UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10K-SB**





[X]
      Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of
      1934 for the year ended May 31, 2006





[
      ]Transition report Pursuant to Section 13 or 15(d) of the Exchange
      Act





**Commission
      File Number:**  **333-131965**





**TYPHOON
      TUNES INC.**


(Name
      of
      Small Business Issuer In Its Charter)





**Nevada
      20-3387991**


(State
      or
      other jurisdiction (I.R.S. Employer


of
      incorporation or organization Identification No.)





**711
      S. Carson Street, Suite #4**


**Carson
      City, Nevada 89701**


(Address
      of principal executive offices) (Zip Code)





**775-881-3326**


(Issuer's
      Telephone Number)




Securities
      registered pursuant to Section 12(b) of the Act: None





Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001





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. Yes [X] No [ ]





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained herein, 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]




We
      had no
      revenues for the fiscal year ended May 31, 2006.





Indicate
      whether by mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES______ NO___X____





As
      of May
      31, 2006, there were 9,000,000 shares of the Registrant's $0.001 par value
      Common Stock ("Common Stock"), Registrant's only outstanding class of voting
      securities, outstanding. At May 31, 2006, there was no aggregate market value
      of
      the Common Stock held by non-affiliates, as we had not yet sold any of the
      securities currently being offered and sold pursuant to a Form SB-2 Registration
      Statement filed with the U.S. Securities and Exchange Commission.


1


Some
      exhibits required to be filed hereunder, are incorporated herein by reference
      to
      Issuer's original Form SB-2 Registration Statement, filed under CIK No.
      0001352588 on February 21, 2006, on the SEC website at www.sec.gov.





Transitional
      Small Business Disclosure Format: Yes No X





Large
      Accelerated Filer ____ Accelerated Filer ____ Non-Accelerated Filer
      ___X____




**Available
      Information**





Our
      Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB, Current Reports
      on Form 8-K and all amendments to those reports that we file with the Securities
      and Exchange Commission, or SEC, are available at the SEC's public reference
      room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
      information on the operation of the public reference room by calling the SEC
      at
      1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains
      reports, proxy and information statements and other information regarding
      issuers that file electronically with the SEC.








**PART
      I**


**Item
      1. Business**





***General*** ****





Typhoon
      Tunes Inc. was incorporated in the State of Nevada on August 30, 2005. We were
      formed to pursue our concept of making the worldwide inventory of online music
      available to customers in a friendly and accessible fashion through retail
      mall
      kiosks and other point-of-purchase locations, including on
      the
      world wide web at typhoonmusic.net. We currently have no patents on our programs
      and no patents pending. We have not generated any revenues to date; and we
      have
      been issued a "substantial doubt"
      going concern opinion from our auditors.





In
      February 2006, we filed a registration statement on Form SB-2 with the U.S.
      Securities and Exchange Commission and received clearance to sell a total of
      10,000,000 Units of our Common Stock at a price of $.025 per Unit. Each Unit
      consists of one share of common stock, par value $.001 (the “Shares”), and one
      common stock purchase warrant. Each common stock purchase warrant (the
“Warrants”) entitles the holder to purchase one additional share of common stock
      at an exercise price of $.10 per Warrant, expiring in May 2008, two years from
      the effective date of the registration statement. The Shares and Warrants will
      be immediately detachable and separately eligible for trading if and when a
      public market is ever developed for our securities. While we intend to seek
      to
      engage the services of a market maker to apply for quotation on the
      Over-the-Counter Bulletin Board on our behalf following completion of the
      offering and implementation of our business plans, we cannot guarantee that
      our
      application will be approved and our stock listed and quoted for sale on any
      public market.





With
      the
      offering proceeds, we intend to develop a series of music kiosks to be placed
      in
      areas of high pedestrian traffic for download assistance and retail distribution
      of music. At these sites, the public will be able to choose music of their
      choice either for download onto their personal storage device or for burning
      onto a CD. Initially, we intend to direct our customers to online music
      suppliers and be, in essence, a gateway or portal to their music content
      websites. As a result, the type and amount of music available to our customers
      will be virtually unlimited or limited only by the number of suppliers we use.
      Our management intends to closely monitor trade publications, like "Billboard"
      magazine, and other media to stay abreast of emerging trends in the music
      industry. Our customers will be required to log into music provider websites,
      create an account using their own credit cards and


2


agree
      to
      the intellectual property and copyright laws posted by each provider. We will
      merely be assisting our customers with this process and directing them to the
      websites, thereby eliminating any intellectual property or copyright
      infringement liability on our part. Our goal is to assist customers who want
      to
      download their music choices from the internet to their personal players, but
      are either not computer savvy or do not want or have the time to search for
      their music choices.





Our
      registered office is located at 711 South Carson Street, Suite 4, Carson City,
      Nevada 89701. Our director is a Canadian citizen and will work from his home
      and
      receive mail at Suite 306-1917 West 4th Avenue, Vancouver, British Columbia,
      Canada, V6J 1M7 until, if ever, we require a public site, other
      than the public kiosks we expect to set up in malls, airports or other high
      traffic areas.





***Proposed
      Operations and Sources of Revenue***





We
      plan
      to be a retail-based reseller and distributor of music. We will enter the market
      by establishing ourselves as the first retailer to provide music exactly as
      demanded by the customer on a song-by- song
      basis. We will establish a presence in malls and high traffic retail locations
      in the form of kiosks where we will make music available to people.





Initially,
      we intend to direct our customers to online music suppliers and be, in essence,
      a gateway or portal to third-party music content websites. As a result, the
      type
      and amount of music available to our customers will be virtually unlimited
      or
      limited only by the number of suppliers we use. Our management intends to
      closely monitor trade publications, like "Billboard" magazine, and other media
      to stay abreast of
      emerging trends in the music industry.





There
      will no costs associated with directing our customers to music supplier websites
      and no written agreements will be required. Once we are operational and
      directing significant traffic to specific music suppliers,
      we intend to approach them to request discounts for our customers and/or payment
      for "top positions", as well as pay per click fees (PPC's).





We
      anticipate that the majority of our revenues will be generated from usage fees
      charged to our customers for using our computers and software to download music
      directly to their portable music device, such as an iPod, MP3 player or personal
      computer, rather than from the compilation of CD's. Customers
      will be charged a per minute fee, with a minimum 10 minute usage charge. We
      intend to keep our usage charges as low as possible initially in order to build
      a loyal customer base. Our initial research has indicated an acceptable usage
      fee would be $2.50-$3.00 U.S. for the first 10 minutes and $.25 U.S. per minute
      after that.





Once
      we
      are operational and established, other potential sources of revenue will be
      from
      PPC's and advertising fees from web-based companies who place ads/links to
      their
      websites on our website. In addition, as resources and demand allow, we may
      also
      sell retail merchandise, including branded clothing,
      hardware such as MP3 players, CD cases and other related products.





For
      each
      customer's convenience, the process of purchasing music will be easy: customers
      will be able to download music to their digital music device or to a CD, which
      we will supply and do for them on a computer located in our kiosk, complete
      with
      a CD label that itemizes each song's title and related information, in minutes
      on-the-spot. Additionally, the kiosks will sell pre-made music mixes and, in
      the
      future when resources and demand allows, we intend to include other items for
      sale, possibly such
      as
      digital music players. The customer will pay for our usage charges and services,
      as well as for the music they choose to download using a credit card over the
      internet.





Because
      we will not initially be selling music, but rather, will be serving as a portal
      to the music download sites and simply assisting our customers with the
      compilation and download of the music they choose, we will not be subject
      to any intellectual property or copyright laws. The customer will be responsible
      for complying with and agreeing to any laws regarding intellectual property
      rights and copyright infringement from the website(s) they choose to download
      their music content from.


3





Customers
      will be required to log into the music-on-demand websites, create their own
      account, accept any agreements regarding content download and use their own
      credit card. As we expand and funds allow, we plan to offer "music on demand"
      to
      the public in what we believe to be a new format. We plan to purchase music
      (individual songs or pieces) from a wide variety of sources on the Internet,
      download them to our server and then invite customers to purchase their
      preferences through a website. The chosen music can then be either burned on
      a
      CD or downloaded onto a personal, portable music device in the order chosen
      by
      the customer. At such will be subject to all the risks related to government
      regulation, content, copyright and intellectual property rights and are
      continuing to assess those risks. We have not yet completed our evaluation
      of
      the costs to expand our services to "music on demand" and may not be able to
      afford to comply with the legal requirements when we are financially able to
      do
      so.





We
      intend
      to place our kiosks in malls and other public locations with high pedestrian
      traffic and decorate them with bright, attractive graphics featuring both
      popular and classic titles to both draw attention to our offerings
      and to assist in customer decision-making.





In
      a
      world of bulk offerings, we hope to attract customers by offering them music
      that has been completely customized, by them and to their own specifications,
      from their choice of song to their choice of listening device, quickly and
      conveniently. We are hopeful that, by offering our customers the choice to
      easily customize their own music using our kiosks, we will become the solution
      for consumers looking for a convenient way to get the music they want, when
      they
      want it.





