FUEGO
        ENTERTAINMENT, INC.
 UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 Form
          10-KSB/A
 First
          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.: **0001336277**
  **FUEGO
              ENTERTAINMENT, INC.**
 (Name
          of
          small business issuer in its charter)
   Nevada
              20-2078925(State
                  or other jurisdiction ofincorporation
                  or organization)
              (I.R.S.
                  Employer Identification No.)
 
 19250
                  NW 89th Court
                Miami,
                  FL 33018
                (Address,
                  including zip code, of principal executive
                  offices)
   Issuer’s
        telephone number: (305) 829-3777
 
 
 Securities
          registered under Section 12(b) of the Exchange Act: None
  Securities
          registered under Section 12(g) of the Exchange Act:
  Common
          Stock, Par Value $.001 Per Share
 (Title
          of
          class)
 
 Check
          whether the issuer (1) filed all reports required to be filed by Section
          13 or
          15(d) of the Exchange Act during the past 12 months (or for such shorter
          period
          that the registrant was required to file such reports), and (2) has been
          subject
          to such filing requirements for the past 90 days.    
[X]Yes     [   ]No
 
 Check
          if
          there is no disclosure of delinquent filers in response to Item 405 of
          Regulation S-B contained in this form, and no disclosure will be contained,
          to
          the best of registrant’s knowledge, in definitive proxy or information
          statements incorporated by reference in Part III of this Form 10-KSB or
          any
          amendment to this Form 10-KSB.     [X]
 
 State
          issuer’s revenues for its most recent fiscal year.    
$202,292.00
 
 As
          of May
          31, 2006, we had 34,959,562 shares of our $0.001 par value common stock
          issued
          and outstanding. On May 31, 2006, the aggregate market value of our common
          stock
          held by non-affiliates was approximately $10,459,562.
 
 DOCUMENTS
          INCORPORATED BY REFERENCE
 SB-2
          Registration Statement, as amended, originally filed on August 17,
          2005.
 
 Transitional
          Small Business Disclosure Form (Check one):    
[   ]Yes     [X]No
 
 To
          simplify the language in this Form 10-KSB, Fuego Entertainment, Inc., a
          Nevada
          corporation, is referred to herein as the "Company" or "We."
 
 PART
          I
 
 This
          report on Form 10-KSB and documents incorporated herein by reference contain
          certain “forward-looking statements” as defined by the Private Securities
          Litigation Reform Act of 1995 which involve substantial risks and uncertainties.
          When used in this report and in other reports filed by the Company, the
          forward-looking statements are often identified by the use of such terms
          and
          phrases as “anticipates,” “believes,” “intends,” “plans,” “expects,” “seeks,”
“scheduled,” “foreseeable future’ and similar expressions. Although the Company
          believes the understandings and assumptions on which the forward-looking
          statements in this report are based are reasonable, the Company’s actual
          results, performance and achievements could differ materially from the
          results
          in, or implied by, these forward-looking statements. Certain factors that
          could
          cause or contribute to such differences include those discussed in “Management’s
          Plan of Operations” and elsewhere herein.
    1
 
  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.
    2
 
  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.
  
  3
   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.
    4
 
  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
  
  5
   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 **.**
 
    6
   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.
 
 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.
 
   7
   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.
  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 compensation and expense for such efforts was categorized
            in
            other selling, general and administrative expense categories and therefore
            not included as a cost of filming revenues in accordance with generally
            accepted
            accounting principles. No employee compensation was ever included in
            the cost of
            filming projects since inception.
 
 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.
 
   8
   LIQUIDITY
          AND CAPITAL RESOURCES
 
 Although
          the Company’s registration statement with the Securities and Exchange Commission
          recently became effective, there were no proceeds from the offering to
          benefit
          the Company. The Company has a deficit in working capital at year end,
          is
          delinquent in the filing of its income tax returns, and is past due on
          the
          majority of its accounts payable. It has no line of credit or other outside
          financing sources presently to enable it to finance exist operations, and
          is
          dependent on its shareholders for current cash flows. Accordingly, it is
          presently seeking financing to continue in existence. The Company is dependent
          solely on its President/CEO for all revenue generating opportunities, and
          his
          time has been and will be for the near term almost exclusively devoted
          to the
          development of a 15 station television network which he believes will be
          beneficial for the Company as his intention is to have the Company manage
          the
          network for compensation.
 
