Mail Stop 3561
October 27, 2005
Hugo M. Cancio, Chief Executive Officer
Fuego Entertainment, Inc.
19250 NW 89th Court
Miami, Florida 33018
Re: Fuego Entertainment, Inc.
Amendment No. 2 to Registration Statement on Form SB-2
Filed October 3, 2005
Amendment No. 3 to Registration Statement on Form SB-2
Filed October 5, 2005
File No. 333-127612
Dear Mr. Cancio:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments. The
page numbers referred to in this letter correspond to the page
numbers in the marked copy of Amendment No. 3 to the Form SB-2
registration statement you filed on EDGAR on October 5, 2005.
Front Cover Page of Prospectus, page 3
1. We reissue comment 4 in our letter dated September 15, 2005.
Please remove the October 5, 2005 date at the bottom of your cover
page and leave it blank. The date of the prospectus is the
effective
date, not the date of any preliminary filing.
Risk Factors, page 7
2. We note you included disclosure on page 26 discussing the fact
that your shares will be traded as penny stocks. Having your
shares
classified as penny stock is still a material risk. Please
reinsert
the risk factor discussing the risk of your shares being
classified
as penny stock and reference the more detailed discussion on page
26.
3. We note your response to comment 6 in our letter dated
September
15, 2005. It appears that there are other risks to you and your
operations that you have not included in this section. For
example,
you state that there is a risk that you will cease to be a going
concern.
Also, each risk factor must have a heading separating one risk
factor
from another risk factor. It appears that the first risk factors
on
page seven and page eight have headings, but they are not written
in
all capital letters as are your other risk factor headings.
Therefore, please designate all your risk factor headings clearly
and
consistently, or if you simply failed to provide headings for
these
risk factors, please add the headings.
Our Business is Dependent on Relationships with Third Parties,
page 7
4. We note your response to comment 8 in our letter dated
September
15, 2005. Please disclose the third parties on whom you depend to
obtain, produce, promote, and distribute your products both in the
United States and internationally. Please disclose your current
relationships, if any, with these third parties.
Management`s Discussion and Analysis or Plan of Operation, page 11
5. We reissue comment 12 in our letter dated September 15, 2005.
Please discuss known material risks, trends, and uncertainties
over
the long and short term.
Plan of Operation, page 13
6. We reissue comment 13 in our letter dated September 15, 2005.
We
note that you generally describe your projects, your future
business
intentions, and Mr. Cancio`s experience. Please revise this
section
to focus on how you have generated revenues since inception and
specific steps, rather than general intentions and discussions
that
you have had with suppliers or distributors, to generate revenues
in
the next 12 months. Please quantify and describe specific
significant costs and expenses incurred thus far and that you
expect
to incur in the next 12 months. Please identify current
significant
customers and describe specific projects that will generate
revenue.
Please quantify the amount you will need to continue operations
for
the next 12 months, how you will raise the required financing, and
the impact on your business if you fail to raise the required
amount.
Filmed Entertainment, page 12
7. We note your response to comment 14 in our letter dated
September
15, 2005. You state that your three projects are "in production,"
in
"the final stages of production," or in "post-production." Please
describe each of these three production stages, and any other
stage
through which one of your films must pass. Also, for each
project,
please discuss the number of individuals you employed and their
salaries, the amount and cost of equipment you must rent or
purchase,
the locations in which you film and the expenses associated with
those locations, and any other expense you paid already to produce
the documentaries and the amount you will require in the future.
If
you outsource the production of these films, please disclose the
amount you spent and will spend on the outsourcing, the number of
people working on each film, the location in which you film, and
any
other material information required for your readers to understand
the size and scope of these projects. Finally, please discuss
your
plans for distributing these films and generating revenue, whether
the production was outsourced or not.
8. We reissue comment 15 in our letter dated September 15, 2005.
It
appears that you discuss the project opportunities that you are
seeking only for your music entertainment and not your filmed
entertainment. Please discuss the specific film projects you are
actively seeking. If there are none, please remove the statement.
