UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 Form
10-QSB
 
 (Mark
One)
 
 x QUARTERLY REPORT UNDER
TO SECTION 13 OR 15(d) OF
 THE
SECURITIES EXCHANGE ACT OF 1934
 For the
quarterly period ended June 30, 2008
 
 o TRANSITION REPORT UNDER
SECTION 13 OR 15(d)  OF THE
 SECURITIES
EXCHANGE ACT OF 1934
 For the
transition period from _______ to _______.
 
 Commission
File Number: 0-09358
 
 IMPART MEDIA GROUP,
INC.
 
 (Exact
name of small business issuer as specified in its charter)
 
 Nevada
              
              88-0441338(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)
 
 1300
North Northlake Way
 Seattle,
WA 98103
 
 (Address
of principal executive offices)
 
 (206)
633-1852
 
 (Issuer's
telephone number)
 
 N/A
 
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes o No x
  Due to
our bankruptcy, we have no shares of common or preferred stock currently
outstanding. Our common stock currently trades on the OTC Bulletin Board under
the symbol “IMMG”.
 
 Transitional
Small Business Disclosure Format (check one): Yes o No x
 
 
  1
 PART
I - FINANCIAL INFORMATION
  ITEM
1.                       
FINANCIAL STATEMENTS.
  The unaudited consolidated financial statements of Impart Media
Group, Inc. (“we,” “us,” “our,” “the Company” and “IMG”) as of the three and
nine months ended June 30, 2008 and 2007 are attached hereto. Our consolidated
financial statements are denominated in United States currency and are prepared
in accordance with accounting principles generally accepted in the United
States.
 
 It is the
opinion of management that the interim consolidated financial statements for the
three and nine months ended June 30, 2008 include all adjustments necessary in
order to ensure that the consolidated financial statements are not misleading.
These statements reflect all adjustments, which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented in accordance with
accounting principles generally accepted in the United States of America. Except
where noted, these interim consolidated financial statements follow the same
accounting policies and methods of their application as our September 30, 2007
audited annual consolidated financial statements. All adjustments are of a
normal recurring nature. It is suggested that these interim consolidated
financial statements be read in conjunction with our September 30, 2007 audited
annual consolidated financial statements.
 
 Operating
results for the three and nine months ended June 30, 2008 are not necessarily
indicative of the results that can be expected for the year ending September 30,
2008.
 2
 IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES
 (Debtors-In-Possession
as of May 21, 2008)
 CONDENSED
CONSOLIDATED BALANCE SHEETS
  June
      30, 2008
                (Unaudited)
              
              
              September 30,2007
                (Audited)ASSETS
              
              (In thousands, except share and per share data)Current
      assets:Cash
              
              $
              859
              
              
              $
              169Restricted
      cash
              
              
              —
              
              
              
              143Accounts
      receivable, net
              
              
              2,532
              
              
              
              5,468Inventories
              
              
              107
              
              
              
              85Prepaid
      expenses and other current assets
              
              
              58
              
              
              
              45Total
      current assets
              
              
              3,556
              
              
              
              5,910Fixed
      assets, net
              
              
              309
              
              
              
              410Deferred
      financing costs, net
              
              
              —
              
              
              
              1,431Other
      assets
              
              
              40
              
              
              
              40Total
      assets
              
              $
              3,905
              
              
              $
              7,791LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
              
              $
              8,790
              
              
              $
              8,101Accrued
      liabilities
              
              
              1,246
              
              
              
              260Customer
      deposits
              
              
              43
              
              
              
              15Line
      of credit
              
              
              —
              
              
              
              2,349Notes
      payable to Novus
              
              
              134
              
              
              
              —Notes
      payable to related parties — current portion
              
              
              179
              
              
              
              76Convertible
      debentures
              
              
              2,100
              
              
              
              —Capital
      lease obligations — current portion
              
              
              47
              
              
              
              48Stock
      and other amounts payable to former IMA owners
              
              
              200
              
              
              
              200Total
      current liabilities
              
              
              12,739
              
              
              
              11,049Convertible
      debentures, net of current portion
              
              
              —
              
              
              
              1,609Notes
      payable to related parties, net of current portion
              
              
              150
              
              
              
              150Capital
      lease obligations, net of current portion
              
              
              12
              
              
              
              39Total
      liabilities
              
              
              12,901
              
              
              
              12,847Commitments
      and contingenciesStockholders’
      equity (deficit):Preferred
      stock, $0.001 par value; 25,000,000 shares authorized: 2,903,229 shares
      issued and outstanding
              
              
              3
              
              
              
              3Common
      stock, $0.001 par value; 100,000,000 shares authorized:23,959,248
      shares issued and outstanding as of June 30, 2008 and September 30,
      2007
              
              
              24
              
              
              
              24Additional
      paid in capital
              
              
              20,377
              
              
              
              20,377Accumulated
      deficit
              
              
              (29,400
              )
              
              
              (25,460
              )Total
      stockholders’ equity (deficit)
              
              
              (8,996
              )
              
              
              (5,056
              )Total
      liabilities and stockholders’ equity (deficit)
              
              $
              3,905
              
              
              $
              7,791
  See notes
to condensed consolidated financial statements
 3
 IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES
 (Debtors-In-Possession
as of May 21, 2008)
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
  Three
      Months Ended
                June 30,
              
