As Filed with the Securities and Exchange Commission on 03/30/2006
Registration No. 333-127612
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EIGHTH AMENDMENT
FUEGO ENTERTAINMENT, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Nevada 7900 20-2078925
- ----------------------------- ---------------------------- ------------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
19250 NW 89th Court
Miami, FL 33018
(305) 829-3777 (ADDRESS
AND TELEPHONE NUMBER OF PRINCIPAL
EXECUTIVE OFFICES)
HUGO M. CANCIO, CHIEF EXECUTIVE OFFICER
19250 NW 89th Court
Miami, FL 33018
(305) 829-3777 (NAME,
ADDRESS AND TELEPHONE NUMBER OF
AGENT FOR SERVICE)
COPIES TO:
THE O'NEAL LAW FIRM, P.C.
Attention: William D. O'Neal, Esq.
17100 E. Shea Boulevard
Suite 400-D
Fountain Hills, Arizona 85268
Tel:(480) 812-5058
Fax: (480) 816-9241
Approximate date of proposed sale to the public: From time to time after
the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]
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If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
Title of Securities to be Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
Registered (1) registered price per share (3) offering registration
price (US $) Fee (2)
- -----------------------------------------------------------------------------------------------------------------------
Common stock to be Offered 10,459,062 $0.25 $2,614,765.50 307.75
for resale by selling
stockholders
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(1) In the event of a stock split, stock dividend, or similar transaction
involving our common stock, the number of shares registered shall
automatically be increased to cover the additional shares of common stock
issuable pursuant to Rule 416 under the Securities Act of 1933, as amended.
(2) Fee calculated in accordance with Rule 457(c) of the Securities Act.
Estimated for the sole purpose of calculating the registration fee.
(3) Fixed offering price was set by the selling shareholders until securities
are quoted on the OTC Bulletin Board or other national exchange, and
thereafter at prevailing market prices or privately negotiated prices.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE
DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SEC IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED ______________.
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FUEGO ENTERTAINMENT, INC.
A NEVADA CORPORATION
RELATING TO THE RESALE OF UP TO 10,459,062 SHARES OF
FUEGO ENTERTAINMENT, INC. COMMON STOCK
The prospectus and the registration statement, of which it is a part, are being
filed with the SEC to satisfy our obligations to the recipients of certain
shares of common stock (the "Selling Shareholders") of Fuego Entertainment, Inc.
Accordingly, the prospectus and the registration statement cover the resale by
certain Selling Shareholders of 10,459,062 shares of our common stock which were
issued from January 1, 2005, to December 15, 2005, in connection with private
placements;
There is currently no public market for our shares.
The sales price to the public was set by the selling shareholders at $0.25 per
share for a total of $2,614,765.50. The price of $0.25 per share is a fixed
price until the shares are listed on the OTC Bulletin Board or other national
exchange, and thereafter at prevailing market prices or privately negotiated
prices. We cannot guarantee that our shares of common stock will ever be quoted
on the Over-the-Counter Bulletin Board or other national exchange. As a result,
no public market for our shares of common stock may ever develop and investors
may not be able to resell their shares.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is _____________.
The following table of contents has been designed to help you find important
information contained in this prospectus. We encourage you to read the entire
prospectus.
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TABLE OF CONTENTS
PAGE NUMBER
PROSPECTUS SUMMARY .......................................................... 5
RISK FACTORS ................................................................ 7
FORWARD-LOOKING STATEMENTS ................................................. 11
USE OF PROCEEDS ............................................................ 11
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ................... 12
DIVIDEND POLICY ............................................................ 12
MANAGEMENT'S DISCUSSION AND ANALYSIS ....................................... 12
DESCRIPTION OF BUSINESS .................................................... 20
LEGAL PROCEEDINGS ...........................................................25
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS ............... 26
EXECUTIVE COMPENSATION ......................................................26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..............................27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ . 28
DESCRIPTION OF COMMON STOCK ................................................ 28
PLAN OF DISTRIBUTION ....................................................... 29
DETERMINATION OF OFFERING PRICE ............................................ 31
SELLING SHAREHOLDERS ....................................................... 31
LEGAL MATTERS .............................................................. 34
TRANSFER AGENT ............................................................. 34
EXPERTS .................................................................... 34
INTEREST OF NAMED EXPERTS .................................................. 34
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES .......................................................... 34
WHERE YOU CAN FIND MORE INFORMATION ........................................ 35
FINANCIAL STATEMENTS ....................................................... 36
INDEMNIFICATION OF DIRECTORS AND OFFICERS .................................. 49
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION ................................ 50
RECENT SALES OF UNREGISTERED SECURITIES .................................... 51
EXHIBITS ................................................................... 53
UNDERTAKINGS ............................................................... 54
SIGNATURES ................................................................. 54
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ABOUT THIS PROSPECTUS
This prospectus is part of a resale registration statement. The selling
shareholders ("Selling Shareholders") may sell some or all of their shares in
transactions from time to time.
You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone else to provide you with
different information. If anyone provides you with different information, you
should not rely upon it. You should assume that the information appearing in
this prospectus, as well as the information we file with the Securities and
Exchange Commission ("SEC") and incorporate by reference in this prospectus is
accurate only as of the date of the documents containing the information. As
used in this prospectus, the terms "we", "us", "our", the "Company", and "Fuego
Entertainment, Inc." All dollar amounts refer to United States dollars unless
otherwise indicated.
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "Risk
Factors" section, the financial statements and the notes to the financial
statements.
GENERAL
Fuego Entertainment, Inc. was originally incorporated under the laws of the
State of Nevada on December 30, 2004 as "Durango Entertainment, Inc.". On
February 15, 2005, we filed a Certificate of Amendment with the State of Nevada
changing our name to "Fuego Entertainment, Inc." Our executive offices are
located at 19250 NW 89th Court, Miami, Florida 33018, and our telephone number
is (305) 829-3777.
OUR BUSINESS
We are engaged in the business of directing, production, marketing, and
distribution of entertainment products, including feature and short films,
documentaries, television shows, music, and tour productions. We also provide
management, marketing, and public relations services to the entertainment
industry.
THE OFFERING
The prospectus and the registration statement, of which it is a part, are being
filed with the SEC to satisfy our obligations to the recipients of certain
shares of common stock (the "Selling Shareholders") of Fuego Entertainment, Inc.
Accordingly, the prospectus and the registration statement cover the resale by
certain Selling Shareholders of 10,459,062 shares of our common stock which were
issued from January 1, 2005, through December 15, 2005, in connection with
private placements.
The sales price to the public was set by the selling shareholders at $0.25 per
share for a total of $2,614,765.50. The price of $0.25 per share is a fixed
price until the shares are listed on the OTC Bulletin Board or other national
exchange, and thereafter at prevailing market prices or privately negotiated
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PROSPECTUS SUMMARY - continued
prices. We cannot guarantee that our shares of common stock will ever be quoted
on the Over-the-Counter Bulletin Board or other national exchange. As a result,
no public market for our shares of common stock may ever develop and investors
may not be able to resell their shares. See "Plan of Distribution" on page 27
for a further description of how the Selling Shareholders may dispose of the
shares covered by this prospectus.
NUMBER OF SHARES OUTSTANDING
There were 34,959,562 shares of our common stock issued and outstanding at March
15, 2006.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of our
common stock being offered for sale by the Selling Shareholders. We will incur
all costs associated with this prospectus and related registration statement.
SUMMARY OF FINANCIAL INFORMATION
The following summary financial information for the periods stated summarizes
certain information from our financial statements included elsewhere in this
prospectus. You should read this information in conjunction with Management's
Plan of Operations and the financial statements and the related notes thereto
included elsewhere in this prospectus.
- ------------------------------ ------------------------- --------------------
December 30, 2004
Income Statement Six Months Ended (inception)
November 30, 2005 To May 31, 2005
- ------------------------------ ------------------------- --------------------
Revenues $ 18,819 $125,128
- ------------------------------ ------------------------- --------------------
Net Income (Loss) $(87,424) $ 39,489
- ------------------------------ ------------------------- --------------------
Net Income (Loss per Share) * *
- ------------------------------ ------------------------- --------------------
Balance Sheet
- ------------------------------ ------------------------- --------------------
Total Current Assets $ 32,166 $ 29,239
- ------------------------------ ------------------------- --------------------
Total Current Liabilities $ 67,920 $ 43,310
- ------------------------------ ------------------------- --------------------
Shareholders' Equity $79,894 $ 98,820
- ------------------------------ ------------------------- --------------------
* = less than $0.01 per share
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RISK FACTORS
An investment in our common stock involves a number of very significant risks.
You should carefully consider the following risks and uncertainties in addition
to other information in this prospectus in evaluating our company and its
business before purchasing shares of our common stock. Our business, operating
results and financial condition could be seriously harmed due to any of the
following risks. The risks described below are all of the material risks that we
are currently aware of that are facing our company. You could lose all or part
of your investment due to any of these risks.
WE WILL REQUIRE ADDITIONAL FUNDING IN THE FUTURE TO REMAIN A GOING CONCERN.
Based upon our historical losses from operations, we will require additional
funding in the future. If we cannot obtain capital through financings or
otherwise, our ability to execute our business plan and achieve profitability
will not be possible. Historically, we have funded our operations through the
issuance of equity securities. We may not be able to obtain additional financing
on favorable terms, if at all. In the event the such funding is insufficient or
unavailable, we have not formulated a plan to continue as a going concern and
investors could lose their entire investment.
THERE CAN BE NO ASSURANCE THAT OUR COMMON STOCK WILL EVER BE PUBLICLY TRADED OR
APPRECIATE SIGNIFICANTLY IN VALUE AND INVESTORS MAY NOT BE ABLE TO FIND
PURCHASERS FOR THEIR SHARES OF OUR COMMON STOCK.
There is no public market for shares of our common stock. We cannot guarantee
that an active public market will develop or be sustained. Therefore, investors
may not be able to find purchasers for their shares of our common stock. Should
there develop a significant market for our shares, the market price for those
shares may be significantly affected by such factors as our financial results
and introduction of new products and services. While we, in conjunction with
broker-dealers, intend to apply to the NASD to have our stock publicly traded on
the Over-the-Counter Electronic Bulletin Board, no assurance can be given that
such regulatory approval will ever be received. If our common stock becomes
publicly traded, no assurance can be given that our common stock will ever be
traded on an established national securities exchange or that our business
strategy will be well received by the investment community.
THE SEC HAS ADOPTED RULES THAT REGULATE BROKER-DEALER PRACTICES IN CONNECTION
WITH TRANSACTIONS IN "PENNY STOCKS" THAT COULD NEGATIVELY AFFECT THE LIQUIDITY
OF OUR COMMON STOCK.
Penny stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system). Penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from those rules, to deliver a standardized
risk disclosure document prepared by the SEC, which specifies information about
penny stocks and the nature and significance of risks of the penny stock market.
A broker-dealer must also provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker-dealer, and sales person in the
transaction, and monthly account statements indicating the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that, prior to a transaction in a penny stock not otherwise exempt from
those rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
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RISK FACTORS - continued
purchaser's written agreement to the transaction. If a trading market for our
common stock develops, our common stock will probably become subject to the
penny stock rules, and shareholders may have difficulty in selling their shares.
SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC
MARKET BY THE SELLING STOCKHOLDERS MAY RESULT IN SIGNIFICANT DOWNWARD PRESSURE
ON THE PRICE OF OUR COMMON STOCK AND COULD AFFECT THE ABILITY OF OUR
STOCKHOLDERS TO REALIZE THE CURRENT TRADING PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public market
could cause a reduction in the market price of our common stock. We had
34,959,562 shares of common stock issued and outstanding as of December 15,
2005. When this registration statement is declared effective, the Selling
Stockholders will be able to resell up to 10,459,062 shares of our common stock.
As a result, a substantial number of our shares of common stock may be issued
and may be available for immediate resale, which could have an adverse effect on
the price of our common stock. As a result of any such decreases in price of our
common stock, purchasers who acquire shares from the Selling Stockholders may
lose some or all of their investment.
Any significant downward pressure on the price of our common stock as the
selling stockholders sell their shares of our common stock could encourage short
sales by the selling stockholders or others. Any such short sales could place
further downward pressure on the price of our common stock.
OUR COMPETITORS HAVE SIGNIFICANTLY GREATER FINANCIAL, MANAGERIAL, DISTRIBUTION
AND MARKETING RESOURCES THAN WE DO AND WE MAY NOT BE ABLE TO SUCCESSFULLY
COMPETE WITH THESE COMPETITORS.
Our competitors are major and independent entertainment companies. We are a
small company compared to most of our competitors, and many such competitors
have greater financial, managerial, distribution and marketing resources than
us. In addition, these competitors may have pre-existing relationships with
providers and purchasers that we will be trying to develop. Existing or future
competitors may develop or offer services that provide price, service or other
advantages over those offered by us. If we fail to compete successfully against
our current or future competitors with respect to these or other factors, our
business, financial condition, and results of operations may be materially and
adversely affected and could affect our ability to remain an on-going concern.