 Material
          Commitments
 
 We
          have
          no material commitments as at the date of this registration
          statement.
 
 Purchase
          of Significant Equipment
 
 We
          do not
          intend to purchase any significant equipment during the next twelve (12)
          months.
 
 Recent
          Accounting Pronouncements
 
 In
          December 2004, the FASB issued SFAS 123R, Share Based Payments. SFAS 123R
          is
          applicable to transactions in which an entity exchanges its equity instruments
          for goods and services. It focuses primarily on transactions in which an
          entity
          obtains employee services in share-based payment transactions. SFAS No.
          123R
          supersedes the intrinsic value method prescribed by APB No. 25, requiring
          that
          the fair value of such equity instruments be recorded as an expense as
          services
          are performed. Prior to SFAS 123R, only certain pro forma disclosures of
          accounting for these transactions at fair value were required. SFAS 123R
          will be
          effective for the first quarter 2006 financial statements, and permits
          varying
          transition methods including retroactive adjustment of prior periods or
          prospective application beginning in 2006. The Company adopted SFAS 123R
          using
          the modified prospective method effective January 1, 2006. Under this transition
          method the Company will begin recording stock option expense prospectively,
          beginning with that date.
  ITEM
          7.   FINANCIAL STATEMENTS.
  ITEM
          8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.
 
 None.
 
 ITEM
          8A.
          CONTROLS AND PROCEDURES
 
 Evaluation
          of Disclosure Controls and Procedures
 
 Disclosure
            controls and procedures are designed to ensure that information required
            to be
            disclosed in the reports filed or submitted under the Exchange Act of
            1934 is
            recorded, processed, summarized and reported, within the time periods
            specified
            in the rules and forms of the Securities and Exchange Commission. Disclosure
            controls and procedures include, without limitation, controls and procedures
            designed to ensure that information required to be disclosed in the reports
            filed under the Securities Exchange Act of 1934 is accumulated and communicated
            to management, including our Chief Executive Officer and Chief Financial
            Officer, as appropriate, to allow timely decisions regarding required
            disclosure.
 
 Within
            the 90 days prior to the filing date of this report, we carried out an
            evaluation of the effectiveness of the design and operation of our disclosure
            controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation
            was done under the supervision and with the participation of our Principal
            Executive Officer. Based upon that evaluation, he concluded that our
            disclosure
            controls and procedures are effective in gathering, analyzing and disclosing
            information needed to satisfy our disclosure obligations under the Exchange
            Act,
            however, there were a number of areas where improvement was noted by
            the
            Company’s auditors, which management is in the process of
            correcting.  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.
 
 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.
 
 Thus,
            given the identified matters, and the steps undertaken by management
            to correct
            these matters, it is management’s determination that our disclosure controls and
            procedures are now effective.
 
 Changes
          in Internal Controls
 
 There
          were no significant changes in our internal controls or in other factors
          that
          could significantly affect those controls since the most recent evaluation
          of
          such controls.
 
   9
   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.
    10
 
  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 Filing31.1
                Certificate
                    of Principal Executive Officer as Required by Rule
                    13a-14(a)/15d-1431.2
                Certificate
                    of Principal Accounting Officer as Required by Rule
                    13a-14(a)/15d-1432.1
                Certificate
                    of Principal Executive Officer as Required by Rule 13a-14(b)
                    and Rule 15d-
                    14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of
                    Title 18 of
                    the United States Code32.1
                Certificate
                    of Principal Accounting Officer as Required by Rule 13a-14(b)
                    and Rule
                    15d-14(b) (17 CFR 240.15d-14(b) and Section 1350 of Chapter 63
                    of Title 18
                    of the United States Code
  (b) Reports
          on Form 8-K
  None.
 
