**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 
 Washington,
        D.C. 20549
  **FORM
        10-QSB**
 
 (Mark
        one)
 x  
QUARTERLY
        REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
        1934
 
 For
        the
        quarterly period ended **June
        30, 2006**
 
 oTRANSITION
        REPORT UNDER
        SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
 
 For
        the
        transition period from ________ to ________
  Commission
          file number: 000-52067
  The
          Tube Media Corp.
 (Exact
          name of small business issuer as specified in its charter)
 
 Delaware
                84-1557072(State
                    or other jurisdiction of
                  incorporation
                    or organization)
                (IRS
                    Employer Identification No.)
  1451
          West
          Cypress Creek Road.
 Ft.
            Lauderdale, FL 33309
 (Address
            of principal executive offices)
 
 (954)
            714-8100
 (Issuer's
            telephone number)
 
 N/A
 (Former
            name, former address and former fiscal year, if changed since last
            report)
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or
        for
        such shorter period that the registrant was required to file such reports),
        and
        (2) has been subject to such filing requirements for the
        past
        90 days.
  Yes
x No
o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes
o No
x
 
 The
        number of shares of the issuer's common stock, par value $0.0001 per
        share ,
        outstanding as of August 8, 2006 was 33,578,550
 
 Transitional
        Small Business Disclosure Format (check one):   Yes o No x
 ,
  
  **THE**  **TUBE
        MEDIA CORP.**
 **(Formerly
        AGU Entertainment Corp.)**
 
 **FORM
        10-QSB**
 
 **INDEX**
 
 **Page****PART
                  I. FINANCIAL INFORMATION**Item
                  1. Financial Statements:Condensed
                  Consolidated Balance Sheets as of June 30, 2006 (Unaudited) and
                  December
                  31, 2005
              4Condensed
                  Consolidated Statements of Operations for the Three and Six Months
                  Ended
                  June 30, 2006 and 2005 (Unaudited)
              5Condensed
                  Consolidated Statement of Changes in Shareholders’ Equity (Deficiency) for
                  the Six Months Ended June 30, 2006 (Unaudited)
              6Condensed
                  Consolidated Statements of Cash Flows for the Six Months Ended
                  June 30,
                  2006 and 2005 (Unaudited)
              7Notes
                  to Condensed Consolidated Financial Statements(Unaudited)
              8Item
                  2.Management’s Discussion and Analysis or Plan of
                  Operation
              20Item
                  3.Controls and Procedures
              26**PART
                  II.OTHER INFORMATION**Item
                  1.Legal Proceedings
              27Item
                  2.Unregistered Sales of Equity Securities and Use of
                  Proceeds
              27Item
                  3.Defaults Upon Senior Securities
              29Item
                  4.Submission of Matters to a Vote of Security Holders.
              29Item
                  5.Other Information
              29Item
                  6.Exhibits
              29SIGNATURES
              31
  2
 
 **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, our ability to continue to operate as
        a going
        concern, our limited operating history and anticipation that we will have
        operating losses in the foreseeable future, our ability to raise additional
        capital which may not be available to us on commercially acceptable terms
        or at
        all, our ability repay our outstanding debt when due, our business revenue
        generation model is unproven and could fail, our success is dependent upon
        our
        senior management team and our ability to hire and retain qualified employees,
        our ability to implement our business and growth strategy, the volatile nature
        of the market in which we will launch new products, our ability to control
        the
        volatility of sales, our ability to purchase and/or license assets that are
        critical to our business, our ability to maintain good working relationships
        with the companies in which we have charter affiliation agreements and our
        ability to perform as required under these agreements, our ability to develop
        advertising revenues, our ability to maintain our client relationships, our
        ability to protect our music business from digital piracy, intense competition
        from substantially larger and better financed companies, our ability to
        adequately manage future growth, our ability to adequately react to market
        changes, our ability to maintain an effective system of internal controls,
        the
        effects of copyright laws on the value of certain of our assets, and potential
        conflicts of interests and risks related to agreements that are not subject
        to
        arm's length negotiations. 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
        (“SEC”).
 
 All
        references to “we,” “our,” or “us” or the “Company” refer, on a consolidated
        basis, to The Tube Media Corp., a Delaware corporation, unless otherwise
        indicated.
  3
 
 **Item
        1. Financial Statements**
 
 **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Condensed
        Consolidated Balance Sheets**
 **As
        of June 30, 2006 and December 31, 2005**
 **June
                    30,**
                
                **December
                    31,****2006**
                
                **2005****Unaudited**
                
                ******Assets**Current
                    Assets:Cash
                
                $
                132,673
                
                $
                346,998Accounts
                        receivable, net of allowance for doubtful accounts of $195,239
                        and
                        $195,703, respectively
                
                
                407,594
                
                
                408,822Prepaid
                    expenses
                
                
                92,628
                
                
                367,264Total
                    current assets
                
                
                632,895
                
                
                1,123,084Property
                    and equipment, net of accumulateddepreciation
                    of $407,275 and $296,876, respectively
                
                
                584,295
                
                
                437,853Property
                    and equipment from discontinued operationsnet
                    of accumulated depreciation of $7,900
                
                
                -
                
                
                28,100Intangibles,
                    net of amortization
                
                
                8,430,518
                
                
                1,077,161Other
                    assets
                
                
                97,801
                
                
                50,480Total
                    assets
                
                $
                9,745,509
                
                $
                2,716,678**Liabilities
                    and Shareholders’ Equity (Deficiency)**Current
                    Liabilities:Accounts
                    payable
                
                $
                2,712,884
                
                $
                794,336Accounts
                    payable - related parties
                
                
                20,115
                
                
                154,708Notes
                    payable, related parties
                
                
                1,037,626
                
                
                1,241,010Notes
                    payable
                
                
                431,000
                
                
                707,818Convertible
                    notes payable
                
                
                2,461,225
                
                
                850,000Capital
                    leases and equipment note payable
                
                
                741
                
                
                24,264Accrued
                    expenses
                
                
                1,822,437
                
                
                1,418,774Other
                    current liabilities
                
                
                6,852
                
                
                6,852Total
                    current liabilities
                
                
                8,492,880
                
                
                5,197,762Capital
                    leases and equipment note payable - long term portion
                
                
                136
                
                
                25,319Notes
                    payable
                
                
                150,000
                
                
                275,000Convertible
                    notes payable - net of unamortized discounts
                
                
                756,453
                
                
                375,408Embedded
                    derivatives at fair value
                
                
                129,637
                
                
                -Other
                    long term liabilities
                
                
                55,436
                
                
                -Total
                    liabilities
                
                
                9,584,542
                
                
                5,873,489COMMITMENTS
                    AND CONTIGENCIESShareholders’
                    equity (deficiency)Preferred
                    stock, $0.0001 par value; 10,000,000 shares authorized,-0-
                    shares issued and outstanding
                
                
                -
                
                
                -Common
                    stock, $0.0001 par value; 100,000,000 shares authorized,29,351,220
                    and 26,046,711 shares issued and outstanding
                
                
                2,935
                
                
                2,604Additional
                    paid-in capital
                
                
                25,212,728
                
                
                17,762,512Accumulated
                    deficit
                
                
                (25,054,696
                )
                
                (20,921,927
                )Total
                    shareholders' equity (deficiency)
                
                
                160,967
                
                
                (3,156,811
                )Total
                    liabilities and shareholders' equity (deficiency)
                
                $
                9,745,509
                
                $
                2,716,678
 
 See
        accompanying notes to condensed consolidated financial statements
  4
  **The
        Tube Media Corp. (formerly AGU Entertainment Corp.) and
        Subsidiaries**
 **Condensed
        Consolidated Statements of Operations**
 **For
        the Three and Six Months Ended June 30, 2006 and 2005**
 **(Unaudited)**
 **Three
                    Months**
                
                **Six
                    Months****2006**
                
                **2005**
                
                **2006**
                
                **2005**Net
                    revenues
                
                $
                -
                
                $
                70,154
                
                $
                -
                
                $
                176,081Cost
                    of sales and services performed
                
                
                -
                
                
                6,636
                
                
                -
                
                
                29,375Gross
                    profit
                
                
                -
                
                
                63,518
                
                
                -
                
                
                146,706Operating
                    ExpensesLegal
                    and professional fees
                
                
                558,296
                
                
                318,339
                
                
                1,047,214
                
                
                592,009Promotion
                    and advertising
                
                
                76,792
                
                
                37,333
                
                
                234,740
                
                
                108,864Depreciation
                    and amortization
                
                
                382,214
                
                
                112,447
                
                
                546,942
                
                
                177,574Other
                    general and administrative costs
                
                
                1,696,938
                
                
                3,411,847
                
                
                2,819,071
                
                
                5,858,136Total
                    operating expenses
                
                
                2,714,240
                
                
                3,879,966
                
                
                4,647,967
                
                
                6,736,583Operating
                    loss
                
                
                (2,714,240
                )
                
                (3,816,448
                )
                
                (4,647,967
                )
                
                (6,589,877
                )Interest
                    expense
                
                
                (584,709
                )
                
                (1,533,408
                )
                
                (1,238,305
                )
                
                (2,821,093
                )Gain
                    on fair value adjustment to embedded derivatives
                
                
                1,743,247
                
                
                -
                
                
                1,743,247
                
                
                -Other
                    income
                
                
                -
                
                
                -
                
                
                10,506
                
                
                -Loss
                    from continuing operations
                
                
                (1,555,702
                )
                
                (5,349,856
                )
                
                (4,132,519
                )
                
                (9,410,970
                )Loss
                    from discontinued operations
                
                
                (250
                )
                
                (139,680
                )
                
                (250
                )
                
                (323,318
                )Net
                    loss
                
                $
                (1,555,952
                )
                $
                (5,489,536
                )
                $
                (4,132,769
                )
                $
                (9,734,288
                )Loss
                    per common share from continuing operations
                
                $
                (0.06
                )
                $
                (0.22
                )
                $
                (0.15
                )
                $
                (0.39
                )Loss
                    per common share from discontinued operations
                
                $
                (0.00
                )
                $
                (0.01
                )
                $
                (0.00
                )
                $
                (0.01
                )Net
                    loss per common share
                
                $
                (0.06
                )
                $
                (0.22
                )
                $
                (0.15
                )
                $
                (0.40
                )Weighted
                    average common shares outstanding -Basic
                    and diluted
                
                
                27,500,263
                
                
                24,608,150
                
                
                26,919,970
                
                
                24,166,866
  See
        accompanying notes to condensed consolidated financial
        statements
  5
  **The
        Tube Media Corp. (formerly AGU Entertainment Corp.) and
        Subsidiaries**
 **Condensed** **Consolidated Statement of Changes in Shareholders’ Equity
        (Deficiency)**
 **For
        the Six Months Ended June 30, 2006**
 **** **(Unaudited)**
  **Shares**
                
                **Common
                    Stock**
                
                **Additional
                    Paid-in Capital**
                
                **Accumulated
                    Deficit**
                
                **Total**Balances
                    at December 31, 2005
                
                
                26,046,711
                
                $
                2,604
                
                $
                17,762,512
                
                $
                (20,921,927
                )
                $
                (3,156,811
                )Issuance
                    of shares of common stock for services
                
                
                135,419
                
                
                14
                
                
                209,885
                
                
                -
                
                
                209,899Issuance
                    of warrants to purchase common stock inconnection
                    the issuance of convertible debt
                
                
                -
                
                
                -
                
                
                171,400
                
                
                -
                
                
                171,400Beneficial
                    conversion feature from issuance of convertible debt
                
                
                -
                
                
                -
                
                
                190,840
                
                
                -
                
                
                190,840Issuance
                    of shares of common stock in connectionwith
                    contract rights agreements for network broadcasting
                
                
                1,100,000
                
                
                110
                
                
                2,409,890
                
                
                -
                
                
                2,410,000Issuance
                    of warrants to purchase common stock inconnection
                    with contract rights agreements for network broadcasting
                
                
                -
                
                
                -
                
                
                1,435,530
                
                
                -
                
                
                1,435,530Issuance
                    of shares of common stock to directors for services
                
                
                5,000
                
                
                -
                
                
                7,750
                
                
                -
                
                
                7,750Issuance
                    of shares of common stock to pay accrued interest
                
                
                5,711
                
                
                1
                
                
                11,420
                
                
                -
                
                
                11,421Issuance
                    of shares of common stock for interest inconnection
                    with the conversion of a convertible note
                
                
                18,420
                
                
                2
                
                
                35,365
                
                
                -
                
                
                35,367Issuance
                    of shares of common stock in connectionwith
                    contract rights agreements for network broadcasting
                
                
                2,039,959
                
                
                204
                
                
                2,978,136
                
                
                -
                
                
                2,978,340Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                (4,132,769
                )
                
                (4,132,769
                )Balances
                    at June 30, 2006
                
                
                29,351,220
                
                $
                2,935
                
                $
                25,212,728
                
                $
                (25,054,696
                )
                $
                160,967
  See
        accompanying notes to condensed consolidated financial
        statements
  6
 
 **The
        Tube Media Corp. (formerly AGU Entertainment Corp.) and
        Subsidiaries**
 **Condensed
        Consolidated Statements of Cash Flows**
 **For
        the Six Months Ended June 30, 2006 and 2005**
 **(Unaudited)**
 **June
                    30, 2006**
                