In this regard, please move the last paragraph on page 12 to your
Music Entertainment subsection.
9. We note your response to comment 16 in our letter dated
September
15, 2005. Please elaborate on the information you provide in the
first paragraph on page 13. For example, please disclose the
United
States and European tours that Mr. Cancio has produced and the
films
and documentaries he has co-produced. As another example, please
disclose how Mr. Cancio`s contacts will be able to specifically
benefit you and your operations.
Other Services, page 14
10. We note your response to comment 19 in our letter dated
September
15, 2005. Please discuss the duties and responsibilities of the
employees you plan on hiring.
For the Period from December 30, 2004 (Inception) to May 31, 2005,
page 14
11. We note your response to comment 21 in our letter dated
September
15, 2005. In the first paragraph on page 15, you state that you
completed videos for three companies. However, it appears that
you
describe only two of the videos. Please revise or advise. For
all
three videos, please disclose the companies who hired you, the
major
expenses for each video, and any outsourcing arrangements you had
with the individuals filming and producing the videos. Also,
please
discuss why and how the car racing video "produced the major
portion
of filming revenue." Further, please disclose your basis for
stating
that "[f]uture filming projects similar to the above are estimated
to
be the principal source of revenues in the near term and are
likely
to have a favorable impact on both revenues and net income."
Finally, please disclose the party with whom you have the six
month
contract for publicist services, the terms of the agreement, and
the
amount of time you dedicate to this endeavor.
Liquidity and Resources, page 15
12. We note your response to comment 22 in our letter dated
September
15, 2005. Please revise your disclosure to state how you will
satisfy
your cash requirements for the next twelve months rather than six
months. See Item 303(a)(1)(i) of Regulation S-B.
Description of Business, page 17
13. We reissue comment 23 in our letter dated September 15, 2005.
Current Business Operations, page 17
14. We note your response to comment 25 in our letter dated
September
15, 2005. In the second paragraph of this subsection, you state
that
by "combining the efforts and products of Fuego and Ciocan, [you]
have been able to reach both markets at the same time as well as
further penetrate Europe where Latin music is very popular."
However, on page 12, you state that you are "actively seeking" an
agreement with Ciocan Entertainment Music Group, L.L.C. Please
revise to state that you do not currently have any agreements with
Ciocan.
Distribution and Publishing, page 17
15. You state that "Ciocan`s and Cancio`s largest distribution
products are music CD`s," and you discuss the methods that "Ciocan
and Cancio" use to select clients. Please clarify whether Mr.
Cancio
engages in distribution and publishing activities on his own in
addition to his duties in relation to Ciocan Entertainment Music
Group, L.L.C. and you.
16. We note your response to comment 27 in our letter dated
September
15, 2005. Please identify your distributors and revise to clarify
what you mean by a "net 30 net 60 payment term."
17. We reissue comment 28 in our letter dated September 15, 2005.
Advertising and Promotional Services, page 18
18. We note your response to comment 31 in our letter dated
September
15, 2005. You make the following statements, "We have used and
will
continue to use in the future on a project to project basis the
services of F&F Media Corp. Mr. Adolfo Fernandez as our Marketing
and Public Relations freelance firm." Please revise these two
sentences to make clear the relationship between F&F Media Corp.
and
Mr. Fernandez, if any.
19. We note your response to comment 32 in our letter dated
September
15, 2005. You state that you would require an extra $40,000 in
revenue to bring your advertising and marketing in-house. Please
discuss your likelihood of earning an additional $40,000 in
revenue
within the timeframe of your 12 month goal.
Projects, page 18
20. We reissue comment 30 in our letter dated September 15, 2005.
Please disclose your relationships with the U.S. Tour of Havana
Night
Club`s Celebrate Freedom Tour `05 and Anthony Pullicino in this
subsection.
21. Please tell us the reasons you deleted all references to Vocal
Sampling from this latest amendment to your registration
statement.
22. We note your response to comment 34 in our letter dated
September
15, 2005. On page 19, you state that, in connection with the U.S.
