UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
      10-KSB





[X]ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF 1934For
                the fiscal year ended May 31,
                2006[  
]TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934For
                the transition period
                from ________________to
                ________________Commission
                File No.:******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.)





19250
                NW 89th Court
              Miami,
                FL 33018
              (Address,
                including zip code, of principal executive
                offices)






Issuer’s
      telephone number: (305) 829-3777










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. [X]Yes [ 
       ]No





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-KSB or any
      amendment to this Form 10-KSB.     [X]





State
      issuer’s revenues for its most recent fiscal year.    
$202,292.00





As
      of May
      31, 2006, we had 34,959,562 shares of our $0.001 par value common stock issued
      and outstanding. On May 31, 2006, the aggregate market value of our common
      stock
      held by non-affiliates was approximately $10,459,562.





DOCUMENTS
      INCORPORATED BY REFERENCE


SB-2
      Registration Statement, as amended, originally filed on August 17,
      2005.





Transitional
      Small Business Disclosure Form (Check one):    
[   ]Yes     [X]No





To
      simplify the language in this Form 10-KSB, Fuego Entertainment, Inc., a Nevada
      corporation, is referred to herein as the "Company" or "We."





PART
      I





This
      report on Form 10-KSB and documents incorporated herein by reference contain
      certain “forward-looking statements” as defined by the Private Securities
      Litigation Reform Act of 1995 which involve substantial risks and uncertainties.
      When used in this report and in other reports filed by the Company, the
      forward-looking statements are often identified by the use of such terms and
      phrases as “anticipates,” “believes,” “intends,” “plans,” “expects,” “seeks,”
“scheduled,” “foreseeable future’ and similar expressions. Although the Company
      believes the understandings and assumptions on which the forward-looking
      statements in this report are based are reasonable, the Company’s actual
      results, performance and achievements could differ materially from the results
      in, or implied by, these forward-looking statements. Certain factors that could
      cause or contribute to such differences include those discussed in “Management’s
      Plan of Operations” and elsewhere herein.












ITEM
      1.   DESCRIPTION OF BUSINESS.





The
      Company





Fuego
      Entertainment, Inc. 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 also provide management, marketing,
      and public relations services to the entertainment industry.





We
      were
      founded by our President, Hugo M. Cancio, who has spent the last five years
      successfully owning and operating Ciocan Entertainment & Music Group, a record
      label and film production company that produces Cuban and world entertainment
      and is extremely well-known throughout the Latin 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. By combining the efforts and products of Fuego and Ciocan, it is
      our
      intention to reach both markets at the same time as well as further penetrate
      Europe where Latin music is very popular. We have entered
      into 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 or with any Cuban
      nationals.





Distribution
      and Publishing





Fuego
      at
      the present time does not have any finished product to offer for distribution,
      however several products are in production stages. Once these products
      are completed we will make contact with several distributors around the world
      with whom Mr. Cancio has conducted business via Ciocan Entertainment and other
      products. Ciocan and Hugo Cancio have contacts with distributors in Spain, France,
      Italy, Germany, England, Portugal, Japan, China and the US. These distributors
      include HL Distributors, Reyes Distribution, Vale Music, Video Distributors,
      GB Distributors, Actual Records & Films Distributors, Latin Universe,
      International Record Distributors, Kubaney Records, Incredible CD's Distributors,
      Ricon Musical, Distribuidora Nacional of Puerto Rico, and Musica Latina
      Distributors. Ciocan's largest distribution products are music
      CD's.





The
      method Ciocan uses to select clients is by traveling every year to the shows and
      conventions related to music products distributions such as MIDEM, BILLBOARDS
      and 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 intend to send products to established distributors ( distributors
      that are well established in the market with whom Ciocan and Cancio have
      done
      business with) on payment terms of net 30 or net 60 , and cash on delivery
      to those we consider new clients. We have a no return policy. Net 30/60 terms
      are
      credit terms for established good standing accounts, meaning we send them
      product and they pay us in 30 or 60 days depending on the credit term. All new
      accounts are on cash only basis.





We
      also
      intend to license products from Sun Flower Publishing, which receives royalties
      for products sold as well as for songs played on the radio and television
      and licensed for soundtracks. We are in preliminary discussions with Sun
      Flower Publishing at this time and expect to enter into a definitive agreement
      within the next six months, but we have not entered into any definitive
      agreement as of yet.





Ciocan
      has verbally agreed to license Fuego its music library
      for the payment of a 25% royalty subsequent to May 31, 2006.












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 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. F&F Media Corp. distributes information
      to the local and international media pertaining to our artist new releases
      or events and organizes the interviews and to markets and promotes our concert
      shows in order to enhance ticket sales.





Our
      future plan is to hire an intern and provide training in the art of advertising
      and marketing. 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 $ 40,000
      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.





Projects


The
      Trader Show




The
      Trader Show is a reality television show based on the real life activities of
      amateur and professional stock traders. While there are many forms of stock trading,
      The Trader Show places an emphasis on the activities of day traders. We have
      no
      firm plans for its showing. The Show is still in production stages having
      shot 4 episodes out of 12 needed to complete a pilot for a first season. Mr.
      Anthony Pullicino participated in the shooting of several scenes and assisted
      in developing the original concept of the show. Mr. Pullicino is no longer
      the central character of the show, there are no other relationships between
      us and Mr. Pullicino regarding this show, and there are no outstanding obligations
      owed to Mr. Pullicino regarding his participation in this show.





The
      four
      episodes of the Trader Show showcasing Mr. Pulluccino as the main character
      will be used for the purpose of pitching the idea of the show to the networks,
      or the idea of the show. We have stopped filming the show and are in the
      process of rewriting the script to showcase 10 ten stock traders which will compete
      with each other to see who makes the most money in an undetermined amount
      of
      time. The amount of time is undetermined at this time as we are still rewriting
      and developing this new concept. Anthony Pulluccino is no longer part of
      the
      show and our working relationship ended in June 2005. After reviewing footage
      of the series we have determined most of the footage will be suitable for
      use
      in the new series concept. Only a small portion of the footage, indicating
      the series was about Mr. Pulluccino's life was scrapped.





Once
      we
      have finished rewriting the script and completed developing this new concept
      we will hold auditions to pick the potential stock traders. No date has been
      set
      to turn in the final.





The
      show
      was created by Hugo Cancio. The show is meant to capture the dynamics of
      investing in the stock markets. We have completed filming several episodes for
      the
      show, however we have temporarily stopped filming to rewrite the script. Originally
      the show was based on the life of one individual who is an active investor,
      a stock trader, we are now writing the script to where there are now ten
      investors competing against each other. Competition is a key ingredient in today's
      reality shows, and we want our show to be able to successfully compete with
      other similar reality shows. There can be no assurance that we will be successful
      in achieving this goal.





A
      budget
      will be determined once the new script is finalized after which we
      will
      contact several television and cable
      network executives to pitch them the idea for our reality show.





Expected
      revenues for this project are speculative at this time and cannot be precisely
      determined or predicted. There is no assurance the show will ever be picked
      up
      by any network or that it will ever generate any revenue.




Gold
      in
      Ecuador




It
        is not
        part of our revised script for Gold in Ecuador to visit any gold mine in
        Ecuador. Mr. Pulluccino is no longer the main character in our show and
        therefore will not be making any visits as part of the cast of the
        show.
 
 The
        diamond mining companies that Mr. Pullucino was going to investigate were;
        Dee
        Beers, and Shore Gold. There is no direct or indirect relationship between
        Fuego
        Entertainment, Inc. or Mr. Cancio with any of these companies. These companies
        were selected by Mr. Pullicino as they are the only active mining companies
        in
        Canada. There are currently three people working on the creation of the show
        and
        that includes Hugo Cancio as the show creator and Executive
        producer.




