UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark one)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                  For the quarterly period ended June 30, 2005

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934

               For the transition period from ________ to ________

                        Commission file number: 005-79752

                             AGU Entertainment Corp.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

               Delaware                                     84-1557072
--------------------------------------         ---------------------------------
   (State or other jurisdiction of             (IRS Employer Identification No.)
    incorporation or organization)

                          3200 West Oakland Park Blvd.
                           Lauderdale Lakes, FL 33311
        -----------------------------------------------------------------
                    (Address of principal executive offices)

                                 (954) 714-8100
        -----------------------------------------------------------------
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]

The number of shares of the issuer's common stock, no par value,  outstanding as
of August 19, 2005 was 25,587,615.

Transitional Small Business Disclosure Format (check one): Yes [ ]; No [X]

<PAGE>

                             AGU ENTERTAINMENT CORP.
                 (Formerly Lexington Barron Technologies, Inc.)

                                   FORM 10-QSB

                                      INDEX

<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                               <C>
PART I.  UNAUDITED FINANCIAL INFORMATION
Item 1.  Financial Statements:
         Condensed Consolidated Balance Sheet as of June 30, 2005
         (unaudited) and December 31, 2004 (audited).............................   3
         Condensed Consolidated Statements of Operations for the
         Three and Six Months Ended June 30, 2005 and 2004 (unaudited) ..........   4
         Condensed Consolidated Statement of Changes in Stockholders'
         Equity for the Six Months Ended June 30, 2005 (unaudited)...............   5
         Condensed Consolidated Statements of Cash Flows for the Six Months
         Ended June 30, 2005 and 2004 (unaudited)................................   6
         Notes to Condensed Consolidated Financial Statements (unaudited)........   7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.....................................  14

Item 3.  Controls and Procedures ................................................  20

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings.......................................................  20

Item 2.  Unregistered Sales of Equity Securities and use of proceeds.............  20

Item 3.  Defaults Upon Senior Securities.........................................  21

Item 4.  Submission of Matters to a Vote of Security Holders.....................  21

Item 5.  Other Information.......................................................  21

Item 6.  Exhibits ...............................................................  21

         SIGNATURES..............................................................  23
</TABLE>

                           FORWARD LOOKING STATEMENTS

         Cautionary Statement Pursuant to Safe Harbor Provisions of the
                Private Securities Litigation Reform Act of 1995

This report may include a number of "forward-looking statements" as that term is
defined in Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. These statements reflect
management's   current  views  with  respect  to  future  events  and  financial
performance and include  statements  regarding  management's  intent,  belief or
current  expectations,  which are based upon assumptions about future conditions
that may prove to be  inaccurate.  Prospective  investors are cautioned that any
such  forward-looking  statements  are not  guarantees  of  future  performance,
involve risk and uncertainties,  and that as a result, actual results may differ
materially from those  contemplated  by such  forward-looking  statements.  Such
risks include, among other things, the volatile and competitive markets in which
we operate, our limited operating history, our limited financial resources,  our
ability to manage our growth and the lack of an  established  trading market for
our securities. When considering  forward-looking statements,  readers are urged
to carefully review and consider the various disclosures, including risk factors
and their  cautionary  statements,  made by us in this  report  and in our other
reports filed with the Securities and Exchange Commission.



                                       2
<PAGE>

                     Part 1. Unaudited Financial Information

Item 1. Financial Statements

                             AGU ENTERTAINMENT CORP.
                    (Formerly Lexington Barron Technologies,
                        Inc.) Consolidated Balance Sheets
              As of June 30, 2005 (unaudited) and December 31, 2004

<TABLE>
<CAPTION>
                                                                     2005              2004
                                                                 ------------      ------------
<S>                                                              <C>               <C>
Current Assets:
    Cash                                                         $      1,332      $    771,533
    Accounts receivable, net of allowance of $109,838 and $0          431,509           507,482
    Prepaid expenses                                                  104,628           225,037
                                                                 ------------      ------------
      Total current assets                                            537,469         1,504,052

    Property and equipment, net of accumulated
      depreciation of $269,174 and $123,260                         9,344,610         9,110,373
    Intangibles  , net of accumulated amortization                  1,291,366           913,735
    Other assets                                                      159,268           164,737
                                                                 ------------      ------------
      Total assets                                               $ 11,332,713      $ 11,692,897
                                                                 ============      ============
Liabilities and Stockholders' Equity (Deficiency)
Current Liabilities:
    Accounts payable                                             $  1,276,039      $    501,514
    Accounts payable - related parties                                162,300           169,258
    Notes payable, related parties - current portion                  890,921           445,642
    Convertible notes payable, net of unamortized discount          7,939,041         7,150,000
    Other notes payable                                               245,000                --
    Equipment note - current portion                                   12,556            12,140
    Capital leases payable - current portion                           13,603            13,881
    Accrued expenses                                                1,393,288           910,418
    Other current liabilities                                           6,852            36,965
                                                                 ------------      ------------
      Total current liabilities                                    11,939,600         9,239,818

Capital leases payable - long term portion                              5,480            11,876
Equipment note - long term portion                                     30,285            36,668
Convertible notes payable - net of unamortized discounts            1,740,190           854,178
                                                                 ------------      ------------
Total liabilities                                                  13,715,555        10,142,540
                                                                 ------------      ------------
Stockholders' Equity:
    Preferred stock, $0.0001par value; 10,000,000 shares
      authorized, -0- shares issued and outstanding                        --                --
    Common stock, $0.0001 par value; 100,000,000 shares
      authorized, 25,134,919 and 23,392,576 shares
      issued and outstanding                                            2,514         4,658,380
    Additional paid-in capital                                     11,822,749         3,593,634
    Accumulated deficit                                           (14,208,105)       (6,701,657)
                                                                 ------------      ------------
      Total stockholders' (deficiency) equity                      (2,382,842)        1,550,357
                                                                 ------------      ------------
      Total liabilities and stockholders' equity                 $ 11,332,713      $ 11,692,897
                                                                 ============      ============
</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                       3
<PAGE>
                    AGU Entertainment Corp. and Subsidiaries
                 (Formerly Lexington Barron Technologies, Inc.)
                 Condensed Consolidated Statements of Operations
            For the Three and Six Months Ended June 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                          Three Months                         Six Months
                                                 ------------------------------      ------------------------------
                                                     2005              2004              2005              2004
                                                 ------------      ------------      ------------      ------------
<S>                                              <C>               <C>               <C>               <C>
Revenues                                         $    107,479      $     15,000      $    257,982      $     15,000
Cost of sales and services performed                   13,338                --            50,083                --
                                                 ------------      ------------      ------------      ------------
    Gross profit                                       94,141            15,000           207,899            15,000

Operating Expenses
    Promotion and advertising                          37,333           394,263           108,864           528,230
    Depreciation and amortization                     146,782            54,689           240,283            66,987
    Other general and administrative costs          2,572,404         1,091,421         4,268,275         1,830,523
                                                 ------------      ------------      ------------      ------------
                   Total operating expenses         2,756,519         1,540,373         4,617,422         2,425,740
                                                 ------------      ------------      ------------      ------------
                   Operating loss                  (2,662,378)       (1,525,373)       (4,409,523)       (2,410,740)

    Interest expense                                1,647,158            32,640         3,096,925            45,154
                                                 ------------      ------------      ------------      ------------
                   Loss before income taxes        (4,309,536)       (1,558,013)       (7,506,448)       (2,455,894)

Income tax provision                                       --                --                --                --
                                                 ------------      ------------      ------------      ------------
                   Net loss                      $ (4,309,536)     $ (1,558,013)       (7,506,448)     $ (2,455,894)
                                                 ============      ============      ============      ============
Basic and diluted loss per share                 $      (0.18)     $      (0.07)     $      (0.31)     $      (0.14)
                                                 ============      ============      ============      ============
Weighted average common shares outstanding -
    Basic and diluted                              24,608,150        21,318,560        24,166,866        18,125,558
                                                 ============      ============      ============      ============
</TABLE>


      See accompanying notes to condensed consolidated financial statements

                                       4
<PAGE>
                    AGU Entertainment Corp. and Subsidiaries
                 (Formerly Lexington Barron Technologies, Inc.)
Condensed Consolidated Statement of Changes in Stockholders' Equity (Deficiency)
                     For the Six Months Ended June 30, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                       Retained
                                                                                     Additional         Earnings
                                                                                      Paid-In         (Accumulated
                                                      Shares          Amount          Capital           Deficit)          Total
                                                   ------------    ------------     ------------     ------------     ------------
<S>                                                <C>             <C>              <C>              <C>              <C>
                      2005

Balance at December 31, 2004                         23,392,576    $  4,658,380     $  3,593,634     $ (6,701,657)    $  1,550,357
To adjust for change in par value                            --      (4,656,041)       4,656,041               --               --
Issuance of shares of common stock for services         347,987              35          868,061               --          868,096
Issuance of shares of common stock to
    employees for compensation                           45,540               5          107,469               --          107,474
Issuance of common stock as a
    price adjustment for certain investors                5,000               1               (1)              --               --
Common stock issued in connection with the
    acquisition of property and equipment                97,800              10          244,490               --          244,500
Issuance of warrants in connection
    with the issuance of convertible debt                    --              --        1,595,428               --        1,595,428
Issuance of shares in settlement of liabilities         121,875              12          337,488               --          337,500
Issuance of shares of common stock
   to directors for services                              5,000               1           11,799                            11,800
Other issuances of common stock to co-founders as
   an adjustment to shares previously issued            500,000              50              (50)              --               --
Issuances of shares of common stock
    in connection with amending the
    terms of certain notes payable                       60,000               6          137,994               --          138,000
Issuance of shares of common stock
    for interest expense                                  3,575              --            7,151               --            7,151
Issuance of shares of common stock to
    a director as an adjustment to shares
    awarded pursuant to an employment agreement         444,000              44              (44)              --               --
Issuance of shares of common stock to a director
    in connection with a termination letter             111,566              11          263,289               --          263,300
Net loss                                                     --              --               --       (7,506,448)      (7,506,448)
                                                   ------------    ------------     ------------     ------------     ------------
Balance at June 30, 2005                           $ 25,134,919    $      2,514     $ 11,822,749     $(14,208,105)    $ (2,382,842)
                                                   ============    ============     ============     ============     ============
</TABLE>