                **June
                    30, 2005******Cash
                    flows from operating activities:Net
                    loss from continuing operations
                
                $
                (4,132,519
                )
                $
                (9,410,970
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                546,942
                
                
                177,574Common
                    stock issued for financing expenses
                
                
                -
                
                
                145,151Common
                    stock issued as payment for services
                
                
                217,649
                
                
                778,670Common
                    stock issued for services and compensation
                
                
                -
                
                
                1,047,840Common
                    stock issued as settlement expense
                
                
                -
                
                
                1,180,000Common
                    stock issued to pay interest
                
                
                35,367
                
                
                -Amortization
                    of deferred financing fees
                
                
                -
                
                
                36,710Interest
                    expense accreted on embedded derivatives
                
                
                179,591
                
                
                -Gain
                    on fair value adjustment to embedded derivatives
                
                
                (1,743,247
                )
                
                -Loss
                    from discontinued operations, less depreciation
                
                
                (250
                )
                
                (260,608
                )Decrease
                    in accounts receivable
                
                
                1,228
                
                
                75,973Decrease
                    in prepaid expenses and other assets
                
                
                227,315
                
                
                89,169Increase
                    in accounts payable and accrued liabilities
                
                
                1,251,279
                
                
                1,587,937(Decrease)
                    in other liabilities
                
                
                -
                
                
                (30,113
                )Decrease
                    in discount on notes payable
                
                
                749,274
                
                
                2,330,481Net
                    cash used in operating activities
                
                
                (2,667,371
                )
                
                (2,252,186
                )Cash
                    flows from investing activities:Disbursements
                    for property and equipment
                
                
                (231,106
                )
                
                (135,652
                )Net
                    cash used in investing activities
                
                
                (231,106
                )
                
                (135,652
                )Cash
                    flows from financing activities:Payment
                    of equipment note and on capital leases
                
                
                (48,706
                )
                
                (6,674
                )Payment
                    of notes payable
                
                
                (125,000
                )
                
                (5,968
                )Proceeds
                    from notes payable to related parties
                
                
                250,800
                
                
                445,279Payment
                    of notes payable to related parties
                
                
                (352,942
                )
                
                -Proceeds
                    from other notes payable
                
                
                3,760,000
                
                
                1,185,000Payment
                    of other notes payable
                
                
                (800,000
                )
                
                -Net
                    cash provided by financing activities
                
                
                2,684,152
                
                
                1,617,637Net
                    (decrease) in cash
                
                
                (214,325
                )
                
                (770,201
                )Cash,
                    beginning of period
                
                
                346,998
                
                
                771,533Cash,
                    end of period
                
                $
                132,673
                
                $
                1,332Supplemental
                    disclosure of cash flow information:Cash
                    paid for income taxes
                
                $
                -
                
                $
                -Cash
                    paid for interest
                
                $
                -
                
                $
                201,914Non-cash
                    financing activities:Common
                    stock issued as payment for services
                
                $
                209,899
                
                $
                1,250,670Common
                    stock issued as settlement expense
                
                $
                -
                
                $
                1,180,000Common
                    stock issued as compensation to a director
                
                $
                7,750
                
                $
                1,047,840Conversion
                    of liabilities to common stock
                
                $
                11,421
                
                $
                337,500Equipment
                    acquired through issuance of common stock
                
                $
                -
                
                $
                244,500Common
                    stock ussed for financing expenses
                
                $
                -
                
                $
                337,500Common
                    stock issued in connection with affiliation
                    agreements
                
                $
                5,388,340
                
                $
                145,151Warrants
                    issued in connection with affiliation agreements
                
                $
                1,435,530
                
                $
                -
  See
        accompanying notes to condensed consolidated financial
        statements
  7
 
 **The
        Tube Media Corp. (formerly AGU Entertainment Corp.) and
        Subsidiaries**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **June
        30, 2006 (Unaudited)**
 
 **1.
        ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES**
 
 **Organization**
 
 The
        Tube
        Media Corp. was initially incorporated as Lexington Barron Technologies,
        Inc. in the State of Colorado on August 23, 2000 for the purpose of addressing
        the specific needs of small businesses and start-up organizations by providing
        a
        broad range of consulting and advisory services ranging from market research
        and
        analysis to business plans and systems development to financial consulting.
        References to the Company mean The Tube Media Corp. and its subsidiaries
        (the
“Company”) unless otherwise indicated. In early 2004, the Company’s former
        management determined that the business model was not progressing and that
        the
        Company should either merge with or acquire an operating company with an
        operating history and assets.
  Effective
        April 1, 2004, the Company entered into a share exchange agreement with Pyramid
        Music Corp., a Florida corporation (“PMC”). Under the terms of the share
        exchange agreement, the Company acquired 100% of the outstanding common stock
        of
        PMC in exchange for 16,922,464 shares of the Company’s common stock. On March
        26, 2004, in anticipation of the completion of the share exchange, the Company
        changed its name to AGU Entertainment Corp. As of April 1, 2004, upon completion
        of the share exchange, the former shareholders of PMC owned, on a fully diluted
        basis, approximately 80% of the outstanding common stock of AGU Entertainment
        Corp., which resulted 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., was deemed to be the
        acquirer for accounting purposes. In addition, as of April 1, 2004, AGU
        Entertainment Corp. had no identifiable assets and liabilities. 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-QSB, including
        the
        consolidated financial statements and Management’s Discussion and Analysis or
        Plan 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”).
  In
        July
        of 2004, the Company dissolved PMC, and The Tube and PRI became direct,
        wholly-owned subsidiaries of AGU Entertainment Corp. On October 20, 2004,
        the
        Company’s shareholders approved the reincorporation of the Company in the State
        of Delaware through a merger of the Company into a wholly-owned subsidiary
        corporation incorporated in the State of Delaware. The reincorporation resulted
        in the Company becoming a Delaware corporation, effective as of October 21,
        2004, and did not result in any change in the Company’s name, headquarters,
        business, jobs, management, location or any of the Company’s offices or
        facilities, number of employees, taxes payable to the State of Colorado,
        assets,
        liabilities or net worth.
  In
        February of 2005, the Company formed two new subsidiaries, AGU Studios, Inc.
        (“AGU Studios”), a Florida corporation, and 3200 Oakland Park Boulevard, Inc., a
        Florida corporation (“3200 Oakland Park”). Liquidity issues and the sale of the
        property located in Lauderdale Lakes, Florida, the operations of AGU Studios
        and
        3200 Oakland Park have been discontinued.
  In
        March
        2005, we changed the name of PRI to AGU Music, Inc. (“AGU Music”).
  On
        February 25, 2006, AGU Entertainment Corp. changed its name to The Tube Media
        Corp. The name change was effected pursuant to Section 253 of the General
        Corporation Law of the State of Delaware by the merger of a wholly-owned
        subsidiary of the Company into the Company. The Company was the surviving
        corporation and, in connection with the merger, the Company amended its
        Certificate of Incorporation to change its name pursuant to the Certificate
        of
        Ownership and Merger filed with the Secretary of State of the State of Delaware.
        The Company also amended its Bylaws to reflect the name change and restated
        its
        Certificate of Incorporation.
  The
        Tube
        is a 24-hour per day broadcast digital television network that delivers high
        quality music video, audio, and e-commerce to digital viewers nationally.
        Its
        national launch is taking place in the second and third quarters of 2006.
        The
        Tube can currently be seen in a limited number of households in various parts
        of
        the United States. AGU Music was formed to produce both studio albums and
        DVD
        concerts.
  8
 
 **Basis
        of Presentation**
 
 The
        condensed consolidated financial statements in this report are unaudited.
        The
        preparation of the condensed consolidated financial statements are in conformity
        with accounting principles generally accepted in the United States of America
        (GAAP) for interim financial reporting and the regulations of the Securities
        and
        Exchange Commission (“SEC”) for quarterly reporting. 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. These 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, 2005.
 
 The
        accompanying financial statements reflect the results of the operations of
        the
        Company for the three and six months ended June 30, 2006 and the results
        of the
        Company for the three and six months ended June 30, 2005
        (restated).
 
 **Principles
        of Consolidation**
 
 The
        accompanying condensed consolidated financial statements include the accounts
        of
        The Tube Media 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.
 
 **Restatement**
  The
        Company restated its previously issued, June 30, 2005 condensed consolidated
        financial statements for matters related to the following previously reported
        items: reclassification of discontinued operations, the issuance of stock
        to a
        former director in connection with an employment agreement and the issuance
        of
        stock in connection with the settlement of dispute. The restatement of the
        previously issued, June 30, 2005 condensed consolidated financial statements
        was
        filed with the Securities and Exchange Commission on July 9, 2006.
  The
        following is a summary of the restatements for the three months ended June
        30,
        2005:
 
 Loss
                from continuing operations as originally
                reported at June 30, 2005
              
              $
              (4,309,536
              )Less:Additional
                  expense in connection with the settlement of a dispute
              
              
              (1,180,000
              )Reclassification
                  of loss attributable to discontinued operations
              
              
              (139,680
              )Loss
                  from continuing operations at June 30, 2005 as restated
              
              $
              (5,349,856
              )Loss
                  from Discontinued operations
              
              $
              (139,680
              )The
                  following is a summary of the restatements for the six months ended
                  June
                  30, 2005:Loss
                  from continuing operations as originally reported at June 30,
                  2005
              
              $
              (7,506,448
              )Less:Additional
                  compensation expense recorded in connection with the Issuance of
                  common
                  stock
              
              
              (1,047,840
              )Additional
                  expense in connection with the settlement of a dispute
              
              
              (1,180,000
              )Reclassification
                  of loss attributable to discontinued operations
              
              
              323,318Loss
                  from continuing operations at June 30, 2005 as restated
              
              $
              (9,410,970
              )Loss
                  from Discontinued operations
              
              $
              (323,318
              )
  9
 
 Certain
        amounts from the prior year have been reclassified to conform to current
        period
        presentation.
 
 **Loss
        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 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 and
        six
        months ended June 30, 2006 and 2005 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.
        The
        aggregate amount of securities that could potentially dilute earnings per
        share
        in future periods, at June 30, 2006 was 20,790,506.
 
 **Stock
        Based Compensation**
 
 Statement
        of Financial Accounting Standards No. 123, “Accounting for Stock-Based
        Compensation” (“SFAS No. 123”), established a fair value method of accounting
        for stock-based compensation plans and for transactions in which an entity
        acquires goods or services from non-employees in exchange for equity
        instruments. SFAS No. 123 was amended by Statement of Financial Accounting
        Standards No. 148, “Accounting for Stock-Based Compensation - Transition and
        Disclosure”, which required companies to disclose in interim financial
        statements the pro forma effect on net income (loss) and net income (loss)
        per
        common share of the estimated fair market value of stock options or warrants
        issued to employees. Through December 31, 2005, the Company accounted for
        stock-based compensation utilizing the intrinsic value method prescribed
        in
        Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
        Employees” (APB No. 25), with pro forma disclosures of net income (loss) as if
        the fair value method had been applied. Accordingly, compensation cost for
        stock
        options was measured as the excess, if any, of the fair market price of the
        Company’s stock at the date of grant over the amount an employee must pay to
        acquire the stock.
 
 As
        the
        exercise price of stock options and warrants issued to employees was not
        less
        than the fair market value of the Company’s common stock on the date of grant,
        and in accordance with accounting for such options utilizing the intrinsic
        value
        method, there was no related compensation expense recorded in the Company’s 2005
        consolidated financial statements. The fair value of stock options and warrants
        issued to officers, directors and employees at not less than fair market
        value
        of the Company’s common stock on the date of grant was estimated using the
        Black-Scholes option-pricing model, and the effect on the Company’s results of
        operations was shown as if such stock options and warrants had been accounted
        for pursuant to SFAS No. 123.
 
 In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        123 (revised 2004), “Share Based Payment” (“SFAS No. 123R”), a revision to SFAS
        No. 123, “Accounting for Stock-Based Compensation”. SFAS No. 123R superseded APB
        No. 25 and amended SFAS No. 95, “Statement of Cash Flows”. Effective January 1,
        2006, SFAS No. 123R requires that the Company measure the cost of employee
        services received in exchange for equity awards based on the grant date fair
        value of the awards, with the cost to be recognized as compensation expense
        in
        the Company’s financial statements over the vesting period of the awards.
        Accordingly, the Company will recognize compensation cost for equity-based
        compensation for all new or modified grants issued after December 31, 2005.
        In
        addition, commencing January 1, 2006, the Company is required to recognize
        the
        unvested portion of the grant date fair value of awards issued prior to adoption
        of SFAS No. 123R based on the fair values previously calculated for disclosure
        purposes over the remaining vesting period of the outstanding stock options
        and
        warrants.
 
 The
        Company adopted SFAS No. 123R effective January 1, 2006, and is using the
        modified prospective method in which compensation cost is recognized beginning
        with the effective date (a) based on the requirements of SFAS No. 123R for
        all
        share-based payments granted after the effective date and (b) based on the
        requirements of SFAS No. 123R for all awards granted to employees prior to
        the
        effective date of SFAS No. 123R that remain unvested on the effective
        date.
 
