UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





Form
        10-KSB/A


Second
        Amendment




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




For
      the
      fiscal year ended May 31, 2006




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




For
      the
      transition period from ________________ to ________________




Commission
        File No.: **000-52054**




**FUEGO
      ENTERTAINMENT, INC.**


(Name
      of
      small business issuer in its charter)









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





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 August 1, 2006, we had 10,459,562 shares of our common
        stock
        held by non-affiliates. The aggregate market value of our common stock held
        by
        non-affiliates was approximately $5,229,781.





Explanatory
        Note





Item
        8A
        pertaining to the disclosures for management’s evaluation of disclosure controls
        and procedures and internal controls over financial reporting required by
        items
        307 and 308 have been revised and the certifications of the Principal Executive
        Officer and Principal Financial Officer conformed to Item 601(b)(31). We
        have
        further reclassified production costs from an investing activity to an operating
        activity. The impact of reclassifying production costs from an investing
        activity to an operating activity was material to cash flows for all periods
        presented, and comments about that change were addressed in liquidity and
        capital resources section of this amended 10KSB. A new restatement footnote
        was
        added to explain that restatement within Note 1 of the Notes to financial
        statements and as per item 9 herein.






1





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.







2




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.


3


ITEM
      1.   DESCRIPTION OF BUSINESS -
      continued




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.


4


ITEM
      1.   DESCRIPTION OF BUSINESS - continued




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.








5


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


6




ITEM
      5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -
      continued




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. Meals capitalized were for the crew who are
      not
      employees of the Company. They are hired to perform filming services and the
      Company paid their meals while on location. Absolutely no general and
      administrative costs were capitalized. 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) . **** The
      President and CEO of the Company owns 100% of the rights to the Film Zafiros
      Locural Azul. The film has never been distributed or commercialized. Fuego
      Entertainment acquired from the Company’s President the right to market,
      promote, and distribute the film in all formats: Theatrical release, Television,
      cable, DVD. This is part of a 10 year licensing agreement in which Fuego
      Entertainment will keep 75% of the net revenues generated. There was no payment
      of any kind involved in the transaction **.**


7




ITEM
      6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
      continued




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.





All
      projects are in final post production stages: The reason why these projects
      have
      been postponed are as follows. The company is seeking distribution for each
      individual project while exploring other possibilities such as going straight
      to
      DVD sales, instead of seeking theatrical distribution. In addition, there are
      other reasons outlined below for the delay that apply to each individual
      project:





a)
      Gold
      In Ecuador is almost complete. The company is currently trying to seek
      distribution for this project prior to incurring anymore postproduction cost.
      This project will be released upon obtaining distribution.





b)
      One
      Million Millionaires: This documentary is in final postproduction stage and
      has
      not been finished because the company is waiting for the outcome of an ongoing
      investigation of the individual whose life this documentary life is based on.
      There have also been several legal complaints filed against this person. Mr.
      Cancio has elected to wait and see the outcome of this pending legal matter
      in
      order to include it in the film project. In essence, the company is waiting
      for
      an ending to this story. Because of the above mentioned, there is no targeted
      distribution date for this project.





c)
      Counterfeit Conspiracy: This documentary is still in postproduction (editing).
      The company continues to add received material and information that it is
      considering including in the film. The company expects this film to be complete
      in the summer of 2007.





Neither
      the Puerto Rican Television project nor any other project the company is
      currently working on will affect the film projects.





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.





8




ITEM
      6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
      continued




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
      Company, 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.






9




ITEM
      6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
      continued




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 .




All
      projects that generated revenues were work for hire projects such as corporate
      and music videos, consulting fees, etc. The company, from inception, has engaged
      in such projects and will continue to seek projects of this nature. The company
      engaged in three to four projects per period. All projects were completed and
      did not continue into the future.





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 $36,000 of compensation and expense for such efforts was
        contributed for the year by him and 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 expenses 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. Fuego Entertainment has
      not made any direct investment for the TV Station in Puerto Rico. “The
“substantial funds” provided thus far by Fuego are directly related to the
      Television project and not the TV station itself, such as, development of TV
      programming, producing TV pilots for several shows Fuego intents to produce,
      a
      sales presentation DVD that showcases the extend of Fuego’ programming. Fuego
      also hired a team of sales representative with the sole intention of presenting
      our DVD to the many different advertising agencies in the Island of Puerto
      Rico.
      The intention was to get solid commitments from the Advertising agencies and
      their respective clients to sponsor the shows prior to management making the
      final decision of going into full production. . All of the above was done in
      anticipation of Fuego intention’s to manage and operate the Station in Puerto
      Rico that is leased by the company President. Management anticipates incurring
      further substantial amounts to manage and operate the stations and to continue
      the development of fresh content (programming), which would have an impact
      on
      the liquidity and resources of the company. Management is currently seeking
      funding for this project and expects to have funding in place by end of year.
      Managements believes that with the above mentioned already in place, the TV
      project in Puerto Rico will bring substantial management revenues to the company
      due to tremendous potential of advertising sales. It is management’s belief that
      the end result will amount to a positive impact on the liquidity and resources
      of the Company.