MR. CANCIO CONTROLS OUR OPERATIONS AND MATTERS REQUIRING SHAREHOLDER APPROVAL
AND THEREFORE HAS THE ABILITY TO SIGNIFICANTLY INFLUENCE ALL MATTERS REQUIRING
SHAREHOLDER APPROVAL.
Hugo M. Cancio, our sole officer and director, controls 70.08% of our
outstanding shares of common stock. As a result, Mr. Cancio will have the
ability to significantly influence all matters requiring approval by our
shareholders, including the election and removal of directors. Such control will
allow Mr. Cancio to control the future course of our company. Mr. Cancio does
not intend to purchase any of the shares in this offering.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY.
In considering whether to invest in our common stock, you should consider that
there is only limited historical financial and operating information available
on which to base your evaluation of our performance. Our inception was December
30, 2004 and, as a result, we have a limited operating history.
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RISK FACTORS - continued
WE MAY EXPERIENCE DIFFICULTY IN ACQUIRING TALENT AND SUFFER FLUCTUATIONS IN
OPERATING RESULTS.
The prerecorded music, like other creative industries, involves a substantial
degree of risk. Each recording is an individual artistic work, and its
commercial success is primarily determined by unpredictable and constantly
changing consumer taste. Accordingly, we are unable to offer any assurance as to
the financial success of any of our proposed records or the popularity of any of
our artists. Nor can we offer any assurance that we will be successful in
developing any new artists. In addition, there can be no assurance that any of
our artists will not request a release from his or her agreement with us.
Because of the highly personal and creative nature of our contractual
relationship with our artists, it is not feasible to force an unwilling artists
to perform the terms of his or her contract. The loss of an artist could have a
materially adverse effect on our business.
WE MAY BE ADVERSELY AFFECTED BY CONTINUING CHANGES IN THE RECORDING INDUSTRY AS
WELL AS OUR DEPENDENCE UPON ATTRACTING RECORDING ARTISTS.
Our ability to succeed will be affected by, among other things, changes in
consumer tastes, national, regional and local economic conditions, demographic
trends and the type and number of competing recording. Since each project is an
individual artistic work and its commercial success is primarily determined by
unpredictable audience reaction, we can offer no assurance as to the economic
success of any of our proposed records or CD's. Even if one of our records or
CD's is an artistic success or recognized favorably by critics, we cannot offer
any assurance that it will generate sufficient audience acceptance. In addition,
we expect to be dependent upon our ability to attract recording artists.
Competition for such persons, especially in the recording industry, is intense.
Although Mr.Cancio has had past success in contracting recording artists with
the requisite skills and experience, we cannot offer any assurance that we will
be able to repeat this success.
THE ENTERTAINMENT INDUSTRY IS HIGHLY COMPETITIVE AND THERE IS NO ASSURANCE THAT
WE WILL BE SUCCESSFUL.
The markets for recorded music are highly competitive. We believe that
competition will intensify and increase in the future. Our competitors include
other major, mini-major and independent recording companies. Compared to these
competitors, we are a very small independent entertaininment company with a
limited operating history. Since we are recently formed, have a limited history
of business operations and have not previously raised significant capital,
virtually all of these competitors enjoy substantial competitive advantages,
such as:
o existing products and experience in the marketplace;
o greater name recognition and larger marketing budgets and resources;
o established marketing and customer relationships; and
o substantially greater financial, technical and other resources.
As a result, these competitors may be able to respond more quickly and
effectively than we can to new or changing opportunities, technologies or
customer requirements. Existing or future competitors may develop or offer
products that provide price or other advantages over those we intend to offer.
If we fail to compete successfully against current or future competitors with
respect to these or other factors, its business, financial condition, and
results of operations may be materially and adversely affected.
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RISK FACTORS - continued
OUR SOLE OFFICER AND DIRECTOR MAY BE SUBJECT TO CONFLICTS OF INTEREST.
Our sole officer and director serves only part time and is subject to conflicts
of interest. Mr. Cancio devotes part of his working time to other business
endeavors and has responsibilities to other entities. Such conflicts include
deciding how much time to devote to our affairs, as well as what business
opportunities should be presented to the company. Because of these
relationships, Mr. Cancio will be subject to conflicts of interest. Currently,
we have no policy in place to resolve any such conflicts of interest.
ADDITIONAL ISSUANCES OF EQUITY SECURITIES MAY RESULT IN DILUTION TO OUR EXISTING
STOCKHOLDERS.
Our Articles of Incorporation authorize the issuance of 75,000,000 shares of
common stock. Common stock is our only authorized class of stock. The board of
directors has the authority to issue additional shares of our capital stock to
provide additional financing in the future and the issuance of any such shares
may result in a reduction of the book value or market price of the outstanding
shares of our common stock. If we do issue any such additional shares, such
issuance also will cause a reduction in the proportionate ownership and voting
power of all other stockholders. As a result of such dilution, if you acquire
shares of our common stock from the Selling Shareholders, your proportionate
ownership interest and voting power will be decreased accordingly. Further, any
such issuance could result in a change of control.
NEVADA LAW AND OUR ARTICLES OF INCORPORATION MAY PROTECT OUR DIRECTORS FROM
CERTAIN TYPES OF LAWSUITS.
Nevada law provides that our officers and directors will not be liable to us or
our stockholders for monetary damages for all but certain types of conduct as
officers and directors. Our Bylaws permit us broad indemnification powers to all
persons against all damages incurred in connection with our business to the
fullest extent provided or allowed by law. The exculpation provisions may have
the effect of preventing stockholders from recovering damages against our
officers and directors caused by their negligence, poor judgment or other
circumstances. The indemnification provisions may require us to use our limited
assets to defend our officers and directors against claims, including claims
arising out of their negligence, poor judgment, or other circumstances.
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FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements," as that term is used in
federal securities laws, about our financial condition, results of operations
and business. These statements include, among others:
o statements concerning the benefits that we expect will result from our
business activities and certain transactions that we have completed, such as
increased revenues, decreased expenses and avoided expenses and expenditures;
and
o statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this document or may be incorporated
by reference to documents that we will file with the SEC. You can find many of
these statements by looking for words such as "believes," "expects,"
"anticipates," "estimates" or similar expressions used in this prospectus. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
"Risk Factors", that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. We caution you not to put undue reliance on
these statements, which speak only as of the date of this Prospectus. Further,
the information contained in this prospectus or incorporated herein by reference
is a statement of our present intention and is based on present facts and
assumptions, and may change at any time and without notice, based on changes in
such facts or assumptions.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results. The safe harbor for forward-looking statements provided in the Private
Securities Litigation Reform Act of 1995 does not apply to the offering made in
this prospectus.
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the account
of the Selling Shareholders named in this prospectus. As a result, all proceeds
from the sales of the common stock will go to the Selling Shareholders and we
will not receive any proceeds from the resale of the common stock by the selling
stockholders. We will, however, incur all costs associated with this prospectus
and related registration statement.
DILUTION
Since this offering is being made solely by the selling stockholders and none of
the proceeds will be paid to our us, our net tangible book value will be
unaffected by this offering.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is not listed on any exchange and there is no public trading
market for the common stock.
As of March 15, 2006, we had 44 shareholders of record.
DIVIDEND POLICY
No dividends have ever been declared by the Board of Directors on our common
stock. Our losses do not currently indicate the ability to pay any cash
dividends, and we do not indicate the intention of paying cash dividends either
on our common stock in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS
We have no equity compensation plan.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with our consolidated
audited financial statements and the related notes that appear elsewhere in this
registration statement. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below and elsewhere in this registration statement,
particularly in the section entitled "Risk Factors" beginning on page 7 of this
registration statement. Our consolidated audited financial statements are stated
in United States Dollars and are prepared in accordance with United States
Generally Accepted Accounting Principles.
PLAN OF OPERATION
We have been in operation for eleven months as of November 30, 2005. Our efforts
during that period have largely been to generate cash flows from operations
which amounted to $82,610, and the sale of securities which amounted to $92,232.
The majority of these cash flows were applied towards, the investment in a
series of shows, Havana Nights, costing $57,400, which investment in September
of 2005, was considered totally impaired for financial accounting purposes
resulting from the cancellation by the promoter, whereby no further shows were
scheduled or rescheduled that would justify a recoupment of our investment.
Secondly, we have focused on the creation and development of our four filming
projects. Three of the four projects are documentaries titled One Million
Millionaires, Gold in Ecuador and Counterfeit Conspiracy. The fourth project is
a reality television series titled The Trader. Our four filming projects cost
$68,432 as of November 30, 2005, which included, script development, principal
photography, sound engineering, personnel, such as a cameraman, producer and
assistant producer, location permits, filming insurance, equipment rental travel
and hotel accommodations. Lastly, we incurred deferred offering costs of
$43,663, largely professional fees, to enable us to pursue a registration
statement on Form SB-2 with the Securities and Exchange Commission.
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MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
Operating expenses from inception to date were principally for selling, general
and administrative expenses, the major components of which were officer
compensation of $33,000, travel and entertainment of $20,863, and professional
fees of $22,682, and impairment of the investment in Havana Nights of $57,400
resulting from the cancellation by the promoter, whereby no further shows were
scheduled or rescheduled that would justify a recoupment of our investment.
We do not anticipate incurring more than $40,000 in additional costs with
respect to our four filming projects prior to their completion. All of our
filming projects are in final stages of development, and the tour of Havana
Night Club which we are still pursuing, does not require any subsequent
investment. Furthermore, we have no plans to engage in any more in-house
productions until we have completed the four current projects that we have
undertaken to complete, thereby reducing the possibility of incurring further
significant costs. Until our in process production filming projects are
completed, we believe we can sustain our cash flows through work for hire
projects such as the sale of corporate videos, from consulting services, and
from the sale of our common stock should our expected cash flows in the next 12
months require it. Our minimum expected cash flows to continue our current level
of operations during the next 12 months is approximately $150,000, however up to
$250,000 would be needed to pursue our goals during that period. These
additional funds would be needed to license products from other parties and
properly market, promote and distribute them, including our own projects
presently in process. To date our revenues have been generated from corporate
videos. If the additional $100,000 is not raised, we may be unable to continue
operations.
Upon the completion of our current projects, we plan to license the music
library catalogue of Ciocan Entertainment Music Group, LLC, ("Ciocan") This
library consists of 33 finished albums (over 300 tracks) by 8 different artists
who are exclusively recording with Ciocan for the release of other future
projects. Ciocan has marketed the catalogue to the Latin market, but we plan to
penetrate the non-Hispanic markets and develop the current marketing efforts
within the Latin base. Once we have an agreement in place with Ciocan, we plan
to develop live productions for artists we intend to sign in the future in
various cities and venues, and generate revenues from these live performances
while marketing and promoting our recordings. The tour productions will be
national and international, for both our future artists and other artists. As
always, visibility will be key in the success of record and merchandise sales,
and can be affected by any sudden changes in the economy. We are addressing this
risk, largely based on past experience, by diversifying our market, products and
scope (i.e. the addition of film and other media). To date, we have no agreement
with Ciocan to license its music library catalogue. No definitive terms have yet
to be agreed upon. Ciocan is also controlled by Mr. Cancio, and an agreement to
license Ciocan's music library will be reached between us and Ciocan after the
completion of our current projects.
Once the Ciocan Music Catalog is licensed, we will develop the size of the
catalogue by increasing the amount of albums we produce and distribute. In order
to reduce costs and thereby reduce the risk involved, the initial projects will
be compilations which we plan to release as new albums. This approach will allow
for increased visibility of our products. This approach is also a response to a
current trend in the market where the demand for compilations has increased in
recent years. We also plan to license some individual music tracks to other
producers, or film production companies to generate additional working capital.
Finally, we will develop additional artists within the Latin genre and create
13
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
our own proprietary library of content. This development strategy includes
sourcing and developing new and existing talent, networking with current music
producers to evaluate available opportunities, and expanding on related
distribution networks.
We are currently producing three documentaries and developing a reality show, a
direct response to the current trend in primetime television. Development costs
incurred for these projects to date have been minimal and will not exceed an
additional $10,000 per project.To date, these projects have not generated any
revenues. Management believes that once our on going filming projects, One
Million Millionaires, Gold in Ecuador and Counterfeit Conspiracy are released,
the sale and distribution of these documentaries will generate sufficient
revenues to sustain us over the next twelve (12) months. We have no outside
investors in any of our three documentaries or the reality television project.
