensed as incurred, except for costs related to the development of a
property and/or live-action television program commercial or media campaign
which are expensed at the time the commercial or campaign is first presented.
Advertising expenses are included in selling, general and administrative expense
in the accompanying statement of operations.
 
 USE
OF ESTIMATES
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ materially from those
estimates.
 
 CASH
AND CASH EQUIVALENTS
 Cash and
cash equivalents consist of all liquid investments with original maturities of
three months or less are classified as cash and cash equivalents. The fair value
of cash and cash equivalents approximate the amounts shown on the financial
statements. Cash and cash equivalents consist of unrestricted cash and
short-term investments. As of May 31, 2008 there were cash and cash equivalents
of $7,754. As of May 31, 2007 there were no cash equivalents and the $207
overdraft balance was included as an account payable
 
 INCOME,
LOSS PER COMMON SHARE
 Basic
income, loss per common share is calculated on the weighted average number of
common shares outstanding during each period. Diluted income per common share is
based on the weighted average number of common shares outstanding during each
period, adjusted for the effect of outstanding stock equivalents. Outstanding
stock equivalents were not used in the computation of basic loss per share, as
their effect would be antidilutive.
 
 FILM
AND TELEVISION COSTS
 We account for our film and television
costs pursuant to AICPA Statement of Position (“SOP”) No. 00-2,Accounting by
Producers or Distributors of Films. The cost of production for film and
television production costs, including direct costs, production overhead and
interest are capitalized and amortized using the individual-film-forecast method
under which such costs are amortized for each program in the ratio that revenue
earned in the current period for such program bears to management’s estimate of
the ultimate revenues to be realized from all media and markets for such
program. Management regularly reviews, and revises when necessary, its ultimate
revenue estimates on a title-by-title basis, which may result in a change in the
rate of amortization applicable to such title and/or a write-down of the value
of such title to estimated fair value. These revisions can result in significant
quarter-to-quarter and year-to-year fluctuations in film write-downs and rates
of amortization. If a total net loss is projected for a particular title, the
associated film and television costs are written down to estimated fair value.
All exploitation costs, including advertising and marketing costs are expensed
as incurred. Television adaptation and production costs that are adapted and/or
produced are stated at the lower of cost, less accumulated amortization, or fair
value. As of May 31, 2008 and 2007, the Company has recorded an impairment of
$50,432 and $-0-, respectively, for production costs capitalized on films which
have not been completed, released or sold within
3years.
 
   22
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES TO FINANCIAL
STATEMENTS
  2.
              SIGNIFICANT ACCOUNTING POLICIES - continued
  DEPOSIT ON MUSIC
LIBRARY
 During
fiscal 2007 we advanced a total of $14,500 with a commitment for an additional
$42,000 towards the acquisition of a media library, a conglomeration of
individual master music tracks.. The acquisition of this library, when
completed, will give us the exclusive right to 100% of the sales generated from
these tracks as well as the authority to infinitely reproduce and/or grant the
reproduction of albums from these musical tracks. With 100% control over the
master copies, Fuego reserves the right to enter into digital distribution
agreements to make these tracks available for download as a means of penetrating
an additional revenue source. As of May 31, 2008 and 2007, the delivery of all
assets was not completed and therefore the balance indicated was considered a
commitment until completion occurs.
 
 During
fiscal 2007, we entered into a contract with Vision Sports Entertainment (VSEN)
to use their content in the launch of VSEN sports and entertainment programming
on our LPTV (low power television station) KVPS, channel 28 in Las Vegas Nevada.
In order to launch the station we paid $50,000 on behalf of
our affiliate, which allowed us to broadcast our sports and entertainment
programming for a period of approximately three (3) months. We had a sales team
in place and received verbal advertising dollar commitments from certain large
advertising agencies in Puerto Rico. However, we still required sufficient
capital to continue operating for a minimum of 6 months until the advertising
revenues were received. Although the company had several financing offers, our
ability to close our financing opportunities depended on our stock price.
 Shortly thereafter, due to the fraudulent manipulation of our stock by a
fraudster, our stock price dropped significantly. Therefore, we declined these
offers, as they would have represented a significant dilution of investors’
holdings.  The results of not securing suitable financing was the
cancellation of the management and development agreement with our affiliate
Fuego Entertainment Media Group, the loss of prospective programming revenues
and profitability, and the incurrence of additional expenses to regroup our
efforts in order to continue business operations.
 
 EQUIPMENT
 Equipment
is carried at cost, net of accumulated depreciation. Depreciation is provided on
the straight-line method based on the estimated useful lives of the assets,
which range from 2.5 years to 7 years.
 
 INTANGIBLE
ASSETS
 We
capitalized the cost of the creation of our logo. Amortization of logo costs is
being recognized ratably over a 5-year useful life, commencing with April 1,
2005, the date on which the logo was acquired by purchase.
 
 INCOME
TAXES
 Deferred
income taxes will be recorded for the temporary differences between the
financial statement and tax bases of assets and liabilities using current tax
rates pursuant to FAS No. 109. Valuation allowances will be established against
deferred tax assets whenever circumstances indicate that it is more likely than
not, that such assets will not be realized in future periods.
 
 FAIR
VALUE OF FINANCIAL INSTRUMENTS
 The
carrying amounts of cash and cash equivalents, accounts receivable, and other
current assets, unearned revenue, accounts payable and accrued liabilities, and
other liabilities approximate their fair values principally because of the
short-term maturities of these instruments. The value of long-term debt
approximates its stated value due to the current rate of interest charged by the
holder thereof.
 