Physically,
      the dimensions of the kiosks are currently planned at approximately 7' x 12'
      in
      order to conform to retail space limitations, while allowing convenient sizing
      opportunities for other venues such as trade show, fairs and other such special
      events. The counter space of the kiosks will feature promotional displays that
      highlight popular and top-selling songs from a number of musical genres to
      help
      with the customers' buying decisions and aid in impulse purchases. Another
      feature of the “Typhoon Tunes” kiosks will be terminals where customers can
      sample music clips and conduct searches for songs they may wish to
      purchase.




Key
      factors in our marketing will include customer convenience, individual choice,
      speed of service and security. It is our intention to ensure that the level
      of
      customer service will be as personalized as the musical tastes of our customers.
      We expect that some customers will wish to make all of the choices by themselves
      and others will want help through the whole process of choosing their music.
      We
      will try to offer each customer the individual service they are looking for.
      Staffed by knowledgeable music consultants, we wish to ensure customers will
      be
      provided individual service to make their buying experience a pleasant one.





Once
      we
      have established a number of mall locations, we will seek to pursue additional
      retail partnerships, where Typhoon Tunes kiosks would be available on a sublease
      basis within a larger store or high traffic environment. By choosing partners
      on
      a strategic basis, Typhoon Tunes and the retail partner would be able to offer
      additional products and potentially increase sales in a complementary customer
      base. These partnerships could include national electronic chains, mobile
      telecom outlets, coffee shops (e.g., Starbucks' Hear Music), bookstores and
      other similar retailers. As we progress, we will examine other point-of-purchase
      locations, including a proposed website at www.typhoonmusic.net, which has
      not
      yet been developed.














3
 4


***Competition***





Presently,
      we have no direct competition but rather, significant indirect competition.
      In
      the music retailing space, there are many players and potentially any of them
      could be competitors. Some of those are listed


below:





Traditional
      retailers:





*
      HMV


*
      Barnes
& Noble


*
      Borders


*
      Tower
      Records


*
      Wal-Mart Future Shop/Best Buy


*
      Chapters/Indigo


*
      A&B
      Sound






On-line
      retailers:





*
      iTunes


*
      Puretracks


*
      My
      Music Inc.


*
      Wal-Mart


*
      Amazon


*
      Lycos
      Music


*
      MP3.com





To
      date,
      none of these retailers has identified the niche opportunity offered by Typhoon
      Tunes - customized music-on-demand. While various electronic stores may burn
      CDs
      upon request, these outlets are not adequately set up for high
      demand.





The
      other
      major competitive factor to our business will be the individuals who borrow
      CDs
      and burn their own music or burn for others, or who download music based on
      illegal peer-to-peer systems. While this may represent somewhat of a threat,
      because of its illegal nature, there are many people in our target market who
      are not willing to engage in this practice.




***Market
      Analysis***





Music
      has
      always been part of popular culture and to a large degree, it defines the times
      in which we live. From iconic songs that can be attributed to generational
      movements such as the 1960s, to wedding songs, to our own favorite songs, music
      plays a large part in the personal lives of many people.





We
      feel
      that today's consumer has become a sophisticated and individualistic shopper.
      From personal ring tones on their telephones to personalized lattes to personal
      computers to video-on-demand, the age of customization is definitely upon us.
      In
      the case of music, consumers can opt to download music themselves from the
      Internet, but if time and technical know-how are commodities they lack, or
      they
      have security fears regarding use of online purchasing via credit card, then
      Typhoon Tunes will offer an attractive alternative. In our opinion, this has
      provided an opportunity for us to set up a low-fixed cost business model, while
      offering a high value proposition for all types of people who are looking for
      a
      convenient, service-oriented, customized music solution.











5


***Sale
      and Distribution Methods***





Marketing
      and sales will play important functions in creating awareness and inducing
      trial
      of Typhoon Tunes' products and services. The opening of each kiosk will be
      accompanied by a launch campaign. Specific marketing programs will
      include:





*Multimedia
      launch campaign* - We
      intend to make the opening of each Typhoon Tunes location an exciting occasion.
      Making use of advertising, public relations, radio/radio remotes and other
      promotional programs, our goal will be to introduce Typhoon Tunes quickly and
      effectively to each location's market base. To help encourage potential business
      to give us a try, two free songs will be offered to new customers.





*Advertising* -
      An
      advertising maintenance campaign will be executed on an ongoing basis to keep
      the "Typhoon Tunes" brand name in the minds of customers and to introduce new
      musical offerings that have been added to our library. We will also advertising
      to help promote our pre-mixed music CDs and other merchandise
      offerings.





*Cross-promotions
      with partners/media partners* - Many
      companies today offer music downloads as rewards in their promotional campaigns.
      With this in mind, Typhoon Tunes will seek out marketing and promotional
      partners to increase sales while leveraging the Typhoon Tunes brand to the
      wider
      audience offered by these promotional partner programs.





*Database
      marketing* -
      Each
      customer will be added to our database, including email address. This database
      will serve as a significant marketing tool and, with the customer's permission,
      in communicating news regarding Typhoon Tunes and its recent promotions, song
      additions and sales programs. This database can also be customized such that
      customers will only be emailed information relating to their specific musical
      tastes. Emails will always provide directional links to Typhoon Tunes'
      website.





*Website* - In
      addition to serving as a marketing-communications tool, www.typhoontunes.com
      will also serve as a fully functioning online retail site. Once developed and
      published, we intend to make the entire library of Typhoon Tunes available
      from
      our website, which has not yet been developed, for individual download, to
      be
      burned to a CD for pick-up at the nearest Typhoon Tunes kiosk or shipped to
      the
      customer's address. We believe the e-commerce capabilities of the website will
      increase revenue opportunities by allowing 24-hour shopping to complement our
      physical retail locations.





*Loyalty
      program* -
      To
      encourage repeat purchases, customers will be encouraged to join a loyalty
      program to receive incentives for increased purchases. For example, customers
      may be given one free song for every nine songs purchased, or some variation
      thereof, which has not yet been developed. We feel this program will serve
      as a
      type of reward for customer purchases, help instill goodwill on the part of
      Typhoon Tunes and, hopefully, encourage increased purchases.





While
      the
      above programs represent the beginning of an integrated marketing strategy,
      we
      will also seek to embark upon a product strategy to help differentiate our
      offering from other music providers. To do this, we will work to develop
      relationships with independent music labels to be able to offer music from
      emerging and local artists, as well as the well-known and established
      artists.





Further,
      we intend to develop our own repertoire of premixed themed CDs (e.g., sixties
      and seventies music, "Today's Top Tunes in New York Clubs", "Aerobics to Music",
      etc.) that will have appeal to specific segments of the market. Finally, as
      resources and demand allow, we may also sell retail merchandise including
      branded clothing, hardware such as MP3 players, CD cases and other related
      products.


6


In
      order
      to accomplish these proposed marketing and advertising programs, we will need
      to
      be able to secure sufficient funds either from completion of our initial public
      offering, from revenues or through bank loans or other funding, none of which
      is
      guaranteed, as we are still in the development stage.





***Suppliers
      and Raw Materials***





All
      of
      the music available to our customers will be offered for download and purchase
      from third party suppliers, with the assistance of our kiosk attendant, on
      a
      song-by-song basis.





We
      plan
      to implement the following three phases in steps, as funds allow:





*Outsourced
      Branded Solution (Phase 1)* - We
      intend to use this method first, as we feel it will be the quickest and most
      cost effective way to implement our plans and begin offering our music to the
      public. Typhoon Tunes will act as a portal to direct customers to established
      outsourced music distributors, generating revenue by charging usage fees. This
      solution can be done on a modest budget and will allow us to both build an
      online presence and get an operational kiosk to market for immediate customer
      feedback. We have not yet contacted any potential suppliers, but rather, are
      compiling lists of contacts so that upon completion of our initial public
      offering and receipt of the funds, we can begin negotiations.





Assuming
      we are successful in implementing our initial Phase 1 business plan sufficient
      to generate revenues, we will endeavor to expand our operations to include
      Phases 2 and 3 below, if and when funds are available either through revenues
      or
      from outside funding, such as bank loans or additional sales of our securities.
      We have made no arrangements for any such financing or sales of our securities
      and do not intend to unless and until our initial Phase 1 business plan is
      successful, which is purely speculative at this juncture. At such time as we
      expand into Phases 2 and 3, we would also be responsible for complying with
      all
      intellectual property laws regarding the collection and purchase of musical
      content. In that regard, we will have to do extensive legal investigation as
      to
      the intellectual property laws applicable to our proposed expansion phases
      prior
      to pursuing them.





*Partial
      In-House Solution (Phase 2)* -
      this
      next step solution would integrate an in-house system that monitors and manages
      Typhoon Music and integrates the Typhoon Music Kiosks and integrates with Phase
      1 - the outsourced distributor. This step will be required to maintain Typhoon
      Tunes music inventory, branding and to establish a successful long-term
      marketing plan.