              
              Nine
      Months Ended
                June
  30,2008
              
              
              2007
              
              
              2008
              
              
              
              2007(In thousands, except per share data)RevenueMedia
      services
              
              $
              859
              
              
              $
              1,281
              
              
              $
              3,935
              
              
              $
              2,656Managed
      subscriptions
              
              
              63
              
              
              
              70
              
              
              
              197
              
              
              
              249Consulting
      and design services
              
              
              8
              
              
              
              20
              
              
              
              41
              
              
              
              158Equipment
      sales
              
              
              23
              
              
              
              388
              
              
              
              427
              
              
              
              2,167Total
      revenue
              
              
              953
              
              
              
              1,759
              
              
              
              4,600
              
              
              
              6,230Cost
      of revenue
              
              
              253
              
              
              
              561
              
              
              
              1,122
              
              
              
              2,403Gross
      profit
              
              
              700
              
              
              
              1,198
              
              
              
              3,478
              
              
              
              3,827Other
      operating expensesWages
      and salaries
              
              
              733
              
              
              
              1,251
              
              
              
              2,779
              
              
              
              3,748Selling
      and marketing
              
              
              25
              
              
              
              85
              
              
              
              73
              
              
              
              363General
      and administrative
              
              
              348
              
              
              
              1,139
              
              
              
              1,458
              
              
              
              3,857Depreciation
      and amortization
              
              
              39
              
              
              
              193
              
              
              
              129
              
              
              
              583Total
      other operating expenses
              
              
              1,146
              
              
              
              2,668
              
              
              
              4,439
              
              
              
              8,551Loss
      from operations
              
              
              (446
              )
              
              
              (1,470
              )
              
              
              (961
              )
              
              
              (4,724
              )Other
      income (expense):Other
      income and expense, net
              
              
              42
              
              
              
              —
              
              
              
              (16
              )
              
              
              —Interest
      expense
              
              
              (38
              )
              
              
              (372
              )
              
              
              (2,962
              )
              
              
              (848
              )Total
      other income (expense)
              
              
              4
              
              
              
              (372
              )
              
              
              (2,978
              )
              
              
              (848
              )Net
      loss
              
              $
              (442
              )
              
              $
              (1,842
              )
              
              $
              (3,939
              )
              
              $
              (5,572
              )Net
      loss attributable to common stockholders:Net
      loss
              
              $
              (442
              )
              
              $
              (1,842
              )
              
              $
              (3,939
              )
              
              $
              (5,572
              )Beneficial
      conversion feature of Series A preferred stock
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (25
              )Revaluation
      of Series A preferred stock – conversion price reduction
              
              
              —
              
              
              
              (2,447
              )
              
              
              —
              
              
              
              (3,421
              )Revaluation
      of Series A preferred stock – warrant exercise price
    reduction
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (935
              )Accretion
      of dividends on Series A preferred stock
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              183Net
      loss attributable to common stockholders
              
              $
              (442
              )
              
              $
              (4,289
              )
              
              $
              (3,939
              )
              
              $
              (9,770
              )Net
      loss per common share — basic and diluted
              
              $
              (0.02
              )
              
              $
              (0.18
              )
              
              $
              (0.16
              )
              
              $
              (0.43
              )Shares
      used in computing net loss per share — basic and diluted
              
              
              23,959
              
              
              
              23,719
              
              
              
              23,959
              
              
              
              22,939
  See notes
to condensed consolidated financial statements
 4
 IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES
 (Debtors-In-Possession
as of May 21, 2008)
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
  Nine
      Months Ended
                June
      30,2008
              
              
              2007(In
      thousands)Operating
      activities:Net
      loss
              
              $
              (3,939
              )
              
              $
              (5,572
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Non-cash
      wages and salaries related to stock options
              
              
              —
              
              
              
              810Non-cash
      general and administrative expenses:Amortization
      of prepaid consulting expense
              
              
              —
              
              
              
              276Warrants
      issued for earned consulting services
              
              
              —
              
              
              
              (342
              )Common
      stock issued to settle legal dispute
              
              
              —
              
              
              
              268Non-cash
      interest expense:Warrants
      issued to bridge lenders
              
              
              —
              
              
              
              206Common
      stock issued to senior executives upon conversion of notes
      payable
              
              
              —
              
              
              
              40Amortization
      of deferred financing costs on line of credit:Warrants
              
              
              —
              
              
              
              875Other
      deferred financing costs
              
              
              1,430
              
              
              
              195Amortization
      of discount on convertible debentures
              
              
              —
              
              
              
              59Common
      stock issued to Laurus for extended filing date
              
              
              —
              
              
              
              52Other
      non-cash interest expense
              
              
              491
              
              
              
              (524
              )Bad
      debt expense
              
              
              —
              
              
              
              32Depreciation
      and amortization
              
              
              129
              
              
              
              583Loss
      on disposal of fixed assets
              
              
              —
              
              
              
              6Other
      adjustments
              
              
              6
              
              
              
              (34
              )Changes
      in assets and liabilities, excluding assets and liabilities from
      acquisitions:Accounts
      receivable
              
              
              2,936
              
              
              
              (203
              )Inventories
              
              
              (23
              )
              
              
              557Prepaid
      expenses and other current assets
              
              
              (13
              )
              
              
              1,826Other
      assets
              
              
              —
              
              
              
              (566
              )Accounts
      payable
              
              
              359
              
              
              