 NEW ACCOUNTING
PRONOUNCEMENTSIn March 2006, the FASB issued SFAS 156, Accounting for Servicing of
Financial Assets (“SFAS 156”), amending SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS
156 permits entities the choice between either the amortization method or the
fair value measurement method for valuing separately recognized servicing assets
and liabilities. SFAS 156 is effective for fiscal years beginning after
September 15, 2006; early adoption is permitted as of the beginning of an
entity’s fiscal year, provided the entity has not yet issued financial
statements for any interim period of that fiscal year. We believe the adoption
of SFAS 156 will not have an impact on our financial
statements.
  23
 
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES TO FINANCIAL
STATEMENTS
  
 2.
              SIGNIFICANT ACCOUNTING POLICIES - continued
  In
September 2006, the FASB issued SFAS 157, Fair Value Measurements
(“SFAS 157”). SFAS 157 provides guidance on the application of fair value
measurement objectives required in existing GAAP literature to ensure
consistency and comparability. Additionally, SFAS 157 requires additional
disclosures on the fair value measurements used. SFAS 157 is effective for
fiscal years beginning after November 15, 2007. We believe the adoption of SFAS
157 will not have a material impact on its financial statements
  Also in
September 2006, the FASB issued SFAS 158, Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an Amendment of FASB Statements
No. 87, 88, 106, and 132(R) (“SFAS 158”). SFAS 158 requires companies to
recognize the overfunded or underfunded status of a defined benefit
post-retirement plan as an asset or liability in their balance sheet and to
recognize changes in that funded status in the year in which the changes occur
through comprehensive income. The statement’s provisions related to the
recognition of the funded status of a defined benefit postretirement plan and
required disclosures are effective for fiscal years ending after December 15,
2006. The requirement to measure plan assets and the benefit obligation as of
the date of the employer’s fiscal year-end statement of financial position is
effective for fiscal years ending after December 15, 2008. The provisions of
SFAS 158 do not have a material effect on our financial statements as we
currently have no defined benefit plan.
  In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities Fair Value Measurements (“SFAS 159”).
SFAS No. 159 permits entities to choose to measure many financial instruments
and certain other items at fair value that are not currently required to be
measured at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. SFAS No. 159 does not
affect any existing accounting literature that requires certain assets and
liabilities to be carried at fair value. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. The Company is currently evaluating the
impact of adopting SFAS No. 159 on our financial statements.
  In June
2006, the FASB issued FIN 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109, Accounting for Income
Taxes (“FIN 48”), which clarifies the accounting for uncertainty in
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. The interpretation
requires the Company to recognize, in its financial statements, the impact of a
tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods and disclosure. The provisions of FIN 48 are effective beginning
January 1, 2007 with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. We are currently
evaluating the impact of adopting FIN 48 on our financial
statements.
 
 The FASB
has revised SFAS No. 141. This revised statement establishes uniform treatment
for all acquisitions.  It defines the acquiring company. The statement
further requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquired at the acquisition
date, measured at their fair market values as of that date. It requires the
acquirer in a business combination achieved in stages to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquired, at the full amounts of their fair values. This changes the way
that minority interest is recorded and modified as a parent’s interest in a
subsidiary changes over time.  This statement also makes corresponding
significant amendments to other standards that related to business combinations,
namely, 109, 142 and various EITFs. This statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. The Company believes the implementation of this standard will have no
effect on our financial statements.
 
 In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities", an amendment of SFAS No. 133. SFAS 161 applies to all
derivative instruments and non-derivative instruments that are designated and
qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and
related hedged items accounted for under SFAS 133. SFAS 161 requires entities to
provide greater transparency through additional disclosures about how and why an
entity uses derivative instruments, how derivative instruments and related
hedged items are accounted  for under SFAS 133 and its related
interpretations, and how derivative instruments and related hedged items affect
an entity's financial position, results of operations, and cash flows. SFAS 161
is effective as of the beginning of an entity's first fiscal year that begins
after November 15, 2008. The Company does not expect the adoption of SFAS 161
will have a material impact on its financial condition or results of
operation.
  24
 
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE FOOTNOTES TO FINANCIAL
STATEMENTS
  2.
              SIGNIFICANT ACCOUNTING POLICIES - continued
  In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No. 60.”  SFAS
163 requires that an insurance enterprise recognize a claim liability prior to
an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation.  This
Statement also clarifies how Statement 60 applies to financial guarantee
insurance contracts, including the recognition and measurement to be used to
account for premium revenue and claim liabilities. Those clarifications will
increase comparability in financial reporting of financial guarantee insurance
contracts by insurance enterprises. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements.  SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008.  The
Company does not expect the adoption of SFAS 163 will have a material impact on
its financial condition or results of operation.
 
 STOCK
BASED COMPENSATION and STOCK OPTION PLAN
 We have
issued restricted shares of common stock and stock options to compensate
non-employees who were principally key personnel.  Effective January
1, 2006, we adopted the fair value recognition provisions of SFAS 123R, Share-Based Payments ("SFAS
No. 123(R)"), which is a revision of SFAS No. 123 which requires that stock
awards granted to directors, consultants and other non-employees be recorded at
the fair value of the award at grant date .
 