These four projects are wholly owned, produced and financed by Fuego
Entertainment. No other entity we have done work for hire including any entity
associated with our previous work for hire clients had any part in the
inspiration or financing of these projects. We are expecting to release these
new projects during the second quarter of 2006, however, these are new
endeavors, and as such carry a certain degree of uncertainty. Any shortage
resulting from delays in release dates or other possible material risks are
addressed through the previously mentioned music catalog. Additionally, we are
also retained by customers to create a filmed product for hire. We are not
dependent on, and have no expectation of producing any future work for hire for
our previous work for hire clients or any entities currently or previously
associated with them. We have and will continue to generate revenues by engaging
in work for hire projects, meaning projects for which our services are requested
such as: corporate videos, music videos and consulting agreements with companies
seeking to reach the Hispanic Market in the US and abroad. Management believes
that this type of activity, in addition to the proposed compilations in the
music catalog, will create a steady source of revenues.
Additional sources of income will include projects where we will also act as an
agent and contract organization for certain entertainment projects that are
fully-developed by others. These services may include marketing, distribution,
principal photography, development, pre- and post-production, introductory
services, and many others that are within our realm of expertise. To date, we
currently do not have any agreements or projects whereby we act as an agent.
For the past six months, we have continued to generate revenues by engaging on
work for hire projects. However, our main goal has been to focus on the three
film projects which are currently in final stages of production ( reviewing
films and getting ready for post-production), and post production ( editing).
For this reason we had a substantial decline in revenues earned in the past
three months, which created a loss for that period. While these film projects
are being completed we will continue to seek work for hire and consulting
services.
In the field of filmed entertainment (feature films and television shows), we
are not currently seeking any specific opportunities at this time. However as it
is the nature of the arts and the entertainment business, if a specific
opportunity or inspiration should occur that we believe has significant market
14
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
potential, we would consider taking on the project and revising our business
plan as required to take advantage of the opportunity.In the future we intend to
actively seek opportunities to negotiate the licensing or purchase of existing
projects that are in various phases of their lifecycle, including development,
pre-production, principal photography and post production. We will also create
filmed products for customers on a "for hire" basis.
We also intend to utilize our extensive network of contacts to gain access to
quality products by established industry participants. To avoid cost overruns
and fixed overhead charges in our current stage of operations, we engage
third-party participants to fulfill the execution of our projects, from camera
crews to editing facilities. We further intend to access various distributors
for penetration into the diverse windows of distribution, depending upon the
project's commercial viability and our marketing approach.
For the past 8 years Mr. Cancio has worked in the entertainment industry, having
produced several US and European Tours, co-produced films and documentaries as
well as many music albums. Mr. Cancio's tour credits include the U.S. and
European tours of Manolin and El Medico de la Salsa, the European tour of
Gilberto Santa Rosa, the U.S. tours of La Charanga, Paulito FG, Elio Reve and
Isaac Delgado. Mr. Cancio's film and documentary credits include "Zafiros Locura
Azul", "Music from the Edge of Time"and "Amor Ciego (Blind Love). Mr. Cancio has
attended music and film conventions and festivals around the world, and been
nominated for two Latin Grammy Awards. This experienced has afforded Mr. Cancio
the opportunity to collaborate with other executives in the field, and associate
with music and film producers, actors, directors, financiers, distributors, and
high level executives. Mr. Cancio has established a vast network of contacts
around the world including those who are considered to be "established
industry," meaning the largest and most successful entities such as Sony/BMG,
Sony Music Latin, Universal, Universal Latino, Miramax Films, Tribeca,
Telemundo/NBC, Univision television Networks, Grupo Prisa in Spain, Tota
Production in Italy, Ahora Corporation in Japan. These contacts will assist us
in obtaining access to key decision makers in these organizations responsible
for promotion and distribution of the kind of products we seek to produce,
market and distribute in the domestic and international market place.
Fuego expects to complete a licensing agreement with Ciocan Entertainment upon
the completion of its current projects and is actively seeking a licensing
agreement with Tota Productions, a music and video production company located in
Torino, Italy, that produces Spanish Hip Hop and Pop artists from Europe, such
as Clan 537 and Evolution. Fuego shall complete a licensing agreement with
Ciocan Music upon the completion of its four current projects in order to market
and distribute its music catalog. Example of some of Ciocan products include
:Manolin, El medico de la Salsa, Live CD recorded in Miami, titled, El Puente,
Carlos Manuel, etc. We are also seeking the opportunity to represent several
Puerto Rican, reggetton artist, example: Willfredo Batista/aka, "Will B", OZ,
the Latin Power. We are also interested in producing, marketing and distributing
their CD's. Fuego is also seeking to present the concert of Havana Night Club,
the show in the island of Puerto Rico which we believe is a strong market for
this product. There are no formal agreements signed with any of the above
mentioned entities or individuals at the present time. The producer of the show
is trying to present the show in San Juan, Puerto Rico and has requested our
assistance to help her present the show. We are seeking a local promoter to
present the Havana Night Club show in the Island of Puerto Rico. The show is the
same show that was presented in Miami and our anticipated level of participation
is 20% of net revenues generated by the ticket sales of this show. This show is
not part of the original agreement signed with Fuego Entertainment and Viashow
15
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
as part of the Celebrate Freedom tour 2005. This show has not yet been
scheduled, there are no agreements as of yet for this particular show.
Presenting the concert of Havana Night Club in Puerto Rico as mentioned here
would be a new separate undertaking not related to the existing contract we
currently have with Viashow with respect to the Havana Nights tour as discussed
elsewhere in this document. With respect to the latter, there are presently no
shows officially scheduled and there are no current plans to continue the tour.
We have generated revenues by engaging in work for hire such as the production
of corporate videos and consulting services. We have produced several corporate
videos and television pilots that have generated substantial revenues for the
company, it is our intention to continue offering these type of services as they
incur no cost for the company, since all costs are paid for by the clients. Our
efforts are provided by Mr. Cancio whose compensation has been and will continue
to be contributed to the Company until we reach profitable ongoing operations. .
We have also generated revenues by providing consulting services to companies
that are in need of reaching the US Hispanic Markets with their products or
services. Consulting services do not incur costs since such services are
provided solely by Mr. Cancio . We will continue seeking these consulting
activities in order to generate revenues.
We are currently engaged in producing four filming projects, one corporate video
( work for hire) Kiddy Inc. and two infomercials for Cremas del Mar Negro. We
are also producing a music video for L for Latin Music Record Label. These
projects should generate revenues for our company. These are the only work for
hire and consulting projects that we are currently working on at this time.
We do not expect to purchase any significant equipment. We will increase the
number of our employees over the next twelve (12) months by one to two
employees: one who will be responsible for internal bookkeeping and accounting
issues, and another who will serve as an executive assistant to Mr. Cancio. Our
current strategy is to outsource where possible because it is management's
belief that this strategy, at our current level of development, gives us access
to the best services available, leads to lower overall costs, and provides us
the most flexibility for our business operations. For the time being Fuego will
outsource the following services: Cameraman, assistant producer or producers,
editors, sound technicians, advertising and marketing services.
FOR THE PERIOD FROM DECEMBER 30, 2004 (INCEPTION) TO MAY 31, 2005
Our net income for the period from inception to May 31, 2005 (a 5 month period)
was $39,489. Substantially all, or $121,628 of the $125,128 of operating
revenues were generated from the filming of corporate videos. The balance of
$3,500 was earned as consulting revenues under a 6 month contract commencing in
August 2005. Cost of the corporate videos of $17,000 and related overhead
consisting of general and administrative expenses of $51,494 and depreciation of
$411, resulted in net income of $39,489 after reduction for income taxes of
$16,734.
The filming activities, all of which were completed as of May 31, 2005,
consisted of shooting corporate videos for three U S companies whose projects
were filmed in California, Canada and Ecuador. These companies were Nevada
Minerals, which generated $13,433 in revenue, United States Canadian Minerals,
which generated $32,795 in revenues, and CMKM Extreme Machines which generated
$75,400 in revenues. The nature of the these filming projects consisted of 1),
the filming of gold mining operations and production in Ecuador and Canada for
two of companies, and 2), a car racing video which included interviews with the
16
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
race car team investors, its personnel including management, drivers, mechanics,
the assembly of a race car, and the race fans. There were no major expenses
incurred in filming any of the three (3) videos, and there were no outsourcing
arrangements in connection with any of the three (3) videos. This latter video
produced the major portion of filming revenues because we were hired to shoot a
video that was going to be used as a presentation/pilot for a possible reality
show regarding how to organize an National Hot Rod Association ("NHRA") racing
team. This required additional work not typically involved in a standard
corporate video such as a preproduction, meaning preparing for the shoot:
writing a script, asking the NHRA permission to film in their locations, (no
cost involved for this)and traveling to several cities. The following is a brief
description of our three film projects:
The Trader Show is a reality television show based on the real life activities
of amateur and professional stock traders. The Trader Show places an emphasis on
the activities of day traders.
Gold in Ecuador is the story of a small mining town of Portobello. In 1916
Mellick Tweedy traveled on a mule thought the jungle of a small mining town in
Ecuador, this small town became one of the biggest gold exporters in South
America. Fifty years ago American company SADCO, abandoned the American shaft,
one of the oldest gold mines in the world, leaving the town of Portobello and
its people in ruins. Today, the people of Portobello have a new hope, or do
they? The Americans are back in Portobello searching for Gold.
One Million Millionaires, This is a documentary that will capture the life of a
controversial individual, Mr. Urban Casavant and his dream of making 1 million
millionaires. For some he is the hope of their life, for others he is a dreamer,
however, thousands follow him and wait patiently. The film will cover his life
from the time he was a low-income earning prison guard to multimillion-dollar
businessman.
Further filming projects similar in nature are estimated to be the principal
source of revenues in the near term because there is a significant market for
corporate videos. Many companies are now educating or training their employees
and associates through corporate videos, and others are presenting their
companies and their operations through corporate videos or video presentations
at trade and economic fares or conventions. We are trying to penetrate this
market. Also, these are projects that requires no investment, and we get paid in
full upon completion.
Publicist revenues originated from a 6 month contract with United States
Canadian Minerals involving the creation of media awareness, interest in the
company's products, services and executives activities. We also advised the
company on how to handle media request for interviews. The term of this
agreement was six (6) months, whereby we were paid $3,500 per month. This
agreement expired on September 8, 2005. We do not expect revenues from this type
of engagement to be a significant recurring revenue source.
Operating expenses, principally selling, general and administrative, included
compensation for officer of $15,000, legal and accounting of $5,848, rent of
$3,500, travel and entertainment of $16, 051, and the balance $11,095, office
overhead.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
At May 31, 2005, our total current assets were $29,239, and our total current
liabilities were $43,310, resulting in a deficiency in working capital of
$14,071. We expect that working capital requirements will continue to be funded
through a combination of our existing funds, cash flow from operations and
further issuances of securities. Our working capital requirements are expected
to increase in line with the growth of our business.
Other assets at May 31, 2005, included production costs for four separate
projects totaling $50,432. Revenue received towards one project, amounting to
$4,691, was deferred until project completion and DVD's to be created there from
are delivered. The other significant asset was the investment of $57,400 in a
series of live entertainment shows.
Net cash flows during the 5 month period were largely generated from net income
as above, proceeds from sale of common stock of $37,623, and contributed capital
of $21,708. Our application of cash flow proceeds went towards production costs
of $50,432, investment in Havana Nights of $57,400 and equipment and logo of
$5,470.
FOR THE SIX MONTH PERIOD ENDED NOVEMBER 30, 2005
For the six month period ending November 30, 2005, we had a net loss of
$(87,424), including the impairment loss associated with the investment of
Havana Nights of $57,400. During this period, we generated revenues of $18,819
of which $13,400 originated from a short-term consulting contract with U.S.
Canadian Minerals entered into in the prior fiscal year, with the balance of
revenues being generated from work for hire projects such as producing music and
corporate videos.
Mr. Cancio, the only person in the Company pursuing corporate projects, spent a
substantial portion of his time during the last six months pursuing other
business interests, which could ultimately benefit the Company. Accordingly, it
was not possible for the Company to have the full time efforts of Mr. Cancio to
develop the revenues of the Company, although our main goal has been to focus on
the three film projects which are currently in final stages of production
(reviewing films and getting ready for post-production), and post production
editing. For this reason we had a substantial decline in revenues earned in the
past six months, which created a net loss. While these film projects are being
completed we will continue to seek work for hire and consulting services
agreements.
There were no costs of revenues during this six month period as the videos
produced required only the efforts of Mr. Cancio whose compensation is included
as a selling, general and administrative expense, and the related clients incur
all other filming costs.
Selling, general and administrative expenses in the six month period consisted
principally of $18,000 for compensation for management, and $19,681 for
accounting fees provided by an outsourced CPA firm. The balance of all other
expenses within this category approximated the total expenses incurred for the
previous 5 months.
Cash flows provided from other than operating activities for the six month
period were $54,609 from the sale of common stock. Cash flows applied to other
than operating activities for this same period were to deferred initial public
18
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
offering costs of $43,663 for the filing of the Form SB-2 registration statement
with the Securities and Exchange Commission, and additional production costs of
$18,000.