              786Other
      current liabilities
              
              
              1,479
              
              
              
              (1,132
              )Net
      cash provided by (used in) operating activities
              
              
              2,855
              
              
              
              (1,802
              )Investing
      activities:Purchases
      of fixed assets
              
              
              (28
              )
              
              
              (51
              )Net
      cash used in investing activities
              
              
              (28
              )
              
              
              (51
              )Financing
      activities:Payments
      on capital lease obligations
              
              
              (28
              )
              
              
              (36
              )Net
      borrowings (repayments) on line of credit
              
              
              (2,109
              )
              
              
              51Issuance
      of convertible debentures
              
              
              —
              
              
              
              2,100Payment
      of deferred financing costs on convertible debentures
              
              
              —
              
              
              
              (51
              )Dividends
      on Series A preferred stock
              
              
              —
              
              
              
              (104
              )Proceeds
      from the sale of common stock, net
              
              
              —
              
              
              
              223Net
      cash provided by (used in) financing activities
              
              
              (2,137
              )
              
              
              813Net
      increase in cash
              
              
              690
              
              
              
              204Cash
      — beginning of period
              
              
              169
              
              
              
              195Cash
      — end of period
              
              $
              859
              
              
              $
              399Supplemental
      disclosure:Cash
      paid for interest
              
              $
              901
              
              
              $
              94
  See notes
to condensed consolidated financial statements
 5
 IMPART
MEDIA GROUP, INC.
 (Debtors-In-Possession
as of May 21, 2008)
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 Note
1.  Chapter 11 Reorganization
 
 Following
the filing of an involuntary petition on February 14, 2008, Impart Media Group,
Inc. (the "Company") consented to bankruptcy relief, and the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
entered an order for relief under Chapter 11 on May 21,
2008.  Thereafter, the Company has operated as a debtor-in-possession
pursuant to 11 U.S.C. Sections 1107 and 1108.  Additionally, one of
the Company’s subsidiaries, Impart, Inc. (“Impart”), filed its own voluntary
petition under Chapter 11 on May 21, 2008 and the two bankruptcy cases were
administered jointly.  The Company’s subsidiary, Impart Media
Advertising, Inc. ("IMA"), was not included in the bankruptcy filing and the
Company subsequently sold its ownership interest to IMA’s management, with
Bankruptcy Court approval.
  On
September 17, 2008, the Company and Impart (together, the “Debtors”) and Enable
Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
Strategy Master Fund, ENA, Hudson Bay Fund, L.P., and Hudson Overseas Fund, Ltd.
(the “Creditor Proponents”) filed with the Bankruptcy Court a plan of
reorganization (“the Plan”) consolidating the two cases.  On January
29, 2009, the Plan was confirmed by the Bankruptcy Court and went effective on
February 11, 2009 (the “Effective Date”).  Pursuant to the Plan,
administrative and priority creditors will be paid 100% of their claims and
general unsecured creditors will receive their pro-rata share of the remaining
cash.  The Creditor Proponents waived cash distributions on all of
their claims and will receive equity in the reorganized
company.  Pursuant to the Plan, all equity interests existing at the
time of the bankruptcy filing, including common stock, preferred stock, options,
and warrants, were cancelled, and the convertible debentures were
satisfied.
  The
Company's unaudited condensed consolidated financial statements are prepared
consistent with accounting principles generally accepted in the United States
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.  However,
as shown in the unaudited condensed consolidated financial statements, the
Company has sustained substantial losses and has relied primarily on sales of
securities and proceeds from borrowings for operating capital, which, along with
the Chapter 11 filing under the Bankruptcy Code, raise substantial doubt about
the Company's ability to continue as a going concern.
 
 Note  2.  Description
of Business
 
 The
Company, which was headquartered in Seattle, Washington, provided digital
signage in the business-to-consumer media sector.  The Company also
provided consulting, design, integration, fabrication, assembly, IP
connectivity, quality assurance, creative production, installation, onsite
maintenance, web-data hosting, network monitoring and content management
services throughout the United States (and in global markets through the
Company's authorized distributors).  As a result of the Company's
acquisition of E&M Advertising, Inc. and its affiliates, renamed IMA, in
February 2006, the Company also provided offline and online direct response
advertising capabilities.  In May 2008, with the approval of the
Bankruptcy Court, the assets of the Seattle operations were sold for
$390,000.  As described in Note 7, IMA was sold in October
2008.  The Company currently has no operating activities.
 
 Note
3.  Summary of Significant Accounting Policies
 
 Basis of Preparation —The
accounting policies used in the preparation of the Company's audited
Consolidated Financial Statements are disclosed in the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 2007.  The
accompanying unaudited interim financial statements should therefore be read in
conjunction with the audited Consolidated Financial Statements for the fiscal
year ended September 30, 2007 included in the Company's Annual Report on Form
10-KSB.  In the opinion of management, the interim financial
statements include all adjustments of a normal recurring nature considered
necessary to present fairly the financial position for the periods
shown.  Quarterly results are not necessarily indicative of the
results which may be expected for the full fiscal year.
 