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.




10




ITEM
      6.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION -
      continued




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. - Financial statements following Signature
      page on page F-1




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 and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure.





As
        of the
        end of the period covered by this report, we carried out an evaluation of
        the
        effectiveness of the design and operation of our disclosure controls and
        procedures pursuant to Exchange Act Rule 13a-14. This evaluation was done
        under
        the supervision and with the participation of our Principal Executive Officer
        and Principal Financial Officer. Based upon that evaluation,they concluded
        that
        our disclosure controls and procedures were ineffective in gathering, analyzing
        and disclosing information needed to satisfy our disclosure obligations under
        the Exchange Act, however, there were a number of areas where improvement
        was
        noted by the Company’s auditors, which management is in the process of
        correcting. Documentation supporting cash transactions including payments
        for crew compensation was non existent. The Company should have obtained
        from
        each crew member the amount paid and their signature as well as information
        necessary to generate the appropriate government forms 1099 and
        1096.





We
        also
        note the incorrect characterization of production costs in our statement
        of cash
        flows that resulted in a material change to cash flows from operating and
        investing activities.





11




ITEM
      8A.
      CONTROLS AND PROCEDURES - continued




In
      connection with the development of a leased TV channel in Puerto Rico, the
      Company shared in paying for certain expenses including travel, lodging and
      meals for its President, in connection with the pursuit of available TV
      programming in that area. There was inadequate documentation to support the
      allocation of such expenses between the Company and the TV station owned by
      the
      Company’s president. In addition there were no signed agreements between the
      Company and the personnel retained to perform services in connection with
      obtaining TV programming which should disclose as a minimum, the nature of
      the
      services to be rendered, the amount of periodic compensation being paid and
      the
      term of the services.




The
      lack
      of support concerning the above matters was considered to be a material
      weaknesses in internal control, which weakness commenced during the entire
      period from inception of the Company as to the first matter and the last quarter
      of the fiscal year ended May 31, 2006, as to the second matter.





The
      President of the Company has since required documentation for all disbursements,
      has recorded in a journal the information necessary to allocate amounts among
      entities, and will obtain written agreements for all services to be provided
      to
      the Company.











Changes
      in Internal Controls





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









12






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.




13







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 Filing10.1
              Zafiros
                  Locura Azul Agreement31.1
              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.






14





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





We
      paid
      Braverman International P.C. a total of $59,702 for audits and interim filings
      including SB-2 registration reviews since inception. The SB-2 was $15,628,
      the
      interim filings were $7,789 and the rest were for two audits of
      $36,285.







Audit-Related
      Fees





Audit
      related fees billed by Braverman International, P.C. was $17,500 for the year
      ended May 31, 2006.





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:
                  April 18, 2007
              By:
              /s/
                  Hugo M. CancioHugo
                  M. Cancio , Principal Executive officerDate:
                  April 18, 2007
              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:
                April 18, 2007
            By:
            /s/
                Hugo M. CancioHugo
                M. Cancio, Director








15




**FUEGO
      ENTERTAINMENT, INC.**





**FINANCIAL
      STATEMENTS**





**MAY
      31, 2006**








**TABLE
      OF CONTENTS**


**PAGE**REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-2BALANCE
                SHEET
            F-3STATEMENTS
                OF OPERATIONS
            F-4STATEMENTS
                OF STOCKHOLDERS’ EQUITY
            F-5STATEMENTS
                OF CASH FLOWS
            F-6NOTES
                TO FINANCIAL STATEMENTS
            F-7 
                to F-14








F-1




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.
 