LIQUIDITY AND CAPITAL RESOURCES
During the period from inception to November 30, 2005 the Company had no net
cash flows, although cash flows from operations were $82,610 and from financing
activities $48,692. These cash flows were entirely applied to investing
activities totaling $131,302.
As of November 30, 2005, we had a deficiency in working capital of $35,754. We
expect that working capital requirements will continue to be negative in the
near term until we secure substantial ongoing revenues from our existing and
foreseeable projects and/or the sale of debt or equity securities.
We have no lines of credit or other bank financing arrangements. Generally, we
have financed operations to date through our current revenues and the proceeds
of the private placement of equity securities. Because we have limited
operations and a negative working capital, cash flows will not be enough to take
advantage of certain business opportunities. We have limited financial resources
available, which has had and may continue to have an adverse impact on our
liquidity, activities and operations. These limitations have adversely affected
our ability to obtain certain projects and pursue additional business. There is
no assurance that we will be able to raise sufficient funding to enhance our
financial resources sufficiently to generate volume for us, or to engage in any
significant research and development, or purchase significant equipment. Over
the long-term, we may need to rely on the issuance of our stock as a form of
liquidity that may have dilutive effects to current shareholders. We are
authorized to issue 75,000,000shares of its $0.001 par value common stock. We
plan to raise operating capital via debt and equity offerings in order to market
and sell our products. However, there are no assurances that such offerings will
be successful or sufficient to fund our operations. In the event the offerings
are insufficient, we have not formulated a plan to continue as a Going Concern.
Additional issuances of equity or convertible debt securities will result in
dilution to our current shareholders. Further, such securities might have
rights, preferences or privileges senior to our common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to take advantage of prospective new business endeavors or opportunities,
which could significantly and materially restrict our business operations.
MATERIAL COMMITMENTS
We have no material commitments as at the date of this registration statement.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve
(12) months.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS - continued
RECENT ACCOUNTING PRONOUNCEMENTS
Consolidation of Variable Interest Entities -- On January 2003, the Financial
Accounting Standards Board ("FASB") issued FASB Interpretation ("FIN") No. 46,
Consolidation of Variable Interest Entities. In December 2003, the FASB issued
FIN No. 46 (Revised) ("FIN No. 46-R") to address certain FIN implementation
issues. This interpretation clarifies the application of Accounting Research
Bulletin No. 51, Consolidated Financial Statements for companies that have
interests in entities that are Variable Interest Entities ("VIE") as defined
under FIN No. 46. According to this interpretation, if a company has an interest
in a VIE and is at risk for a majority of the VIE's losses or receives a
majority of the VIE's expected gains it shall consolidate the VIE. FIN No. 46-R
also requires additional disclosures by primary beneficiaries and other
significant variable interest holders. For entities acquired or created before
February 1, 2003, this interpretation was effective no later than the end of the
first interim or reporting period ended March 31, 2004, except for those VIE's
that are considered to be special purpose entities, for which the effective date
is no later than the end of the first interim period or reporting period ended
after December 15, 2003. As of May 31, 2005, the Company did not have an
interest in any VIE's, and accordingly, the adoption of the provisions of this
interpretation by the Company did not have a material effect on its financial
position or results of operations.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment." SFAS No. 123R replaced SFAS No. 123 and superseded Accounting
Principles Board Opinion No. 25. SFAS No. 123R will require compensation costs
related to share-based payment transactions to be recognized in the financial
statements. The effective date of SFAS No. 123R is the first reporting period
beginning after June 15, 2005.
On April 14, 2005, the Securities and Exchange Commission issued an announcement
amending the compliance dates for the FASB's SFAS 123R that addresses accounting
for equity based compensation arrangements. Under SFAS 123R registrants would
have been required to implement the standard as of the beginning of the first
interim or annual period that begins after June 15, 2005. The Commission's new
rule will allow companies to implement SFAS 123R at the beginning of the next
fiscal year after June 15, 2005. The adoption of his pronouncement had no effect
on the accompanying financial statements as of November 30, 2005.
DESCRIPTION OF BUSINESS
CORPORATE HISTORY
Fuego Entertainment, Inc. was originally incorporated under the laws of the
State of Nevada on December 30, 2004 as "Durango Entertainment, Inc." On March
15, 2005, we filed a Certificate of Amendment with the Nevada Secretary of State
changing our name to "Fuego Entertainment, Inc."
Please note that throughout this report, and unless otherwise noted, the words
"we," "our," "us," the "Company," or "Fuego," refers to Fuego Entertainment,
Inc.
20
CURRENT BUSINESS OPERATIONS
DESCRIPTION OF BUSINESS - continued
We are engaged in the directing, production, marketing, and distribution of
entertainment products, including feature and short films, documentaries,
television shows, music, and tour productions. We also provide management,
marketing, and public relations services to the entertainment industry.
We were founded by our President, Hugo M. Cancio, who has spent the last five
years successfully owning and operating Ciocan Entertainment & Music Group, a
record label and film production company that produces Cuban and world
entertainment and is extremely well-known throughout the Latin Market - both in
Latin America and the U.S. Fuego was formed in order to cross over into
mainstream America with some of Ciocan's Latin music and film products as well
as to produce music, films, and television programs geared toward the English
speaking markets. By combining the efforts and products of Fuego and Ciocan, it
is our intention to reach both markets at the same time as well as further
penetrate Europe where Latin music is very popular. At the present time, we have
not entered into any agreements with Ciocan to license, produce or distribute
any Ciocan products. Ciocan has not, does not now, nor does it intend to,
conduct any business operations of any kind in Cuba or any Cuban nationals.
DISTRIBUTION AND PUBLISHING
Fuego at the present time does not have any finished product to offer for
distribution, however several products are in production stages. Once these
products are completed we will make contact with several distributors around the
world with whom Mr. Cancio has conducted business via Ciocan Entertainment and
other products. Ciocan and Hugo Cancio have contacts with distributors in Spain,
France, Italy, Germany, England, Portugal, Japan, China and the US. These
distributors include HL Distributors, Reyes Distribution, Vale Music, Video
Distributors, GB Distributors, Actual Records & Films Distributors, Latin
Universe, International Record Distributors, Kubaney Records, Incredible CD's
Distributors, Ricon Musical, Distribuidora Nacional of Puerto Rico, and Musica
Latina Distributors. Ciocan's largest distribution products are music CD's.
The method Ciocan uses to select clients is by traveling every year to the shows
and conventions related to music products distributions such as MIDEM,
BILLBOARDS and film and television shows and conventions such as MIPCOM NATPE as
well as the already established film festivals around the world such as: Cannes,
Berlin, Miami, and Sundance.
Out-sourcing process: We intend to send products to established distributors (
distributors that are well established in the market with whom Ciocan and Cancio
have done business with) on payment terms of net 30 or net 60 , and cash on
delivery to those we consider new clients. We have a no return policy. Net 30/60
terms are credit terms for established good standing accounts, meaning we send
them product and they pay us in 30 or 60 days depending on the credit term. All
new accounts are on cash only basis.
We also intend to license products from Sun Flower Publishing, which receives
royalties for products sold as well as for songs played on the radio and
television and licensed for soundtracks. We are in preliminary discussions with
Sun Flower Publishing at this time and expect to enter into a definitive
agreement within the next six months, but we have not entered into any
definitive agreement as of yet.
21
DESCRIPTION OF BUSINESS - continued
There is no written agreement setting forth definitive terms between Ciocan and
Fuego at this time. However, Ciocan has agreed to license Fuego its music
library upon mutually acceptable terms to be negotiated. This agreement will be
completed after we have completed our current projects. Mr. Hugo Cancio as the
majority owner of Ciocan has already committed to approve this agreement once
definitive terms are mutually agreed upon .
ADVERTISING AND PROMOTIONAL SERVICES
In terms of advertising and promoting our products, we currently use freelance
individuals and marketing firms to assist with this function. However, we are
investigating the possibility of bringing this function in-house in the near
future as revenues permit. We have used and will continue to use on a project to
project basis the services of F&F Media Corp. F&F Media Corp. distributes
information to the local and international media pertaining to our artist new
releases or events and organizes the interviews and to markets and promotes our
concert shows in order to enhance ticket sales.
Our future plan is to hire an intern and train her in the art of advertising and
marketing. For the past seven (7) years, Mr. Cancio has developed relationships
with the local and international media and media outlets. This will help us in
bringing our advertising and marketing functions in-house. Our goal is to bring
these services in-house within the next 12 months if our revenues permit..It is
management's belief that this will have a positive effect in our business
operation as it will allow us to advertise, market and promote our artists,
projects and services from within, We estimate that $ 40,000 a year in extra
revenue will permit us to accomplish this goal. Management believes that our
likelihood of earning this additional revenue within the next twelve months is
favorable, though there can be no assurance that we will earn such revenues
within this stated time frame. Our failure to earn this additional revenue could
negatively impact our ability to bring advertising and marketing functions
in-house.
PROJECTS
The Trader Show is a reality television show based on the real life activities
of amateur and professional stock traders. While there are many forms of stock
trading, The Trader Show places an emphasis on the activities of day traders.
The show focuses on the real life activities of Anthony Pullicino (A.K.A., The
Trader), who quit his sales position at a BMW dealership in order to satisfy his
desire to perfect his trading abilities and earn even greater profits. The show
includes Anthony's circle of influence, from those who give advice to him to
those he advises. As Anthony investigates and researches public companies to
invest in, it is necessary from time to time for him to venture out and actually
be on the site of his next investment. From gold mining companies in Ecuador, to
diamond mining companies in Canada, to financial organizations in the U.S., The
Trader Show follows the trail of The Trader, documenting his every move and
delivering it to television sets around the country. Ups and downs, profits and
losses, happiness and sadness, The Trader Show captures it all and shows the
reality of life as a stock trader to the world. We have no firm plans for its
showing. The Show is still in production stages having shot 4 episodes out of 12
needed to complete a pilot for a first season. Mr. Pullicino participated in the
shooting of several scenes and assisted in developing the original concept of
the show. Mr. Pullicino is no longer the central character of the show, there
are no other relationships between us and Mr. Pullicino regarding this show, and
there are no outstanding obligations owed to Mr. Pullicino regarding his
participation in this show.
22
DESCRIPTION OF BUSINESS - continued
The four episodes of the Trader Show will be used for the sole purpose of
pitching the idea of the show to the networks, or the idea of the show. We have
stopped filming the show and are in the process of rewriting the script to
showcase 10 ten stock traders which will compete with each other to see who
makes the most money in an undetermined amount of time. The amount of time is
undetermined at this time as we are still rewriting and developing this new
concept. Anthony Pulluccino is no longer part of the show and our working
relationship ended in June 2005.Once we have finished rewriting the script and
completed developing this new concept we will hold auditions to pick the
potential stock traders. No date have been set to turn in the final
The show was created by Hugo Cancio. The show is meant to capture the dynamics
of investing in the stock markets. We have completed filming several episodes
for the show, however we have temporarily stopped filming to rewrite the script.
Originally the show was based on the life of one individual who is an active
investor, a stock trader, we are now writing the script to where there are now
ten investors competing against each other. Competition is a key ingredient in
today's reality shows, and we want our show to be able to successfully compete
with other similar reality shows. There can be no assurance that we will be
successful in achieving this goal.
It is not part of our revised script for our show to visit any gold mine in
Ecuador. Mr. Pulluccino is no longer the main character on our show and
therefore will not be making any visits as part of the cast of the show.
The diamond mining companies that Mr. Pullucino was going to investigate were;
Dee Beers, and Shore Gold. There is no direct or indirect relationship between
Fuego Entertainment or Mr. Cancio with any of these companies. These companies
were selected by Mr. Pullicino as they are the only active mining companies in
Canada.
There are currently three people working on the creation of the show and that
includes Hugo Cancio as the show creator and Executive producer.
A budget will be determined once the new script is finalized. Once we have
finalized our new version of the script, we will contact several television and
cable network executives to pitch them the idea for our reality show.
Expected revenues for this project are speculative at this time and cannot be
precisely determined or predicted. There is no assurance the show will ever be
picked up by any network or that it will ever generate any revenue.
TARGET MARKETS
With its current offerings, our entertainment products appeal to both the Latin
and English-speaking markets. We offer a wide selection of hip-hop, rap, pop,
and contemporary music as well as films encompassing the documentary and reality
television genre - thereby crossing all age groups, sexes, income levels, and
races.
STRATEGY AND IMPLEMENTATION SUMMARY
In the entertainment industry, a key factor to success is the reputation and
visibility of the company. A successful, well-known company will attract the
best artists and products, create the best, most financially-rewarding industry
23
DESCRIPTION OF BUSINESS - continued
deals, and have the highest distribution rates and channels. Fortunately,
through Hugo Cancio's established industry reputation and Ciocan's achievements
in the Latin market, Fuego has successfully entered the marketplace in Latin
America and the U.S. and, in management's opinion, is poised for future success.
