UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549


Form
                  10-QSB/A
 (Amendment
                No. 1)


(Mark
      One)





T QUARTERLY
          REPORT PURSUANT TO SECTION 13 OR 15(D) OF


THE
      SECURITIES EXCHANGE ACT OF 1934





For
      the
      period ended June 30, 2006





£ 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 WaySeattle,
                WA 98103(Address
                of principal executive offices)





(206)
                633-1852(Issuer's
                telephone number)





N/A(Former
                Address of principal executive
                offices)








Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the preceding 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 T No £




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Securities Exchange Act of 1934)  Yes £  No T




As
      of
      August 15, 2006, 22,512,863  shares
      of
      our common stock, $0.001 par value per share, and 2,903,229 shares of our Series
      A preferred stock, $0.001 par value per share, which shares of Series A
      preferred stock, were, at August 15, 2006, convertible into an aggregate of
      2,903,229 shares of our common stock, were outstanding. Our common stock
      currently trades on the OTC Bulletin Board under the symbol “IMMG”.





Transitional
      Small Business Disclosure Format (check one):  Yes £ No T












*When
      used in this Report, the words "believes", "anticipates", "expects" and similar
      expressions are intended to identify forward-looking statements. Such statements
      are subject to certain risks and uncertainties that could cause actual results
      to differ materially from those projected.*





*Our
      business and results of operations are affected by a wide variety of factors
      that could materially and adversely affect our company and our actual results,
      including, but not limited to: (1) the availability of additional funds to
      enable us to successfully pursue our business plan; (2) the uncertainties
      related to the effectiveness of our technologies and the development of our
      products and services; (3) our ability to maintain, attract and integrate
      management personnel; (4) our ability to complete the development of our
      proposed services in a timely manner; (5) our ability to effectively market
      and
      sell our services to current and new customers; (6) our ability to negotiate
      and
      maintain suitable strategic licenses and corporate relationships; (7) the
      intensity of competition; and (8) general economic conditions. As a result
      of
      these and other factors, we may experience material fluctuations in future
      operating results on a quarterly or annual basis, which could materially and
      adversely affect our business, financial condition, operating results and stock
      price.*





*These
      forward-looking statements speak only as of the date hereof. We undertake no
      obligation to publicly release the results of any revisions to these
      forward-looking statements that may be made to reflect events or circumstances
      after the date hereof or to reflect the occurrence of unanticipated
      events.*





**Explanatory
        Note Regarding Amendment**





We
        are
        filing this amendment to our Quarterly Report on Form 10-QSB for the quarter
        ended June 30, 2006, originally filed with the U.S. Securities and Exchange
        Commission on August 21, 2006 to correct the following items:


•
                Part
                    I, Item 1 Unaudited Financial Statements and Notes to Consolidated
                    Financial Statements and Management’s Discussion and Analysis of Financial
                    Condition and Results of Operations to reflect the additional
                    general and
                    administrative expense recorded in connection with the issuance
                    of shares
                    of our common stock and warrants pursuant to two consulting contracts
                    that
                    were not previously recorded. As
                    a result of the omission, our general and administrative expenses
                    and net
                    loss for each of the three and six months ended June 30, 2006
                    were
                    understated by approximately $200,000. Earnings per share decreased
                    by
                    approximately $0.01 for each of the three and six months ended
                    June 30,
                    2006.




Pursuant
          to Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as
          amended
          (the "Exchange Act"), this Amendment No. 1 presents new certifications
          pursuant
          to Rule 13a-14(a)/15d-14(a) and Rules 13a-14(b)/15d-14(b) under the Exchange
          Act. Except as described above, no substantive change has been made to
          the
          Quarterly Report as originally filed. This Amendment No. 1 does not reflect
          events occurring after the filing of the Quarterly Report as originally
          filed or
          modify or update those disclosures affected by subsequent events.




2




PART
      I.
      FINANCIAL INFORMATION





ITEM
                1.
            FINANCIAL
                STATEMENTS.







IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  BALANCE SHEET (RESTATED*)June
                  30, 2006(UNAUDITED)ASSETSCurrent
                  assetsCash
              
              $
              406,459Accounts
                  receivable, net
              
              
              4,630,344Inventory
              
              
              477,366Prepaid
                  expenses and other current assets
              
              
              1,978,884Total
                  current assets
              
              
              7,493,053Fixed
                  assets, net (Note 7)
              
              
              1,437,639Other
                  AssetsIntangible
                  assets, net (Note 5, 8)
              
              
              6,121,166Deferred
                  financing costs, net (Note 10)
              
              
              2,183,446Other
                  Assets
              
              
              64,013Total
                  other assets
              
              
              8,368,625Total
                  assets
              
              $
              17,299,317LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable
              
              $
              7,195,828Accrued
                  liabilities
              
              
              429,070Customer
                  deposits
              
              
              85,534Lines
                  of credit (Note 10)
              
              
              657,137Note
                  payable
              
              
              100,000Note
                  payable - related parties (Note 9)
              
              
              190,766Capital
                  lease obligation - current portion
              
              
              21,330Stock
                  issuance payable (Note 5)
              
              
              793,710Other
                  liabilities
              
              
              203,215Total
                  current liabilities
              
              
              9,676,590Capital
                  lease obligation - long term
              
              
              92,328Total
                  liabilities
              
              
              9,768,918Commitments
                  and contingencies (Notes 16,17)Stockholders'
                  equityPreferred
                  stock - $.001 par value, 25,000,000 shares authorized, 2,903,229
                  shares
                  issued and outstanding
              
              
              2,903Common
                  stock - $.001 par value, 100,000,000 shares authorized, 21,828,299
                  shares
                  issued and outstanding
              
              
              21,834Additional
                  paid-in capital
              
              
              17,796,930Accumulated
                  deficit
              
              
              (10,291,268
              )Total
                  stockholders' equity
              
              
              7,530,399Total
                  liabilities and stockholders' equity
              
              $
              17,299,317





*
          (See
          Note 1)


See
        Notes to Consolidated Financial
        Statements





3




IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  STATEMENTS OF OPERATIONS (RESTATED*)June
                  30, 2006For
                  the Three
                Months
                  Ended
                June
                  30, 2006
              
              For
                  the Three
                Months
                  Ended
                June
                  30, 2005
              
              For
                  the Six
                Months
                  Ended
                June
                  30, 2006
              
              For
                  the Six
                Months
                  Ended
                June
                  30, 2005RevenuesEquipment
                  sales
              
              $
              634,553
              
              $
              850,251
              
              $
              1,159,189
              
              $
              1,734,037Managed
                  subscription
              
              
              108,031
              
              
              -
              
              
              261,130
              
              
              -Consulting
                  and design services
              
              
              100,565
              
              
              166,715
              
              
              206,428
              
              
              173,291Media
                  Services
              
              
              583,188
              
              
              -
              
              
              1,022,334
              
              
              -Total
                  revenues
              
              
              1,426,337
              
              
              1,016,966
              
              
              2,649,081
              
              
              1,907,328Cost
                  of revenues
              
              
              703,287
              
              
              613,125
              
              
              1,291,728
              
              
              1,311,573Gross
                  profit
              
              
              723,050
              
              
              403,841
              
              
              1,357,353
              
              
              595,755General
                  and administrative expensesProfessional
                  and consulting
              
              
              966,184
              
              
              27,341
              
              
              1,572,736
              
              
              59,257Selling
                  and marketing
              
              
              266,175
              
              
              31,213
              
              
              336,372
              
              
              69,632Depreciation
                  and amortization
              
              
              741,514
              
              
              7,389
              
              
              1,080,132
              
              
              13,013Wages
                  and salaries
              
              
              1,027,151
              
              
              229,225
              
              
              2,372,031
              
              
              434,506Rent
                  expense
              
              
              109,718
              
              
              53,652
              
              
              198,183
              
              
              107,213Other
                  general and administrative expenses
              
              
              589,921
              
              
              32,560
              
              
              1,294,319
              
              
              75,584Total
                  general and administrative expenses
              
              
              3,700,663
              
              
              381,380
              
              
              6,853,773
              
              
              759,205Income
                  (loss) from operations
              
              
              (2,977,613
              )
              
              22,461
              
              
              (5,496,420
              )
              
              (163,450
              )7,195,828Other
                  income (expense)Other
                  income and expense, net
              
              
              (14,052
              )
              
              10,176
              
              
              -
              
              
              23,866Gain
                  on retirement of notes payable
              
              
              -
              
              
              -
              
              
              106,423
              
              
              -Interest
                  expense
              
              
              (277,925
              )
              
              (5,845
              )
              
              (715,277
              )
              
              (21,208
              )Net
                  Income (loss)
              
              $
              (3,269,590
              )
              $
              26,792
              
              $
              (6,105,274
              )
              $
              (160,792
              )Net
                  Income (Loss) - Common Stockholders:Net
                  Loss
              
              $
              (3,269,590
              )
              $
              26,792
              
              $
              (6,105,274
              )
              $
              (160,792
              )Beneficial
                  conversion feature of Series A preferred stock
              
              
              
              
              
              --
              
              
              (933,873
              )
              
              --Accretion
                  of dividends on Series A preferred stock
              
              
              (80,675
              )
              
              --
              
              
              (104,125
              )
              
              --Net
                  earnings (loss) - available to common stockholders
              
              $
              (3,350,265
              )
              $
              26,792
              
              $
              (7,143,272
              )
              $
              (160,792
              )Basic
                  and diluted earnings (loss) per common share
              
              $
              (0.15
              )
              $
              0.01
              
              $
              (0.36
              )
              $
              (0.03
              )Basic
                  and Diluted weighted average common shares outstanding
              
              
              21,750,103
              
              
              4,828,831
              
              
              20,097,470
              
              
              4,828,831





*
        (See
        Note 1)




See
        Notes to Consolidated Financial
        Statements





4




IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (RESTATED*)June
                  30, 2006For
                  the six months
                Ended
                June
                  30, 2006
              
              For
                  the six months
                Ended
                June
                  30, 2005Cash
                  flows from operating activities:Net
                  loss
              
              $
              (6,105,274
              )
              $
              (160,792
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Issue
                  common stock for non-cash consulting expense
              
              
              1,000,000
              
              
              --Issue
                  warrants for services
              
              
              343,765
              
              
              --Non-cash
                  compensation expense
              
              
              355,637
              
              
              --Non-cash
                  stock compensation expense
              
              
              91,022
              
              
              --Non-cash
                  interest expense
              
              
              264,041
              
              
              --Gain
                  on retirement of notes payable
              
              
              (106,423
              )
              
              --Depreciation
                  and amortization
              
              
              1,073,131
              
              
              13,013Other
              
              
              13,148
              
              
              --Changes
                  in operating assets and liabilities net of acquired assets and
                  liabilities
                  due to acquisitions:Accounts
                  receivable
              
              
              (3,869,595
              )
              
              421,940Inventory
              
              
              6,172
              
              
              (25,632
              )Prepaid
                  expenses and other current assets
              