*In-House
      Solution* ( *Phase
      3)* -
      An
      in-house solution for building, collecting and distributing music would
      ultimately be the best solution, although it would be very costly (minimum
      $300,000) and is not in the predictable future. This solution would, however,
      provide freedom from contractual obligations and no limit to the library that
      Typhoon Tunes builds.





We
      intend
      to begin our marketing and distribution plans with Phase 1 above to ensure
      that
      our product gets to market quickly in an attempt to generate income as quickly
      as possible. Phases 2 and 3 will only be implemented as and when income is
      sufficient to allow us to do so.





***Equipment***





Each
      kiosk will require an up-to-date computer, cash register and other cash
      processing equipment for debit and credit cards. We will also require specific
      software for ensuring fast and easy downloads through our distributors. The
      software will be purchased direct from the distributor. In the long term, if
      we
      are able to implement Phase 3 of our program, we may choose to develop our
      own
      in-house software, however, as mentioned above, we will not be able to do this
      until we are generating revenues and funds are available for
      expansion.




7


All
      equipment is readily available and no special orders or waiting period will
      be
      required to purchase the equipment.





***Patents
      and Trademarks***





We
      do not
      currently have any patent or trademark protection for our brand name. If we
      determine it is feasible to file for such trademark protection, we may do so
      but
      at present we have no plans in this regard. Even if we do try to copyright
      our
      branding, graphics or logo, we still have no assurance that doing so will
      prevent competitors from using the same or similar names, marks, concepts or
      appearance. Should this happen, we may have to enter into litigation to prevent
      the use of our property and, at least at present, we do not feel we have the
      resources to do so and would probably avoid any such litigation.





***Government
      and Industry Regulation***





Regulation
      of Internet - Websites are not currently subject to direct federal laws or
      regulations applicable to access, content or commerce on the Internet. However,
      due to the increasing popularity and use of the


Internet,
      it is possible that a number of laws and regulations may be adopted with respect
      to the Internet covering issues such as:





*
      user
      privacy


*
      freedom
      of expression


*
      pricing


*
      content
      and quality of products and services


*
      taxation


*
      advertising


*
      intellectual property rights


*
      information security





The
      adoption of any such laws or regulations might decrease the rate of growth
      of
      Internet use, which in turn could decrease the demand for our services, increase
      the cost of doing business or in some other manner have a negative impact on
      our
      business, financial condition and operating results. In addition, applicability
      to the Internet of existing laws governing issues such as property ownership,
      copyrights and other intellectual property issues, taxation, libel, obscenity
      and personal privacy is uncertain. The vast majority of such laws were adopted
      prior to the advent of the Internet and related technologies and, as a result,
      do not contemplate or address the unique issues of the Internet and related
      technologies.





Initially,
      our customers will be responsible for agreeing to copyright infringement laws
      when downloading their music content from our third-party suppliers; however,
      once we expand our business and begin downloading music ourselves for resale
      to
      the public, we intend to abide by all copyright laws to ensure that any
      copyrighted information that is provided on our website or included in any
      or
      our music offerings has received approval from the source of the copyright
      information. When using the information provided or refurbished from other
      sources and to protect us from any potential intellectual property claims,
      we
      will endeavor to obtain all necessary consents prior to the use of the sources
      and will reference the sources on our website to give full credit where it
      is
      due.





At
      such
      time as we expand our business operations to include providing music on demand,
      we will be subject to all of the rules, regulations and laws relating to the
      download of copyrighted materials and intellectual property. We have not yet
      done any legal investigation of the copyright or intellectual property laws
      that
      will apply to our proposed plan of operation and may not have sufficient funds
      to do so, if and when we have funds available for our proposed expansion into
      the music-on-demand market.




8


***Employees
      and Employment Agreements***





We
      currently have no employees other than James Shepard, our sole officer and
      director, who devotes approximately 20 hours per week to our business and who
      will not be compensated for his time until and if we become profitable. If
      we
      are successful in completing our initial public offering, we intend to contract
      the services of a web designer and programmer, a builder (for the kiosks),
      and
      eventually, customer service reps to work in the kiosks. We do not currently
      have any agreements, verbal or written, with Mr. Shepard or any other proposed
      employee or independent contractor. We presently do not have pension, health,
      annuity, insurance, stock options, profit sharing or similar benefit plans;
      however, we may adopt such plans in the future. There are presently no employee
      contracts, agreements or personal benefits available to anyone associated
      directly or indirectly with the company.


***Risk
      Factors***




Our
      securities are highly speculative and involve a high degree of risk, including
      among other items the risk factors described below. You should carefully
      consider the following risk factors and other information in this 10-KSB before
      deciding to invest in us.





The
      risk
      factors set forth in our final SB-2/A registration statement, filed on May
      12,
      2006, are substantially still the same and have not changed, as we have not
      yet
      completed the sale of Units in the offering and fully commence business
      operations. The Risk Factors section of the registration statement are,
      therefore, incorporated herein by this reference.





**Item
      3. Legal Proceedings**





We
      are
      not a party to any pending legal proceeding.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None.








**PART
      II**





**Item
      5. Market for Registrant's Common Equity, Related Stockholder Matters, and
      Issuer Purchases of Equity Securities.**





***Market
      Information***




Our
      Common Stock is not yet traded on any public market and, therefore, no table
      is
      included herein.





***Holders***




As
      of May
      31, 2006 and the date of the filing of this Form 10K-SB, our sole officer and
      direct was the sole shareholder of 9,000,000 issued and outstanding shares
      of
      our Common Stock.




***Dividends***




We
      did
      not declare or pay cash or other dividends on its Common Stock during the last
      two calendar years. We currently have no plans to pay any dividends, although
      we
      may do so in the future, if our financial position changes.


9




***Equity
      Compensation Plans***




We
      have
      not adopted any equity compensation plans.





***Recent
      Sales of Unregistered Securities***




Following
      is the issuance of securities without registration since inception. No issuance
      involved the use of an underwriter; no advertising or public solicitation were
      involved; the securities bear a restrictive legend and no commissions were
      paid
      in connection with the issuance of these securities.





On
      November 30, 2005, 9,000,000 shares were issued to James Shepard, our founder,
      President, Secretary, Treasurer, Chief Financial Officer and sole director,
      as
      founder's shares, in exchange for services rendered to date to registrant,
      which
      include: the original concept development and business plan, the original
      company incorporation, the business plan, basic office supplies, a home office
      and computer and basic office equipment usage, and for $9,000 in cash,
      representing 9,000,000 shares at $.001 per share. These securities were issued
      in reliance upon the exemption contained in Section 4(2) of the Securities
      Act
      of 1933. The securities bear a restrictive legend and were issued to a non-US
      resident. No other shares have been issued. There were no stock options issued
      or outstanding at May 31, 2006.





**Item
      6. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**





THIS
      ANNUAL REPORT, INCLUDING THE FOLLOWING MANAGEMENT'S DISCUSSION AND


ANALYSIS,
      AND OTHER REPORTS FILED BY THE REGISTRANT FROM TIME TO TIME WITH THE SECURITIES
      AND EXCHANGE COMMISSION (COLLECTIVELY THE "FILINGS") CONTAIN FORWARD-LOOKING
      STATEMENTS WHICH ARE INTENDED TO CONVEY OUR EXPECTATIONS OR PREDICTIONS
      REGARDING THE OCCURRENCE OF POSSIBLE FUTURE EVENTS OR THE EXISTENCE OF TRENDS
      AND FACTORS THAT MAY IMPACT OUR FUTURE PLANS AND OPERATING RESULTS. THESE
      FORWARD-LOOKING STATEMENTS ARE DERIVED, IN PART, FROM VARIOUS ASSUMPTIONS AND
      ANALYSES WE HAVE MADE IN THE CONTEXT OF OUR CURRENT BUSINESS PLAN AND NFORMATION
      CURRENTLY AVAILABLE TO US AND IN LIGHT OF OUR EXPERIENCE AND PERCEPTIONS OF
      HISTORICAL TRENDS, CURRENT CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AND
      OTHER
      FACTORS WE BELIEVE TO BE APPROPRIATE IN THE CIRCUMSTANCES. YOU CAN GENERALLY
      IDENTIFY FORWARD-LOOKING STATEMENTS THROUGH WORDS AND PHRASES SUCH AS "SEEK",
      "ANTICIPATE", "BELIEVE", "ESTIMATE", "EXPECT","INTEND", "PLAN", "BUDGET",
      "PROJECT", "MAY BE", "MAY CONTINUE", "MAY LIKELY RESULT", AND SIMILAR
      EXPRESSIONS. WHEN READING ANY FORWARD-LOOKING STATEMENT YOU SHOULD REMAIN
      MINDFUL THAT ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY
      ARE
      BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE
      PERFORMANCE OF OUR COMPANY, AND ARE SUBJECT TO RISKS,