 On
February 5, 2008, we registered the “2008 Stock Option Plan of Fuego
Entertainment, Inc.” The purpose of this Plan is to strengthen Fuego
Entertainment, Inc. (hereinafter the “Company”) by providing incentive stock
options as a means to attract, retain and motivate key corporate personnel,
through ownership of stock of the Company, and to attract individuals of
outstanding ability to render services to and enter the employment of the
Company or its subsidiaries. There shall be two types of Stock Options that may
be granted under this Plan: (1) Options intended to qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code (“Qualified Stock
Options”), and 2) Options not specifically authorized or qualified for favorable
income tax treatment under the Internal Revenue Code (“Non-Qualified Stock
Options”).
 
 During
the year ended May 31, 2008, the estimated value of the compensatory common
stock purchase options granted to non-employees in exchange for services and
financing expenses was determined using the Black-Scholes pricing model and the
following assumptions: expected term of 3 years, a risk free interest rate of
3.30%, a dividend yield of 0% and volatility of 137%. The amount of the expense
charged to operations for compensatory options and warrants granted in exchange
for services was $226,727.
 
 The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to employees and
non-employees of the Company. These options were granted in lieu of cash
compensation for services performed.
 Number
      of Shares
              
              
              Weighted
      Average Exercise PriceOutstanding
      as of June 1, 2007
              
              
              -
              
              
              $
              0.00Granted
              
              
              690,000
              
              
              
              0.38Exercised
              
              
              -
              
              
              
              0.00Cancelled
              
              
              -
              
              
              
              0.00Outstanding
      at May 31, 2008
              
              
              690,000
              
              
              $
              0.38
  
 25
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
 2.
              SIGNIFICANT ACCOUNTING POLICIES - continued
  The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. These options were granted in lieu of cash compensation for
services performed or financing expenses.
 
 
 Options
      Outstanding
              
              
              Options
      ExercisableYear
              
              Exercise
      Price
              
              
              Number
      shares outstanding
              
              
              Weighted
      Average Contractual Life (Years)
              
              
              Number
      Exercisable
              
              
              Weighted
      Average Exercise Price2008
              
              $
              0.50
              
              
              
              475,000
              
              
              
              2.75
              
              
              
              475,000
              
              
              $
              0.502008
              
              $
              0.18
              
              
              
              35,000
              
              
              
              2.75
              
              
              
              35,000
              
              
              $
              0.182008
              
              $
              0.09
              
              
              
              80,000
              
              
              
              2.75
              
              
              
              80,000
              
              
              $
              0.092008
              
              $
              0.15
              
              
              
              100,000
              
              
              
              2.75
              
              
              
              100,000
              
              
              $
              0.15Total
              
              
              
              
              
              
              690,000
              
              
              
              
              
              
              
              690,000
  
 3.
              SIGNIFICANT
      CUSTOMERS AND CONCENTRATION OF CREDIT
RISK
  Financial
instruments, which potentially subject the Company to concentration of credit
risk, consist primarily of temporary cash investments and accounts receivable.
The majority of the cash and cash equivalents are maintained with major
financial institutions in the United States of America. Credit risk on accounts
receivable is minimized by the Company by performing ongoing credit evaluations
of its customers’ financial condition and monitoring its exposure for credit
losses and maintaining allowances for anticipated losses. For the year ended May
31, 2008 the most significant customers, (two music distributors) accounted for
46% and 39% respectively. For the year ended May 31, 2007 the most significant
customers, (two music distributors) accounted for 21% and 69%,
respectively.
 
 The
latter distributor is located in Italy and represents the only foreign
distributor we have at this time and there are no assets of ours located in any
foreign country except for the Italian distributor’s accounts receivable of
$94,441 as of May 31, 2008 and $107,542 as of May 31, 2007, against which an
allowance for doubtful accounts has been provided for the majority of that
balance.
  4.
              CAPITALIZED
      PRODUCTION COSTS
 
 Capitalized
production costs represent development costs incurred on projects in process. A
summary of these costs as of May 31, 2008 follows: and 2007.
 The Trader
      Showis a reality
      television show based on the real life activities of amateur and
      professional stock traders. The Trader Show places an emphasis on the
      activities of day traders.
              
              $34,784Gold
      in Ecuador is the story of a small mining town
      of Portobello. In 1916 Mellick Tweedy traveled on a
      mule through the jungle of a small mining town in Ecuador, this
      small town became one of
      the largest gold exporters in South America. 
      Fifty years ago the American company SADCO, abandoned the American
      shaft, one of the oldest gold mines in the world, leaving the town
      of Portobello and its people in ruins.  Today, the
      people of Portobello have a new hope, or do they? The Americans
      are back in Portobello searching for Gold.
              
              14,866
   26
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
 4.
                CAPITALIZED
      PRODUCTION COSTS - continued
 One Million
      Millionaires,This is a documentary that will capture the life of a
      controversial individual, Mr. Urban Casavant and his dream of making
      1 million millionaires. For some he is the hope of their life,
      for others he is a dreamer, however, thousands follow him and
      wait patiently.  The film will cover his life from the time
      he was a low-income earning prison guard to a multimillion-dollar
      businessman.
              
              
              16,594Counterfeit
      Conspiracy is a documentary on stock market scandals from the
      1980’s to present, covering court documents, testimony, and
      interviews with participants to fashion an authoritative account of what
      happened. For example it covers the highly publicized account
      of, Michael Milliken, the Drexel Burnham Lambert junk bond
      king who convinced many savings
      institutions and insurance companies to
      buy such bonds in large quantities.  It will also
      document the illegal practice of Naked Short Selling perpetrated by some
      offshore organizations and self-inflicted by some
    companies.
              