              
              (1,457,702
              )
              
              100Other
                  assets
              
              
              440,527
              
              
              --Accounts
                  payable
              
              
              3,975,794
              
              
              (362,810
              )Accrued
                  liabilities
              
              
              1,975,520
              
              
              (40,335
              )Customer
                  deposits
              
              
              
              
              
              119,834Net
                  cash used by operating activities
              
              
              (2,000,237
              )
              
              (34,682
              )Cash
                  flows from investing activities:Cash
                  paid in acquisitions
              
              
              (500,000
              )
              
              --Acquisition
                  of E&M
              
              
              (600,000
              )
              
              --Purchase
                  of fixed assets
              
              
              (222,303
              )
              
              (190,436
              )Cash
                  acquired in reverse merger
              
              
              --
              
              
              1,968Net
                  cash used by investing activities
              
              
              (1,322,303
              )
              
              (188,468
              )Cash
                  flows from financing activities:Proceeds
                  from sale of common stock
              
              
              681,501
              
              
              --Net
                  proceeds from sale of Preferred stock and issuance of
                  warrants
              
              
              3,910,505
              
              
              --Issuance
                  of common stock for exercise of warrants
              
              
              22,750
              
              
              --Deferred
                  financing costs and commitment fees
              
              
              (428,000
              )
              
              --Net
                  change in line of credit
              
              
              (38,294
              )
              
              11,494Proceeds
                  from notes payable
              
              
              --
              
              
              70,000Net
                  change in bank overdraft
              
              
              --
              
              
              95,531Change
                  in due to related parties
              
              
              --
              
              
              (10,250
              )Principal
                  payments on notes payable
              
              
              (607,600
              )
              
              --Proceeds
                  from notes payable - related parties
              
              
              150,000
              
              
              36,000Principal
                  payments on notes payable - related parties
              
              
              --
              
              
              (16,102
              )Principal
                  payments on capital lease obligations
              
              
              (28,504
              )
              
              --Net
                  cash provided by financing activities
              
              
              3,662,358
              
              
              186,673Net
                  change in cash
              
              
              339,818
              
              
              (36,477
              )Cash,
                  beginning of period
              
              
              66,641
              
              
              36,477Cash,
                  end of period
              
              $
              406,459
              
              $
              --Supplementary
                  cash flow information:Cash
                  payments for income taxes
              
              $
              --
              
              $
              --Cash
                  payments for interest
              
              $
              138,335
              
              $
              23,455Schedule
                  of non-cash investing and financing activities:Common
                  stock issued for acquisition
              
              $
              572,500
              
              $
              --




*
        (See
        Note 1)




See
        Notes
        to Consolidated Financial Statements




5




**IMPART
      MEDIA GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.
      Description of Business and History**





**Description
      of Business.** Impart
      Media Group, Inc. (formerly known as Limelight Media Group, Inc. and hereinafter
      referred to as "we”, “us” or the ”company") sells dynamic digital media
      solutions consisting of monitors, media servers, and associated technological
      hardware and software. We provide design, integration, fabrication, assembly,
      QA
      (quality assurance), creative production, and installation services throughout
      the United States. As a result of our acquisition of E&M Advertising, Inc.
      and its affiliates in February 2006, we now provide advertising capability
      to
      the digital elements and other media services we deploy for our
      customers.





We
      have
      developed and offer for sale a digital media network that is based on a unique
      architecture called Impart IQ, a web-based service that we believe no other
      company in the sector provides. Our products are targeted to businesses desiring
      digital signage and interactive media systems in one or more locations. This
      centrally managed network has the capability to deliver relevant information
      to
      any location where a message benefits from real time delivery to one or numerous
      displays. The network may be managed by our customers or by us.





We
      are
      currently developing products and networks for multiple markets, thereby
      providing the potential to realize revenue from multiple sources. For example,
      airports, mass transit facilities, malls, financial institutions, retail stores
      and government agencies can be location partners for directory services and
      the
      distribution of advertisements, marketing messages and information and
      entertainment content. Revenues are derived from network monitoring, hosting,
      equipment sales, maintenance and installation fees, content management, creative
      development fees, advertising sales and sponsorships. Advertising revenue may
      be
      used to offset the costs of deployment for location partners or the partners
      may
      receive a portion of the advertising revenue on a negotiated basis.





For
      the
      three month period and six month period ended June 30, 2006, our primary source
      of revenue was derived from media services, equipment sales, and managed
      subscription services. For the three month period and six month period ended
      June 30, 2005, our primary source of revenue was derived from equipment sales
      and consulting and design services.





**History.** We
      were
      incorporated in the State of Nevada on May 17, 1996 under the name "Multinet
      International Corporation." On October 3, 2003, we changed our name to
      "Limelight Media Group, Inc.".





On
      June
      30, 2005, we acquired all of the outstanding capital stock of Impart, Inc.,
      a
      Washington corporation (the "Impart, Inc. Transaction"). Impart, Inc. was a
      privately-held company that sold dynamic media solutions consisting of monitors,
      computers, mounting systems, and associated technological hardware. The
      acquisition of the Impart, Inc. stock was a "reverse acquisition" in which
      all
      of the outstanding capital stock of Impart, Inc. was effectively exchanged
      for a
      controlling interest in our company. On June 30, 2005, immediately prior to
      the
      Impart, Inc. Transaction, Impart, Inc. purchased all of the assets of iPoint
      Networks, LLC, a Washington limited liability company ("iPoint"), pursuant
      to an
      asset purchase agreement (the “iPoint Transaction”). As consideration for the
      asset purchase, Impart, Inc. issued a promissory note in the amount of $250,000
      to the seller of iPoint and issued shares of our common stock having an
      aggregate value of $750,000.





Prior
      to
      the Impart, Inc. Transaction, we were a public company with nominal operations
      and had $106,000 in assets (including cash totaling $2,000); liabilities
      totaling $891,000; a cash equivalent credit valued at $125,000 previously
      purchased through the issuance of shares of our common stock and a receivable
      related to the issuance of our common stock totaling $12,500.





As
      we did
      not have a sufficient number of duly authorized shares on the date of the
      acquisition, the parties agreed to holdback 2.9 million shares ("Holdback
      Shares") of the 8.1 million shares of our common stock to be issued to the
      owners of Impart, Inc. and iPoint. During the fourth quarter of 2005, we entered
      into agreements to convert the 2.9 million Holdback Shares into a liability
      totaling $4.6 million. This liability later was satisfied in exchange for the
      issuance of the same number of shares as was originally defined as the Holdback
      Shares.





6




The
      following table reflects the stock issued in relation to the Impart, Inc.
      Transaction and the iPoint Transaction:





Impart
              Transaction1
            
            iPoint
              Transaction2
            
            TotalTotal
                consideration
            
            
            7,656,250
            
            
            468,750
            
            
            8,125,000Holdback
                shares
            
            
            (2,709,135
            )
            
            (165,865
            )
            
            (2,875,000
            )Total
                common stock issuance
            
            
            4,947,115
            
            
            302,885
            
            
            5,250,000





In
        addition to the shares described above, we issued 81,441 shares of our common
        stock as part of the Impart, Inc. Transaction that are held in escrow. Some
        or
        all of these shares will be used to settle liabilities that were outstanding
        at
        the time of the transaction and that are still being
        negotiated.





On
      June
      30, 2005, immediately prior to the consummation of the Impart, Inc. Transaction,
      Impart, Inc. purchased all of the assets of Media Sidestreet Corporation
      ("MSSCO") pursuant to an asset purchase agreement. In exchange for the purchase
      of all the assets of MSSCO, Impart, Inc. issued promissory notes in the
      aggregate principal amount of $1 million to the sellers of MSSCO. We satisfied
      such notes in January of 2006 by issuing our common stock at a value of $1.00
      per share. The satisfaction of the notes through the issuance of our common
      stock resulted in a gain on retirement of debt of $106,000. Prior to the Impart,
      Inc. Transaction, the majority owners of Impart, Inc. were the owners of MSSCO.
      As a result, this acquisition was a related party transaction. Accordingly,
      our
      financial statements include the combined historical financial statements of
      Impart, Inc. and MSSCO.





On
        February 2, 2006, we purchased from Marlin Capital Partners II, LLC (doing
        business as InTransit Media) all of the assets used in its digital advertising
        services business, including the right to manage the PATHVISION digital signage
        system owned by the New York and New Jersey Port Authority’s PATHVISION
        broadcasting system, and the equipment, computer servers and software used
        by
        them in the delivery of such services.





On
      February 28, 2006, we purchased substantially all of the assets E&M
      Advertising, Inc., E&M West/Camelot, Inc. and NextReflex, Inc.
      (collectively, “E&M”), through a newly formed subsidiary, Impart Media
      Advertising, Inc. E&M was engaged in the placement and marketing of direct
      response media. In consideration for the purchase of the assets, we agreed
      (i)
      to pay an aggregate of $800,000, of which $200,000 was paid on the closing
      date,
      $400,000 was paid in March 2006 and the remaining $200,000 is required to be
      paid on the first anniversary of the closing date and (ii) to issue an aggregate
      of 1.6 million restricted shares of our common stock. In April 2006, we issued
      1.47 million of the 1.6 million restricted shares. The fair value of the shares
      issued at the measurement date was approximately $4.8 million.





**Restatement.** Our
        management determined that our unaudited interim consolidated financial
        statements as of and for the three and six months ended June 30, 2006 should
        be
        restated in order to correct the reporting of expenses associated with the
        issuance of common stock and warrants to purchase common stock pursuant to
        two
        consulting contracts. The Statement of Operations has been restated to reflect
        the following changes to the three months ended June 30,
        2006:





__________________________


1
            The
                Impart, Inc. Transaction is considered to be a capital transaction
                in
                substance, rather than a business combination. As such, the Impart,
                Inc.
                Transaction is equivalent to the issuance of stock by a private company
                (Impart, Inc.) for the net monetary assets of a public shell company
                (Limelight Media Group, Inc.), accompanied by a recapitalization.
                Thus,
                the 4.95 million shares (net of Holdback Shares) of common stock
                issued to
                the shareholders of Impart, Inc. are retroactively applied. The accounting
                for the Impart, Inc. Transaction is identical to that resulting from
                a
                reverse acquisition, except that neither goodwill nor other intangible
                assets was recorded. Accordingly, these financial statements are
                the
                historical financial statements of Impart, Inc. Impart, Inc. was
                incorporated on June 19, 1984, in the State of
                Washington.





2
            The
                Ipoint Transaction resulted in the acquisition of certain fixed assets
                in
                exchange for 302,885 shares (net of Holdback Shares) and a promissory
                note
                totaling $250,000. The note was satisfied in January
                2006.