UNCERTAINTIES,
      ASSUMPTIONS AND OTHER FACTORS RELATING TO OUR INDUSTRY AND RESULTS OF
      OPERATIONS, INCLUDING BUT NOT LIMITED TO THE FOLLOWING FACTORS:





o
      OUR
      ABILITY TO ATTRACT AND RETAIN THE PERSONNEL QUALIFIED TO IMPLEMENT OUR GROWTH
      STRATEGIES;





o
      OUR
      ABILITY TO OBTAIN APPROVAL FROM GOVERNMENT AUTHORITIES FOR OUR
      PRODUCTS;





o
      OUR
      ABILITY TO PROTECT THE PATENTS ON OUR PROPRIETARY TECHNOLOGY;





o
      OUR
      ABILITY TO FUND OUR SHORT-TERM AND LONG-TERM FINANCING NEEDS;





o
      OUR
      ABILITY TO COMPETE AGAINST LARGE COMPETITORS IN A RAPIDLY CHANGING


MARKET;


10


o
      CHANGES
      IN OUR BUSINESS PLAN AND CORPORATE STRATEGIES; AND





o
      OTHER
      RISKS AND UNCERTAINTIES DISCUSSED IN GREATER DETAIL IN VARIOUS SECTIONS OF
      THIS
      REPORT.





SHOULD
      ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE
      UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
      FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
      EACH
      FORWARD-LOOKING STATEMENT SHOULD BE READ IN CONTEXT WITH, AND WITH AN
      UNDERSTANDING OF, THE VARIOUS OTHER DISCLOSURES CONCERNING OUR COMPANY AND
      OUR
      BUSINESS MADE IN OUR FILINGS. YOU SHOULD NOT PLACE UNDUE RELIANCE ON ANY
      FORWARD-LOOKING STATEMENT AS A PREDICTION OF ACTUAL RESULTS OR DEVELOPMENTS.
      WE
      ARE NOT OBLIGATED TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT CONTAINED
      IN
      THIS REPORT TO REFLECT NEW EVENTS OR CIRCUMSTANCES UNLESS AND TO THE EXTENT
      REQUIRED BY APPLICABLE LAW.





***Results
      of Operations***





Since
      we
      were only incorporated in August 2005, no comparative analyses are made in
      this
      section.





For
      the
      fiscal year ended May 31 2006, we incurred a net operating loss of $22,936.
      Our
      total expenses were $22,936, of which $20,970 were for legal and accounting
      fees
      incurred in connection with the preparation and filing of our initial public
      offering documents with the U.S. Securities and Exchange
      Commission.





***Liquidity
      and Capital Resources***





At
      May
      31, 2006, we had only $585 in cash on hand and are currently selling the Units
      registered in our initial public offering documents. If we are unsuccessful
      in
      selling all of the Units and do not receive all of the proceeds therefrom,
      we
      will be forced to seek other sources of funding to continue our operations.
      However, there can be no assurance that debt or equity financing will be
      available to us on acceptable terms to meet these requirements, as and when
      needed. Our auditors have expressed substantial doubt about our ability to
      continue as a going concern.





As
      of the
      date of this annual report, we have not yet generated any revenues.





Cash
      provided by financing activities for the year ended May 31, 2006 was $15,500,
      consisting of $9,000 attributed to the sale of shares to our Founder, who is
      our
      sole officer and director; a loan payable of $3,000 for working capital; and
      advances due to our sole shareholder and director in the amount of $3,500.





There
      was
      no cash used in investing activities for the year ended May 31,
      2006.





Our
      net
      loss for the year ended May 31, 2006 was $22,936.





We
      anticipate no material commitments for capital expenditures in the near term.
      Management is not aware of any trend in our proposed industry, which may have
      a
      negative impact on future income, revenue or income from
      operations.





We
      are
      relying solely on the monies raised in our initial public offering to pursue
      the
      development, setup and marketing of our products. There is no guarantee we
      will
      be successful in completing the offering or completing our proposed business
      plans. Other than the Units offered, no other source of capital has been
      identified or sought.





We
      have
      never had any discussions with any possible acquisition candidate, nor have
      we
      any intention of doing so.


11


We
      do not
      expect to purchase any real estate and do not own any to sell.




We
      do not
      expect to hire full time employees until our business operations are established
      and we have constructed and placed our first kiosk.





***Proposed
      Milestones to Implement Business Operations***





In
      order
      to become fully operational and profitable, we will need to achieve each of
      the
      milestones outlined below, all of which are dependent on receipt of the proceeds
      from our initial public offering, of which their can be no
      assurance.





Within
      3
      months following completion of the offering and receipt of the total proceeds
      therefrom, we expect to:





1.
      Develop and publish the website


3.
      Begin
      design and construction of a first model of a kiosk to be used for test purposes
      and training


4.
      Finalize logo and graphics that will be associated with our brand
      name.





Our
      budget for this phase is estimated to be approximately $19,500.





Within
      approximately 6-9 months, or upon completion of the first phase above, we expect
      to:





1.
      Once
      our website is established and operational, we will begin seeking space in
      a
      mall or other high traffic location to begin negotiations for our first
      kiosk


2.
      Complete the model kiosk and test all equipment


2.
      Have
      all graphics and promotional material completed


3.
      Develop and begin to initiate advertising and PR plan


4.
      Begin
      hiring and training an employee to staff the kiosk


5.
      Purchase initial foundation for music library


6.
      Complete details to handle debit and credit card transactions





Our
      budget for this phase is estimated to be approximately $64,500.





Within
      approximately 12 months, or upon completion of the first and second phases
      above, we expect to:





1.
      Enter
      into a lease agreement and have the first TyTunes kiosk operational


2.
      Continue to research and develop software and expand online suppliers


3.
      Launch
      full advertising and marketing program


4.
      Scout
      out additional locations for subsequent kiosk locations





Our
      budget for this phase is estimated to be approximately $91,500.





Within
      12-18 months we expect to:





1.
      Have a
      successful location generating sales and revenues


2.
      Develop a loyalty program for our customers


3.
      Have
      several additional locations researched for suitability


4.
      Commence web-based sales


5.
      Determine possibility of expansion and possibly enter into additional leases
      for
      space





Our
      budget for this phase is estimated to be $64,500.


12


***Off-Balance
      Sheet Arrangements***





We
      have
      no off-balance sheet arrangements or contractual or commercial
      commitments.





***Subsequent
      Events***





Subsequent
      to May 31, 2006 and as of the date of the filing of this annual report, we
      have
      sold a total of 1,440,000 Units for proceeds of $36,000 in connection with
      our
      initial public offering, registered with the U.S. Securities and Exchange
      Commission on Form SB-2. Pursuant to the terms of the offering, which is an
      “all-or-none” offering, all of the proceeds will be held in a separate bank
      account and will not be transferred or used by us until all of the Units are
      sold and the total proceeds are received. A copy of the final Form SB-2/A
      registration statement with complete details can be found in its entirety on
      the
      SEC website under our file number 333-131965.





**Item
      7. Financial Statements**





See
      our
      Financial Statements and Supplementary Data following the signature page of
      this
      Form 10-KSB.








**Item
      8. Disagreements with Accountants on Accounting and Financial
      Disclosures**





There
      have been no disagreements with our accountants on accounting or other financial
      disclosures since inception.





On
      June
      16, 2006, we held a Special Board of Directors' Meeting and recommended to
      the
      stockholders that the Company change accounting firms. The decision to change
      auditors was approved by the Board of Directors based on the reason that the
      current accounting firm is located too far from our business operations and
      we
      found it was difficult to get information to and communicate with DeJoya
      Griffith & Company of Henderson, Nevada, in order to efficiently and
      effectively prepare and timely file our periodic reports. As a result, on June
      16, 2006, we engaged the services of James Stafford, Chartered Accountants,
      of
      Vancouver, BC, Canada, an independent chartered registered accounting firm,
      as
      its principal accountant to audit and review our financial statements. Our
      decision to change auditors was based solely on location, convenience and time
      factors.





DeJoya
      Griffith & Company's audit report on the financial statements for the fiscal
      year ended December 31, 2005 included in our initial Form SB-2 registration
      statement, and amendments thereto, did not contain any adverse opinion or
      disclaimer of opinion, nor were they qualified or modified as to uncertainty,
      audit scope or accounting principle. Their audit report, dated February 13,
      2006
      did contain a "going concern" paragraph concerning an uncertainty as to the
      ability of Registrant to continue as a going concern.





There
      have been no disagreements with James Stafford, Chartered Accountants, nor
      were
      there any with DeJoya Griffith & Company, on any matter of accounting
      principles or practices, financial statement disclosures, or auditing scopes
      or
      procedures which, if not resolved to their satisfaction, would have caused
      either firm to make reference to the subject matter in connection with its
      reports and/or reviews of our consolidated financial statements during the
      periods reported on by them. None of the reportable events described in Item
      304(a) (1)(iv) of Regulation S-B occurred.