 Loss per Share — Basic loss per
share is computed by dividing net loss attributable to common stockholders by
the weighted average number of common stock shares outstanding during the
period.  Diluted loss per share, which would include the effect of the
conversion of unexercised stock options, unexercised warrants to purchase common
stock, and convertible preferred stock, is not separately computed because
inclusion of such conversions is antidilutive.  In these cases, basic
and diluted loss per share is the same.
 6
 Basic and
diluted weighted average common shares outstanding, and the potentially dilutive
securities excluded from loss per share computations because they are
antidilutive, are as follows for June 30, 2008 and 2007:
 
 June
      30,2008
              
              
              2007Convertible
      debentures
              
              
              16,378,000
              
              
              
              0Convertible
      Series A preferred stock
              
              
              2,903,229
              
              
              
              4,500,005Common
      stock options
              
              
              0
              
              
              
              3,892,500Common
      stock warrants
              
              
              5,646,194
              
              
              
              4,913,113Total
              
              
              24,927,423
              
              
              
              13,305,618
 
 As more
fully described in the Form 10-KSB for September 30, 2007, all incentive
stock options were deemed forfeited in December 2007.  Pursuant to the
Plan, all equity interests existing at the time of the bankruptcy filing,
including common stock, preferred stock, options, and warrants, were
cancelled.
 
 Advertising Costs— The
Company expenses the costs of producing advertisements at the time production
occurs and expenses the costs of communicating advertisements in the period in
which the advertising space or airtime is used.  Advertising costs
were $7,661 and $8,215 for the three months ended June 30, 2008 and 2007 and
$28,920 and $39,229 for the nine months June 30, 2008 and 2007,
respectively.
 
 Revenue Recognition — The Company's
revenue recognition policies are based on the requirements of Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104
“Revenue Recognition,” the provisions of AICPA Statement of Position (“SOP”) No.
81-1, “Accounting for Performance of Construction-Type and Certain
Production-Type Contracts” (“SOP 81-1”) and the guidance set forth in EITF Issue
99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”. Revenue
is recognized when there is persuasive evidence that an arrangement exists,
delivery has occurred, collectability is reasonably assured, and fees are fixed
or determinable.
 
 Substantially
all of the Company's revenues are generated from media services which consist of
sales of brokered advertising and certain other consulting, content creation,
and Internet-based advertising fees.  Because the Company typically
acted as an agent on behalf of the Company's advertising clients, brokered
advertising revenues were recorded based on the net commissions
earned.  Media services revenues from consulting, content creation,
and Internet-based advertising fees were recorded at their gross billing
amounts.
 
 The gross
and net billing amounts included in operating revenues for the three and nine
months ended June 30, 2008 and 2007 are as follows (in thousands):
 
 Three
      Months Ended June 30,
              
              
              Nine
      Months Ended June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Consolidated
      gross revenue
              
              $
              953
              
              
              $
              10,301
              
              
              $
              26,177
              
              
              $
              29,712Direct
      cost of sales
              
              
              —
              
              
              
              8,542
              
              
              
              21,577
              
              
              
              23,482Consolidated
      net revenue
              
              $
              953
              
              
              $
              1,759
              
              
              $
              4,600
              
              
              $
              6,230
 
 Revenue
from equipment sales is generally recognized when products were shipped and
ownership passes to the customer.  Revenue from management
subscriptions is recorded in the month the service was
provided.  Revenue from consulting and design services, which are all
short-term, is recognized using the completed-contract method under SOP
81-1.  There were no significant contracts in process at June 30, 2008
or 2007.
 
 Recent Accounting Pronouncements— In accordance with Release No. 8760 of the Securities Act of 1933,
commencing with our fiscal year ending September 30, 2009, we will become
subject to the requirement to include in our annual report management’s
assessment of internal controls over financial reporting.  This
assessment will require us to document and test our internal control procedures
in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.  Our
independent registered public accountants will be required to audit our
assessment of internal controls for our fiscal year ending September 30,
2010.
 7
 Note
4.  Certain Assets and Liabilities
 
 As a
result of the Plan, certain assets and liabilities will be settled for less than
amounts shown on the accompanying balance sheet, as follows:
 
 Accounts Receivable -Accounts receivable at June 30, 2008 and September 30, 2007 is comprised
as follows:
 
 June
      30,
                2008
              
              
              September
      30,
                2007IMG
      (in bankruptcy)
              
              $
              12
              
              
              $
              254IMA
      (not in bankruptcy)
              
              
              2,520
              
              
              
              5,214Total
      accounts receivable
              
              $
              2,532
              
              
              $
              5,468
 
 Fixed assets, which primarily related
to the Company ("IMG"), were written down to their net realizable value at
September 30, 2007 and were sold pursuant to the Plan.  In addition,
inventory at June 30, 2008 and September 30, 2007, which solely related to IMG,
was sold pursuant to the Plan.
  Accounts Payable -Accounts payable at June 30, 2008 and September 30,
2007 is comprised as follows:
 
 June
      30,
                2008
              
              
              September
      30,
                2007IMG
      (in bankruptcy)
              
              $
              1,090
              
              
              $
              603IMA
      (not in bankruptcy)
              
              
              7,700
              
              
              
              7,498Total
      accounts payable
              
              $
              8,790
              
              
              $
              8,101
 
 Accrued Expenses -Accrued expenses at June 30, 2008 and September 30, 2007 is comprised as
follows:
 
 June
      30,
                2008
              
              
              September
      30,
                2007IMG
      (in bankruptcy)
              
              $
              783
              
              
              $
              169IMA
      (not in bankruptcy)
              
              
              463
              
              
              
