**UNITED
      STATES**




**SECURITIES
      AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**




**FORM
      10-QSB/A**


**(Amendment
      No. 1)**


(Mark
      one)




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




For
      the
      quarterly period ended **March 31, 2005**




o
            TRANSITION
                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, Suite 300.**
              **Fort
                Lauderdale, FL 33309****(Address
                of principal executive offices)****(954)
                714-8100****(Issuer’s
                telephone number)**




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




The
      number of shares of the issuer’s common stock, no par value, outstanding as of
      May 15, 2005 was 24,597,603.




Transitional
      Small Business Disclosure Format (check one):  Yes
o; No
x







**EXPLANATORY
      NOTE**




In
      connection with the preparation of our annual report on Form 10-KSB for the
      year
      ended December 31, 2005, we determined that we needed to restate our quarterly
      financials for the fiscal year ended December 31, 2005 to reflect discontinued
      operations and the issuance of stock to a former director in connection with
      an
      employment agreement. Our Form 10-KSB for the fiscal year ended December 31,
      2005 has taken into account the discontinued operations and the issuance of
      stock to a former director in connection with an employment
      agreement.




This
      Amendment No. 1 on Form 10-QSB/A to our quarterly report on Form 10-QSB for
      the
      quarter ended March 31, 2005, initially filed with the Securities and Exchange
      Commission on May 26, 2005 (the “Initial Filing”), is being filed to reflect the
      restatement of our condensed consolidated balance sheet at March 31, 2005 and
      our condensed consolidated statements of operations, condensed consolidated
      statements of changes in stockholders’ equity and condensed consolidated
      statements of cash flows for the three months ended March 31, 2005 and the
      notes
      related thereto. For a more detailed description of this restatement, see Note
      1, “Nature of Operations and Basis of Presentation - Restatement” and Note 9,
“Discontinued Operations” to the accompanying condensed consolidated financial
      statements and the section entitled “Restatement” in Management’s Discussion and
      Analysis of Financial Condition and Results of Operations contained in this
      Form
      10-QSB/A. This Form 10-QSB/A only amends and restates Items 1, 2, and 3 of
      Part
      I of the Initial Filing and no other material information in the Initial Filing
      is amended hereby. The foregoing items have not been updated to reflect other
      events concerning our business or financial condition occurring after the
      Initial Filing or to modify or update those disclosures affected by subsequent
      events except that we updated the information contained in such sections to
      reflect our name change from AGU Entertainment Corp. to The Tube Media Corp.,
      our change in address, the change in our state of incorporation from Colorado
      to
      Delaware on February 25, 2006 and the receipt of a new commission file number.
      We also corrected typographical errors. In addition, pursuant to the rules
      of
      the SEC, Item 6 of Part II to the Initial Filing has been amended to contain
      currently-dated certifications from our Principal Executive Officer and
      Principal Financial Officer, as required by Sections 302 and 906 of the
      Sarbanes-Oxley Act of 2002. The certifications of our Principal Executive
      Officer and Principal Financial Officer are attached to this Form 10-QSB/A
      as
      Exhibits 31.1, 31.2 and 32.1, respectively.




i




**THE**  **TUBE
        MEDIA CORP.**
 **(Formerly
        AGU Entertainment Corp.)**
 **FORM
        10-QSB**
  **INDEX**
  **Page**




PART
                I.
            UNAUDITED
                FINANCIAL INFORMATION
            2Item
                1.
            FINANCIAL
                STATEMENTS
            2Condensed
                Consolidated Balance Sheets as of March 31, 2005
                (unaudited)
            2Condensed
                Consolidated Statements of Operations for the Three Months Ended
                March 31,
                2005 and 2004 (Unaudited)
            3Condensed
                Consolidated Statements of Changes in Stockholders’ Equity for the Three
                Months Ended March 31, 2005 (Unaudited)
            4Condensed
                Consolidated Statements of Cash Flows for the Three Months Ended
                March 31,
                2005 and 2004
            5Notes
                to Condensed Consolidated Financial Statements March 31, 2005
                (unaudited)
            6Item
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS.
            14Item
                3.
            CONTROLS
                AND PROCEDURES
            20PART
                II.
            OTHER
                INFORMATION
            21Item
                6.
            EXHIBITS
            21





ii




**FORWARD
        LOOKING STATEMENTS**
  **Cautionary
        Statement Pursuant to Safe Harbor Provisions of the**
  **Private
        Securities Litigation Reform Act of 1995**
  This
        report may include a number of “forward-looking statements” as that term is
        defined in Section 27A of the Securities Act of 1933, as amended, and Section
        21E of the Securities Exchange Act of 1934, as amended. These statements
        reflect
        management’s current views with respect to future events and financial
        performance and include statements regarding management’s intent, belief or
        current expectations, which are based upon assumptions about future conditions
        that may prove to be inaccurate. Prospective investors are cautioned that
        any
        such forward-looking statements are not guarantees of future performance,
        involve risk and uncertainties, and that as a result, actual results may
        differ
        materially from those contemplated by such forward-looking statements. Such
        risks include, among other things, the volatile and competitive markets in
        which
        we operate, our limited operating history, our limited financial resources,
        our
        ability to manage our growth and the lack of an established trading market
        for
        our securities. When considering forward-looking statements, readers are
        urged
        to carefully review and consider the various disclosures, including risk
        factors
        and their cautionary statements, made by us in this report and in our other
        reports filed with the Securities and Exchange Commission.
  **PART
        I.**
  1
  **UNAUDITED
        FINANCIAL INFORMATION**
  **Item
                  1.**
              **FINANCIAL
                  STATEMENTS**
  **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Condensed
        Consolidated Balance Sheets**
 **As
        of March 31, 2005 (unaudited)** **and December 31, 2004**
 
 **2005**
                **Unaudited**
              
              **2004**
                **Audited****(RESTATED**)**Assets****Current
                  Assets:****Cash**
              
              **$**
              **5,379**
              
              **$**
              **771,533****Accounts
                  receivable, net of allowance of $10,000 and $0**
              
              
              **475,139**
              
              
              **507,482****Prepaid
                  expenses**
              
              
              **254,628**
              
              
              **225,037****Total
                  current assets**
              
              
              **735,146**
              
              
              **1,504,052****Property
                  and equipment, net of accumulated**
                **depreciation
                  of $139,470 and $103,442, respectively**
              
              
              **568,277**
              
              
              **246,144****Property
                  and equipment from discontinued operations, net of**
                **accumulated
                  depreciation of $48,191 and $19,818, respectively**
              
              
              **8,850,856**
              
              
              **8,864,229****Intangibles,
                  net of accumulated amortization**
              
              
              **884,635**
              
              
              **913,735****Other
                  assets**
              
              
              **137,635**
              
              
              **164,737****Total
                  assets**
              
              **$**
              **11,176,549**
              
              **$**
              **11,692,897****Liabilities
                  and Stockholders’ Equity****Current
                  Liabilities:****Accounts
                  payable**
              
              **$**
              **771,062**
              
              **$**
              **501,514****Accounts
                  payable - related parties**
              
              
              **109,887**
              
              
              **169,258****Notes
                  payable, related parties**
              
              
              **636,325**
              
              
              **445,642****Convertible
                  notes payable**
                **Convertible
                  notes payable from discontinued operations**
              
              
              **150,000**
                **7,000,000**
              
              
              **150,000**
                **7,000,000****Equipment
                  note - current portion**
              
              
              **12,346**
              
              
              **12,140****Capital
                  leases payable - current portion**
              
              
              **14,276**
              
              
              **13,881****Accrued
                  expenses**
              
              
              **789,918**
              
              
              **910,418****Other
                  current liabilities**
              
              
              **6,872**
              
              
              **36,965****Total
                  current liabilities**
              
              
              **9,490,686**
              
              
              **9,239,818****Capital
                  leases payable- long term portion**
              
              
              **8,209**
              
              
              **11,876****Equipment
                  note - long term portion**
              
              
              **33,503**
              
              
              **36,668****Convertible
                  notes payable - net of unamortized**
                **discounts**
              
              
              **944,052**
              
              
              **854,178****Total
                  liabilities**
              
              
              **10,476,450**
              
              
              **10,142,540****Stockholders’
                  Equity:****Preferred
                  stock, no par value, 10,000,000 shares authorized, -0-**
                **shares
                  issues and outstanding**
              
              
              **--**
              
              
              **--****Common
                  stock, no par value; 100,000,000 shares authorized,**
                **24,220,361
                  and 23,392,576 shares issues and outstanding**
              
              
              **2,422**
              
              
              **2,339****Additional
                  paid-in capital**
              
              
              **11,644,086**
              
              
              **8,249,675****Accumulated
                  deficit**
              
              
              **(10,946,409**
              **)**
              
              **(6,701,657**
              **)****Total
                  stockholders’ equity**
              
              
              **700,099**
              
              
              **1,550,357****Total
                  liabilities and stockholders’ equity**
              
              **$**
              **11,176,549**
              
              **$**
              **11,692,897**
 
 See
        accompanying notes to condensed consolidated financial statements
  2
  **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Operations**
 **for
        the Three Months Ended March 31, 2005 and 2004**
 **(Unaudited)**
  **March
                    31,**
                
                **March
                    31,****2005**
                
                **2004****(RESTATED**)**Revenues**
                
                **$**
                **105,927**
                
                **$**
                **--****Cost
                    of sales and services performed**
                
                
                **22,739****Gross
                    profit**
                
                
                **83,188**
                
                
                **--****Operating
                    Expenses****Promotion
                    and advertising**
                
                
                **71,530**
                
                
                **133,968****Depreciation**
                
                
                **65,128**
                
                
                **12,299****Other
                    general and administrative costs**
                
                
                **2,719,960**
                
                
                **739,100****Total
                    operating expenses**
                
                
                **2,856,618**
                
                
                **885,367****Operating
                    loss**
                
                
                **(2,773,430**
                **)**
                
                **(885,367**
                **)****Interest
                    expense**
                
                
                **(1,287,684**
                **)**
                
                **(12,514**
                **)****Loss
                    from continuing operations**
                
                
                **(4,061,114**
                **)**
                
                **(897,881**
                **)****Loss
                    from discontinued operations**
                
                
                **(183,638**
                **)**
                
                **--****Net
                    loss**
                
                **$**
                **(4,244,752**
                **)**
                **$**
                **(897,881**
                **)****Basic
                  and diluted loss per
                  share**
                