Tour of Havana Night Club, none of your members or representatives
travel on business to Cuba or transact business with banks or
other
entities in Cuba. Please tell us whether you have any current or
planned operations in, or other contacts with, Cuba, unrelated to
your co-presentation of the U.S. Tour of Havana Night Club. In
this
regard, please tell us about any direct or indirect contacts with
Cuba by you or Mr. Cancio, or, if you and Mr. Cancio have no
direct
or indirect contacts with Cuba, advise us that this is the case.
23. We note your response to comment 35 in our letter dated
September
15, 2005. You state that the U.S. Tour of Havana Night Club,
Celebrate Freedom Tour `05 is the "largest musical show from Cuba
to
appear in the United States in about 50 years." Please provide
the
source of this factual statement. Also, in your response to
comment
24, you state that you do not intend to conduct any business with
any
Cuban nationals. If so, please tell us how you claim that this is
the largest musical show from Cuba in 50 years.
24. We note your response to comment 36 in our letter dated
September
15, 2005. You state that the show is in the "production stages."
Please disclose more information about the show`s creation and
development stage. For example, please discuss the number of
people
working on the show, its budget, your plans to air the show on
television, and the expected revenue of the show.
Also, you state that one of the companies that Mr. Pullicino will
visit personally is a gold mining company in Ecuador. Please tell
us
whether this company is related to the one you describe in your
Filmed Entertainment subsection on page 12. If so, please
disclose
the name of this company and discuss any relationships or
agreements,
whether formal or informal, between or among you, this Ecuadorian
company, and any other entity or individual involved in this
television show. If not, please tell us how you or Mr. Pullicino
chose this company to investigate.
Further, please disclose the diamond mining companies in Canada
that
Mr. Pullicino will investigate for the show and whether you have
any
relationships with these companies. If so, please discuss the
nature
and scope of these relationships. If not, please tell us how Mr.
Pullicino selected these companies to investigate.
Sales Strategy, page 19
25. Please disclose the "retail stores, music stores, etc. across
the
globe" in which you will place your products. Please revise to
state
whether you have any agreements with these stores or with the
"various radio stations, television producers, newspaper editors,
etc."
Certain Relationships and Related Transactions, page 22
26. We note your response to comment 43 in our letter dated
September
15, 2005. Please tell us why, in Amendment No. 1 to your
registration statement filed August 19, 2005 on Form SB-2, you
stated
that on January 6, 2005 you issued 19,000,000 shares of your
comment
stock to Hugo Cancio worth $19,000 for services rendered.
However,
in this amendment to your registration statement, you disclose
that
on January 6, 2005 you issued only 7,772,670 shares to Mr. Cancio
worth $7,772.67 for services rendered.
In this regard, we noticed you changed the amount of shares
beneficially owned by Mr. Cancio in the beneficial ownership table
on
page 23. Therefore, please address the changes in the Selling
Shareholders section of your document as well.
Plan of Distribution, page 26
27. We note your response to comment 45 in our letter dated
September
15, 2005. In addition to the disclosure you provided, please
discuss
any factors considered in determining the offering price,
including
your asset value, earnings, book value, or other criteria. Also,
please state that there is no guarantee that a market will develop
for your securities.
Selling Shareholders, page 26
28. We note your response to comment 49 in our letter dated
September
15, 2005. Please describe in this section how the selling
shareholders received their shares.
Where You Can Find More Information, page 30
29. We note your response to comment 50 in our letter dated
September
15, 2005. Please revise this section to note our address as 100 F
Street, N.E.
Financial Statements, page 31
Part 1. Financial Information, page 31
30. Please update your registration statement to include interim
financial statements to reduce the age of your financial
statements.
See Rule 3-12(g) of Regulation S-X. Also, please update your
Management`s Discussion and Analysis section to include a
discussion
of the included interim period. See Item 303(b)(2) of Regulation
S-
B.
Balance Sheet, page 32
31. We note your response to comment 52 in our letter dated
September
15, 2005. As previously requested, please revise your disclosure
to
include the requirements in paragraph 53 of SOP 00-2.