Neither
      Typhoon Tunes nor anyone on our behalf consulted James Stafford, Chartered
      Accountants, nor DeJoya Griffith & Company, on any matter relating to the
      application of accounting principles to a specific completed or contemplated
      transaction or the type of audit opinion that might be rendered on our financial
      statements for the fiscal year ended May 31, 2006.


13


**Item
      8a. Accounting Controls and Procedures**





***Critical
      Accounting Policies***





The
      financial statements included herein have been prepared pursuant to the rules
      and regulations of the Securities and Exchange Commission. Management believes
      the disclosures made are adequate to make the information not misleading. The
      financial statements and accompanying notes are prepared in accordance with
      the
      United States generally accepted accounting principles. Preparing financial
      statements 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. These estimates and
      assumptions are affected by Management's application of accounting policies.
      These important accounting policies include the successful efforts method of
      accounting for property and equipment, revenue recognition, accounting for
      income taxes and foreign currency translation.





Management
      maintains disclosure controls and procedures designed to ensure that we are
      able
      to timely collect the information we are required to disclose in our reports
      filed with the U.S. Securities and Exchange Commission.





As
      of the
      end of the period covered by this report, we performed an evaluation, under
      the
      supervision and with the participation of our Management, of the effectiveness
      of the design and operation of our disclosure controls and procedures pursuant
      to Exchange Act Rule 13a-14. Based upon the evaluation, our Principal Executive
      Officer and Principal Accounting Officer concluded that the current disclosure
      controls are effective in timely alerting us to any material information
      required to be included in our periodic SEC filings.





We
      also
      maintain a system of internal controls designed to provide reasonable assurance
      that (i) transactions are executed in accordance with Management's general
      and
      specific authorization; (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with the United States
      generally accepted accounting principles and to maintain accountability for
      assets; (ii) access to assets is permitted only in accordance with Management's
      general or specific authorization; and (iv) the recorded accountability for
      assets is compared with the existing assets at reasonable intervals and
      appropriate action is taken with respect to any differences. We believe that
      our
      internal controls are effective to provide reasonable assurance that our
      financial statements are fairly presented in conformity with generally accepted
      accounting principals. Since our most recent evaluation, there have been no
      changes in our internal controls or in other factors that could significantly
      affect our internal controls, nor were any corrective actions required with
      regard to significant deficiencies and material weaknesses. However, our
      auditors did not test the effectiveness of nor relied on our internal controls
      for the fiscal year ended May 31, 2006.





**PART
      III**




**Item
      9. Directors, Executive Officers, Promoters and Control Persons; Compliance
      with
      Section 16(a) of the Exchange Act**





***Management***





The
      following table sets forth the names, positions and ages of the executive
      officers and directors. Directors are elected at the annual meeting of
      stockholders and serve for one year or until their successors are elected and
      qualify. Officers are elected by the Board of Directors and their terms of
      office are, except to the extent governed by employment contract, at the
      discretion of the Board of Directors.








14





*Name
      and
      Address* *Age* *Position(s)*




James
      Shepard     41   President,
      CEO,
      Secretary,  Treasurer CFO, Principal Accounting Officer and
      Director


306-1917
      West 4th Ave.


Vancouver,
      British Columbia


Canada,
      V6J 1M7





The
      person named above is expected to hold his offices/positions until the next
      annual meeting of our stockholders.





***Background
      Information about Our Sole Officer and Director***





James
      Shepard has been our sole officer and director since inception. Mr. Shepard
      devotes approximately 20 hours per week to our business. Since 1992, Mr. Shepard
      has been employed by JGS Events Inc., a company of which he is the owner,
      president and founder. With extensive experience in trade show production,
      he
      owns and has produced many shows including:





-
      4th
      World Chinese Entrepreneurs Convention Industry & Trade
      Exhibition


-
      Aerospace North America Home Improvement Trade Show


-
      Alberta
      Heavy Construction Show


-
      Pacific
      Agriculture Show


-
      Aqua
      '92


-
      Pacific
      Rim Computer Show


-
      Cultus
      Lake Floating Boat Show


-
      Property Management Trade Show


-
      Exfor
      West


-
      Ship to
      Shore


-
      eWorld
      Exhibition & Conference


-
      Spring
& Fall Home Shows


-
      Heavy
      Construction Show


-
      Vancouver Spring & Fall Gift Show


-
      Home-Based Business & Opportunities Show


-
      Wood
      Technology Show





Prior
      to
      forming JGS Events, Mr. Shepard worked with Southex Exhibitions as sales
      manager/show management. James Shepard completed a Bachelor of Arts from the
      University of British Columbia in 1988.








***Section
      16(a) Beneficial Ownership Reporting Compliance***





Section
      16(a) of the Securities Exchange Act of 1934 requires our directors and
      executive officers, and persons who own more than ten percent of our Common
      Stock, to file with the Securities and Exchange Commission initial reports
      of
      ownership and reports of changes of ownership of our Common Stock. Officers,
      directors and greater than ten percent stockholders are required by SEC
      regulation to furnish us with copies of all Section 16(a) forms they file.
      To
      the best of our knowledge, all Section 16(a) filing requirements applicable
      to
      our officers, directors and greater than ten percent beneficial owners were
      complied with. In making these disclosures, we have relied solely on a review
      of
      the copies of such reports furnished to us and written representations by our
      directors, executive officers and greater than ten percent stockholders.







15


***Code
      of Ethics***





At
      this
      time, we have not adopted a formal Code of Ethics that applies to the Chief
      Financial Officer. We have, however, followed an informal Code of Ethics
      requiring Board of Director approval of any material transaction involving
      our
      Chief Financial Officer. We believe this procedure reasonably deters material
      wrongdoing and promotes honest and ethical conduct from our executive
      officers.





**Item
      10. Executive Compensation**





Our
      officers and directors do not presently receive any cash or non-cash
      compensation for their services and there are currently no plans to implement
      any such compensation. They are, however, reimbursed for any out-of-pocket
      expenses incurred on our behalf and have received equity compensation. As a
      result, no Summary Compensation Table is included in this annual
      report.




There
      are
      no employment agreements, other arrangements or understandings between any
      executive officer and any director or other person pursuant to which any person
      was selected as a director or an executive officer.





There
      were no stock options, SARs or stock warrants granted as bonuses or compensation
      during the fiscal year ended May 31, 2006.





We
      do not
      have any standard arrangements pursuant to which directors are compensated
      for
      services as directors.





In
      addition, no pension or retirement benefit plan has been adopted and none is
      proposed at this time. There are currently no benefits available or planned
      for
      our officers or directors.




**ITEM
      11. Security Ownership of Certain Beneficial Owners and
      Management**





The
      following table sets forth certain information regarding Common Stock
      beneficially owned on the date of this filing for (i) each shareholder known
      by
      us to be the beneficial owner of five (5%) percent or more of our issued and
      outstanding Common Stock, (ii) each executive officers and directors, and (iii)
      all executive officers and directors as a group. As of the date of the filing
      of
      this annual report, there were 9,000,000 shares of Common Stock issued and
      outstanding.





**Name
                and Address of Beneficial Owner**
            **Position(s)
                Held**
            **Nature
                and Amount of****Beneficial
                Ownership (1)**
            **Percent
                of Outstanding Common Stock**James
                Shepard
            President,
                Chief Executive
            Direct
                9,000,000
            100%306-1917
                West 4th Ave. Vancouver, BC
            Officer,
                Principal Accounting Officer, Secretary, Treasurer and
                Director**All
                Officers and Directors**
            
            9,000,000
            100%**as
                a Group (1 person)**





(1)
      In
      general, a person is considered a beneficial owner of a security if that person
      has or shares the power to vote or direct the voting of such security, or the
      power to dispose of such security. A person is also considered to be a
      beneficial owner of any securities of which the person has the right to acquire
      beneficial ownership within (60) days.


16





**Changes
      in Control**





There
      are
      no arrangements known to us, the operation of which may at a subsequent date
      result in a change of control of our company.





**Item
      12. Certain Relationships and Related Transactions**





At
      May
      31, 2006, a total of $3,500 was due to James Shepard, our sole officer and
      director for monies advanced to us for operating expenses until completion
      of
      the sale of our initial public offering and receipt of the proceeds to implement
      our proposed business plans. The advances made by Mr. Shepard are non-interest
      bearing, unsecured and have no fixed terms of repayment.





**Item
      13. Exhibits and Reports on Form 8-K**





The
      following exhibits, marked with an asterisk and required to be filed hereunder,
      are incorporated herein by reference and can be found in their entirety in
      our
      original Form SB-2 Registration Statement, filed under our SEC File Number
      333-131965 on the SEC website at www.sec.gov:





**Exhibit
      No.**   **Description**




*
      3(i) Articles
      of Incorporation


*
      3(ii) Bylaws


23 Consent
      of Accountants


31.1 Sec.
      302
      Certification of President


31.2 Sec.
      302
      Certification of Principal Accounting Officer/CFO


32.1 Sec.
      906
      Certification of President


32.2 Sec.
      906
      Certification of Principal Accounting Officer/CFO





**Item
      14. Principal Accountant Fees and Services**





**Audit
      Fees**





The
      aggregate fees billed for professional services rendered by our principal
      accountant for the audit of our annual financial statements for the fiscal
      year
      ended May 31, 2006 were $4,500.