              
              29,697Impairment
      reserve,May 31, 2008
              
              
              (50,432)Net
      capitalized production costs, May 31, 2008
              
              $
              45,509  All of
the above films are in production and none have been acquired from other
parties. None have been released into the market or are generating revenues
except for incidental advance sales of DVD’s for Counterfeit Conspiracy totaling
$6,659 during the fiscal year ended May 31, 2007.  No amortization has
commenced on any film products in production, and there are no other films owned
by the Company.
 
 Amortization
of all of the above costs will commence upon their completion dates, with the
possible exception of the costs incurred in the Trader Show, which the Company
will not be able to begin marketing to television companies until completion
thereof. The Trader Show costs represent the only costs in production to be
considered a direct-to-television product.
 
 5.
              COMMITMENTS:
  OPERATING
LEASE
 Fuego’s
President/CEO contributed the fair value of an office in home at $1,600 a month
during all of fiscal 2008, and the same per month for most of fiscal 2007, on a
month to month basis, including utilities and insurance. Total rent expense for
the years ended May 31, 2008 and 2007 was $19,200 and $15,083
respectively.
 
 DELINQUENT
INCOME TAXES
 Neither
the federal nor state income tax liabilities, as revised, of $15,985 for the
year ended May 31, 2005, have been paid as of May 31, 2007,. Accordingly,
estimated accrued interest and penalties of $3,906 have been provided as of May
31, 2007 as “other liabilities” on the accompanying balance sheet.
 
 
 The state
income taxes payable for the year ended May 31, 2005 have not been paid as of
May 31, 2008. Accordingly, estimated accrued interest and penalties of $884 as
of May 31, 2008 have been included in “other liabilities” on the accompanying
balance sheet.
 
 ACCOUNTS
PAYABLE
 The majority of the accounts payable as
of May 31, 2008 and 2007, are past due on the basis of their
terms.
   27
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
  6.
              RELATED
      PARTY TRANSACTIONS
  ·
              Ciocan
      is an entertainment company owned by our President/CEO that creates
      products for the Latino Market worldwide and anticipates using us to
      market, promote and commercialize some of its products (music, films,
      documentaries, artist, etc) for the Anglo and international markets.
      During the year ended May 31, 2007, Ciocan advanced us a total of $33,050
      for accounting, legal and other expenses, and was repaid a total of
      $8,250, leaving a balance owing as of May 31, 2007, of $24,800, and
      accrued interest of $2,223. In addition Ciocan was owed a total of $37,954
      for music royalties earned during fiscal 2007.
                
                During
      the current fiscal year, Ciocan was repaid a total of $24,800, showing a
      zero balance as of May 31, 2008.  In addition, Ciocan earned no
      music royalties in the current fiscal year and none were repaid in the
      current fiscal year that were earned in prior
  years.
 
 ·
              During
      the 2007 fiscal year we entered into a management agreement with an
      affiliate, Fuego Entertainment Media, LLC (FEML) to manage and operate a
      television network. Previously, FEML entered into a lease/purchase option
      arrangement with the antenna’s owner to enable FEML to broadcast its
      programming content until such time as we could exercise the two-year
      underlying option purchase agreement.
                
                Under
      this management agreement we acquired the aforementioned lease/purchase
      option.  In the event we were able to earn substantial
      management fees from the programming content over a sustained period of
      time and our common stock value was at a certain level, the Company would
      have been able to arrange suitable financing to acquire the antenna
      outright, at a cost of approximately $3.2 million dollars for the Las
      Vegas television station and $3.8 million for the three television
      stations in Puerto Rico.
                
                As
      previously reported on December 11, 2006 in a Form 8K filing, we will be
      required to hire qualified programming and technical personnel to
      facilitate the management agreement with FEML and will incur substantial
      related costs and expenses to enable us to initiate and carry out our
      obligations under the agreement with FEML. We are still actively seeking
      financing for these projects and have no financial ownership interest in
      FEML under the existing agreement with FEML.
                
                Although
      we received several financing opportunities in the form of convertible
      debentures, management has not accepted any of these financing
      opportunities due to what we consider to be “unacceptable terms,” such as
      high interest rates, excessive dilution, and the other risks this
      could represent. We spent almost $250,000 in direct costs since we started
      this project, to facilitate the management of a Puerto Rico TV station, to
      sustain 3 months of TV programming, to purchase equipment, and create
      several TV pilots and sales presentation DVDs in anticipation of managing
      our television projects. We still require substantial additional funds to
      make this project operational. Without adequate financing, we are not
      in a position to be able to carry out our intent to manage and operate
      these stations. Therefore, we terminated our agreement with FEML along
      with our management and operation of the television stations and purchase
      options. We have also postponed our plans to launch our own television
      network, Fuego TV, until adequate financing becomes available and can
      secure it.·
              Our
      President/CEO is owed $235,330 as of May 31, 2008 for cash advances to the
      company for a variety of general and administrative expenses and various
      other costs since inception. During the current year he advanced $102,251
      and was repaid $106,014. No interest was paid during the current fiscal
      year, which accrues at 15 percent per annum. The note is payable on June
      1, 2008 and will be extended for another year. Also, our President/CEO is
      owed accrued interest of $58,907 as of May 31, 2008.
                