                **$**
                **(0.18**
                **)**
                **$**
                **(0.06**
                **)****Loss
                  per share from continuing
                  operations**
                
                **$**
                **(0.17**
                **)**
                **$**
                **(0.06**
                **)****Loss
                    per share from discontinued operations**
                
                **$**
                **(0.01**
                **)**
                **$**
                **(0.00**
                **)****Weighted
                    average common shares outstanding -Basic and
                    diluted**
                
                
                **23,720,678**
                
                
                **14,880,427**
  See
        accompanying notes to condensed consolidated financial statements
  3
 **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Condensed
        Consolidated Statements of**
 **Changes
        in Stockholders’ Equity**
 **for
        the Three Months Ended March 31, 2005**
 **(Unaudited)**
 
 **Retained****Additional**
              
              **Earnings****Paid-In**
              
              **(Accumulated****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit)**
              
              **Total****Balance
                  at December 31, 2004**
              
              
              **23,392,576**
              
              **$**
              **2,339**
              
              **$**
              **8,249,675**
              
              **$**
              **(6,701,657**
              **)**
              **$**
              **1,550,357****Issuance
                of shares of common stock for****services**
              
              
              **108,570**
              
              
              **11**
              
              
              **286,581**
              
              
              **--**
              
              
              **286,592****Issuance
                of shares of common stock to****employees
                  for compensation**
              
              
              **45,540**
              
              
              **5**
              
              
              **107,469**
              
              
              **--**
              
              
              **107,474****Issuance
                of common stock as a price****adjustment
                  for certain investors**
              
              
              **5,000**
              
              
              **--**
              
              
              **--**
              
              
              **--**
              
              
              **--****Common
                stock issues in connection with the****acquisition
                  of property plant and****equipment**
              
              
              **97,800**
              
              
              **10**
              
              
              **244,490**
              
              
              **--**
              
              
              **244,500****Issuance
                of warrants in connection with the****issuance
                  of convertible debt**
              
              
              **--**
              
              
              **--**
              
              
              **1,358,788**
              
              
              **--**
              
              
              **1,358,788****Issuance
                  of shares in settlement of liabilities**
              
              
              **121,875**
              
              
              **12**
              
              
              **337,488**
              
              
              **--**
              
              
              **337,500****Issuance
                of shares of common stock to****directors
                  for services**
              
              
              **5,000**
              
              
              **1**
              
              
              **11,799**
              
              
              **--**
              
              
              **11,800****Issuance
                of common stock to a director as****an
                  adjustment to shares awarded****pursuant
                  to an employment agreement**
              
              
              **444,000**
              
              
              **44**
              
              
              **1,047,796**
              
              
              **--**
              
              
              **1,047,840****Net
                  loss**
              
              
              **--**
              
              
              **--**
              
              
              **--**
              
              
              **(4,244,752**
              **)**
              
              **(4,244,752**
              **)****Balance
                  at March 31, 2005**
              
              
              **24,220,361**
              
              **$**
              **2,422**
              
              **$**
              **11,644,086**
              
              **$**
              **(10,946,409**
              **)**
              **$**
              **700,099**
  See
        accompanying notes to condensed consolidated financial statements
  4
  **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Condensed
        Consolidated Statements of Cash Flows**
 **for
        the Three Months Ended March 31, 2005 and 2004**
  **2005**
                
                **2004****(RESTATED)****Cash
                    flows from operating activities****Net
                    loss from continuing operations**
                
                **$**
                **(4,061,114**
                **)**
                **$**
                **(897,881**
                **)****Adjustments
                    to reconcile net loss to net cash****used
                    in operating activities****Depreciation
                    and amortization**
                
                
                **65,128**
                
                
                **12,299****Common
                    stock issued as payment for services**
                
                
                **405,866**
                
                
                **28,677****Common
                    stock issued as compensation to a director**
                
                
                **1,047,840**
                
                
                **--****Amortization
                    of discount on convertible notes payable**
                
                
                **1,178,662**
                
                
                **--****Loss
                    from discontinued operations, less depreciation**
                
                
                **(155,266**
                **)**
                
                **--****Amortization
                    of deferred financing fees**
                
                
                **18,254**
                
                
                **--****Decrease
                    in accounts receivable**
                
                
                **32,343**
                
                
                **40,671****Increase
                    in prepaid expenses**
                
                
                **(29,591**
                **)**
                
                **(200,200**
                **)****Increase
                    (decrease) in other assets**
                
                
                **8,849**
                
                
                **(369,804**
                **)****Increase
                    in accounts payable and accrued liabilities**
                
                
                **427,177**
                
                
                **88,891****(Decrease)
                    increase in other liabilities**
                
                
                **(30,093**
                **)**
                
                **24,462****Net
                    cash used in operating activities**
                
                
                **(1,091,945**
                **)**
                
                **(1,272,885**
                **)****Cash
                    flows from investing activities:**
                
                
                **1,091,947**
                
                
                **1,273,883****Disbursements
                    for property and equipment**
                
                
                **(128,661**
                **)**
                
                **(22,334**
                **)****Net
                    cash used in investing activities**
                
                
                **(128,661**
                **)**
                
                **(22,334**
                **)****Cash
                    flows from financing activities:****Payment
                    of notes payable**
                
                
                **(2,959**
                **)**
                
                **(9,972**
                **)****Proceeds
                    from notes payable to related parties**
                
                
                **190,683**
                
                
                **--****Payment
                    on capital leases**
                
                
                **(3,272**
                **)**
                
                **(3,417**
                **)****Proceeds
                    from other notes payable**
                
                
                **270,000**
                
                
                **1,220,000****Net
                    cash provided by financing activities**
                
                
                **454,452**
                
                
                **1,206,611****Net
                    decrease in cash**
                
                
                **(766,154**
                **)**
                
                **(88,608**
                **)****Cash,
                    beginning of period**
                
                
                **771,533**
                
                
                **137,048****Cash,
                    end of period**
                
                **$**
                **5,379**
                
                **$**
                **48,440****Supplemental
                    disclosure of cash flow information:****Cash
                    paid for income taxes**
                
                **$**
                **--**
                
                **$**
                **--****Cash
                    paid for interest**
                
                **$**
                **50,512**
                
                **$**
                **4,862****Non-cash
                    financing activities:****Common
                    stock issued as payment for services**
                
                **$**
                **405,866**
                
                **$**
                **28,677****Common
                    stock issued as compensation to a director**
                
                **$**
                **1,047,840**
                
                **$**
                **--****Conversion
                    of liabilities to common stock**
                
                **$**
                **337,500**
                
                **$**
                **--****Equipment
                    acquired through issuance of common stock**
                
                **$**
                **244,500**
                
                **$**
                **--**
  See
        accompanying notes to condensed consolidated financial statements
  5
  **THE
        TUBE MEDIA CORP. (Formerly AGU Entertainment Corp.) and
        SUBSIDIARIES**
 **Notes
        to Condensed Consolidated Financial Statements**
 **March
        31, 2005 (unaudited)**
 
 **1.**  **NATURE
        OF OPERATIONS AND BASIS OF PRESENTATION**
  **Nature
        of Operations**
  AGU
        Entertainment Corp. (formerly Lexington Barron Technologies, Inc.) was
        incorporated in the state of Colorado on August 23, 2000 to engage in financial,
        operational and systems consulting to startup and small businesses. Prior
        to
        April 1, 2004, AGU Entertainment Corp. (“AGU”) was a development stage, public
        reporting company and did not engage in any significant operations or enter
        into
        any material transactions.
  Effective
        April 1, 2004, AGU entered into a Share Exchange Agreement with Pyramid Music
        Corp. (“PMC”), a Florida corporation having an inception date of May 20, 2003,
        whereby AGU acquired 100% of the outstanding common stock of PMC in exchange
        for
        issuing 16,922,464 shares of its common stock to the stockholders of PMC
        (see
        note 2). PMC was a development stage company and was formed for the purpose
        of
        developing market share in the recording and broadcast media industries through
        the establishment of a music oriented television network and archived video
        and
        music collection libraries.
  On
        October 20, 2004, AGU was reincorporated in the state of Delaware through
        a
        merger of AGU into a wholly owned subsidiary corporation incorporated in
        the
        State of Delaware. The reincorporation resulted in AGU becoming a Delaware
        corporation effective as of October 21, 2004 and did not result in any change
        in
        the company’s name, business, assets, liabilities or net worth.
  At
        March
        31, 2005, AGU had two wholly-owned operating subsidiaries that were 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, AGU Music, Inc. (“AGU Music”), formerly Pyramid
        Records International, Inc. 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 for the purpose of
        developing a media center for the film and entertainment business.
  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.
  **Basis
        of Presentation**
  The
        unaudited condensed consolidated financial statements of The Tube Media Corp.
        (formerly AGU Entertainment Corp.) and its subsidiaries (the “Company”) have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States of America for interim financial reporting and the regulations
        of
        the Securities and Exchange Commission (“SEC”) for quarterly reporting. The
        interim unaudited condensed consolidated financial statements should be read
        in
        conjunction with the financial statements and notes thereto included in the
        Company’s annual report on Form 10-KSB as filed with the SEC for the year ended
        December 31, 2004. Management acknowledges its responsibility for the
        preparation of the accompanying interim condensed consolidated financial
        statements which reflect all adjustments considered necessary, in the opinion
        of
        management, for a fair statement of the results of interim periods presented.
        The accompanying financial statements reflect the results of operations of
        AGU
        and its subsidiaries for the three months ended March 31, 2005 and the results
        of the Company for the three months ended March 31, 2004. Because the Company
        was a development stage enterprise for most of 2004, the financial statements
        for 2005 are not comparable to those of the prior year. In addition, the
        results
        of operations for the interim periods are not necessarily indicative of the
        results of operations for the entire year.
  6
 The
        accompanying financial statements reflect the results of the operations of
        the
        Company and its subsidiaries for the three months ended March 31, 2005
        (restated) and the results of the Company for the three months ended March
        31,
        2004.
  **Principles
        of Consolidation**
  The
        accompanying consolidated financial statements include the accounts of The
        Tube
        Media Corp. (formerly AGU Entertainment Corp.) and its subsidiaries. All
        significant intercompany transactions have been eliminated.
  **Use
        of Estimates**
  The
        preparation of financial statements in accordance with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and the disclosure
        of
        contingent assets and liabilities at the date of financial statements and
        the
        reported amounts of revenues and expenses during the reporting period. Actual
        results could differ from those estimates.
  **Restatement**
  The
        Company has restated its previously issued March 31, 2005 condensed consolidated
        financial statements for matters related to the following previously reported
        items: reclassification of discontinued operations and the issuance of stock
        to
        a former director in connection with an employment agreement.
  Loss
                    from continuing operations as originally reported at March 31,
                    2005
                