              91Total
      accrued liabilities
              
              $
              1,246
              
              
              $
              260
 
 All of the remaining liabilities on the
balance sheet as of June 30, 2008 and September 30, 2007 relate solely to IMG
and are subject to compromise due to the bankruptcy as described in Note
1.
 Note
5.  Convertible Debentures
 
 In
February 2009, the Convertible Debentures, including all accrued interest and
penalties, were satisfied in exchange for equity in the Reorganized
Company.
  In May
2007, the Company entered into a Securities Purchase Agreement with six
institutional investors, pursuant to which the Company agreed to
sell unsecured convertible debentures (the “Convertible Debentures”) in the
aggregate principal amount of $2.1 million.  In connection with the
issuance of the Convertible Debentures, the Company paid to a placement agent
cash fees of approximately $150,000 and issued five-year warrants to purchase an
aggregate of 280,000 shares of common stock with an exercise price of $0.52 per
share, which contractually were due to expire on May 24, 2012.
 
 Purchasers
of the Convertible Debentures received registration rights pursuant to
a Registration Rights Agreement that required us to file a registration
statement under the Securities Act of 1933 covering the resale the shares of
common stock issuable upon conversion of the principal amount and interest
payable, which the Company filed with the SEC on July 10, 2007.  The
registration statement has not been declared effective.
 
 The cash
fees paid and the value of the warrants in association with the issuance of
Convertible Debentures were recorded as deferred finance costs totaling
approximately $302,000.  Due to the default described in the following
paragraphs, all remaining deferred finance costs have been expensed in the
quarter ended December 31, 2007.  As a result, the total discount on
the notes equaled $694,000.  Due to the default described in the
following paragraphs, all remaining debt discount has been expensed in the
quarter ended December 31, 2007. 
 8
 
 Under the
terms of the debentures, the Company was required to commence monthly redemption
against the principal debenture amount on December 1, 2007.  In lieu
of making such principal payment on December 1, 2007, the Company commenced
negotiations to restructure the Company's obligations under the terms of the
Convertible Debentures on December 3, 2007.  The Company did not
obtain a waiver and was declared in default.
 
 Pursuant
to the terms of the Convertible Debentures, the default gave each investor the
option to declare immediately due and payable all obligations under the
Convertible Debentures at an amount equal to all costs, fees and liquidated
damages plus the greater of (i) 130% of the outstanding principal amount of the
debenture plus accrued interest thereon or (ii) the outstanding principal amount
of the debenture plus accrued interest thereon divided by the conversion price
on the date of the default (approximately 25,890,000 shares).  As of
December 31, 2007, the Company accrued the 30% penalty totaling $630,000, which
is reflected as additional interest expense.
 On
December 3, 2007, one investor invoked the right to convert cash liquidated
damages into shares of common stock at a conversion price of $0.1095, or 85% of
the ten day volume weighted average price of common stock.  Pursuant
to the terms of the debentures, conversion of liquidated damages at a conversion
price lower than the original conversion price of $0.75 would cause a downward
adjustment of the conversion price for all of the securities offered under the
Securities Purchase Agreement, such that the resulting conversion price would
equal the lower conversion rate.  As such, the conversion of the
debentures and the exercise price of the warrants issued under the securities
purchase agreement are equal to $0.1095 at December 31,
2007.  Assuming the conversion of all such debentures, the adjustment
would have resulted in the conversion of a total of approximately 16,378,000
additional shares of common stock.
 Note
6.  Commitments and Contingencies
 
 Contingencies— The Company
is subject to various legal proceedings and claims that arise in the ordinary
course of business.  The Company's management currently believes that
resolution of such legal matters will not have a material adverse impact on the
Company's consolidated financial position, results of operations or cash
flows.
 
 Note
7.  Subsequent Events
 
 Chapter 11 Bankruptcy
Proceedings— See Note 1 regarding the Company's entrance into bankruptcy
under Chapter 11 as a result of involuntary petition filed in February
2008.
 
 Changes in Executive Officers— As a result of the Plan discussed in Note 1, in February 2009, all of
the existing officers and directors were removed from their positions and were
replaced by Barry Eisenberg as sole officer and director.
 
 Sale of IMA Subsidiary— In
October 2008, with the approval of the Bankruptcy Court, the stock of IMA was
sold for $100,000.
 9
 
 ITEM
2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 Statements
contained herein that are not historical fact may be forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, an amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended, that are subject to a variety of risks and uncertainties.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which the Company cannot predict with accuracy and some of which the
Company might not even anticipate. Although the Company believe that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions at the time made, the Company can give no assurance that
such expectations will be achieved. Factors that would cause actual results to
differ materially from those projected or suggested in any forward-looking
statements are contained in the Company's filings with the Securities and
Exchange Commission, including those factors discussed under the captions
“Forward-Looking Information” in the Company's most recent Annual Report on Form
10-K, as may be supplemented or amended by the Company's Quarterly Reports on
Form 10-Q, which the Company urge investors to consider. The Company undertake
no obligation to publicly release revisions in such forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events or circumstances, except as
otherwise required by securities and other applicable laws.
 