 ITEM
          14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Our
          Board
          of Directors reviews and approves audit and permissible non-audit services
          performed by its independent accountants, as well as the fees charged for
          such
          services. In our review of non-audit service fees and its appointment of
          Braverman International, P.C., as our independent accountants, our Board
          of
          Directors considered whether the provision of such services is compatible
          with
          maintaining independence. All of the services provided and fees charged
          by
          Braverman International, P.C., in fiscal year ended May 31, 2006, were
          approved
          by our board of directors.
 
 Audit
          Fees
 
 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.
 11
 
  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:
                    December 6, 2006
                By:
                /s/
                    Hugo M. CancioHugo
                    M. Cancio , Principal Executive officerDate:
                    December 6, 2006
                By:
                /s/
                    Hugo M. CancioHugo
                    M. Cancio, Principal Accounting Officer
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this Report has
        been
        signed by the following persons on behalf of the Registrant and in the
        capacities and on the dates indicated.
 Date:
                    December 6, 2006
                By:
                /s/
                    Hugo M. CancioHugo
                    M. Cancio, Director


12






**FUEGO
      ENTERTAINMENT, INC.**





**FINANCIAL
      STATEMENTS**





**MAY
      31, 2006**








13






**TABLE
      OF CONTENTS**


**PAGE**REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            F-1BALANCE
                SHEET
            F-2STATEMENTS
                OF OPERATIONS
            F-3STATEMENTS
                OF STOCKHOLDERS’ EQUITY
            F-4STATEMENTS
                OF CASH FLOWS
            F-5NOTES
                TO FINANCIAL STATEMENTS
            F-6








14






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.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company has determined that
      it
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audit included consideration
      of
      internal control over financial reporting as a basis for designing audit
      procedures that are appropriate in the circumstances, but not for the purpose
      of
      expressing an opinion on the effectiveness of the Company’s internal control
      over financial reporting. Accordingly, we express no such opinion. An audit
      also includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation.  We believe that our audit
      provides a reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of FUEGO ENTERTAINMENT, INC. as
      of May 31, 2006, and the results of its operations and its cash flows for the
      year then ended and for the period from December 30, 2004 (inception) to May
      31,
      2005, in conformity with accounting principles generally accepted in the United
      States of America.




The
      accompanying financial statements have been prepared assuming the Company will
      continue as a going concern. As discussed in Note 2 of the Notes to financial
      statements, the Company, has incurred a significant loss during the current
      year, and has a significant deficit in working capital. Its ability to continue
      as a going concern is dependent upon its ability to develop additional sources
      of capital, and/or achieve profitable operations. These conditions raise
      substantial doubt about its ability to continue as a going concern. The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.




Braverman
      International, P.C.


Prescott,
      Arizona


August
      26, 2006






F-1




15







**FUEGO
                  ENTERTAINMENT, INC.****BALANCE
                  SHEET****May
                  31, 2006****ASSETS**CURRENT
                  ASSETSCash
              
              
              
              
              $
              152Account
                  receivable-trade, less allowance of $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, 75,000,000 shares authorized, 34,959,562 
                  issued and outstanding
              
              
              
              
              
              34,960Paid
                  in capital
              
              
              
              
              
              118,398Retained
                  earnings(deficit)
              
              
              
              
              
              (86,166
              )Total
                  Stockholders' Equity
              
              
              
              
              
              67,192$
              134,184


SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS








F-2




16






**FUEGO ENTERTAINMENT, INC****STATEMENTS
                OF OPERATIONS****For
                The**
            
            **December
                30, 2004****Year
                Ended**
            
            **(Inception)
                to****May
                31,2006**
            
            **May
                31,2005**REVENUESFilming
            
            $
            178,720
            
            $
            121,628Consulting
            
            
            23,572
            
            
            3,500Total
                Revenues
            
            
            202,292
            
            
            125,128COSTS
                AND EXPENSESCost
                of revenue - Filming
            
            
            24,631
            
            
            17,000Selling,
                general and administrative:Stock
                Registration Costs
            