                Our
      President/CEO is owed$239,093 as of May 31, 2007 for cash advances to the
      company for a variety of general and administrative expenses and the
      development of TV station programming. During the current year he advanced
      $245,625 and was repaid $6,533. No interest was paid on this date which
      accrues at 15 percent per annum and is payable on June 1, 2008. Accrued
      interest totaled $15,424 as of May 31,
2007
   28
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
  6.
              RELATED
      PARTY TRANSACTIONS -continued
  ·
              The
      accounting firm contracted for accounting, tax and financial statement
      preparation services has one owner-employee who had purchased 23,000
      shares of common stock of the Company in August 2005 at $.18 per share.
      Prior to the completion of the public offering, 40,000 shares of
      restricted common stock were approved for issuance to the owner of the
      firm in exchange for accounting services valued at $.18 per share. In
      October 2007 the accounting firm received 525,000 shares in payment of
      certain outstanding invoices for accounting, tax and financial statement
      preparation services rendered since September, 2006 through part of the
      current fiscal year.  Fees incurred during the fiscal year ended
      May 31, 2008 by this related party accounting firm totaled $79,141. The
      amount owed to the firm as of May 31, 2008 is $40,192 and appears
      as
                accounts
      payable-related party in the accompanying balance
  sheet.
 
 Fees
incurred during the fiscal year ended May 31, 2007 by this related party
accounting firm totaled $39,723, of which $38,664 remained unpaid as of that
date and appears as accounts payable-related party in the accompanying balance
sheet at May 31, 2007
 
 7.
              INCOME
      TAXES
 
 The following is an analysis of income
taxes for the two years ended May 31, 2008.
 
 The
provision for current income taxes is as follows:
 For
      the
                year
      ended
                May
      31, 2008
              
              
              For the
                year
      ended
                May
      31, 2007Current
      tax expense (benefit):Federal
      tax at 34% statutory rate
              $
              (151,162
              )
              $
              (179,313
              )Benefit
      of surtax exemptions
              
              11,709Valuation
      allowance
              
              107,871
              
              
              136,674Permanent
      differences
              
              31,582
              
              
              20,807Income
      tax expense
              $
              -0-
              
              $
              (21,832
              )
 
 The
analysis of income tax expense is as follows:
 For
      the
                year
      ended
                May
      31, 2008
              
              
              For
      the
                year
      ended
                May
      31, 2007Current
              $
              -0-
              
              
              $
              (21,832
              )Deferred
              
              -
      0-
              
              
              
              -0-Income
      tax expense
              $
              -0-
              
              
              $
              (21,832
              )
 
 
 The
Company has a deferred tax asset of approximately $161,000.  This
deferred tax asset is for the $107,000 tax benefit of net operating loss carry
forwards which expires in 2027 and 2028 if unused, and $54,000 of cumulative
temporary timing differences through the year ended May 31, 2008. However, the
company has a valuation allowance for $161,000 as of May 31, 2008, as the
Company believes it is more likely than not that this future tax benefit of this
deferred tax asset will not be realized.
  29
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
  7.
              INCOME
      TAXES -
      continued
 
 The
following is an analysis of the change in the deferred tax asset during the
years ended May 31, 2008, and 2007:
 May
      31, 2008
              
              
              May
      31, 2007Deferred
      tax asset, beginning of year
              $
              -0-
              
              
              $
              11,172Prior
      year tax adjustment
              
              -0-
              
              
              
              (9,717
              )Net
      operating loss carryforward
              
              1,769
              
              
              
              114,037Allowance
      for doubtful accounts
              
              -0-
              
              
              
              26,577Interest
      Expense related party
              
              11,699
              
              
              
              6,000Depreciation
              
              169
              
              
              
              (223
              )Stock
      options granted
              
              77,087
              
              
              
              -0-Valuation
      allowance
              
              (90,724
              )
              
              
              (147,846
              )Deferred
      tax asset, end of year
              $
              -0-
              
              
              $
              -0-
   8.
              CONTRIBUTED
      CAPITAL
 
 For the
year ended May 31, 2008, the President contributed the value of his services
totaling $80,950. This amount consisted of $54,000 for the value of his personal
services to the Compaany, $7,750 for the prorata share of auto expenses, and
$19,200 for the rent of corporate office facilities. For the year ended May 31,
2007 the President contributed a total of $60,925 consisting of $40,500 for the
value of services, $7,625 for the prorata share of auto expenses, and $12,800
for the rent of corporate office facilities.
 
 9.
              DEFERRED
      CHARGE
 
 On May 9,
2007, we entered into a contract with Var Growth Corporation (D.B.A. Ice Cold
Stocks) and issued 875,000 shares of restricted common stock at $.15 in exchange
for consulting services to be performed over 12 months from the date the
contract. For the year ended May 31, 2007, $8,271 of this cost was expensed. The
remaining balance is treated as a deferred charge, a contra equity account, as
all of the shares were issued for services but not yet fully rendered.  On
or about April 8, 2008, we sued the above-named parties seeking damages,
interest, costs and reasonable attorney fees and enjoining them from selling or
disposing or otherwise transferring 875,000 common shares of our
equities.  The nature of this disagreement relates to the contract. No
adjustment to deferred charge was made as of May 31, 2008. A favorable
settlement was reached on July 27, 2008.
 