7




Three
                  Months Ended June 30, 2006As
                  amended
              
              As
                  previously
                filed
              
              Change(in
                  thousands)General
                  and administrative expenses
              
              
              (3,701
              )
              
              (3,496
              )
              
              (205
              )Net
                  Income (loss)
              
              
              (3,270
              )
              
              (3,065
              )
              
              (205
              )Earnings
                Per Share
              
              
              (0.15
              )
              
              (0.14
              )
              
              (0.01
              )





The
        Statement of Operations has been restated to reflect the following changes
        to
        the six months ended June 30, 2006:





Six
                  Months Ended June 30, 2006As
                  amended
              
              As
                  previously
                filed
              
              Change(in
                  thousands)General
                  and administrative expenses
              
              
              (1,294
              )
              
              (1,089
              )
              
              (205
              )Net
                  Income (loss)
              
              
              (6,105
              )
              
              (5,900
              )
              
              (205
              )Earnings
                  Per Share
              
              
              (.036
              )
              
              (.035
              )
              
              (.01
              )





The
        Balance Sheet has been restated to reflect the following changes to the balances
        as of June 30, 2006:





As
                  of June 30, 2006As
                  amended
              
              As
                  previously
                filed
              
              Change(in
                  thousands)Prepaid
                  expenses and other current assets
              
              
              1,978,884
              
              
              1,581,993
              
              
              396,891Accrued
                  liabilities
              
              
              429,070
              
              
              411,570
              
              
              17,500Stock
                  issuance payable
              
              
              793,710
              
              
              462,210
              
              
              331,500Additional
                  paid-in capital
              
              
              17,796,930
              
              
              17,544,509
              
              
              252,421Accumulated
                  deficit
              
              
              (10,291,268
              )
              
              (10,086,732
              )
              
              (204,536
              )





**2.
      Basis of Presentation**





In
      the
      opinion of management, the accompanying unaudited condensed consolidated
      financial statements reflect all adjustments, consisting of normal recurring
      adjustments, necessary to present fairly the financial position of our company
      as of June 30, 2006, its cash flows for the six months ended June 30, 2006
      and
      2005 and its results of operations for the three and six months ended June
      30,
      2006 and 2005. Pursuant to the rules and regulations of the U.S. Securities
      and
      Exchange Commission (the “SEC”), certain information and disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted from these financial statements unless significant changes
      have taken place since the end of the most recent fiscal year. Accordingly,
      these unaudited condensed consolidated financial statements should be read
      in
      conjunction with the Audited Financial Statements and the other information
      also
      included in the Annual Report on Form 10-KSB for the year ended December 31,
      2005.





The
      results of our operations for the three months and the six months ended June
      30,
      2006 are not necessarily indicative of the results of operations for the full
      year ending December 31, 2006.




**3.
      Liquidity: Going Concern**





The
        accompanying financial statements have been prepared on a going concern basis,
        which contemplates the realization of assets and the satisfaction of liabilities
        in the normal course of business. We have incurred net losses of approximately
        $6.1 million and $161,000 for the six months ended June 30, 2006 and June
        30,
        2005, respectively. Our current liabilities exceeded our current assets by
        approximately $2.2 million as of June 30, 2006. Our net cash used in operating
        activities approximated $2.0 million for the six months ended June 30, 2006.





8




At
      June
      30, 2006, total cash was approximately $406,000. In the first quarter of 2006,
      we entered into a $6 million secured, revolving credit facility (the Laurus
      Facility”) with Laurus Master Fund, Ltd., a Cayman Islands corporation
      (“Laurus”). The term of the Laurus Facility is three years and interest accrues
      on any unpaid principal plus interest at a rate per annum equal to the “prime
      rate” plus three percent (3%). The maximum principal amount of all borrowings
      under the Laurus Facility cannot exceed ninety percent of our eligible accounts
      receivable minus such reserves that Laurus may in good faith deem necessary
      and
      appropriate. As of June 30, 2006, the amount available to us to draw down under
      the Laurus facility was $1.2 million.


We
          anticipate that our existing capital resources, including amounts available
          under the Laurus Facility, will enable us to continue operations through
          June
          30, 2007, assuming we meet our sales projections for such period. If we
          materially fail to meet such sales projections and we do not raise additional
          capital, then we may be forced to severely curtail or cease operations.
          Consequently, we are actively working with investment banks and institutional
          investors to obtain additional capital through various financing options;
          however, we do not have any financing commitments. There can be no assurance
          that financing will be available on favorable terms or at all. If we raise
          additional capital through the sale of equity or convertible debt securities,
          the issuance of such securities may result in dilution to existing stockholders.




We
        anticipate that we will generate significant losses from operations for the
        foreseeable future. As of June 30, 2006, our accumulated deficit was $10.3
        million. Our net loss was $3.3 million for the three months ended June 30,
        2006
        and $6.1 million for the six month period ending June 30, 2006. We have limited
        capital resources, and operations to date have been funded with the proceeds
        from product sales, accounts receivable based financings, public and private
        equity and debt financings and income earned on investments. These conditions
        raise substantial doubt about our ability to continue as a going concern.
        The
        audit report prepared by our independent registered public accounting firm
        relating to our consolidated financial statements for the year ended December
        31, 2005 includes an explanatory paragraph expressing the substantial doubt
        about our ability to continue as a going concern.





Our
      ability to continue as a going concern is dependent on additional sources of
      capital and the success of our operating plan. The financial statements do
      not
      include any adjustments that might be necessary if we are unable to continue
      as
      a going concern.





To
      realize our growth strategy and business plans, we will likely seek additional
      borrowings under the Laurus Facility (Note 10) or through sales of additional
      shares of our capital stock to institutional investors, or a combination of
      both.





**4.
      Summary of Significant Accounting Policies**





**Use
      of estimates.** The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect reported amounts of assets and liabilities
      as of the dates of the condensed consolidated balance sheets and reported amount
      of revenues and expenses for the periods presented. Accordingly, actual results
      could materially differ from those estimates.





**Principles
      of Consolidation.** The
      accompanying consolidated financial statements include the accounts of our
      company and its subsidiaries. All significant intercompany accounts and
      transactions have been eliminated.





**Accounts
      Receivable.** Accounts
      receivables are reviewed quarterly to determine whether their carrying value
      has
      become impaired. We consider the assets to be impaired if the balances are
      more
      than one year old. We have established an allowance for doubtful accounts of
      $42,000 as of June 30, 2006. When accounts are written off, they are charged
      against the allowance. Generally, we do not assign past due status to
      receivables. Also, receivables generally are not collateralized and do not
      bear
      interest.





**Concentration
      of Credit Risk.** Financial
      instruments, which potentially subject us to concentrations of credit risk,
      consist principally of accounts receivable. As of June 30, 2006, two customers
      represented approximately 28% of accounts receivable. These two customers
      represented 11% and 11% and 12% and 13% of total revenues during the three
      and
      six months ending June 30, 2006 and 2005, respectively.





**Inventory.** Inventory
      is stated at lower of cost or market. Cost is principally determined by using
      the average cost method. Inventory consists of raw materials as well as finished
      goods held for sale. We monitor our inventory for excess and obsolete items
      and
      make necessary valuation adjustments when required.





9




**Fixed
      Assets.** Fixed
      assets are stated at cost less accumulated depreciation. Depreciation is
      calculated principally on the straight-line method over the estimated useful
      lives of the assets, which are generally 3 to 10 years. The cost of repairs
      and
      maintenance is charged to expense as incurred. Expenditures for property
      betterments and renewals are capitalized.





We
      periodically evaluate whether events and circumstances have occurred that may
      warrant revision of the estimated useful lives of fixed assets or whether the
      remaining balance of fixed assets should be evaluated for possible impairment.
      We use an estimate of the related undiscounted cash flows over the remaining
      life of the fixed assets in measuring their recoverability. No impairment was
      deemed to exist as of June 30, 2006.





Fixed
      assets acquired through the E&M Acquisition were recorded at their estimated
      fair value at the time of acquisition. Depreciation is recorded using the
      straight-line method with useful lives of approximately 3 years.





**Intangibles.** Intangible
      assets are recorded in accordance with Statement of Financial Accounting
      Standards (“SFAS”) No. 141, “Business Combinations.” Infinite lived assets
      consist of goodwill, which is subject to an impairment test at least annually.
      Finite lived assets consist of customer lists and contractual rights, which
      we
      amortize over a period of 3 and 2 years, respectively.





**Net
        Earnings (Loss) per Common Share.** Net
        loss
        per common share excludes any dilutive effects of options, warrants and
        convertible securities. Net earnings (loss) per share is computed using the
        weighted-average number of outstanding common shares and common stock equivalent
        shares during the applicable period. Common stock equivalent shares, which
        include options warrants and convertible securities, are excluded from the
        computation if their effect is antidilutive. There were no dilutive instruments
        for the three months ended June 30, 2006.





**Income
      Taxes.** We
      account for income taxes in accordance with SFAS No. 109, “Accounting for Income
      Taxes,” which requires recognition of deferred tax assets and liabilities for
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases and tax credit carry forwards. Deferred tax assets and
      liabilities are measured using enacted tax rates expected to apply to taxable
      income in the years in which those temporary differences are expected to be
      recovered or settled. The effect on deferred tax assets and liabilities of
      a
      change in tax rates is recognized in income in the period that includes the
      enactment date.





**Comprehensive
      Loss.** SFAS
      No.
      130, “Reporting of Comprehensive Income,” establishes standards for reporting
      comprehensive income (loss) and its components in financial statements.
      Comprehensive loss, as defined, includes all changes in equity (net assets)
      during a period from non-owner sources. To date, we have not had any significant
      transactions that are required to be reported in other comprehensive
      loss.





**Segment
      Information.** In
      accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and
      Related Information,” which uses the management approach to determine reportable
      segments. We operate under one segment.





**Advertising
      Costs.** We
      recognize advertising expenses in accordance with Statement of Position 93-7
      “Reporting on Advertising Costs.” Accordingly, we expense the costs of producing
      advertisements at the time production occurs, and expense the costs of
      communicating advertisements in the period in which the advertising space or
      airtime is used.





**Stock-based
        Compensation.** Prior
        to
        January 1, 2006, we accounted for stock-based compensation under the recognition
        and measurement principles of SFAS No. 123, “Accounting for Stock-Based
        Compensation.” Effective January 1, 2006, we began recording compensation
        expense associated with stock options and other equity-based compensation
        in
        accordance with SFAS No. 123 (revised 2004), “Share-Based Payment”. We adopted
        FAS 123(R) using the modified prospective method. We recognize these
        compensation costs on a straight-line basis over the requisite service period
        of
        the award. Total compensation cost recognized for fair value options issued
        was
        $91,000 and $0 for the six months ended June 30, 2006 and 2005, respectively.
        There was no compensation cost recognized for the fair value options for
        the
        three months ended June 30, 2006 and 2005, respectively.





SFAS
      No.
      123R requires that cash flows resulting from tax deductions in excess of the
      cumulative compensation cost recognized for options exercised (excess tax
      benefits) be classified as cash inflows from financing activities and cash
      outflows from operating activities. Due to our net loss position, no tax
      benefits have been recognized in the cash flow statement.