 Overview
 
 Impart
Media Group, Inc. (the “Company” or "IMG") is a Nevada corporation formed in
1996.  The Company, which was headquartered in Seattle, Washington,
provided digital signage in the business-to-consumer media
sector.  The Company also provided consulting, design, integration,
fabrication, assembly, IP connectivity, quality assurance, creative production,
installation, onsite maintenance, web-data hosting, network monitoring and
content management services throughout the United States (and in global markets
through the Company's authorized distributors).  As a result of the
Company's acquisition of E&M Advertising, Inc. and its affiliates, renamed
Impart Media Advertising, Inc. (“IMA”), in February 2006, the Company also
provided offline and online direct response advertising
capabilities.  The Company currently has no business operations, and
therefore, no sources of revenue.  Currently, there are no products or
services being offered and there are no plans to begin offering products or
services in the future.
  Following
the filing of an involuntary petition on February 14, 2008, the Company
consented to bankruptcy relief, and the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy Court”) entered an order for
relief under Chapter 11 on May 21, 2008.  Thereafter, IMG has operated
as a debtor-in-possession pursuant to 11 U.S.C. Sections 1107 and
1108.  Additionally, one of IMG’s subsidiaries, Impart, Inc.
(“Impart”), filed its own voluntary petition under Chapter 11 on May 21, 2008
and the two bankruptcy cases were administered jointly.  IMG’s
subsidiary, IMA, was not included in the bankruptcy filing and IMG subsequently
sold its ownership interest to IMA’s management, with Bankruptcy Court
approval.
  On
September 17, 2008, the Company and Impart (together, the “Debtors”) and Enable
Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
Strategy Master Fund, ENA, Hudson Bay Fund, L.P., and Hudson Overseas Fund, Ltd.
(the “Creditor Proponents”) filed with the Bankruptcy Court a plan of
reorganization (“the Plan”) consolidating the two cases.  On January
29, 2009, the Plan was confirmed by the Bankruptcy Court and went effective on
February 11, 2009 (the “Effective Date”).  Pursuant to the Plan,
administrative and priority creditors will be paid 100% of their claims and
general unsecured creditors will receive their pro-rata share of the remaining
cash.  The Creditor Proponents waived cash distributions on all of
their claims and will receive equity in the reorganized
company.  Pursuant to the Plan, all equity interests existing at the
time of the bankruptcy filing, including common stock, preferred stock, options,
and warrants, were cancelled, and the convertible debentures were
satisfied.
  Proceedings
under Chapter 11
 
 On
February 14, 2008, an involuntary petition was filed against IMG for relief
under Chapter 11 of the Bankruptcy Code.  On May 21, 2008, the
Company's wholly-owned subsidiary, Impart, Inc. (“Impart”) filed its own
voluntary petition under the Bankruptcy Code.  Both Chapter 11 cases
were jointly administered by the Hon. Robert E. Gerber under case number
08-10510.
 
 Following
the filing of an involuntary petition on February 14, 2008, but before the Order
for Relief Date and before Impart filed its voluntary petition, the Debtors and
Enable Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce
Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas
Fund, Ltd. (the “Creditor Proponents”) engaged in engaged in successful
negotiations for a consensual restructuring of the Debtors.  In
connection with the implementation of the restructuring, on or about May 8,
2008, the Debtors, E&M and the Creditor Proponents entered into a
Restructuring Agreement (the “Restructuring Agreement”) which provided for
consent to the involuntary Chapter 11 filing against IMG, a voluntary Chapter 11
filing by Impart and the Debtors’ best efforts to consummate the restructuring
through a pre-negotiated plan of reorganization.  IMG consented to
bankruptcy relief, and the Bankruptcy Court entered an order for relief under
Chapter 11 of the Bankruptcy Code on May 21, 2008.
 
 Pursuant
to the Restructuring Agreement, the Debtors entered into an Asset Purchase
Agreement (“APA”) for the sale (the “Sale”) of the Seattle operations to Novus
Communication Technologies, Inc. (“Novus”) for $390,000.  In addition,
the Debtors entered into a Management Agreement with Novus, by which Novus not
only managed the Seattle Business before closing on the APA, but assumed
substantial post-petition obligations.  By Order dated June 20,
2008, the Bankruptcy Court approved the rejection of the lease for Debtors’
warehouse and office facilities located at 1300 N. Northlake Way, Seattle,
Washington as the premises would not be used by Novus.
 
 In
addition, IMG sought Bankruptcy Court approval of the sale of its stock in IMA
to an entity controlled by IMA’s president (the “Purchaser”) for $100,000 (the
“IMA Stock Payment”).  Pursuant to the IMA agreement, IMA, the
Purchaser, and the Debtors exchanged mutual releases.  By so doing,
IMA waived potential claims against the Debtors of approximately $5.0
million.  As the purchaser of the Debtors’ stock in IMA, the Purchaser
assumed responsibility for IMA’s liabilities.  The IMA Stock Payment
was to be made over four months and was secured by all of the assets of IMA and
the Purchaser entity.
 10
 Through
February 11, 2009 (the "Effective Date"), the Company operated the Company's
business as a debtor-in-possession subject to the provisions of the Bankruptcy
Code.  Pursuant to the provisions of the Bankruptcy Code, the Company
was not permitted to pay any claims or obligations which arose prior to the
Filing date (pre-petition claims) unless specifically authorized by the
Bankruptcy Court.  Similarly, claimants could not enforce any
prepetition claims unless specifically authorized by the Bankruptcy
Court.
 