 As
        of
        June 30, 2006, the Company has not granted stock options to purchase shares
        of
        its common stock under its 2004 Stock Option Plan, or for employee services.
        Accordingly, the Company’s Condensed Consolidated Financial Statements do not
        include any stock based compensation expense for the three and six months
        ended
        June, 2006, and no proforma information for June 30, 2005 is required, nor
        does
        the Company have any unvested deferred compensation that must be amortized
        over
        any vesting periods.
  10
  **2.
        INTANGIBLES**
 
 Intangible
        assets at June 30, 2006 were as follows:
  Value
                  atAcquisition
              
              AccumulatedAmortization
              
              Balance
                  at
                June
                  30, 2006Distribution
                  agreement
              
              $
              350,000
              
              $
              (262,400
              )
              $
              87,600Contract
                  rights
              
              
              8,231,715
              
              
              (286,652
              )
              
              7,945,063Other
                  intangibles
              
              
              651,035
              
              
              (253,180
              )
              
              397,855Total
                  intangibles
              
              $
              9,232,750
              
              $
              (802,232
              )
              $
              8,430,518
 
 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 and March
        2006 for common stock and warrants to purchase the Company’s common stock, to
        broadcast The Tube in certain markets, are being amortized over the initial
        lives of the agreements, which are five year periods beginning in July 2005
        and
        April 2006. On June 21, 2006, the Company issued 2,039,959 shares of common
        stock pursuant to an Agreement (see Note 5) for the launching of The Tube
        into
        various markets. These shares were valued at $1.46 per share, which was the
        closing price for the common stock on June 21, 2006, and recorded as intangible
        assets. Under the terms of an amended distribution agreement with Ark 21
        Records, LP, the Company agreed to pay cash and shares of common stock for
        contract rights, which are being amortized on a straight line basis over
        a
        period of three years. Other intangibles pertain to costs to develop network
        logos, graphic templates and on-air interstitials for The Tube. Amortization
        expense for the three months ended June 30, 2006 and June 30, 2005 was $299,305
        and $65,269, respectively. Amortization expense for the six months ended
        June
        30, 2006 and June 30, 2005 was $406,358 and $94,369, respectively. Aggregate
        amortization expense over the next five years is expected to be as follows:
 
 For
                  the year ending December 31:2006
              
              $
              1,412,1102007
              
              
              1,923,9052008
              
              
              1,750,0312009
              
              
              1,677,6942010
              
              
              1,630,494
  **3.
        NOTES PAYABLE**
 
 **Convertible
        Notes**
 
 Convertible
        notes payable consist of the following at June 30, 2006:
 Convertible
                    notes
                
                $
                5,553,150Less:
                    current portion
                
                
                (2,461,225
                )Less:
                    Discount on convertible notes payable
                
                
                (642,179
                )Less:
                    Value assigned to derivatives
                
                
                (1,693,293
                )Convertible
                    notes payable, long term portion, net of discounts
                
                $
                756,453
 During
        the first quarter of 2006, the Company issued additional convertible promissory
        notes to various accredited investors in the aggregate principal amount of
        $510,000. These 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
        ranging from $2.50 to $3.00 per share. In connection with the issuance of
        the
        convertible notes, the Company issued to the holders warrants to purchase
        an
        aggregate of 184,000 shares of the Company’s common stock. The common stock
        purchase warrants have two year terms and an exercise price ranging from
        $2.50
        to $3.00 per share. The Company estimated the fair value of each warrant
        at the
        date of grant by using the Black-Scholes pricing model with the following
        weighted average assumptions: no dividend yield, expected volatility of 50%,
        risk-free interest rate of 4.5%, and an expected life from two to ten years.
        The
        aggregate value of the warrants issued in the first quarter of 2006, in
        connection with convertible promissory notes, was $171,400 and this amount
        was
        recorded as a discount of the notes payable with an offset to paid in capital.
        Accordingly, as the effective conversion price of the notes was less than
        the
        fair price at the date of issuance, a beneficial conversion feature of $190,840
        was determined and recorded as a discount to notes payable with an offset
        to
        paid in capital.
  11
 
 On
        April
        21, 2006, the Company completed a private placement (the “Private Placement”) of
        $2.45 million of securities to accredited investors (the “Investors”). In
        connection with the Private Placement, the Company and the Investors entered
        into a purchase agreement (the “Purchase Agreement”) and a registration rights
        agreement (the “Registration Rights Agreement”), each of which is dated as of
        April 21, 2006. Pursuant to the terms of the Purchase Agreement, the Company
        sold 7% secured convertible notes in the aggregate principal amount of $2.45
        million (the “7% Notes”) and issued common stock purchase warrants to purchase
        an aggregate of 1,088,889 shares of the common stock at an exercise price
        of
        $2.25 per share (the “Warrants”) to the Investors.
 
 Pursuant
        to the terms of the 7% Notes, the Company is required to make equal monthly
        payments of principal commencing on November 21, 2006 and continuing, on
        the
        first business day of each month, until the aggregate principal amount has
        been
        paid in full. Interest on the 7% Notes accrues quarterly and is payable on
        the
        last day of March, June, September and December of each year, commencing
        on
        September 30, 2006. At the option of the Company and subject to certain
        conditions, principal and interest payments due under the 7% Notes may be
        paid
        in cash or shares of common stock.
  The
        7%
        Notes are convertible in shares of common stock at a conversion price of
        $2.25
        per share, subject to adjustments for stock splits, stock dividends, mergers
        and
        reorganizations. In addition, if the Company issues or sells any shares of
        common stock for a price per share that is less than the applicable conversion
        price of the 7% Notes, the conversion price of the 7% Notes will be reduced.
        The
        conversion price of the 7% Notes will also be adjusted if the Company issues,
        sells or grants any stock or other securities convertible into or exchangeable
        for common stock in an issuance that is not specifically exempt by the terms
        of
        the 7% Notes. The number of shares that may be acquired by any holder of
        the 7%
        Notes upon any conversion of the 7% Notes or issuance of shares of common
        stock
        as principal or interest payments shall be limited to the extent to insure
        that
        the total number of shares of common stock beneficially owned by any holder
        does
        not exceed 4.99% of the total number of issued and outstanding shares of
        common
        stock.
  Upon
        the
        occurrence of an event of default, the 7% Notes will bear interest at the
        rate
        of 12% per annum and all unpaid principal and interest accrued under the
        7%
        Notes shall become (1) immediately due and payable upon the election of the
        holder, with respect to the events in (i) through (iv) and (vi) through (vii)
        below; and (2) automatically due and payable, with respect to the event in
        (v)
        below. An event of default under the 7% Notes occurs upon (i) the Company’s
        failure to timely pay principal due under the 7% Notes; (ii) the Company’s
        failure to timely pay interest due under the 7% Notes and such failure continues
        for more than five days; (iii) the Company’s and its subsidiaries’ failure to
        make a required payment or payments of indebtedness of $500,000 or more in
        aggregate principal amount and such failure continues for more than 20 days;
        (iv) an acceleration of the stated maturity date of any indebtedness of the
        Company or its subsidiaries of $500,000 or more in aggregate principal amount,
        which acceleration is not rescinded within 20 days; (v) the Company’s assignment
        for the benefit of creditors or admission in writing of its inability to
        pay its
        debts generally as they become due, or the voluntary or involuntary bankruptcy
        of the Company; (vi) the rendering of a final judgment that exceeds $500,000
        in
        the aggregate against the Company or its subsidiaries, which is not discharged
        within 60 days; (vii) proof that any representation of material fact made
        in any
        of the transaction documents or furnished to the holder by the Company was
        false
        in any material respect; and (viii) the Company’s failure to observe or perform
        in any material respect certain covenants in the transaction documents.
  The
        7%
        Notes are secured by shares of common stock pledged by David Levy, President
        of
        the Company, pursuant to the terms of a stock pledge agreement.
  Under
        the
        Registration Rights Agreement, on or prior to the 60 th calendar
        day after the closing of the Private Placement, the Company is obligated
        to file
        with the Securities and Exchange Commission (the “SEC”) a registration statement
        covering the resale of the registrable securities, which includes (i) 150%
        of
        the shares of common stock issuable upon the conversion of the 7% Notes;
        (ii)
        150% of the shares of common stock issuable as payment of interest on the
        7%
        Notes; (iii) 150% of the shares of common stock issuable upon the exercise
        of
        the Warrants. The Company was required to use reasonable efforts to cause
        the
        registration statement to be declared effective by the SEC the earlier of
        (i)
        the 120 th day
        following the closing of the Private Placement and (ii) the fifth trading
        day
        following the date on which the Company is notified by the SEC that the
        registration statement will not be reviewed or is no longer subject to further
        review. The Company filed a registration statement with the SEC on June 21,
        2006. The registration statement was declared effective by the SEC on August
        8,
        2006. The Company is also obligated to use commercially reasonable efforts
        to
        keep such registration statement continuously effective until all registrable
        securities covered by such registration statement have been sold or may be
        sold
        pursuant to Rule 144(k) under the Securities Act of 1933, as amended. If
        (i) the
        registration statement is not filed by the required filing date; (ii) the
        registration statement is not declared effective by the SEC by the required
        effectiveness date; or (iii) after its effective date, the registration
        statement ceases for any reason to be effective or available to holders of
        all
        registrable securities for more than 20 consecutive trading days or an aggregate
        of 50 trading days (each, an “Event”), then (i) on the date of such Event, the
        Company shall pay each holder an amount in cash equal to 1.0% of the aggregate
        subscription amount paid by such holder in the Private Placement; and (ii)
        on
        each monthly anniversary of such an Event, until the Event is cured, the
        Company
        shall pay each holder an amount in cash equal to 1.0% of the aggregate
        subscription amount paid by such holder in the Private Placement. If the
        Company
        fails to pay any damages pursuant to an Event in full within ten days after
        its
        due date, the Company will pay interest thereon equal to 10% per annum. The
        maximum amount payable to any holder shall not exceed 12% of the aggregate
        subscription amount paid by such holder in the Private Placement. We will
        pay
        the holders of the 7% Notes an aggregate of $24,500 in penalty for the
        registration statement not becoming effective within the period set forth
        in the
        purchase agreement.
  12
  The
        Warrants may be exercised for common stock on or before April 21, 2011. The
        Warrants are exercisable for shares of common stock at an exercise price
        of
        $2.25 per share, subject to adjustments for stock splits, stock dividends,
        mergers and reorganizations, or through a “cashless exercise” provision
        contained in the Warrants. In addition, if the Company issues or sells any
        shares of common stock for a price per share that is less than the applicable
        exercise price of the Warrants, the exercise price of the Warrants will be
        reduced. The exercise price of the Warrants will also be adjusted if the
        Company
        issues, sells or grants any stock or other securities convertible into or
        exchangeable for common stock in an issuance that is not specifically exempt
        by
        the terms of the Warrants. The accounting for the warrants was determined
        under
        the guidance of SFAS 133. Accordingly, the warrants, valued at $860,220,
        are
        treated as derivatives and classified as a liability on April 21, 2006. The
        warrants are recorded at a fair value, based on the Black-Scholes pricing
        model,
        and revalued each reporting period with the change in fair value recorded
        as
        other income/(expense). For the three months ended June 30, 2006 the fair
        value
        adjustment resulted in a gain of $730,583 and a reduction of the liability
        to
        $129,637 at June 30, 2006.
  The
        beneficial conversion feature relating to the convertible notes is also treated
        as an embedded derivative valued at $1,012,664 and classified as a liability
        on
        April 21, 2006 in accordance with SFAS 133. The conversion feature of the
        convertible notes is recorded at fair value, based on the Black-Scholes pricing
        model, and revalued each reporting period with the change in fair value recorded
        as other income/(expense). For the three months ended June 30, 2006 the fair
        value adjustment resulted in a gain of $1,012,664 and a reduction of the
        liability to zero at June 30, 2006.
  At
        June
        30, 2006, the $2.45 million of April 21, 2006 notes payable are recorded
        as
        $756,707 as result of the derivative accounting for the beneficial conversion
        feature and the warrants. The value of the warrants and the beneficial
        conversion feature are being accreted to the note payable over the two year
        term
        of the notes with charges to interest expense. For the three months ended
        June
        30, 2006 this interest expense was $179,591.
  The
        Company has used a portion of the proceeds from the Private Placement to
        repay
        the Bridge Loan obtained by the Company on March 31, 2006.
  In
        connection with advances of working capital to the Company, the Company issued
        in 2005 promissory notes to a stockholder in the amount of $532,818; $350,000
        of
        which was repaid in the same period. The remaining $182,818 was repaid on
        April
        27, 2006, plus accrued interest of $19,218, plus $37,534 of interest payable
        on
        the Note issued on September 15, 2004 to the Galt Financial
        Corporation.
 
 No
        warrants were exercised during the first six months of 2006 and warrants
        to
        purchase 10,993,797 shares of common stock were outstanding at June 30, 2006.
        The unamortized balance of the discount for all notes as of June 30, 2006
        was
        $682,558.
 