                $
                (3,196,912
                )Less:Additional
                    compensation expense recorded in connection with theissuance
                    of common stock
                
                
                (1,047,840
                )Reclassification
                    of loss attributable to discontinued operations
                
                
                183,638Loss
                    from continuing operations at March 31, 2005 as restated
                
                $
                (4,061,114
                )Loss
                    from Discontinued operations
                
                $
                (183,638
                )
 
 The
        effect on the Company’s previously issued March 31, 2005 financial statements
        are summarized as follows:
 
 ***Balance
        Sheet as of March 31, 2005***
 
 ***Previously***
              
              ***Increase******Reported***
              
              ***(Decrease)***
              
              ***Restated*****Current
                  Assets**
              
              
              **735,146**
              
              
              **--**
              
              
              **735,146****Other
                  Assets**
              
              
              **10,441,403**
              
              
              **--**
              
              
              **10,441,403****Total
                  Assets**
              
              
              **11,176,549**
              
              
              **--**
              
              
              **11,176,549****Current
                  Liabilities**
              
              
              **9,490,686**
              
              
              **--**
              
              
              **9,490,686****Deferred
                  Tax Liability****Total
                  Liabilities**
              
              
              **10,476,450**
              
              
              **--**
              
              
              **10,476,450****Stockholders’
                  Deficit:****Common
                  stock**
              
              
              **2,422**
              
              
              **--**
              
              
              **2,422****Additional
                  paid-in-capital**
              
              
              **10,596,246**
              
              
              **1,047,840**
              
              
              **11,644,086****Accumulated
                  Deficit**
              
              
              **(
                  9,898,569**
              **)**
              
              **(1,047,840**
              **)**
              
              **(10,946,409**
              **)****Total
                  Liabilities and Stockholders’ Deficit**
              
              
              **11,176,549**
              
              
              **--**
              
              
              **11,176,549**
  7
  ***Statement
        of Operations for the Three Months Ended March 31,
        2005:***
  ***Previously***
              
              ***Increase******Reported***
              
              ***(Decrease)***
              
              ***Restated*****Revenue**
              
              **$**
              **150,503**
              
              **$**
              **(44,576**
              **)**
              **$**
              **105,927****Cost
                  of Sales**
              
              
              **36,745**
              
              
              **(14,006**
              **)**
              
              **22,739****Gross
                  Profit**
              
              
              **113,758**
              
              
              **(30,570**
              **)**
              
              **83,188****Total
                  Operating Expenses**
              
              
              **1,860,902**
              
              
              **995,716**
              
              
              **2,856,618****Loss
                  from Operations**
              
              
              **(1,747,144**
              **)**
              
              **(1,026,286**
              **)**
              
              **(2,773,430**
              **)****Loss
                  from Discontinued Operations**
              
              
              **--**
              
              
              **(183,638**
              **)**
              
              **(183,638**
              **)****Interest
                  Expense**
              
              
              **(1,449,768**
              **)**
              
              **(162,083**
              **)**
              
              **(1,287,684**
              **)****Net
                  Loss**
              
              **$**
              **(3,196,912**
              **)**
              **$**
              **(1,047,840**
              **)**
              **$**
              **(4,244,752**
              **)**
  ***Shareholders’
        Equity as of March 31, 2005***
 
 ***Number
                  of***
                ***Shares***
              
              ***Common***
                ***Stock***
              
              ***Accumulated***
                ***Deficit***
              
              ***Total***
                ***Stockholders’***
                ***Equity/Deficit)*****Balance
                  at March 31, 2005, as**
                **previously
                  reported**
              
              
              **24,220,361**
              
              **$**
              **2,422**
              
              **$**
              **(9,898,569**
              **)**
              **$**
              **700,099****Adjustment**
              
              
              **--**
              
              
              
              
              
              **(1,047,840**
              **)**
              
              **--****Balance
                  at March 31, 2005, as**
                **restated**
              
              
              **24,220,361**
              
              **$**
              **2,422**
              
              **$**
              **(10,946,409**
              **)**
              **$**
              **700,099**
 
  **2.**
              **INTANGIBLES**
  Intangible
        assets at March 31, 2005 are as follows:
  **Value
                  at acquisition**
              
              **Accumulation**
                **amortization**
              
              **Balance
                  at**
                **March
                  31, 2005****Distribution
                  agreement**
              
              **$**
              **350,000**
              
              **$**
              **(116,400**
              **)**
              **$**
              **233,600****Other
                  intangibles**
              
              
              **651,035**
              
              
              **--**
              
              
              **651,035****Total
                  intangibles**
              
              **$**
              **1,001,035**
              
              **$**
              **(116,400**
              **)**
              **$**
              **884,635**
 
 8
 The
        distribution agreement is 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, whose national launch
        commenced in the second quarter of 2005. The Company will begin amortizing
        these
        assets over their estimated useful lives beginning in May of 2005. Aggregate
        amortization expense over the next three years, assuming an estimated useful
        life of two years for the other intangibles, is expected to be as
        follows:
  **For
                  the year ending December 31:****Remainder
                  of 2005**
              
              **$**
              **277,185****2006**
              
              
              **441,918****2007**
              
              
              **165,532**
  **3.**
              **NOTES
                  PAYABLE**
  **Convertible
        Notes**
  Convertible
        Notes Payable consists of the following at March 31, 2005 and December 31,
        2004:
  **2005**
              
              **2004****First
                  mortgage note secured by Lauderdale Property**
              
              **$**
              **7,000,000**
              
              **$**
              **7,000,000****Second
                  mortgage note secured by Lauderdale Property**
              
              
              **3,000,000**
              
              
              **3,000,000****Other
                  convertible notes and subordinated debentures**
              
              
              **1,745,000**
              
              
              **1,475,000****11,745,000**
              
              
              **11,475,000****Less:
                  current portion**
              
              
              **(7,150,000**
              **)**
              
              **(7,150,000**
              **)****Less:
                  discount on convertible mortgage and notes
                  payable**
              