10




We
      also
      apply SFAS No. 123R and the consensus in Emerging Issues Task Force No. 96-18
      "Accounting for Equity Instruments That Are Issued to Other Than Employees
      for
      Acquiring, or in Conjunction with Selling, Goods or Services" for stock based
      compensation to non-employees.





**Revenue
      Recognition.** We
      derive
      substantially all of our advertising revenue from fees for services.
      Additionally, commissions are earned based upon the placement of advertisements
      in various media. Revenue is realized when the service is performed in
      accordance with the terms of each client arrangement and upon completion of
      the
      earnings process. Revenue recognition policies are in compliance with the
      Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) 101,
“Revenue and Recognition in Financial Statements”, as updated by SAB 104. In
      July 2000, the Emerging Issues Task Force (EITF) of the Financial Accounting
      Standards Board (FASB) released Issue 99-19 (EITF 99-19). This Issue summarized
      the EITF’s views on when revenue should be recorded at the gross amount billed
      because revenue has been earned from the sale of goods or services, or the
      net
      amount retained because revenue has been earned from a fee or commission. We
      typically act as an agent on behalf of our clients in their primary lines of
      business. Accordingly, most revenues are recorded based upon the net commissions
      earned. We record non-media and Internet services at a gross billing amount,
      due
      to the actual services we perform or provide. The net billing amounts included
      in operating revenues for the three months and six months ended June 30, 2006
      and 2005 were approximately $494,000 and $0, and $277,000 and $0,
      respectively.





Revenue
      from product sales is generally recognized when our products are shipped and/or
      the revenue is fully earned and ownership has passed to the customer. Revenue
      from management fees is recorded in the month the service is provided. Revenue
      from design and installation contracts is recognized using the
      completed-contract method. Due to the short term nature of the contracts, there
      were no significant contracts in process at June 30, 2006.





**5.
      Acquisitions**




InTransit
      Media





On
      February 6, 2006, we purchased from Marlin Capital Partners II, LLC (doing
      business as InTransit Media) all of the assets used in its digital advertising
      services business, including the right to manage the PATHVISION digital signage
      system owned by the Port Authority of New York and New Jersey. In consideration
      for the assets, we paid $500,000 in cash and delivered 146,762 shares of our
      common stock valued at $572,372 for total consideration of $1,072,372. The
      purchased assets consisted of the assets used in InTransit Media’s digital
      advertising services business, including its exclusive right to provide digital
      advertising services to the Port Authority of New York and New Jersey for the
      Port Authority's PATHVISION broadcasting system, and the equipment, computer
      servers and software used in the delivery of such services.





We
      consolidated the operations of InTransit as of the date of acquisition. The
      unaudited pro forma financial information presented herein reflects the
      estimated pro forma effect of the InTransit transaction as if it occurred on
      January 1, 2006 and 2005, respectively.





The
      unaudited pro forma condensed financial statements include specific assumptions
      and adjustments related to the purchase of the assets. These pro forma
      adjustments have been made to illustrate the anticipated financial effect of
      the
      purchase of the assets. The adjustments are based upon available information
      and
      assumptions that we believe are reasonable as of the date of this filing.
      However, actual adjustments may differ materially from the information
      presented. Assumptions underlying the pro forma adjustments are described in
      the
      accompanying notes, which should be read in conjunction with the unaudited
      pro
      forma condensed financial statements.





The
      unaudited pro forma financial statements are presented for informational
      purposes only and do not purport to be indicative of the financial position
      which would actually have been obtained if the transaction had occurred in
      the
      periods indicated below or which may exist or be obtained in the future. The
      information is not representative of future results of operations or financial
      position. The unaudited condensed pro forma financial information is qualified
      in its entirety and should be read in conjunction with the more detailed
      information and financial data appearing in our historical financial statements
      and notes thereto included herein. In the opinion of management, all material
      adjustments necessary to reflect the acquisition of the assets by us have been
      made.





11




Proforma
      Statement of Operations (Unaudited)





For
                  the Six Months Ended June 30, 2006Actual
              
              Adjustments
                  *
              
              ProformaRevenues
              
              $
              2,649,081
              
              $
              9,000
              
              $
              2,658,081Operating
                  loss
              
              
              (5,496,420
              )
              
              (58,620
              )
              
              (5,555,040
              )Net
                  loss
              
              
              (6,105,274
              )
              
              (58,620
              )
              
              (6,163,894
              )Beneficial
                  Conversion Feature of Series A Preferred
              
              
              (933,873
              )
              
              -
              
              
              (933,873
              )Accretion
                  of Dividends on Series A Preferred Stock
              
              
              (104,125
              )
              
              -
              
              
              (104,125
              )Net
                  loss - Common Stockholders
              
              
              (7,143,272
              )
              
              (58,620
              )
              
              (7,201,892
              )Loss
                  per share - basic and diluted
              
              $
              (0.36
              )
              
              
              
              $
              (0.36
              )





*
      The
      proforma adjustment to the historical financial statements reflects an increase
      in revenue of $9,000 and operating expenses of $20,000 from January 1, 2006
      through February 5, 2006, as well as an increase in amortization expense of
      $47,620 related to the acquisition.





Proforma
      Statement of Operations (Unaudited)





For
                  the Six Months Ended June 30, 2005Actual
              
              Adjustments
                  *
              
              ProformaRevenues
              
              $
              1,907,328
              
              $
              27,000
              
              $
              1,934,328Operating
                  loss
              
              
              (163,450
              )
              
              (301,092
              )
              
              (464,542
              )Net
                  loss
              
              
              (160,792
              )
              
              (301,092
              )
              
              (461,884
              )Loss
                  per share - basic and diluted
              
              $
              (0.03
              )
              
              
              
              $
              (0.10
              )





*
      The
      proforma adjustment to the historical financial statements reflects an increase
      in revenue of $27,000 and operating expenses of $60,000 as well as amortization
      expense of $268,092 related to the acquisition.




E&M
      Advertising





On
      February 28, 2006, we purchased substantially all of the assets E&M
      Advertising, Inc., E&M West/Camelot, Inc. and NextReflex, Inc. (collectively
“E&M”), through a newly formed subsidiary, Impart Media Advertising, Inc.
      E&M was engaged in the placement and marketing of direct response media. In
      consideration for the purchase of the assets, we agreed (i) to pay an aggregate
      of $800,000, of which $200,000 was paid on the closing date, $400,000 was paid
      in March 2006 and the remaining $200,000 is required to be paid on the first
      anniversary of the closing date and (ii) to issue an aggregate of 1.6 million
      restricted shares of our common stock.





In
      April
      2006, we issued 1.47 million of the 1.6 million shares of our common stock
      to be
      issued in connection with the acquisition of E&M. The fair value of the
      remaining shares to be issued as determined based on the measurement date is
      approximately $462,000. The fair value of these shares has been recorded as
      “Stock Issuance Payable” as of June 30, 2006.





We
      consolidated the operations of E&M as of the date of acquisition. The
      unaudited pro forma financial information presented reflects the estimated
      pro
      forma effect of the E&M transaction as if it occurred on January 1, 2006 and
      2005, respectively.





The
      unaudited pro forma condensed financial statements include specific assumptions
      and adjustments related to the purchase of the assets. These pro forma
      adjustments have been made to illustrate the anticipated financial effect of
      the
      purchase of the assets. The adjustments are based upon available information
      and
      assumptions that our company believes are reasonable as of the date of this
      filing. However, actual adjustments may differ materially from the information
      presented. Assumptions underlying the pro forma adjustments are described in
      the
      accompanying notes, which should be read in conjunction with the unaudited
      pro
      forma condensed financial statements.





12




The
      unaudited pro forma financial statements are presented for informational
      purposes only and do not purport to be indicative of the financial position
      which would actually have been obtained if the transaction had occurred in
      the
      periods indicated below or which may exist or be obtained in the future. The
      information is not representative of future results of operations or financial
      position. The unaudited condensed pro forma financial information is qualified
      in its entirety and should be read in conjunction with the more detailed
      information and financial data appearing in our company's historical financial
      statements and notes thereto included herein. In the opinion of management,
      all
      material adjustments necessary to reflect the acquisition of the assets by
      us
      have been made.





Pro
      forma Statement of Operations (Unaudited)





For
                  the Six Months Ended June 30, 2006Actual
              
              Adjustments
                  *
              
              ProformaRevenues
              
              $
              2,649,081
              
              $
              689,247
              
              $
              3,338,328Operating
                  loss
              
              
              (5,496,420
              )
              
              (49,708
              )
              
              (5,546,128
              )Net
                  loss
              
              
              (6,105,274
              )
              
              (378,622
              )
              
              (6,483,896
              )Beneficial
                  Conversion Feature of Series A Preferred
              
              
              (933,873
              )
              
              
              
              
              (933,873
              )Accretion
                  of Dividends on Series A Preferred Stock
              
              
              (104,125
              )
              
              -
              
              
              (104,125
              )Net
                  loss - Common Stockholders
              
              
              (7,143,272
              )
              
              (378,622
              )
              
              (7,521,894
              )Loss
                  per share - basic and diluted
              
              $
              (0.36
              )
              
              
              
              $
              (0.37
              )





*The
      proforma adjustment to historical financial statements reflects the recognition
      of amortization of approximately $329,000 from January 1 through February 28,
      2006, related to the acquisition and total operating expenses of $410,000 of
      the
      same period. The revenue adjustment reflects earned revenue by E&M of
      $689,000 from January 1 through February 28, 2006.





Proforma
      Statement of Operations (Unaudited)





For
                  the Six Months Ended June 30, 2005Actual
              
              Adjustments
                  *
              
              ProformaRevenues
              
              $
              1,907,328
              
              $
              2,286,129
              
              $
              4,193,457Operating
                  income ( loss)
              
              
              (163,450
              )
              
              161,369
              
              
              (2,081
              )Net
                  income (loss)
              
              
              (160,792
              )
              
              (142,745
              )
              
              (18,047
              )Loss
                  per share - basic and diluted
              
              $
              (0.03
              )
              
              
              
              $
              0.00





*
      The
      proforma adjustment to the historical financial statements reflects an increase
      in revenue of $2,286,129 and operating expenses of $1,631,388 as well as
      amortization expense of $493,372 related to the acquisition.





**6.
      Inventory**





Inventory
      totaling $477,000 consisted of finished goods as of June 30, 2006.