ADVERTISING AND MARKETING STRATEGY
In terms of marketing the end products to the consumer, we intend to utilize a
variety of methods, including radio, television, print advertising, public
relations efforts, and press mention, depending on the project. By bringing the
marketing functions in-house, we will be able to further penetrate the
marketplace and increase its brand awareness as well as generate incremental
revenues. Currently, we are not conducting any specific sales and marketing
campaigns.
SALES STRATEGY
We have already developed strong relationships with the channels of distribution
for the products as well as works with reputable distributors to place the
products within retail stores, music stores across the globe, including Specs
Music, Tower Records, Descarga.com. Timba.com, El Museo del Disco, Lily's
Records, Music Latina,. We also stay in close contact with various radio
stations, television producers, newspaper editors. in order to get our artists'
songs played on the radio, on televised shows, and to generally gain public
exposure for our artists. There are no agreements with these stores or various
radio stations, television producers, and newspapers editors.
COMPETITION
Our competitors are major and independent entertainment companies. We are a
small company compared to most of our competitors, and many such competitors
have greater financial, managerial, distribution and marketing resources than
us. In addition, these competitors may have pre-existing relationships with
providers and purchasers that we will be trying to develop. Existing or future
competitors may develop or offer services that provide price, service or other
advantages over those offered by us. If we fail to compete successfully against
our current or future competitors with respect to these or other factors, our
business, financial condition, and results of operations may be materially and
adversely affected and could affect our ability to remain an on-going concern.
RESEARCH AND DEVELOPMENT ACTIVITIES
No research and development expenditures have been incurred, either on our
account or sponsored by customers, to the date of our inception.
Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor
Contracts
We have no current plans for any registrations such as patents, trademarks,
copyrights, franchises, concessions, royalty agreements or labor contracts. We
will assess the need for any copyright, trademark or patent applications on an
ongoing basis.
24
DESCRIPTION OF BUSINESS - continued
EMPLOYEES
We do not employ any persons on a full-time or on a part-time basis. Hugo M.
Cancio is our President, Chief Executive Officer, Chief Financial Officer and
Secretary. Mr. Cancio is responsible for all of our day-to-day operations. Other
services are provided by outsourcing and consultant and special purpose
contracts.
EXECUTIVE OFFICES
We lease our principal office space located at 19250 NW 89th Court, Miami,
Florida 33018. This facility is personally owned by Hugo Cancio and is leased
back to the Company for $700 per month in rent. Total rent expense from
inception to November 30, 2005 was $7,700.
LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our
company, nor are we involved as a plaintiff in any material proceeding or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder, is an
adverse party or has a material interest adverse to our interest.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
All of our directors hold office until the next annual general meeting of the
shareholders or until their successors are elected and qualified. Our officers
are appointed by our board of directors and hold office until their earlier
death, retirement, resignation or removal.
Our directors and executive officers, their ages, positions held are as follows:
NAME AGE POSITION TERM COMMENCED TERM EXPIRES
- -------------------- ----- ----------------------- -------------------- ------------------
Hugo M. Cancio 41 President, Treasurer, December 30, 2005 December 29, 2006
19250 NW 89th Court Secretary, Director
Miami, FL 33018
- -------------------- ----- ----------------------- -------------------- ------------------
BUSINESS EXPERIENCE
The following is a brief account of the education and business experience of
each director, executive officer and key employee during at least the past five
years, indicating each person's principal occupation during the period, and the
name and principal business of the organization by which he or she was employed.
HUGO M. CANCIO, President, Treasurer, Secretary and Director, Age 41, is our
sole officer and director. Since 2003, Mr. Cancio has served as the president of
Ciocan Entertainment and Music Group, L.L.C., an independent film and music
company. Prior to 2003, Mr. Cancio was self-employed as an independent film and
25
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS - continued
music producer since 1990. Mr. Cancio attended Miami-Dade Community College
where he studied Business Administration. Mr. Cancio is not an officer or
director of any other publicly traded company.
FAMILY RELATIONSHIPS
There are no family relationships among our directors or officers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
During the past five years, none of our directors, executive officers or persons
that may be deemed promoters is or have been involved in any legal proceeding
concerning (i) any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (ii) any conviction in a
criminal proceeding or being subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses); (iii) being subject to any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction permanently or temporarily enjoining, barring,
suspending or otherwise limiting involvement in any type of business, securities
or banking activity; or (iv) being found by a court, the Securities and Exchange
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law (and the judgment has not been
reversed, suspended or vacated).
EXECUTIVE COMPENSATION
During the last fiscal year, none of our directors were compensated for their
roles as directors. Our Officers and directors may be reimbursed for any
out-of-pocket expenses incurred by them on behalf of our company. We presently
have no pension, health, annuity, insurance, profit sharing or similar benefit
plans. Executive compensation is subject to change concurrent with our
requirements.
SUMMARY COMPENSATION TABLE
None of our executive officers received an annual salary and bonus that exceeded
$100,000 during the fiscal year ending December 31, 2004. The following table
sets forth the compensation received by Hugo M. Cancio, our sole officer and
director.
ANNUAL COMPENSATION LONG TERM
COMPENSATION
NAME AND 12/30/04 SALARY OTHER SECURITIES
PRINCIPAL POSITION through UNDERLYING
11/30/05 OPTIONS
Hugo M Cancio $33,000 $0 N/A
President,Treasurer
Secretary and Director
26
EXECUTIVE COMPENSATION - continued
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
COMPENSATION OF DIRECTORS
Generally, our Directors do not receive salaries or fees for serving as
directors, nor do they receive any compensation for attending meetings of the
Board of Directors. Directors are entitled to reimbursement of expenses incurred
in attending meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ciocan Entertainment and Music Group, LLC, "Ciocan" is an entertainment company
owned by Hugo M. Cancio, our sole officer, director and principal shareholder.
Ciocan creates products for the Latino Market in and out of the United States
borders and will use our company to market, promote and commercialize some its
products (music, films, documentaries, artist, etc) for the Anglo and
international markets. During the five month period ended May 31, 2005, Ciocan
advanced to the Company a total of $31,552 of which, $29,850 was applied towards
the purchase, by Ciocan, of 5.5 million shares of the Company's common stock,
and $1,400 was charged for rent, leaving a balance advanced of $302 as of May
31, 2005. As of November 30, 2005, $122 was owed to a stock subscriber.
We lease our principal office space located at 19250 NW 89th Court, Miami,
Florida 33018. This facility is personally owned by our sole officer, director
and principal shareholder, Hugo M. Cancio, and is leased back to us for $700 per
month in rent. Total rent expense from inception to November 30, 2005 was
$7,700.
On January 6, 2005, we issued 7,772,670 shares of our common stock to our sole
officer and director, Hugo M. Cancio, for services rendered to our company in
connection with our organization and formation at a value of $7,772.67. The
balance of $11,227,330 were also subscribed by him at the same price of $0.001
per share.
On August 22, 2005, we issued 9,500,000 shares of our common stock to our sole
officer and director, Hugo M. Cancio, pursuant to his stock subscription for
which $9,500 was paid by Mr. Cancio.
On September 1, 2005, we issued the balance of 1,727,330 shares of our common
stock to our sole officer and director, Hugo M. Cancio, pursuant to his stock
subscription for which $1,727.33 was paid by Mr. Cancio.
With respect to Sunflower Publishing, Anthony Hattenbach is an independent music
producer and promoter. Mr. Cancio and Mr. Hattenbach have known each other for
many years, however, they have no current working relationship. Sunflower
Publishing is a publishing company Mr. Cancio started several years ago for the
purposes of managing artist compositions. However, Mr. Cancio later moved away
from the publishing business to focus on Music, Film and Concert Productions. At
the present time Mr.Cancio no longer owns any interest in Sunflower Publishing
nor there is a working relationship with that company.
27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2006, certain information with
respect to the beneficial ownership of our common stock by each stockholder
known by us to be the beneficial owner of more than 5% of our common stock and
by each of our current directors and executive officers. Each person has sole
voting and investment power with respect to the shares of common stock, except
as otherwise indicated. Beneficial ownership consists of a direct interest in
the shares of common stock, except as otherwise indicated.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
Hugo M. Cancio 19,000,000 Direct 54.35%
19250 NW 89th Court
Miami, FL 33018
Ciocan Entertainment Film 5,500,000 Direct 15.73%
and Music Group, L.L.C.
19250 NW 89th Court
Miami, FL 33018
- --------------------------------------------------------------------------------
All Officers, Directors 70.08%
And 5% Shareholders
* Hugo M. Cancio is the controlling shareholder of Ciocan Entertainment Film and
Music Group, L.L.C. which owns 5,500,000 shares of our common stock.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement the operation of which may
at a subsequent date result in a change in control of our company.
DESCRIPTION OF COMMON STOCK
We are authorized to issue 75,000,000 common shares with a par value of $0.001.
As of December 15, 2005 we had 34,959,562 common shares outstanding. Upon
liquidation, dissolution or winding up of the corporation, the holders of common
stock are entitled to share ratably in all net assets available for distribution
to common stockholders after payment to creditors. The common stock is not
convertible or redeemable and has no preemptive, subscription or conversion
rights. Each outstanding share of common stock is entitled to one vote on all
matters submitted to a vote of stockholders. There are no cumulative voting
rights.
The holders of outstanding shares of common stock are entitled to receive
dividends out of assets legally available therefore at such times and in such
amounts as our board of directors may from time to time determine. Holders of
common stock will share equally on a per share basis in any dividend declared by
the board of directors. We have not paid any dividends on our common stock and
do not anticipate paying any cash dividends on such stock in the foreseeable
future.
28
DESCRIPTION OF COMMON STOCK - continued
In the event of a merger or consolidation, all holders of common stock will be
entitled to receive the same per share consideration.
PLAN OF DISTRIBUTION
The Selling Shareholders of the common stock of Fuego Entertainment, Inc., and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. The sales price to the public has been determined by the
shareholders to be $0.25 per share. The price of $0.25 per share is a fixed
price until the securities are listed on the OTC Bulletin Board or other
national exchange, and thereafter at prevailing market prices or privately
negotiated prices.
The Selling Shareholders may use any one or more of the following methods when
selling shares:
- - ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
- - an exchange distribution in accordance with the rules of the applicable
exchange;
- - privately negotiated transactions;
- - settlement of short sales entered into after the date of this prospectus;
- - broker-dealers may agree with the Selling Shareholders to sell a specified
number of such shares at a stipulated price per share;
- - a combination of any such methods of sale;
- - through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; or
- - any other method permitted pursuant to applicable law.
The Selling Shareholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each Selling Shareholders does not expect these commissions and
discounts relating to their sales of shares to exceed what is customary in the
types of transactions involved.
29
PLAN OF DISTRIBUTION - continued
In connection with the sale of our common stock or interests therein, the
Selling Shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Shareholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Shareholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Shareholder has informed us
that it does not have any agreement or understanding, directly or indirectly,
with any person to distribute the common stock.
Because the Selling Shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Shareholders has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Shareholders.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Shareholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
Selling Shareholders or any other person. We will make copies of this prospectus
available to the Selling Shareholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks." Penny stocks generally are equity
securities with a price of less than $5.00 (other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system). Penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
those rules, to deliver a standardized risk disclosure document prepared by the
SEC, which specifies information about penny stocks and the nature and
significance of risks of the penny stock market. A broker-dealer must also
provide the customer with bid and offer quotations for the penny stock, the
30
PLAN OF DISTRIBUTION - continued
compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that,
prior to a transaction in a penny stock not otherwise exempt from those rules,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the trading activity in the secondary market for stock that becomes
subject to those penny stock rules. If a trading market for our common stock
develops, our common stock will probably become subject to the penny stock
rules, and shareholders may have difficulty in selling their shares.
DETERMINATION OF OFFERING PRICE
The shareholders set the offering price of the common stock at $0.25 per share.
The shareholders arbitrarily set the offering price based upon their collective
judgment as to a price per share they were willing to accept, without regard to
our asset value, earnings, book value or other objective criteria. The price of
$0.25 per share is a fixed price until the securities are listed on the OTC
Bulletin Board or other national exchange, and thereafter at prevailing market
prices or privately negotiated prices. There can be no assurance that any market
will develop for our securities.
SELLING SHAREHOLDERS
The Selling Shareholders may offer and sell, from time to time, any or all of
the common stock issued. Because the Selling Shareholders may offer all or only
some portion of the 10,459,062 shares of common stock to be registered, no
estimate can be given as to the amount or percentage of these shares of common
stock that will be held by the selling stockholders upon termination of the
offering.
The following table sets forth certain information regarding the beneficial
ownership of shares of common stock by the Selling Shareholders as of February
15, 2006, and the number of shares of common stock covered by this prospectus.