 **Other
        Notes Payable**
 
 On
        March
        31, 2006, the Company entered into agreements with two individuals (the
“Lenders”), pursuant to which the Lenders agreed to loan to the Company, an
        aggregate amount of $800,000 (the “Bridge Loan”). In connection with the Bridge
        Loan, the Company issued two promissory Bridge Notes (the “Bridge Notes”), in
        the aggregate principal amount of $800,000, to the Lenders, both of whom
        are
        accredited investors. Pursuant to the terms of the Bridge Notes, the Bridge
        Loan
        would accrue interest at the rate of four percent per year, and the principal
        and interest on the Bridge Notes would be due on March 31, 2007. The payments
        due under the Bridge Notes would be accelerated as follows: (i) in the event
        the
        Company closes a round of financing of not less than $2.0 million and not
        more
        than $2.49 million prior to March 31, 2007, the Company would pay each Lender
        an
        amount equal to $320,000; and (ii) in the event the Company closes a round
        of
        financing equal to or greater than $2.5 million prior to March 31, 2007,
        the
        Company would pay each Lender the total amount due under each Note. The Bridge
        loans were repaid on April 21, 2006 from the proceeds of the “Private
        Placement”.
  13
 
 During
        the first quarter of 2006, the Company disposed of a Company vehicle and
        retired
        the equipment note in the amount of $36,669. The disposal resulted in a gain
        on
        disposal of the equipment of $1,005.
 
 Other
        notes payable at June 30, 2006 are as follows:
 
 Note
                  payable to Dr. Robert A. Kast
              
              $
              375,000Note
                  payable to M2 Films
              
              
              150,000Note
                  payable for insurance
              
              
              56,000Less
                  current portion
              
              
              (431,000
              )Long
                  term Other Notes Payable
              
              $
              150,000
 
 The
        Company received promissory notes from, Dr. Robert A. Kast and his family
        during
        2005 in the aggregate amount of $700,000, including the extension of a $150,000
        promissory note, which was originally issued in 2004. As of December 31,
        2005,
        $375,000 was unpaid and in default. The $150,000 promissory note originally
        paid
        interest at 8% interest, which was increased to 10% until its repayment in
        2005.
        The $700,000 promissory notes pay interest at 6% and were due at various
        dates
        in 2005. On April 12, 2006, the due date of the remaining $375,000 promissory
        notes was extended until such time as the Company raises an additional $2
        million of equity or equity related securities in addition to the $2.45 million
        raised on April 21, 2006. The Company has also issued warrants to Dr. Robert
        A.
        Kast to purchase up to 3,128,575 shares of common stock.
 
 **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 shareholder 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 between PMG and ARK21, AGU Music assumed
        the obligation to repay $350,000 of notes payable to Neil Strum and Ned Siegel,
        two significant stockholders of the Company. The Company guaranteed payment
        on
        the notes. The notes have an annual interest rate of 8%. Approximately $19,000
        of the notes were paid in 2004 and the outstanding balance at December 31,
        2005
        was approximately $331,000. The terms of these notes required monthly payments
        of principal and interest. The Company had not made the required monthly
        principal and interest payments since June of 2004. On May 5, 2005, the Company
        entered into a settlement agreement, effective April 15, 2005, with the holders
        of the notes. Under the terms of the settlement agreement, the 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. The Company did not make any of the required payments
        under
        the new notes. The stockholders filed suit and commenced litigation in the
        State
        of Florida and on January 16, 2006, the Company and the stockholders reached
        an
        agreement which required the immediate payment of $175,000 to the stockholders,
        and a subsequent payment of $125,000 on February 15, 2006, subject to a personal
        guarantee by David Levy, President of the Company and Donna Levy, his wife,
        as a
        complete settlement of the Distribution Agreement and dispute. On February
        15,
        2006, the Company paid the settlement amount in full ,
        plus an
        additional $10,000 as consideration for the delayed payment .
        The
        stockholders withdrew their suit in connection with the settlement
        agreement.
 
 During
        the first six months of 2006, the Company received loans in the aggregate
        amount
        of $326,800 from three stockholders of the Company, who are related parties,
        of
        which $76,000 was repaid as of June 30, 2006, leaving an amount outstanding
        as
        of June 30, 2006 of $250,800. On April 3, 2006, the Company repaid a promissory
        note dated December 9, 2005 to DML Marketing, in the amount of $108,378.
        The
        loans, which are considered working capital advances, pay interest at 10%
        and
        are due when subsequent financing occurs.
 
 **4.
        STOCKHOLDERS’ EQUITY**
 
 During
        the first three months of 2006, the Company issued 135,419 shares of common
        stock to various service providers and consultants in exchange for services
        performed. These services were valued at $209,899 and this amount was charged
        to
        operating expenses during the period. The Company also issued 5,000 shares
        of
        common stock to its directors during the first three months of 2006 and recorded
        compensation expense of $7,750.
  14
 
 In
        addition, the Company issued 1,100,000 shares of common stock pursuant to
        charter affiliation agreements. The charter affiliation agreements provide
        distribution services to air the Tube in certain markets, for five years,
        which
        were valued at fair market price and resulted in $2,410,000 being recorded
        as an
        intangible asset. Additionally, the Company issued warrants to purchase
        1,350,000 shares of common stock of the Company, in connection with the charter
        affiliation agreements, which were valued at the day of the agreement by
        using
        the Black-Scholes pricing model with the following weighted average assumptions:
        no dividend yield, expected volatility of 50%, risk free interest rate of
        4.5%
        and an expected life of ten years. The aggregate value of the warrants was
        $1,435,530 and the charter affiliation agreements were recorded as an intangible
        asset. (See Note 5).
 
 During
        the first three months of 2006, the Company issued 5,711 shares of its common
        stock for payment of interest in the amount of $11,421, which was accrued
        in
        2005.
 
 During
        the three months ended June 30, 2006, the Company issued 18,420 shares of
        its
        common stock for interest in connection with the conversion of a convertible
        note payable to common stock.
 
 On
        June
        21, 2006, the Company issued 2,039,959 shares of common stock pursuant to
        an
        Agreement (see Note 5) for the launching of The Tube into various markets.
        These
        shares were valued at $1.46 per share, which was the closing price for the
        stock
        on June 21, 2006, resulting in a value of $2,978,340 which was recorded as
        an
        intangible asset (see Note 2).
 
 **5.
        AFFILIATION AGREEMENTS**
 
 On
        March
        6, 2006, The Tube, entered into a charter affiliation agreement, with the
        Tribune Broadcasting Company (“Tribune”). The charter affiliation agreement
        provides that Tribune will have the exclusive right and obligation to transmit
        The Tube’s music network via broadcast television from Tribune’s existing and
        acquired stations in the designated markets specified in the charter affiliation
        agreement.
  The
        charter affiliation agreement provides the terms and conditions of broadcasting,
        as well as the obligations of each of the parties. Pursuant to the terms
        of the
        charter affiliation agreement, The Tube will pay a portion of its advertising
        revenue and a portion of the revenue that it receives from the sale of products
        on The Tube’s music network to Tribune as compensation, and other compensation
        as described in the Tribune Letter Agreement.
  On
        March
        22, 2006, The Tube also entered into a charter affiliation agreement with
        Sinclair television Group, Inc. (“Sinclair”). The charter affiliation agreement
        provides that Sinclair will have the exclusive right and obligation to transmit
        The Tube’s music network from Sinclair’s existing and acquired stations in the
        designated markets specified in the affiliation agreement.
  The
        affiliation agreement provides the terms and conditions of broadcasting,
        as well
        as the obligations of each of the parties.
  On
        June
        21, 2006, the Company issued 2,039,959 shares of common stock pursuant to
        an
        Agreement for the launching of The Tube into various markets. These shares
        were
        valued at $1.46 per share, which was the closing price for the stock on June
        21,
        2006, and recorded as an intangible assets (See Note 2).
  **6.
        CONTINGENCIES**
 
 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.
 
 In
        an
        action initiated by Michael Jay Solomon (“Solomon”) on December 12, 2005 against
        the Company for breach of contract, Solomon asserts that the Company failed
        to
        pay him approximately $100,000 in connection with his resignation from the
        Company, $50,000 of which was alleged to be an agreed upon sum plus $50,000
        for
        asserted reimbursements. In June, 2006, the Company and Solomon entered into
        a
        settlement and mutual release with the Company paying Solomon $75,000 in
        equal
        monthly payments of approximately $10,714 June through December,
        2006.
  15
 
 An
        action
        was initiated by Lalah Hathaway against MB Recordings, Inc. d/b/a Mesa Blue
        Moon
        naming the Company as a defendant in the action as a result of an alleged
        agreement between MB Recordings and AGU Music, for which Hathaway asserts
        AGU
        Music is liable for her damages caused by MB Recordings. MB Recording, Inc.
        has
        also filed a cross-claim against AGU Music and the Company in connection
        with an
        alleged agreement between the Company and MB Recordings. AGU Music has not
        been
        served with the cross-complaint and AGU Music has not been required to file
        a
        response to cross-complaint. An Arbitration Hearing was scheduled for July
        25,
        2006, but was cancelled due to scheduling conflicts. **** The
        Arbitration Hearing will be rescheduled.
 
 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 had a beginning principal
        balance of $345,806. The Company did not make any of the required payments
        under
        the new notes. The stockholders filed suit and commenced litigation in the
        State
        of Florida and on January 16, 2006. The Company and the stockholders reached
        an
        agreement, which required the immediate payment of $175,000 to the stockholders,
        and a subsequent payment of $125,000. On February 15, 2006, the Company paid
        the
        settlement amount in full, plus an additional $10,000 as consideration for
        the
        delayed payment. The stockholders withdrew their suit in connection with
        the
        settlement agreement.
 
 On
        June
        19, 2006, the Company entered into a Settlement Agreement with Ralph Tashjian,
        an employee of the Company. Upon execution of the Settlement Agreement his
        employment contract terminated. Pursuant to the Settlement Agreement, the
        Company agreed to pay $50,000 to Mr. Tashjian and issue to Mr. Tashjian 50,000
        shares of common stock of the Company. Additionally, the Company will reimburse
        Mr. Tashjian for outstanding expenses incurred by him in the years 2004 and
        2005. The amount of reimbursement will be agreed upon by Mr. Tashjian and
        the
        Company pending good faith inspections of receipts, expense reports and other
        accounting information, except that the amount will not be less than $2,159.
        Upon full payment, the Company and Mr. Tashjian will executive general releases.
        All amounts owed under the Settlement Agreement have been recorded as
        liabilities and charged to expense as of June 30, 2006.
 
 On
        June
        20, 2006, the Company entered into a Settlement Agreement with George Nauful,
        an
        employee of the Company. Upon execution of the Settlement Agreement his
        employment contract terminated. Pursuant to the Settlement Agreement, the
        Company agreed to pay $50,000 to Mr. Nauful and issue to Mr. Tashjian 50,000
        shares of common stock of the Company. Additionally, the Company will reimburse
        Mr. Nauful for outstanding expenses incurred by him in the years 2004 and
        2005.
        The amount of reimbursement will be agreed upon by Mr. Nauful and the Company
        pending good faith inspections of receipts, expense reports and other accounting
        information, except that the amount will not be less than $4,870. Upon full
        payment, the Company and Mr. Nauful will executive general releases. All
        amounts
        owed under the Settlement Agreement have been recorded as liabilities and
        charged to expense as of June 30, 2006.
 
 During
        2004 and 2005, the Company did not remit its payroll taxes timely due to
        liquidity issues. The Company has recorded a liability for the 2004 unpaid
        payroll taxes in the amount of $45,147 and the expected interest and penalties
        for 2004 in the amount of $32,856. In 2005 all of the payroll taxes have
        been
        paid with the exception of $157,936.  We have recorded this amount as a
        liability, and an estimate of the expected interest and penalties in respect
        of
        the late taxes for 2005, in the amount of $165,508. The Company paid its
        payroll
        taxes for the first quarter of 2006 late and has recorded a liability of
        $16,082
        for estimated interest and penalties as of June 30, 2006. The Company has
        not
        paid its payroll taxes of $180,106 for the second quarter of 2006 and has
        recorded a liability of $20,634 for estimated interest and penalties as of
        June
        30, 2006. The Company believes the amounts for unpaid payroll taxes and related
        estimated interest and penalties reserved are adequate in all material
        respects.
  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.
 