13




**7.
      Fixed Assets**





Fixed
      assets consisted of the following as of June 30, 2006:





Computer
                and other equipment
            
            $
            837,123Furniture
                and fixtures
            
            
            137,174Software
            
            
            977,199Leasehold
                equipment
            
            
            3,853Less:
                accumulated depreciation
            
            
            (517,710
            )Fixed
                assets, net
            
            $
            1,437,639





**8.
      Intangibles**





Intangibles
      consisted of the following as of June 30, 2006:





Finite-lived:Customer
                List
              
              
              5,420,459Contractual
                  Rights
              
              
              1,072,372Less:
                  accumulated amortization
              
              
              (871,665
              )Intangibles,
                  net
              
              $
              6,121,166





**9.
      Due to/from Related Parties**





Due
      to
      Related Parties totaling $191,000 as of June 30, 2006, consisted of the
      following:





Related
                party agreement in which stockholder will receive a revenue share
                of
                $18,000 per year and an additional 5% of net ad revenues as it pertains
                to
                a specific airport project for a period of 3 years
            
            $
            150,000Unreimbursed
                expenses to various stockholders, unsecured, bearing
                interest
            
            
            19,965Accrued
                interest on related party loans
            
            
            20,801Total
                due to related parties
            
            $
            190,766





Due
        from
        related parties totaling $256,000 as of June 30, 2006, included in prepaid
        expenses and other assets consisted of the following:





Related
                party receivable assumed as part of E&M Acquisition
            
            $
            256,423





**10.
      Line of Credit**





On
      January 27, 2006, we entered into a Security Agreement with Laurus Master Fund,
      Ltd., a Cayman Islands corporation (“Laurus”), pursuant to which Laurus agreed
      to provide us with a revolving credit facility of up to $6 million (“Laurus
      Facility”). The term of the Laurus Facility is three (3) years and borrowings
      under the Laurus Facility accrue interest on the unpaid principal and interest
      at a rate per annum equal to the “prime rate” published in *The
      Wall Street Journal* from
      time
      to time, plus three percent (3%). Interest on borrowings under the Laurus
      Facility is payable monthly on the first day of each month, commencing on
      February 1, 2006. All outstanding principal amounts must be paid on January
      27,
      2009. The maximum principal amount of all borrowings under the Laurus Facility
      cannot exceed ninety percent (90%) of our eligible accounts receivable minus
      such reserves that Laurus may in good faith deem necessary and
      appropriate.





On
      January 27, 2006, we obtained an initial draw under the Laurus Facility of
      $2
      million, of which approximately $782,000 was used to satisfy bank loans in
      full.
      The draws under the Laurus Facility are used for general corporate and working
      capital purposes. As of June 30, 2006, the balance due to Laurus was
      approximately $657,000.





14




In
      connection with the Laurus Facility, we paid Laurus approximately $246,000,
      comprised of a management fee of $216,000 and reimbursement of $30,000 in due
      diligence and documentation expenses. The management fee is being amortized
      to
      interest expense over the three-year term of the Laurus Facility. We also paid
      a
      cash fee of $180,000 and issued warrants to purchase 231,000 shares of common
      stock to GunnAllen Financial, Inc. for investment banking services. The warrants
      were recorded at fair value totaling $442,000 using the Black-Scholes
      option-pricing model. These fees were recorded as deferred debt issue costs
      to
      be amortized to interest expense over the three-year term of the Laurus
      Facility.




***Warrant*** .
      We
      issued to Laurus a common stock purchase warrant, entitling Laurus to purchase
      up to 750,000 shares of our common stock, par value $.001 per share at an
      exercise price of $.01 per share, subject to certain adjustments. We determined
      the fair value of the warrant to be $1.6 million as determined by using the
      Black-Scholes option-pricing model. This warrant was issued to obtain the Laurus
      Facility. As such, we recorded the full value of the warrant as deferred debt
      issue costs upon entering the Laurus facility agreement with Laurus. Debt issue
      costs are amortized to interest expense over the three-year term of the Laurus
      Facility.





The
      Laurus warrant expires on January 27, 2013. In connection with the Security
      Agreement entered into in conjunction with the Laurus Facility, Laurus is
      restricted from selling any shares of common stock it receives through the
      exercise of the warrant prior to January 27, 2007. Additionally, Laurus agreed
      to certain restrictions to selling shares acquired through the exercise of
      the
      warrant, except under certain circumstances, including the continuance of an
      event of default under the Security Agreement.




***Security
      Agreement*** **.** The
      Facility is secured by a blanket lien on substantially all of our assets and
      those of our subsidiaries pursuant to the terms of a Security Agreement. In
      addition, we pledged the ownership interests in our subsidiaries pursuant to
      a
      stock pledge agreement executed in favor of Laurus. If an event of default
      occurs under any of the Security Agreement, the Warrant, the Stock Pledge
      Agreement, the Registration Rights Agreement or the Note (collectively, the
      “Transaction Documents”), Laurus has the right to accelerate payments under the
      Note and, in addition to any other remedies available to it, to foreclose upon
      the assets securing the Note. If an event of default occurs under any of the
      Transaction Documents, one hundred twenty-five percent (125%) of the unpaid
      principal balance, plus accrued interest and fees, will become immediately
      due
      and payable. Laurus will also be entitled to payment of a default interest
      rate
      of two percent (2%) per month on all amounts due and such other remedies
      specified in the Transaction Documents and under the Uniform Commercial Code.





The
      Security Agreement contains certain negative covenants that require us to obtain
      the prior written consent or other actions of Laurus in order for us to take
      certain actions at any time when borrowings remain outstanding under the
      Facility.





***Registration
      Rights Agreement*** **.** Pursuant
      to the terms of a Registration Rights Agreement between Laurus and the Company
      (the “Registration Rights Agreement”), we are obligated to file a registration
      statement on Form SB-2 or S-3 to register the resale of the shares of Common
      Stock issuable (i) upon exercise of the Warrant and (ii) as a result of
      adjustments made to the Exercise Price pursuant to the Warrant. We were
      initially required to file the registration statement required to be filed
      in
      connection with the exercise of the Warrant (the “Original Registration
      Statement) on or prior to April 15, 2006. During the second quarter of 2006,
      we
      obtained a waiver from Laurus with respect to this requirement. Accordingly,
      the
      initial filing date of the Original Registration Statement was postponed to
      on
      or prior to July 31, 2006. We filed the Original Registration Statement with
      the
      SEC on July 31, 2006. We are also required to use our best efforts to have
      the
      Original Registration Statement declared effective by the SEC as promptly as
      possible after filing, on or prior to November 13, 2006. In the event of
      adjustments made to the Exercise Price pursuant to the Warrant, we are required
      to file a registration statement (the “Additional Registration Statement”)
      within thirty (30) days of (i) such event resulting in the adjustment of the
      Exercise Price or (ii) the actual date of the adjustment of the Exercise Price.





15




**11.
      Stock Option Plans and Warrants**





In
      2005,
      our Board of Directors adopted an incentive stock plan for our employees (“2005
      Stock Option Plan”). Options granted under the 2005 Stock Option Plan are as
      follows:




Shares
                  Available
                for
                  Grant
              
              Options
                Outstanding
              
              Weighted
                  Average
                Exercise
                  PriceBalance,
                  December 31, 2005
              
              
              1,295,000
              
              
              705,000
              
              $
              0.73Grants
              
              
              -
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -
              
              
              -Balance,
                  June 30, 2006
              
              
              1,295,000
              
              
              705,000
              
              $
              0.73





Options
      outstanding are summarized as follows:





Range
                of
              Exercise
                Prices
            
            Stock
                Options
              Outstanding
            
            Stock
                Options
              Exercisable
            
            Weighted
                Average
              Exercise
                Price
            
            Weighted
                Average Remaining
              Contractual
                Life$0.70
                - $0.77
            
            705,000
            
            309,998
            
            $0.73
            
            4.99





The
      weighted-average fair value for options granted during 2005 was $0.82 and was
      estimated using the Black-Scholes option valuation model with the following
      weighted-average assumptions:





Expected
                life in years
            
            
            2.50Volatility
            
            
            256.18%Interest
                rate
            
            
            4.35%Yield
                rate
            
            
            0%





In
      addition, we granted warrants to non-employees as follows:





Warrants
                Outstanding
              
              Weighted
                  Average
                Exercise
                  PriceBalance,
                  December 31, 2005
              
              
              447,566
              
              $
              0.95Granted
              
              
              4,847,877
              
              
              1.34Exercised
              
              
              (100,000
              )
              
              .20Forfeited
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Balance,
                  June 30, 2006
              
              
              5,195,443
              
              $
              1.31Warrants
                  exercisable as of June 30, 2006
              
              
              5,045,443
              
              $
              1.30





The
      weighted-average fair value for warrants granted during 2006 was $2.66 and
      was
      estimated using the Black-Scholes option valuation model with the following
      weighted-average assumptions:





Expected
                  life in years
              
              
              3.0Volatility
              
              
              130%-139%Interest
                  rate
              
              
              4.41%-5.13%Dividend
                  rate
              
              
              0%





**12.
      Separation Agreements**





During
        March 2006, David V. Lott resigned from his position as our Chief Executive
        Officer and from our board of directors. In accordance with his separation
        agreement dated March 15, 2006, Mr. Lott will receive a base salary of $120,000
        for a period of one year following his resignation date and the remaining
        balance is included in accrued liabilities.





**13.
      Series A Convertible Preferred Stock**





During
      March 2006, we sold 2,903,229 shares of Series A Convertible Preferred Stock
      (“Series A Shares”) at $1.55 per share for total gross proceeds of $4.5 million.
      We paid $562,000 in issuance costs, and realized net proceeds of $3.9 million.
      In addition, the purchasers of the Series A Shares received warrants to purchase
      an aggregate of 2,903,229 shares of common stock with an exercise price of
      $2.25
      per share and a three-year term.





16




Each
      Series A Share is convertible into one share of common stock, subject to
      adjustment for certain dilutive events. Series A Shares are convertible by
      the
      holder at any time. The Series A Shares will automatically convert into shares
      of common stock, at a conversion price of $1.55 (subject to certain
      adjustments), on the third anniversary of the issuance date or upon the date
      of
      a consummation of a bona fide firm underwritten public offering of our
      securities of at least $20 million in which the price per share is at least
      $4.00 (subject to certain restrictions). The Series A Shares provide that the
      consent or affirmative vote of the holders of at least seventy-five percent
      (75%) of the Series A Shares is necessary to: (a) authorize, create, issue
      or
      increase the authorized or issued amount of any class or series of stock (with
      limited exceptions); (b) amend, alter or repeal the provisions of the Series
      A
      Shares to adversely affect the rights, preferences and voting powers of such
      Series A Shares, (c) repurchase, redeem or pay dividends on any shares of common
      stock; (d) amend our Articles of Incorporation or By-Laws; (e) effect any
      distribution with respect to any junior stock; (f) reclassify the our
      outstanding securities, and (g) voluntarily file for bankruptcy, liquidate
      our
      assets or change the nature of the business.





The
      Series A Shares provide that dividends will accrue at an annual rate of seven
      percent (7%) of the gross issuance price of the stock ($4.5 million), payable
      semi-annually on January 1 and July 1 of each year. Dividends on the Series
      A
      Shares will be paid in either cash or shares of common stock at our discretion,
      provided that we have an effective registration statement providing for the
      resale of the shares of our common stock. If a registration is not currently
      effective, we must pay dividends in cash. Through June 30, 2006, we have accrued
      approximately $104,000 in dividends payable.