The number of shares in the table represents an estimate of the number of shares
of common stock to be offered by the selling stockholder. None of the Selling
Shareholders is a broker-dealer, or an affiliate of a broker-dealer. Each
shareholder received their shares pursuant to a private placement conducted
between the date of our inception through December 15, 2005.
31
SELLING SHAREHOLDERS - continued
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage
Stock Owned Common Stock Common Stock Common Stock of Common
Prior to Offering to be Offered Owned After Owned Before Stock Owned
for Sale the Offering the Offering After the
Offering
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Maritza de la Torre 1,450,000 1,450,000 0 4.15% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Braynert Marquez 10,000 10,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Juan Ramon Guzman 500,000 500,000 0 1.43% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Jose Gomez 1,400,000 1,400,000 0 4.00% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Johnna Catanella-Davis 1,000 1,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Katie Hale 200 200 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Edward Kaminsky 20,000 20,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Joseph MacCarthy 11,111 11,111 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Linda M. Vance 12,000 12,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Jimmy Hopler 1,000 1,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Daniel York 3,332 3,332 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Charles Short 1,000 1,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Anthony Hattenbach 700,000 700,000 0 2.00% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Jason Webb 13,888 13,888 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Cherie Cancio (1) 1,100,000 1,100,000 0 3.15% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Miguel A. Cancio (2) 1,600,000 1,600,000 0 4.58% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Sunflower Publishing (3) 500,000 500,000 0 1.43% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Ana M. Cancio (4) 450,000 450,000 0 1.29% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Christy Cancio (5) 1,000,000 1,000,000 0 2.86% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Vivianka Cancio (6) 75,694 75,694 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Rogelia Morua 1,501,666 1,501,666 0 4.30% 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Roberto Soto 3,000 3,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Louis Mendez 20,000 20,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Lee Delor 5,000 5,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
32
SELLING SHAREHOLDERS - continued
Selling Shareholders Shares of Common Shares of Shares of Percentage of Percentage
Stock Owned Common Stock Common Stock Common Stock of Common
Prior to Offering to be Offered Owned After Owned Before Stock Owned
for Sale the Offering the Offering After the
Offering
- ----------------------------- ------------------ --------------- ---------------- --------------- --------------
Berverly Jo Mehlman 10,000 10,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
TRW Family Limited 5,555 5,555 0 * 0
Partnership (7)
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Verna Tucker & Roger Summers 5,555 5,555 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Jonathan D. Gildin & Leah 1,500 1,500 0 * 0
Gildin
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Noleia Guzman 250 250 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Juan R. Guzman & Noelia Sosa 200 200 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Kenneth Hicks and Sandra 1,000 1,000 0 * 0
Hicks
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Choice Mortgage Funding, 1,000 1,000 0 * 0
Inc. (8)
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Hope Seitzinger 500 500 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Kevin West 2,000 2,000 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Mary Alice Seagill 555 555 0 * 0
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Behrens International Group 5,556 5,556 0 * 0
(9)
----------------------------- ------------------ --------------- ---------------- --------------- --------------
Tucker Hoss 20,000 20,000 0 * 0
- ------------------------------ ------------------ --------------- ---------------- --------------- --------------
Niurka Marques 25,000 25,000 0 * 0
- ------------------------------ ------------------ --------------- ---------------- --------------- --------------
Cohen Enright 2000 2000 0 * 0
- ------------------------------ ------------------ --------------- --------------- --------------- --------------
Total 10,459,062 10,459,062 0 29.92% 0
- ------------------------------ ------------------ --------------- --------------- --------------- --------------
(1) Cherie Cancio is the daughter of Hugo M.Cancio.
(2) Miguel A. Cancio is the father of Hugo M. Cancio.
(3) Sunflower Publishing is controlled by Anthony Hattenbach.
(4) Ana M. Cancio is the wife of Hugo M. Cancio.
(5) Christy Cancio is the daughter of Hugo M. Cancio.
(6) Vivianka Cancio is the sister of Hugo M. Cancio.
(7) TRW Family Limited Partnership is controlled by Roxanne Wojtowicz
(8) Choice Mortgage Funding, Inc. is controlled by Jason Webb.
(9) Behrens International Group is controlled by Judi Behrens.
33
SELLING SHAREHOLDERS - continued
We may require the Selling Shareholders to suspend the sales of the securities
offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in these documents
in order to make statements in those documents not misleading.
LEGAL MATTERS
The validity of the common stock offered by this prospectus has been passed upon
by The O'Neal Law Firm, P.C., 17100 East Shea Boulevard, Suite 400-D, Fountain
Hills, Arizona 85268.
TRANSFER AGENT
Our transfer agent is First American Stock Transfer, 706 E. Bell Road, Suite
201, Phoenix, Arizona 85022.
EXPERTS
The consolidated financial statements of Fuego included in this registration
statement have been audited by Braverman International, P.C. to the extent and
for the period set forth in their reports appearing elsewhere in the
registration statement, and are included in reliance upon such reports given
upon the authority of said firms as experts in auditing and accounting.
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency basis
or had, or is to receive, in connection with the offering, a substantial
interest, directly or indirectly, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents, subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer or employee.
DISCLOSURE OF SEC POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Bylaws provide that directors and officers shall be indemnified by us to the
fullest extent authorized by the Nevada General Corporation Law, against all
expenses and liabilities reasonably incurred in connection with services for us
or on our behalf. The bylaws also authorize the board of directors to indemnify
any other person who we have the power to indemnify under the Nevada General
Corporation Law, and indemnification for such a person may be greater or
different from that provided in the bylaws.
Insofar as indemnification for liabilities arising under the Securities Act
might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
34
WHERE YOU CAN FIND MORE INFORMATION
We are required to file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any document we file at the Commission's Public Reference Room 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. You can also obtain copies of our Commission filings by going to
the Commission's website at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a registration
statement on Form SB-2, under the Securities Act with respect to the securities
offered under this prospectus. This prospectus, which forms a part of that
registration statement, does not contain all information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract or other document of Lexington Resources, Inc.,
the references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract or
document.
No finder, dealer, sales person or other person has been authorized to give any
information or to make any representation in connection with this offering other
than those contained in this prospectus and, if given or made, such information
or representation must not be relied upon as having been authorized by Fuego
Entertainment, Inc.. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby by anyone
in any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date of this prospectus.
35
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FUEGO ENTERTAINMENT, INC.
TABLE OF CONTENTS
Part I Financial Information Page Page
Item 1. Financial Statements:
Report of Independent Registered Public Accounting Firm ............ 37
Balance Sheets November 30, 2005 (unaudited) and May 31,
2005 ............................................................... 38
Statements of Operations from December 30, 2004 (Inception)
to May 31, 2005, and six months ended November 30, 2005
(unaudited) ........................................................ 39
Statements of Cash Flows from December 30, 2004 (Inception)
to May 31, 2005, and six months ended November 30, 2005
(unaudited) ........................................................ 40
Statements of Stockholders' equity for the period from
December 30, 2004 (Inception) to November 30, 2005 (unaudited) ..... 41
Notes to Financial Statements ...................................... 42
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
FUEGO ENTERTAINMENT, INC.
Miami, Florida
We have audited the accompanying balance sheet of FUEGO ENTERTAINMENT, INC. (a
Nevada corporation) as of May 31, 2005, and the related statements of
operations, stockholders' equity, and cash flows for the period from December
30, 2004 (inception) to May 31, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined that it
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FUEGO ENTERTAINMENT, INC. as of
May 31, 2005, and the results of its operations and its cash flows for the
period from December 30, 2004 (inception) to May 31, 2005, in conformity with
accounting principles generally accepted in the United States of America.
Braverman International, P.C.
Prescott, Arizona
August 3, 2005, except for Note 9 as
To which the date is December 23, 2005
37
FUEGO ENTERTAINMENT, INC.
BALANCE SHEETS
November 30, May 31,
2005 2005
--------- ----------
(unaudited)
ASSETS
--------
CURRENT ASSETS
Cash $ -- $ 7,479
Account receivable-trade 17,133 16,833
Deferred tax asset 13,532 3,375
Other 1,501 1,552
--------- ---------
Total Current Assets 32,166 29,239
--------- ---------
EQUIPMENT, net of accumulated depreciation of $1,557
and $206 1,213 2,449
OTHER ASSETS
Production costs 68,432 50,432
Investment -- 57,400
Deferred initial public offering costs 43,663 --
Logo, net 2,340 2,610
--------- ---------
Total Other Assets 114,435 110,442
--------- ---------
$ 147,814 $ 142,130
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 38,609 $ 18,208
Advances from related parties 123 302
Income taxes payable 17,870 20,109
Deferred revenue 10,308 4,691
Other current liabilities 1,010 --
--------- ---------
Total Current Liabilities 67,920 43,310
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.001, 75,000,000
shares authorized, 34,951,300 and
13,272,670 shares outstanding, respectively 34,953 13,273
Paid in capital 92,876 46,058
Common stock subscribed, 8,262 and
and 21,663,854 shares, respectively 1,487 43,274
Common stock subscriptions receivable (1,487) (43,274)
Retained earnings(deficit) (47,935) 39,489
--------- ---------
Total Stockholders' Equity 79,894 98,820
--------- ---------
$ 147,814 $ 142,130
========= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
38
FUEGO ENTERTAINMENT, INC
STATEMENTS OF OPERATIONS
From
Six Months Ended December 30, 2004
November 30, (Inception) to
2005 May 31, 2005
---------------- ----------------
(unaudited)
REVENUES $ 18,819 $ 125,128
---------------- ----------------
COSTS AND EXPENSES
Cost of revenue -- 17,000
Selling, general and administrative 59,733 51,494
Impairment of investmest 57,400 --
Depreciation and amortization 1,506 411
---------------- ----------------
Total costs and expenses 118,639 68,905
---------------- ----------------
Income (loss) before provision for income taxes (99,820) 56,223
Provision for (benefit from) income taxes (12,396) 16,734
---------------- ----------------
NET INCOME (LOSS) $ (87,424) $ 39,489
================ ================
BASIC AND FULLY DILUTED EARNINGS (LOSS)
PER SHARE * *
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - BASIC 26,337,377 12,172,670
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - FULLY DILUTED 26,337,377 33,713,910
================ ================
* less than $(.01) per share
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
39
FUEGO ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
From
Six Months Ended December 30, 2004
November 30, (Inception) to
2005 May 31, 2005
------------- -------------
(unaudited)
OPERATING ACTIVITIES
Net income (loss) from operations $ (87,424) $ 39,489
Adjustments to reconcile net income to net cash provided by
operating activities
Contributed capital 13,889 21,708
Impairment loss on investment 57,400
Depreciation and amortization 1,506 411
Changes in operating assets and liabilities
Accounts receivable (300) (16,833)
Deferred tax asset (10,157) (3,375)
Other current asset 51 (1,552)
Accounts payable 20,401 18,208
Income taxes payable (2,239) 20,109
Other current liabilities 1,010 --
Deferred revenue 5,617 4,691
------------- -------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (246) 82,856
------------- -------------
INVESTING ACTIVITIES
Purchased of equipment -- (2,770)
Production costs (18,000) (50,432)
Investments -- (57,400)
Logo -- (2,700)
------------- -------------
NET CASH (USED) BY INVESTING ACTIVITIES (18,000) (113,302)
------------- -------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 54,609 37,623
Deferred financing costs (43,663) --
Advances from related parties (179) 302
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,767 37,925
------------- -------------
NET INCREASE IN CASH (7,479) 7,479
CASH, BEGINNING OF PERIOD 7,479 --
------------- -------------
CASH, END OF PERIOD $ -- $ 7,479
============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
40
FUEGO ENTERTAINMENT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Subscriptions
Common Stock ------------------------ Retained
------------------------ Paid-in Common Amount Earnings
Shares Amount Capital Stock Receivable (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, at inception -- $ -- $ -- $ -- $ -- $ -- $ --
Proceeds from sale of common stock for
$.001 per share 7,772,670 7,773 -- -- -- -- 7,773
Proceeds from sale of common stock for
$.006 per share 5,500,000 5,500 24,350 -- -- -- 29,850
Common stock subscribed
21,262,530 shares @ $.001 per share -- -- -- 21,262 (21,262) -- --
295,450 shares @ $.009 per share -- -- -- 2,955 (2,955) -- --
105,874 shares @ $.179 per share -- -- -- 19,057 (19,057) -- --
Contributed services -- -- 21,708 -- -- -- 21,708
Net income -- -- -- -- -- 39,489 39,489
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, May 31, 2005 13,272,670 13,273 46,058 43,274 (43,274) 39,489 98,820
(unaudited)
Proceeds received from subscribed shares 21,650,715 21,651 27,933 (49,585) 49,585 -- 49,584
Proceeds from sale of common stock for
$.18 per share 27,915 29 4,996 -- -- -- 5,025
Common stock subscribed
53,111 shares @.179 per share -- -- -- 9,561 (9,561) -- --
Common stock subscriptions canceled
10,000 shares @ .001 per share -- -- -- (10) 10 -- --
40,500 shares @ .009 per share -- -- -- (405) 405 -- --
7,488 shares @ .179 per share -- -- -- (1,348) 1,348 -- --
Contributed services -- -- 13,889 -- -- -- 13,889
Net (loss) for the six months -- -- -- -- -- (87,424) (87,424)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, November 30, 2005 (unaudited) 34,951,300 $ 34,953 $ 92,876 $ 1,487 $ (1,487) $ (47,935) $ 79,894
=========== =========== =========== =========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
41
FUEGO ENTERTAINMENT, INC.