 Plan
of Reorganization
 
 Pursuant
to the involuntary petition and subsequent voluntary petition under Chapter 11,
IMG and the Creditor Proponents filed the Plan with the Bankruptcy Court on
September 17, 2008 and a plan supplement dated January 26, 2009.  On
January 29, 2009, the Plan was confirmed by the Bankruptcy Court.  The
Plan went effective on February 11, 2009.
  Default of Principal Payment under Convertible
Debentures
  In May 2007, the
Company entered into a securities purchase agreement and a registration rights
agreement with six institutional investors (five of which are Creditor
Proponents to the Plan), pursuant to which the Company agreed to sell unsecured
convertible debentures (the “Convertible Debentures”).  Under the
terms of the Convertible Debentures, the Company was required to commence
monthly redemption against the principal amount on December 1,
2007.  In lieu of making such principal payment, the Company commenced
negotiations to restructure the Company's obligations under the terms of the
Convertible Debentures on December 3, 2007.  The Company did not
obtain a waiver and was declared in default.
  Pursuant
to the terms of the Convertible Debentures, the default gives each investor the
option to declare immediately due and payable all obligations under the
Convertible Debentures at an amount equal to all costs, fees and liquidated
damages plus the greater of (i) 130% of the outstanding principal amount of the
debenture plus accrued interest thereon or (ii) the outstanding principal amount
of the debenture plus accrued interest thereon divided by the conversion price
on the date of the default (approximately 25,890,000 shares).  In
December 2007, the Company accrued the 30% penalty totaling $630,000 as
additional interest expense.
  In
February 2009, the Convertible Debentures, including all accrued interest and
penalties, were satisfied in exchange for equity in the Reorganized Company in
accordance with the provisions of the Plan.
 
 Default
of Laurus Security Agreement
  In
January 2006, the Company entered into a security agreement, with Laurus Master
Fund, Ltd. (“Laurus”), pursuant to which Laurus agreed to provide a revolving
credit facility of up to $6 million.  Among other things, the security
agreement defines an event of default as any default in the performance of any
other agreement relating to any indebtedness, the effect of which default is to
cause, or permit the holder or holders of such indebtedness to cause, such
indebtedness to become due prior to its stated maturity of such contingent
obligation to become payable.
  Accordingly,
the default on the Convertible Debentures triggered an event of default under
the Laurus Security Agreement as of December 2007, giving Laurus the right to
accelerate payments in connection with the revolving credit facility and, in
addition to any other remedies available, to foreclose upon the assets securing
the facility.  Additionally, Laurus had the right to receive 125% of
the unpaid principal balance, plus accrued interest and fees, as the principal
became immediately due and payable upon the event of default.  Laurus
was also entitled to payment of a default interest rate of 2% per month on all
amounts due and such other remedies specified under the agreement governing the
facility and under the Uniform Commercial Code. All remaining deferred financing
costs were expensed in the quarter ended December 31, 2007.  All
amounts due to Laurus were paid as of March 31, 2008.
 
 Results of Operations
  Our
operations for the three months ended June 30, 2008 reflected a net loss of $0.4
million which was consistent with the prior quarter.  Net loss was
$4.3 million for the three months ended June 30, 2007, reflecting significantly
higher operating and interest expense and conversion price reduction due to the
revaluation of Series A preferred stock.  Net loss for the nine months
ended June 30, 2008 was $3.9 million, compared to $9.8 million in the prior year
nine-month period.  Net loss decreased significantly as compared to
the prior year nine-month period due to lower operating expenses partially
offset by higher interest expense as compared to the prior year nine-month
period.  As discussed above, the deferred financing costs related to
the Laurus Facility were expensed in the first fiscal quarter of
2008.
 Liquidity, Going Concern and Capital
Resources
 
 We have
prepared our consolidated financial statements assuming that we will continue as
a going concern, which contemplates realization of assets and the satisfaction
of liabilities in the normal course of business. However, as shown in the
unaudited condensed consolidated financial statements, we have sustained
substantial losses and have relied primarily on sales of securities and proceeds
from borrowings for operating capital, which, along with the Chapter 11 filing
under the Bankruptcy Code, raise substantial doubt about our ability to continue
as a going concern.  We currently have no business operations and
therefore, no sources of revenue.  Currently, there are no products or
services being offered and there are no plans to begin offering products or
services in the future. 
 11
 As of
June 30, 2008, we had an accumulated deficit of approximately
$29.4 million, we had approximately $859,000 in cash, and our working
capital deficit was approximately $9.2 million.  We have received an
opinion for the fiscal year ended September 30, 2007 from our independent
registered accounting firm noting the substantial doubt about our ability to
continue as a going concern due to our significant recurring operating losses
and negative cash flows.
 
 In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled.  The Convertible Debentures were converted
into equity of the Reorganized Company in February 2009.
  Critical
Accounting Policies and Estimates
 
 The
accounting policies used in the preparation of the Company's audited
Consolidated Financial Statements are disclosed in the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 2007.  The
Company prepared its consolidated financial statements in conformity with
accounting principles generally accepted in the U.S.  As such, the
Company is required to make certain estimates, judgments, and assumptions that
the Company believes are reasonable based upon the information
available.  These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the periods
presented.  Actual results could differ significantly from those
estimates under different assumptions and conditions.  The Company
believes that the following discussion addresses the Company's most critical
accounting estimates, which are those that the Company believes are most
important to the portrayal of the Company's financial condition and results of
operations and which require the Company's most difficult and subjective
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.  Estimates having relatively
greater significance include revenue recognition, allowance for bad debts,
impairment of long-lived assets, and income taxes.  Actual results
could differ from those estimates.
 