              
              **(3,650,948**
              **)**
              
              **(3,470,822**
              **)****Notes
                  payable, long term portion, net of discounts**
              
              **$**
              **944,052**
              
              **$**
              **854,178**
  In
        connection with the purchase of the Lauderdale Property, the Company issued
        to
        the seller on December 22, 2004 a convertible mortgage promissory note in
        the
        principal amount of $7,000,000. The note pays interest at an annual rate
        of 6.5%
        and is convertible at any time at the seller’s option into shares of the
        Company’s common stock at a conversion price of $2.50 per share. A principal
        payment of $250,000 is due on June 25, 2005 and the remaining balance of
        the
        note matures on December 22, 2005. At the closing of the purchase of the
        Lauderdale Property, the Company made a prepayment into an escrow account
        of
        $150,000 for interest on the note and real estate taxes on the Lauderdale
        Property covering the quarterly period ending March 31, 2005. Additional
        quarterly prepayments of interest and real estate taxes in the amount of
        $145,000 were required to be put into escrow beginning March 22, 2005. The
        Company did not make the required prepayment on March 22, 2005. This amount
        was
        paid on behalf of the Company by the holder of the Mitchell Note (which is
        evidenced by the second mortgage on the Lauderdale Property) on April 22,
        2005,
        at which time the Company received a letter from the holder of the first
        mortgage note acknowledging the cure of the payment default. All of the
        Company’s obligations to the holder of this convertible promissory note and
        related agreements are secured by a first mortgage on the Lauderdale Property,
        including all of the Company’s rights, title and interest as lessor in and to
        all leases or rental arrangements of the Lauderdale Property.
  On
        May
        13, 2005 the Company executed a letter agreement with the holder of the Mitchell
        Note whereby the Company agreed that the $145,000 interest and real estate
        tax
        payment made on behalf of the Company, the $100,000 that was advanced to
        the
        Company on April 29, 2005 by the holder of the Mitchell Note, the unpaid
        interest on the Mitchell Note for March and April 2005 and the legal fees
        incurred by the holder in connection with the letter agreement, would accrue
        interest at the default rate of 18% and would be due and payable by the Company
        on August 1, 2005. The letter agreement also extends the deadline for which
        the
        Company was to have filed a registration statement to register the Company’s
        common stock pertaining to the Mitchell Note and related warrants from April
        30,
        2005 to June 30, 2005, and extends the date for which the registration statement
        is required to be declared effective to November 30, 2005. The Company also
        agreed to grant the holder of the Mitchell Note an additional 150,000 warrants
        to purchase the Company’s common stock at an exercise price of $1.50 per share,
        with the same registration and anti-dilution protections contained in the
        warrants originally granted to the holder of the Mitchell Note (See Note
        10).
        The Mitchell Note is evidenced by a second mortgage on the Lauderdale Property
        and by substantially all of the Company’s other assets, including the capital
        stock of its subsidiaries. Because the Company did not pay the required monthly
        interest payments for March and April 2005, which resulted in the Company
        receiving a default letter from the holder of the Mitchell Note on April
        8,
        2005, the interest rate on the note was increased to the default rate of
        18%. If
        in the future the Company is unable to comply with the terms of the Mitchell
        Note, the May 13 letter agreement or the terms of the first mortgage note,
        the
        holders of either note may seek to foreclose on the Lauderdale
        Property.
  9
 During
        January and March of 2005 the Company issued convertible promissory notes
        to
        various accredited investors in the aggregate principal amount of $270,000.
        The
        $270,000 of convertible promissory notes are due on the second anniversary
        of
        their issuance date and are convertible into shares of the Company’s common
        stock at the option of each holder at a conversion price of $3.00 per share.
        In
        connection with the issuance of the convertible notes, the Company issued
        to the
        holders an aggregate of 89,999 common stock purchase warrants to purchase
        the
        Company’s common stock (See Note 4). The common stock purchase warrants have a
        two year term and the exercise price is $3.00 per share. The common stock
        purchase warrants were valued at $46,217, and this amount was recorded as
        a
        discount to the convertible promissory notes. The unamortized balance of
        the
        discount for these notes as of March 31, 2005 was $42,982.
  **Related
        Party Notes**
  On
        March
        3, 2004, AGU Music entered into an Assignment and Assumption Agreement with
        Pyramid Media Group, Inc. (“PMG”) (of which a related party and a stockholder of
        the Company own a controlling interest), whereby AGU Music agreed to assume
        all
        of the covenants and obligations of a Distribution Agreement between PMG
        and ARK
        21 Records, LP (“ARK21”). The Distribution Agreement provides that ARK21 be the
        manufacturer and distributor of certain recorded music projects for AGU Music
        through normal retail channels throughout the United States. In exchange
        for the
        rights to the Distribution Agreement and certain assets of PMG, AGU Music
        assumed the obligation to repay $350,000 of notes payable (“the ARK 21 Notes”)
        to certain principals of PMG. The Company has guaranteed the payment of the
        ARK
        21 Notes, which have an annual interest rate of 8%, and were to have matured
        on
        May 1, 2007. Approximately $19,000 of these notes was paid in 2004 and the
        outstanding balance as of March 31, 2005 is approximately $331,000. The terms
        of
        the ARK 21 Notes require monthly payments of principal and interest. The
        Company
        has not made the required monthly principal and interest payments since June
        of
        2004. On May 5, 2005, the Company entered into a settlement agreement with
        the
        holders of the ARK 21 Notes, who are significant stockholders of the Company.
        Under the terms of the settlement agreement, the ARK 21 Notes were cancelled
        and
        were replaced with new notes containing the same terms and conditions as
        the old
        notes, except that the new notes have a beginning principal balance of $331,240
        and require, in addition to the monthly payment of approximately $8,500,
        the
        repayment of principal in the amount of $50,000 for every $1,000,000 in equity
        capital raised by the Company. In addition, upon the Company’s closing of a
        capital raising of at least $250,000, the Company must pay all the principal
        and
        interest due under the original notes for the period January through April,
        2005
        in the amount of approximately $36,000. The Company also agreed to issue
        500,000
        restricted shares of the Company’s common stock to the holders of the ARK 21
        Notes.
  On
        March
        31, 2005 the Company received a loan in the amount of $190,683 from a
        stockholder of the Company who is a related party. This loan pays interest
        at
        10% and is due June 30, 2005. As of March 31, 2005 the Company had outstanding
        loans payable to related parties in the aggregate amount of $636,325. The
        Company currently does not have the resources to repay these loans upon their
        maturity.
  **4.**
              **STOCKHOLDERS’
                  EQUITY**
  During
        the first three months of 2005, the Company issued 108,570 shares of common
        stock to third parties in exchange for services performed. These services
        were
        valued at $286,592 and this amount was charged to earnings during the period.
        The Company also issued 45,540 shares of common stock to employees and 5,000
        shares to directors during the first three months of 2005 and recorded
        compensation expense of $119,274. In addition, the Company issued 444,000
        shares
        of common stock to its chairman as an adjustment to the shares allocated
        to the
        original investors of the Company, 5,000 shares of common stock as a share
        price
        adjustment for certain investors, 97,800 shares of common stock in connection
        with the acquisition of property and equipment valued at $244,500 and 121,875
        shares of common stock in settlement of a liability of $337,500.
  10
 During
        the first three months of 2005, the Company issued 89,999 detached common
        stock
        purchase warrants to acquire the Company’s common stock in connection with the
        issuance of convertible promissory notes (see note 3). The warrants have
        an
        exercise price of $3.00 per share and expire on the maturity dates of the
        respective convertible promissory notes with which they were issued. In
        addition, the Company issued 2,550,000 common stock purchase warrants at
        an
        exercise price of $3.00 per share and 3,575 common stock purchase warrants
        at an
        exercise price of $2.00 per share to a significant stockholder in consideration
        for converting a substantial portion of his holdings of Company promissory
        notes
        to common stock and for extending the maturity dates of some of the other
        promissory notes of the Company held by him. The aggregate value of the warrants
        issued during the period was $1,358,788, and this amount was recorded as
        a
        discount on the Company’s convertible debt with an offset to Paid in Capital.
        The discount is being amortized on a pro rata basis over the life of the
        respective convertible debt instruments. No warrants were exercised during
        the
        first three months of 2005 and 5,325,910 warrants were outstanding at March
        31,
        2005.
  **5.**
              **EARNINGS
                  PER SHARE**
  Basic
        income or loss per share is computed by dividing net income or loss attributable
        to common stockholders by the weighted average number of shares outstanding
        during the year. Diluted income or loss per share attributable to common
        stockholders further considers the impact of dilutive common stock equivalents.
        Diluted loss per share has not been presented separately for the three
        months ending March 31, 2005 and 2004 because the effect of the additional
        shares which would be issued, assuming conversion of the convertible notes
        and
        common stock purchase warrants, are anti-dilutive for the aforementioned
        periods.
  **6.**
              **COMMITMENTS
                  AND CONTINGENCIES**
  On
        January 27, 2005, the Company was served with a summons with notice by Jarred
        Weisfeld and Cherry Jones, individually and doing business as JarredCherry
        Productions LLC, referred to herein as the plaintiffs, which indicates that
        the
        plaintiffs commenced an action against the Company. The plaintiffs allege,
        among
        other things, breach of contract, and breach of implied covenant of good
        faith
        and fair dealing, unfair competition, tortuous misappropriation of goodwill,
        and
        deceptive acts and practices pursuant to Section 349 of the New York General
        Business Law. This dispute stems from an alleged agreement between the
        plaintiffs and the Company related to the works of the late Mr. Russell Jones,
        who was the son of Ms. Jones and the management client of Mr. Weisfeld. The
        Company served on plaintiffs and filed a demand for complaint in the
        jurisdiction in which the summons with notice was filed by the plaintiffs.
        The
        plaintiffs were required to respond within 20 calendar days as measured from
        February 23, 2005, to avoid having the action dismissed. The plaintiffs did
        not
        respond within the required 20 calendar days but did file a complaint on
        March
        15, 2005. The complaint indicates that the plaintiffs are seeking compensatory
        and punitive damages of no less than $1,812,500 for each of the six causes
        of
        action alleged. On May 6, 2005 the Company forwarded a proposed definitive
        settlement agreement to the Plaintiffs Attorney and is currently waiting
        for
        their response. To date, the Company has not heard from the Plaintiffs or
        their
        Counsel. The Company believes that this dispute will be resolved, however
        the
        Company is unable to predict the outcome of this action and the effect that
        it
        may have on the Company’s liquidity and results of operations.
  October
        13, 2004, The Tube received notification from a television channel featuring
        music related programming that the circle logo used by The Tube is “confusingly
        similar” to the circle logo used by that television channel, supporting claims
        of trademark infringement and unfair competition. On November 3, 2004, the
        Company responded to the October 13, letter stating it does not believe the
        logos are confusingly similar or that any trademark infringement has occurred.
        The Company has not received a response to its November 3, 2004 letter. The
        Company intends to vigorously defend any challenge to its use of its
        logo.
  The
        Company is subject to claims and legal actions that arise in the ordinary
        course
        of its business. The Company believes that the ultimate liability, if any,
        with
        respect to these claims and legal actions, will not have a material effect
        on
        the financial position or results of operations of the Company.
  **7.**
              **RECENT
                  ACCOUNTING PRONOUNCEMENTS**
  In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        123, Share-Based Payments (revised 2004), (“SFAS No. 123R”). This statement
        eliminates the option to apply the intrinsic value measurement provisions
        of
        Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued
        to Employees, to stock based compensation issued to employees. The Statement
        requires companies to measure the cost of employee services received in exchange
        for an award of equity instruments based on the fair value of the award at
        the
        date of grant, and recognize that cost over the period during which an employee
        is required to provide services in exchange for the award. The adoption of
        SFAS
        No. 123R could have a material effect on the Company’s results of
        operations.
  11
  **8.**
              **SEGMENT
                  REPORTING**
  The
        Company has two reportable operating segments: The Tube and AGU Music; AGU
        Studios operations were discontinued and are being reported as discontinued
        operations (see Note 9). The Tube airs traditional music videos and live
        concerts of contemporary music material that is derived from archived video
        and
        music collection libraries. When fully operational, the Company expects that
        The
        Tube will generate revenues by selling advertising time and through direct
        sales
        of music related to the content broadcasted on the network. AGU Music is
        a
        record company engaged in the release of recorded music materials acquired
        through artist signings and acquisitions. Each segment is separately managed
        and
        is evaluated by the Company’s chief operating decision makers for the purpose of
        allocating the Company’s resources. The Company also has a corporate
        headquarters function which does not meet the criteria of a reportable operating
        segment.
  The
        table
        below presents information about reportable segments for the three months
        ending
        March 31, 2005 and 2004.
  **March
                  31, 2005**
              