 **7.
        SEGMENT REPORTING**
 
 The
        Company has two reportable operating segments: The Tube Music Network (“The
        Tube”) and AGU Music. 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,
        which has not generated revenues to date, 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.
        The accounting policies of each segment are the same as those described in
        the
        summary of significant accounting policies (see Note 1). Each segment is
        separately managed and is evaluated by the Company’s management 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. Interest expense and corporate expenses are not allocated to the
        operating segments.
  16
  The
        table
        below presents information about reportable segments for the three and six
        months ended June 30, 2006 and 2005.
 **Three
                    Months****June
                    30, 2006**
                
                **June
                    30, 2005****Revenues**AGU
                    Music
                
                $
                -
                
                $
                70,154Discontinued
                    operations
                
                
                -
                
                
                37,325Consolidated
                    revenues
                
                $
                -
                
                $
                107,479**Operating
                    loss**AGU
                    Music
                
                
                (282,085
                )
                
                (426,139
                )The
                    Tube
                
                
                (1,353,728
                )
                
                (1,083,431
                )Segment
                    loss
                
                
                (1,635,813
                )
                
                (1,509,570
                )Corporate
                
                
                (1,078,427
                )
                
                (2,306,878
                )Discontinued
                    operations
                
                
                (250
                )
                
                (139,680
                )Consolidated
                    operating loss
                
                $
                (2,714,490
                )
                $
                (3,956,128
                )
  **Six
                    Months****June
                    30, 2006**
                
                **June
                    30, 2005****Revenues**AGU
                    Music
                
                $
                -
                
                $
                176,081Discontinued
                    operations
                
                
                -
                
                
                81,901Consolidated
                    revenues
                
                $
                -
                
                $
                257,982**Operating
                    loss**AGU
                    Music
                
                $
                (314,984
                )
                $
                (407,380
                )The
                    Tube
                
                
                (2,243,569
                )
                
                (1,894,672
                )Segment
                    loss
                
                
                (2,558,553
                )
                
                (2,302,052
                )Corporate
                
                
                (2,089,414
                )
                
                (4,287,825
                )Discontinued
                    operations
                
                
                (250
                )
                
                (323,318
                )Consolidated
                    operating loss
                
                $
                (4,648,217
                )
                $
                (6,913,195
                )
  17
  The
        table
        below reconciles the measurement of segment profit shown in the previous
        table
        to the Company’s consolidated loss before taxes:
 **Three
                    Months****June
                    30, 2006**
                
                **June
                    30, 2005**Total
                    segment loss
                
                $
                (1,635,813
                )
                $
                (1,509,570
                )Operating
                    loss - corporate
                
                
                (1,078,427
                )
                
                (2,306,878
                )Loss
                    from discontinued operations
                
                
                (250
                )
                
                (139,680
                )Interest
                    expense
                
                
                (584,709
                )
                
                (1,533,408
                )Gain
                    on embedded derivatives
                
                
                1,743,247
                
                
                -Loss
                    before income tax
                
                $
                (1,555,952
                )
                $
                (5,489,536
                )
  **Six
                    Months****June
                    30, 2006**
                
                **June
                    30, 2005**Total
                    segment loss
                
                $
                (2,558,553
                )
                $
                (2,302,052
                )Operating
                    loss - corporate
                
                
                (2,089,414
                )
                
                (4,287,825
                )Other
                    income
                
                
                10,506Loss
                    from discontinued operations
                
                
                (250
                )
                
                (323,318
                )Interest
                    expense
                
                
                (1,238,305
                )
                
                (2,821,093
                )Gain
                    on embedded derivatives
                
                
                1,743,247
                
                
                -Loss
                    before income tax
                
                $
                (4,132,769
                )
                $
                (9,734,288
                )
  **8.
        RELATED PARTY TRANSACTIONS**
 
 During
        the first six months of 2006, the Company received loans in the aggregate
        amount
        of $326,800 from three stockholders of the Company, who are related parties,
        of
        which $76,000 was repaid as of June 30, 2006, leaving an amount outstanding
        as
        of June 30, 2006 of $250,800 (see Note 3). On April 3, 2006, the Company
        repaid
        a promissory note dated December 9, 2005 to DML Marketing, in the amount
        of
        $108,378. The loans, which are considered working capital advances, pay interest
        at 10% and are due when subsequent financing occurs.
 
 During
        2005, the Company received loans in the aggregate amount of approximately
        $1.5
        million from, David Levy and DML Marketing, of which $679,025 were repaid
        as of
        December 31, 2005, leaving an amount outstanding as of December 31, 2005
        of
        $780,803. On April 3, 2006, the Company repaid a promissory note dated December
        9, 2005 to DML Marketing, in the amount of $108,378. The loans, which are
        considered working capital advances, generally pay interest at 10% and are
        due
        upon additional equity transactions. The Company has also issued warrants
        to
        purchase up to 800,000 shares of common stock to DML Marketing at $1.50 per
        share. On April 3, 2006, the warrants were amended to change the exercise
        price
        per share to $2.00.
 
 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 had a beginning principal
        balance of $345,806; the Company did not make any of the required payments
        under
        the new notes. The stockholders filed suit and commenced litigation in the
        State
        of Florida and on January 16, 2006, the Company and the stockholders reached
        an
        agreement, which required the immediate payment of $175,000 to the stockholders,
        and a subsequent payment of $125,000. On February 15, 2006, the Company paid
        the
        settlement amount in full, plus an additional $10,000 as consideration for
        the
        delayed payment.
  For
        the
        period from January 1, 2006 through March 31, 2006, the Company received
        various
        services totaling $4,000 from an affiliate. This amount was paid to the
        affiliate in the quarter ended June 30, 2006.
 
 Accounts
        payable to related parties at June 30, 2006, totaled approximately $20,115.
        Included in this amount was $1,800 in director’s fees payable to a director.
 
 **9.
        GOING CONCERN**
 
 The
        accompanying condensed 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 approxim ately
        $7.9 million and an accumulated deficit of approximately $25.1 million at
        June
        30, 2006, as well as a net loss of approximately $4.1 million ****and
        net cash used in operations of $2.7 million for the
        six
        months ended June 30, 2006, 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 and recorded music business.
  18
  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.
 
 **10.
        SUBSEQUENT EVENTS**
 
 On
        July
        7, 2006, the Board of Directors approved the issuance of stock options for
        certain officers, employees and consultants of the Company to purchase 1,687,500
        shares of common stock of the Company under the 2004 Stock Option and Stock
        Incentive Plan. The options are exercisable at $1.45 per share which was
        the
        closing price for the Company’s common stock on July 7, 2006. The Company
        anticipates that it will record an expense for these options starting in
        the
        third quarter and up to three years for the options that vest over three
        years
        based on the Black-Sholes valuation method.
 
 On
        July
        11, 2006, the Board of Directors approved the issuance of 988,584 shares
        of the
        Company’s common stock for professional services, settlement agreements with two
        former employees (see Note 6) and in connection with a Charter Affiliation
        Agreement. The Company recorded an addition to intangible assets of
        approximately $936,000 and expenses of approximately $398,000 in the second
        quarter based on the $1.35 per share closing price of the stock on July 11,
        2006.
 
 The
        Company held its annual stockholders meeting on July 11, 2006 and reelected
        David Levy and Gregory Catinella directors of the Company.
 
 On
        July
        11, 2006, the Board of Directors appointed Michael Brauser to serve as a
        Class I
        director. On July 26, 2006, the Board awarded Mr. Brauser, effective July
        27,
        2006, a grant of 1,500,000 shares of restricted common stock that vest
        immediately. The
        Company will be recording an expense for these shares subsequent to June
        30,
        2006 .
 
 On
        July
        26, 2006, the Board of Directors also set the size of the Board at 7 directors.
        The Board appointed Shane E. Coppola and D. Patrick LaPlatney to serve as
        a
        Class II and a Class III director, respectively. Mr. Coppola was appointed
        to
        serve as Chairman of the Board. Mr. LaPlatney was appointed to serve as Chief
        Executive Officer of the Company effective July 31, 2006. As compensation
        for
        services as a director, on July 26, 2006, the Board awarded to each of Shane
        E.
        Coppola and D. Patrick LaPlatney, effective on July 27, 2006, a grant of
        1,000,000 shares of restricted common stock to vest equally at the end of
        each
        quarter for the next two years, beginning with the quarter ending September
        30,
        2006. The Company will be recording an expense for these shares subsequent
        to
        June 30, 2006 The Board of Directors also set Mr. LaPlatney’s compensation for
        services as Chief Executive Officer of the Company effective July 31, 2006.
        Mr.
        LaPlatney’s annual base salary was set at $350,000. The Company intends to enter
        into an employment contract with Mr. LaPlatney.
 
 On
        July
        26, 2006, the Board of Directors approved the issuance of 200,000 shares
        to an
        accredited investor as compensation for services rendered as a consultant
        subsequent to June 30, 2006.
 
 On
        August
        8, 2006, the Board of Directors approved the issuance of 1,533,746 shares
        of
        common stock of the Company and a warrant to purchase 500,000 shares of the
        common stock of the Company at $2.50 per share pursuant to a Charter Affiliation
        Agreement.
 
 On
        August
        8, 2006, the Board of Directors approved the issuance of 5,000 shares of
        common
        stock of the Company to a member of the Company’s Board of Directors for
        director services accrued for at June 30, 2005 and for services subsequent
        to
        June 30, 2006.
 
 On
        August
        11, 2006, the Company received a complaint filed by Titan Global Entertainment,
        Inc. on July 7, 2006 alleging breach of contract and unjust enrichment from
        the
        Company’s sale of its building at 3200 W. Oakland Park Blvd. In Lauderdale
        Lakes, Florida in 2005 and violation of a Letter of Understanding of July
        8,
        2004 and a Non-Disclosure, Confidentiality and Non-Circumvent Agreement of
        July
        8, 2004. The Company is evaluating the complaint and intends to vigorously
        defend itself.
  19
  **Item
        2.**
 
 **MANAGEMENT'S
        DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**
 
 **Overview**
 
 We
        were
        initially 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 start-up 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.
 
 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 shareholders 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-QSB,
        including the consolidated financial statements and this Management’s Discussion
        and Analysis or Plan 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
        Music Network is a 24-hour music network featuring the greatest artists of
        all
        time, irrespective of genre or era. The Company anticipates that The Tube
        Music
        Network will reach penetration of approximately 23 million homes by the end
        of
        2006. The Tube is the only all-music network on television and will not air
        any game shows, awards shows, reality shows or news shows.
 
 In
        addition to anticipated revenue generated from national and local advertising,
        we expect to generate revenue via a direct commerce component that will enable
        The Tube audience to purchase the music they see and hear immediately by
        telephone or online. We also expect that The Tube will earn revenue through
        sales of music related merchandise on The Tube’s website.
  The
        Tube
        is currently delivering programming to the majority of the top Designated
        Market
        Areas following its national launch in the second quarter of 2006 and can
        currently be seen in digital households throughout of the United States.
        The
        Company anticipates increases in household penetration will continue steadily
        through third quarter of 2006, supported by a national media campaign utilizing
        marketing, promotions and public relations to reach every relevant audience
        for
        the network.  The campaign is designed to heighten awareness of the
        network, stimulate demand for it across the country and cultivate its image
        as
        the only network that delivers quality music and entertainment content.
 
 Legislation
        recently passed by the Senate requires broadcasters to end their traditional
        analog transmissions by February 17, 2009 and send their signals
        digitally.  The transition from analog to digital transmission creates
        extra bandwidth that enables one station to broadcast up to five separate
        channels or a few high-definition channels via a new technology referred
        to as
        multicasting. Approximately 80% of U.S. stations have already upgraded to
        digital transmission enabling them to broadcast additional channels that
        offer
        local news, sports, weather or other specialty services like The Tube. Consumers
        in these markets are able to receive multicast programming free, over-the-air
        on
        television sets that are enabled with digital tuners.
  20
  Current
        distribution was achieved through agreements with three major station groups.
        In
        April of 2005, The Tube Music Network signed an agreement with Raycom
        Media, Inc. and in March 2006, The Tube entered into charter affiliation
        agreements with Tribune Broadcasting Company and Sinclair Television Group.
        The
        combined agreements will put The Tube Music Network in 8 of the top 10 and
        approximately 70 of the top 100 market areas in the United States by the
        end of
        2006.
 
 The
        Company believes that it will be able to generate advertising and e-commerce
        revenue from The Tube Music Network, however, its revenue model is new and
        evolving, and it cannot be certain that it will be successful.  The
        potential profitability of The Tube’s business model is unproven and there can
        be no assurance that it can achieve profitable operations.  The Company’s
        ability to generate revenues depends, among other things, on its ability
        to
        sustain advertising and e-commerce revenues. ****
 
 AGU
        Music
        was formed to produce 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 2006 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 did not produce
        any
        new albums and DVD concerts in 2005 due to the limited availability of working
        capital.
  The
        Company’s 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 approxim ately
        $7.9 million and an accumulated deficit of approximately $25.1 million at
        June
        30, 2006, as well as a net loss of approximately $4.2 million **** for the
        six
        months ended June 30, 2006, raise substantial doubt about its ability to
        continue as a going concern.
  **Restatement**
  The
        Company restated its previously issued, June 30, 2005 condensed consolidated
        financial statements for matters related to the following previously reported
        items: discontinued operations, the issuance of stock to a former director
        in
        connection with an employment agreement and the issuance of stock in connection
        with the settlement of a dispute.
  **Results
        of Operations for the Three Months ended June 30, 2006 and
        2005**
 
 We
        have
        recorded no revenues for the three
        months ended June 30, 2006 compared with approximately $70,000 in net revenues
        for the three months ended March 31, 2005. **** During
        the three months ended June 30, 2005, the Company generated revenue primarily
        from its record label subsidiary. During the three months ended June 30,
        2006,
        the Company did not generate any revenue from its record label subsidiary
        or
        music network subsidiary. During the three months ended June 30, 2005
        approximately $37,000 of revenues were generated by the discontinued operations
        of AGU Studios. During the three months ended June 30, 2005, AGU Music had
        gross
        profit of $64,000 and the gross profit from discontinued operations was $31,000
        during the period.
 
 Operating
        expenses from continuing operations were $2.7 million and $3.8 million for
        the
        three months ended June 30, 2006 and 2005, respectively, the majority of
        which
        was general and administrative expenses. General and administrative expenses
        were $1.7 million for the three months ended June 30, 2006, compared with
        $3.4
        million for the three months ended June 30, 2005. The decrease
        reflects reductions in payroll and payroll taxes, consulting and production and planning
        expenses in both the record label subsidiary, the music network subsidiary
        and
        our corporate offices and depreciation and amortization. Legal and professional
        expenses were $558,000 and $318,000, for the three months ended June 30,
        2006
        and June 30, 2005, respectively. The increase
        reflects increased compliance cost for SEC filings, legal costs in connection with
        the
        two charter affiliation agreements entered into during the first quarter
        of 2006
        and auditing expenses. Thus far in 2006 our liquidity constraints have 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 another substantial debt or equity
        offering.
 