   30
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
 10.
                CONTINGENCIES
  The
Beatles
 In
January 2008 Fuego and Jeffrey Collins (Echo Vista, Inc.) through Echo-Fuego
Music Group, LLC announced plans to sell the eight “lost” Beatles’ club
recordings. Apple Corps Limited, representing the Beatles, is seeking to have
Fuego remove any information about the planned release from Fuego’s website, is
requiring Fuego to cease any use of the trademark, The Beatles, for commercial
purposes, and is also seeking $15 million in the lawsuit filed against Fuego,
Echo-Fuego Music Group, LLC, Hugo Cancio and Jeffrey Collins. On April 4, 2008,
Apple Corps Limited and Fuego struck an injunction agreement approved by a Miami
U.S. District Judge that requires Fuego to halt plans to release the eight song
recordings. On May 16, 29008, Fuego Entertainment filed a motion to dismiss the
lawsuit brought by Apple Corps Limited and Apple Records, Inc. as a matter of
law.  In the motion to dismiss Fuego Entertainment asserts that as a matter
of law Fuego has the right to commercially exploit the 15 “Lost” 1962 Beatles
recordings. Fuego is vigorously defending the lawsuit. The case and the
ultimate outcome are presently uncertain. The accompanying financial statements
do not include any adjustments that might be necessary should the case result in
an unfavorable outcome.
 
 11.
              ISSUANCE
      OF RESTRICTED COMMON STOCK
 
 We
authorized the issuance of 157,000 shares of restricted common stock at $.15 per
share on September 18, 2007; 83,000 shares of restricted common stock at $.15
per share on September 30, 2007; 575,000 shares of restricted common stock at
$.15 per share on October 15, 2007; 100,000 shares of restricted common stock at
$.28 per share on February 15, 2008; 25,000 shares were canceled March 3, 2008;
100,000 shares of restricted common stock at $.12 per share on May 20, 2008 and
5,000 shares of restricted common stock at $.17 per share on May 30,
2008.
 
 On
December 7, 2007 we issued 1,841,667 restricted shares of stock to AES Capital
Partners, LP regarding two separate Private Placement Memorandums. The first one
was signed on October 15, 2007 for 541,667 restricted shares at $.12 for a total
subscription amount of $65,000 and the funds deposited on October 17,
2007.  The second one was signed on December 5, 2007 for 1,300,000
restricted shares at $.212 for a total subscription amount of $275,600, half the
funds were deposited on December 10, 2007 and the other deposited on January 11,
2008.
 
 Principally
in connection with our efforts to obtain additional capital to sustain our
business, the following restricted stock was issued. Restricted shares of stock
consisted of 525,000 issued to the accounting firm in payment for outstanding
invoices regarding their accounting, tax and financial statement preparation
services, 150,000 shares issued to several board members, 237,000 shares were
issued to various individuals for services rendered, and the sale of 1,924,667
shares for cash.
  12.
              REPRODUCTION
      AND DISTRIBUTION AGREEMENTS
 
 As of
June 2007, we have begun and expect to continue the conversion of our fully
owned and licensed musical tracks into digital distribution.
 
 CONTRACTS
AND AGREEMENTS
 
 On July
20, 2007, we entered into an exclusive contract with Frontier Nutritional
Research, Inc. to distribute their product “Fit-a-Rita” a zero calories, zero,
sugar Margarita Mix in the Latin American market and non-exclusive rights for
certain US Latino distributors. Under the terms and conditions of the contract,
we will be given the title of distributor and are granted the right to purchase
the product in bulk at a distributor’s price. The payment terms for the product
is net 30 days. If payment is not received by the vendor 60 days after the date
the product is delivered to the distributor, then 12% interest is accrues on the
amount due to them.
 
  31
 FUEGO
ENTERTAINMENT, INC. AND AFFILIATE
 FOOTNOTES
TO FINANCIAL STATEMENTS
  12.
                  REPRODUCTION
      AND DISTRIBUTION AGREEMENTS - continued
  MUSIC
ARRANGEMENTS
 
 Since
launching FEMI, we expanded our music and video catalog, by signing
new artists, and acquiring music masters containing over 890 music tracks. We
have also expanded our marketing and distribution
 
 13.
              SUBSEQUENT
      EVENTS
 
 Var
Growth Corporation
 On July
27, 2008 we settled a lawsuit against Var Growth Corporation (D.B.A. Ice Cold
Stocks) and Barry Davis regarding a consulting agreement executed May 9,
2007.  On or about April 8, 2008, we sued the above-named parties
seeking damages, interest, costs and reasonable attorney fees and enjoining them
from selling or disposing or otherwise transferring 875,000 common shares of our
equities.  The nature of this disagreement relates to a contract
entered into between the Company and Var Growth Corporation to provide
independent consulting services associated with our marketing plan and business
goals and other related services.
 
 “Havana
Night Club” Show
 On August
14, 2008, we filed a lawsuit against ViaShow, Inc., a Nevada corporation and
Nicole Durr in reference to the “Havana Night Club” show.  We sued the
above-named parties seeking compensatory damages, punitive damages, costs and
reasonable attorney fees and enjoining them from selling or
disposing.  The nature of this disagreement relates to a contract
entered into between the Company and the Defendant corporation, ViaShow, Inc. to
pay us royalties relating to the Havana Night Club show to be presented in five
different cities in the Spring and Summer of 2005.
  We allege
that ViaShow, Inc. was to pay us royalties computed at the rate of 20% of all
tour revenue in exchange for an investment by us and two other investors of a
total of $1,500,000 to be paid to ViaShow, Inc.  It is further alleged
that we were guaranteed a return of our investment and that ViaShow, Inc. and
Nicole Durr failed to make any payments to us in reference to this
agreement.
 