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.














Strategy
      and Implementation Plan





In
      the
      entertainment industry, a key factor to success is the reputation and visibility
      of the company. A successful, well-known company will attract the best
      artists and products, create the best, most financially-rewarding industry deals,
      and have the highest distribution rates and channels. Fortunately, through
      Hugo Cancio's established industry reputation and Ciocan's achievements in
      the
      Latin market, Fuego has successfully entered the marketplace in Latin America
      and the U.S. and, in management's opinion, is poised for future
      success.





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 as well as works with reputable distributors to place the products
      within retail stores, music stores across the globe, including Specs Music,
      Tower Records, Descarga.com, Timba.com, El Museo del Disco, Lily's Records,
      Music Latina. We also stay in close contact with various radio stations,
      television producers, newspaper editors. in order to get our artists' songs
      played on the radio, on televised shows, and to generally gain public exposure
      for our artists. There are no agreements with these stores or various radio
      stations, television producers, and newspapers editors.





Employees





We
      do not
      employ any persons on a full-time or on a part-time basis. 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.





ITEM
      2.   DESCRIPTION OF PROPERTY.





We
      lease
      our principal office space located at 19250 NW 89th Court, Miami, Florida
      33018 on a month to month basis from an unrelated party. Total rent
      expense for the year ended May 31, 2006 was $8,500.





ITEM
      3.   LEGAL PROCEEDINGS.





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 his or her capacity as such.





ITEM
      4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None





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.”





Approximate
      Number of Common Stock Holders





As
      of May
      31, 2006, we had 34,959,562 shares of common stock outstanding, held by
      approximately 44 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





From
      June
      1, 2005 through May 31, 2006, we issued a total of 21,686,892 shares of our
      common stock to those investors set forth in the table below for a total value
      of $ 56,096.29.












NAME
            
            SHARES
            
            PAID
            
            DATE
                ACQUIREDCherie
              Cancio
            
            
            1,100,000
            
            $
            1,100.00
            
            
            08/22/2005Christy
              Cancio
            
            
            1,100,000
            
            $
            1,100.00
            
            
            08/22/2005Miguel
              Cancio
            
            
            1,600,000
            
            $
            1,600.00
            
            
            10/17/2005Ana Cancio
            
            
            450,000
            
            $
            450.00
            
            
            09/13/2005Hugo M.
              Cancio
            
            
            7,672,670
            
            $
            7,672.67
            
            
            05/31/2005Sunflower
              Publishing
            
            
            500,000
            
            $
            500.00
            
            
            10/03/2005Vivianka
              Cancio
            
            
            75,000
            
            $
            75.00
            
            
            08/22/2005Rogelia
              Morua
            
            
            1,500,000
            
            $
            1,500.00
            
            
            06/23/2005Maritza
              de la
              Torre
            
            
            1,200,000
            
            $
            1,200.00
            
            
            10/03/2005Juan Ramon
              Guzman
            
            
            500,000
            
            $
            500.00
            
            
            06/23/2005Katie Hale
            
            
            200
            
            $
            0.20
            
            
            08/22/2005Jose Gomez
            
            
            1,400,000
            
            $
            1,400.00
            
            
            10/03/2005Anthony
              Hattenbach
            
            
            420,000
            
            $
            420.00
            
            
            06/22/2005Ciocan Entertainment&Music
                Group, LLC
            
            
            5,500,000
            
            $
            29,850.00
            
            
            05/31/2005Maritza
              De La Torre
            
            
            250,000
            
            $
            2,500.00
            
            
            11//03/2005Johnna
              Catanella-Davis
            
            
            1,000
            
            $
            10.00
            
            
            09/23/2005Jimmy
              Hopler
            
            
            1,000
            
            $
            10.00
            
            
            09/23/2005Charles
              Short
            
            
            1,000
            
            $
            10.00
            
            
            09/23/2005Hope
              Seitzinger
            
            
            500
            
            $
            5.00
            
            
            09/23/2005Choice
                Mortgage Funding,Inc.
            
            
            1,000
            
            $
            10.00
            
            
            09/23/2005Noelia
              de
              Guzman
            
            
            250
            
            $
            2.50
            
            
            09/23/2005Juan Ramon
              Guzman
              &
              Noelia Sosa
            
            
            200
            
            $
            2.50
            
            
            09/23/2005Jason Webb
            
            
            13,888
            
            $
            2,499.84
            
            
            06/30/2005Braynert
              Marquez
            
            
            10,000
            
            $
            1,800.00
            
            
            10/11/2005Beverly
              Jo
              Mehlman
            
            
            10,000
            
            $
            1,800.00
            
            
            07/13/2005TRW Family
              Limited
              Ptr.
            
            
            5,555
            
            $
            999.90
            
            
            07/13/2005Daniel
              York
            
            
            2,777
            
            $
            499.86
            
            
            07/01/2005Linda M.
              Vance
            
            
            12,000
            
            $
            2,160.00
            
            
            07/13/2005Edward
              Kaminsky
            
            
            20,000
            
            $
            3,600.00
            
            
            07/13/2005Joseph
              P.
              Mccarthy
            
            
            11,111
            
            $
            1,999.98
            
            
            07/19/2005Lee W.
              Delor
            
            
            5,000
            
            $
            900.00
            
            
            07/21/2005Verna Tucker
&
              Roger Summers
            
            
            5,555
            
            $
            999.90
            
            
            07/22/2005Johnathan
              Gildin
              & Leah
              Gildin
            
            
            1,500
            
            $
            270.00
            
            
            07/25/2005Keneth
              P. Hicks
              & Sandra
              Hicks
            
            
            1,000
            
            $
            180.00
            
            
            07/22/2005Robert
              Soto
            
            
            3,000
            
            $
            540.00
            
            
            08/08/2005Louis
              Mendez
            
            
            20,000
            
            $
            3,600.00
            
            
            08/08/2005Kevin West
            
            
            2,000
            
            $
            360.00
            
            
            11/03/2005Mary Alice
              Seagill
            
            
            555
            
            $
            99.50
            
            
            09/01/2005Behrens
              International Group
            
            
            5,556
            
            $
            1,000.08
            
            
            09/01/2005Vivianka
              Cancio
            
            
            694
            
            $
            124.92
            
            
            08/22/2005Rogelia
              Morua
            
            
            1,666
            
            $
            299.88
            
            
            06/23/2005Niurka
              Marques
            
            
            4,016
            
            $
            723.00
            
            
            09/01/2005Niurka
              Marques
            
            
            2,722
            
            $
            490.00
            
            
            09/03/2005Niurka
              Marques
            
            
            2,222
            
            $
            400.00
            
            
            09/28/2005Niurka
              Marques
            
            
            1,111
            
            $
            200.00
            
            
            10/03/2005Niurka
              Marques
            
            
            1,111
            
            $
            200.00
            
            
            11/03/2005Niurka
              Marques
            
            
            5,556
            
            $
            1,000.00
            
            
            11/22/2005Niurka
              Marques
            
            
            8,262
            
            $
            1,487.00
            
            
            12/06/2005Cohen
              Enright
            
            
            2,000
            
            $
            360.00
            
            
            08/30/2005Tucker
              Hoss
            
            
            20,000
            
            $
            3,600.00
            
            
            10/11/2005Daniel
              York
            
            
            555
            
            $
            99.90
            
            
            07/01/2005Hugo M.
              Cancio
            
            
            9,500,000
            
            $
            9,500.00
            
            
            08/22/2005Hugo M.
              Cancio
            
            
            1,727,330
            
            $
            1,727.33
            
            
            09/01/2005Anthony
              Hattenbach
            
            
            280,000
            
            $
            280.00
            
            
            11/03/20005$TOTALS
            
            
            21,686,892
            
            $
            56,096.29














We
      relied
      upon Section 4(2) of the Securities Act of 1933, as amended (the "Act").
      Our officers and directors determined the sophistication of our investors,
      as the investors were either business associates of, or personally known
      to,
      our officer and director. Each investor completed a subscription agreement
      whereby the investors certified that they were purchasing the shares for
      their
      own accounts, with investment intent. This offering was not accompanied
      by general advertisement or general solicitation and the shares were issued
      with a Rule 144 restrictive legend.