      See accompanying notes to condensed consolidated financial statements

                                       5

<PAGE>
                    AGU Entertainment Corp. and Subsidiaries
                 (Formerly Lexington Barron Technologies, Inc.)
                 Condensed Consolidated Statements of Cash Flows
                 For the Six Months Ended June 30, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        2005             2004
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
Cash flows from operating activities:
     Net loss                                                        $(7,506,448)     $(2,455,894)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                 240,284           66,987
           Stock based service expenses                                  778,670           28,677
           Common stock issued financing expenses                        145,151
           Amortization of discount on note payable                    2,330,481               --
           Amortization of deferred financing fees                        36,710
           Decrease in accounts receivable                                75,973           40,671
           Decrease (increase) in prepaid expenses                       120,409         (101,588)
           Increase in other assets                                      (31,240)         (22,219)
           Increase in accounts payable and accrued liabilities        1,587,937          337,213
           (Decrease) increase in other liabilities                      (30,113)         124,796
                                                                     -----------      -----------
                       Net cash used in operating activities          (2,252,186)      (1,981,357)
                                                                     -----------      -----------
Cash flows from investing activities:
     Disbursements for intangibles                                            --          (51,035)
     Disbursements for property and equipment                           (135,652)        (182,159)
                                                                     -----------      -----------
                       Net cash used in investing activities            (135,652)        (233,194)
                                                                     -----------      -----------
Cash flows from financing activities:
     Payment of notes payable                                             (5,968)         (30,673)
     Proceeds from notes payable to related parties                      445,279          235,000
     Payment on capital leases                                            (6,674)          (5,224)
     Proceeds from convertible and other notes payable                 1,185,000        1,879,000
                                                                     -----------      -----------
                       Net cash provided by financing activities       1,617,637        2,078,103
                                                                     -----------      -----------
                       Net (decrease) increase in cash                  (770,201)        (136,448)
Cash, beginning of period                                                771,533          137,048
                                                                     -----------      -----------
Cash, end of period                                                  $     1,332      $       600
                                                                     ===========      ===========
Supplemental disclosure of cash flow information:
        Cash paid for income taxes                                   $        --      $        --
                                                                     ===========      ===========
        Cash paid for interest                                       $   201,914      $     4,862
                                                                     ===========      ===========
     Non-cash financing activities:
        Common stock issued as payment for services                  $ 1,250,670      $    28,677
                                                                     ===========      ===========
        Conversion of liabilities to common stock                    $   337,500      $   740,702
                                                                     ===========      ===========
        Equipment acquired through issuance of common stock          $   244,500      $        --
                                                                     ===========      ===========
        Equipment acquired through capital lease obligations         $        --      $    12,940
                                                                     ===========      ===========
        Common stock issued for financing expenses                   $   145,151      $        --
                                                                     ===========      ===========
        Warrants issued for convertibe debt                          $ 1,595,426      $        --
                                                                     ===========      ===========
</TABLE>



      See accompanying notes to condensed consolidated financial statements

                                       6

<PAGE>
                    AGU Entertainment Corp. and Subsidiaries
                 (Formerly Lexington Barron Technologies, Inc.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            June 30, 2005 (unaudited)

1.  NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

     AGU Entertainment Corp. (formerly Lexington Barron Technologies,  Inc.) was
incorporated in the state of Colorado on August 23, 2000 to engage in financial,
operational  and systems  consulting to startup and small  businesses.  Prior to
April 1, 2004, AGU Entertainment  Corp. ("AGU") was a development stage,  public
reporting company and did not engage in any significant operations or enter into
any material transactions.

     Effective  April 1, 2004, AGU entered into a Share Exchange  Agreement with
Pyramid Music Corp.  ("PMC"), a Florida  corporation having an inception date of
May 20, 2003,  whereby AGU acquired 100% of the outstanding  common stock of PMC
in  exchange  for  issuing   16,922,464  shares  of  its  common  stock  to  the
stockholders  of PMC,  resulting in a change of control.  PMC was a  development
stage company and was formed for the purpose of  developing  market share in the
recording and broadcast media  industries  through the  establishment of a music
oriented  television network and archived video and music collection  libraries.
In July 2004, AGU dissolved PMC.

     On  October  20,  2004,  AGU was  reincorporated  in the state of  Delaware
through a merger of AGU into a wholly owned subsidiary corporation  incorporated
in the  State of  Delaware.  The  reincorporation  resulted  in AGU  becoming  a
Delaware corporation  effective as of October 21, 2004 and did not result in any
change in the company's name, business, assets, liabilities or net worth.

     One of AGU's wholly-owned subsidiaries,  The Tube Music Network, Inc. ("The
Tube"),  airs traditional  music videos and live concerts of contemporary  music
material that is derived from  archived  video and music  collection  libraries.
Another wholly-owned subsidiary, AGU Music, Inc. ("AGU Music"), formerly Pyramid
Records International,  Inc., is a production, marketing and distribution record
company. The Tube and AGU Music were subsidiaries of PMC when it was acquired by
AGU  in  April  of  2004.  In  February  of  2005,  AGU  formed  two  additional
subsidiaries,   AGU  Studios,  Inc.  ("AGU  Studios"),  and  3200  Oakland  Park
Boulevard,  Inc.  for the purpose of  developing a media center for the film and
entertainment  business. AGU Studios was originally conceived as a comprehensive
media  entertainment  center,  which  will  offer  film,  television  and  music
production  facilities,  sound stages for recording,  and executive  offices for
AGU's operations and other entertainment  industry  organizations.  However, the
Company's  continued  liquidity  problems requires the Company to reevaluate the
feasibility of developing the business as originally planned. No final decisions
have been made and the Company is currently  evaluating various alternatives for
AGU Studios and the Lauderdale Property, See Note 7.

Basis of Presentation

     The unaudited condensed  consolidated  financial  statements of AGU and its
subsidiaries  (the  "Company")  have been prepared in accordance with accounting
principles  generally  accepted  in the  United  States of America  for  interim
financial   reporting  and  the  regulations  of  the  Securities  and  Exchange
Commission  ("SEC") for quarterly  reporting.  The interim  unaudited  condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
financial  statements and notes thereto  included in the Company's annual report
on Form  10-KSB as filed  with the SEC for the year  ended  December  31,  2004.
Management   acknowledges  its   responsibility   for  the  preparation  of  the
accompanying interim condensed  consolidated  financial statements which reflect
all adjustments considered necessary,  in the opinion of management,  for a fair
statement of the results of interim periods presented. Because the Company was a
development stage enterprise for most of 2004, the financial statements for 2005
are not  comparable  to those of the prior  year.  In  addition,  the results of
operations for the interim periods are not necessarily indicative of the results
of operations for the entire year.



                                       7
<PAGE>

     The accompanying financial statements reflect the results of the operations
of AGU and its  subsidiaries  for the six  months  ended  June 30,  2005 and the
results of the Company for the six months ended June 30, 2004.

Principles of Consolidation

     The accompanying  consolidated financial statements include the accounts of
AGU  Entertainment  Corp. and its  subsidiaries.  All  significant  intercompany
transactions have been eliminated.

Use of Estimates

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

Recent Accounting Pronouncements

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No. 123,  Share-Based  Payments  (revised  2004),  ("SFAS No. 123R").  This
statement  eliminates  the  option  to apply  the  intrinsic  value  measurement
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, to stock based compensation issued to employees.  The
Statement  requires  companies to measure the cost of employee services received
in exchange  for an award of equity  instruments  based on the fair value of the
award at the date of grant, and recognize that cost over the period during which
an  employee is required  to provide  services  in exchange  for the award.  The
adoption of SFAS No. 123R could have a material effect on the Company's  results
of  operations.  SFAS  123R  must be  adopted  no later  than the  first  annual
reporting period of the first fiscal year that begins after December 15, 2005 by
small business issuers.

2. INTANGIBLES

        Intangible assets at June 30, 2005 are as follows:

<TABLE>
<CAPTION>
                                     Value at        Accumulated      Balance at
                                   acquisition      amortization    June 30, 2005
                                   -----------      ------------    -------------
<S>                                <C>              <C>             <C>
Distribution agreement
(see note 3)                       $  350,000       $ (145,500)       $  204,500
Contract rights                       472,000               --           472,000
Other intangibles                     651,035          (36,169)          614,866
                                   ----------       ----------        ----------
Total intangibles                  $1,473,035       $ (181,669)       $1,291,366
                                   ==========       ==========        ==========
</TABLE>

     The distribution agreement is being amortized on a straight line basis over
a period of three years.  Contract rights, which were acquired in April 2005 for
stock,  will be amortized,  beginning in July of 2005,  over a five year period,
which corresponds to the initial term of an agreement to air The Tube in certain
markets.  Other intangibles  pertain to costs to develop network logos,  graphic
templates and on-air  intersticials  for The Tube. The estimated  useful life of
these assets is three years,  and  amortization of these assets commenced in the
second quarter of 2005. Aggregate amortization expense over the next five years,
assuming an  estimated  useful life of two years for the other  intangibles,  is
expected to be as follows:

<TABLE>
<CAPTION>
         For the year ending December 31:
         --------------------------------
<S>                                                                <C>
         Remainder of 2005                                         $ 214,206
         2006                                                        428,212
         2007                                                        340,612
         2008                                                        166,737
         2009                                                         94,400
         2010                                                         47,200
</TABLE>



                                       8
<PAGE>

3. NOTES PAYABLE

Convertible Notes

     Convertible  Notes  Payable  consists of the following at June 30, 2005 and
December 31, 2004:

<TABLE>
<CAPTION>
                                                                 2005              2004
                                                             ------------      ------------
<S>                                                          <C>               <C>
First mortgage note secured by real property                 $  7,000,000      $  7,000,000
Second mortgage note secured by real property                   3,000,000         3,000,000
Other convertible notes and subordinated debentures             2,415,000         1,475,000
                                                             ------------      ------------
                                                               12,415,000        11,475,000
Less: current portion                                          (7,939,041)       (7,150,000)
Less: Discount on convertible mortgage and notes payable       (2,735,769)       (3,470,822)
                                                             ------------      ------------
Notes payable, long term portion, net of discounts           $  1,740,190      $    854,178
                                                             ============      ============
</TABLE>

     On  December  22,  2004,  the Company  closed on the  purchase of a 162,000
square foot facility situated on 23 acres of land in Lauderdale  Lakes,  Florida
(the "Lauderdale  Property").  In connection with the purchase of the Lauderdale
Property,  the Company issued to the seller, on December 22, 2004, a convertible
mortgage  promissory note in the principal  amount of $7,000,000.  The note pays
interest  at an  annual  rate  of 6.5%  and is  convertible  at any  time at the
seller's option into shares of the Company's  common stock at a conversion price
of $2.50 per share. A principal payment of $250,000 was due on June 20, 2005 and
was paid on July 1, 2005. The remaining  balance of the note matures on December
20,  2005.  The  terms  of the  convertible  mortgage  promissory  note  require
quarterly  prepayments  of $145,000  into an escrow  account for interest on the
note and real estate taxes on the property.  Additional quarterly prepayments of
interest and real estate taxes in the amount of $145,000 were required to be put
into escrow  beginning  March 20,  2005.  The Company did not make the  required
prepayment  on March 20, 2005.  This amount was paid on behalf of the Company by
the holder of the $3 million second mortgage note (the "Mitchell Note") on April
22,  2005,  at which time the  Company  received a letter from the holder of the
first mortgage note acknowledging the cure of the payment default. The quarterly
payment  due  June  20,  2005 was  paid on July 1,  2005.  All of the  Company's
obligations  to the  holder  of this  convertible  promissory  note and  related
agreements are secured by a first mortgage on the Lauderdale Property, including
all of the Company's  rights,  title and interest as lessor in and to all leases
or rental arrangements of the Lauderdale Property.

     On May 13, 2005, the Company executed a letter agreement with the holder of
the Mitchell Note whereby the Company agreed that the $145,000 interest and real
estate tax payment made on behalf of the Company, the $100,000 that was advanced
to the Company on April 29, 2005 by the holder of the Mitchell  Note, the unpaid
interest  on the  Mitchell  Note for  March and  April  2005 and the legal  fees
incurred by the holder in  connection  with the letter  agreement,  would accrue
interest at the default  rate of 18% and would be due and payable by the Company
on August 1, 2005. The letter agreement also extended the deadline for which the
Company was to have filed a  registration  statement to register  the  Company's
common stock pertaining to the Mitchell Note and related warrants from April 30,
2005 to June  30,  2005,  and  extended  the  date for  which  the  registration
statement  is required to be  declared  effective  to  November  30,  2005.  The
$145,000 payment made on behalf of the Company and the $100,000  advanced to the
Company are reflected in the Company's balance sheet as Other Notes Payable. The
Company  also  agreed to grant the  holder of the  Mitchell  Note an  additional
150,000  warrants to purchase the Company's common stock at an exercise price of
$1.50  per  share,  with the same  registration  and  anti-dilution  protections
contained in the warrants originally granted to the holder of the Mitchell Note.
These  warrants  were valued at $169,025 and were  recorded as a discount to the
$245,000 loan. The discount is being  amortized  through August 1, 2005, and the
unamortized  balance of this discount at June 30, 2005 is $54,902.  The Mitchell
Note  is  secured  by a  second  mortgage  on  the  Lauderdale  Property  and by
substantially all of the Company's other assets,  including the capital stock of
its subsidiaries.  Because the Company did not pay the required monthly interest
payments for March and April 2005,  the interest  rate on the note was increased
to the default rate of 18%.