Additionally,
      the terms of our Series A Shares also require us to pay a one-time special
      dividend, payable in additional Series A Shares to the holders thereof, if
      our
      aggregate gross revenues for the four consecutive calendar quarters commencing
      on April 1, 2006 do not equal or exceed $50 million. The number of additional
      shares issuable to each holder shall be equal to the product of (i) the number
      of Series A Shares held by such holder at such time multiplied by (ii)
      38.39%.





In
      the
      event of our liquidation, dissolution or winding up, the holders of
      Series A Shares are generally entitled to receive a liquidation preference
      over the holders of common stock equal to $1.55 per Series A Share held and
      any
      declared but unpaid dividends.





The
      Series A Shares are subject to a mandatory redemption feature at a price equal
      to $1.55 per share, plus any accrued and unpaid dividends and certain other
      adjustments in the event of a closing of a purchase, tender or exchange offer
      made to one person or a group in which more than fifty percent of the
      outstanding shares of common stock are tendered and accepted. In the event
      of
      the our suspension from listing, our inability to comply or intention not to
      comply with a request for conversion, deregistration of the our shares of common
      stock, the consummation of a ‘going private’ transaction or breach of the
      representation, warranty, covenant or other term or condition of agreements
      pursuant to the sale of the Series A Shares, the shares become mandatorily
      redeemable at a price equal to 120% of $1.55 per share, plus any accrued and
      unpaid dividends and certain other adjustments.





Of
      the
      $4.5 million in gross proceeds from the stock sale, we allocated $2.8 million
      to
      the Series A Shares and $1.7 million to the warrants, based on their relative
      fair values on the date of issuance, pursuant to Accounting Principles Board
      Opinion No. 14 “Accounting for Convertible Debt and Debt Issued with Stock
      Purchase Warrants.” The fair value used to allocate total proceeds to the Series
      A Shares was based upon a valuation that considered, among other things, the
      closing price of the common stock on the date of closing, the impact of the
      preferred stock on market capitalization on an as converted basis, dividend
      rights, liquidation preferences and redemption rights. The fair value used
      to
      allocate the proceeds to the warrants to purchase common stock was based on
      a
      Black-Scholes valuation model and the following assumptions: exercise price
      $2.25; no dividends; term of 3 years; risk free interest rate of 4.75%; and
      volatility of 136.5%.




In
      accordance with the provisions of EITF 98-5 “Accounting for Convertible
      Securities with Beneficial Conversion Features or Contingently Adjustable
      Conversion Ratios” and EITF 00-27 “Application of Issue No. 98-5 to Certain
      Convertible Instruments,” we separately valued the in-the-money conversion
      feature embedded in the Series A and allocated $933,873 to this embedded
      beneficial conversion feature. As described in EITF 00-27, EITF 98-5 and .
      As
      described in EITF 00-27, EITF 98-5 and Accounting Series Release No. 268
“Presentation in Financial Statements of Redeemable Preferred Stocks”, the
      beneficial conversion feature is amortized as a deemed dividend with a
      corresponding increase in the carrying value of the Series A Convertible
      Preferred Stock on the date of issuance as there is no stated redemption date
      and the shares are immediately convertible upon issuance. In light of our
      retained deficit, the deemed dividend remains in additional paid in capital.
      The
      beneficial conversion cost of $934,000 and the accreted dividends of $104,000
      are added to net loss to determine the net loss available to common
      stockholders. Accreted dividends of $81,000 are added to net loss for the three
      months ended June 30, 2006 to determine the net loss available to common
      stockholders.





17




The
      following table sets forth the calculation used in determining the amount of
      the
      beneficial conversion feature (in thousands, except per share
      amounts):





Gross
                proceeds allocated to the Series A Convertible Preferred Stock based
                on
                relative fair value (prior to the allocation of issuance
                costs)
            
            $
            2,836Shares
                of common stock into which the Series A Convertible Preferred Stock
                is
                convertible
            
            
            2,903Effective
                conversion price per common share
            
            
            0.98Closing
                price of common stock on transaction dates
            
            
            3.42Intrinsic
                spread representing the value of beneficial conversion feature per
                share
            
            
            2.44Shares
                of common stock into which the Series A Convertible Preferred Stock
                is
                convertible
            
            
            2,903Aggregate
                value of the beneficial conversion feature, limited to proceeds allocated
                to preferred stock net of issuance costs
            
            $
            934




**14.
      Common Stock Transactions**


In
          the
          three months ended March 31, 2006, the company’s warrant holders exercised
          warrants for an aggregate 100,000 shares of common stock, with net proceeds
          of
          $20,000.
 
 In
          January 2006, the Company issued and sold to eight purchasers in a private
          placement, an aggregate of 216,072 shares of common stock at $1.12 per
          share
          pursuant to a common stock purchase agreement, together with warrants to
          purchase an aggregate of 83,479 shares of common stock at an exercise price
          of
          $1.50 per share and an aggregate of 23,066 shares of common stock at an
          exercise
          price of $3.18 per share. These warrants immediately vest and expire in
          January
          2009. The Company received approximately $242,000 in connection with the
          sale
          and issuance of the common stock and related warrants. The relative fair
          value
          of the common stock was estimated to be approximately $172,000 and the
          relative
          fair value of the warrants was estimated to be $70,000 as determined based
          on
          the relative fair value allocation of the proceeds received. The warrants
          were
          valued using the Black-Scholes valuation model.
 
 In
          January 2006 the Company issued and sold to five purchasers in a private
          placement, an aggregate of 400,002 shares of common stock at a purchase
          price of
          $.75 per share pursuant to a common stock purchase agreement for net proceeds
          of
          $300,000.
 
 In
          January 2006, the Company issued 500,000 and 700,000 shares of common stock
          pursuant to two consulting agreements. The shares had a fair value of $1.0
          million.
 
 In
          January 2006, the Company issued 2,394,873 million shares of common stock
          to
          related parties in satisfaction of outstanding notes payable and other
          certain
          accrued expenses totaling $2.4 million. These shares had a fair value of
          $2.3
          million. The difference of $106,000 has been recorded as a gain on retirement
          of
          notes payable.
 
 In
          February 2006, the Company issued 146,762 shares of its common stock, valued
          at
          $572,372, in consideration for the transaction with
          Intransit.


In
          February 2006, the Company issued and sold to two purchasers in a private
          placement an aggregate of 30,137 shares of common stock at a purchase price
          of
          $2.48 per share pursuant to a common stock agreement, together with warrants
          to
          purchase an aggregate of 15,068 shares of common stock at an exercise price
          of
          $3.00 per share. These warrants immediately vest and expire in February
          2009.
          The Company received approximately $74,800 in connection with the sale
          and
          issuance of the common stock and related warrants. The relative fair value
          of
          the common stock was estimated to be approximately $60,700 and the relative
          fair
          value of the warrants was estimated to be $14,100 as determined based on
          the
          relative fair value allocation of the proceeds received. The warrants were
          valued using the Black-Scholes valuation model.




18


In
          February 2006, the Company sold to five purchasers in a private placement,
          an
          aggregate of 199,400 shares of common stock at a purchase price of $1.12
          per
          share pursuant to a common stock purchase agreement, together with warrants
          to
          purchase an aggregate of 100,000 shares of common stock at an exercise
          price of
          $1.50 per share. These warrants immediately vest and expire in February
          2009.
          The relative fair value of the common stock to be issued was estimated
          to be
          approximately $154,800 and the relative fair value of the warrants was
          estimated
          to be $69,200 as determined based on the relative fair value allocation
          of the
          proceeds received. The warrants were valued using the Black-Scholes valuation
          model. In April 2006, the Company issued the 200,000 shares of the common
          stock
          together with warrants to purchase the aggregate of 100,000 shares of common
          stock.
 
 In
          February 2006, the Company issued 31,540 shares of common stock valued
          at
          $50,000 to a consultant in consideration for the provision of consulting
          services.
 
 In
          March
          2006, the Company issued 141,000 shares of common stock to an institutional
          investor in full satisfaction of amounts such investor claimed were due
          under a
          convertible debenture, dated February 17, 2004. These shares had a fair
          value of
          $267,900, which we recorded as Legal Settlement Fees.
 
 In
          April
          2006, the Company issued 1.47 million of the 1.6 million shares of common
          stock
          in connection with the acquisition of E&M Advertising, Inc., E&M
          West/Camelot, Inc. and NextReflex, Inc. The fair value of the all shares
          to be
          issued as determined based on the measurement date is approximately $5.3
          million. During the second quarter 2006, the Company issued 46,620 of the
          remaining common stock payable. In connection with the issuance of these
          shares,
          the “Stock Issuance Payable” balance has been decreased to $308,000 as of
          September 30, 2006.
 
 In
          April
          2006, the Company issued 6,000 shares of common stock to one of its board
          members for consulting services previously rendered. The fair market value
          of
          those shares is $15,000.
 
 In
          April
          2006, the Company issued and sold in a private placement, an aggregate
          of 50,000
          shares of common stock at $2 per share pursuant to a common stock purchase
          agreement. the Company received net proceeds of $100,000.
 
 In
          April
          2006, a warrant holder exercised warrants for a total of 132,500 shares
          of
          common stock, with net proceeds to the Company of $2,750.
 
 On
          June
          2, 2006, the Company received a waiver from Laurus with respect to its
          default
          of certain covenants relating to the registration of shares underlying
          warrants
          held by Laurus. In consideration of the waiver, the Company issued to Laurus
          30,000 shares of common stock. the Company filed the registration statement
          on
          July 31, 2006.
 
 During
          second quarter 2006, the Company entered a service agreement with a one
          year
          term in exchange for the issuance of 150,000 shares of restricted common
          stock.
          As of June 30, 2006, these shares had not been issued and accordingly,
          the fair
          value of these shares was recorded as “Stock Issuance Payable” as of that date.
          The shares were issued during third quarter 2006.
  During
          second quarter 2006, the Company entered a service agreement with a one
          year
          term in exchange for the issuance of 200,000 warrants to purchase shares
          of
          restricted common stock at an exercise price of $2.60 per share.
 
 In
          addition to the shares described above, 81,441 shares of the Company’s common
          stock as part of the Impart, Inc. Transaction were held in escrow. Some
          or all
          of these shares may be used to settle liabilities that were outstanding
          at the
          time of the transaction and that are still being
          negotiated.




**15.
      Capital Lease Obligations**





We
      are
      obligated to make payments under two capital leases for equipment with a total
      cost of $122,000. The capital lease obligations require a minimum lease payment
      of $4,800 per month with an interest rate of approximately 31%. Future minimum
      lease payments are as follows:





July
                1, 2006 through December 31, 2006
            
            $
            25,1152007
            
            
            50,2312008
            
            
            36,5132009
            
            
            1,799113,658Less:
                current portion
            
            
            21,330Capital
                lease obligations - long-term portion
            
            $
            92,328




19




**16.
      Commitments and Contingencies**





**Leased
      Facilities** We
      utilize leased facilities under a noncancellable-operating lease. The lease
      calls for a base monthly rent of $15,000 through November 30, 2018. Total rent
      expense for this operating lease was $45,000 for both the three months ended
      June 30, 2006 and 2005, and $90,000 for both the six months ended June 30,
      2006
      and June 30, 2005. Certain of our officers, directors and stockholders are
      owners of the company that owns the facility.