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 seventeen months as of May 31, 2006. Our efforts
      during that period have largely been to generate cash flows from operations
      which amounted to $95,685, and the sale of securities which amounted to
      $93,719. The majority of these cash flows were applied towards, production costs
      of
      $93,431, and the investment in a series of shows, Havana Nights, costing
      $57,400, which investment in September of 2005, was considered totally impaired
      for financial accounting purposes resulting from the cancellation by the
      promoter, whereby as of May 31, 2006, no further shows were scheduled or
      rescheduled that would justify a recoupment of our investment.





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 cost $93,431
      as of May 31, 2006, which included, 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. Lastly, we initially incurred stock registration
      costs of $63,382, consisting largely of professional fees, to enable us to
      pursue a registration statement on Form SB-2 with the Securities and Exchange
      Commission.





Operating
      expenses from May 31, 2005 to May 31, 2006 were principally for selling, general
      and administrative expenses, the major components of which were stock
      registration costs of $63,382, travel and development costs of
      $36,000 ,
      and
      impairment of the investment in Havana Nights of $57,400.





We
      do not
      anticipate incurring more than $10,000 in additional costs with respect
      to our four filming projects prior to their completion. All of our filming
      projects are in final stages of development, and the tour of Havana Night
      Club which we are still pursuing, does not require any subsequent investment.
      Furthermore, 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 work for hire projects
      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. Our minimum expected cash flows to continue our current level of
      operations during the next 12 months is approximately $150,000, however up
      to $250,000
      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 corporate videos.
      If the additional $100,000 is not raised, we may be unable to continue operations.





We
      recently entered into a verbal licensing agreement with our affiliate, 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. Once we have an agreement in place with Ciocan, we plan to
      develop live productions for artists we intend to sign in the future in various
      cities and venues, and generate revenues from these live performances while
      marketing and promoting our recordings. The tour productions will be national
      and international, for both our future artists and other artists. As always,
      visibility will be key in the success of record and merchandise sales, and
      can
      be affected by any sudden changes in the economy. We are addressing this risk,
      largely based on past experience, by diversifying our market, products and scope
      (i.e. the addition of film and other media). Ciocan is also controlled by Mr.
      Cancio, and the agreement to license Ciocan's music requires us to pay a royalty
      of 25%.





We
      will
      develop the size of the Ciocan Music Catalogue by increasing the amount of
      albums we produce and distribute. In order to reduce costs and thereby reduce
      the risk involved, the initial projects will be compilations which we plan
      to
      release as new albums. This approach will allow for increased visibility of
      our
      products. This approach
      is also a response to a current trend in the market where the demand for
      compilations has increased in recent years. We also plan to license some individual
      music tracks to other producers, or film production companies to generate
      additional working capital on a similar royalty basis. Finally, we will develop
      additional artists within the Latin genre and create our own proprietary library
      of content. This development strategy includes sourcing and developing new
      and
      existing talent, networking with current music producers to evaluate available
      opportunities, and expanding on related distribution networks. A similar
      arrangement was made between the Company’s President/CEO wherein he is to
      receive royalties of 25% for the multi-media releases of a popular film he
      owns
      and produced in Cuba called Zafiros Locura Azul ( Sapphire Blue Madness)
      . ****













We
      are
      currently producing 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. Management believes that once our on going filming projects,
      One Million Millionaires, Gold in Ecuador and Counterfeit Conspiracy are
      released, the sale and distribution of these documentaries will generate sufficient
      revenues to sustain us over the next twelve (12) months. We have no outside
      investors in any of our three documentaries or the reality television project.
      These four projects are wholly owned, produced and financed by Fuego Entertainment.
      No other entity we have done work for hire including any entity associated
      with our previous work for hire clients had any part in the inspiration
      or financing of these projects. We are expecting to release these new
      projects during the summer of calendar 2007, however, these are new endeavors,
      and as such carry a certain degree of uncertainty. Any shortage resulting
      from delays in release dates or other possible material risks are addressed
      through the previously mentioned music catalog. Additionally, we are also
      retained by customers to create a filmed product for hire. We are not dependent
      on, and have no expectation of producing any future work for hire for our
      previous work for hire clients or any entities currently or previously associated
      with them. We have and will continue to generate revenues by engaging in
      work
      for hire projects, meaning projects for which our services are requested such
      as:
      corporate videos, music videos and consulting agreements with companies seeking
      to reach the Hispanic/Latino Market in the US and abroad. Management believes
      that this type of activity, in addition to the proposed compilations in the
      music
      catalog, will create a steady source of revenues.





Additional
      sources of income will 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 work
      for
      hire projects. However, our main goal has been to focus on the three film
      projects which are currently in final stages of production (reviewing films
      and
      getting ready for post-production), and post production (editing), and to manage
      television stations currently being developed by Mr. Cancio. For
      this
      reason we had a substantial decline in revenues earned in the past nine months,
      which created a loss for that period. While these film projects are being
      completed we will continue to seek work for hire and consulting
      services.





In
      the
      field of filmed entertainment (feature films and television shows), we are
      not
      currently seeking any specific opportunities at this time. However as it is
      the
      nature of the arts and the entertainment business, if a specific opportunity
      or inspiration should occur that we believe has significant market potential,
      we would consider taking on the project and revising our business plan
      as
      required to take advantage of the opportunity. In the future we intend to
      actively seek opportunities to negotiate the licensing or purchase of existing
      projects that are in various phases of their lifecycle, including development,
      pre-production, principal photography and post production. We will also
      create filmed products for customers on a "for hire" basis.





We
      also
      intend to utilize our extensive network of contacts to gain access to quality
      products by established industry participants. To avoid cost overruns and
      fixed
      overhead charges in our current stage of operations, we engage third-party
      participants to fulfill the execution of our projects, from camera crews
      to
      editing facilities. We further intend to access various distributors for
      penetration into the diverse windows of distribution, depending upon the project's
      commercial viability and our marketing approach.





For
      the
      past 8 years Mr. Cancio has worked in the entertainment industry, having produced
      several US and European Tours, co-produced films and documentaries as well
      as
      many music albums. Mr. Cancio's tour credits include the U.S. and European
      tours of Manolin and El Medico de la Salsa, the European tour of Gilberto
      Santa Rosa, the U.S. tours of La Charanga, Paulito FG, Elio Reve and Isaac
      Delgado. Mr. Cancio's film and documentary credits include "Zafiros Locura Azul",
      "Music from the Edge of Time"and "Amor Ciego (Blind Love). Mr. Cancio has attended
      music and film conventions and festivals around the world, and been nominated
      for two Latin Grammy Awards. This experienced has afforded Mr. Cancio the
      opportunity to collaborate with other executives in the field, and associate with
      music and film producers, actors, directors, financiers, distributors, and high
      level executives. Mr. Cancio has established a vast network of contacts around
      the world including those who are considered to be "established industry,"
      meaning the largest and most successful entities such as Sony/BMG, Sony
      Music Latin, Universal, Universal Latino, Miramax Films, Tribeca, Telemundo/NBC,
      Univision television Networks, Grupo Prisa in Spain, Tota Production
      in Italy, Ahora Corporation in Japan. These contacts will assist us in
      obtaining access to key decision makers in these organizations responsible for
      promotion and distribution of the kind of products we seek to produce, market
      and distribute in the domestic and international market place.