32. We note your response to comment 53 in our letter dated
September
15, 2005. If these investment costs are akin to advance
royalties,
as described in paragraph 10 of SFAS No. 50, you are required to
demonstrate that past performance and current popularity of these
events provide a basis for estimating that the investment will be
fully recoverable from future royalties. Further, if these costs
do
not appear to be fully recoverable they shall be charged to income
as
the loss becomes evident. The losses generated by the three shows
held before the date of your balance sheet indicate this
investment
does not satisfy the requirements in paragraph 10 of this
statement.
Please advise or revise your financial statements to reflect the
cost
of the investment as a charge to income as of your balance sheet
date.
33. We note your response to comment 54 in our letter dated
September
15, 2005. The accounting guidance in paragraph 10 of SFAS No. 142
generally supports internally developed intangible assets being
expensed as incurred. Please advise or revise your financial
statements to reflect the deferred logo cost as a charge to income
on
the date incurred.
Statement of Stockholder`s Equity, page 34
34. We note your response to comment 57 in our letter dated
September
15, 2005. Please tell us why your response represents that Hugo
M.
Cancio was issued 19 million shares on January 6, 2005 in light of
the fact this number of shares exceeds total shares outstanding as
of
your balance sheet date and 5.5 million of the 19 million shares
were
issued to Ciocan Entertainment Film and Music Group LLC. Include
with your response a schedule listing all common share issuances
including each shareholder name, the date of each share purchase
and
number of shares per purchase from the entity`s inception to
September 15, 2005.
Statement of Cash Flows, page 34
35. Your cash and cash equivalents at year end do not reconcile
with
the amount presented in your balance sheet as a result of the
$6,000
adjustment reflected in the changes in deferred tax assets.
Please
tell us why you have revised your statement of cash flow to
reflect
this change in consideration of the fact your balance sheet does
not
reflect any change. Please advise or revise your financial
statements.
Notes to Financial Statements, page 36
6. Related Party Transactions, page 40
36. We note your response to comment 59 in our letter dated
September
15, 2005. Please revise to state, if true, that the consideration
from Ciocan for the 5.5 million shares was cash. If the
consideration was other than cash or was a cash advance requiring
repayment, please revise your disclosure accordingly. Also,
please
revise page 22 to clearly indicate the consideration for the
shares
and tell us where the recent revision of $1,400 is reflected in
your
financial statements.
37. We note your response to comment 60 in our letter dated
September
15, 2005. We do not see the revised disclosure concerning Anthony
Hattenbach and Sunflower Publishing in this footnote. Please
advise
or revise your disclosure to respond to our former comment.
Part II - Information Not Required In Prospectus, page 41
Recent Sales of Unregistered Securities, page 43
38. We note your response to comment 61 in our letter dated
September
15, 2005. Currently, you disclose you have 18,004,647 shares
outstanding at May 31, 2005. Your financial statements reflect
13,272,670 common shares outstanding as of your balance sheet
date.
Please advise or revise this disclosure.
Also, please provide the date, title, and amount of shares for
each
particular sale of your unregistered securities as it appears you
have done with the shares issued to Mr. Cancio for services
rendered
on January 6, 2005. In addition, please identify the type of
purchaser in each unregistered sale. We note that you refer only
to
investors.
Exhibit 23.1
39. We note your response to comment 63 in our letter dated
September
15, 2005. Please revise this exhibit to include the actual
independent accountant`s consent rather than the accompanying
cover
letter.
* * * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
You may contact Brian McAllister, Staff Accountant, at (202)
551-3341, or Donna DiSilvio, Senior Accountant, at (202) 551-3202,
if
you have questions regarding comments on the financial statements
and
related matters. Please contact John Fieldsend, Staff Attorney,
at
(202) 551-3343, Peggy Kim, Senior Attorney, at (202) 551-4504, or
me
at (202) 551-3720 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: William D. O`Neal, Esq.
The O`Neal Law Firm, P.C.
Via Fax: (480) 816-9241
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Hugo M. Cancio, Chief Executive Officer
Fuego Entertainment, Inc.
October 27, 2005
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