SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>2
<FILENAME>filename2.txt
<TEXT>
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  uses the  allowance  method  for bad  debts.  Based on  historical
collection activity, no allowance is deemed necessary.

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 in the accompanying statement of operations.

                                       1
<PAGE>

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.

INCOME PER COMMON SHARE

Basic  income 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.

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
which is anticipated to occur at the end of the summer of 2006.

The three shows  performed as of May 31,  2005,  exhausted  the  budgeted  funds
available by the producer/promoter since the promoter/promoter  decided to incur
additional  costs  for high  definition  filming,  production  costs  for a live
recording of a compact disc, and a substantial payment to secure the services of
an Oscar  Winner  Film  Director.  In the  opinion of the  president/CEO,  whose
background includes  substantial tour production,  the majority of shows on tour
typically incur  front-end costs of this type and magnitude,  prior to realizing
the financial benefits from subsequent shows during the tour.

                                       2
<PAGE>

As a result of these increased show costs,  the initial  royalty  agreement with
the Company was  renegotiated  to allow  deferral of the initial  payment to the
Company of its  investment  until the December 31, 2005 show is  performed.  The
Company  does not  consider  this  deferral as a basis for  amortization  of its
investment or impairment thereof,

In addition to expecting  full recovery of the  investment in December 2005, the
Company  believes  additional  shows may be added to the tour  depending  on the
success achieved during the remaining shows.

The tour  being  presented  is a more  expanded  version  of the same show being
presented  semi-weekly  at the Stardust  hotel in Las Vegas,  Nevada,  which has
enjoyed near sell-out performances.

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 by which such costs were incurred.

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
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.

                                       3
<PAGE>

In December 2004, the FASB issued  Statement of Financial  Accounting  Standards
("SFAS") No. 123 (revised 2004),  Share-Based  Payment ("SFAS No. 123-R").  SFAS
No.123-R is a revision of SFAS No. 123, as amended,  Accounting for  Stock-Based
Compensation,  and  supersedes  Accounting  Principles  Board  Opinion  No.  25,
Accounting  for  Stock  Issued  to  Employees.   SFAS  No.123-R  eliminates  the
alternative to use the intrinsic value method of accounting that was provided in
SFAS No. 123, which generally  resulted in no compensation  expense  recorded in
the financial  statements related to the issuance of equity awards to employees.
SFAS No. 123-R  requires that the cost resulting  from all  share-based  payment
transactions  be  recognized  in  the  financial  statements.   SFAS  No.  123-R
establishes   fair  value  as  the  measurement   objective  in  accounting  for
share-based  payment   arrangements  and  requires  all  companies  to  apply  a
fair-value-based  measurement method in accounting for generally all share-based
payment transactions with employees.

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 three months
ended  August  31,  2005  one  customer  accounted  for 55% of  total  operating
revenues.

CAPITALIZED PRODUCTION COSTS

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

                                                            August 31    May 31
                                                               2005       2005
                                                             --------  --------
The Trader Show is a reality television show based on the    $ 38,852  $ 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         15,148    15,148
Portobello. In 1916 Mellick Tweedy traveled on a mule
thought the jungle of a small mining tow 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       6,800     6,800
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.

                                       4
<PAGE>

Counterfeit Conspiracy is a documentary on stock market         2,879       642
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.

Total capitalized production costs                           $ 63,679  $ 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 $xxxxx as of August 31, 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  in  xxxxxxxx.  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 three
months ended August 31, 2005 was $2,10