Fuego
      is
      actively seeking 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, such as Clan 537 and Evolution. Fuego completed a
      licensing agreement with Ciocan Music in order to market and distribute its
      music catalog. Example of some of Ciocan products include :Manolin, El medico
      de
      la Salsa, Live CD recorded in Miami, titled, El Puente, Carlos Manuel, etc.
      Fuego is also seeking to present the concert of Havana Night Club, the show
      in
      the island of Puerto Rico, which we believe is a strong market for this product.
      There are no formal agreements signed with any of the above mentioned entities
      or individuals at the present time. The producer of the show is trying to
      present the show in San Juan, Puerto Rico and has requested our assistance
      to
      help her present the show. We are assisting the producer in seeking
      a
      local promoter to present the Havana Night Club show in the Island of Puerto
      Rico. The producer of the Havana Night Show has not decided whether to present
      the show in Puerto Rico, therefore no producer/promoter has been chosen.
      The show is the same show that was presented in Miami. At this point Viashow
      is exploring the possibility of bringing the show to Puerto Rico and Mr. Cancio
      is
      assisting in that process through with his know how and experience in the
      musical tour arena. Because Mr. Cancio is assisting Viashow in this preliminary
      process and decision making, if and when this show is to take place, Fuego
      Entertainment for its participation expects it will receive 20% of the net revenues
      generated by the show in Puerto Rico. No additional investment will be required
      of Fuego Entertainment. This show is not part of the original agreement signed
      with Fuego Entertainment and Viashow as part of the Celebrate Freedom tour
      2005. This show has not yet been scheduled, and there are no agreements as
      of yet
      for
      this particular show. Presenting the concert of Havana Night Club in Puerto
      Rico as mentioned here would be a new separate undertaking without limitation
      and not related to the existing contract we currently have with Viashow
      with respect to the Havana Nights tour as discussed elsewhere in this document.
      With respect to the latter, there are presently no shows officially scheduled
      and there are no current plans to continue the tour.












The
      agreement that Mr. Hugo Cancio and Fuego Entertainment signed with Viashow, as
      one of
      three investors and attached as an exhibit to this document, is the sole
      formal contract that exists between Fuego Entertainment and Viashow. Due to events
      beyond the control of the producer the Five City Tour was canceled. The individual
      investors are referred to in the agreement as "Investor" as the legal term
      does
      not imply that the parties invested collectively, invested in equal amounts,
      or the existence of any personal or business relationship between the individual
      investors. Fuego Entertainments invested $57,400 for which it was assigned
      a 20% royalty. The remainder of the total investment was provided by the
      other
      investors. The $1.5 million investment in the Five City Tour was paid in
      full
      at the time the investment contract was executed by the third party investors,
      leaving no further liability of payment by any investor. Fuego received
      a disproportionate percentage of the royalties based on the fact that Mr.
      Cancio happens to be Cuban and a producer and promoter of Cuban acts and that
      Mr.
      Cancio assisted in the preparation, pre-production of the tour, especially
      in the presentation of the Miami show, which is the city where Mr. Cancio
      resides and has produced most of his live events. The Viashow producer personally
      contacted and invited the other investors into the agreement. There is
      absolutely no ongoing business or personal relationship between Mr. Cancio
      or Fuego
      Entertainment with the other investors related to the Five City Tour. There
      are
      no plans or expectation of any future business or personal relationship
      between Mr. Cancio or Fuego Entertainment and the other investing individuals
      and/or Trusts that are parties to the Royalty Agreement and the Five City
      Tour.





We
      have
      generated revenues by engaging in work for hire such as the production of
      corporate videos and consulting services. We have produced several corporate videos
      and television pilots that have generated substantial revenues for the
      Co mpany,
      it
      is our intention to continue offering these type of services as they incur
      no
      material costs or expenses by the Company, since all costs are paid for by
      the
      clients. Our efforts are provided by Mr. Cancio whose compensation has been
      and
      will continue to be contributed to the Company until we reach profitable
      ongoing operations. We have also 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.





We
      will
      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 .




Results
        of Operations for the Fiscal Year ended May 31, 2006
  Revenues
  Although
        we operated for a full 12 months this year, we were unable to maintain the
        same
        level of revenues that we achieved in the prior year, considering last year
        had
        only 5 months of operations. That is, the monthly average last year was
        approximately $25,000 and in the current year the average revenues were $16,800,
        the majority of which were generated from filming. This
        reduction in average monthly revenues was a direct result of the president’s
        efforts being directed in two significant non-revenue generating areas; the
        filing of a registration statement with the SEC which became effective shortly
        after year end, and his direct involvement in developing a television station
        in
        Puerto Rico which was incorporated in early March 2006, and into which
        substantial funds of the Company were invested, of which approximately $27,000
        was capitalized for office furniture, video equipment and cellular phones,
        and
        approximately $39,000 in expenses .
 
 Cost
        of
        Filming Revenues:
 
 Of
        the
        filming revenues generated for the current year, our Presidnet/CEO was able
        to
        perform the majority of effort necessary to generate such revenues as in
        the
        past period. His compensation and expense for such efforts was categorized
        in
        other selling, general and administrative expense categories and therefore
        not included as a cost of filming revenues in accordance with generally accepted
        accounting principles.
  Operating
        Expenses:
  The
        current year's operating exepenses increased
        dramatically. Selling, general and administrative expenses totaled $234,539
        which included $63,382 for stock registration costs, $39,474 for television
        development expenses, $34,842 for related party accounting, tax and financial
        preparation services performed for the Company by a Miami based CPA firm,
        $36,000 for management compensation, and $27,636 for travel, meals and
        entertainment expenses.





Results
      of Operations for the Fiscal Year ended May 31, 2006, Compared to Period from
      Inception on December 30, 2004 to May 31, 2005





Reveunes
      and Cost of Filming





The
      Company's major revenue source to date, the filming of corporate videos, was
      $57,000 more than the preceding year of only 5 months, but was curtailed in
      the
      current year for the reasons previously mentioned. Related costs of filming,
      as
      a percentage of revenue, was 14% for both and would be much higher if the costs
      and associated with the President/CEO's efforts in producing all of theses
      films
      were included.





Operating
      Expenses





The
      current year's operating activities were more involved since they included
      the
      registration costs of going public of $63,382, the development expenses incurred
      towards the effort to determine the viability of a Puerto Rico television
      station of $39,474, and the impairment of the investment in Havana nights of
      $57,400. In the prior year, no similar amounts were incurred. Other selling,
      general and administrative expenses of the current year were in line with the
      level of expenses incurred in the previous period of 5 months.










LIQUIDITY
        AND CAPITAL RESOURCES
 
 Although
        the Company’s registration statement with the Securities and Exchange Commission
        recently became effective, there were no proceeds from the offering to benefit
        the Company. 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 shareholders for current cash flows.
        Accordingly, it is presently seeking financing to continue in existence.
        The
        Company is dependent solely on its President/CEO for all revenue generating
        opportunities, and his time has been and will be for the near term almost
        exclusively devoted to the development of a 15 station television network
        which
        he believes will be beneficial for the Company as his intention is to have
        the
        Company manage the network for compensation.
 