Impart
      Media Advertising, Inc. leases its office facilities under an operating lease,
      which was extended June 2011. Total rental expense under the facilities lease
      was approximately $36,000 and $0, and $90,000 and $0 for the three and six
      months ended June 20, 2006 and June 30, 2005, respectively. We also have various
      non-cancelable operating leases for automobiles and equipment that expire at
      various dates through 2008.





Future
      minimum rental payments for the leased facilities as of June 30, 2006, are
      as
      follows:





July
                1, 2006 through December 31, 2006
            
            $
            202,0002007
            
            
            406,2402008
            
            
            410,7652009
            
            
            415,3802010
            
            
            420,090Thereafter
            
            
            1,245,000$
            3,099,475





**17.
      Legal Proceedings**




On
      April
      21, 2006, an action was filed against our company in Division No. 1 of the
      Warren Circuit Court of the Commonwealth of Kentucky titled William
      H. Funk, II and All American Investors Group, Inc. v. Limelight Media Group,
      Inc., David Lott, Impart Mobile Media division/OTR Media, Inc. and Stewart
      Layton, case
      number 06-CI-854. Such complaint alleges that our company unfairly competed
      with
      OTR Media, Inc. by utilizing its trade secrets and other confidential
      information in our mobile media business, thus depriving the stockholders of
      OTR
      Media, Inc. of the full value of their shares and pecuniary interest in OTR
      Media, Inc. The plaintiffs in such action are seeking an injunction against
      our
      company to enjoin the alleged use and appropriation of such trade secrets,
      as
      well as monetary damages of a yet unspecified amount. On May 18, 2006, the
      action was removed to federal court in the Western District of Kentucky, C.V.
      No.: 1:06-CV-72-M. On June 6, 2006, we filed a motion to dismiss the complaint
      on the basis of plaintiffs’ lack of standing to bring a direct claim against us,
      plaintiffs’ failure to state a claim upon which relief may be granted and lack
      of personal jurisdiction over us and the other defendants, among other bases.
      As
      of August 15, 2006, we await a final ruling on the matter.




**18.
      Subsequent Events**





During
        the third quarter 2006, we issued an aggregate of 350,000 shares of common
        stock
        as consideration for services pursuant to a consulting services agreement.
        In
        addition, we agreed to issue warrants to purchase up to 100,000 shares of
        common
        stock at an exercise price of $1.55 per share. These warrants will vest based
        on
        the consultant meeting certain predetermined milestones.





During
        the third quarter 2006, we issued 46,620 additional shares pertaining to
        the
        E&M purchase in the first quarter of 2006.





**19.
      New Accounting Pronouncements**





In
      July
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      (FIN) No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of
      FASB Statement No. 109.” This Interpretation provides guidance for recognizing
      and measuring uncertain tax positions, as defined in Statement of Financial
      Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” FIN No. 48
      prescribes a threshold condition that a tax position must meet for any of the
      benefit of an uncertain tax position to be recognized in the financial
      statements. Guidance is also provided regarding derecognition, classification
      and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal
      years beginning after December 15, 2006. We do not expect that this
      Interpretation will have a material impact on our financial position, results
      of
      operations or cash flows.





20





**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





Certain
      statements made in this Management’s Discussion and Analysis of Financial
      Condition and Results of Operations, as well as statements made from time to
      time by our representatives, may constitute “forward-looking statements” within
      the meaning of the Private Securities Litigation Reform Act of 1995. These
      forward-looking statements include, without limitation, statements regarding
      planned or expected contracts that we may enter into with regard to our
      proprietary hardware, *IQ
      Box,* our
      media content, *IQ
      Streams,* our
      advertising offering, *IQ
      Ads;* advertising contracts originated by our wholly-owned subsidiary, Impart Media
      Advertising, Inc.; the potential market size for our products; advantages of
      our
      products; variation in actual savings and operating improvements resulting
      from
      restructurings; and the sufficiency of our available capital resources to meet
      our funding needs. We do not undertake any obligation to publicly update any
      forward-looking statement, whether as a result of new information, future
      events, or otherwise, except as required by law. Such forward-looking statements
      involve known and unknown risks, uncertainties and other factors which may
      cause
      our actual results or achievements to be materially different from any future
      results or achievements expressed or implied by such forward-looking statements.
      Such factors include the factors described in our Annual Report on Form 10-KSB
      for the year ending December 31, 2005 under the caption “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations—Risk Factors” and
      the other factors discussed in connection with any forward-looking statements.





**General**




Impart
      Media Group, Inc. (formerly known as Limelight Media Group, Inc. and hereinafter
      referred to as "we”, “us” or “our company") sells dynamic digital media
      solutions consisting of monitors, media servers, and associated technological
      hardware and software. We provide design, integration, fabrication, assembly,
      QA
      (quality assurance), creative production, and installation services throughout
      the United States. As a result of our acquisition of E&M Advertising, Inc.
      and its affiliates in February 2006, we now provide advertising capability
      to
      the digital elements and other media services we deploy for our
      customers.





We
      have
      developed and offer for sale a digital media network that is based on a unique
      architecture called *Impart
      IQ* ,
      a
      web-based service that we believe no other company in the sector provides.
      Our
      products are targeted to businesses desiring digital signage and interactive
      media systems in one or more locations. This centrally managed network has
      the
      capability to deliver relevant information to any location where a message
      benefits from real time delivery to one or numerous displays. The network may
      be
      managed by our customer or us.





We
      are
      currently developing products and networks for multiple markets, thereby
      providing the potential to realize revenue from multiple sources. For example,
      airports, mass transit facilities, malls, financial institutions, retail stores
      and government agencies can be location partners for directory services and
      the
      distribution of advertisements, marketing messages and infotainment content.
      Revenues are derived from network monitoring, hosting, equipment sales,
      maintenance & installation fees, content management, creative development
      fees, advertising sales and sponsorships. Advertising revenue may be used to
      offset the costs of deployment for location partners or the partners may receive
      a portion of the advertising revenue on a negotiated basis.





*Recent
      Developments*





On
      July
      31, 2006, we filed with the SEC a registration statement on Form SB-2 (the
      “Registration Statement”). The securities covered by the Registration Statement
      are shares of common stock being registered for resale by certain selling
      stockholders upon exercise of outstanding 7-year warrants, 3-year warrants
      and
      5-year warrants and an indeterminate number of shares that may be issued and
      resold to prevent dilution resulting from stock splits, stock dividends or
      similar transactions. Additionally, under the Registration Statement, shares
      of
      common stock are being registered for resale by certain selling stockholders
      named in the prospectus upon the conversion of outstanding shares of Series
      A
      convertible preferred stock as well as an indeterminate number of shares that
      may be issued and resold to prevent dilution resulting from stock splits, stock
      dividends or similar transactions. Finally, shares of common stock issued to
      certain selling stockholders are being registered pursuant to terms of
      applicable registration rights agreements covering such shares. The Registration
      Statement has not yet been declared effective by the SEC.





21





**Critical
      Accounting Estimates and New Accounting Pronouncements**





Critical
      Accounting Estimates





The
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect reported amounts and related disclosures in the
      financial statements. Management considers an accounting estimate to be critical
      if:





•
            It
                requires assumptions to be made that were uncertain at the time the
                estimate was made, and


•
            Changes
                in the estimate or different estimates that could have been selected
                could
                have a material impact on our consolidated results of operations
                or
                financial condition.





*Share-Based
      Payments* **** -
      On
      January 1, 2006, we adopted SFAS 123(R), “Share-Based Payment”, which
      establishes standards for share-based transactions in which an entity receives
      employee’s services for (a) equity instruments of the entity, such as stock
      options, or (b) liabilities that are based on the fair value of the entity’s
      equity instruments or that may be settled by the issuance of such equity
      instruments. SFAS 123(R) supersedes the option of accounting for share-based
      compensation transactions using APB Opinion No. 25, “Accounting for Stock Issued
      to Employees”, and requires that companies expense the fair value of stock
      options and similar awards, as measured on the awards’ grant date. SFAS 123(R)
      applies to all awards granted after the date of adoption, and to awards
      modified, repurchased or cancelled after that date. We have elected to apply
      SFAS 123(R) using a modified version of prospective application, under which
      compensation cost is recognized only for the portion of awards outstanding
      for
      which the requisite service has not been rendered as of the adoption date,
      based
      on the grant date fair value of those awards calculated under SFAS 123 for
      pro
      forma disclosures.





We
      grant
      options to purchase our common stock to our employees and directors under our
      stock option plans. The benefits provided under these plans are share-based
      payments subject to the provisions of SFAS 123(R). Share-based compensation
      expense recognized under SFAS 123(R) during the first half of 2006 was $91,000.
      At June 30, 2006, total unrecognized estimated compensation expense related
      to
      non-vested stock options granted prior to that date was $86,000, of which
      approximately $86,000 is expected to be recognized over the remaining six months
      of 2006.





We
      estimate the value of stock option awards on the date of grant using the
      Black-Scholes option-pricing model (the “Black-Scholes model”). The
      determination of the fair value of share-based payment awards on the date of
      grant is affected by our stock price as well as assumptions regarding a number
      of complex and subjective variables. These variables include our expected stock
      price volatility over the term of the awards, expected term, risk-free interest
      rate, expected dividends and expected forfeiture rates.





If
      factors change and we employ different assumptions in the application of SFAS
      123(R) in future periods, the compensation expense that we record under SFAS
      123(R) may differ significantly from what we have recorded in the current
      period. There is a high degree of subjectivity involved when using option
      pricing models to estimate share-based compensation under SFAS 123(R).
      Consequently, there is a risk that our estimates of the fair values of our
      share-based compensation awards on the grant dates may bear little resemblance
      to the actual values realized upon the exercise, expiration, early termination
      or forfeiture of those share-based payments in the future. Employee stock
      options may expire worthless or otherwise result in zero intrinsic value as
      compared to the fair values originally estimated on the grant date and reported
      in our financial statements. Alternatively, value may be realized from these
      instruments that is significantly in excess of the fair values originally
      estimated on the grant date and reported in our financial statements.





The
      guidance in SFAS 123(R) and Securities and Exchange Commission’s Staff
      Accounting Bulletin No. 107 (SAB 107) is relatively new and best practices
      are
      not well established. There are significant differences among valuation models,
      and there is a possibility that we will adopt a different valuation model in
      the
      future. Theoretical valuation models are evolving and may result in lower or
      higher fair value estimates for share-based compensation. The timing, readiness,
      adoption, general acceptance, reliability and testing of these methods is
      uncertain. Sophisticated mathematical models may require voluminous historical
      information, modeling expertise, financial analyses, correlation analyses,
      integrated software and databases, consulting fees, customization and testing
      for adequacy of internal controls. The uncertainties and costs of these
      extensive valuation efforts may outweigh the benefits to investors.