 In the
Complaint, we outlined our causes of action against Defendant ViaShow,
Inc.including the following: (1) failure to provide an accounting as to show
revenues, (2) breach of contract, (3) unjust enrichment, (4) fraudulent
inducement, (5) conversion, and (6) negligent misrepresentation. As to
Defendant Nichole Durr, we outlined our causes of action as follows: (1)
fraudulent inducement, (2) conversion, and (3) negligent
misrepresentation.


32




ITEM
8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
 
 No
disagreement or concerns as to our financial reporting was reported to us or our
audit committee by the Company’s auditor.  There are no changes in and
disagreements with accountants on accounting and financial
disclosure.
 
 ITEM
8A. CONTROLS AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in the reports filed or submitted under the Exchange Act of 1934 is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the reports
filed under the Securities
 
 Exchange
Act of 1934 is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
   33
 
 As of the
end of the period covered by this report, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done under
the supervision and with the participation of our Principal Executive Officer
and Principal Financial Officer. Based upon that evaluation, he concluded that
our disclosure controls and procedures were ineffective in gathering, analyzing
and disclosing information needed to satisfy our disclosure obligations under
the Exchange Act.
 
 There
were no changes in internal controls over financial reporting that occurred
during the last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the internal control over financial
reporting.  We also note the incorrect characterization of production
costs in our statement of cash flows that resulted in a material change to cash
flows from operating and investing activities.
 
 In
connection with the development of a leased TV channel in Puerto Rico, the
Company shared in paying for certain expenses including travel, lodging and
meals for its President, in connection with the pursuit of available TV
programming in that area. There was inadequate documentation to support the
allocation of such expenses between the Company and the TV station owned by the
Company’s president. In addition there were no signed agreements between the
Company and the personnel retained to perform services in connection with
obtaining TV programming which should disclose as a minimum, the nature of the
services to be rendered, the amount of periodic compensation being paid and the
term of the services.
 
 The lack
of support concerning the above matters was considered to be a material weakness
in internal control, which weakness commenced during the entire period from
inception of the Company as to the first matter and the last quarter of the
fiscal year ended May 31, 2008, as to the second matter.
 
 The
President of the Company has since required documentation for all disbursements,
has recorded in a journal the information necessary to allocate amounts among
entities, and will obtain written agreements for all services to be provided to
the Company.
 
 Changes
in Internal Controls
 
 There
were no changes in our internal controls or in other factors that could
significantly affect those controls since the most recent evaluation of such
controls.
 
 
 PART
III
  ITEM
9.   DIRECTORS, EXECUTIVE OFFICERS. PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a)
 
 The
following table sets forth the names and ages of the directors and executive
officers of the Company through the date of this Report, as well as the current
officers and directors; the principal officers and positions with the Company
held by each person and the date such person became a director or executive
officer of the Company. Each serves until the next annual meeting of the
stockholders.
 
  Names
      of Current Executive
                Officers
      and Directors
              Age
              Position
              Date of
      AppointmentHugo M.
      Cancio
              41
              Treasurer/secretary/Director/President
              December 29,
      2005
  HUGO M.
CANCIO, President, Treasurer, Secretary and Director, Age 42, is our sole
officer and director. Since 2003, Mr. Cancio has served as the president of
Ciocan Entertainment and Music Group, L.L.C., an independent film and music
company. Prior to 2003, Mr. Cancio was self-employed as an independent
film
 
 and music
producer since 1990. Mr. Cancio attended Miami-Dade Community College where he
studied Business Administration. Mr. Cancio is not an officer or director of any
other publicly traded company.
 34
  ITEM
9B: COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
 
 Section
16(a) of the Securities Exchange Act of 1934 requires our officers, directors
and person who own more than 10% of our Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
All of the aforesaid persons are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. No changes in the holdings of any
officer, director or other person took place and therefore, no other reports
were required to be filed.
 
 ITEM
10.  EXECUTIVE COMPENSATION
 
 The
following table sets forth certain information concerning the compensation paid
by the Company for services rendered in all capacities to the Company from for
the period ended May 31, 2008 and 2007 of all officers and directors of the
Company.
 
 
 Long
      – Term Compensation AwardsName
      and Principal
                
                
                Stock-Based
                UnderlyingPositions
      at 5/31/07
                Salary
      2008 and 2007
                Bonus
      2008 and 2007
                Compensation
      2008 and 2007
                Options
      2008 and 2007Hugo
      M. Cancio
                  Director/President
                  Treasurer
                $54,000
      (2008) *
                $15,000
      (2008)
                $125,000-
      (2008)
                -0-Hugo
      M. Cancio
                  Director/President
                  Treasurer
                $45,000(2007)
                -0-
      (2007)
                -0-
      (2007)
                -0-
      (2007)
 
 •           Compensation
represents the fair market value of the amount accrued but
unpaid.
 •           **
Based on the grant of stock options in January, 2008 for 250,000
shares
 
 ITEM
11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
 
 The
following table sets forth, as of May 31, 2008, certain information with respect
to the beneficial ownership of our common stock by (i) each director and officer
of the Company, (ii) each person known to the Company to be the beneficial owner
of 5% or more of the outstanding shares of common stock, with such person’s
address, and (iii) all of the directors and officers as a group. Unless
otherwise indicated, the person or entity listed in the table is the beneficial
owner of the shares and has sole voting and investment power with respect to the
shares indicated.  The total number of issued and outstanding shares
as of May 31, 2008 is 39,476,020.
 