The Company has not paid the  $245,000  plus  accrued  interest and lender legal
fees that was due on August  1,  2005,  in  accordance  with the May 13,  letter
agreement,  nor has it filed a  registration  statement to register the required
securities. The holder of the Mitchell Note issued a default letter on August 2,
2005.  On August 11,  2005,  and August 17, 2005,  the Company  entered into two
letter  agreements  with the holder of the Mitchell Note,  pursuant to which (i)
the holder of the  Mitchell  Note  agreed that the payment due on August 1, 2005
would be deferred until September 1, 2005;  (ii) the parties agreed that,  until
maturity of the Mitchell  Note,  all monies due under the Mitchell  Note,  other
than monies that accrue  interest at the 18% default rate, will bear interest at
the lower of 18% per  annum or the  highest  rate  permitted  by law;  (iii) the
Company agreed to pay the holder, upon the first monies it receives, in addition
to the sums otherwise due under the Mitchell Note,  approximately  $512,000 plus
interest,  attorneys'  fees in the  amount of $1,000  and any  further  costs of
collection (the "September Payment"); (iv) the Company agreed to pay the holder,
up to the September Payment, any monies it receives upon the consummation of the
terms of a non-binding  letter of intent  relating to the sale of the Lauderdale
Property;  (v) the lender agreed to extend the filing date for the  registration
statement to September 1, 2005;  and (vi) the parties agreed that there would be
no further grace  periods  allowed  under the Mitchell  Note.  In addition,  the
letter agreement provides for the issue to the holder of warrants to purchase an
additional  150,000 shares of the Company's common stock at an exercise price of
$1.50 per share under the same terms and conditions as the common stock purchase
warrants previously issued to the holder.


                                       9
<PAGE>

     During  the  first  six  months  of 2005  the  Company  issued  convertible
promissory  notes to various  accredited  investors in the  aggregate  principal
amount of $665,000. The $665,000 of convertible promissory notes pay interest at
10% and  are due on the  second  anniversary  of  their  issuance  date  and are
convertible  into  shares of the  Company's  common  stock at the option of each
holder at a conversion price of $3.00 per share. In connection with the issuance
of the  convertible  notes,  the Company  issued to the holders an  aggregate of
221,666  warrants to purchase  the  Company's  common  stock.  The common  stock
purchase  warrants  have a two year  term and the  exercise  price is $3.00  per
share.  The common stock  purchase  warrants  were valued at $113,832,  and this
amount was  recorded  as a discount to the  convertible  promissory  notes.  The
unamortized  balance of the  discount  for these  notes as of June 30,  2005 was
$102,786.

Related Party Notes

     On March 3, 2004,  AGU Music  entered  into an  Assignment  and  Assumption
Agreement with Pyramid Media Group, Inc. ("PMG") (of which a related party and a
stockholder of the Company own a controlling interest), whereby AGU Music agreed
to assume all of the  covenants  and  obligations  of a  Distribution  Agreement
between  PMG  and ARK 21  Records,  LP  ("ARK21").  The  Distribution  Agreement
provides that ARK21 be the  manufacturer  and  distributor  of certain  recorded
music  projects for AGU Music through  normal  retail  channels  throughout  the
United  States.  In exchange for the rights to the  Distribution  Agreement  and
certain  assets of PMG, AGU Music assumed the  obligation  to repay  $350,000 of
notes payable ("the ARK 21 Notes") to certain principals of PMG. The Company has
guaranteed the payment of the ARK 21 Notes,  which have an annual  interest rate
of 8%, and were to have matured on May 1, 2007.  Approximately  $19,000 of these
notes  was paid in 2004 and the  outstanding  balance  as of March  31,  2005 is
approximately  $331,000.  The terms of the ARK 21 Notes require monthly payments
of  principal  and  interest.  The  Company  has not made the  required  monthly
principal and interest  payments since June of 2004. On May 5, 2005, the Company
entered into a settlement  agreement  with the holders of the ARK 21 Notes,  who
are significant  stockholders of the Company.  Under the terms of the settlement
agreement,  the ARK 21 Notes were  cancelled  and were  replaced  with new notes
containing the same terms and  conditions as the old notes,  except that the new
notes have a beginning  principal  balance of $345,806  ($331,000  plus  accrued
interest  of  $14,508)  and  require,  in  addition  to the  monthly  payment of
approximately  $8,500,  the  repayment of principal in the amount of $50,000 for
every $1,000,000 in equity capital raised by the Company. In addition,  upon the
Company's  closing of a capital raising of at least  $250,000,  the Company must
pay all the principal  and interest due under the original  notes for the period
January through April, 2005 in the amount of approximately  $36,000. The Company
has not made any of the required  payments  under the  settlement  agreement and
received a default letter on August 1, 2005 demanding immediate repayment of all
amounts due under the ARK 21 Notes and related settlement agreement. The Company
is in discussions with the note holders to remedy the default.  The Company does
not have the resources to satisfy this obligation.

     During  the first  six  months of 2005 the  Company  received  loans in the
aggregate  amount of $382,516 from a stockholder of the Company who is a related
party.  The loans pay  interest at 10% and are due on  December  31,  2005.  The
Company also received loans from significant  stockholders  during the first six
months of 2005 in the aggregate  amount of $48,200.  These loans pay interest at
10% and are due on September 30, 2005.  During July and August of 2005,  $43,200
of these loans was repaid.


                                       10
<PAGE>

4. STOCKHOLDERS' EQUITY

     During the first six months of 2005,  the Company  issued 347,987 shares of
common stock to third parties in exchange for services performed. These services
were  valued at $868,096  and this  amount was  charged to  earnings  during the
period.  The Company also issued  50,540 shares of common stock to employees and
directors  during  the  first  three  months of 2005 and  recorded  compensation
expense of $119,274.  In addition,  the Company  issued 444,000 shares of common
stock to its former  chairman as an  adjustment  to the shares  allocated to the
original  investors  of the  Company  and  111,566  shares  of  common  stock in
connection with the terms of his termination agreement and recorded compensation
expense of $263,300,  and agreed to pay an additional  $50,000 as  compensation,
5,000 shares of common stock as a share price adjustment for certain  investors,
97,800 shares of common stock in connection with the acquisition of property and
equipment and 121,875 shares of common stock in settlement of a liability.  Also
during this period, the Company issued 60,000 shares in connection with amending
the terms of certain  notes  payable  and 3,575  shares for  payment of interest
expense in lieu of cash.  The Company also issued 500,000 shares of common stock
to two  co-founders  of the Company as an adjustment to the shares  allocated to
the original investors of the Company

     During the first six months of 2005, the Company  issued  221,666  detached
common  stock  purchase  warrants  to  acquire  the  Company's  common  stock in
connection with the issuance of convertible  promissory  notes (see Note 3). The
warrants  have an exercise  price of $3.00 per share and expire on the  maturity
dates of the  respective  convertible  promissory  notes  with  which  they were
issued. In addition, the Company issued 2,550,000 common stock purchase warrants
at an exercise price of $3.00 per share and 3,575 common stock purchase warrants
at an  exercise  price  of  $2.00  per  share to a  significant  stockholder  in
consideration  for  converting a substantial  portion of his holdings of Company
promissory notes to common stock and for extending the maturity dates of some of
the other  promissory  notes of the  Company.  The Company  also issued  150,000
warrants at an exercise  price of $1.50 per share to the holder of the  Mitchell
Note in connection  with advances made to the Company  during the second quarter
of 2005. The aggregate  value of the warrants issued during the first six months
of 2005 was  $1,595,428,  and this  amount was  recorded  as a  discount  on the
Company's  convertible  debt with an offset to paid in capital.  The discount is
being amortized on a pro rata basis over the life of the respective  convertible
debt instruments. No warrants were exercised during the first six months of 2005
and 5,607,577 warrants were outstanding at June 30, 2005.

5. LOSSES PER SHARE

     Basic  income or loss per share is computed by dividing  net income or loss
attributable  to common  stockholders  by the weighted  average number of shares
outstanding  during the year.  Diluted income or loss per share  attributable to
common  stockholders  further  considers  the impact of  dilutive  common  stock
equivalents.  Diluted loss per share has not been  presented  separately for the
three ending June 30, 2005 and 2004 because the effect of the additional  shares
which would be issued,  assuming  conversion of the convertible notes and common
stock purchase warrants, are anti-dilutive for the aforementioned periods.

6. COMMITMENTS AND CONTINGENCIES

     On January 27,  2005,  the Company was served with a summons with notice by
Jarred   Weisfeld  and  Cherry  Jones,   individually   and  doing  business  as
JarredCherry  Productions  LLC,  referred  to  herein as the  plaintiffs,  which
indicates  that the  plaintiffs  commenced an action  against the  Company.  The
plaintiffs alleged,  among other things,  breach of contract,  breach of implied
covenant  of  good  faith  and  fair  dealing,   unfair  competition,   tortuous
misappropriation  of goodwill,  and  deceptive  acts and  practices  pursuant to
Section 349 of the New York General Business Law. The dispute originated from an
alleged agreement between the plaintiffs and the Company related to the works of
the late Mr.  Russell  Jones,  who was the son of Ms.  Jones and the  management
client of Mr. Weisfeld. The complaint indicated that the plaintiffs were seeking
compensatory and punitive damages of no less than $1,812,500 for each of the six
causes of action  alleged.  On June 20,  2005,  the Company  and the  Plaintiffs
entered  into a  Confidential  Settlement  Agreement  and  Mutual  Release  (the
"Agreement")  wherein the parties  agreed to resolve their  differences  without
admitting  or  acknowledging  the  validity of the  position  taken by the other
parties in the course of the litigation.  Under the terms of the Agreement,  the
Company paid  JarredCherry  $10,000 on June 28,  2005,  and will pay $10,000 per
month  for  eight  consecutive  months  commencing  30 days from the date of the
Agreement,  as full and final  settlement of the disputes.  This amount has been
accrued on the Company's  balance sheet as of June 30, 2005. The complaint filed
by the Plaintiffs has since been dismissed.

     On October 13,  2004,  The Tube  received  notification  from a  television
channel  featuring  music related  programming  that the circle logo used by The
Tube is  "confusingly  similar"  to the  circle  logo  used  by that  television
channel,  supporting claims of trademark infringement and unfair competition. On
November 3, 2004,  the Company  responded to the October 13,  letter  stating it
does not  believe  the  logos  are  confusingly  similar  or that any  trademark
infringement  has  occurred.  The  Company  has not  received a response  to its
November 3, 2004 letter.  The Company intends to vigorously defend any challenge
to its use of its logo.

     The  Company  is  subject  to claims  and legal  actions  that arise in the
ordinary  course  of its  business.  The  Company  believes  that  the  ultimate
liability, if any, with respect to these claims and legal actions, will not have
a material  effect on the  financial  position or results of  operations  of the
Company.