 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.


ITEM
      7.   FINANCIAL STATEMENTS.




ITEM
      8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE.





None.


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, as appropriate, to allow
      timely decisions regarding required disclosure.





Within
      the 90 days prior to the filing date of 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. Based upon that evaluation, he concluded that our disclosure
      controls and procedures are effective in gathering, analyzing and disclosing
      information needed to satisfy our disclosure obligations under the Exchange
      Act,
      however, there were a number of areas where improvement was noted by the
      Company’s auditors, which management is in the process of correcting.
      .





Changes
      in Internal Controls





There
      were no significant changes in our internal controls or in other factors that
      could significantly affect those controls since the most recent evaluation
      of
      such controls.












PART
      II





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
            Director/President
              Treasurer/secretary
            December 29,
              2005





HUGO
      M.
      CANCIO, President, Treasurer, Secretary and Director, Age 41, 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.





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
      June
      1, 2006, through the fiscal year ended May 31, 2006, of all officers and
      directors of the Company.


SecuritiesName and Principal
              
              
              
              UnderlyingPositions at 5/31/06
              Salary
              Bonus
              Compensation
              OptionsHugo M. Cancio
                Director/President
                Treasurer
              $-0-
              -0-
              -0-
              -0-
 
 ITEM
          11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.
 
 The
          following table sets forth, as of May 31, 2006, 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.
  Name of Beneficial Owner
                Shares
                    Beneficiallyor Name of Officer or
                  Director
                Owned
                PercentHugo
                    M. Cancio
                  Director/President
                  Treasurer/Secretary
                19,000,000
                54.35%Ciocan
                    Entertainment Film&
                    Music Group, LLC
                5,500,000
                15.73%Total
                    Director/Officer/
                  5%
                    Owners
                24,500,000
                70.08%
 
 *
          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.










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 five month period ended May 31, 2005, Ciocan advanced
      to the Company a total of $31,552 of which, $29,850 was applied towards the
      purchase, by Ciocan, of 5.5 million shares of the Company's common stock, and
      $1,400 was charged for rent, leaving a balance advanced of $302 as of May 31,
      2005.
      As of May, 2006 $0 was
      owed
      to a stock subscriber.





We
      lease
      our principal office space located at 19250 NW 89th Court, Miami, Florida
      33018 on a month to month basis from an unrelated third party. Total rent
      expense for the year ended May 31, 2006 was $8,500.





The
      balance of $11,227,330 were also subscribed by him on January 2, 2005 at the same
      price of $0.001 per share.





On
      August
      22, 2005, we issued 9,500,000 shares of our common stock to our sole officer
      and director, Hugo M. Cancio, pursuant to his stock subscription for which
      $9,500 was paid by Mr. Cancio.





On
      September 1, 2005, we issued the balance of 1,727,330 shares of our common stock
      to
      our sole officer and director, Hugo M. Cancio, pursuant to his stock subscription
      for which $1,727.33 was paid by Mr. Cancio.





With
      respect to Sunflower Publishing, Anthony Hattenbach is an independent music producer
      and promoter. Mr. Cancio and Mr. Hattenbach have known each other for many
      years, however, they have no current working relationship. Sunflower Publishing
      is a publishing company Mr. Cancio started several years ago for the purposes
      of managing artist compositions. However, Mr. Cancio later moved away from
      the
      publishing business to focus on Music, Film and Concert Productions. At the
      present time Mr.Cancio no longer owns any interest in Sunflower Publishing nor
      there
      is a working relationship with that company.




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




(a) Exhibits




Exhibit
                No.
            Description and Method of Filing23.1
            Consent of Independent Auditor31.1
            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
              Code32.1
            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




None.





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
      Braverman International, P.C., 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
      Braverman International, P.C., in fiscal year ended May 31, 2006, were approved
      by our board of directors.





Audit
      Fees





The
      aggregate fees billed by Braverman International, P.C. for professional services
      for the audit of our annual financial statements for fiscal 2005 were $20,800
      net of expenses.





Audit-Related
      Fees





Audit
      related fees billed by Braverman International, P.C. was $17,500.





Tax
      Fees





None
      paid
      to Braverman International, P.C.














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 15, 2006
            By:
            /s/
              Hugo
              M. CancioHugo
              M. Cancio , Principal Executive officer


Date:
              September 15, 2006
            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 15, 2006
            By:
            /s/
              Hugo
              M. CancioHugo
              M. Cancio, Director











**FUEGO
        ENTERTAINMENT, INC.**
 
 **FINANCIAL
        STATEMENTS**
 
 **MAY
        31, 2006**
   
   **TABLE
        OF CONTENTS**
 **PAGE**REPORT
                OF INDEPENDENT REGISTERED ACCOUNTING
                FIRM
              F-1BALANCE
                SHEET
              F-2STATEMENTS
                OF
                OPERATIONS
              F-3STATEMENTS
                OF
                STOCKHOLDERS’ EQUITY
              F-4STATEMENTS
                OF CASH
                FLOWS
              F-5NOTES
                TO
                FINANCIAL STATEMENTS
              F-6
   
   REPORT
        OF  INDEPENDENT
        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, 2006, and the related statements of operations,
        stockholders’ equity, and cash flows for the year then ended and for the period
        from December 30, 2004 (inception) to May 31, 2005. 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.
  W e
        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, 2006, and the results of its operations and its cash flows for the year
        then
        ended and for the period from December 30, 2004 (inception) to May 31, 2005,
        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 a significant loss during the current
        year, and has a significant deficit in working capital. 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. The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
  Braverman
        International, P.C.
 Prescott,
        Arizona
 August
        26, 2006
   F-1
  **FUEGO
                    ENTERTAINMENT, INC.****BALANCE
                    SHEET****May
                    31, 2006****ASSETS**CURRENT
                    ASSETSCash
                
                
                
                
                $
                152Account
                      receivable-trade, less allowanceof
                      $11,833 in 2006
                
                
                
                
                
                5,000Total
                    Current Assets
                
                
                
                
                
                5,152EQUIPMENT,
                    less accumulated depreciation of $2,190
                
                
                
                
                
                33,531OTHER
                    ASSETSProduction
                    costs
                
                
                
                
                
                93,431Logo,
                    less accumulated amortization of $630
                
                
                
                
                
                2,070Total
                    Other Assets
                
                
                
                
                
                95,501$
                134,184**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**CURRENT
                    LIABILITIESAccounts
                    payable
                
                
                
                
                $
                9,359Accounts
                    payable - related party
                
                
                
                
                
                23,642Other
                    liabilities
                
                
                
                
                
                1,630Income
                    taxes payable
                
                
                
                
                
                25,702Deferred
                    revenue
                
                
                
                
                
                6,659Total
                    Current Liabilities
                
                
                
                
                
                66,992COMMITMENTS
                    AND CONTINGENCIESSTOCKHOLDERS'
                    EQUITYCommon
                      stock, par value $.001, 75,000,000shares
                      authorized, 34,959,562 outstanding
                
                
                
                
                
                34,960Paid
                    in capital
                
                
                
                
                
                118,398Retained
                    earnings(deficit)
                
                
                
                
                
                (86,166
                )Total
                    Stockholders' Equity
                
                
                
                
                
                67,192$
                134,184
 SEE
          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
    F-2
   **FUEGO ENTERTAINMENT, INC****STATEMENTS
                    OF
                    OPERATIONS****For
                    The**
                