***Audit
      Related Fees***





We
      incurred no fees for the fiscal year ended May 31, 2006 for assurance and
      related services by our principal accountant that were reasonably related to
      the
      performance of the audit or review of our financial statements, and not reported
      under Audit Fees above.





***Tax
      Fees***





There
      were no fees billed for professional services rendered by our principal
      accountant for tax compliance, tax advice, preparation and filing of tax returns
      and tax planning for the fiscal year ended May 31, 2006.





***All
      Other Fees***





We
      incurred no other fees during the fiscal year ended May 31, 2006 and 2005 for
      products and services rendered by our principal accountants.


17





***Audit
      Committee Requirements***




Section 10A(i) of
      the Exchange Act prohibits our auditors from performing audit services for
      us,
      as well as any services not considered to be "audit services", unless such
      services are pre-approved by the audit committee of the Board of Directors,
      or
      unless the services meet certain *de
      minimis* standards. Because we are still in the development stage and have not yet
      completed our business plans and/or generated any revenues, we have not yet
      appointed an audit committee. Our Board of Directors ensure that:




·
            All
                audit services that the auditor may provide to us or any subsidiary
                (including, without limitation, providing comfort letters in connection
                with securities underwritings or statutory audits) as required by
                §10A(i)(1)(A) of the Exchange Act (as amended by the Sarbanes-Oxley
                Act of
                2002) are preapproved by the Board.




·
            All
                non-audit services (other than certain*de
                minimis*services described in §10A(i)(1)(B) of the Exchange Act (as amended by the
                Sarbanes-Oxley Act of 2002)) that the auditors propose to provide
                to us or
                any of our subsidiaries are preapproved by the Board.




All
      audit
      fees were approved by the Board of Directors.





**SIGNATURES**







Pursuant
      to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
      of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





July
      29,
      2006     **Typhoon
      Tunes Inc., Registrant**





/s/
      James
      Shepard


By:
      James
      Shepard, President, CEO, Secretary,


Treasurer,
      CFO, Principal Accounting Officer and


Sole
      Director





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





July
      29,
      2006******Typhoon
      Tunes Inc., Registrant**





/s/
      James
      Shepard


By:
      James
      Shepard, President, CEO, Secretary,


Treasurer,
      CFO, Principal Accounting Officer and


Sole
      Director




















18



































**TYPHOON
      TUNES INC.**


**(A
      Development Stage Company)**





Financial
      Statements


(Expressed
      in U.S. Dollars)


**31
      May 2006**














3
 19




**James
                  Stafford**
  **James
        Stafford**
 **Chartered
        Accountants***
 Suite
        350
        - 1111 Melville Street
 Vancouver,
        British Columbia
 Canada
        V6E 3V6
 Telephone
        +1 604 669 0711
 Facsimile
        +1 604 669 0754
 * Incorporated professional
    **Report
        of Independent Registered Public Accounting Firm**
   **To
        the Board of Directors and Stockholder of**  **Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 
 We
        have
        audited the balance sheet of **Typhoon
        Tunes Inc.** (the
        “Company”) as at 31 May 2006, and the related statements of operations, cash
        flows and changes in stockholder’s deficiency for the period from the date of
        inception on 30 August 2005 to 31 May 2006. 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 of America). Those standards require
        that we plan and perform the audits to obtain reasonable assurance about
        whether
        the financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        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 the Company as of 31 May 2006
        and
        the results of its operations, cash flows and changes in stockholder’s
        deficiency for the period from the date of inception on 30 August 2005 to
        31 May
        2006 in conformity with accounting principles generally accepted in the United
        States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 1 to the
        financial statements, conditions exist which raise substantial doubt about
        the
        Company’s ability to continue as a going concern unless it is able to generate
        sufficient cash flows to meet its obligations and sustain its operations.
        Management’s plans in regard to these matters are also described in Note 1 .
        The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
 
 */s/
        “James Stafford”*
 
 Vancouver,
        Canada **Chartered
        Accountants**
 
 21
        July
        2006













20


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Balance
      Sheet


(Expressed
      in U.S. Dollars)


**As
      at 31 May
      2006**





**$****Assets****Current**Cash
                and cash equivalents
            
            
            
            585585**Liabilities****Current**Accounts
                payable and accrued liabilities (Note 3)
            
            
            
            8,021Loan
                payable (Note 4)
            
            
            
            3,000Due
                to related party (Note 5)
            
            
            
            3,50014,521**Stockholder’s
                deficiency****Capital
                stock**(Note 6)Authorized75,000,000
                common shares, par value $0.001Issued
                and outstanding2006
                - 9,000,000 common shares, par value $0.001
            
            
            
            9,000**Deficit,
                accumulated during the development stage**
            
            
            
            (22,936)(13,936)585





**Nature
      and Continuance of Operations** (Note
      1)





**On
      behalf of the Board:**





/s/
      James
      Shepard, Director























21


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Statement
      of Operations


(Expressed
      in U.S. Dollars)


**For
      the period from the date of inception on 30 August 2005 to 31 May
      2006**





**$****Expenses**Filing
                fees
            
            
            
            
            
            204Legal
                and accounting
            
            
            
            
            
            20,970Office
                and miscellaneous
            
            
            
            
            
            905Transfer
                agent fees
            
            
            
            
            
            857**Net
                loss for the period**
            
            
            
            
            
            22,936**Basic
                and diluted earnings per common share**
            
            
            
            
            
            (0.003)**Weighted
                average number of common shares used in per**
              **share
                calculations**(Note
                2)
            
            
            
            
            
            9,000,000





22


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Statement
      of Cash Flows


(Expressed
      in U.S. Dollars)


**For
      the period from the date of inception on 30 August 2005 to 31 May
      2006**





**$****Cash
                flows from operating activities**Net
                loss for the period
            
            
            
            
            
            (22,936)Changes
                in operating assets and liabilitiesIncrease
                in accounts payable and accrued liabilities
            
            
            
            
            
            8,021(14,915)**Cash
                flows from financing activities**Common
                shares issued for cash
            
            
            
            
            
            9,000Increase
                in note payable
            
            
            
            
            
            3,000Increase
                in due to related party
            
            
            
            
            
            3,50015,500**Increase
                in cash and cash equivalents, being cash and cash equivalents, end
                of
                period**
            585





**Supplemental
      Disclosures with Respect to Cash Flows** (Note
      8)





23


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Statement
      of Changes in Stockholder’s Deficiency


(Expressed
      in U.S.
      Dollars)











**Number
                of shares issued**
            **Share
                Capital**
            **Additional
                paid in capital**
            **Deficit,
                accumulated during the development stage**
            **Stockholder’s
                deficiency****$**
            
            **$**
            
            **$**
            
            **$****Balance
                at 30 August 2005 (inception)**
            
            -
            
            -
            
            -
            
            -
            
            -Common
                share issued - cash ($0.001 per share) (Note 6)
            
            9,000,000
            
            9,000
            
            -
            
            -
            
            9,000Net
                loss for the period
            
            -
            
            -
            
            -
            
            (22,936)
            
            (22,936)**Balance
                at 31 May 2006**
            
            9,000,000
            
            9,000
            
            -
            
            (22,936)
            
            (13,936)











24


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Notes
      to
      Financial Statements


(Expressed
      in U.S. Dollars)


**31
      May
      2006**





**1.
      Nature and Continuance of Operations**





Typhoon
      Tunes Inc. (the “Company”) was incorporated under the laws of the State of
      Nevada on 30 August 2005. The Company was formed to pursue our concept of
      making the worldwide inventory of online music available to customers in a
      friendly and accessible fashion through retail mall kiosks and other
      point-of-purchase locations, including on the web at
      typhoonmusic.net.





The
      Company plans to initially offer download assistance of music from third-party
      Internet music suppliers to the public in what it believes to be a new format,
      designed to target people who are not Internet or computer savvy and, thus,
      not
      able to download their music preferences on their own.





Once
      the
      Company is operational and as funds allow, the Company also intends to expand
      into a new genre, "music on demand" - downloading music requested by customers
      and composing CDs for them. By offering customized music, the Company feels
      it
      can be the solution for consumers looking for an easy and convenient way to
      get
      the music they want, when they want it. Additionally, if customers wish, they
      will have the option to purchase pre-made music mixes. For example, this could
      include "today's top ten New York club hits" or "London's favorite hits of
      the
      year". At a later date, after our first year of operations, we will consider
      expanding our offerings to include digital music players and other
      merchandise.