                                       11
<PAGE>

7. SEGMENT REPORTING

     The Company has three reportable  operating  segments:  The Tube, AGU Music
and AGU Studios.  The Tube airs  traditional  music videos and live  concerts of
contemporary  music  material  that is  derived  from  archived  video and music
collection libraries. When fully operational,  the Company expects that The Tube
will generate  revenues by selling  advertising time and through direct sales of
music related to the content  broadcasted on the network.  AGU Music is a record
company  engaged in the release of recorded  music  materials  acquired  through
artist  signings and  acquisitions.  AGU Studios was  originally  conceived as a
comprehensive media entertainment  center, which will offer film, television and
music production facilities,  sound stages for recording,  and executive offices
for AGU's operations and other entertainment industry organizations. However the
Company's  continued  liquidity  problem  requires the Company to reevaluate the
feasibility  of  developing  this  business  as  originally  planned.  No  final
decisions  have  been  made and the  Company  is  currently  evaluating  various
alternatives  for AGU  Studios  and the  Lauderdale  Property.  Each  segment is
separately  managed and is evaluated by the Company's chief  operating  decision
makers for the purpose of allocating the Company's  resources.  The Company also
has a corporate  headquarters  function,  which does not meet the  criteria of a
reportable operating segment.

     The table below  presents  information  about  reportable  segments for the
three and six months ending June 30, 2005 and 2004.

<TABLE>
<CAPTION>
                                               Three Months                      Six Months
                                       ----------------------------      ----------------------------
                                           2005             2004             2005             2004
                                       -----------      -----------      -----------      -----------
<S>                                    <C>              <C>              <C>              <C>
Revenues
       AGU Music                       $    70,154      $    15,000      $   176,081      $    15,000
       AGU Studios                          37,325               --           81,901               --
       The Tube                                 --               --               --               --
                                       -----------      -----------      -----------      -----------
          Consolidated revenues        $   107,479      $    15,000      $   257,982      $    15,000
                                       ===========      ===========      ===========      ===========


Operating loss
       AGU Music                       $  (426,139)     $  (637,239)     $  (407,380)     $  (952,580)
       AGU Studios                         (25,930)              --         (101,698)              --
       The Tube                         (1,083,431)        (482,774)      (1,894,672)        (776,036)
                                       -----------      -----------      -----------      -----------
          Segment loss                  (1,535,500)      (1,120,013)      (2,403,750)      (1,728,616)
       Corporate                        (1,126,878)        (405,360)      (2,005,773)        (682,124)
                                       -----------      -----------      -----------      -----------
       Consolidated operating loss     $(2,662,378)     $(1,525,373)     $(4,409,523)     $(2,410,740)
                                       ===========      ===========      ===========      ===========
</TABLE>



The table  below  reconciles  the  measurement  of segment  profit  shown in the
previous table to the Company's consolidated income before taxes:

<TABLE>
<CAPTION>
                                               Three Months                       Six Months
                                       ----------------------------      ----------------------------
                                           2005             2004             2005             2004
                                       -----------      -----------      -----------      -----------
<S>                                    <C>              <C>              <C>              <C>
Total segment loss                     $(1,535,500)     $(1,120,013)     $(2,403,750)     $(1,728,616)
Operating loss - corporate              (1,126,878)        (405,360)      (2,005,773)        (682,124)
Interest expense                        (1,647,158)         (32,640)      (3,096,925)         (45,154)
                                       -----------      -----------      -----------      -----------
Loss before income tax                 $(4,309,536)     $(1,558,013)     $(7,506,448)     $(2,455,894)
                                       ===========      ===========      ===========      ===========
</TABLE>



                                       12
<PAGE>

8. RELATED PARTY TRANSACTIONS

     During  the first  six  months of 2005 the  Company  received  loans in the
aggregate  amount of $382,516 from a stockholder of the Company who is a related
party.  The loans pay interest at 10% and are due December 31, 2005. The Company
also received loans from significant stockholders during the first six months of
2005 in the aggregate amount of $48,200. These loans pay interest at 10% and are
due  September  30, 2005 and December 31, 2005. In addition to the ARK 21 Notes,
as of June 30,  2005,  the  Company  had  outstanding  loans  payable to related
parties in the aggregate  amount of $54,500 that were due Nov. 1, 2004,  $59,500
that was due June 30,  2005,  $48,200  that are due Sept.  30, 2005 and $382,516
that are due Dec. 31, 2005. The Company currently does not have the resources to
pay these loans upon their maturity.

     On May 5, 2005, the Company entered into a settlement agreement,  effective
April  15,  2005,  with the  holders  of the ARK 21 Notes,  who are  significant
stockholders of the Company.  Under the terms of the settlement  agreement,  the
ARK 21 notes were cancelled and were replaced with new notes containing the same
terms  and  conditions  as the old  notes,  except  that  the new  notes  have a
beginning  principal balance of $345,806 and require, in addition to the monthly
payment of  approximately  $8,500,  the  repayment of principal in the amount of
$50,000  for every  $1,000,000  in equity  capital  raised  by the  Company.  In
addition,  upon the Company's closing of a capital raising of at least $250,000,
the Company must pay all the principal and interest due under the original notes
for the  period  January  through  April  2005 in the  amount  of  approximately
$36,000.  The  Company  has not  made any of the  required  payments  under  the
settlement  agreement and received a default  letter on August 1, 2005 demanding
immediate  payment  of all  amounts  due  under  the  Ark21  Notes  and  related
settlement agreement.

     For the period from  January 1, 2005  through  June 30,  2005,  the Company
received various consulting  services totaling  approximately  $117,500 from two
stockholders. At June 30, 2005 approximately $72,000 was unpaid.

     Additionally,  two  officers  of the  Company  agreed to defer a portion of
their  salary,  payable  under their  employment  agreements  until such time as
adequate capital has been raised by the Company.  The amount deferred as of June
30, 2005 was approximately $212,000.

     Accounts payable to related parties at June 30, 2005 totaled  approximately
$162,000. Included in this amount was $7,800 in director's fees due to a certain
director and a $2,500 director's fee payable to a second director.

     In July and August of 2005,  the Company  received  various  loans from two
significant  stockholders  as follows;  $401,225  from DML Marketing  Corp,  and
$156,424 from John P. Grandinetti.  Approximately  $158,000 of these loans, plus
approximately  $43,000 of loans which were  outstanding  at June 30, 2005,  were
repaid  during the same  period.  The  remaining  outstanding  loans will accrue
interest at an annual rate of 10% and mature on December 31, 2005.

9. SUBSEQUENT EVENTS

     On July 27, 2005,  the Company  issued a promissory  note in the  principal
amount of $500,000.  The Promissory Note accrues interest at an annual rate of 4
1/2%,  payable  annually,  and matures on January 1, 2007.  The  interest on the
Promissory  Note is  compounded  quarterly  and at the end of each  quarter such
interest is added to the principal  balance of the Promissory  Note. The Company
does not have the right to prepay the  Promissory  Note. The note is convertible
along with all outstanding accrued interest, into shares of the Company's common
stock at the  conversion  price of  $2.00  per  share.  In  connection  with the
promissory  note, the Company issued a warrant to purchase 400,000 shares of the
Company's common stock at an exercise price of $1.50 per share.

     In July and August of 2005, the Company issued convertible promissory notes
to two accredited  investors in the aggregate principal amount of $110,000.  The
$110,000 of convertible  promissory  notes are due on the second  anniversary of
their  issuance date and are  convertible  into shares of the  Company's  common
stock at the option of each holder at a conversion  price of $3.00 per share. In
connection with the issuance of the convertible notes, the Company issued to the
holders an aggregate of 36,667 warrants to purchase the Company's  common stock.
The common stock  purchase  warrants have a two year term and the exercise price
is $3.00 per share.

     In July and August of 2005, the Company issued 452,696 shares of its common
stock as follows:

     o    400,000 shares to a certain  investor as a price  adjustment for prior
          conversions of debt to equity
     o    37,696 shares in exchange for  professional  services  received by the
          Company
     o    5,000 shares as consideration for defaults on promissory notes
     o    10,000 shares as compensation to non-employee directors



                                       13
<PAGE>

     On August 2, 2005, the Company issued warrants to purchase Company's common
stock as follows:

     o    650,000  shares  to  related  parties  as  consideration  for  various
          advances to the Company
     o    36,667 shares to convertible noteholders
     o    25,000 shares as consideration for defaults on promissory notes
     o    10,000 shares in exchange for  professional  services  received by the
          Company

The Company has not paid the  $245,000  plus  accrued  interest and lender legal
fees that was due on August  1,  2005,  in  accordance  with the May 13,  letter
agreement,  nor has it filed a  registration  statement to register the required
securities. The holder of the Mitchell Note issued a default letter on August 2,
2005.  On August 11,  2005,  and August 17, 2005,  the Company  entered into two
letter  agreements  with the holder of the Mitchell Note,  pursuant to which (i)
the holder of the  Mitchell  Note  agreed that the payment due on August 1, 2005
would be deferred until September 1, 2005;  (ii) the parties agreed that,  until
maturity of the Mitchell  Note,  all monies due under the Mitchell  Note,  other
than monies that accrue  interest at the 18% default rate, will bear interest at
the lower of 18% per  annum or the  highest  rate  permitted  by law;  (iii) the
Company agreed to pay the holder, upon the first monies it receives, in addition
to the sums otherwise due under the Mitchell Note,  approximately  $512,000 plus
interest,  attorneys'  fees in the  amount of $1,000  and any  further  costs of
collection (the "September Payment"); (iv) the Company agreed to pay the holder,
up to the September Payment, any monies it receives upon the consummation of the
terms of a non-binding  letter of intent  relating to the sale of the Lauderdale
Property;  (v) the lender agreed to extend the filing date and effective date of
the   registration   statement   to  December  31,  2005  and  March  31,  2006,
respectively;  and (vi) the parties  agreed that there would be no further grace
periods  allowed  under the Mitchell  Note.  In addition,  the letter  agreement
provides  for the issue to the holder of  warrants  to  purchase  an  additional
150,000  shares of the Company's  common stock at an exercise price of $1.50 per
share under the same terms and conditions as the common stock purchase  warrants
previously issued to the holder.

     Effective August 1, 2005 the Company entered into a Technical  Services and
Support  Agreement  which  requires a monthly  payment of $22,000  and  $18,000,
respectively.

10. GOING CONCERN

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that the Company  will  continue  as a going  concern.  The  Company's
financial  condition  and  operating  results,  specifically  a working  capital
deficiency  of   approximately   $11.4  million  and   accumulated   deficit  of
approximately $14.2 million at June 30, 2005, negative cash flow from operations
of  approximately  $2.3  million  as well as a net  loss of  approximately  $7.5
million for the six months  ending  June 30,  2005 and de minimus  cash on hand,
raise  substantial  doubt about its ability to continue as a going concern.  The
Company's  existence is dependent on Management's  ability to develop profitable
operations and resolve the Company's liquidity problems.  Management anticipates
that the Company will attain profitable status and improve its liquidity through
the continued  development of the Company's  television network,  recorded music
business and the potential sale of certain assets.

     These financial statements do not include any adjustments that might result
from  the  outcome  of this  uncertainty.  If the  Company  is  unsuccessful  in
obtaining the additional  capital  necessary to fund its  operations,  it may be
forced to downsize certain operations,  restructure its current debt obligations
on terms less  favorable to the Company than the  existing  obligations  or sell
some of its  assets.  It may also  need to seek  protection  under  the  federal
bankruptcy laws or be forced into  bankruptcy by its creditors.  There can be no
assurance  the Company  will be  successful  in its efforts to raise  additional
financing.

Item 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS.

Overview

     We were  formerly  known as Lexington  Barron  Technologies,  Inc. and were
incorporated  in the State of  Colorado  on August 23,  2000 for the  purpose of
addressing the specific needs of small  businesses and startup  organizations by
providing a broad range of consulting and advisory services, ranging from market
research  and  analysis to business  plan and systems  development  to financial
consulting.  In early 2004, our former management determined that their business
model was not  progressing  and that we should  either  merge with or acquire an
operating company with an operating history and assets.