              **March
                  31, 2004****Revenues****AGU
                  Music**
              
              **$**
              **105,927**
              
              **$**
              **--****Discontinued
                  operations**
              
              
              **44,576**
              
              
              **--****The
                  Tube**
              
              
              **--**
              
              
              **--****Consolidated
                  revenues**
              
              **$**
              **150,503**
              
              **$**
              **--****Operating
                  loss****AGU
                  Music**
              
              **$**
              **18,760**
              
              **$**
              **(315,340**
              **)****The
                  Tube**
              
              
              **(811,242**
              **)**
              
              **(293,262**
              **)****Segment
                  loss**
              
              
              **(792,482**
              **)**
              
              **(608,602**
              **)****Corporate**
              
              
              **(1,980,948**
              **)**
              
              **(276,765**
              **)****Discontinued
                  operations**
              
              
              **(183,638**
              **)**
              
              **--****Consolidated
                  operating loss**
              
              **$**
              **(2,957,068**
              **)**
              **$**
              **(885,367**
              **)**
  The
        table
        below reconciles the measurement of segment profit shown in the previous
        table
        to the Company’s consolidated income before taxes:
  March
                  31, 2005
              
              March
                  31, 2004**Total
                  segment loss**
              
              **$**
              **(792,482**
              **)**
              **$**
              **(608,602**
              **)****Operating
                  loss - corporate**
              
              
              **(1,980,947**
              **)**
              
              **(276,765**
              **)****Loss
                  from discontinued operations**
              
              
              **(183,638**
              **)**
              
              **--****Interest
                  expense**
              
              
              **(1,287,685**
              **)**
              
              **(12,514**
              **)****Loss
                  before income tax**
              
              **$**
              **(4,244,752**
              **)**
              **$**
              **(897,881**
              **)**
  **9.**
              **DISCONTINUED
                  OPERATIONS**
  During
        the third quarter of 2005, the Company determined to discontinue the operations
        of AGU Studios and sell the Lauderdale Property. The Company decided to sell
        the
        building and discontinue the studio operations primarily due to liquidity
        issues
        and to provide additional funds for working capital and the repayment of
        debt.
        The sale of the building took place on December 28, 2005. AGU Studios revenues
        reported in discontinued operations, for the years ended December 31, 2005
        were
        $44,576. There were no revenues from AGU Studios in 2004. Prior year financial
        statements for 2005 have been restated to reflect the operations of AGU Studios
        as a discontinued operation.
  12
 The
        following table illustrates the reporting of the discontinued operations
        for the
        three months ended March 31, 2005 and the three months ended March 31,
        2004.
  **Three
                    Month****March
                    31, 2005**
                
                **March
                    31, 2004**Loss
                    from continuing operations
                
                $
                (792,482
                )
                $
                (608,602
                )Discontinued
                    operations:Loss
                    from operations of discontinued AGU Studios
                
                
                (183,638
                )
                
                -Corporate
                
                
                (1,980,948
                )
                