                **December
                    30, 2004****Year
                    Ended**
                
                **(Inception)
                    to****May
                    31,2006**
                
                **May
                    31,2005**REVENUESFilming
                
                $
                178,720
                
                $
                121,628Consulting
                
                
                23,572
                
                
                3,500Total
                    Revenues
                
                
                202,292
                
                
                125,128COSTS
                    AND EXPENSESCost
                    of revenue - Filming
                
                
                24,631
                
                
                17,000Selling,
                    general and administrative:Stock
                    Registration Costs
                
                
                63,382TV
                    Development
                
                
                39,474Other
                
                
                131,683
                
                
                51,494Impairment
                    of investment
                
                
                57,400Depreciation
                    and amortization
                
                
                2,409
                
                
                411Total
                    costs and expenses
                
                
                318,979
                
                
                68,905Income
                    (loss) before provision for income taxes
                
                
                (116,687
                )
                
                56,223Provision
                    for income taxes
                
                
                8,968
                
                
                16,734NET
                    INCOME (LOSS)
                
                $
                (125,655
                )
                $
                39,489EARNINGS
                    (LOSS) PER SHARE - BASIC
                
                
                *
                
                $
                0.01WEIGHTED
                      AVERAGE NUMBER OFCOMMON
                      SHARES OUTSTANDING - BASIC
                
                
                30,647,092
                
                
                2,734,534EARNINGS
                    (LOSS) PER SHARE - DILUTED
                
                
                
                
                
                *WEIGHTED
                      AVERAGE NUMBER OFCOMMON
                      SHARES OUTSTANDING - DILUTED
                
                
                
                
                
                34,813,910
  *
                    less than $.01 per share
 SEE
          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
   F-3
  **FUEGO
                      ENTERTAINMENT, INC.****STATEMENTS
                      OF STOCKHOLDERS' EQUITY****Subscriptions**
                  
                  **Retained****Common
                      Stock**
                  
                  **Paid-in**
                  
                  **Common**
                  
                  **Amount**
                  
                  **Earnings****Shares**
                  
                  **Amount**
                  
                  **Capital**
                  
                  **Stock**
                  
                  **Receivable**
                  
                  **(Deficit)**
                  
                  **Total****Balance,
                      at inception**
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Proceeds
                        from sale of common stock for
                    $.001
                      per share
                  
                  
                  7,772,670
                  
                  
                  7,773
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  7,773Proceeds
                        from sale of common stock for
                    $.006
                      per share
                  
                  
                  5,500,000
                  
                  
                  5,500
                  
                  
                  24,350
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  29,850Common
                      stock subscribed21,262,530
                      shares @ $.001 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  21,262
                  
                  
                  (21,262
                  )
                  
                  
                  
                  
                  -295,450
                      shares @ $.009 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,955
                  
                  
                  (2,955
                  )
                  
                  
                  
                  
                  -105,874
                      shares @ $.179 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  19,057
                  
                  
                  (19,057
                  )
                  
                  
                  
                  
                  -Contributed
                      services
                  
                  
                  
                  
                  
                  
                  
                  
                  21,708
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  21,708Net
                      income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  39,489
                  
                  
                  39,489**Balance,
                      May 31, 2005**
                  
                  
                  13,272,670
                  
                  
                  13,273
                  
                  
                  46,058
                  
                  
                  43,274
                  
                  
                  (43,274
                  )
                  
                  39,489
                  
                  
                  98,820Proceeds
                      received from subscribed shares
                  
                  
                  21,658,977
                  
                  
                  21,659
                  
                  
                  29,412
                  
                  
                  (51,072
                  )
                  
                  51,072
                  
                  
                  
                  
                  
                  51,071Proceeds
                        from sale of common stock for
                    $.18
                      per share
                  
                  
                  27,915
                  
                  
                  28
                  
                  
                  4,997
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  5,025Common
                        stock subscribed
                    53,111
                      shares @.179 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  9,561
                  
                  
                  (9,561
                  )Common
                      stock subscriptions canceled10,000
                      shares @ .001 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (10
                  )
                  
                  1040,500
                      shares @ .009 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (405
                  )
                  
                  4057,488
                      shares @ .179 per share
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (1,348
                  )
                  
                  1,348Contributed
                      services
                  
                  
                  
                  
                  
                  
                  
                  
                  37,931
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  37,931Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (125,655
                  )
                  
                  (125,655
                  )**Balance,
                      May 31, 2006**
                  
                  
                  34,959,562
                  
                  $
                  34,960
                  
                  $
                  118,398
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  (86,166
                  )
                  $
                  67,192
   **SEE
          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS**
   F-4
   **FUEGO
                    ENTERTAINMENT, INC.****STATEMENTS
                    OF CASH
                    FLOWS****From****For
                    The**
                
                **December
                    30, 2004****Year
                    Ended**
                
                **(Inception)
                    to****May
                    31,2006**
                
                **May
                    31,2005****OPERATING
                    ACTIVITIES**Net
                    income (loss) from operations
                
                $
                (125,655
                )
                $
                39,489Adjustments
                    to reconcile net income to net cash provided by operating
                    activitiesContributed
                    capital
                
                
                37,931
                
                
                21,708Impairment
                    loss on investment
                
                
                57,400
                
                
                -Depreciation
                    and amortization
                
                
                2,409
                
                
                411Changes
                    in operating assets and liabilitiesAccounts
                    receivable
                
                
                11,833
                
                
                (16,833
                )Deferred
                    tax asset
                
                
                3,375
                
                
                (3,375
                )Other
                    current asset
                
                
                1,552
                
                
                (1,552
                )Accounts
                    payable
                
                
                (8,849
                )
                
                18,208Accounts
                    payable - related party
                
                
                23,642
                
                
                -Income
                    taxes payable
                
                
                5,593
                
                
                20,109Other
                    current liabilities
                
                
                1,630
                
                
                -Deferred
                    revenue
                
                
                1,968
                
                
                4,691**NET
                    CASH PROVIDED BY OPERATING ACTIVITIES**
                
                
                12,829
                
                
                82,856**INVESTING
                    ACTIVITIES**Purchased
                    of equipment, software, & furniture
                
                
                (32,951
                )
                
                (2,770
                )Production
                    costs
                
                
                (42,999
                )
                
                (50,432
                )Investments
                
                
                -
                
                
                (57,400
                )Logo
                
                
                -
                
                
                (2,700
                )**NET
                    CASH (USED BY) INVESTING ACTIVITIES**
                
                
                (75,950
                )
                
                (113,302
                )**FINANCING
                    ACTIVITIES**Proceeds
                    from sale of common stock
                
                
                56,096
                
                
                37,623Advances
                    from related parties
                
                
                (302
                )
                
                302**NET
                    CASH PROVIDED BY FINANCING ACTIVITIES**
                
                
                55,794
                
                
                37,925**NET
                    INCREASE IN CASH**
                
                
                (7,327
                )
                
                7,479CASH,
                    BEGINNING OF PERIOD
                
                
                7,479
                
                
                -CASH,
                    END OF PERIOD
                
                $
                152
                
                $
                7,479
 SEE
          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
   F-5
   FUEGO
        ENTERTAINMENT, INC.
 NOTES
        TO FINANCIAL STATEMENTS
  **1.** **NATURE
          OF BUSINESS**
 Fuego
          Entertainment, Inc. (the “Company”) 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. The Company
          also
          provides management, marketing, and public relations services to the
          entertainment industry. During the year ended May 31, 2006 the majority
          of
          revenues earned were earned from companies located in Puerto Rico.
  **2.** **SIGNIFICANT
          ACCOUNTING POLICIES**
  ***GOING
          CONCERN***
 The
          Company’s 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. The Company’s ability to
          continue in existence is dependent on its ability to develop additional
          sources
          of capital, or achieve profitable operations. Management’s plan is to obtain
          additional capital, and to develop, market and distribute music CDs of
          musical
          tracks owned and controlled by Ciocan Entertainment & Music Group, LLC, an
          affiliated company, for a 25% royalty, to pursue the multi-media releases
          of a
          popular film he owns and produced in Cuba for a similar royalty, and to
          manage
          television stations in Puerto Rico and continental United States. The
          accompanying financial statements do not include any adjustments that might
          result from the outcome of this uncertainty.
 