            
            63,382TV
                Development
            
            
            39,474Other
            
            
            131,683
            
            
            51,494Impairment
                of investment
            
            
            57,400Depreciation
                and amortization
            
            
            2,409
            
            
            411Total
                costs and expenses
            
            
            318,979
            
            
            68,905Income
                (loss) before provision for income taxes
            
            
            (116,687
            )
            
            56,223Provision
                for income taxes
            
            
            8,968
            
            
            16,734NET
                INCOME (LOSS)
            
            $
            (125,655
            )
            $
            39,489EARNINGS
                (LOSS) PER SHARE - BASIC
            
            
            *
            
            $
            0.01WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
            
            
            30,647,092
            
            
            2,734,534EARNINGS
                (LOSS) PER SHARE - DILUTED
            
            
            
            
            
            *WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED
            
            
            
            
            
            34,813,910




*
                less than $.01 per share






SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS






F-3




17







**FUEGO
                ENTERTAINMENT, INC.****STATEMENTS
                OF STOCKHOLDERS' EQUITY****Subscriptions**
            
            **Retained****Common
                Stock**
            
            **Paid-in**
            
            **Common**
            
            **Amount**
            
            **Earnings****Shares**
            
            **Amount**
            
            **Capital**
            
            **Stock**
            
            **Receivable**
            
            **(Deficit)**
            
            **Total****Balance,
                at inception**
            
            
            -
            
            $
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -Proceeds
                from sale of common stock for
              $.001
                per share
            
            
            7,772,670
            
            
            7,773
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            7,773Proceeds
                from sale of common stock for
              $.006
                per share
            
            
            5,500,000
            
            
            5,500
            
            
            24,350
            
            
            
            
            
            
            
            
            
            
            
            29,850Common
                stock subscribed21,262,530
                shares @ $.001 per share
            
            
            
            
            
            
            
            
            
            
            
            21,262
            
            
            (21,262
            )
            
            
            
            
            -295,450
                shares @ $.009 per share
            
            
            
            
            
            
            
            
            
            
            
            2,955
            
            
            (2,955
            )
            
            
            
            
            -105,874
                shares @ $.179 per share
            
            
            
            
            
            
            
            
            
            
            
            19,057
            
            
            (19,057
            )
            
            
            
            
            -Contributed
                services
            
            
            
            
            
            
            
            
            21,708
            
            
            
            
            
            
            
            
            
            
            
            21,708Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            39,489
            
            
            39,489**Balance,
                May 31, 2005**
            
            
            13,272,670
            
            
            13,273
            
            
            46,058
            
            
            43,274
            
            
            (43,274
            )
            
            39,489
            
            
            98,820Proceeds
                received from subscribed shares
            
            
            21,658,977
            
            
            21,659
            
            
            29,412
            
            
            (51,072
            )
            
            51,072
            
            
            
            
            
            51,071Proceeds
                from sale of common stock for
              $.18
                per share
            
            
            27,915
            
            
            28
            
            
            4,997
            
            
            
            
            
            
            
            
            
            
            
            5,025Common
                stock subscribed
              53,111
                shares @.179 per share
            
            
            
            
            
            
            
            
            
            
            
            9,561
            
            
            (9,561
            )Common
                stock subscriptions canceled10,000
                shares @ .001 per share
            
            
            
            
            
            
            
            
            
            
            
            (10
            )
            
            1040,500
                shares @ .009 per share
            
            
            
            
            
            
            
            
            
            
            
            (405
            )
            
            4057,488
                shares @ .179 per share
            
            
            
            
            
            
            
            
            
            
            
            (1,348
            )
            
            1,348Contributed
                services
            
            
            
            
            
            
            
            
            37,931
            
            
            
            
            
            
            
            
            
            
            
            37,931Net
                (loss) for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (125,655
            )
            
            (125,655
            )**Balance,
                May 31, 2006**
            
            
            34,959,562
            
            $
            34,960
            
            $
            118,398
            
            
            -
            
            $
            -
            
            $
            (86,166
            )
            $
            67,192






**SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS**






F-4




18






**FUEGO
                    ENTERTAINMENT, INC.****STATEMENTS
                    OF CASH FLOWS****From****For
                    The**
                