Notes to Financial Statements
1. NATURE OF BUSINESS
Fuego Entertainment, Inc. (the "Company") is primarily engaged in the directing,
production, marketing, and distribution of entertainment products, including
feature and short films, documentaries, television shows, music, and tour
productions. The Company also provides management, marketing, and public
relations services to the entertainment industry.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of the Company formed
in the State of Nevada on December 30, 2004. The Company was originally formed
as Durango Entertainment, but changed its name to Fuego Entertainment in March
2005. These financial statements reflect the use of significant accounting
policies, as described below and elsewhere in the notes to the financial
statements, and are prepared in accordance with accounting principles generally
accepted in the United States of America. The fiscal year end of the Company is
May 31.
REVENUE RECOGNITION
Revenue from the sale of film and television programming rights and license
arrangements is recognized only when persuasive evidence of a sale or
arrangement with a customer exists, the project is complete, the contractual
delivery arrangements have been satisfied, the license period has commenced if
applicable, the arrangement fee is fixed or determinable, collection of the
arrangement fee is reasonably assured, and other conditions as specified in the
respective agreements have been met.
Revenue from production services for third parties is recognized when the
production is completed and delivered. All associated production costs are
deferred and charged against income when the film is delivered and the related
revenue is recognized.
Fees for other services provided to third parties are recognized as revenues
when the services are performed and there is reasonable assurance over the
collection of the fees.
Cash received in advance of meeting the revenue recognition criteria described
above is recorded as deferred revenue.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company estimates the collectibility of its trade accounts receivable. In
order to assess the collectibility of these receivables, the Company monitors
the current creditworthiness of each customer and analyzes the balances aged
beyond the customer's credit terms. Theses evaluations may indicate a situation
in which a certain customer cannot meet its financial obligations due to
deterioration of its financial viability, credit ratings or bankruptcy. The
allowance requirements are based on currents facts and are reevaluated and
adjusted as additional information is received. Trade accounts receivable are
subject to an allowance for collection when it is probable that the balance will
not be collected. As of November 30, 2005, no allowance for collectibility was
needed.
42
2. SIGNIFICANT ACCOUNTING POLICIES - continued
ADVERTISING EXPENSES
Advertising costs are expensed as incurred, except for costs related to the
development of a property and/or live-action television program commercial or
media campaign which are expensed in the period in which the commercial or
campaign is first presented. Advertising expenses are included in advertising
and marketing expenses, a component of general and administrative expense.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ materially from those
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all liquid investments with original
maturities of three months or less are classified as cash and cash equivalents.
The fair value of cash and cash equivalents approximate the amounts shown on the
financial statements. Cash and cash equivalents consist of unrestricted cash and
short-term investments. As of May 31, 2005 and November 30, 2005 there were no
cash equivalents.
INCOME, LOSS PER COMMON SHARE
Basic income, loss per common share is calculated on the average number of
common shares outstanding during each period. Diluted income per common share is
based on the average number of common shares outstanding during each period,
adjusted for the effect of outstanding stock subscriptions. Outstanding stock
subscriptions were not used in the computation of basic loss per share as their
effect would be antidilutive.
FILM AND TELEVISION COSTS
The Company accounts for its film and television costs pursuant to AICPA
Statement of Position ("SOP") No. 00-2, Accounting by Producers or Distributors
of Films. The cost of production for film and television production costs,
including direct costs, production overhead and interest are capitalized and
amortized using the individual-film-forecast method under which such costs are
amortized for each program in the ratio that revenue earned in the current
period for such program bears to management's estimate of the ultimate revenues
to be realized from all media and markets for such program. Management regularly
reviews, and revises when necessary, its ultimate revenue estimates on a
title-by-title basis, which may result in a change in the rate of amortization
applicable to such title and/or a write-down of the value of such title to
estimated fair value. These revisions can result in significant
quarter-to-quarter and year-to-year fluctuations in film write-downs and rates
of amortization. If a total net loss is projected for a particular title, the
associated film and television costs are written down to estimated fair value.
All exploitation costs, including advertising and marketing costs are expensed
as incurred. Television adaptation and production costs that are adapted and/or
produced are stated at the lower of cost, less accumulated amortization, or fair
value.
INVESTMENT
The Company invested a total of $57,400 in a series of shows to be presented in
5 cities in the United States, from which it was to receive the return of its
investment based on a percentage of ticket sales from all shows performed, and
then participate in the net income of all of the shows after their completion.
43
2. SIGNIFICANT ACCOUNTING POLICIES - continued
In September, 2005, the show scheduled to be presented on December 31, 2005, at
the Miami Arena, was postponed by the tour promoter, due to 1), the decision by
the Miami Arena to charge a substantial percentage for the sales of all
promotional merchandise during the show, which was presented to the tour
promoter in a meeting on September 20, 2005, and 2), the severity of the damage
caused by hurricane Rita on September 22, 2005, and the prospect of additional
hurricanes occurring in the area (hurricane Wilma occurred on October 9, 2005),
which would have a negative impact on the community, including the potential for
reduction in the sale of the 15,000 seating capacity for the New Year's Eve
performance of the scheduled show.
No shows have been rescheduled since the postponement in September 2005.
Accordingly, the Company completely impaired its investment of $57,400 in
September 2005. Any later recovery of the investment, if any, will be recorded
as income at the time such amounts have been earned by the Company.
EQUIPMENT
Equipment is carried at cost, net of accumulated depreciation. Depreciation is
provided on the straight-line method based on the estimated useful lives of the
assets, which range from 2.5 years to 5 years.
INTANGIBLE ASSETS
The company has capitalized the cost of the creation of its logo. Amortization
of logo costs is being amortized ratably over a 5-year useful life, commencing
with April 1, 2005, the date on which the logo was acquired by purchase.
DEFERRED INITIAL PUBLIC OFFERING COSTS
Deferred initial public offering costs, principally legal and audit fees, are
deferred until the successful completion of the pending registration of the
Company's common stock on Form SB-2, at which time all such costs will be
charged against paid in capital. If unsuccessful, these deferred costs will be
charged against income at that time.
INCOME TAXES
Deferred income taxes will be recorded for the temporary differences between the
financial statement and tax bases of assets and liabilities using current tax
rates. Valuation allowances will be established against deferred tax assets
whenever circumstances indicate that it is more likely than not that such assets
will not be realized in future periods.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
investments, prepaid expenses and other current assets, unearned revenue,
accounts payable and accrued expenses, and other liabilities approximate their
fair values principally because of the short-term maturities of these
instruments.
NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment." SFAS No. 123R replaced SFAS No. 123 and superseded Accounting
Principles Board Opinion No. 25. SFAS No. 123R will require compensation costs
related to share-based payment transactions to be recognized in the financial
statements. The effective date of SFAS No. 123R is the first reporting period
beginning after June 15, 2005.
On April 14, 2005, the Securities and Exchange Commission issued an announcement
amending the compliance dates for the FASB's SFAS 123R that addresses accounting
for equity based compensation arrangements. Under SFAS 123R registrants would
44
2. SIGNIFICANT ACCOUNTING POLICIES - continued
have been required to implement the standard as of the beginning of the first
interim or annual period that begins after June 15, 2005. The Commission's new
rule will allow companies to implement SFAS 123R at the beginning of the next
fiscal year after June 15, 2005. The adoption of his pronouncement had no effect
on the accompanying financial statements as of November 30, 2005.
3. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentration of
credit risk, consist primarily of temporary cash investments and accounts
receivable. The majority of the cash and cash equivalents are maintained with
major financial institutions in the United States of America. Credit risk on
accounts receivable is minimized by the Company by performing ongoing credit
evaluations of its customers' financial condition and monitoring its exposure
for credit losses and maintaining allowances for anticipated losses. One
customer for which a corporate video was produced accounted for 60% of total
operating revenues from inception to May 31, 2005, and for the six months ended
November 30, 2005 one customer accounted for 55% of total operating revenues.
4. CAPITALIZED PRODUCTION COSTS
Capitalized production costs represent development costs incurred on projects in
process.
A summary of these costs as of November 30, 2005, and May 31, 2005 follows:
November May
30, 2005 31, 2005
--------- ---------
The Trader Show is a reality television show based on the $39,152 $27,842
real life activities of amateur and professional stock
traders. The Trader Show places an emphasis on the
activities of day traders.
Gold in Ecuador is the story of a small mining town of
Portobello. In 1916 Mellick Tweedy traveled on a mule
thought the jungle of a small mining town in Ecuador, this
small town became one of the biggest gold exporters in South
America. Fifty years ago American company SADCO, abandoned
the American shaft, one of the oldest gold mines in the
world, leaving the town of Portobello and its people in
ruins. Today, the people of Portobello have a new hope, or
do they? The Americans are back in Portobello searching for
Gold.
15,441 15,148
One Million Millionaires, This is a documentary that will
capture the life of a controversial individual, Mr. Urban
Casavant and his dream of making 1 million millionaires. For
some he is the hope of their life, for others he is a
dreamer, however, thousands follow him and wait patiently.
The film will cover his life from the time he was a
low-income earning prison guard to multimillion-dollar
businessman. 8,174 6,800
45
4. CAPITALIZED PRODUCTION COSTS - continued
Counterfeit Conspiracy is a documentary on stock market
scandals: Still in production filming several more
interviews. Wall Street insider trading scandals from the
1980's to present, covers the various scandals, reportage of
court documents, testimony, and interviews with some
participants to fashion an authoritative account of what
happened. For example, Milliken, the Drexel Burnham Lambert
junk bond king who convinced many savings institutions and
insurance companies to buy these bonds in large quantities.
It will also document the illegal practice of Naked Short
Selling perpetrated by some offshore organizations and
self-inflicted by some companies. 5,665 642
--------- ---------
Total capitalized production costs $ 68,432 $ 50,432
========= =========
All of the above films are in production and none have been acquired from other
parties. None have been released into the market or are generating revenues
except for incidental advance sales of DVD's for Counterfeit Conspiracy totaling
$4,691 as of May 31, 2005 and $5,617 for the six months ended November 30, 2005.
Advance sales have been classified as deferred revenue in the accompanying
balance sheets. No amortization has commenced on any film products in
production, and there are no other films owned by the Company.
Amortization of all of the above costs is estimated to commence within the next
fiscal year, based upon their anticipated completion dates, with the possible
exception of the costs incurred in the Trader Show, which the Company will not
be able to begin marketing to television companies until completion thereof,
expected by the end of calendar 2006. The Trader Show costs represent the only
costs in production to be considered a direct-to-television product.
5. COMMITMENTS
The Company leases office and equipment from a related party for $700 a month.
Total rent expense from inception to May 31, 2005 was $3,500 and for the six
months ended November 30, 2005 was $4,200.
46
6. RELATED PARTY TRANSACTIONS
Ciocan Entertainment and Music Group, LLC, "Ciocan" is an entertainment company
owned by the principal shareholder of the Company. Ciocan creates products for
the Latino Market in and out of the United States borders and will use the
Company to market, promote and commercialize some its products (music, films,
documentaries, artist, etc) for the Anglo and international markets. During the
five month period ended May 31, 2005, Ciocan advanced to the Company a total of
$31,552 of which, $29,850 was applied towards the purchase, by Ciocan, of 5.5
million shares of the Company's common stock, and $1,400 was charged as rent,
leaving a balance advanced of $302 as of May 31, 2005. and $0 as of August 31,
2005. Also,
An advance of $122 was owed to a stock subscriber as of November 30, 2005.
7. INCOME TAXES
The Company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards Board Opinion No. 109. Under this
method, deferred income taxes are recorded to reflect the tax consequences in
future periods of temporary differences between the tax basis of assets and
liabilities and their financial amounts at year-end.
The provision for current income taxes is as follows as of November 30, 2005 and
May 31, 2005:
For the For the
six months ended five months ended
November 30, 2005 May 31, 2005
------------------ -----------------
Current tax expense:
Federal tax at statutory rates $(33,939) $ 19,116
State income taxes less federal tax benefit 0 2,645
Benefit of surtax exemptions 4,369 (11,382)
Permanent differences 6,700 6,355
Valuation Allowance 10,474 0
---------- ----------
Income tax expense $(12,396) $ 16,734
========== ==========
The analysis of income tax expense for the six months ended at November 30, 2005
and the five months ended May 31, 2005 are as follows:
For the For the
six months ended five months ended
November 30, 2005 May 31, 2005
------------------ -----------------
Current $ (2,239) $20,109
Deferred (10,157) (3,375)
---------- ----------
Income tax expense $(12,396) $ 16,734
========== ==========
A deferred tax asset was recognized of $3,375 for the approximate $6,031 of
temporary timing differences during the period from inception to May 31, 2005.