The
      Company is a development stage enterprise, as defined in Statements
      of Financial Accounting Standards (“SFAS”)
      No. 7. The Company is devoting all of its present efforts in securing and
      establishing a new business, and its planned principle operations have not
      commenced. As a result, no revenue has been derived during the organization
      period. All
      losses accumulated since inception, have been considered as part of the
      Company’s development stage activities.





The
      Company’s financial statements as at 31 May 2006 and for the period from the
      date of inception on 30 August 2005 to 31 May 2006 have been prepared on a
      going concern basis, which contemplates the realization of assets and the
      settlement of liabilities and commitments in the normal course of business.
      The
      Company has a loss of $22,936 for the period from the date of inception on
      30
      August 2005 to 31 May 2006 and has a working capital deficit of $13,936 at
      31
      May 2006.





Management
      cannot provide assurance that the Company will ultimately achieve profitable
      operations or become cash flow positive, or raise additional debt and/or equity
      capital. Management believes that the Company’s capital resources should be
      adequate to continue operating and maintaining its business strategy during
      the
      fiscal year ending 31 May 2007. However, if the Company is unable to raise
      additional capital in the near future, due to the Company’s liquidity problems,
      management expects that the Company will need to curtail operations, liquidate
      assets, seek additional capital on less favorable terms and/or pursue other
      remedial measures. These financial statements do not include any adjustments
      related to the recoverability and classification of assets or the amounts and
      classification of liabilities that might be necessary should the Company be
      unable to continue as a going concern.

















25


**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**


At
      31 May
      2006, the Company had suffered losses from development stage activities to
      date.
      Although management is currently attempting to implement its business plan,
      and
      is seeking additional sources of equity or debt financing, there is no assurance
      these activities will be successful. Accordingly, the Company must rely on
      its
      president to perform essential functions without compensation until a business
      operation can be commenced. These factors raise substantial doubt about the
      ability of the Company to continue as a going concern. The financial statements
      do not include any adjustments that might result from the outcome of this
      uncertainty.





**2.
      Significant Accounting Policies**





The
      following is a summary of significant accounting policies used in the
      preparation of these financial statements.





**Basis
      of presentation**





The
      financial statements of the Company have been prepared in accordance with
      accounting principles generally accepted in the United States of America
      applicable to development stage enterprises, and are expressed in U.S. dollars.
      The Company’s fiscal year end is 31 May.





**Cash
      and cash equivalents**





Cash
      and
      cash equivalents include highly liquid investments with original maturities
      of
      three months or less.




**Financial
      instruments**





The
      carrying value of cash, accounts payable and accrued liabilities, loan payable
      and due to related party approximates their fair value because of the short
      maturity of these instruments. The Company’s operations are in Canada and
      virtually all of its assets and liabilities are giving rise to significant
      exposure to market risks from changes in foreign currency rates. The Company’s
      financial risk is the risk that arises from fluctuations in foreign exchange
      rates and the degree of volatility of these rates. Currently, the Company does
      not use derivative instruments to reduce its exposure to foreign currency
      risk.





**Derivative
      financial instruments**





The
      Company has not, to the date of these financial statements, entered into
      derivative instruments to offset the impact of foreign currency
      fluctuations.





























26






**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**


**Income
      taxes**





Deferred
      income taxes are reported for timing differences between items of income or
      expense reported in the financial statements and those reported for income
      tax
      purposes in accordance with SFAS No. 109, *Accounting
      for Income Taxes* ,
      which
      requires the use of the asset/liability method of accounting for income taxes.
      Deferred income taxes and tax benefits are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      bases, and for tax losses and credit carry-forwards. Deferred tax assets and
      liabilities are measured using enacted tax rates expected to apply to taxable
      income in the years in which those temporary differences are expected to be
      recovered or settled. The Company provides for deferred taxes for the estimated
      future tax effects attributable to temporary differences and carry-forwards
      when
      realization is more likely than not.





**Basic
      and diluted net loss per share**





The
      Company computes net loss per share in accordance with SFAS No. 128,
“ *Earnings
      per Share”* .
      SFAS
      No. 128 requires presentation of both basic and diluted earnings per share
      (“EPS”) on the face of the income statement. Basic EPS is computed by dividing
      net loss available to common shareholders (numerator) by the weighted average
      number of shares outstanding (denominator) during the period. Diluted EPS gives
      effect to all potentially dilutive common shares outstanding during the period
      using the treasury stock method and convertible preferred stock using the
      if-converted method. In computing diluted EPS, the average stock price for
      the
      period is used in determining the number of shares assumed to be purchased
      from
      the exercise of stock options or warrants. Diluted EPS excludes all potentially
      dilutive shares if their effect is anti-dilutive.





**Comprehensive
      loss**





SFAS
      No.
      130, “ *Reporting
      Comprehensive Income”* ,
      establishes standards for the reporting and display of comprehensive loss and
      its components in the financial statements. As at 31 May 2006, the Company
      has
      no items that represent a comprehensive loss and, therefore, has not included
      a
      schedule of comprehensive loss in the financial statements.





**Revenues
      and Expenses Recognition**





The
      Company recognizes revenue in accordance with Securities and Exchange Commission
      Staff Accounting Bulletin No. 104 ("SAB 104"), " *Revenue
      Recognition in Financial Statements"* .
      The
      Company recognizes revenue when all of the following criteria are met: 1) there
      is persuasive evidence that an arrangement exists, 2) delivery of goods has
      occurred, 3) the sales price is fixed or determinable, and 4) collectibility
      is
      reasonably assured. The Company uses guidance provided by the Financial
      Accounting Standards Board's Emerging Issues Task Force Item 99-19 ("EITF 99-19)
      in determining whether to report revenues on either a gross or net
      basis.

















27


**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May  2006**




Revenues
      are reported on a gross basis when the majority of the following indicators
      exist: 1) the Company is the primary obligor in the arrangement, 2) the Company
      has general inventory risk, 3) latitude in establishing price rests with the
      Company, 4) the Company changes the product or performs part of the service,
      5)
      the Company has discretion in supplier selection, 6) product or service
      specifications are determined in part by the Company, 7) physical loss inventory
      risk exists for the Company, and 8) the Company has credit risk. The Company
      reports revenues on a gross basis when it acts as principal and the preceding
      indicators exist.




Revenues
      are reported on a net basis when the majority of the following indicators exist:
      1) the supplier is the primary obligor in the arrangement, 2) the amount the
      Company earns is fixed, and 3) the supplier has credit risk. The Company reports
      revenues on a net basis when it provides brokerage services, including assisting
      buyers and sellers in preparing and coordinating the purchase and delivery
      of
      products, generating commission revenues from facilitating the
      process.





**Segments
      of an enterprise and related information**





SFAS
      No.
      131, “ *Disclosures
      about Segments of an Enterprise and Related Information”* ,
      supersedes SFAS No. 14, “ *Financial
      Reporting for Segments of a Business Enterprise”* .
      SFAS
      131 establishes standards for the way that public companies report information
      about operating segments in annual financial statements and requires reporting
      of selected information about operating segments in interim financial statements
      issued to the public. It also establishes standards for disclosures regarding
      products and services, geographic areas and major customers. SFAS 131 defines
      operating segments as components of a company about which separate financial
      information is available that is evaluated regularly by the chief operating
      decision maker in deciding how to allocate resources and in assessing
      performance. The Company has evaluated this SFAS and does not believe it is
      applicable at this time.





**Start-up
      expenses**





The
      Company has adopted Statement of Position No. 98-5, “ *Reporting
      the Costs of Start-up Activities”* ,
      which
      requires that costs associated with start-up activities be expensed as
      incurred.  Accordingly, start-up costs associated with the Company's
      formation have been included in the Company's general and administrative
      expenses for the period from the date of inception on 30 August 2005 to 31
      May
      2006.





**Foreign
      currency translation**





The
      Company’s functional and reporting currency is in U.S. dollars. The financial
      statements of the Company are translated to U.S. dollars in accordance with
      SFAS
      No. 52, “ *Foreign
      Currency Translatio”n* .
      Monetary assets and liabilities denominated in foreign currencies are translated
      using the exchange rate prevailing at the balance sheet date. Gains and losses
      arising on translation or settlement of foreign currency denominated
      transactions or balances are included in the determination of income. The
      Company has not, to the date of these financial statements, entered into
      derivative instruments to offset the impact of foreign currency fluctuations.











28


**Typhoon
      Tunes Inc.**


**(A
      Development Stage Company)**


Notes
      to
      Financial Statements


(Expressed
      in U.S. Dollars)


**31
      May
      2006**


**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 amounts of assets and liabilities
      and
      disclosures of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenditures during the
      reporting period. Actual results could differ from these estimates.