                
                **December
                    30, 2004****Year
                    Ended**
                
                
                **(Inception)
                    to****May
                    31,2006**
                
                
                **May
                    31,2005****OPERATING
                    ACTIVITIES**Net
                    income (loss) from operations
                
                $
                (125,655
                )
                $
                39,489Adjustments
                    to reconcile net income to net cash provided 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 (USED 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
                
                $
                7,479






SEE
      ACCOMPANYING NOTES TO FINANCIAL STATEMENTS






F-5




19






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS







**1.** **** **NATURE
      OF BUSINESS**




Fuego
      Entertainment, Inc. (the “Company”) was formed on December 30, 2004 as a Florida
      corporation and is primarily engaged in the directing, production, marketing,
      and distribution of entertainment products, including feature and short films,
      documentaries, television shows, music, and tour productions. The Company also
      provides management, marketing, and public relations services to the
      entertainment industry. During the year ended May 31, 2006 the majority of
      revenues earned were earned from companies located in Puerto Rico.




**2.** **** **SIGNIFICANT
      ACCOUNTING POLICIES**




***GOING
      CONCERN***


The
      Company’s financial statements have been presented on the basis that it is a
      going concern, which contemplates the realization of assets and the satisfaction
      of liabilities in the normal course of business. The Company’s ability to
      continue in existence is dependent on its ability to develop additional sources
      of capital, or achieve profitable operations. Management’s plan is to obtain
      additional capital, and to develop, market and distribute music CDs of musical
      tracks owned and controlled by Ciocan Entertainment & Music Group, LLC, an
      affiliated company, for a 25% royalty, to pursue the multi-media releases of
      a
      popular film he owns and produced in Cuba for a similar royalty, and to manage
      television stations in Puerto Rico and continental United States. The
      accompanying financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





***BASIS
      OF PRESENTATION***


These
      financial statements reflect the use of significant accounting policies, as
      described below and elsewhere in the notes to the financial statements, and
      are
      prepared in accordance with accounting principles generally accepted in the
      United States of America. The fiscal year end of the Company is May
      31.





***REVENUE
      RECOGNITION***


Revenue
      from the sale of film and television programming rights and license arrangements
      is recognized only when persuasive evidence of a sale or arrangement with a
      customer exists, the project is complete, the contractual delivery arrangements
      have been satisfied, the license period has commenced if applicable, the
      arrangement fee is fixed or determinable, collection of the arrangement fee
      is
      reasonably assured, and other conditions as specified in the respective
      agreements have been met.





Revenue
      from production services for third parties is recognized when the production
      is
      completed and delivered. All associated production costs are deferred and
      charged against income when the film is delivered and the related revenue is
      recognized.






F-6




20






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




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




***REVENUE
      RECOGNITION-continued***


Fees
      for
      other services, such as consulting provided to third parties, are recognized
      as
      revenues when the services are performed and there is reasonable assurance
      over
      the collection of the fees.




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




***ALLOWANCE
      FOR DOUBTFUL ACCOUNTS***


The
      Company estimates the collectibility of its trade accounts receivable. In order
      to assess the collectibility of these receivables, the Company monitors the
      current creditworthiness of each customer and analyzes the balances aged beyond
      the customer's credit terms. Theses evaluations may indicate a situation in
      which a certain customer cannot meet its financial obligations due to
      deterioration of its financial viability, credit ratings or bankruptcy. The
      allowance requirements are based on currents facts and are reevaluated and
      adjusted as additional information is received. Trade accounts receivable are
      subject to an allowance for collection when it is probable that the balance
      will
      not be collected. As of May 31, 2006, allowances totaled $11,833.





***ADVERTISING
      EXPENSES***


Advertising
      costs are expensed as incurred, except for costs related to the development
      of a
      property and/or live-action television program commercial or media campaign
      which are expensed in the period in which the commercial or campaign is first
      presented. Advertising expenses are included in selling, general and
      administrative expense in the accompanying statement of operations.





***USE
      OF ESTIMATES***


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ materially from those
      estimates.