These differences resulted from the filing of income tax returns on the cash
basis, wherein certain expenses totaling $18,173 were not deductible until paid,
deferred revenue of $4,691 was taxable when received, and income related to
accounts receivable of $16, 833 was not taxable until collected.
47
INCOME TAXES - continued
A deferred tax asset was recognized of $10,157 for the approximate $65,189 of
temporary timing differences during the six months ended November 30, 2005.
These differences resulted from the filing of income tax returns on the cash
basis, wherein certain expenses totaling $2,172 were not deductible until paid,
deferred revenue of $5,617 was taxable when received and the impairment loss
(Note 9) is not deductible for tax purposes until the investment is abandoned.
8. CONTRIBUTED CAPITAL
The President of the Company contributed the value of his services from
inception to May 31, 2005, at $15,000, and the value of other expenses totaling
$6,708, which consisted of office rent of $2,100, the prorata share of auto
expenses of $3,958, and legal services of $650. For the six months ended
November 30, 2005, the president of the Company contributed only the value of
his services at $13,889.
9. SUBSEQUENT EVENT
INVESTMENT IN HAVANA NIGHTS
In September, 2005, the show scheduled to be presented on December 31, 2005, at
the Miami Arena, was postponed by the tour promoter, due to 1), the decision by
the Miami Arena to charge a substantial percentage for the sales of all
promotional merchandise during the show, which was presented to the tour
promoter in a meeting on September 20, 2005, and 2), the severity of the damage
caused by hurricane Rita on September 22, 2005, and the prospect of additional
hurricanes occurring in the area ( hurricane Wilma occurred on October 9, 2005),
which would have a the negative impact on the community, including the potential
for reduction in the sale of the 15,000 seating capacity for the New Year's Eve
performance of the scheduled show.
No shows have been rescheduled since the postponement in September 2005.
Accordingly, the Company believes it is necessary to completely impair its
investment of $57,400 in September 2005. Any later recovery of the investment,
if any, will be recorded as income at the time such amounts have been earned by
the Company.
48
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada Revised Statute Section 78.7502 provides that:
(i) a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful;
(ii) a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper; and
(iii) to the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein, the corporation
shall indemnify him against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
Nevada Revise Statute Section 78.751 provides that we may make any discretionary
indemnification only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
(a) by our stockholders;
(b) by our board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) if a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion;
49
INDEMNIFICATION OF DIRECTORS AND OFFICERS - continued
(d) if a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a written
opinion; or
(e) by court order.
Our Certificate of Incorporation and Articles provide that no director or
officer shall be personally liable to our company, any of our stockholders or
any other for damages for breach of fiduciary duty as a director or officer
involving any act or omission of such director or officer unless such acts or
omissions involve intentional misconduct, fraud or a knowing violation of law,
or the payment of dividends in violation of the General Corporate Law of Nevada.
Further, our Bylaws provide that we shall, to the fullest and broadest extent
permitted by law, indemnify all persons whom we may indemnify pursuant thereto.
We may, but shall not be obligated to, maintain insurance, at our expense, to
protect ourselves and any other person against any liability, cost or expense.
We shall not indemnify persons seeking indemnity in connection with any
threatened, pending or completed action, suit or proceeding voluntarily brought
or threatened by such person unless such action, suit or proceeding has been
authorized by a majority of the entire Board of Directors.
Insofar as indemnification for liabilities arising under the Securities Act
might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection with this
registration:
SEC Registration Fees $ 307.75
Printing and Engraving Fees (1) $ 500.00
Accounting Fees and Expenses $15,000.00
Legal Fees and Expenses $20,000.00
Edgarization and Filing Fees $ 3,000.00
Transfer Agent Fees and Expenses (1) $ 750.00
- --------------------------------------------------------------------------------
TOTAL $ 39,557.75
(1) We have estimated these amounts.
50
RECENT SALES OF UNREGISTERED SECURITIES
From inception through December 15, 2005, we issued a total of 34,959,562 shares
of our common stock to those investors set forth in the table below for a total
value of $ 93,718.96.
- ------------------------ ---------------- ------------- --------------
NAME SHARES PAID DATE ACQUIRED
- ------------------------ ----------------- ------------ --------------
Cherie Cancio 1,100,000 $ 1,100.00 08/22/2005
- ------------------------ ----------------- ------------ --------------
Christy Cancio 1,000,000 $ 1,000.00 8/22/2005
- ------------------------ ----------------- ------------ --------------
Miguel Cancio 1,600,000 $ 1,600.00 10/17/2005
- ------------------------ ----------------- ------------ --------------
Ana Cancio 450,000 $ 450.00 9/13/2005
- ------------------------ ----------------- ------------ --------------
Hugo M. Cancio 7,772,670 $ 7,772.67 01/06/2005
- ------------------------ ----------------- ------------ --------------
Sunflower Publishing 500,000 $ 500.00 10/03/2005
- ------------------------ ----------------- ------------ --------------
Vivianka Cancio 75,000 $ 75.00 8/22/2005
- ------------------------ ----------------- ------------ --------------
Rogelia Morua 1,500,000 $ 1,500.00 6/23/2005
- ------------------------ ----------------- ------------ --------------
Maritza de la Torre 1,200,000 $ 1,200.00 10/03/2005
- ------------------------ ----------------- ------------ --------------
Juan Ramon Guzman 500,000 $ 500.00 6/23/2005
- ------------------------ ----------------- ------------ --------------
Katie Hale 200 $ 0.20 8/22/2005
- ------------------------ ----------------- ------------ --------------
Jose Gomez 1,400,000 $ 1,400.00 10/03/2005
- ------------------------ ----------------- ------------ --------------
Anthony Hattenbach 420,000 $ 420.00 6/22/2005
- ------------------------ ----------------- ------------ --------------
Ciocan Entertainment &
Music Group, LLC 5,500,000 $29,850.00 2/01/2005
- ------------------------ ----------------- ------------ --------------
Maritza De La Torre 250,000 $ 2,500.00 11//03/2005
- ------------------------ ----------------- ------------ --------------
Johnna Catanella-Davis 1,000 $ 10.00 9/23/2005
- ------------------------ ----------------- ------------ --------------
Jimmy Hopler 1,000 $ 10.00 9/23/2005
- ------------------------ ----------------- ------------ --------------
Charles Short 1,000 $ 10.00 9/23/2005
- ------------------------ ----------------- ------------ --------------
Hope Seitzinger 500 $ 5.00 9/23/2005
- ------------------------ ----------------- ------------ --------------
Choice Mortgage Funding,
Inc. 1,000 $ 10.00 9/23/2005
- ------------------------ ----------------- ------------ --------------
Noelia de Guzman 250 $ 2.50 9/23/2005
- ------------------------ ----------------- ------------ --------------
Juan Ramon Guzman
& Noelia Sosa 200 $ 2.50 9/23/2005
- ------------------------ ----------------- ------------ -------------
Jason Webb 13,888 $ 2,499.84 6/30/2005
- ------------------------ ----------------- ------------ -------------
Braynert Marquez 10,000 $ 1,800.00 10/11/2005
- ------------------------ ----------------- ------------ -------------
51
RECENT SALES OF UNREGISTERED SECURITIES - continued
- ------------------------ ---------------- ------------- --------------
NAME SHARES PAID DATE ACQUIRED
- ------------------------ ----------------- ------------ --------------
Beverly Jo Mehlman 10,000 $ 1,800.00 7/13/2005
- ------------------------ ----------------- ------------ -------------
TRW Family Limited Ptr. 5,555 $ 999.90 7/13/2005
- ------------------------ ----------------- ------------ -------------
Daniel York 2,777 $ 499.86 7/01/2005
- ------------------------ ----------------- ------------ -------------
Linda M. Vance 12,000 $ 2,160.00 7/13/2005
- ------------------------ ----------------- ------------ -------------
Edward Kaminsky 20,000 $ 3,600.00 7/13/2005
- ------------------------ ----------------- ------------ -------------
Joseph P. Mccarthy 11,111 $ 1,999.98 7/19/2005
- ------------------------ ----------------- ------------ -------------
Lee W. Delor 5,000 $ 900.00 7/21/2005
- ------------------------ ----------------- ------------ -------------
Verna Tucker & Roger
Summers 5,555 $ 999.90 7/22/2005
- ------------------------ ----------------- ------------ -------------
Johnathan Gildin &
Leah Gildin 1,500 $ 270.00 7/25/2005
- ------------------------ ----------------- ------------ -------------
Keneth P. Hicks &
Sandra Hicks 1,000 $ 180.00 7/22/2005
- ------------------------ ----------------- ------------ -------------
Robert Soto 3,000 $ 540.00 8/08/2005
- ------------------------ ----------------- ------------ -------------
Louis Mendez 20,000 $ 3,600.00 8/08/2005
- ------------------------ ----------------- ------------ -------------
Kevin West 2,000 $ 360.00 11/03/2005
- ------------------------ ----------------- ------------ -------------
Mary Alice Seagill 555 $ 99.50 9/01/2005
- ------------------------ ----------------- ------------ -------------
Behrens International
Group 5,556 $ 1,000.08 9/01/2005
- ------------------------ ----------------- ------------ -------------
Vivianka Cancio 694 $ 124.92 8/22/2005
- ------------------------ ----------------- ------------ -------------
Rogelia Morua 1,666 $ 299.88 6/23/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 4016 $ 723.00 9/01/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 2,722 $ 490.00 9/03/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 2,222 $ 400.00 9/28/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 1,111 $ 200.00 10/03/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 1,111 $ 200.00 11/03/2005
- ------------------------ ----------------- ------------ -------------
Niurka Marques 5,556 $ 1,000.00 11/22/2005
- ----------------------- ------------------ ------------ -------------
Niurka Marques 8,262 $1,487.00 12/06/2005
- ----------------------- ------------------ ------------ -------------
52
RECENT SALES OF UNREGISTERED SECURITIES - continued
- ------------------------ ---------------- ------------- --------------
NAME SHARES PAID DATE ACQUIRED
- ------------------------ ----------------- ------------ --------------
Cohen Enright 2,000 $ 360.00 8/30/2005
- ------------------------ ----------------- ------------ -------------
Tucker Hoss 20,000 $ 3,600.00 10/11/2005
- ------------------------ ----------------- ------------ -------------
Daniel York 555 $ 99.90 7/01/2005
- ------------------------ ----------------- ------------ -------------
Hugo M. Cancio 9,500.000 $ 9,500.00 8/22/2005
- ------------------------ ----------------- ------------ -------------
Hugo M. Cancio 1,727.330 $ 1,727.33 9/01/2005
- ------------------------ ----------------- ------------ -------------
Anthony Hattenbach 280,000 $ 280.00 11/03/20005
- ------------------------ ----------------- ------------ -------------
34,959,562 $ 93,718.96
TOTALS ================= ============
We relied upon Section 4(2) of the Securities Act of 1933, as amended (the
"Act"). Our officers and directors determined the sophistication of our
investors, as the investors were either business associates of, or personally
known to, our officer and director. Each investor completed a subscription
agreement whereby the investors certified that they were purchasing the shares
for their own accounts, with investment intent. This offering was not
accompanied by general advertisement or general solicitation and the shares were
issued with a Rule 144 restrictive legend.
EXHIBITS
Exhibit Number Description
3.1 Articles of Incorporation (1)
3.2 Certificate of Amendment (1)
3.3 Bylaws (1)
5.1 Opinion and Consent of Counsel
10.1 Viashow Agreement and Addendum
23.1 Consent of Independent Auditor
(1) Incorporated by reference from Form SB-2 filed August 19, 2005
53
UNDERTAKINGS
With regard to the securities of the registrant being registered pursuant to
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement. Not withstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) (Section 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has authorized this
registration statement to be signed on its behalf by the undersigned in the City
of Miami, Florida on February 28, 2006.
54
FUEGO ENTERTAINMENT, INC.
/s/ Hugo M.Cancio
- ------------------------------
Hugo M. Cancio
Principal Executive Officer
/s/ Hugo M.Cancio
- ------------------------------
Hugo M. Cancio
Principal Financial Officer
/s/ Hugo M.Cancio
- ------------------------------
Hugo M. Cancio
Principal Accounting Officer
In accordance with the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: March 29, 2006 /s/ Hugo M. Cancio
------------------
Hugo M. Cancio, Director
Dealer Prospectus Delivery Obligation
Until 90 days from the effective date of this Registration Statement, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
55