 Our
        operating loss from continuing operations for the three months ended June
        30,
        2006 was $2.7 million compared to the operating loss of $3.8 million for
        the
        three months ended June 30, 2005. The decrease was based
        in
        part on
        decreases in payroll and payroll taxes, consulting and production and planning
        expenses in both the record label subsidiary, the music network subsidiary
        and
        our corporate offices and depreciation and amortization, offset by increases
        in
        accounting and legal fees and other internal costs relating to compliance
        with
        federal and state securities laws and $1.2 million of expense in connection
        with
        the settlement of a dispute.
 .
 21
  Our
        operating loss from discontinued operations for the three months ended June
        30,
        2006 was $250 compared to the operating loss of $139,680 for the three months
        ended June 30, 2005.
 
 Interest
        expense in the three months ended June 30, 2006 was $584,709 compared to
        $1,533,408 in 2005, and includes $212,191 for the reduction of debt discounts
        and $179,591 for the accretion of warrants and beneficial conversion feature
        of
        the April 21, 2006 convertible notes payable, compared with $1,169,000 of
        debt
        discount expense in the three months ended June 30, 2005. Interest expense decreased
        primarily due to the
        level of indebtedness in the second quarter of 2006 compared to the second
        quarter of 2005.
 
 The
        Gain
        on the fair value adjustment to embedded derivatives was $1,743,247 for the
        three months ended June 30, 2006 compared to zero in 2005. This gain resulted
        from the valuation of the warrants and the beneficial conversion feature
        of
        convertible notes payable issued April 21, 2006 compared to the valuation
        at
        June 30, 2006.
 
 We
        have
        reported a net loss for the three months ended June 30, 2006, of $1.6 million
        compared to the net loss of $5.5 million reported for the three months ended
        June 30, 2005, primarily due to lower expenses, interest and debt discount
        amortization and the gain on the embedded derivative within the convertible
        notes and warrants issued on April 21, 2006.
 
 **Results
        of Operations for the Six Months ended June 30, 2006 and
        2005**
 
 We
        have
        recorded no revenues for the six
        months ended March 31, 2006 compared the $176,000 in net revenues for the
        six
        months ended June 30, 2005. **** During
        the first six months of 2005, the Company generated revenue primarily from
        its
        record label subsidiary. During the first six months of 2006, the Company
        did
        not generate any revenue from its record label subsidiary or music network
        subsidiary.
 
 Operating
        expenses from continuing operations were $4.7 million and $6.7 million in
        the
        six months ended June 30, 2006 and 2005, respectively, the majority of which
        was
        general and administrative expenses. General and administrative expenses
        were
        $2.8 million for the six months ended June 30, 2006, compared with $5.9 for
        the
        six months ended June 30, 2005. The decrease
        reflects reductions
        in payroll and payroll taxes, consulting and production and planning expenses
        in
        both the record label subsidiary, the music network subsidiary and our corporate
        offices. Legal and professional expenses were $1.0 million and $600,000,
        for the
        six months ended June 30, 2006 and March 31, 2005, respectively. The increase
        reflects increased compliance cost for SEC filings, legal costs in connection with
        the
        two charter affiliation agreements entered into during the first quarter
        of 2006
        and auditing expenses. Thus far in 2006 our liquidity constraints have 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 another substantial debt or equity
        offering.
 
 Our
        operating loss from continuing operations for the six months ended June 30,
        2006
        was $4.7 million compared to the operating loss of $6.6 million reported
        for the
        six months ended June 30, 2005. The decrease was based
        in
        part on
        decreases in payroll and payroll taxes, consulting and production and planning
        expenses in both the record label subsidiary, the music network subsidiary
        and
        our corporate offices and depreciation and amortization, offset by increases
        in
        accounting and legal fees and other internal costs relating to compliance
        with
        federal and state securities laws and $1.2 million of expense in connection
        with
        a the settlement of a dispute, and $1.1 million compensation expense in the
        first quarter of 2005 to a director.
 
 Our
        operating loss from discontinued operations for the six months ended June
        30,
        2006 was $250 compared to the operating loss of $323,000 for the six months
        ended June 30, 2005.
 
 Interest
        expense in the six months ended June 30, 2006 was $1.2 million compared to
        $2.8
        million in 2005, and includes $749,000 for the reduction of debt discounts
        and
        $179,000 for the accretion of warrants and beneficial conversion feature
        of the
        April 21, 2006 convertible notes payable, compared with debt discount expense
        of
        $2,367,000 in the six months ended June 30, 2005. Interest expense decreased
        primarily due to the
        level of indebtedness in the first six months of 2006 compared to the first
        six
        months of 2005.
 
 The
        Gain
        on the fair value adjustment to embedded derivatives was $1,743,000 for the
        three months ended June 30, 2006 compared to zero in 2005. This gain resulted
        from the valuation of the warrants and the beneficial conversion feature
        of
        convertible notes payable issued April 21, 2006.
 
 We
        have
        reported a net loss for the six months ended June 30, 2006, of $4.1 million
        compared to the net loss of $9.7 reported for the six months ended June 30,
        2005, primarily due to lower expenses, interest and debt discount amortization
        and the gain on the embedded derivative within the convertible notes and
        warrants issued on April 21, 2006.
  22
  **Liquidity
        and Capital Resources**
 
 The
        growth and development of our business will require a significant amount
        of
        additional working capital. We currently have limited financial resources
        and
        based on our current operating plan, we will need to raise additional capital
        in
        order to continue as a going concern. We currently do not have adequate cash
        to
        meet our short or long term objectives. In the event additional capital is
        raised, it may have a dilutive effect on our existing stockholders.
 
 As
        a
        company that has recently emerged from the development 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 and the emerging nature of the markets in which we compete, we
        anticipate operating losses until such time as we can successfully implement
        our
        business strategy, which includes the full national launch of The Tube in
        the
        second and third quarters of 2006. In the six months ended June 30, 2006,
        we had
        no
        revenues to
        report, compared with $176,000 in net revenues for the six months ended June
        30,
        2005. We also reported a net loss of approximately **$** 4.1
        million for
        the
        six months ended June 30, 2006 compared to a net loss of $9.7
        million reported
        for the six months ended June 30, 2005. Our financial condition and operating
        results, specifically a working capital deficiency of approximately $7.9
        million ,
        an
        accumulated deficit of approximately $25.1
        million ,
        and net
        cash used in operations of approximately $2.7
        million **** during
        the six months ended June 30, 2006, raise substantial doubt about our ability
        to
        continue to operate as a going concern. Because of losses incurred by us
        to date
        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, our inception, we have financed our operations through numerous
        debt
        and equity issuances from 2003 through the second quarter of 2006, we issued
        an
        aggregate principal amount of approximately $14.65 million of promissory
        notes,
        convertible notes or debentures, approximately $3.3 million of which plus
        accrued interest, were subsequently converted into 1,191,960 shares of common
        stock of the Company and approximately $3.3 million was repaid in 2005.
        Approximately $1.3 million of the remaining convertible promissory notes
        mature
        in the fourth quarter of 2006. A $150,000 promissory note matured on June
        30,
        2005 and remains unpaid as of June 30, 2006. On April 12, 2006 the due date
        of
        this $150,000 note was extended until such time the Company raises an additional
        $2 million of equity or equity related securities in addition to $2.45 million
        raised on April 21, 2006. Interest on the convertible and promissory notes
        are
        payable quarterly at a rate of 10%, other than the convertible notes issued
        on
        April 21, 2006. As of June 30, 2006, all accrued interest on the notes has
        been
        paid. While these notes are convertible into shares of our common stock at
        a
        conversion price between $2.00 and $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
        additional financing.
 
 On
        May 5,
        2005 we 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 had a beginning principal balance of $345,806.
        The Company did not make any of the required payments under the new notes.
        The
        stockholders filed suit and commenced litigation in the State of Florida
        and on
        January 16, 2006. The Company and the stockholders reached an agreement which
        required the immediate payment of $175,000 to the stockholders, and a subsequent
        payment of $125,000. On February 15, 2006 we paid the settlement amount in
        full,
        plus an additional $10,000 as consideration for the delayed
        payment.
 
 At
        June
        30, 2006, payments required under our known contractual obligations over
        the
        next three years are as follows:
 **2006**
                
                **2007**
                
                **2008**
                
                **Total**Principal
                    on notes payable
                
                $
                2,611,263
                
                $
                1,486,817
                
                $
                2,960,000
                
                $
                7,058,080Operating
                    leases
                
                
                11,232
                
                
                -
                
                
                -
                
                
                11,232Capital
                    leases
                
                
                544
                
                
                408
                
                
                -
                
                
                952Total
                    contractual obligations
                
                $
                2,623,039
                
                $
                1,487,225
                
                $
                2,960,000
                
                $
                7,070,264
  23
 
 On
        March
        31, 2006, we entered into agreements with two individuals (the “Lenders”),
        pursuant to which the Lenders agreed to loan an aggregate amount of $800,000
        (the “Bridge Loan”) to us. In connection with the Bridge Loan, the Company
        issued two promissory Bridge Notes (the “Bridge Notes”), in the aggregate
        principal amount of $800,000, to the Lenders, both of whom are accredited
        investors. Pursuant to the terms of the Bridge Notes, the Bridge Loan would
        accrue interest at the rate of four percent per year, and the principal and
        interest on the Bridge Notes would be due on March 31, 2007. The payments
        due
        under the Bridge Notes would be accelerated as follows: (i) in the event
        the
        Company closes a round of financing of not less than $2.0 million and not
        more
        than $2.49 million prior to March 31, 2007, the Company would pay each Lender
        an
        amount equal to $320,000; and (ii) in the event the Company closes a round
        of
        financing equal to or greater than $2.5 million prior to March 31, 2007,
        the
        Company would pay each Lender the total amount due under each Note. Upon
        the
        occurrence of an event of default under the Bridge Notes, (i) the entire
        unpaid
        balance of the principal and any interest on the Bridge Notes would bear
        interest at the rate of 12% per year; and (ii) the holders of the Bridge
        Notes
        may, without notice and at their option, accelerate the maturity of the Bridge
        Notes and cause the entire unpaid balance and any interest on the Bridge
        Notes
        to be immediately due and payable. An event of default under the Bridge Notes
        occurs upon (i) the Company’s failure to timely pay any amount due under the
        Bridge Notes; (ii) the institution of any bankruptcy, reorganization,
        insolvency, liquidation or other proceeding for relief by or against the
        Company, and if instituted against the Company, the Company consents to any
        such
        proceeding or such proceeding is not dismissed within 90 calendar days; and
        (iii) any breach by the Company of the terms of the Bridge Notes that remains
        uncured for more than five days after receipt of written notice of such breach.
        The Bridge Loan was repaid with the proceeds of the sale of securities on
        April
        21, 2006, as described below.
 
 On
        April
        21, 2006, we completed a private placement (the “Private Placement”) of $2.45
        million of securities. In connection with the Private Placement, the Company
        and
        the Investors entered into a purchase agreement (the “Purchase Agreement”) dated
        as of April 21, 2006. Pursuant to the terms of the Purchase Agreement, the
        Company sold 7% secured convertible notes in the aggregate principal amount
        of
        $2.45 million (the “7% Notes”) and issued common stock purchase warrants to
        purchase an aggregate of 1,088,889 shares of the Common stock at an exercise
        price of $2.25 per share to the Investors. The proceeds of this offering,
        part
        of which was used to repay the Bridge Loan entered into on March 31, 2006,
        have
        been used to repay debt and provide additional working capital necessary
        to help
        launch The Tube during the second and third quarters of 2006.
 
 Pursuant
        to the terms of the 7% Notes, the Company is required to make equal monthly
        payments of principal commencing on November 21, 2006 and continuing, on
        the
        first business day of each month, until the aggregate principal amount has
        been
        paid in full. Interest on the 7% Notes accrues quarterly and is payable on
        the
        last day of March, June, September and December of each year, commencing
        on
        September 30, 2006. At the option of the Company and subject to certain
        conditions, principal and interest payments due under the 7% Notes may be
        paid
        in cash or shares of common stock.
  Upon
        the
        occurrence of an event of default, the 7% Notes will bear interest at the
        rate
        of 12% per annum and all unpaid principal and interest accrued under the
        7%
        Notes shall become (1) immediately due and payable upon the election of the
        holder, with respect to the events in (i) through (iv) and (vi) through (vii)
        below; and (2) automatically due and payable, with respect to the event in
        (v)
        below. An event of default under the 7% Notes occurs upon (i) the Company’s
        failure to timely pay principal due under the 7% Notes; (ii) the Company’s
        failure to timely pay interest due under the 7% Notes and such failure continues
        for more than five days; (iii) the Company’s and its subsidiaries’ failure to
        make a required payment or payments of indebtedness of $500,000 or more in
        aggregate principal amount and such failure continues for more than 20 days;
        (iv) an acceleration of the stated maturity date of any indebtedness of the
        Company or its subsidiaries of $500,000 or more in aggregate principal amount,
        which acceleration is not rescinded within 20 days; (v) the Company’s assignment
        for the benefit of creditors or admission in writing of its inability to
        pay its
        debts generally as they become due, or the voluntary or involuntary bankruptcy
        of the Company; (vi) the rendering of a final judgment that exceeds $500,000
        in
        the aggregate against the Company or its subsidiaries, which is not discharged
        within 60 days; (vii) proof that any representation of material fact made
        in any
        of the transaction documents or furnished to the holder by the Company was
        false
        in any material respect; and (viii) the Company’s failure to observe or perform
        in any material respect certain covenants in the transaction
        documents.
 