 
 /s/
        Braverman International, P.C.
 Braverman
        International, P.C.
 Prescott,
        Arizona
 August
          26, 2006, except for Note 1, in which the
 restatement
          of cash flows is disclosed, and
 as
        to
        which the date is April 18, 2007






F-2


**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 shares issued and outstanding
              
              
              34,960Paid
                  in capital
              
              
              118,398Retained
                  earnings(deficit)
              
              
              (86,166
              )Total
                  Stockholders' Equity
              
              
              67,192$
              134,184SEE
                  ACCOMPANYING NOTES TO FINANCIAL
                  STATEMENTS




F-3




**FUEGO
                  ENTERTAINMENT, INC****STATEMENTS
                  OF OPERATIONS****From****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 shareSEE
                  ACCOMPANYING NOTES TO FINANCIAL
                  STATEMENTS






F-4


**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-5


**FUEGO
                    ENTERTAINMENT, INC.****STATEMENTS
                    OF CASH FLOWS****From****For
                    The**
                
                
                **December
                    30, 2004****Year
                    Ended**
                
                
                **(Inception)
                    to****May
                    31,2006**
                
                
                **May
                    31,2005**(Restated)
                
                
                (Restated)**OPERATING
                    ACTIVITIES**Net
                    income (loss) from operations
                
                $
                (125,655
                )
                $
                39,489Adjustments
                    to reconcile net income to net cash provided byoperating
                    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
                
                
                4,691Production
                    costs
                
                
                (42,999
                )
                
                (50,432
                )**NET
                    CASH PROVIDED BY OPERATING ACTIVITIES**
                
                
                (30,170
                )
                
                32,424**INVESTING
                    ACTIVITIES**Purchased
                    of equipment, software, & furniture
                
                
                (32,951
                )
                
                (2,770
                )Investments
                
                
                -
                
                
                (57,400
                )Logo
                
                
                -
                
                
                (2,700
                )**NET
                    CASH (USED BY) INVESTING ACTIVITIES**
                
                
                (32,951
                )
                
                (62,870
                )**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
                
                $
                7,479SEE
                    ACCOMPANYING NOTES TO FINANCIAL
                    STATEMENTS


F-6
 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.




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.





F-7
 
 FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS







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


***ADVERTISING
      EXPENSES***


Advertising
      costs are expensed as incurred, except for costs related to the development
      of a
      property and/or live-action television program commercial or media campaign
      which are expensed 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.





***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.





***RESTATEMENT
      OF CASH FLOWS-PRODUCTION COSTS***


The
      accompanying statement of cash flows includes a restatement in classification
      of
      production costs from investing to operating activities as required by the
      above
      referenced SOP 00-2. Accordingly for the years ended May 31, 2006 and 2005
      production costs of $42,999 and $50,432 have been so reclassified. This change
      had no effect on results of operations or earnings (loss) per share for those
      years.





F-8
 
 FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS





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


***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.





***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**


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.**
            **SIGNIFICANT
                CUSTOMERS AND CONCENTRATION OF CREDIT
                RISK**




Financial
      instruments, which potentially subject the Company to concentration of credit
      risk, consist primarily of temporary cash investments and accounts receivable.
      The majority of the cash and cash equivalents are maintained with major
      financial institutions in the United States of America. Credit risk on accounts
      receivable is minimized by the Company by performing ongoing credit evaluations
      of its customers’ financial condition and monitoring its exposure for credit
      losses and maintaining allowances for anticipated losses. 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.





F-10





**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 South
                America. 
                  Fifty years ago the American company SADCO, abandoned the American
                  shaft, one of the oldest gold mines in the world, leaving the town
                  of Portobello and its people in ruins.  Today, the
                  people of Portobello have a new hope, or do they? The Americans
                  are back in Portobello searching for Gold.
              
              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
 
 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.







F-11
 
 FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS


**6.**
              **RELATED
                  PARTY TRANSACTIONS -
                  continued**







·
            The
                Company paid $119,219 towards the development of contracted services
                in
                Puerto Rico in connection with its planned management of programming
                for a
                TV channel to be located there. Of that amount $79,745 was reimbursed
                by
                the president of the Company, leaving $39,474 as the Company’s portion
                which was considered to be a development expense to enable the Company
                to
                determine whether there was sufficient interest by local Puerto Rican
                businesses to provide programming content to obtain revenues from
                major
                advertisers. The Company’s shared payments for some of the development
                expenses was provided for the purpose of eventually managing the
                programming for the TV channel and did not result in any equity investment
                or beneficial interest in the corporation formed by the president
                of the
                Company to lease the TV channel in Puerto
                Rico.




·
            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.




The
      relevance of the President’s investment in the radio station in Puerto Rico is
      that the management of the station by the Company is dependent on the
      President’s acquisition of the leased TV channel in Puerto Rico.





·
            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 because of the accounting firm’s ownership of the Company’s
                common stock at that date.






**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.












F-12
 
 FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS




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





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 basisIncrease
              due to temporary timing differences during the year:
            
            
            (3,375
            )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


F-13
 
 FUEGO
          ENTERTAINMENT, INC.
 NOTES
          TO
          FINANCIAL STATEMENTS







**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.





**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 based on net
        sales
        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% based on net sales 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 18 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-14