                                       14
<PAGE>

     Effective  April 1, 2004,  we  completed a Share  Exchange  Agreement  with
Pyramid Music Corp., a Florida corporation ("PMC"). Under the terms of the Share
Exchange  Agreement,  we acquired 100% of the outstanding common stock of PMC in
exchange  for  16,922,464  shares of our common  stock.  On March 26,  2004,  in
anticipation of the completion of the share exchange, we changed our name to AGU
Entertainment Corp. Upon completion of this transaction, the former stockholders
of PMC owned,  on a fully diluted  basis,  approximately  eighty  percent of the
outstanding  common  stock of AGU  Entertainment  Corp.  as of  April  1,  2004,
resulting in a change in control. The transaction was accounted for as a reverse
merger and recapitalization  whereby PMC, which became a wholly owned subsidiary
of AGU  Entertainment  Corp.,  is  deemed  to be  the  acquirer  for  accounting
purposes. In addition, we had no identifiable assets and liabilities as of April
1, 2004. As a result, PMC is deemed to be the surviving accounting and reporting
entity, and all of the historical financial  information  presented in this Form
10-KSB,  including the consolidated  financial  statements and this Management's
Discussion  and  Analysis of  Financial  Condition  and  Results of  Operations,
reflect the assets, liabilities, results of operations and cash flows of PMC and
its  subsidiaries,  The Tube Music Network,  Inc., a Florida  corporation  ("The
Tube") and Pyramid Records International, inc., a Florida corporation ("PRI").

     As a result of the share  exchange,  AGU became the parent  company of PMC,
which was a  development  stage  company with an inception  date of May 20, 2003
with two wholly-owned  operating  subsidiaries that are engaged in the following
services:  (i) the  formation and  operation of a television  network,  The Tube
Music Network,  Inc., ("The Tube") that airs  traditional  music videos and live
concerts of contemporary  music material that is derived from archived video and
music collection  libraries,  and (ii) a production,  marketing and distribution
record company,  Pyramid Records International,  Inc. ("PRI"). PMC was dissolved
in  July  of 2004  and at  that  time  The  Tube  and  PRI  became  wholly-owned
subsidiaries of AGU Entertainment Corp. In February 2005, PRI officially changed
its name to AGU Music, Inc. ("AGU Music").

     The Tube is a 24-hour per day  broadcast  digital  television  network that
delivers high quality music video, audio,  pay-per-view  options and commerce to
digital viewers nationally. Its national launch is expected to take place in the
third  quarter of 2005.  The Tube can  currently be seen in a limited  number of
households in various parts of the United States.

     In the late  1990's,  broadcasters  throughout  the  country  were  granted
portions  of the  airwaves  at no cost with the  understanding  that they  would
provide free digital  signals as part of the U.S.  government's  desire for high
definition   television.   However,   due  to  improvements  in  digital  signal
compression,   the  bandwidth  required  to  broadcast  digital  television  was
substantially  reduced,  leaving  broadcasters  with excess  bandwidth to use at
their discretion.  As a result,  there are currently a number of media companies
that have the ability to offer a digital  quality  picture over the air directly
to consumers and indirectly  through the cable and satellite  operators' digital
box using surplus  bandwidth  from local  broadcasters.  These media outlets can
offer  additional  channels to broadcast  local news,  sports,  weather or other
specialty  services like The Tube. This new broadcasting  concept is referred to
as  "multicasting."  In April of 2005, we signed an agreement with Raycom Media,
Inc.  ("Raycom"),  which will enable  consumers in all of the markets  served by
Raycom to receive The Tube with digital  cable service or with  television  sets
that are enabled with  digital  tuners.  Raycom owns and operates 39  television
stations  in 20  states,  which  cover  over  10% of  United  States  television
households.  We are currently in  negotiations  with several other  broadcasters
with multicasting  capabilities,  and expect to eventually  leverage this market
penetration into households served by larger cable and satellite systems.  There
can be no  assurance  as to whether or when these  negotiations  will  result in
additional  definitive  agreements.  We expect that The Tube will earn  revenues
through  advertising  sales and  through  e-commerce  with  respect to music and
related products that will be seen by consumers on The Tube.

     AGU Music  produces both studio  albums and DVD  concerts.  It entered into
several  agreements for  distribution and released three albums to the public in
2004.  Our  ability to  produce  new  albums  and DVD  concerts  in 2005 will be
dependent on the amount of working  capital  available to us (see  Liquidity and
Capital Resources) for the required  marketing,  promotional and other operating
expenses necessary to produce recorded music projects.  We have not produced any
new music  projects in 2005, and do not expect to release any new projects until
our liquidity situation improves.

     In the third  quarter of 2004,  our board of directors  decided to purchase
and develop a facility that would serve as a comprehensive  media  entertainment
recording and  production  facility that would  encompass  film,  television and
musical  projects.  On December 22, 2004, we closed on the purchase of a 162,000
square foot facility situated on 23 acres of land in Lauderdale  Lakes,  Florida
(the "Lauderdale  Property").  Our business plan envisioned a facility that will
consist of approximately 75,000 square feet of office space available for lease,
as well as six sound  stages,  an audio  production  studio and a two and a half
acre back lot for film projects.


                                       15
<PAGE>

     It was  originally  anticipated  that within three years the rental  income
from the office space and  production  facilities  would be  sufficient to cover
substantially all of the operating expenses of the studio,  which would allow us
to use the  soundstages  and  production  studio to  develop  new music and film
projects  without  requiring  significant  cash  outlays.  To date,  we have not
entered  into any  leases or any other  material  contractual  commitments  with
respect  to the  usage of this  facility.  The  Company's  expectation  was that
revenue would be generated by offering technical and production  services in the
areas of film, television and music production, and through the rental of office
and studio space. A limited amount of production  activity did take place on the
Lauderdale Property in 2004 and in the first six months of 2005, and in February
2005 we formed a separate subsidiary,  AGU Studios, Inc., a Florida Corporation,
under which our studio  development and production  activities would take place.
However due to the Company's  continuing  liquidity  problems (see Liquidity and
Capital  Resources),  we have had to  reevaluate  our plans  for the  Lauderdale
Property.  While no  definitive  decisions  have  been  made,  we are  currently
considering alternatives to developing the facility as originally planned, which
could include a reduction in the size and scope of the  property's  development,
or a sale of the  property  in order to assist in meeting  the  working  capital
requirements of the Company.

     Because of the start up nature of our business throughout most of 2004, our
results  of  operations  and cash  flows in the  first  quarter  of 2005 are not
comparable to the same period of a year ago.

Liquidity and Capital Resources

     We do not have adequate cash to meet our current obligations as well as our
short  and  long  term  objectives  and we do not  have  the  capital  resources
necessary to implement  our business  plan.  The growth and  development  of our
business will require a significant  amount of additional  working  capital.  We
currently  have  very  limited  financial  resources  and  will  need  to  raise
additional  capital  in  order  to  continue  as a  going  concern.  If  we  are
unsuccessful  in  obtaining  the  additional   capital  necessary  to  fund  our
operations,  we may be forced to downsize  certain  operations,  restructure our
current  debt  obligations  on terms  less  favorable  to us than  the  existing
obligations  or sell some of our  assets.  We may also  need to seek  protection
under the federal bankruptcy laws or be forced into bankruptcy by our creditors.

     Our  financial  condition  and operating  results,  specifically  a working
capital  deficit of  approximately  $11.4  million,  an  accumulated  deficit of
approximately  $14.2 million and de minimus cash on hand as of June 30, 2005, as
well as a net loss of approximately  $7.5 million for the six months ending June
30, 2005 raise  substantial  doubt about our ability to continue to operate as a
going concern.

     As a company  that has  recently  emerged  from the  start-up  phase with a
limited operating history,  we are subject to all the substantial risks inherent
in the development of a new business enterprise within an extremely  competitive
industry.  We cannot  assure  you that the  business  will  continue  as a going
concern  or ever  achieve  profitability.  Due to the  absence  of an  operating
history,  the  emerging  nature of the  market in which we  compete  and lack of
sufficient  capital to fund our  operations  and implement our business plan, we
anticipate operating losses until such time as we can successfully implement our
business  strategy,  which  includes  the  national  launch  of  The  Tube  and,
potentially,  new projects for AGU Music and the  development  of the Lauderdale
Property.  Because of losses  incurred by us through our most recent fiscal year
end and our general  financial  condition,  our  independent  registered  public
accounting firm inserted a going concern qualification in their audit report for
the most recent fiscal year that raises  substantial  doubt about our ability to
continue as a going concern.

     Since May 20, 2003, we have financed our operations  through  numerous debt
and equity  issuances.  In addition to the convertible notes discussed below, we
issued   approximately   $5,369,000   of   convertible   notes  or   debentures,
approximately  $3,379,000  of which plus  accrued  interest,  were  subsequently
converted  into  1,173,540  shares of common stock of the Company and $75,000 of
which was repaid in 2004.  Approximately $1,765,000 of the remaining convertible
promissory  notes  mature  between  the  fourth  quarter  of 2006 and the second
quarter of 2007 and a $150,000  promissory  note was to have matured on June 30,
2005. On August 2, 2005, we issued 5,000 shares of our common stock and warrants
to purchase  25,000 shares of our common stock at an exercise price of $1.50 per
share in exchange for the holder of this note  extending  the  maturity  date of
this note to October 1, 2005. While these convertible notes are convertible into
shares of our common stock at a conversion  price of $3.00 per share,  there can
be no assurances that these notes will be converted prior to their becoming due.
We currently do not have the financial resources to repay these promissory notes
without completing an additional financing, reducing expenses, selling assets or
extending the maturities of this debt. If we are  unsuccessful  in obtaining the
additional capital necessary to fund our operations and service our debt, we may
be  forced  to  downsize  certain  operations,   restructure  our  current  debt
obligations,  find a strategic  partner,  and or sell some of our assets. We may
also need to seek protection under the federal bankruptcy laws or be forced into
bankruptcy by our creditors.



                                       16
<PAGE>

     As part of the purchase price of the Lauderdale Property,  we issued to the
seller on  December  22, 2004 a  convertible  promissory  note in the  principal
amount of  $7,000,000.  The note pays  interest at an annual rate of 6.5% and is
convertible  at any time at the seller's  option into shares of our common stock
at a conversion  price of $2.50 per share.  A principal  payment of $250,000 was
due on June 25, 2005 and was paid on July 1, 2005. The remaining  balance of the
note matures on December 22, 2005.  All of our  obligations  to the seller under
this convertible  promissory note and related  agreements are secured by a first
mortgage on the  Lauderdale  Property,  including  all of our rights,  title and
interest as lessor in and to all leases or rental arrangements of the Lauderdale
Property.  At the closing of the purchase of the Lauderdale Property,  we made a
prepayment  into an escrow account of $150,000 for interest on the note and real
estate taxes on the  Lauderdale  Property  covering the quarterly  period ending
March 31, 2005.  Additional quarterly prepayments of $145,000 are required to be
put  into  escrow  beginning  March  22,  2005.  We did not  make  the  required
prepayment  on March 22, 2005.  This amount was paid on behalf of the Company by
one of our other  creditors  (see  below) on April 22,  2005,  at which  time we
received a letter from the holder of the first mortgage note  acknowledging  the
cure of the payment default. The quarterly prepayment due June 22, 2005 was paid
by the  Company on July 1, 2005 with the  proceeds  of a note issued on the same
date by the Company to a related party.