                (276,765
                )Net
                    operating loss
                
                $
                (2,957,068
                )
                $
                (885,367
                )
  **10.**
              **RELATED
                  PARTY TRANSACTIONS**
  On
        Mar c h
        31,
        2005 the Company received a loan in the aggregate amount of $190,683 from
        a
        related party and stockholder of the Company. This loan pays interest at
        10% and
        is due June 30, 2005. As of March 31, 2005 the Company had outstanding loans
        payable to related parties in the aggregate amount of $636,325. The Company
        currently does not have the resources to pay these loans upon their
        maturity.
  On
        May 5,
        2005, the Company entered into a settlement agreement with the holders of
        the
        ARK 21 Notes (See Note 3), who are significant stockholders of the Company.
        Under the terms of the settlement agreement, the ARK 21 notes were cancelled
        and
        were replaced with new notes containing the same terms and conditions as
        the old
        notes, except that the new notes have a beginning principal balance of $331,240
        and require, in addition to the monthly payment of approximately $8,500,
        the
        repayment of principal in the amount of $50,000 for every $1,000,000 in equity
        capital raised by the Company. In addition, upon the Company’s closing of a
        capital raising of at least $250,000, the Company must pay all the principal
        and
        interest due under the original notes for the period January through April,
        2005
        in the amount of approximately $36,000. The Company also agreed to issue
        500,000
        restricted shares of the Company’s common stock to the holders of the ARK 21
        Notes.
  For
        the
        period from January 1, 2005 through March 31, 2005, the Company received
        various
        consulting services totaling approximately $63,600 from two stockholders.
        At
        March 31, 2005 approximately $58,600 was unpaid.
  Additionally,
        two officers of the Company agreed to defer a portion of their salary, payable
        under their employment agreements until such time as adequate capital has
        been
        raised by the Company. The amount deferred as of March 31, 2005 was
        approximately $151,000.
  Accounts
        payable to related parties at March 31, 2005 totaled approximately $110,000.
        Included in this amount was $5,400 in consulting services and expenses provided
        by a director.
  For
        the
        period from April 1, 2005 through May 17, 2005, the Company received various
        loans from three stockholders totaling $98,500 as follows; $75,000 from DML
        Marketing Corp, $7,500 from John P. Grandinetti , and $5,000 from David Levy.
        The loans will accrue interest at an annual rate of 10% and mature on June
        30,
        2005.
  **11.**
              **SUBSEQUENT
                  EVENTS**
  On
        May 5,
        2005, the Company entered into a settlement agreement with the holders of
        the
        ARK 21 Notes, who are significant stockholders of the Company. Under the
        terms
        of the settlement agreement, the ARK 21 notes were cancelled and were replaced
        with new notes, terms of which are more fully described in Notes 3 and
        9.
  13
 On
        May
        13, 2005, the Company executed a letter agreement with the holder of the
        Mitchell Note whereby the Company agreed that the $145,000 interest and real
        estate tax payment made on behalf of the Company, the $100,000 that was advanced
        to the Company on April 29, 2005 by the holder of the Mitchell Note, the
        unpaid
        interest on the Mitchell Note for March and April 2005 and the legal fees
        incurred by the holder in connection with the letter agreement, would accrue
        interest at the default rate of 18% and would be due and payable by the Company
        on August 1, 2005. The letter agreement also extends the deadline for which
        the
        Company was to have filed a registration statement to register the Company’s
        common stock pertaining to the Mitchell Note and related warrants from April
        30,
        2005 to June 30, 2005, and extends the date for which the registration statement
        is required to be declared effective to November 30, 2005. The Company also
        agreed to grant the holder of the Mitchell Note an additional 150,000 warrants
        to purchase the Company’s common stock at an exercise price of $1.50 per share,
        with the same registration and anti-dilution protections contained in the
        warrants originally granted to the holder of the Mitchell Note.
  On
        April
        19, 2005, the Company was advanced $100,000 from a stockholder and issued
        a
        promissory note that matures on June 30, 2005 and has an annual interest
        rate of
        10%.
  On
        April
        20, 2005, the Company issued 277,242 shares of its common stock as
        follow;
  ·
              200,000
                  shares in connection with a services
                  agreement
 ·
              13,667
                  shares in exchange for professional services received by the
                  Company
 ·
              60,000
                  shares as consideration for defaults on promissory
                  notes
 ·
              3,575
                  shares as payment of interest
  **12.**
              **GOING
                  CONCERN**
  The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. The Company’s financial condition
        and operating results, specifically a working capital deficiency of
        approximately $8.8 million and accumulated deficit of approximately $10.9
        million at March 31, 2005, as well as a net loss of approximately $4.2 million
        and net cash used in operations of approximately $1.1 mi l lion
        for
        the quarter ended March 31, 2005 and de-minimus cash on hand, raise substantial
        doubt about our 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, the recorded music
        business and the Lauderdale Property.
  These
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty. If the Company is unsuccessful in obtaining
        the
        additional capital necessary to fund its operations, it may be forced to
        downsize certain operations, restructure its current debt obligations on
        terms
        less favorable to the Company than the existing obligations or sell some
        of its
        assets. It may also need to seek protection under the federal bankruptcy
        laws or
        be forced into bankruptcy by its creditors. There can be no assurance the
        Company will be successful in its efforts to raise additional
        financing.
  **Item
                  2.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS.**
  **Overview**
  We
        were
        formerly known as Lexington Barron Technologies, Inc. and were incorporated
        in
        the State of Colorado on August 23, 2000 for the purpose of addressing the
        specific needs of small businesses and startup organizations by providing
        a
        broad range of consulting and advisory services, ranging from market research
        and analysis to business plan and systems development to financial consulting.
        In early 2004, our former management determined that their business model
        was
        not progressing and that we should either merge with or acquire an operating
        company with an operating history and assets.
  Effective
        April 1, 2004, we completed a Share Exchange Agreement with Pyramid Music
        Corp.,
        a Florida corporation (“PMC”). Under the terms of the Share Exchange Agreement,
        we acquired 100% of the outstanding common stock of PMC in exchange for
        16,922,464 shares of our common stock. On March 26, 2004, in anticipation
        of the
        completion of the share exchange, we changed our name to AGU Entertainment
        Corp.
        Upon completion of this transaction, the former stockholders of PMC owned,
        on a
        fully diluted basis, approximately eighty percent of the outstanding common
        stock of AGU Entertainment Corp. as of April 1, 2004, resulting in a change
        in
        control. The transaction was accounted for as a reverse merger and
        recapitalization whereby PMC, which became a wholly owned subsidiary of AGU
        Entertainment Corp., is deemed to be the acquirer for accounting purposes.
        In
        addition, we had no identifiable assets and liabilities as of April 1, 2004.
        As
        a result, PMC is deemed to be the surviving accounting and reporting entity,
        and
        all of the historical financial information presented in this Form 10-KSB,
        including the consolidated financial statements and this Management’s Discussion
        and Analysis of Financial Condition and Results of Operations, reflect the
        assets, liabilities, results of operations and cash flows of PMC and its
        subsidiaries, The Tube Music Network, Inc., a Florida corporation (“The Tube”)
        and Pyramid Records International, inc., a Florida corporation
        (“PRI”).
  14
 As
        a
        result of the share exchange, AGU became the parent company of PMC, which
        was a
        development stage company with an inception date of May 20, 2003 with two
        wholly-owned operating subsidiaries that are engaged in the following services:
        (i) the formation and operation of a television network, The Tube Music Network,
        Inc., (“The Tube”) that airs traditional music videos and live concerts of
        contemporary music material that is derived from archived video and music
        collection libraries, and (ii) a production, marketing and distribution record
        company, Pyramid Records International, Inc. (“PRI”). PMC was dissolved in July
        of 2004 and at that time The Tube and PRI became wholly-owned subsidiaries
        of
        AGU Entertainment Corp. In February 2005, PRI officially changed its name
        to AGU
        Music, Inc. (“AGU Music”).
  The
        Tube
        is a 24-hour per day broadcast digital television network that delivers high
        quality music video, audio, pay-per-view options and commerce to digital
        viewers
        nationally. Its national launch is expected to take place in the second quarter
        of 2005. The Tube can currently be seen in a limited number of households
        in
        various parts of the United States.
  In
        the
        late 1990’s, broadcasters throughout the country were granted portions of the
        airwaves at no cost with the understanding that they would provide free digital
        signals as part of the U.S. government’s desire for high definition television.
        However, due to improvements in digital signal compression, the bandwidth
        required to broadcast digital television was substantially reduced, leaving
        broadcasters with excess bandwidth to use at their discretion. As a result,
        there are currently a number of media companies that have the ability to
        offer a
        digital quality picture over the air directly to consumers and indirectly
        through the cable and satellite operators’ digital box using surplus bandwidth
        from local broadcasters. These media outlets can offer additional channels
        to
        broadcast local news, sports, weather or other specialty services like The
        Tube.
        We expect to gain additional distribution for The Tube by reaching agreements
        with these service providers to air The Tube’s digital signal. We are currently
        in negotiations with several of these service providers, and expect to
        eventually leverage this market penetration into households served by larger
        cable and satellite systems. There can be no assurance as to whether or when
        these negotiations will result in definitive agreements. We expect that The
        Tube
        will earn revenues through advertising sales and through e-commerce with
        respect
        to music and related products that will be seen by consumers on The
        Tube.
  AGU
        Music
        produces both studio albums and DVD concerts. It entered into several agreements
        for distribution and released three albums to the public in 2004. Our ability
        to
        produce new albums and DVD concerts in 2005 will be dependent on the amount
        of
        working capital available to us (see Liquidity and Capital Resources) for
        the
        required marketing, promotional and other operating expenses necessary to
        produce recorded music projects. We have already cancelled plans for one
        significant music project due to a lack of available working capital, and
        do not
        expect to release any new projects until our liquidity situation improves
        substantially.
  In
        the
        third quarter of 2004, our board of directors decided to purchase and develop
        a
        facility that would serve as a comprehensive media entertainment recording
        and
        production facility that would encompass film, television and musical projects.
        On December 22, 2004, we closed on the purchase of a 162,000 square foot
        facility situated on 23 acres of land in Lauderdale Lakes, Florida (the
“Lauderdale Property”). Our business plan envisioned a facility that would
        consist of approximately 75,000 square feet of office space available for
        lease,
        six sound stages ranging in size from 1,800 square feet to 28,000 square
        feet, a
        12,000 square foot audio production studio, a 7,000 square foot commissary
        and a
        two and a half acre back lot for film projects. We believed that this would
        be
        one of the largest studio production facilities on the east coast and that
        there
        is substantial demand within the entertainment industry for a facility of
        this
        type in South Florida.
  15
 Originally
        we anticipated that within three years the rental income from the office
        space
        and production facilities would be sufficient to cover substantially all
        of the
        operating expenses of the studio, which would allow us to use the soundstages
        and production studio to develop new music and film projects without requiring
        significant cash outlays. The Company further expected to generate revenue
        by
        offering technical and production services in the areas of film, television
        and
        music production, and through the rental of office and studio space. A limited
        amount of production activity did take place on the Lauderdale Property in
        2004
        and in the first quarter of 2005, and in February 2005 we formed a separate
        subsidiary, AGU Studios, Inc., a Florida Corporation, under which our studio
        development and production activities were to take place. We did not enter
        into
        any leases or any other material contractual commitments with respect to
        the
        usage of this facility and because of continuing liquidity issues, the Company
        decided to discontinue AGU Studios and sell the Lauderdale Property. See
        “-Restatement” below.
  Because
        of the start up nature of our business throughout most of 2004, our results
        of
        operations and cash flows in the first quarter of 2005 are not comparable
        to the
        same period of a year ago.
  **Restatement**
  The
        Company has restated its previously issued, March 31, 2005 condensed
        consolidated financial statements for matters related to the following
        previously reported items: reclassification of discontinued operations and
        the
        issuance of stock to a former director in connection with an employment
        agreement.
  **Liquidity
        and Capital Resources**
  We
        do not
        have adequate cash to meet our current obligations as well as our short and
        long
        term objectives. The growth and development of our business will require a
        significant amount of additional working capital. Our sources of cash are
        not
        adequate to fund the next 12 months of operations. We currently have very
        limited financial resources and will need to raise additional capital in
        order
        to continue as a going concern. If we are unsuccessful in obtaining the
        additional capital necessary to fund our operations, we may be forced to
        downsize certain operations, restructure our current debt obligations on
        terms
        less favorable to us than the existing obligations or sell some of our assets.
        We may also need to seek protection under the federal bankruptcy laws or
        be
        forced into bankruptcy by our creditors.
  Our
        financial condition and operating results, specifically a working capital
        deficit of approximately $8.8 million, an accumulated deficit of approximately
        $10.9 million, de minimus cash on hand as of March 31, 2005 and a net loss
        of
        $4.2 million and net cash used in operations of approximately $1.1 million
        for
        the three months ending March 31, 2005 raise substantial doubt about our
        ability
        to continue to operate as a going concern.
  As
        a
        company that has recently emerged from the start-up phase with a limited
        operating history, we are subject to all the substantial risks inherent in
        the
        development of a new business enterprise within an extremely competitive
        industry. We cannot assure you that the business will continue as a going
        concern or ever achieve profitability. Due to the absence of an operating
        history and the emerging nature of the market in which we compete and lack
        of
        sufficient capital to fund our operations and implement our business plan,
        we
        anticipate operating losses until such time as we can successfully implement
        our
        business strategy, which includes the national launch of The Tube and the
        development of the Lauderdale Property. Because of losses incurred by us
        through
        our most recent fiscal year end and our general financial condition, our
        independent registered public accounting firm inserted a going concern
        qualification in their audit report for the most recent fiscal year that
        raises
        substantial doubt about our ability to continue as a going concern.
  Since
        May
        20, 2003, we have financed our operations through numerous debt and equity
        issuances. In addition to the convertible notes discussed below, we issued
        approximately $4,699,000 of convertible notes or debentures, approximately
        $3,379,000 of which plus accrued interest, were subsequently converted into
        1,173,540 shares of common stock of the Company and $75,000 of which was
        repaid
        in 2004. Approximately $1,095,000 of the remaining convertible promissory
        notes
        mature between the fourth quarter of 2006 and the first quarter of 2007 and
        a
        $150,000 promissory note matures on June 30, 2005. While these convertible
        notes
        are convertible into shares of our common stock at a conversion price of
        $3.00
        per share, there can be no assurances that these notes will be converted
        prior
        to their becoming due. We currently do not have the financial resources to
        repay
        these promissory notes without completing an additional financing, reducing
        expenses, selling assets or extending the maturities of this debt. If we
        are
        unsuccessful in obtaining the additional capital necessary to fund our
        operations, it may be forced to downsize certain operations, restructure
        our
        current debt obligations, find a strategic partner, and or sell some certain
        assets. We may also have to seek protection under the federal bankruptcy
        laws or
        be forced into bankruptcy by its creditors.
  16
 As
        part
        of the purchase price of the Lauderdale Property, we issued to the seller
        on
        December 22, 2004 a convertible promissory note in the principal amount of
        $7,000,000. The note pays interest at an annual rate of 6.5% and is convertible
        at any time at the seller’s option into shares of our common stock at a
        conversion price of $2.50 per share. A principal payment of $250,000 is due
        on
        June 25, 2005 and the remaining balance of the note matures on December 22,
        2005. All of our obligations to the seller under this convertible promissory
        note and related agreements are secured by a first mortgage on the Lauderdale
        Property, including all of our rights, title and interest as lessor in and
        to
        all leases or rental arrangements of the Lauderdale Property. At the closing
        of
        the purchase of the Lauderdale Property, we made a prepayment into an escrow
        account of $150,000 for interest on the note and real estate taxes on the