 Revenue Recognition — The Company's
revenue recognition policies are based on the requirements of SEC Staff
Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition,” the provisions
of AICPA Statement of Position (“SOP”) No. 81-1, “Accounting for Performance of
Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”) and the
guidance set forth in EITF Issue 99-19, “Reporting Revenue Gross as a Principal
versus Net as an Agent”. Revenue is recognized when there is persuasive evidence
that an arrangement exists, delivery has occurred, collectability is reasonably
assured, and fees are fixed or determinable.
 
 Substantially
all of the Company's revenues are generated from media services which consist of
sales of brokered advertising and certain other consulting, content creation,
and Internet-based advertising fees.  Because the Company typically
acted as an agent on behalf of the Company's advertising clients, brokered
advertising revenues were recorded based on the net commissions
earned.  Media services revenues from consulting, content creation,
and Internet-based advertising fees were recorded at their gross billing
amounts.
 
 The gross
and net billing amounts included in operating revenues for the three and nine
months ended June 30, 2008 and 2007are as follows (in thousands):
 
 Three
      Months Ended June 30,
              
              
              Nine
      Months Ended June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Consolidated
      gross revenue
              
              $
              953
              
              
              $
              10,301
              
              
              $
              26,177
              
              
              $
              29,712Direct
      cost of sales
              
              
              —
              
              
              
              8,542
              
              
              
              21,577
              
              
              
              23,482Consolidated
      net revenue
              
              $
              953
              
              
              $
              1,759
              
              
              $
              4,600
              
              
              $
              6,230
 
 Revenue
from equipment sales is generally recognized when products were shipped and
ownership passes to the customer.  Revenue from management
subscriptions is recorded in the month the service was
provided.  Revenue from consulting and design services, which are all
short-term, is recognized using the completed-contract method under SOP
81-1.  There were no significant contracts in process at June 30, 2008
or 2007.
 
 New
Accounting Pronouncements
 
 In
accordance with Release No. 8760 of the Securities Act of 1933, commencing with
our fiscal year ending September 30, 2009, we will become subject to the
requirement to include in our annual report management’s assessment of internal
controls over financial reporting.  This assessment will require us to
document and test our internal control procedures in accordance with Section 404
of the Sarbanes-Oxley Act of 2002.  Our independent registered public
accountants will be required to audit our assessment of internal controls for
our fiscal year ending September 30, 2010.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, results of
operations, liquidity, or capital expenditures.
 12
 
 ITEM
3.    CONTROLS AND
PROCEDURES
 
 Disclosure Controls and
Procedures. The Company maintain disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions in accordance with the required
“disclosure controls and  procedures” as defined in Rule
13a-15(e).  The Company's disclosure and control procedures are
designed to provide reasonable assurance of achieving their objectives, and the
Company's principal executive officer and principal financial officer concluded
that the Company's disclosure controls and procedures were effective at the
reasonable assurance level.
 
 At the
end of the period covered by this Quarterly Report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's principal executive officer and principal
financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures.  Based on the foregoing,
the Company's principal executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures were effective
to ensure that the information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to the Company's management including the
Company's principal executive officer and principal financial officer to allow
timely decisions regarding required disclosure.
 
 Internal Control Over Financial
Reporting.  There were no changes in the Company's internal
control over financial reporting that occurred during the fiscal quarter ended
June 30, 2008 that has materially affected, or is reasonably likely to
materially affect, the Company's  internal control over financial
reporting.
 
 PART
II -OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 See Item
2, Operations, "Proceedings under Chapter 11," and "Plan of
Reorganization."
 
 ITEM
2.  DEFAULTS UPON SENIOR SECURITIES
 
 See
discussion regarding the Chapter 11 filing and the Company’s default on its
obligations above.
 
 ITEM
3.  EXHIBITS.
 
 The
exhibits required by this item are listed on the Exhibit Index attached
hereto.
 
 
 
 In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 Dated:
      May 1, 2009
              IMPART
      MEDIA GROUP, INC.By:
              /s/Joe
      MartinezChief
      Executive Officer(Principal
      Executive Officer)
 
 
 Dated:
      May 1, 2009
              IMPART
      MEDIA GROUP, INC.By:
              /s/Alan
      ChaffeeChief
      Accounting Officer(Principal
      Financial Officer)
  13
 EXHIBIT
INDEX
 
 2.4
              
              Order
      Confirming the Plan of Reorganization Proposed by the Debtors and Co-Plan
      Proponents (filed as Exhibit 2.4 to our Current Report on Form 8-K dated
      February 11, 2009, and incorporated herein by
  reference).10.34
              
              Plan
      of Reorganization Proposed by the Debtors and Co-Plan Proponents Enable
      Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce
      Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson
      Overseas Fund, Ltd. (filed as Exhibit
      2.5 to our Current Report on Form 8-K dated February 11, 2009, and
      incorporated herein by reference).10.35
              
              Amended
      Disclosure Statement Accompanying Plan of Reorganization Dated September
      17, 2008 Proposed by the Debtors and Co-Plan Proponents Enable Growth
      Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
      Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas Fund,
      Ltd. (filed
      as Exhibit 99.2 to our Current Report on Form 8-K dated February 11, 2009,
      and incorporated herein by reference).31.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
              
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.
  14