     Also on December 22, 2004, we issued a secured convertible term note in the
principal amount of $3,000,000 to Mitchell  Entertainment Company (the "Mitchell
Note").  The note  pays  interest  monthly  at an  annual  rate of 10% and has a
maturity date of December 19, 2006. The note can be converted at any time by the
lender into shares of our common stock at an initial  conversion  price of $1.50
per share,  subject to anti-dilution  protections and certain other adjustments.
The Mitchell note is secured by a second mortgage on the Lauderdale Property and
by  substantially  all of our other  assets,  including the capital stock of our
subsidiaries.

     On May 13,  2005,  we  executed a letter  agreement  with the holder of the
Mitchell  Note whereby we agreed that the $145,000  interest and real estate tax
payment made on behalf of the Company,  the $100,000  that was advanced to us on
April 29, 2005 by the holder of the Mitchell Note, the interest  installments on
the Mitchell  Note for April 1, 2005 and May 1, 2005 and the legal fees incurred
by the  holder  in  connection  with the  letter  agreement,  together  with the
interest due on the foregoing  amount would accrue  interest at the default rate
of 18% and  would  be due and  payable  by us on  August  1,  2005.  The  letter
agreement  also  extended  the  deadline  for  which  we were  to  have  filed a
registration  statement to register the Company's common stock pertaining to the
Mitchell  Note and related  warrants  from April 30, 2005 to June 30, 2005,  and
extended  the date for  which  the  registration  statement  is  required  to be
declared  effective to November 30, 2005.  We also agreed to grant the holder of
the Mitchell Note  additional  warrants of 100,000 and 50,000  respectively,  to
purchase our common stock at an exercise price of $1.50 per share, with the same
registration and anti-dilution  protections contained in the warrants originally
granted to the holder of the Mitchell Note.  Because we did not pay the required
monthly  interest  payments  for March and April  2005,  which  resulted  in our
receiving  a default  letter  from the holder of the  Mitchell  Note on April 8,
2005, the interest rate on the note was increased to the default rate of 18%.

     We have not paid the $245,000  plus accrued  interest and lender legal fees
that was due on August 1, 2005, in accordance with the May 13, letter agreement,
nor have we filed a registration  statement to register the required securities.
The holder of the Mitchell  Note issued a default  letter on August 2, 2005.  On
August 11, 2005,  we entered into two letter  agreements  with the holder of the
Mitchell Note, pursuant to which (i) the holder of the Mitchell Note agreed that
the  payment due on August 1, 2005 would be deferred  until  September  1, 2005;
(ii) the parties  agreed that,  until  maturity of the Mitchell Note, all monies
due under the Mitchell Note,  other than monies that accrue  interest at the 18%
default  rate,  will bear  interest at the lower of 18% per annum or the highest
rate permitted by law; (iii) we agreed to pay the holder,  upon the first monies
it receives,  in addition to the sums  otherwise  due under the  Mitchell  Note,
approximately $512,000 plus interest, attorneys' fees in the amount of $1000 and
any further costs of collection (the "September Payment"); (iv) we agreed to pay
the  holder,  up to the  September  Payment,  any  monies  we  receive  upon the
consummation of the terms of a non-binding letter of intent relating to the sale
of the Lauderdale Property;  (v) the lender agreed to extend the filing date for
the  registration  statement to September 1, 2005;  and (vi) the parties  agreed
that there would be no further grace periods allowed under the Mitchell Note. In
addition,  the letter agreement provides for the issue to the holder of warrants
to  purchase an  additional  150,000  shares of our common  stock at an exercise
price of $1.50 per share under the same terms and conditions as the common stock
purchase warrants previously issued to the holder. On August 3, 2005, the holder
of the  first  mortgage  note on this  property  issued a  default  letter to us
pursuant to the cross default  provision of the note, which was triggered by the
Company's  default on the Mitchell  Note. On August 19, 2005,  the holder of the
first mortgage note issued a letter  acknowledging the cure of the Mitchell Note
and accepting the cure under the first mortgage note.




                                       17
<PAGE>

On March 3,  2004,  our AGU Music  subsidiary  entered  into an  Assignment  and
Assumption  Agreement with Pyramid Media Group,  Inc.  ("PMG") whereby AGU Music
agreed  to  assume  all of  the  covenants  and  obligations  of a  Distribution
Agreement  between PMG and ARK 21 Records,  LP  ("ARK21").  In exchange  for the
rights to the  Distribution  Agreement  and  certain  assets  of PMG,  AGU Music
assumed the obligation to repay $350,000 of notes payable to certain  principals
of PMG (the "ARK 21 Notes").  The Company has  guaranteed the payment of the ARK
21 notes,  which have an annual  interest  rate of 8% and mature on May 1, 2007.
Allen Jacobi,  the former  President of AGU Music,  is an owner and  controlling
stockholder  of PMG.  Approximately  $19,000 of these notes was paid in 2004 and
the  outstanding  balance as of March 31, 2005 is  approximately  $331,000.  The
terms of these notes require monthly payments of principal and interest. We have
not made the required  monthly  principal  and interest  payments  since June of
2004. On May 5, 2005, we entered into a settlement agreement with the holders of
the ARK 21 Notes,  who are significant  stockholders  of the Company.  Under the
terms of the  settlement  agreement,  the ARK 21 Notes were  cancelled  and were
replaced  with new notes  containing  the same terms and  conditions  as the old
notes,  except that the new notes have a beginning principal balance of $345,806
and require,  in addition to the monthly payment of  approximately  $8,500,  the
repayment of principal in the amount of $50,000 for every  $1,000,000  in equity
capital raised by us. In addition,  upon the our closing of a capital raising of
at least  $250,000,  we must pay all the  principal  and  interest due under the
original  notes for the  period  January  through  April,  2005 in the amount of
approximately  $36,000. We also agreed to issue 500,000 restricted shares of the
Company's  common stock to the holders of the ARK 21 Notes. We have not made any
of the required  payments under the settlement  agreement and received a default
letter on August 1, 2005 demanding  immediate repayment of all amounts due under
the ARK 21 Notes and related settlement agreement.  We currently do not have the
financial  resources  to repay  these notes  without  completing  an  additional
financing,  reducing  expenses,  selling assets or extending the maturity of the
ARK 21 Notes.  In  addition,  defaults  under the ARK 21 Notes  cause a default,
pursuant  to the cross  default  provision,  of the first  mortgage  note of the
Lauderdale Property.  To date, the holder of the first mortgage has not issued a
default notice relating to our default on the ARK21 Notes.

     We currently have a monthly cash requirement of approximately  $550,000 and
we will need to raise  additional  capital in the remainder of 2005, for working
capital,  capital expenditures,  business expansion,  repayment of maturing debt
and to continue as a going concern.  We anticipate that we will need to raise up
to  approximately  $6 million  over the  balance  of 2005 to  provide  for these
requirements.  Management is evaluating several alternatives, including the sale
of assets,  sale of equity securities or issuance of additional debt, or finding
a  strategic  partner.  We  cannot  assure  you  that we will be  successful  in
completing  such an  offering,  in  executing  the  business  plan or  achieving
profitability.  If we are not  successful  in  raising  additional  capital  and
refinancing the $7,000,000 convertible promissory note due in December 2005, our
financial  condition,  business  operations  and  ability to continue as a going
concern will be adversely affected, and we may need to seek protection under the
federal bankruptcy laws.

     Cash used in  operations  for the first six months of 2005 was  $2,252,000,
which was primarily the result of our operating  loss of  $4,409,000,  partially
offset by increases to accounts payable and accrued expenses and the issuance of
common  stock in exchange  for  services.  Cash used in  operations  in 2004 was
$1,981,000.  We  expect  to  continue  to  generate  negative  cash  flows  from
operations  until  such  time as we can  gain  national  distribution  for,  and
generate  significant  advertising revenues from, The Tube. No assurances can be
given as to when or if we will be able to develop profitable operations.

     Cash used in  investing  activities  in the six months of 2005  amounted to
$136,000,  as compared to $233,000 in 2004.  The  decrease  was due to a $51,000
investment  for  certain  intangible  assets  for The Tube in 2004,  and  severe
liquidity  restraints,  which have  limited  our capital  expenditures  in 2005.
Capital  expenditures  for the  remainder  of 2005 will depend  largely upon our
ability to raise  additional  capital;  however,  our  business  plan  currently
assumes  approximately $1 million of capital  expenditures  over the next twelve
months.

     We received cash from financing  activities in the first six months of 2005
in the amount of  $1,630,000,  as compared to $2,078,000 in the same period of a
year ago. The decrease was due to fewer issuances of convertible notes in 2005.

     We have  experienced  liquidity issues since our inception due primarily to
our limited ability,  to date, to raise adequate capital on acceptable terms. We
have  historically  relied  upon  the  issuance  of  promissory  notes  that are
convertible into shares of our common stock to fund our operations and currently
anticipate  that we will need to continue to issue  promissory  notes and common
stock to fund our operations and repay our outstanding  debt for the foreseeable
future.  At  June  30,  2005,  we  had  approximately   $13.5  million  of  debt
outstanding, approximately $8.2 million of which is due at various dates in 2005
or in default.  We currently do not have the financial resources to repay any of
these or any of the aforementioned  obligations without completing an additional
financing.  We also  currently do not have funds  available for working  capital
requirements beyond August,  2005. On July 27, 2005, we issued a promissory note
in the principal amount of $500,000.  The Promissory Note accrues interest at an
annual rate of 4 1/2%,  payable  annually,  and matures on January 1, 2007.  The
interest on the Promissory  Note is compounded  quarterly and at the end of each
quarter such interest is added to the principal  balance of the Promissory Note.
The note is  convertible,  along with all  outstanding  accrued  interest,  into
shares of the Company's common stock at the conversion price of $2.00 per share.
The proceeds from this note were used for general corporate purposes,  primarily
working  capital.  There  can be no  assurance  that we will  be  successful  in
obtaining additional funds necessary to finance our operations or repay debt.


                                       18
<PAGE>

     If we are unable to raise the  necessary  capital to meet our  current  and
future  obligations,  we will need to consider other  alternatives,  which could
include  curtailing our business  plan,  selling some of our assets or finding a
strategic  partner.  We may  also  need to seek  protection  under  the  federal
bankruptcy laws or be forced into bankruptcy by our creditors.

     Moreover,  as a result of our liquidity issues, we have experienced  delays
in the repayment of certain  promissory  notes upon maturity.  However,  certain
holders of our  promissory  notes  have  agreed to extend the due dates on their
promissory  notes. If in the future,  the holders of our promissory notes demand
repayment of principal  and accrued  interest  instead of electing to extend the
maturity  dates on their  notes and if we are  unable to repay our debt when due
because of our continued  liquidity issues, we may be forced into an involuntary
bankruptcy filing.

Critical Accounting Policies and Estimates

     The accounting policies that we have identified as critical to our business
operations and to an understanding of our results of operations are described in
detail in our Annual  Report on Form 10-KSB for the fiscal  year ended  December
31, 2004. In many cases, the accounting treatment of a particular transaction is
specifically  dictated by accounting principles generally accepted in the United
States of America,  with no need for management's judgment in their application.
In other cases,  preparation of our unaudited condensed  consolidated  financial
statements for interim  periods  requires us to make  estimates and  assumptions
that  affect  the  reported  amount of assets  and  liabilities,  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. There
can be no  assurance  that  the  actual  results  will  not  differ  from  those
estimates.

Results of Operations for the Three Months ending June 30, 2005 and 2004

     Revenues  were $107,000 in the three months ended June 30, 2005 and $15,000
in the three months ended June 30,  2004.  Approximately  $70,000 of this amount
was related to  recorded  music  shipments  by AGU Music and the  remainder  was
generated by AGU Studios.  AGU Music had gross profit of $63,000 and AGU Studios
had gross profit of $31,000 during the period.