        Lauderdale Property covering the quarterly period ending March 31, 2005.
        Additional quarterly prepayments of $145,000 are required to be put into
        escrow
        beginning March 22, 2005. We did not make the required prepayment on March
        22,
        2005. This amount was paid on behalf of the Company by one of our other
        creditors (see below) on April 22, 2005, at which time we received a letter
        from
        the holder of the first mortgage note acknowledging the cure of the payment
        default.
  Also
        on
        December 22, 2004, we issued a secured convertible term note in the principal
        amount of $3,000,000 to Mitchell Entertainment Company (the “Mitchell Note”).
        The note pays interest monthly at an annual rate of 10% and has a maturity
        date
        of December 19, 2006. The note can be converted at any time by the lender
        into
        shares of our common stock at an initial conversion price of $1.50 per share,
        subject to anti-dilution protections and certain other adjustments. The Mitchell
        note is secured by a second mortgage on the Lauderdale Property and by
        substantially all of our other assets, including the capital stock of our
        subsidiaries.
  On
        May
        13, 2005 we executed a letter agreement with the holder of the Mitchell Note
        whereby we agreed that the $145,000 interest and real estate tax payment
        made on
        behalf of the Company, the $100,000 that was advanced to us on April 29,
        2005 by
        the holder of the Mitchell Note, the interest installments on the Mitchell
        Note
        for April 1,2005 and May 1, 2005 and the legal fees incurred by the holder
        in
        connection with the letter agreement, together with the interest due on the
        foregoing amount would accrue interest at the default rate of 18% and would
        be
        due and payable by us on August 1, 2005. The letter agreement also extends
        the
        deadline for which we were to have filed a registration statement to register
        the Company’s common stock pertaining to the Mitchell Note and related warrants
        from April 30, 2005 to June 30, 2005, and extends the date for which the
        registration statement is required to be declared effective to November 30,
        2005. We also agreed to grant the holder of the Mitchell Note additional
        warrants of 100,000 and 50,000 respectively, to purchase our common stock
        at an
        exercise price of $1.50 per share, with the same registration and anti-dilution
        protections contained in the warrants originally granted to the holder of
        the
        Mitchell Note. Because we did not pay the required monthly interest payments
        for
        March and April 2005, which resulted in our receiving a default letter from
        the
        holder of the Mitchell Note on April 8, 2005, the interest rate on the note
        was
        increased to the default rate of 18%. If in the future we are unable to comply
        with the terms of the Mitchell Note, the May 13, letter agreement or the
        terms
        of the first mortgage note, the holders of either note may seek to foreclose
        on
        the Lauderdale Property.
  On
        March
        3, 2004 our AGU Music subsidiary entered into an Assignment and Assumption
        Agreement with Pyramid Media Group, Inc. (“PMG”) whereby, AGU Music agreed to
        assume all of the covenants and obligations of a Distribution Agreement between
        PMG and ARK 21 Records, LP (“ARK21”). In exchange for the rights to the
        Distribution Agreement and certain assets of PMG, AGU Music assumed the
        obligation to repay $350,000 of notes payable to certain principals of PMG
        (the
“ARK 21 Notes”). The Company has guaranteed the payment of the ARK 21 notes,
        which have an annual interest rate of 8% and mature on May 1, 2007. Allen
        Jacobi, the former President of AGU Music, is an owner and controlling
        stockholder of PMG. Approximately $19,000 of these notes was paid in 2004
        and
        the outstanding balance as of March 31, 2005 is approximately $331,000. The
        terms of these notes require monthly payments of principal and interest.
        We have
        not made the required monthly principal and interest payments since June
        of
        2004. On May 5, 2005, we entered into a settlement agreement with the holders
        of
        the ARK 21 Notes, who are significant stockholders of the Company. Under
        the
        terms of the settlement agreement, the ARK 21 Notes were cancelled and were
        replaced with new notes containing the same terms and conditions as the old
        notes, except that the new notes have a beginning principal balance of $331,240
        and require, in addition to the monthly payment of approximately $8,500,
        the
        repayment of principal in the amount of $50,000 for every $1,000,000 in equity
        capital raised by us. In addition, upon the our closing of a capital raising
        of
        at least $250,000, we must pay all the principal and interest due under the
        original notes for the period January through April, 2005 in the amount of
        approximately $36,000. We also agreed to issue 500,000 restricted shares
        of the
        Company’s common stock to the holders of the ARK 21 Notes.
  17
  We
        currently have a monthly cash requirement of approximately $550,000 and we
        will
        need to raise additional capital in the second quarter and the balance of
        2005,
        for working capital, capital expenditures, business expansion, repayment
        of
        maturing debt and to continue as a going concern. We anticipate that we will
        need to raise up to approximately $6 million over the balance of 2005 to
        provide
        for these requirements. Management is evaluating several alternatives, including
        the sale of assets, sale of equity securities or issuance of additional debt,
        or
        finding a strategic partner. We cannot assure you that we will be successful
        in
        completing such an offering, in executing the business plan or achieving
        profitability. If we are not successful in raising additional capital and
        refinancing the $7,000,000 convertible promissory note due in December 2005,
        our
        financial condition, business operations and ability to continue as a going
        concern will be adversely affected, and we may need to seek protection under
        the
        federal bankruptcy laws.
  Cash
        used
        in operations for the first three months of 2005 was $1,092,000, which was
        primarily the result of our total operating loss of $2,957,000, partially
        offset
        by increases to accounts payable and accrued expenses and the issuance of
        common
        stock in exchange for services. Cash used in operations in 2004 was $1,273,000.
        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 more fully
        develop our three lines of business. No assurances can be given as to when
        or if
        we will be able to develop profitable operations.
  Cash
        used
        in investing activities in the first quarter of 2005 amounted to $129,000,
        as
        compared to $22,000 in 2004. The increase was due to higher capital expenditures
        in 2005. Capital expenditures for the remainder of 2005 will depend largely
        upon
        our ability to raise additional capital; however, our business plan currently
        assumes approximately $1 million of capital expenditures over the next twelve
        months.
  We
        received cash from financing in the first quarter of 2005 in the amount of
        $454,000, as compared to $1,207,000 in the same period of a year ago. The
        decrease was due to fewer issuances of convertible notes in 2005.
  We
        have
        experienced liquidity issues since our inception due primarily to our limited
        ability, to date, to raise adequate capital on acceptable terms. We have
        historically relied upon the issuance of promissory notes that are convertible
        into shares of our common stock to fund our operations and currently anticipate
        that we will need to continue to issue promissory notes and common stock
        to fund
        our operations and repay our outstanding debt for the foreseeable future.
        At
        March 31, 2005, we had approximately $12.5 million of debt outstanding,
        approximately $7.3 million of which is due at various dates in 2005. We
        currently do not have the financial resources to repay any of these or any
        of
        the aforementioned obligations without completing an additional financing.
        We
        also currently do not have funds available for basic working capital
        requirements beyond May 31, 2005. There can be no assurance that we will
        be
        successful in obtaining additional funds necessary to finance our operation
        or
        repay debt.
  If
        we are
        unable to raise the necessary capital to meet our current and future
        obligations, we will need to consider other alternatives, which could include
        curtailing our business plan, selling some of our assets or finding a strategic
        partner.
  Moreover,
        as a result of our liquidity issues, we have experienced delays in the repayment
        of certain promissory notes upon maturity. However, certain holders of our
        promissory notes have agreed in 2004 and 2005 to extend the due dates on
        their
        promissory notes. If in the future, the holders of our promissory notes demand
        repayment of principal and accrued interest instead of electing to extend
        the
        maturity dates on their notes and if we are unable to repay our debt when
        due
        because of our continued liquidity issues, we may be forced into an involuntary
        bankruptcy filing.
  18
  We
        do not
        have adequate cash to meet our current obligations as well as its short and
        long
        term objectives. The growth and development of the Company’s business will
        require a significant amount of additional working capital. We currently
        have
        very limited financial resources and will need to raise additional capital
        in
        order to continue as a going concern. Our financial condition and operating
        results, specifically a working capital deficit of approximately $8.8 million,
        an accumulated deficit of approximately $10.9 million, de minimus cash on
        hand
        as of March 31, 2005 and a net loss of $4.2 million for the three months
        ending
        March 31, 2005 raise substantial doubt about our ability to continue to operate
        as a going concern. If we are unsuccessful in obtaining the additional capital
        necessary to fund our operations, we may be forced to downsize certain
        operations, restructure our current debt obligations on terms less favorable
        to
        the existing obligations or sell some of our assets. We may also need to
        seek
        protection under the federal bankruptcy laws or be forced into bankruptcy
        by our
        creditors.
  **Critical
        Accounting Policies and Estimates**
  The
        accounting policies that we have identified as critical to our business
        operations and to an understanding of our results of operations are described
        in
        detail in our Annual Report on Form 10-KSB for the fiscal year ended December
        31, 2004. In many cases, the accounting treatment of a particular transaction
        is
        specifically dictated by accounting principles generally accepted in the
        United
        States of America, with no need for management’s judgment in their application.
        In other cases, preparation of our unaudited condensed consolidated financial
        statements for interim periods requires us to make estimates and assumptions
        that affect the reported amount of assets and liabilities, disclosure of
        contingent assets and liabilities at the date of the financial statements,
        and
        the reported amounts of revenues and expenses during the reporting period.
        There
        can be no assurance that the actual results will not differ from those
        estimates.
  In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        123, Share-Based Payments (revised 2004), (“SFAS No. 123R”). This statement
        eliminates the option to apply the intrinsic value measurement provisions
        of
        Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued
        to Employees, to stock based compensation issued to employees. The Statement
        requires companies to measure the cost of employee services received in exchange
        for an award of equity instruments based on the fair value of the award at
        the
        date of grant, and recognize that cost over the period during which an employee
        is required to provide services in exchange for the award. Adoption of SFAS
        No.
        123R could have a material effect on the Company’s results of
        operations.
  **Results
        of Operations for the Three Months ending March 31, 2005 and
        2004**
  Revenues
        from continuing operations were $106,000 for the three months ended March
        31,
        2005 and $0 for the three months ended March 31, 2004. This amount was related
        to recorded music shipments by AGU Music. Approximately $45,000 of revenues
        were
        generated by the discontinued operations of AGU Studios. AGU Music had a
        gross
        profit of $83,000 and the gross profit from discontinued operations was
        approximately $31,000 during the period.
  Operating
        expenses from continuing operations were $2,857,000 and $885,000 for the
        three
        months ended March 31, 2005 and 2004 respectively, the majority of which
        was
        general and administrative expenses. Included in this amount is $1,047,000
        of
        compensation expense in connection to the issuance of common stock to a director
        relative to his employment contract. Thus far in 2005 our liquidity constraints
        have severely limited our ability to engage in marketing, promotion, advertising
        and similar expenses necessary to develop our business. We expect this trend
        to
        continue until such time as we can complete a substantial debt or equity
        offering.
  Our
        operating loss from discontinued operations for the three months ended March
        31,
        2005 was $183,638 compared to the operating loss of $0 for the three months
        ended March 31, 2004.
  Interest
        expense in 2005 was $1,450,000 which included $162,000 in interest from
        discontinued operations, as compared to $12,500 in 2004, and includes $1,197,000
        for the amortization of debt discounts and the amortization of deferred
        financing fees. The remainder of the increase in interest expense is the
        result
        of increased indebtedness in 2005.
  19
  We
        did
        not record a tax benefit during this period as we determined that it was
        more
        likely than not that we would not be able to generate sufficient taxable
        income
        to use any net deferred tax assets. As such, we increased our valuation
        allowance for the net deferred tax asset that existed at December 31, 2004
        so
        that no net tax benefit was recorded in 2005.
  Our
        net
        loss for the period was $4,245,000, as compared to $898,000 in the prior
        year.
  We
        anticipate entering into several affiliate agreements with digital broadcasters,
        which will allow The Tube to be seen in approximately 20 million homes by
        the
        end of 2005. While we expect this market penetration to generate a substantial
        increase in marketing, promotion and other expenses at The Tube, we also
        expect
        that our revenues will ultimately increase sufficiently enough to cover these
        increases. Thus, our results of operations in fiscal 2004 are not indicative
        of
        our projected results of operations in fiscal 2005 and beyond.
  **Recent
        Accounting Pronouncements**
  In
        December 2004, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standards No. 123, Share-Based Payments
        (revised 2004), (“SFAS No. 123R”). This statement eliminates the option to apply
        the intrinsic value measurement provisions of Accounting Principles Board
        (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, to stock based
        compensation issued to employees. The Statement requires companies to measure
        the cost of employee services received in exchange for an award of equity
        instruments based on the fair value of the award at the date of grant, and
        recognize that cost over the period during which an employee is required
        to
        provide services in exchange for the award. Adoption of SFAS No. 123R could
        have
        a material effect on the Company’s results of operations.
  **Item
                  3.**
              **CONTROLS
                  AND PROCEDURES**
  The
        Company, under the supervision and with the participation of its management,
        including its principal executive officer and principal financial officer,
        previously evaluated the effectiveness of the design and operation of its
        disclosure controls and procedures as of the end of the period covered by
        this
        report. Based on this evaluation, the principal executive officer and principal
        financial officer concluded that, as of the end of the period covered by
        this
        report, the Company’s disclosure controls and procedures were effective in
        reaching a reasonable level of assurance that management is timely alerted
        to
        material information related to and during the period when our periodic reports
        are being prepared. Subsequent to the original evaluation and in connection
        with
        the preparation of the Company’s Form 10-KSB for the year ended December 31,
        2005, the Company recognized an error in the accounting treatment for the
        issuance of stock to a director pursuant to an employment agreement and
        determined that it should restate the financial results to correct the
        accounting treatment of the issuance of stock and also reflect discontinued
        operations. The Company’s disclosure controls and procedures did not detect on a
        timely basis the additional compensation expense in connection with the issuance
        of common stock. The methodology for accounting for the issuance of such
        stock
        was corrected subsequent to the initial filing of the Form 10-QSB for the
        period
        covered by this report. As a result of this restatement as discussed further
        in
        Note 1 and Note 9 to the condensed consolidated financial statements, the
        Company, under the supervision and with the participation of its management,
        including its principal executive officer and principal financial officer,
        re-evaluated the effectiveness of the design and operation of its disclosure
        controls and procedures as of the end of the period covered by this report.
        Based upon this re-evaluation, the principal executive officer and principal
        financial officer concluded that, as of the end of the period covered by
        this
        report, the Company’s disclosure controls and procedures were not effective in
        reaching a reasonable level of assurance that management is timely alerted
        to
        material information related to and during the period when our periodic reports
        are being prepared.
  A
        control
        system, no matter how well conceived and operated, can provide only reasonable,
        not absolute, assurance that the objectives of the control system are met.
        Further, the design of a control system must reflect the fact that there are
        resource constraints, and the benefits of controls must be considered relative
        to their costs. Because of the inherent limitations in all control systems,
        no
        evaluation of controls can provide absolute assurance that all control issues
        and instances of fraud, if any, within the Company have been detected. Because
        of the inherent limitations in a cost-effective control system, misstatements
        due to error or fraud may occur and not be detected.
  20
  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.
  **PART
        II.** **OTHER
        INFORMATION**
  **ITEM
        6.**  **EXHIBITS**
  The
        following exhibits are incorporated by reference herein or filed herewith.
        The
        warranties, representations and covenants contained in the agreements listed
        below as exhibits should not be relied upon by buyers, sellers or holders
        of the
        Company’s securities and are not intended as warranties, representations or
        covenants to any individual or entity except as specifically set forth in
        the
        agreements.
  **Number**
              