 ***BASIS
          OF PRESENTATION***
 These
          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***
 Revenue
          from the sale of film and television programming rights and license arrangements
          is recognized only when persuasive evidence of a sale or arrangement with
          a
          customer exists, the project 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.
   F-6
   FUEGO
            ENTERTAINMENT, INC.
 NOTES
            TO
            FINANCIAL STATEMENTS
 **2.****SIGNIFICANT
          ACCOUNTING POLICIES-continued**




***REVENUE
      RECOGNITION-continued***


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
      over
      the collection of the fees.




Cash
      received in advance of meeting the revenue recognition criteria described above
      is recorded as deferred revenue.




***ALLOWANCE
      FOR DOUBTFUL ACCOUNTS***


The
      Company estimates the collectibility of its trade accounts receivable. In order
      to assess the collectibility 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, 2006, allowances totaled $11,833.





***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 in the period in which 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, 2006 and May 31, 2005 there were no cash
      equivalents.





***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 subscriptions. Outstanding
      stock subscriptions were not used in the computation of basic loss per share
      as
      their effect would be antidilutive.






F-7






FUEGO
        ENTERTAINMENT, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS


**2.****SIGNIFICANT
        ACCOUNTING POLICIES-continued**




***FILM
      AND TELEVISION COSTS***


The
      Company accounts for its 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.





***INVESTMENT***


The
      Company invested a total of $57,400 in a series of shows to be presented in
      5
      cities in the United States, from which it was to receive the return of its
      investment based on a percentage of ticket sales from all shows performed,
      and
      then participate in the net income of all of the shows after their completion.
      .





In
      September, 2005, the show scheduled to be presented on December 31, 2005, at
      the
      Miami Arena, was postponed by the tour promoter, due to 1), the decision by
      the
      Miami Arena to charge a substantial percentage for the sales of all promotional
      merchandise during the show, which was presented to the tour promoter in a
      meeting on September 20, 2005, and 2), the severity of the damage caused by
      hurricane Rita on September 22, 2005, and the prospect of additional hurricanes
      occurring in the area (hurricane Wilma occurred on October 9, 2005), which
      would
      have a the negative impact on the community, including the potential for
      reduction in the sale of the 15,000 seating capacity for the New Year's Eve
      performance of the scheduled show.





No
      shows
      have been rescheduled since the postponement in September 2005. Accordingly,
      the
      Company completely impaired its investment of $57,400 in September 2005. Any
      later recovery of the investment, if any, will be recorded as income at the
      time
      such amounts have been earned by the Company.






F-8






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




**2.****SIGNIFICANT
        ACCOUNTING POLICIES-continued**




***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 5 years.





***INTANGIBLE
      ASSETS***


The
      company has capitalized the cost of the creation of its logo. Amortization
      of
      logo costs is being amortized ratably over a 5-year useful life, commencing
      with
      April 1, 2005, the date on which the logo was acquired by purchase.





***DEFERRED
      INITIAL PUBLIC OFFERING COSTS***


Deferred
      initial public offering costs, principally legal and audit fees, have been
      charged against income in the year ended May 31, 2006, as Stock Registration
      Costs since there were no proceeds from the related registration of the
      Company’s common stock on Form SB-2 which became effective in June 2006.





***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. 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 expenses, and
      other liabilities approximate their fair values principally because of the
      short-term maturities of these instruments.





***NEW
      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.






F-9






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS


**2.****SIGNIFICANT
        ACCOUNTING POLICIES-continued**




*NEW
      ACCOUNTING
      PRONOUNCEMENTS*


For
      stock
      based compensation to non-employees, the Company is required to follow 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 granted.





***CHANGES
      IF FINANCIAL PRESENTATION***


In
      preparing the accompanying financial statements, certain comparative amounts
      for
      the prior year have been changed to conform to the current year’s
      presentation.





**3.SI** **GNIFICANT
      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. One customer for
      which
      a corporate video was produced accounted for 60% of total operating revenues
      from inception to May 31, 2005. For the year ended May 31, 2006 three different
      corporate video customers accounted for 53%, 24%, and 11% of total operating
      revenues.




**4.** **CAPITALIZED
      PRODUCTION COSTS**




Capitalized
      production costs represent development costs incurred on projects in process.
      A
      summary of these costs as of May 31, 2006, and May 31, 2005
      follows:




**May
                31, 2006**
            
            **May
                31, 2005*****The
                Trader Show*****is
                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.
            
            $
            32,666
            
            $
            27,842***Gold
                in Ecuador***isthestory
                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 SouthAmerica. 
                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.
            
            
            15,441
            
            
            15,148***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.
            
            
            16,110
            
            
            6,800***Counterfeit
                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.
            
            
            29,214
            
            
            642Total
                capitalized production costs
            
            $
            93,431
            
            $
            50,432






F-10




FUEGO
        ENTERTAINMENT, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS





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
      $4,691 as of May 31, 2005 and $6,659 as of May 31, 2006. Advance sales have
      been
      classified as deferred revenue in the accompanying balance sheets. 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 is estimated to commence within the next fiscal year,
      based upon their anticipated 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, expected
      by
      the end of calendar 2007. The Trader Show costs represent the only costs in
      production to be considered a direct-to-television product.





**5.** **COMMITMENTS:**




***OPERATING
      LEASE***


The
      Company leases office facilities and office equipment from a related party
      for
      $750 a month, on a month to month basis, including utilities and insurance.
      Total rent expense from inception to May 31, 2005 was $3,500 and for the year
      ended May 31, 2006 it was $8,550.





***DELINQUENT
      INCOME TAXES***


Neither
      the federal or state income tax liabilities, as revised, of $15,985 for the
      year
      ended May 31, 2005, have been paid as of May 31, 2006, nor have any required
      estimated tax payments been paid during the year ended May 31, 2006.
      Accordingly, interest and penalties of $1,630 have been provided as of May
      31,
      2006.





**6.** **RELATED
      PARTY TRANSACTIONS**




·
            
            Ciocan
                Entertainment and Music Group, LLC,
                “Ciocan” is an entertainment company owned by the principal shareholder of
                the Company. Ciocan creates products for the Latino Market in and out
                of the United States borders and anticipates using the Company to
                market,
                promote and commercialize some its products (music, films, documentaries,
                artist, etc) for the Anglo and international markets. During the five
                month period ended May 31, 2005, Ciocan advanced to the Company a
                total of
                $31,552 of which, $29,850 was applied towards the purchase, by Ciocan,
                of
                5.5 million shares of the Company’s common stock, and $1,400 was charged
                as rent, leaving a balance advanced of $302 as of May 31, 2005 and
                $0 as
                of May 31, 2006.·
            
            Hugo
                Cancio, President and a majority shareholder of the company, has
                advanced
                $79,745 as of May 31, 2006, all of which was applied against the
                Company’s
                development expenses totaling $39, 474 as of May 31, 2006, which
                was
                incurred in connection with a future potential interest in a Puerto
                Rico
                Television station.·
            
            The
                accounting firm contracted for accounting, tax and financial statement
                preparation services has two employees who had purchased 23,000 shares
                of
                common stock of the Company in August 2005 at $.18 per share. Subsequent
                to May 31, 2006, 40,000 shares of restricted common stock were issued
                in
                exchange for accounting services valued at $.18 per share. Fees incurred
                during the fiscal year ended May 31, 2006 for this accounting firm
                totaled
                $33,842, of which $23,642 remained unpaid as of that date and appears
                as
                accounts payable-related party in the accompanying balance sheet
                at May
                31, 2006.