     Operating expenses were $2,756,000 and $1,540,000 in the three months ended
June 30,  2005 and 2004,  respectively,  the  majority  of which was general and
administrative  expenses.  Thus  far in  2005  our  liquidity  constraints  have
severely limited our ability to engage in marketing, promotion,  advertising and
similar  expenses  necessary  to develop our  business.  We expect this trend to
continue  until  such  time as we can  complete  a  substantial  debt or  equity
offering.

     Interest  expense in 2005 was  $1,647,000,  as compared to $33,000 in 2004,
and includes $1,169,000 for the reduction of debt discounts and the amortization
of deferred  financing  fees. The remainder of the increase in interest  expense
was the result of increased indebtedness in 2005.

     We did not record a tax benefit during this period as we determined that it
was  more  likely  than not that we  would  not be able to  generate  sufficient
taxable  income to use any net deferred tax assets.  As such,  we increased  our
valuation  allowance for the net deferred tax asset that existed at December 31,
2004 so that no net tax benefit was recorded in 2005.

     Our net loss  for the  quarter  ended  June 30,  2005  was  $4,309,000,  as
compared to $1,558,000 in the prior year.

Results of Operations for the Six Months ending June 30, 2005 and 2004

     Revenues  were  $258,000 for the six months ended June 30, 2005 and $15,000
for the six months  ended June 30, 2004.  Approximately  $176,000 of this amount
was related to  recorded  music  shipments  by AGU Music and the  remainder  was
generated by AGU Studios. AGU Music had gross profit of $147,000 and AGU Studios
had gross profit of $61,000 during the period.


                                       19
<PAGE>

     Operating  expenses were $4,617,000 and $2,426,000 for the six months ended
June 30,  2005 and 2004  respectively,  the  majority  of which was  general and
administrative  expenses.  Thus  far in  2005  our  liquidity  constraints  have
severely limited our ability to engage in marketing, promotion,  advertising and
similar  expenses  necessary  to develop our  business.  We expect this trend to
continue  until  such  time as we can  complete  a  substantial  debt or  equity
offering.

     Interest expense for the six months ended June 30, 2005 was $3,096,000,  as
compared  to  $45,000  for the six  months  ended June 30,  2004,  and  includes
$2,367,000 for the reduction of debt discounts and the  amortization of deferred
financing fees. The remainder of the increase in interest  expense is the result
of increased indebtedness in 2005.

     We did not record a tax benefit during this period as we determined that it
was  more  likely  than not that we  would  not be able to  generate  sufficient
taxable  income to use any net deferred tax assets.  As such,  we increased  our
valuation  allowance for the net deferred tax asset that existed at December 31,
2004 so that no net tax benefit was recorded in 2005.

     Our net loss for the six month period  ended June 30, 2005 was  $7,506,000,
as compared to $2,456,000 in the prior year.

     We anticipate  entering into several additional  affiliate  agreements with
digital  broadcasters,  which will allow The Tube to be seen in approximately 20
million  homes by the end of 2005.  While we expect this market  penetration  to
generate a substantial increase in marketing,  promotion and other expenses both
at The Tube and at AGU Studios, we also expect that our revenues will ultimately
increase sufficiently enough to cover these increases. Thus, we believe that our
results  of  operations  in  fiscal  2004  and 2005  are not  indicative  of our
projected results of operations in fiscal 2006 and beyond.

Item 3. CONTROLS AND PROCEDURES

     The  Company,  under  the  supervision  and with the  participation  of its
management,  including its principal  executive officer and principal  financial
officer,  evaluated  the  effectiveness  of  the  design  and  operation  of its
disclosure  controls and  procedures as of the end of the period covered by this
report. Based on this evaluation,  the principal executive officer and principal
financial  officer  concluded  that, as of the end of the period covered by this
report,  the Company's  disclosure  controls and  procedures  were  effective in
reaching a reasonable  level of assurance  that  management is timely alerted to
material  information related to and during the period when our periodic reports
are being prepared.

     A control  system,  no matter how well conceived and operated,  can provide
only  reasonable,  not absolute,  assurance  that the  objectives of the control
system are met.  Further,  the design of a control  system must reflect the fact
that there are  resource  constraints,  and the  benefits  of  controls  must be
considered relative to their costs.  Because of the inherent  limitations in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control issues and instances of fraud,  if any, within the Company have been
detected.  Because  of the  inherent  limitations  in a  cost-effective  control
system, misstatements due to error or fraud may occur and not be detected.

     There has been no change in the Company's  internal  control over financial
reporting that occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.


                                       20
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.

     On January 27,  2005,  the Company was served with a summons with notice by
Jarred   Weisfeld  and  Cherry  Jones,   individually   and  doing  business  as
JarredCherry  Productions  LLC,  referred  to  herein as the  plaintiffs,  which
indicated  that the  plaintiffs  commenced an action  against the  Company.  The
plaintiffs alleged,  among other things,  breach of contract,  breach of implied
covenant  of  good  faith  and  fair  dealing,   unfair  competition,   tortuous
misappropriation  of goodwill,  and  deceptive  acts and  practices  pursuant to
Section 349 of the New York General Business Law. The dispute originated from an
alleged agreement between the plaintiffs and the Company related to the works of
the late Mr.  Russell  Jones,  who was the son of Ms.  Jones and the  management
client of Mr. Weisfeld. The complaint indicated that the plaintiffs were seeking
compensatory and punitive damages of no less than $1,812,500 for each of the six
causes of action  alleged.  On June 20,  2005,  the Company  and the  plaintiffs
entered  into a  Confidential  Settlement  Agreement  and  Mutual  Release  (the
"Agreement")  wherein the parties  agreed to resolve their  differences  without
admitting  or  acknowledging  the  validity of the  position  taken by the other
parties in the course of the litigation.  Under the terms of the Agreement,  the
Company paid the  plaintiffs  $10,000 on June 28, 2005, and will pay $10,000 per
month  for  eight  consecutive  months  commencing  30 days from the date of the
Agreement,  as full and final settlement of the disputes. The complaint filed by
the Plaintiffs has since been dismissed.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     During  the  first  six  months  of 2005  the  Company  issued  convertible
promissory notes to various  accredited  and/or  sophisticated  investors in the
aggregate principal amount of $665,000.  The $665,000 of convertible  promissory
notes  are  due on the  second  anniversary  of  their  issuance  date  and  are
convertible  into  shares of the  Company's  common  stock at the option of each
holder at a conversion price of $3.00 per share. In connection with the issuance
of the  convertible  notes,  the Company  issued to the holders an  aggregate of
221,666  warrants to purchase  the  Company's  common  stock.  The common  stock
purchase  warrants  have a two year  term and the  exercise  price is $3.00  per
share.  The common stock  purchase  warrants  were valued at $113,832,  and this
amount was  recorded  as a discount to the  convertible  promissory  notes.  The
unamortized  balance of the  discount  for these  notes as of June 30,  2005 was
$102,786.

     During the first six months of 2005,  the Company  issued 347,987 shares of
common stock to third parties in exchange for services performed. These services
were  valued at $868,096  and this  amount was  charged to  earnings  during the
period.  The Company also issued  50,540 shares of common stock to employees and
directors  during  the  first  three  months of 2005 and  recorded  compensation
expense of $119,274.  In addition,  the Company  issued 555,566 shares of common
stock to its former  chairman as an  adjustment  to the shares  allocated to the
original  investors  of the  Company  and in  connection  with the  terms of his
employment  agreement,  5,000 shares of common stock as a share price adjustment
for certain  investors,  97,800  shares of common stock in  connection  with the
acquisition  of property  and  equipment  and 121,875  shares of common stock in
settlement of a liability.  Also during this period,  the Company  issued 60,000
shares of common stock in  connection  with  amending the terms of certain notes
payable and 3,575 shares of common stock for payment of interest expense in lieu
of cash.

     No  underwriters  or  brokers  were  employed  in  the  transactions.   The
securities  will  be  deemed  restricted  securities  for  the  purposes  of the
Securities Act.

     See the Company's Current Reports on Form 8-K filed with the Securities and
Exchange  Commission on April 20, 2005,  April 28, 2005,  May 11, 2005,  May 20,
2005 and August 2, 2005.

     The Company  maintains that the issuances of these  securities  were exempt
from registration  under the Securities Act of 1933, as amended  (the"Securities
Act"),  in reliance upon Section 4(2) of the Securities Act and/or  Regulation D
promulgated  thereunder  as  transactions  by an issuer not  involving  a public
offering.  In  addition,  certain of the  securities  were  issued as bonuses to
employees pursuant to the Company's benefit plan approved by its stockholders.

Item 3.  DEFAULTS UPON SENIOR SECURITIES

     On August 2, 2005,  the holder of the Mitchell Note issued a default letter
for the  Company's  failure to pay monthly  interest  payment from April 2005 to
August 2005, the Company's  failure to repay $245,000 of additional  advances to
the  Company  prior to August  1,  2005,  and the  Company's  failure  to file a
registration  statement with the SEC prior to June 30, 2005. On August 11, 2005,
the Company  entered into two letter  agreements with the holder of the Mitchell
Note,  pursuant  to which (i) the holder of the  Mitchell  Note  agreed that the
payment due on August 1, 2005 would be deferred  until  September 1, 2005;  (ii)
the parties  agreed that,  until  maturity of the Mitchell  Note, all monies due
under the  Mitchell  Note,  other than monies  that  accrue  interest at the 18%
default  rate,  will bear  interest at the lower of 18% per annum or the highest
rate  permitted  by law;  (iii) the Company  agreed to pay the holder,  upon the
first  monies it  receives,  in  addition  to the sums  otherwise  due under the
Mitchell  Note,  approximately  $512,000 plus interest,  attorneys'  fees in the
amount of $1000 and any further costs of collection (the  "September  Payment");
(iv) the Company  agreed to pay the holder,  up to the  September  Payment,  any
monies it receives upon the consummation of the terms of a non-binding letter of
intent relating to the sale of the Lauderdale Property; (v) the lender agreed to
extend the filing  date and  effective  date of the  registration  statement  to
December 31, 2005 and March 31, 2006, respectively;  and (vi) the parties agreed
that there would be no further grace periods allowed under the Mitchell Note. In
addition,  the letter agreement provides for the issue to the holder of warrants
to purchase an additional  150,000  shares of the  Company's  common stock at an
exercise  price of $1.50 per share  under the same terms and  conditions  as the
common stock purchase warrants previously issued to the holder.


                                       21
<PAGE>

     On August 3, 2005,  the holder of the first  mortgage note issued a default
letter to the Company pursuant to the cross default provision of the note, which
was triggered by the Company's default on the Mitchell Note. On August 19, 2005,
the holder of the first mortgage note issued a letter  acknowledging the cure of
the Mitchell Note and accepting the cure under the first mortgage note.