              **Title****2.1**
              
              **Share
                  Exchange Agreement, dated March 15, 2004, between the shareholders
                  of
                  Pyramid Music Corp., Pyramid Music Corp. and Lexington Barron
                  Technologies, Inc. (Incorporated by reference to the Registrants
                  Form 8-K
                  filed April 21, 2004, as amended)****2.2**
              
              **Agreement
                  and Plan of Merger, dated as of September 30, 2004, by and between
                  AGU
                  Entertainment Corp., a Colorado corporation, and AGU Entertainment
                  Corp.,
                  a Delaware corporation (incorporated herein by reference to the
                  Registrant’s Form 10-QSB filed November 12,
                  2004)****3.1**
              
              **Certificate
                  of Incorporation of AGU Entertainment Corp., a Delaware corporation
                  (incorporated herein by reference to the Registrant’s Form 10-QSB filed
                  November 12, 2004)****3.2**
              
              **Bylaws
                  of AGU Entertainment Corp., a Delaware corporation (incorporated
                  herein by
                  reference to the Registrant’s Form 10-QSB filed November 12,
                  2004)****3.4**
              
              **Specimen
                  certificate of the common stock of AGU Entertainment Corp., a Delaware
                  company (incorporated herein by reference to the Registrant’s Registration
                  Statement on Form SB-2 (File No. 333-86244)).****4.1**
              
              **Convertible
                  Promissory Note dated September 13, 2004, made by AGU Entertainment
                  Corp.
                  in favor of Galt Financial Corp. (incorporated herein by reference
                  to the
                  Registrant’s Form 8-K filed September 20,
                  2004)****4.2**
              
              **Warrant
                  to subscribe for 500,000 shares of common stock of AGU Entertainment
                  Corp.
                  issued to Galt Financial Corporation (incorporated herein by reference
                  to
                  the Registrant’s Form 8-K filed September 20,
                  2004)****4.3**
              
              **Secured
                  Convertible Term Note issued by AGU Entertainment Corp., The Tube
                  Music
                  Network, Inc., and Pyramid Records International, Inc. to Mitchell
                  Entertainment Company (incorporated herein by reference to the
                  Registrant’s Form 8-K filed December 29, 2004)****4.4**
              
              **Common
                  Stock Purchase Warrant of AGU Entertainment Corp. issued to Mitchell
                  Entertainment Company (incorporated herein by reference to the
                  Registrant’s Form 8-K filed December 29, 2004)****4.5**
              
              **Promissory
                  Note issued by AGU Entertainment Corp. to Charley Zeches, in her
                  capacity
                  as trustee of Lakes Holding Trust U/A (incorporated herein by reference
                  to
                  the Registrant’s Form 8-K filed December 29,
                  2004)****10.1**
              
              **Letter
                  Agreement regarding $145,000 Protective Advance, dated April 14,
                  2005
                  (incorporated herein by reference to the Registrant’s Form 8-K filed April
                  20, 2005)**
  21
 **Number**
                
                **Title****10.2**
                
                **Letter,
                    dated April 22, 2005 from Elizabeth Buntrock (incorporated herein
                    by
                    reference to the Registrant’s Form 8-K/A filed April 28,
                    2005)****10.3**
                
                **Settlement
                    and Mutual Release Agreement, effective April 15, 2005, by and
                    among AGU
                    Entertainment Corp. and each of its subsidiaries, and Ned Siegel,
                    Neil
                    Strum and Strum Brothers Investment, LLC. (incorporated herein
                    by
                    reference to the Registrant’s Form 8-K filed May 11,
                    2005)****10.4**
                
                **Charter
                    Affiliate Affiliation Agreement dated as of April 15, 2005, by
                    and between
                    The Tube Music Network, Inc. and Raycom Media, Inc. (incorporated
                    herein
                    by reference to the Registrant’s Form 8-K/A filed May 23, 2005) (This
                    agreement has been redacted pursuant to a confidential treatment
                    request
                    filed with the SEC)****10.5**
                
                **Technical
                    Services Agreement, dated as of December 1, 2004, by and between
                    The Tube
                    Music Network, Inc. and Skyport Services, Inc. (incorporated
                    herein by
                    reference to the Registrant’s Form 8-K/A filed May 23, 2005) (This
                    agreement has been redacted pursuant to a confidential treatment
                    request
                    filed with the SEC)****31.1**
                
                **Certification
                    of David C. Levy, Chief Executive Officer of the Company, dated
                    June 21,
                    2006, pursuant to Rule 13a - 14(a)/15d - 14(a) of the Securities
                    Exchange
                    Act of 1934, as amended, as adopted pursuant to Sections 302
                    and 404 of
                    the Sarbanes-Oxley Act of 2002.****31.2**
                
                **Certification
                    of John W. Poling, Chief Financial Officer of the Company, dated
                    June 21,
                    2006, pursuant to Rule 13a - 14(a)/15d -14(a) of the Securities
                    Exchange
                    Act of 1934, as amended, as adopted pursuant to Sections 302
                    and 404 of
                    the Sarbanes-Oxley Act of 2002.****32.1**
                
                **Certification
                    of David C. Levy, Chief Executive Officer of the Company, and
                    John W.
                    Poling, Chief Financial Officer of the Company, dated June 21,
                    2006
                    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                    906 of
                    the Sarbanes-Oxley Act of
                    2002.**
  22
  **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:
                    June 21, 2006**
                /s/
                    John W. PolingName:
                    John W. PolingTitle:
                    Chief Financial Officer
   23