**Stock-based
      compensation**





Effective 1
      March 2006, the Company adopted the provisions of SFAS No. 123(R),
“ *Share-Based
      Payment* ”,
      which
      establishes accounting for equity instruments exchanged for employee services.
      Under the provisions of SFAS 123(R), stock-based compensation cost is measured
      at the grant date, based on the calculated fair value of the award, and is
      recognized as an expense over the employees’ requisite service period (generally
      the vesting period of the equity grant). Before 1 March 2006, the Company
      accounted for stock-based compensation to employees in accordance with
      Accounting Principles Board Opinion No. 25, “ *Accounting
      for Stock Issued to Employees* ”,
      and
      complied with the disclosure requirements of SFAS No. 123, “ *Accounting
      for Stock-Based Compensation* ”. 
      The Company adopted FAS 123(R) using the modified prospective method, which
      requires the Company to record compensation expense over the vesting period
      for
      all awards granted after the date of adoption, and for the unvested portion
      of
      previously granted awards that remain outstanding at the date of adoption.
      Accordingly, financial statements for the periods prior to 1 March 2006 have
      not
      been restated to reflect the fair value method of expensing share-based
      compensation. Adoption of SFAS No. 123(R) does not change the way the
      Company accounts for share-based payments to non-employees, with guidance
      provided by SFAS 123 (as originally issued) and Emerging Issues Task Force
      Issue
      No. 96-18, “ *Accounting
      for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* ”.





**Recent
      accounting pronouncements**





In
      March
      2006, the Financial Accounting Standards Board (the “FASB”) issued SFAS
      No. 156, “ *Accounting
      for Servicing of Financial Assets* ”,
      which
      amends SFAS Statement No. 140. SFAS No. 156 may be adopted as early as 1 January
      2006, for calendar year-end entities, provided that no interim financial
      statements have been issued. Those not choosing to early adopt are required
      to
      apply the provisions as of the beginning of the first fiscal year that begins
      after 15 September 2006 (e.g., 1 January 2007, for calendar year-end
      entities).  The intention of the new statement is to simplify accounting
      for separately recognized servicing assets and liabilities, such as those common
      with mortgage securitization activities, as well as to simplify efforts to
      obtain hedge-like accounting.  Specifically, the FASB said SFAS No. 156
      permits a servicer using derivative financial instruments to report both the
      derivative financial instrument and related servicing asset or liability by
      using a consistent measurement attribute, or fair value. The
      adoption of SFAS No. 156 is not expected to have a material impact on the
      Company’s financial position, results of operations or cash flows.

















29


**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**


In
      February 2006, the FASB issued SFAS No. 155, “ *Accounting
      for Certain Hybrid Financial Instruments* ”,
      which
      amends SFAS No. 133, “ *Accounting
      for Derivative Instruments and Hedging Activities* ”
and
      SFAS No. 140, “ *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* ” *.* SFAS
      No. 155 permits fair value measurement for any hybrid financial instrument
      that contains an embedded derivative that otherwise would require bifurcation,
      establishes a requirement to evaluate interests in securitized financial assets
      to identify interests that are freestanding derivatives or hybrid financial
      instruments containing embedded derivatives. The
      adoption of SFAS No. 155 is not expected to have a material impact on the
      Company’s financial position, results of operations or cash flows.





In
      May
      2005, the FASB issued SFAS No. 154, “ *Accounting
      Changes and Error Corrections - A Replacement of APB Opinion No. 20 and SFAS
      No.
      3”* .
      SFAS
      No. 154 changes the requirements for the accounting for and the reporting of
      a
      change in accounting principle and applies to all voluntary changes in
      accounting principle. It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. SFAS No. 154 requires retrospective application
      to prior periods' financial statements of changes in accounting principle,
      unless it is impracticable to determine either the period-specific effects
      or
      the cumulative effect of the change. The provisions of SFAS No. 154 are
      effective for accounting changes and correction of errors made in fiscal years
      beginning after 15 December 2005. The adoption of this standard is not expected
      to have a material effect on the Company's results of operations or financial
      position.





In
      December 2004, the FASB issued SFAS No. 153, “ *Exchanges
      of Nonmonetary Assets - An Amendment of APB Opinion No. 2”9* .
      The
      guidance in APB Opinion No. 29, “ *Accounting
      for Nonmonetary Transactions* ,”
is
      based on the principle that exchanges of nonmonetary assets should be measured
      based on the fair value of the assets exchanged. The guidance in that Opinion,
      however, included certain exceptions to that principle. SFAS No. 153 amends
      Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetary exchange
      has commercial substance if the future cash flows of the entity are expected
      to
      change significantly as a result of the exchange. The provisions of SFAS No.
      153
      are effective for nonmonetary asset exchanges occurring in fiscal periods
      beginning after 15 June 2005. Early application is permitted and companies
      must
      apply the standard prospectively. The adoption of this standard is not expected
      to have a material effect on the Company's results of operations or its
      financial position.





The
      FASB
      has also issued SFAS No. 151 and 152, but they will not have an effect of the
      financial reporting of the Company.


3.
            **Accounts
                Payable and Accrued Liabilities**





Accounts
      payable and accrued liabilities are non-interest bearing, unsecured and have
      settlement dates within one year.














30






**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**


**4.
      Note payable**





The
      note
      payable is non-interest bearing, unsecured and has no fixed term of
      repayment.





**5.
      Due to Related Party**





As
      at 31
      May 2006, the amount due to related party consists of $3,500 payable to a
      director and shareholder of the Company. This balance is non-interest bearing,
      unsecured and has no fixed terms of repayment.




**6.
      Capital Stock**





**Authorized**





The
      total
      authorized capital is 75,000,000 common shares with a par value of $0.001 per
      common share.





**Issued
      and outstanding**





The
      total
      issued and outstanding capital stock is 9,000,000 common shares with a par
      value
      of $0.001 per common share.





On
      31
      October 2005, 9,000,000 common shares of the Company were issued for cash
      proceeds of $9,000.





There
      were no common share purchase options or warrants outstanding as of 31 May
      2006.





By
      a
      prospectus filed 21 February 2006, the Company announced an offering of
      10,000,000 Units (the “Units”) on a “self-underwritten” basis under which
      officers and directors of the Company will attempt to sell the Units. The Units
      will be offered at a fixed price of $0.025 per Unit for a period of 180 days
      from the date of the prospectus. Each Unit consists of one common share of
      the
      Company and one common share purchase warrant. Each common share purchase
      warrant entitles the holder to purchase one additional common share of the
      Company at a price of $0.10 per share for a period of two years from the date
      of
      the offering. Under the terms of this “all-or-nothing” offering, the Company
      must sell all of the Units before it can use any of the proceeds, and in the
      event that the Company does not sell all of the Units within 180 days from
      the
      date of the prospectus, all funds raised must be returned to the holders,
      without deductions or interest.





**7.    Income
      Taxes**





There
      are
      no current or deferred tax expenses for the year ended 31 May 2006 due to the
      Company’s loss position. The Company has fully reserved for any benefits of
      these losses. The deferred tax consequences of temporary differences in
      reporting items for financial statement and income tax purposes are recognized,
      as appropriate. Realization of the future tax benefits related to the deferred
      tax assets is dependent on many factors, including the Company’s ability to
      generate taxable income within the net operating loss carryforward period.
      Management has considered these factors in reaching its conclusion as to the
      valuation allowance for financial reporting purposes.








31


**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**


The
      provision for refundable federal income tax consists of the
      following:





**For
                the period from the date of inception on 30 August 2005 to 31 May
                2006****$**Deferred
                tax asset attributable to:Current
                operations
            
            
            
            
            
            (7,798)Less:
                Change in valuation allowance
            
            
            
            
            
            7,798Net
                refundable amount
            
            
            
            
            
            -





The
      composition of the Company’s deferred tax assets as at 31 May 2006 is as
      follows:





**31
                May 2006****$**Net
                income tax operating loss carryforward
            
            
            
            (22,936)Statutory
                federal income tax rate
            
            
            
            34%Effective
                income tax rate
            
            
            
            0%Gross
                deferred tax assets
            
            
            
            (7,798)Less:
                Valuation allowance
            
            
            
            7,798Net
                deferred tax asset
            
            
            
            -





The
      potential income tax benefit of these losses has been offset by a full valuation
      allowance.





As
      at 31
      May 2006, the Company has an unused net operating loss carry-forward balance
      of
      approximately $22,936 that is available to offset future taxable income. This
      unused net operating loss carry-forward balance expires in 2026.























32


**Typhoon
        Tunes Inc.**
 **(A
        Development Stage Company)**
 Notes
        to
        Financial Statements
 (Expressed
        in U.S. Dollars)
 **31
        May
        2006**





**8.
      Supplemental Disclosures with Respect to Cash Flows**





**For
                the period from the date of inception on 30 August 2005 to 31 May
                2006****$**Cash
                paid during the year for interest
            
            
            
            
            
            -Cash
                paid during the year for income taxes
            
            
            
            
            
            -





**9.**
            **Subsequent
                Event**





**** Subsequent
      to 31 May 2006, the Company received subscriptions for 1,440,000 Units for
      cash proceeds
      of $36,000 ( Note 6).