***CASH
      AND CASH EQUIVALENTS***


Cash
      and
      cash equivalents consist of all liquid investments with original maturities
      of
      three months or less are classified as cash and cash equivalents. The fair
      value
      of cash and cash equivalents approximate the amounts shown on the financial
      statements. Cash and cash equivalents consist of unrestricted cash and
      short-term investments. As of May 31, 2006 and May 31, 2005 there were no cash
      equivalents.





***INCOME,
      LOSS PER COMMON SHARE***


Basic
      income, loss per common share is calculated on the weighted average number
      of
      common shares outstanding during each period. Diluted income per common share
      is
      based on the weighted average number of common shares outstanding during each
      period, adjusted for the effect of outstanding stock subscriptions. Outstanding
      stock subscriptions were not used in the computation of basic loss per share
      as
      their effect would be antidilutive.






F-7




21






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





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




***FILM
      AND TELEVISION COSTS***


The
      Company accounts for its film and television costs pursuant to AICPA Statement
      of Position (“SOP”) No. 00-2, *Accounting
      by Producers or Distributors of Films* .
      The
      cost of production for film and television production costs, including direct
      costs, production overhead and interest are capitalized and amortized using
      the
      individual-film-forecast method under which such costs are amortized for each
      program in the ratio that revenue earned in the current period for such program
      bears to management’s estimate of the ultimate revenues to be realized from all
      media and markets for such program. Management regularly reviews, and revises
      when necessary, its ultimate revenue estimates on a title-by-title basis, which
      may result in a change in the rate of amortization applicable to such title
      and/or a write-down of the value of such title to estimated fair value. These
      revisions can result in significant quarter-to-quarter and year-to-year
      fluctuations in film write-downs and rates of amortization. If a total net
      loss
      is projected for a particular title, the associated film and television costs
      are written down to estimated fair value. All exploitation costs, including
      advertising and marketing costs are expensed as incurred. Television adaptation
      and production costs that are adapted and/or produced are stated at the lower
      of
      cost, less accumulated amortization, or fair value.





***INVESTMENT***


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





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





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






F-8




22






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




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




***EQUIPMENT***


Equipment
      is carried at cost, net of accumulated depreciation. Depreciation is provided
      on
      the straight-line method based on the estimated useful lives of the assets,
      which range from 2.5 years to 5 years.





***INTANGIBLE
      ASSETS***


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





***DEFERRED
      INITIAL PUBLIC OFFERING COSTS***


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





***INCOME
      TAXES***


Deferred
      income taxes will be recorded for the temporary differences between the
      financial statement and tax bases of assets and liabilities using current tax
      rates. Valuation allowances will be established against deferred tax assets
      whenever circumstances indicate that it is more likely than not, that such
      assets will not be realized in future periods.





***FAIR
      VALUE OF FINANCIAL INSTRUMENTS***


The
      carrying amounts of cash and cash equivalents, accounts receivable, and other
      current assets, unearned revenue, accounts payable and accrued expenses, and
      other liabilities approximate their fair values principally because of the
      short-term maturities of these instruments.





***NEW
      ACCOUNTING PRONOUNCEMENTS***


In
      December 2004, the FASB issued SFAS 123R, Share Based Payments. SFAS 123R is
      applicable to transactions in which an entity exchanges its equity instruments
      for goods and services. It focuses primarily on transactions in which an entity
      obtains employee services in share-based payment transactions. SFAS No. 123R
      supersedes the intrinsic value method prescribed by APB No. 25, requiring that
      the fair value of such equity instruments be recorded as an expense as services
      are performed. Prior to SFAS 123R, only certain pro forma disclosures of
      accounting for these transactions at fair value were required. SFAS 123R will
      be
      effective for the first quarter 2006 financial statements, and permits varying
      transition methods including retroactive adjustment of prior periods or
      prospective application beginning in 2006. The Company adopted SFAS 123R using
      the modified prospective method effective January 1, 2006. Under this transition
      method the Company will begin recording stock option expense prospectively,
      beginning with that date.






F-9




23






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





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




***NEW
      ACCOUNTING PRONOUNCEMENTS***


For
      stock
      based compensation to non-employees, the Company is required to follow SFAS
      No.
      123, which requires that stock awards granted to directors, consultants and
      other non-employees be recorded at the fair value of the award granted.