 We
        will
        pay the holders of the 7% Notes an aggregate of $24,500 in penalty for the
        registration statement not becoming effective within the period set forth
        in the
        purchase agreement.
 
 There
        can
        be no assurances that we will be successful in raising the additional capital
        to
        implement our business plan.
 
 On
        April
        27, 2006, we repaid $182,818 on promissory notes payable to one of our
        stockholders and the principal of Galt Financial Services, plus $56,752 in
        interest on such notes, which included $37,534 in interest payable on the
        note
        issued on September 15, 2004 to the Galt Financial Corporation.
  24
 
 Cash
        used
        in operations for the six months ended June 30, 2006 was $2.7 million, which
        was
        primarily the result of our accumulated deficit of $4.2 million as of June
        30,
        2006, partially offset by increases to accounts payable and accrued expenses,
        non cash expenses and the issuance of common stock in exchange for services.
        We
        expect to continue to generate negative cash flows from operations until
        such
        time as we can complete a substantial debt or equity offering and launch
        The
        Tube nationally, which we currently expect will be the third quarter of 2006.
        There can be no assurances that we will be successful in launching The Tube
        in
        this timeframe.
 
 Cash
        used
        in investing activities for the three months ended June 30, 2006 amounted
        to
        $231,108 and was attributable primarily capital expenditures. Capital
        expenditures in 2006 will depend largely upon our ability to raise additional
        capital; however, our business plan currently assumes approximately $2.5
        million
        of capital expenditures over the balance of fiscal 2006.
 
 We
        received cash provided by financing activities during the first six months
        of
        2006 in the amount of $2.7 million which was mainly comprised of the of
        convertible notes issued as described above and the Bridge Loan and the Private
        Placement discussed above.
 
 During
        2004 and 2005, we did not remit our payroll taxes timely due to liquidity
        issues. We have recorded a liability for the 2004 unpaid payroll taxes in
        the
        amount of $45,147 and the expected interest and penalties for 2004 in the
        amount
        of $32,856. In 2005 all of the payroll taxes have been paid with the exception
        of $157,936.  We have recorded this amount as a liability, and an estimate
        of the expected interest and penalties in respect of the late taxes for 2005,
        in
        the amount of $165,508. The Company paid its payroll taxes for the first
        quarter
        of 2006 late and has recorded a liability of $16,082 for estimated interest
        and
        penalties as of June 30, 2006. The Company has not paid its payroll taxes
        of
        $180,106 for the second quarter of 2006 and has recorded a liability of $20,634
        for estimated interest and penalties as of June 30, 2006. We believe the
        amounts
        for unpaid payroll taxes and related estimated interest and penalties reserved
        are adequate in all material respects.
 
 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 to fund our operations
        and repay our outstanding debt for the foreseeable future .
        At June
        30, 2006, we had $7.0 million of promissory notes and convertible notes
        outstanding. If we are unable to issue additional promissory notes or secure
        other forms of financing, we will have to evaluate alternative actions to
        reduce
        our operating expenses and conserve cash.
 
 As
        a
        result of our liquidity issues, we have experienced delays in the repayment
        of
        certain promissory notes upon maturity and payments to vendors and others.
        However, certain holders of our promissory notes agreed in 2005 to extend
        the
        due dates on their promissory notes. If in the future, the holders of our
        promissory notes may demand repayment of principal and accrued interest instead
        of electing to extend the due date and if we are unable to repay our debt
        when
        due because of our liquidity issues, we may be forced to refinance these
        notes
        on terms less favorable to us than the existing notes, seek protection under
        the
        federal bankruptcy laws or be forced into an involuntary bankruptcy filing.
 
 The
        Company will need to raise substantial additional capital to continue the
        national launch of The Tube beyond the third quarter of 2006 and provide
        substantial working capital for the development of national advertising
        relationships, increases in operating costs resulting from additional staff
        and
        office space until such time as the Company begins to generate revenues
        sufficient to fund ongoing operations. The Company believes that in the
        aggregate, it will need as much as approximately $15 million to $20 million
        to
        complete the launch of The Tube, repay debt obligations, provide capital
        expenditures for additional equipment, payment obligations under charter
        affiliation agreements, office space and systems for managing the business,
        and
        cover other operating costs until advertising and e-commerce revenues begin
        to
        offset our operating costs. There can be no assurances that the Company will
        be
        successful in raising the required capital to complete this portion of its
        business plan.
 
 **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, 2005. In many cases, the accounting treatment of a particular transaction
        is
        specifically dictated by accounting principles generally accepted in the
        United
        States of America (GAAP), 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.
  25
  **Item
        3. CONTROLS AND PROCEDURES**
 Based
          upon the Disclosure Controls evaluation, the principal executive officer
          and
          principal financial officer have concluded that the Company's disclosure
          controls and procedures were effective in reaching a reasonable level of
          assurance that (i) information required to be disclosed by the Company
          in the
          reports that it files or submits under the Act is recorded, processed,
          summarized and reported within the time periods specified in the Securities
          and
          Exchange Commission’s rules and forms and (ii) information required to be
          disclosed by the Company in the reports that it files or submits under
          the Act
          is accumulated and communicated to the Company’s management, including its
          principal executive and principal financial officers, or persons performing
          similar functions, as appropriate to allow timely decisions regarding required
          disclosure.
  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. In July 2006, the Company hired a Chief
        Financial Officer experienced in accounting and financial reporting of public
        companies and the Company’s previous Chief Financial Officer assumed the duties
        of Executive Vice President of Corporate Development.
  26
 
 **PART
        II. OTHER INFORMATION**
 
 **Item
        1. LEGAL PROCEEDINGS.**
 
 On
        May 5,
        2005, the Company entered into a settlement and mutual release agreement,
        effective as of April 15, 2005 (the “Initial Settlement Agreement”), with Ned
        Siegel, Neil Strum and Strum Brothers Investment, LLC (the "Settlement
        Parties"). The Company guaranteed the repayment of the notes AGU Music assumed
        on March 3, 2004 to repay $350,000 to Ned Siegel and Neil Strum (the “Notes”) in
        connection with the assumption of a distribution agreement. Pursuant to the
        Initial Settlement Agreement, the Notes were cancelled and replaced with
        new
        notes having a principal beginning balance of $345,806 (the "New Notes").
        The
        Company did not make any of the required payments under the New Notes and/or
        Initial Settlement Agreement.
 
 On
        February 1, 2006, the Company entered into a settlement and mutual release
        agreement, effective January 16, 2006 (the “Final Settlement Agreement”), with
        the Settlement Parties. Pursuant to the terms of the Final Settlement Agreement,
        the Company (i) was required to pay the Settlement Parties the sum of $175,000
        upon the execution of the Final Settlement Agreement and (ii) was required
        to
        pay the Settlement Parties the sum of $125,000 on a date no later than February
        15, 2006. As of February 22, 2006, the Company had made all of the required
        payments under the Final Settlement Agreement. In connection with the Final
        Settlement Agreement, the Settlement Parties agreed to dismiss, with prejudice,
        the litigation they filed against the Company on September 1, 2005 in the
        Superior Court of the State of California for the County of Los Angeles in
        connection with (i) the Company’s failure to make the required payments due
        under the New Notes and (ii) other disputes between the Company and Neil
        Strum.
        In addition, the Settlement Parties and the Company released each other from
        all
        past claims the parties have or may have against each other in connection
        such
        litigation. Simultaneously with the execution of the Final Settlement Agreement,
        David Levy, Chief Executive Officer of the Company, and Donna Levy, his wife,
        executed personal guaranty agreements in the amount of $125,000 in favor
        of the
        Settlement Parties. As of February 15, 2006, the Company had made all of
        the
        required payments under the Final Settlement Agreement, plus an additional
        $10,000 as consideration for the delayed payment. The stockholders withdrew
        their suit in connection with the settlement agreement.
  On
        February 21, 2006, Federal Express Corporation filed a complaint against
        the
        Company, in the Circuit Court of the Seventeenth Judicial Circuit in and
        for
        Broward County, Florida, for breach of contract and unjust enrichment claims
        and
        is seeking the sum of $23,205.24 plus interest and costs. Subsequent to June
        30,
        2006, the Company settled this claim with three equal payments beginning
        in
        August, 2006
 
 An
        action
        was initiated by Lalah Hathaway against MB Recordings, Inc. d/b/a Mesa Blue
        Moon
        naming the Company as a defendant in the action as a result of an alleged
        agreement between MB Recordings and AGU Music, for which Hathaway asserts
        AGU
        Music is liable for her damages caused by MB Recordings. MB Recording, Inc.
        has
        also filed a cross-claim against AGU Music and the Company in connection
        with an
        alleged agreement between the Company and MB Recordings. This action is still
        in
        the pleading state and AGU Music has not yet been required to file a response
        to
        the action. The plaintiff did not plead any specific damages to
        date. **** An
        Arbitration Hearing was scheduled for July 25, 2006, but was cancelled due
        to
        scheduling conflicts. **** The
        Arbitration Hearing will be rescheduled.
 
 MB
        Recordings, Inc. has also filed a cross-claim against AGU Music and the Company
        in connection with an alleged agreement between the Company and MB Recordings.
        We have not yet been served with the cross-complaint and have not yet been
        required to file a response to the cross complaint.
  On
        August
        11, 2006, the Company received a complaint filedin the
        Circuit Court of the 17thJudicial
        Circuit in and for Broward County, Florida, by Titan Global Entertainment,
        Inc.
        on July 7, 2006 alleging breach of contract and unjust enrichment from the
        Company’s sale of its building at 3200 W. Oakland Park Blvd. In Lauderdale
        Lakes, Florida in 2005 and violation of a Letter of Understanding of July
        8,
        2004 and a Non-Disclosure, Confidentiality and Non-Circumvent Agreement of
        July
        8, 2004. The Complaint states damages in excess of $15,000. The Company is
        evaluating the complaint and intends to vigorously defend
        itself.
  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.
 
 **Item
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
 
 On
        April
        21, 2006, the Company completed a private placement (the “Private Placement”) of
        $2.45 million of securities to accredited investors (the “Investors”). In
        connection with the Private Placement, the Company and the Investors entered
        into a purchase agreement (the “Purchase Agreement”) and a registration rights
        agreement (the “Registration Rights Agreement”), each of which is dated as of
        April 21, 2006. Pursuant to the terms of the Purchase Agreement, the Company
        sold 7% secured convertible notes in the aggregate principal amount of $2.45
        million (the “7% Notes”) and issued common stock purchase warrants to purchase
        an aggregate of 1,088,889 shares of the common stock at an exercise price
        of
        $2.25 per share (the “Warrants”) to the Investors.
  27
 