F-12






FUEGO
        ENTERTAINMENT, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS




6.RELATED
      PARTY TRANSACTIONS-continued




·
            
            Fuego
                Entertainment, Inc. and its President/CEO
                incurred certain costs and expenses during the latter part of fiscal
                year
                ended May 31, 2006, to facilitate the management of a Puerto Rico
                TV
                station incorporated in March 2006. Included in these costs and
                expenses were the creation of several TV pilots and sales
                presentation DVDs, which were presented to all of the local advertising
                agencies in Puerto Rico. Additionally, funds were provided for equipment
                and the services of a sales team and manager.The
                Company initially announced on August 25,
                2006, that it was going to launch a full power television station
                called City TV, Inc. on the island of Puerto Rico under an exclusive
                agreement with Chum International, but later postponed its commencement
                because of the potential acquisition of 18 additional television
                stations
                owned by another company . Delaying the launch of the
                Puerto Rico station allows the Company to restructure its format for
                a Spanish language network. With the proposed acquisition of the
                additional 14 TV stations, the Company intends to create its own
                brand
                name and launch its own network.The
                Company's President/CEO has personally contributed approximately
                $500,000
                (unaudited) towards the development of this TV station including
                the
                aforementioned reimbursement of $79,745 to the Company. The Company
                capitalized certain items attributed to the TV station such as cellular,
                video equipment, and furniture having a book value at May 31, 2006
                of
                $26,115 in addition to TV development expenses mentioned
                above.




**7.** **INCOME
      TAXES**




The
      Company uses the liability method of accounting for income taxes pursuant to
      Statement of Financial Accounting Standards Board Opinion No. 109. Under this
      method, deferred income taxes are recorded to reflect the tax consequences
      in
      future periods of temporary differences between the tax basis of assets and
      liabilities and their financial amounts at year-end.




The
      provision for current income taxes is as follows:





**For**
              **the
                year ended**
              **May
                31, 2006**
            
            **From**
              **December
                30,**
              **2004
                (Inception)**
              **to
                May 31,**
              **2005**Current
                tax expense:Federal
                tax at statutory rates
            
            $
            (39,674
            )
            $
            19,116State
                income taxes less federal tax benefit
            
            
            0
            
            
            2,645Benefit
                of surtax exemptions
            
            
            2,792
            
            
            (11,382
            )Valuation
                allowance
            
            
            11,172Permanent
                differences
            
            
            34,678
            
            
            6,355Income
                tax expense
            
            $
            8,968
            
            $
            16,734






F-13






FUEGO
        ENTERTAINMENT, INC.
 NOTES
        TO
        FINANCIAL STATEMENTS


**7.** **INCOME
        TAXES-continued**




The
      analysis of income tax expense is as follows:





**For**
              **the
                year ended**
              **May
                31, 2006**
            
            **From**
              **December
                30,**
              **2004
                (Inception)**
              **to
                May 31,**
              **2005**Current
            
            $
            8,968
            
            $
            20,109Deferred
            
            
            -
                0-
            
            
            (3,375
            )Income
                tax expense
            
            $
            8,968
            
            $
            16,734





A
      deferred tax asset was recognized of $3,375 for the approximate $10,400 of
      temporary timing differences during the period from inception to May 31, 2005,
      based on the cash basis of filing its income tax returns. Subsequently, the
      Company decided to file its tax returns on the accrual basis. Accordingly,
      an
      adjustment was made in the current year to eliminate the deferred tax asset
      and
      reduce the current income tax liability as of May 31, 2005.





A
      deferred tax asset was recognized of $11,172 for the approximate $69,463 of
      temporary timing differences during the year ended May 31, 2006. The major
      difference resulted from the impairment of the investment in Havana Nights
      of
      $57,400. A valuation allowance for $11,172 was recorded as of May 31, 2006,
      as
      the Company believes it is more likely than not that this future tax benefit
      will not be realized.





The
      following is an analysis of the change in the deferred tax asset during the
      year
      ended May 31, 2006:




May
                31, 2006Deferred
              tax asset, beginning of year
            
            $
            3,375Correction
                during the year based onchange
                in filing income
              tax
                returnsfrom
                cash to accrual basis
            
            
            (3,375
            )Increase
              due to temporary timing differencesduring
              the year:Allowance
                for doubtful accounts
            
            
            1,775Investment
                in Havana Nights
            
            
            7,861Depreciation
            
            
            (870
            )State
                income taxes
            
            
            2,406Valuation
                allowance
            
            
            (11,172
            )Deferred tax asset, end of year
            
            
            -0-




**8.** **CONTRIBUTED
      CAPITAL**





The
      President of the Company contributed the value of his services from inception
      to
      May 31, 2005, of $15,000, and the value of other expenses totaling $6,708,
      which
      consisted of office rent of $2,100, the prorata share of auto expenses of
      $3,958, and legal services of $650, for a grand total of $21,708. For the year
      ended May 31, 2006, the president of the Company paid a $2,000 expense on behalf
      of the company, contributed the value of his services of $31,889, and the
      prorata share of auto expenses of $4,042 for a grand total of
      $37,931.






F-14






FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS


**9.** **U.S.
      CANADIAN MINERALS CONTRACT DEFAULT**





After
      paying 4of the 6 required contract payments of $3,500 each for consulting
      services, U S Canadian Minerals, Inc. defaulted on their last payment, and
      no
      further work was performed by the Company as a result. The parties are
      continuing to discuss the resolution of this matter.




**10.** **SUBSEQUENT
      EVENTS**




***REPRODUCTION
      AND
      DISTRIBUTION AGREEMENTS***


As
      of
      August 2006, the Company is expected to develop music CDs of musical tracks
      owned and controlled by Ciocan Entertainment & Music Group, LLC, an
      affiliated company, in exchange for the rights for temporary reproduction and
      distribution of these tracks. The Company will pay royalties of 25% to Ciocan
      Entertainment & Music Group, LLC per a verbal 10-year agreement between
      these related parties.





A
      similar
      arrangement was made between the Company’s President/CEO wherein he is to
      receive royalties of 25% for the multi-media releases of a popular film he
      owns
      and produced in Cuba called Zafiros Locura Azul ( Sapphire Blue Madness) .





***EQUITY
      INTEREST IN TELEVISION STATIONS***


The
      Company is pursuing the potential management of 15 television broadcasting
      stations, related licenses and governmental approvals, related intellectual
      property and operating assets, and other assets to be determined and outlined
      in
      a formal definitive agreement from L4 Media Group, LLC.





***ISSUANCE
      OF RESTRICTED COMMON STOCK***


On
      July
      2, 2006, the Company authorized the issuance of 560,879 shares of restricted
      common stock at $.18 per share to various persons for cash and/or services
      they
      performed subsequent to May 31, 2006, principally in connection with their
      efforts to enable the Company to obtain additional capital to sustain its
      business. Included in these shares were 40,000 shares issued to the accounting
      firm in part payment for their accounting, tax and financial statement
      preparation services, 25,000 shares issued to a Board member and the sale of
      102,778 shares for cash.






F-15