***CHANGES
      IF FINANCIAL PRESENTATION***


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





**3.** **** **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.




**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***is
                the story of a small mining town of Portobello. In
                1916 Mellick Tweedy traveled on a mule through the jungle
                of a small mining town in Ecuador, this small town became one of
                the largest gold exporters in South America. 
                Fifty years ago the American company SADCO, abandoned the American
                shaft, one of the oldest gold mines in the world, leaving the town
                of Portobello and its people in ruins.  Today, the
                people of Portobello have a new hope, or do they? The Americans
                are back in Portobello searching for Gold.
            
            
            15,441
            
            
            15,148***One
                Million Millionaires,***This
                is a documentary that will capture the life of a
                controversial individual, Mr. Urban Casavant and his dream of making
                1 million millionaires. For some he is the hope of their life,
                for others he is a dreamer, however, thousands follow him and
                wait patiently.  The film will cover his life from the time
                he was a low-income earning prison guard to a multimillion-dollar
                businessman.
            
            
            16,110
            
            
            6,800***Counterfeit
                Conspiracy***is
                a documentary on stock market scandals from the 1980’s to present,
                covering court documents, testimony, and interviews with
                participants to fashion an authoritative account of what happened.
                For
                example it covers the highly publicized account of, Michael
                Milliken, the Drexel Burnham Lambert junk bond king who
                convinced many savings
                institutions and insurance companies to
                buy such bonds in large quantities.  It will also
                document the illegal practice of Naked Short Selling perpetrated
                by some
                offshore organizations and self-inflicted by some
                companies.
            
            
            29,214
            
            
            642Total
                capitalized production costs
            
            $
            93,431
            
            $
            50,432






F-10


24







FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





All
      of
      the above films are in production and none have been acquired from other
      parties. None have been released into the market or are generating revenues
      except for incidental advance sales of DVD’s for Counterfeit Conspiracy totaling
      $4,691 as of May 31, 2005 and $6,659 as of May 31, 2006. Advance sales have
      been
      classified as deferred revenue in the accompanying balance sheets. No
      amortization has commenced on any film products in production, and there are
      no
      other films owned by the Company.





Amortization
      of all of the above costs is estimated to commence within the next fiscal year,
      based upon their anticipated completion dates, with the possible exception
      of
      the costs incurred in the Trader Show, which the Company will not be able to
      begin marketing to television companies until completion thereof, expected
      by
      the end of calendar 2007. The Trader Show costs represent the only costs in
      production to be considered a direct-to-television product.





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




***OPERATING
      LEASE***


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





***DELINQUENT
      INCOME TAXES***


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





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




·
              Ciocan
                  Entertainment and Music Group, LLC, “Ciocan” is an entertainment company
                  owned by the principal shareholder of the Company. Ciocan creates
                  products for the Latino Market in and out of the United States
                  borders and anticipates using the Company to market, promote and
                  commercialize some its products (music, films, documentaries, artist,
                  etc) for the Anglo and international markets. During the five month
                  period ended May 31, 2005, Ciocan advanced to the Company a total
                  of
                  $31,552 of which, $29,850 was applied towards the purchase, by
                  Ciocan, of
                  5.5 million shares of the Company’s common stock, and $1,400 was charged
                  as rent, leaving a balance advanced of $302 as of May 31, 2005
                  and $0 as
                  of May 31, 2006.  ·
              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.




F-12




25






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




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




·
              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.




The
      provision for current income taxes is as follows:





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






F-13




26






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS





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




The
      analysis of income tax expense is as follows:





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





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





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





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




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




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





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






F-14




27






FUEGO
      ENTERTAINMENT, INC.


NOTES
      TO
      FINANCIAL STATEMENTS




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





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




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




****** ***REPRODUCTION
      AND DISTRIBUTION AGREEMENTS***


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





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





***EQUITY
      INTEREST IN TELEVISION STATIONS***


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





***ISSUANCE
      OF RESTRICTED COMMON STOCK***


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






F-15