 Pursuant
        to the terms of the 7% Notes, the Company is required to make equal monthly
        payments of principal commencing on November 21, 2006 and continuing, on
        the
        first business day of each month, until the aggregate principal amount has
        been
        paid in full. Interest on the 7% Notes accrues quarterly and is payable on
        the
        last day of March, June, September and December of each year, commencing
        on
        September 30, 2006. At the option of the Company and subject to certain
        conditions, principal and interest payments due under the 7% Notes may be
        paid
        in cash or shares of common stock.
  The
        7%
        Notes are convertible in shares of common stock at a conversion price of
        $2.25
        per share, subject to adjustments for stock splits, stock dividends, mergers
        and
        reorganizations. In addition, if the Company issues or sells any shares of
        common stock for a price per share that is less than the applicable conversion
        price of the 7% Notes, the conversion price of the 7% Notes will be reduced.
        The
        conversion price of the 7% Notes will also be adjusted if the Company issues,
        sells or grants any stock or other securities convertible into or exchangeable
        for common stock in an issuance that is not specifically exempt by the terms
        of
        the 7% Notes. The number of shares that may be acquired by any holder of
        the 7%
        Notes upon any conversion of the 7% Notes or issuance of shares of common
        stock
        as principal or interest payments shall be limited to the extent to insure
        that
        the total number of shares of common stock beneficially owned by any holder
        does
        not exceed 4.99% of the total number of issued and outstanding shares of
        common
        stock.
  Upon
        the
        occurrence of an event of default, the 7% Notes will bear interest at the
        rate
        of 12% per annum and all unpaid principal and interest accrued under the
        7%
        Notes shall become (1) immediately due and payable upon the election of the
        holder, with respect to the events in (i) through (iv) and (vi) through (vii)
        below; and (2) automatically due and payable, with respect to the event in
        (v)
        below. An event of default under the 7% Notes occurs upon (i) the Company’s
        failure to timely pay principal due under the 7% Notes; (ii) the Company’s
        failure to timely pay interest due under the 7% Notes and such failure continues
        for more than five days; (iii) the Company and its subsidiaries failure to
        make
        a required payment or payments of indebtedness of $500,000 or more in aggregate
        principal amount and such failure continues for more than 20 days; (iv) an
        acceleration of the stated maturity date of any indebtedness of the Company
        or
        its subsidiaries of $500,000 or more in aggregate principal amount, which
        acceleration in not rescinded within 20 days; (v) the Company’s assignment for
        the benefit of creditors or admission in writing of its inability to pay
        its
        debts generally as they become due, or the voluntary or involuntary bankruptcy
        of the Company; (vi) the rendering of a final judgment that exceeds $500,000
        in
        the aggregate against the Company or its subsidiaries, which is not discharged
        within 60 days; (vii) proof that any representation of material fact made
        in any
        of the transaction documents or furnished to the holder by the Company was
        false
        in any material respect; and (viii) the Company’s failure to observe or perform
        in any material respect certain covenants in the transaction
        documents.
  The
        7%
        Notes are secured by shares of common stock pledged by David Levy, President
        of
        the Company, pursuant to the terms of a stock pledge agreement.
  The
        Warrants may be exercised for common stock on or before April 21, 2011. The
        Warrants are exercisable for shares of common stock at an exercise price
        of
        $2.25 per share, subject to adjustments for stock splits, stock dividends,
        mergers and reorganizations, or through a “cashless exercise” provision
        contained in the Warrants. In addition, if the Company issues or sells any
        shares of common stock for a price per share that is less than the applicable
        exercise price of the Warrants, the exercise price of the Warrants will be
        reduced. The exercise price of the Warrants will also be adjusted if the
        Company
        issues, sells or grants any stock or other securities convertible into or
        exchangeable for common stock in an issuance that is not specifically exempt
        by
        the terms of the Warrants. The accounting for the warrants was determined
        under
        the guidance of SFAS 133. Accordingly, the warrants, valued at $860,220,
        are
        treated as derivatives and classified as a liability on April 21, 2006. The
        warrants are recorded at a fair value, based on the Black-Sholes pricing
        model,
        and revalued each reporting period with the change in fair value recorded
        as
        other income/(expense). For the three months ended June 30, 2006 the fair
        value
        adjustment resulted in a gain of $730,583 and a reduction of the liability
        to
        $129,637 at June 30, 2006.
  The
        beneficial conversion feature relating to the convertible notes is also treated
        as an embedded derivative valued at $1,012,664 and classified as a liability
        on
        April 21, 2006 in accordance with SFAS 133. The conversion feature of the
        convertible notes is recorded at fair value, based on the Black-Sholes pricing
        model, and revalued each reporting period with the change in fair value recorded
        as other income/(expense). For the three months ended June 30, 2006 the fair
        value adjustment resulted in a gain of $1,012,664 and a reduction of the
        liability to zero at June 30, 2006.
  28
  At
        June
        30, 2006, the $2.45 million of April 21, 2006 notes payable are recorded
        as
        $756,707 as a result of the derivative accounting for the beneficial conversion
        feature and the warrants. The value of the warrants and the beneficial
        conversion feature are being accreted to the notes payable over the two year
        term of the notes with charges to interest expense. For the three months
        ended
        June 30, 2006 this interest expense was $179,591.
  On
        June
        1, 2006, the Company issued 18,420 shares of common stock for interest in
        connection with conversion of a convertible note payable. These share were
        valued at $1.92 per share, which was the closing price for the stock on June
        1,
        2006, and recorded as interest expense.
 
 On
        June
        21, 2006, the Company issued 2,039,959 shares of common stock pursuant to
        an
        Agreement (see Note 5) for the launching of The Tube into various markets.
        These
        shares were valued at $1.46 per share, which was the closing price for the
        stock
        on June 21, 2006, and recorded to intangible assets.
 
 On
        July
        11, 2006, the Company issued 193,000 shares of common stock to various service
        providers and consultants in exchange for services performed. These shares
        were
        valued at $1.35 per share, which was the closing price for the stock on July
        11,
        2006, and were recorded as expense in the second quarter.
 
 On
        July
        11, 2006, the Company issued 50,000 shares of common stock in connection
        with an
        agreement with two former employees. These shares were valued at $1.35 per
        share, which was the closing price for the stock on July 11, 2006, and were
        previously recorded as expense in the second quarter.
 
 On
        July
        11, 2006, the Company issued 693,584 shares of common stock pursuant to a
        charter affiliation agreement entered into in April 2004. These shares were
        valued at $1.35 per share, which was the closing price for the stock on July
        11,
        2006, and recorded to intangible assets.
 
 On
        July
        26, 2006, the Company’s Board of Directors approved the issuance of 3.5 million
        shares to three directors and approved that 3.5 million shares of common
        stock
        be reserved on the Company’s records.
 
 On
        July
        26, 2006, the Company’s Board of Directors approved the issuance of 200,000
        shares to an accredited investor as compensation for services rendered as
        a
        consultant subsequent to June 30, 2006..
 
 On
        August
        8, 2006, the Board of Directors approved the issuance of 1,533,746 shares
        of
        common stock of the Company and a warrant to purchase 500,000 shares of the
        common stock of the Company at $2.50 per share under a Charter Affiliation
        Agreement and a Letter Agreement.
 
 On
        August
        8, 2006, the Board of Directors approved the issuance of 5,000 shares of
        common
        stock of the Company to a member of the Company’s Board of Directors for
        director services accrued for at June 30, 2006 and or services subsequent
        to
        June 30, 2006.
 
 The
        Company maintains that the above issuances of securities were exempt from
        registration under 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. No underwriters or brokers were employed
        in these transactions. The securities will be deemed restricted securities
        for
        the purposes of the Securities Act.
 
 **Item
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 None.
 
 **Item
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None.
 
 **Item
        5. OTHER INFORMATION** ****
 
 On
          June
          21, 2006, the Company issued 2,039,959 shares of common stock pursuant
          to an
          Agreement (see Note 5) for the launching of The Tube into various markets.
          These
          shares were valued at $1.46 per share, which was the closing price for
          the stock
          on June 21, 2006, and recorded to intangible assets.
 
 The
          Company maintains that the above issuance of securities was exempt from
          registration under the Securities Act in reliance upon Section 4 (2) of
          the
          Securities Act and/or Regulation D promulgated thereunder as a transaction
          by an
          issuer not involving a public offering. No underwriters or brokers were
          employed
          in these transactions. The securities will be deemed restricted securities
          for
          the purposes of the Securities Act.
 
 **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.
  29
  **Number**
              
              **Title**4.1
              
              Form
                  of 7% Secured Convertible Notes, dated April 21, 2006, issued by
                  The Tube
                  Media Corp. (Incorporated by reference to the Company’s Current Report on
                  Form 8-K filed with the Securities and Exchange Commission on April
                  26,
                  2006)4.2
              
              Form
                  of Common Stock Purchase Warrants, dated April 21, 2006, issued
                  by The
                  Tube Media Corp. (Incorporated by reference to the Company’s Current
                  Report on Form 8-K filed with the Securities and Exchange Commission
                  on
                  April 26, 2006)10.1
              
              Settlement
                  and Mutual Release Agreement effective January 16, 2006. (Incorporated
                  by
                  reference to the Company’s Current Report on Form 8-K filed with the
                  Securities and Exchange Commission on April 13, 2006)10.2
              
              Guaranty
                  Agreement by David Levy, dated as of January 16, 2006. (Incorporated
                  by
                  reference to the Company’s Current Report on Form 8-K filed with the
                  Securities and Exchange Commission on April 13, 2006)10.3
              
              Guaranty
                  Agreement by Donna Levy, dated as of January 16, 2006. (Incorporated
                  by
                  reference to the Company’s Current Report on Form 8-K filed with the
                  Securities and Exchange Commission on April 13, 2006)10.4
              
              Letter
                  Agreement, dated April 11, 2006, with Robert Alan Kast relating
                  to
                  $225,000 Promissory Note. (Incorporated by reference to the Company’s
                  Current Report on Form 8-K filed with the Securities and Exchange
                  Commission on April 13, 2006)10.5
              
              Letter
                  Agreement, dated April 11, 2006, with Robert Alan Kast relating
                  to
                  $150,000 Promissory Note. (Incorporated by reference to the Company’s
                  Current Report on Form 8-K filed with the Securities and Exchange
                  Commission on April 13, 2006)10.6
              
              Form
                  of Purchase Agreement, dated as of April 21, 2006, by and between
                  The Tube
                  Media Corp. and the investors listed on the signature pages thereto.
                  (Incorporated by reference to the Company’s Current Report on Form 8-K
                  filed with the Securities and Exchange Commission on April 26,
                  2006)10.7
              
              Form
                  of Registration Rights Agreement, dated as of April 21, 2006, by
                  and
                  between The Tube Media Corp. and the investors listed on the signature
                  pages thereto. (Incorporated by reference to the Company’s Current Report
                  on Form 8-K filed with the Securities and Exchange Commission on
                  April 26,
                  2006)10.8
              
              Form
                  of Pledge and Security Agreement, dated April 21, 2006, made by
                  David Levy
                  in favor of Nite Capital, L.P. and acknowledged by The Tube Media
                  Corp.
                  (Incorporated by reference to the Company’s Current Report on Form 8-K
                  filed with the Securities and Exchange Commission on April 26,
                  2006)10.9
              
              First
                  Amendment to Agreement by and between The Tube Music Network, Inc.
                  and
                  Crawford Communications, Inc. dated as of May 25, 2006. (Incorporated
                  by
                  reference from the Company’s Current Report on Form 8-K filed with the
                  Securities and Exchange Commission on June 16, 2006)10.10
              
              Settlement
                  Agreement by and amongst George Nauful and The Tube Media Corp.
                  dated as
                  of June 19, 2006.10.11
              
              Settlement
                  Agreement by and amongst Ralph Tashjian and The Tube Media Corp.
                  dated as
                  of June 19, 2006.31.1
              
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act.31.2
              
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act.32.1
              
              Section
                  906 Certification
  30
  **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 14, 2006
              /s/
                  Celestine F. SpodenName:
                  Celestine F. SpodenTitle:
                  Chief Financial Officer
  31
 **EXHIBIT
          INDEX**
 
 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**4.1
                Form
                    of 7% Secured Convertible Notes, dated April 21, 2006, issued
                    by The Tube
                    Media Corp. (Incorporated by reference to the Company’s Current Report on
                    Form 8-K filed with the Securities and Exchange Commission on
                    April 26,
                    2006)4.2
                Form
                    of Common Stock Purchase Warrants, dated April 21, 2006, issued
                    by The
                    Tube Media Corp. (Incorporated by reference to the Company’s Current
                    Report on Form 8-K filed with the Securities and Exchange Commission
                    on
                    April 26, 2006)10.1
                Settlement
                    and Mutual Release Agreement effective January 16, 2006. (Incorporated
                    by
                    reference to the Company’s Current Report on Form 8-K filed with the
                    Securities and Exchange Commission on April 13, 2006)10.2
                Guaranty
                    Agreement by David Levy, dated as of January 16, 2006. (Incorporated
                    by
                    reference to the Company’s Current Report on Form 8-K filed with the
                    Securities and Exchange Commission on April 13, 2006)10.3
                Guaranty
                    Agreement by Donna Levy, dated as of January 16, 2006. (Incorporated
                    by
                    reference to the Company’s Current Report on Form 8-K filed with the
                    Securities and Exchange Commission on April 13, 2006)10.4
                Letter
                    Agreement, dated April 11, 2006, with Robert Alan Kast relating
                    to
                    $225,000 Promissory Note. (Incorporated by reference to the Company’s
                    Current Report on Form 8-K filed with the Securities and Exchange
                    Commission on April 13, 2006)10.5
                Letter
                    Agreement, dated April 11, 2006, with Robert Alan Kast relating
                    to
                    $150,000 Promissory Note. (Incorporated by reference to the Company’s
                    Current Report on Form 8-K filed with the Securities and Exchange
                    Commission on April 13, 2006)10.6
                Form
                    of Purchase Agreement, dated as of April 21, 2006, by and between
                    The Tube
                    Media Corp. and the investors listed on the signature pages thereto.
                    (Incorporated by reference to the Company’s Current Report on Form 8-K
                    filed with the Securities and Exchange Commission on April 26,
                    2006)10.7
                Form
                    of Registration Rights Agreement, dated as of April 21, 2006,
                    by and
                    between The Tube Media Corp. and the investors listed on the
                    signature
                    pages thereto. (Incorporated by reference to the Company’s Current Report
                    on Form 8-K filed with the Securities and Exchange Commission
                    on April 26,
                    2006)10.8
                Form
                    of Pledge and Security Agreement, dated April 21, 2006, made
                    by David Levy
                    in favor of Nite Capital, L.P. and acknowledged by The Tube Media
                    Corp.
                    (Incorporated by reference to the Company’s Current Report on Form 8-K
                    filed with the Securities and Exchange Commission on April 26,
                    2006)10.9
                First
                    Amendment to Agreement by and between The Tube Music Network,
                    Inc. and
                    Crawford Communications, Inc. dated as of May 25, 2006. (Incorporated
                    by
                    reference from the Company’s Current Report on Form 8-K filed with the
                    Securities and Exchange Commission on June 16, 2006)10.10
                Settlement
                    Agreement by and amongst George Nauful and The Tube Media Corp.
                    dated as
                    of June 19, 2006.10.11
                Settlement
                    Agreement by and amongst Ralph Tashjian and The Tube Media Corp.
                    dated as
                    of June 19, 2006.




32