 
 Name
      of Beneficial Owner
                Shares
      Beneficiallyor
      Name of Officer or Director
                Owned **
                PercentHugo
      M. Cancio
                  Director/President
                  Treasurer/Secretary
                19,250,000
                48.76%Ciocan
      Entertainment Film & Music Group, LLC *
                5,500,000
                13.93%Total
      Director/Officer/
                  5%
      Owners
                24,750,000
                62.70%
 
 * Hugo M.
Cancio is the controlling shareholder of Ciocan Entertainment Film and Music
Group, L.L.C. which owns 5,500,000 shares of our common stock.
 **
Includes stock options granted of 250,000 shares granted in January, 2008 and
reported herein on a fully-diluted basis as if all share were to be
exercised.
 
 35
  ITEM
12.  CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS.
 
 Ciocan
Entertainment and Music Group, LLC, "Ciocan" is an entertainment company owned
by Hugo M. Cancio, our sole officer, director and principal shareholder. Ciocan
creates products for the Latino Market in and out of the United States borders
and will use our company to market, promote and commercialize some its products
(music, films, documentaries, artist, etc) for the Anglo and international
markets. During the year ended May 31, 2008, Ciocan did not advance any money to
the Company.
 
 We lease
our principal office space located at 8010 NW 156 Street, Miami Lakes, Florida
33016 on a month to month basis from a related party. Total rent expense for the
year ended May 31, 2008 and 2007 was $19,200, and $15,083,
respectively.
 
 No
additional shares have been issued to our President/CEO.
 
 Our
President/CEO is owed $235,330 for the period from inception through May 31,
2008 for cash advances to the company for a variety of general and
administrative expenses and the development of TV station programming. During
the current year he advanced $102,251 and was repaid $106,014. No interest was
paid on this date which accrues at 15 percent per annum and is payable on June
1, 2008. Accrued interest totaled $51,443 as of May 31, 2008.
 
 Audit
Committee financial expert.  Our Board of Directors has determined
that the sole member of our Audit Committee, Mr. Felix Danciu qualifies as an
audit committee financial expert under the applicable rules of the
SEC.  Mr. Danciu’s qualifications include, among other things, his
practice as a financial consultant and investment banker. Mr. Danciu does not
meet the audit committee independence criteria prescribed by the NASDAQ as he is
also a member of our Board of Directors.  Our company is not required
to have an audit committee under the FINRA guidelines for OTC traded companies,
and therefore is not required to have an independent audit committee
member.




ITEM
13.  EXHIBITS AND REPORTS ON FORM 8-K.




(a) Exhibits




Exhibit
      No.
            Description
      and Method of Filing31.1
            Certificate of Principal Executive Officer as
      Required by Rule 13a-14(a)/15d-1431.2
            Certificate of Principal Accounting Officer as
      Required by Rule 13a-14(a)/15d-1432.1
            Certificate of Principal Executive Officer as
      Required by Rule 13a-14(b) and Rule 15d- 14(b) (17 CFR 240.15d-14(b)) and
      Section 1350 of Chapter 63 of Title 18 of the United States
      Code32.2
            Certificate of Principal Accounting Officer as
      Required by Rule 13a-14(b) and Rule 15d-14(b) (17 CFR 240.15d-14(b) and
      Section 1350 of Chapter 63 of Title 18 of the United States
      Code




(b) Reports
on Form 8-K


Form 8-K
filed with the U.S. SEC on May 19, 2008


Form 8-K
filed with the U.S. SEC on April 21, 2008


Form 8-K
filed with the U.S. SEC on April 21, 2008


Form 8-K
filed with the U.S. SEC on April, 7, 2008


Form
8-K/A filed with the U.S. SEC on March 28, 2008


Form 8-K
filed with the U.S. SEC on March 26, 2008


Form 8-K
filed with the U.S. SEC on March 13, 2008


Form 8-K
filed with the U.S. SEC on December 12, 2007


Form 8-K
filed with the U.S. SEC on October 21, 2008


Form 8-K
filed with the U.S. SEC on October 10, 2007


Form 8-K
filed with the U.S. SEC on October 9, 2007


Form 8-K
filed with the U.S. SEC on July 7, 2007







ITEM 14.  PRINCIPAL
ACCOUNTANT FEES AND SERVICES





Our Board
of Directors reviews and approves audit and permissible non-audit services
performed by its independent accountants, as well as the fees charged for such
services. In our review of non-audit service fees and its appointment of Moore
& Associates Chartered, as our independent accountants, our Board of
Directors considered whether the provision of such services is compatible with
maintaining independence. All of the services provided and fees charged by Moore
and Associates, Chartered, in fiscal year ended May 31, 2008, were approved by
our board of directors.
 
 Audit
Related Fees
 
  We
incurred fees to  Braverman International P.C. of $28,824 for the
audit and audit related services of the fiscal year ended May 31, 2007. Of this
amount, $17,500 related to our audit.  We incurred fees to Moore &
Associates Chartered of $10,800 related to the interim filings for the fiscal
year ended May 31, 2008.  We incurred fees of approximately $10,000
related to our audit for 2008.




Tax
Fees





None paid
to Moore and Associates, Chartered.






36




SIGNATURES





In
accordance with Section 13 and 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





FUEGO
      ENTERTAINMENT, INC.Date:
      September 17, 2008
            By:
            /s/
      Hugo M. CancioHugo
      M. Cancio , Principal Executive officerDate:
      September 17, 2008
            By:
            /s/
      Hugo M. CancioHugo
      M. Cancio, Principal Accounting Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.


Date: September
      17, 2008
            By:
            /s/
      Hugo M. CancioHugo
      M. Cancio, Director