     On March 3,  2004,  the  Company's  AGU Music  subsidiary  entered  into an
Assignment and Assumption  Agreement with Pyramid Media Group,  Inc. ("PMG") (of
which a  related  party  and a  stockholder  of the  Company  own a  controlling
interest),  whereby  AGU  Music  agreed  to  assume  all  of the  covenants  and
obligations  of a  Distribution  Agreement  between PMG and ARK 21  Records,  LP
("ARK21").  The Distribution  Agreement  provides that ARK21 be the manufacturer
and distributor of certain  recorded music projects for AGU Music through normal
retail channels  throughout the United States. In exchange for the rights to the
Distribution  Agreement  and  certain  assets  of PMG,  AGU  Music  assumed  the
obligation  to repay  $350,000 of notes  payable ("the ARK 21 Notes") to certain
principals of PMG. The Company has  guaranteed  the payment of the ARK 21 Notes,
which have an annual  interest  rate of 8%,  and were to have  matured on May 1,
2007.  Approximately $19,000 of these notes was paid in 2004 and the outstanding
balance as of March 31, 2005 is approximately  $331,000. The terms of the ARK 21
Notes require  monthly  payments of principal and interest.  The Company has not
made the required monthly principal and interest payments since June of 2004. On
May 5, 2005, the Company entered into a settlement agreement with the holders of
the ARK 21 Notes,  who are significant  stockholders  of the Company.  Under the
terms of the  settlement  agreement,  the ARK 21 Notes were  cancelled  and were
replaced  with new notes  containing  the same terms and  conditions  as the old
notes,  except that the new notes have a beginning principal balance of $345,806
and require,  in addition to the monthly payment of  approximately  $8,500,  the
repayment of principal in the amount of $50,000 for every  $1,000,000  in equity
capital  raised by the Company.  In addition,  upon the  Company's  closing of a
capital raising of at least $250,000, the Company must pay all the principal and
interest due under the original notes for the period January through April, 2005
in the amount of approximately $36,000. The Company also agreed to issue 500,000
restricted  shares of the  Company's  common  stock to the holders of the ARK 21
Notes.  The  Company  has  not  made  any of the  required  payments  under  the
settlement  agreement and received a default  letter on August 1, 2005 demanding
immediate  repayment  of all  amounts  due under  the ARK 21 Notes  and  related
settlement agreement.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5.  OTHER INFORMATION

     On August 2, 2005,  the holder of the Mitchell Note issued a default letter
for the  Company's  failure to pay monthly  interest  payment from April 2005 to
August 2005, the Company's  failure to repay $245,000 of additional  advances to
the  Company  prior to August  1,  2005,  and the  Company's  failure  to file a
registration  statement with the SEC prior to June 30, 2005. On August 11, 2005,
the Company  entered into two letter  agreements with the holder of the Mitchell
Note,  pursuant  to which (i) the holder of the  Mitchell  Note  agreed that the
payment due on August 1, 2005 would be deferred  until  September 1, 2005;  (ii)
the parties  agreed that,  until  maturity of the Mitchell  Note, all monies due
under the  Mitchell  Note,  other than monies  that  accrue  interest at the 18%
default  rate,  will bear  interest at the lower of 18% per annum or the highest
rate  permitted  by law;  (iii) the Company  agreed to pay the holder,  upon the
first  monies it  receives,  in  addition  to the sums  otherwise  due under the
Mitchell  Note,  approximately  $512,000 plus interest,  attorneys'  fees in the
amount of $1000 and any further costs of collection (the  "September  Payment");
(iv) the Company  agreed to pay the holder,  up to the  September  Payment,  any
monies it receives upon the consummation of the terms of a non-binding letter of
intent relating to the sale of the Lauderdale Property; (v) the lender agreed to
extend the filing  date and  effective  date of the  registration  statement  to
December 31, 2005 and March 31, 2006, respectively;  and (vi) the parties agreed
that there would be no further grace periods allowed under the Mitchell Note. In
addition,  the letter agreement provides for the issue to the holder of warrants
to purchase an additional  150,000  shares of the  Company's  common stock at an
exercise  price of $1.50 per share  under the same terms and  conditions  as the
common stock purchase warrants previously issued to the holder.

     On August 3, 2005,  the holder of the first  mortgage note issued a default
letter to the Company pursuant to the cross default provision of the note, which
was triggered by the Company's default on the Mitchell Note. On August 19, 2005,
the holder of the first mortgage note issued a letter  acknowledging the cure of
the Mitchell Note and accepting the cure under the first mortgage note.


                                       22
<PAGE>

     On August 1, 2005,  the holders of the ARK 21 Notes issued a demand  letter
for  immediate  payment of all  amounts  due under the ARK 21 Notes and  related
settlement  agreement.  On May 5, 2005,  the Company  entered  into a settlement
agreement  with the  holders of the ARK 21 Notes,  pursuant  to which the ARK 21
Notes were cancelled and were replaced with new notes  containing the same terms
and  conditions  as the old  notes,  except  that the new notes had a  beginning
principal balance of $[345,806] and require,  in addition to the monthly payment
of approximately $8,500, the repayment of principal in the amount of $50,000 for
every  $1,000,000 in equity capital  raised by the Company.  The Company has not
made any of the required payments under the settlement agreement and the current
amount due under the ARK 21 Notes is approximately $346,000 Due to this default,
the  holder  of the  first  mortgage  note may,  pursuant  to the cross  default
provision  of the  note,  issue a demand  letter  declaring  the  entire  unpaid
principal  and  accrued  interest  due  and  payable  immediately.  The  Company
currently  does not have the  financial  resources  to repay  this debt  without
completing  an  additional  financing,  reducing  expenses,  selling  assets  or
extending the maturities of the debt.

     Effective August 1, 2005 the Company entered into a Technical  Services and
Support  Agreement  which  requires a monthly  payment of $22,000  and  $18,000,
respectively.

Item 6.  EXHIBITS

The following  exhibits are  incorporated by reference herein or filed herewith.
The warranties, representations and covenants contained in the agreements listed
below as exhibits should not be relied upon by buyers, sellers or holders of the
Company's  securities  and are not intended as  warranties,  representations  or
covenants to any  individual or entity except as  specifically  set forth in the
agreements.

    Number  Title
    ------  -----
      2.1   Share  Exchange  Agreement,   dated  March  15,  2004,  between  the
            stockholders  of  Pyramid  Music  Corp.,  Pyramid  Music  Corp.  and
            Lexington Barron  Technologies,  Inc.  (Incorporated by reference to
            the Registrants Form 8-K filed April 21, 2004, as amended)

      2.2   Agreement and Plan of Merger, dated as of September 30, 2004, by and
            between AGU  Entertainment  Corp., a Colorado  corporation,  and AGU
            Entertainment Corp., a Delaware corporation  (incorporated herein by
            reference to the Registrant's Form 10-QSB filed November 12, 2004)

      3.1   Certificate of Incorporation of AGU Entertainment  Corp., a Delaware
            corporation  (incorporated  herein by reference to the  Registrant's
            Form 10-QSB filed November 12, 2004)

      3.2   Bylaws  of  AGU   Entertainment   Corp.,   a  Delaware   corporation
            (incorporated  herein by reference to the  Registrant's  Form 10-QSB
            filed November 12, 2004)

      3.4   Specimen certificate of the common stock of AGU Entertainment Corp.,
            a  Delaware  company   (incorporated  herein  by  reference  to  the
            Registrant's   Registration   Statement   on  Form  SB-2,  File  No.
            333-86244).

      4.1   Convertible  Promissory  Note dated  September 13, 2004, made by AGU
            Entertainment  Corp. in favor of Galt Financial Corp.  (incorporated
            herein by reference to the Registrant's Form 8-K filed September 20,
            2004)

      4.2   Warrant  to  subscribe  for  500,000  shares of common  stock of AGU
            Entertainment   Corp.   issued   to   Galt   Financial   Corporation
            (incorporated herein by reference to the Registrant's Form 8-K filed
            September 20, 2004)

      4.3   Secured Convertible Term Note issued by AGU Entertainment Corp., The
            Tube Music Network, Inc., and Pyramid Records International, Inc. to
            Mitchell  Entertainment Company (incorporated herein by reference to
            the Registrant's Form 8-K filed December 29, 2004)

      4.4   Common Stock Purchase Warrant of AGU  Entertainment  Corp. issued to
            Mitchell  Entertainment Company (incorporated herein by reference to
            the Registrant's Form 8-K filed December 29, 2004)


                                       23
<PAGE>

      4.5   Promissory Note issued by AGU Entertainment Corp. to Charley Zeches,
            in her capacity as trustee of Lakes Holding Trust U/A  (incorporated
            herein by reference to the Registrant's  Form 10-KSB filed March 31,
            2005)

      4.6   Common Stock Purchase Warrant of AGU  Entertainment  Corp. issued to
            Mitchell  Entertainment Company (incorporated herein by reference to
            the Registrant's Form 8-K filed August 2, 2004)

      4.7   Promissory Note issued by AGU  Entertainment  Corp. to Robert Jaffee
            (incorporated by reference to the Registrant's Form 8-K filed August
            2, 2005).

      4.8   Warrant  to  purchase  up to 400,000  shares of common  stock of AGU
            Entertainment  Corp.  issued  to  Robert  Jaffee   (incorporated  by
            reference to the Registrant's Form 8-K filed August 2, 2005).

      10.1  Letter Agreement regarding $145,000 Protective Advance,  dated April
            14, 2005 (incorporated  herein by reference to the Registrant's Form
            8-K filed April 20, 2005)

      10.2  Letter,  dated April 22, 2005 from Elizabeth Buntrock  (incorporated
            herein by reference to the  Registrant's  Form 8-K/A filed April 28,
            2005)

      10.3  Settlement and Mutual Release  Agreement,  effective April 15, 2005,
            by and among AgU  Entertainment  Corp. and each of its subsidiaries,
            and Ned  Siegel,  Neil  Strum and Strum  Brothers  Investment,  LLC.
            (incorporated herein by reference to the Registrant's Form 8-K filed
            May 11, 2005)

      10.4  Charter Affiliate  Affiliation Agreement dated as of April 15, 2005,
            by and between The Tube Music Network,  Inc. and Raycom Media,  Inc.
            (incorporated  herein by  reference to the  Registrant's  Form 8-K/A
            filed May 23, 2005) (This agreement has been redacted  pursuant to a
            confidential treatment request filed with the SEC)

      10.5  Technical Services  Agreement,  dated as of December 1, 2004, by and
            between The Tube Music  Network,  Inc.  and Skyport  Services,  Inc.
            (incorporated  herein by  reference to the  Registrant's  Form 8-K/A
            filed May 23, 2005) (This agreement has been redacted  pursuant to a
            confidential treatment request filed with the SEC)

      10.6  Loan  Agreement  dated  July 25,  2005,  David  Levy,  Les  Garland,
            Victoria  Levy,  Marc  Gelberg,  Greg  Catinella  and John W. Poling
            (incorporated herein by reference to the Registrant's Form 8-K filed
            August 2, 2004).

      10.7  Confidential Settlement Agreement,  dated June 20, 2005, between AGU
            Entertainment   Corp.,   and  Jarred   Weisfeld  and  Cherry  Jones,
            individually  and doing  business as  JarredCherry  Productions  LLC
            (incorporated by reference to the  Registrant's  Form 8-K filed July
            8, 2005).

      10.8  Letter  Agreement,  dated  August  11,  2005,  by  and  between  AGU
            Entertainment  Corp. and Mitchell  Entertainment  Company  regarding
            extension of maturity date.

      10.9  Letter  Agreement,  dated  August  17,  2005,  by  and  between  AGU
            Entertainment  Corp. and Mitchell  Entertainment  Company  regarding
            extension of due date for filing of registration statement.

      31.1  Certification  of David C.  Levy,  Chief  Executive  Officer  of the
            Company,  dated August 22,, 2005, pursuant to Rule 13a - 14(a)/15d -
            14(a) of the Securities Exchange Act of 1934, as amended, as adopted
            pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002.

      31.2  Certification  of John W.  Poling,  Chief  Financial  Officer of the
            Company,  dated August 22, 2005,  pursuant to Rule 13a - 14(a)/15d -
            14(a) of the Securities Exchange Act of 1934, as amended, as adopted
            pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act of 2002.

      32.1  Certification  of David C.  Levy,  Chief  Executive  Officer  of the
            Company, and John W. Poling, Chief Financial Officer of the Company,
            dated August 22, 2005 pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


                                       24
<PAGE>

                                   SIGNATURES

    In accordance  with the  requirements  of the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Date: August 19, 2005                      /s/ John W. Poling
                                           -----------------------------
                                           Name: John W. Poling
                                           Title: Chief Financial Officer


                                       25