22





*Revenue
      Recognition* **-** Revenue
      from design and installation contracts is recognized using the
      completed-contract method under which the amount of revenue recognized is the
      lower of the percentage complete applied to expected contractual payments or
      the
      total non-refundable cash received to date. Changes in the projected hours
      or
      cost to complete the project could significantly change the amount of revenue
      recognized. There were no significant contracts in process during the three
      and
      six months ended June 30, 2006.





**Results
      of Operations**





*Three
      Months Ended June 30, 2006 Compared to Three Months Ended June 30,
      2005*





**Three
                  Months Ended June 30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change****(in
                  thousands)**Revenue
              
              $
              1,426
              
              $
              1,017
              
              $
              409
              
              
              40
              %Cost
                  of revenue
              
              
              (703
              )
              
              (613
              )
              
              (90
              )
              
              15
              %General
                  and administrative expenses
              
              
              (3,701
              )
              
              (381
              )
              
              (3,320
              )
              
              (871
              )%Interest
                  expense
              
              
              (278
              )
              
              (6
              )
              
              (272
              )
              
              (4,510
              )%Depreciation
                  and amortization
              
              
              (741
              )
              
              (7
              )
              
              (734
              )
              
              (10,486
              )%Net
                  Income (loss)
              
              
              (3,270
              )
              
              27
              
              
              (3,297
              )
              
              (12,211
              )%





Revenue
      increased $409,000, from $1,017,000 to $1,426,000 during the three months ended
      June 30, 2006, as compared to the three months ended June 30, 2005. The increase
      was primarily due to increased media services revenues of $573,000 derived
      as a
      result of our acquisition of E&M Advertising, Inc. in February 2006, and
      increased subscription revenues of approximately $90,000 derived as a result
      our
      acquisition of Media SideStreet Corporation in June 2005, offset by a decrease
      of $215,000 in revenues from sales of digital signage equipment.





The
      decrease of $215,000 in revenues from sales of digital signage equipment was
      primarily due to a shift in our long-term business strategy. Historically,
      one
      significant component of our business has been the sale and distribution of
      brackets and fixtures to support the deployment of plasma screens and LCD
      screens. During the third quarter of 2005, we began to reduce our emphasis
      on
      the distribution of these products and began shifting our primary focus to
      a
      more full-service digital media offering. For example, in the first quarter
      of
      2006 we launched several advertising-based programs whereby we derive revenue
      from the sale of advertising time on the digital signage networks that we manage
      for our venue providers. Advertisers pay us a negotiated fee for advertising
      time slots and for content creation and network management services and we
      often
      pay a percentage of such fees to the relevant venue provider. As a result,
      our
      revenue models now include integration and equipment sales, subscription and
      management services, revenues from third-party advertising and marketing and
      content management with development services. We believe this integration will
      maximize our earnings potential because it delivers a one-stop digital signage
      solution to our customers whereby they can secure all necessary equipment and
      services from one source rather than from multiple vendors. We believe these
      offerings will position our company as a full-service digital media solution
      provider.





Cost
      of
      revenues primarily consists of the amounts we pay for hardware (e.g. video
      displays, media players and servers) that we integrate and install for our
      customers. Additional cost of revenues pertains to costs resulting from the
      increased revenues in media services.





23




General
      and administrative expenses for the quarter ended June 30, 2006 increased by
      $3.3 million as compared with the three months ended June 30, 2005 primarily
      due
      to the significant increase in compensation expenses, professional and
      consulting fees and other general and administrative expenses.





Wages
      and
      salary expense for the quarter ended June 30, 2006 was $1.027 million, an
      increase of $798,000 over the comparable period in 2005 and was primarily due
      to
      the addition of executive, sales and administrative personnel resulting from
      acquisitions since the three months ended June 30, 2005, including our
      acquisitions of E&M Advertising, Inc., iPoint Networks, LLC and Media
      SideStreet Corporation





Professional
      and consulting fees for the quarter ended June 30, 2006 was $966,000, an
      increase of $939,000 over the comparable period in 2005, and was primarily
      due
      to the incremental cost of complying with the reporting requirements of a public
      company as set forth by the SEC and the legal and accounting expenses we
      incurred relating to our required filings Securities and Exchange Act of 1934
      and as well as the costs associated with the acquisition transactions that
      we
      completed in 2006.





Other
        general and administrative expenses were $590,000 during the three months
        ended
        June 30, 2006, an increase of $557,000 over the same period in 2005 and was
        primarily due to increased investor relations expenses and additional ongoing
        administrative expenses resulting from the acquisition of E&M Advertising,
        Inc.





Interest
      expense was $278,000 for the quarter ended June 30, 2006, an increase of
      $272,000 over the same period in 2005 primarily due to interest expense incurred
      in connection with the Laurus Facility.





Depreciation
      and amortization costs increased by $734,000 compared to the same quarter of
      2005. This increase resulted primarily from acquisition activity.





Based
        on
        the above, we had a net loss of $3.3 million for the three months ended June
        30,
        2006 as compared to a net income of $27,000 for the three months ended June
        30,
        2005.





*Six
      Months Ended June 30, 2006 Compared to Six Months Ended June 30,
      2005*




**Six
                  Months Ended June 30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change****(in
                  thousands)**Revenue
              
              $
              2,649
              
              $
              1,907
              
              $
              742
              
              
              39
              %Cost
                  of revenue
              
              
              (1,291
              )
              
              (1,311
              )
              
              20
              
              
              (2
              )%General
                  and administrative expenses
              
              
              (6,854
              )
              
              (759
              )
              
              (6,095
              )
              
              (803
              )%Interest
                  expense
              
              
              (715
              )
              
              (21
              )
              
              (694
              )
              
              (3,304
              )%Depreciation
                  and amortization
              
              
              (1,080
              )
              
              (13
              )
              
              1,067
              
              
              8,200
              %Net
                  loss
              
              
              (6,105
              )
              
              (161
              )
              
              (5,944
              )
              
              (3,692
              )%





Revenue
      increased from the same period of 2005 primarily due to increased media services
      revenues of $1.0 million derived as a result of our acquisition of E&M
      Advertising, Inc. in February 2006, and increased subscription revenues of
      $200,000 derived as a result our acquisition of Media SideStreet Corp. in June
      2005, offset by a decrease of $575,000 in revenues from sales of digital signage
      equipment.





The
      decrease of $575,000 in revenues from sales of digital signage equipment was
      primarily due to a shift in our long-term business strategy as referenced above
      in our discussion of the three months ended June 30, 2005.




24




Cost
      of
      revenues was essentially the same as the comparable period last year despite
      the
      increased sales activity because of increased sales of products and services
      with improved margins.





General
        and administrative expenses for the six months ended June 30, 2006 increased
        by
        $6.1 million as compared with the six months ended June 30, 2005 primarily
        due
        to the significant increase in compensation expenses, professional and
        consulting fees and other general and administrative expenses. Wages and
        salary
        expense for the six months ended June 30, 2006 was $2.4 million, an increase
        of
        $1.9 million over the comparable period last year and was primarily due to
        the
        addition of executive, sales and administrative personnel resulting from
        acquisitions since the six months ended June 30, 2005, including our
        acquisitions of E&M Advertising, Inc., iPoint Networks, LLC and Media
        SideStreet Corp.





Interest
      expense was $715,000 for the six months ended June 30, 2006, representing an
      increase of $694,000 over the same period in 2005 primarily due to interest
      expense incurred in connection with the Laurus Facility and due to interest
      expense resulting from the issuance of common stock warrants in lieu of the
      payment of accrued interest on loans payable.





Depreciation
      and amortization costs increased by $1.1 million compared to the same quarter
      of
      the prior year. This increase resulted primarily from acquisition
      activity.





Based
        on
        the above, we had a net loss of $6.1 million for the six months ended June
        30,
        2006 as compared to a net loss of $161,000 for the six months ended June
        30,
        2005.





**Liquidity
      and Capital Resources**





At
      June
      30, 2006, total cash was approximately $406,000. In the first quarter of 2006,
      we entered into the Laurus Facility with Laurus. The term of the Laurus Facility
      is three years and interest accrues on any unpaid principal plus interest at
      a
      rate per annum equal to the “prime rate” plus three percent (3%). The maximum
      principal amount of all borrowings under the Laurus Facility cannot exceed
      ninety percent of our eligible accounts receivable minus such reserves that
      Laurus may in good faith deem necessary and appropriate. As of June 30, 2006,
      the amount available to us to draw down under the Laurus Facility was $1.2
      million.


We
          anticipate that our existing capital resources, including amounts available
          under the Laurus Facility, will enable us to continue operations through
          June
          30, 2007, assuming we meet our sales projections for such period. If we
          materially fail to meet such sales projections and we do not raise additional
          capital, then we may be forced to severely curtail or cease operations.
          Consequently, we are actively working with investment banks and institutional
          investors to obtain additional capital through various financing options;
          however, we do not have any financing commitments. There can be no assurance
          that financing will be available on favorable terms or at all. If we raise
          additional capital through the sale of equity or convertible debt securities,
          the issuance of such securities may result in dilution to existing stockholders.


We
        anticipate that we will generate significant losses from operations for the
        foreseeable future. As of June 30, 2006, our accumulated deficit was $10.3
        million. Our net loss was $3.3 million for the quarter ended June 30, 2006
        and
        $6.1 million and $0.2 million for the six months ended June 30, 2006 and
        2005,
        respectively. Our stockholders’ equity increased from a $2.8 million deficit as
        of December 31, 2005 to positive equity of $7.5 million as of June 30, 2006.
        We
        have limited capital resources, and operations to date have been funded with
        the
        proceeds from product sales, accounts receivable based financings, public
        and
        private equity and debt financings and income earned on investments. These
        conditions raise substantial doubt about our ability to continue as a going
        concern. The audit report prepared by our independent registered public
        accounting firm relating to our consolidated financial statements for the
        year
        ended December 31, 2005 includes an explanatory paragraph expressing the
        substantial doubt about our ability to continue as a going
        concern.





25





*Cash
      Sources and Uses*





Cash
      inflows during 2006 include $3.9 million of net proceeds from a private
      placement of shares of our Series A preferred convertible stock, draw downs
      under the Laurus Facility, and proceeds from product sales. We used
      approximately $782,000 of the proceeds from the Laurus drawdown to satisfy
      in
      full our then-existing bank debt. Our remaining cash balances have been used
      for
      general corporate and working capital purposes. The following table summarizes
      cash flow activity for the six months ended June 30, 2006 and 2005:





**Six
                  months ended June 30,****2006**
              
              **2005**(in
                  thousands)**Cash
                  Sources**Proceeds
                  from issuance of equity securities
              
              $
              4,615
              
              $
              -Proceeds
                  from notes payable - related parties
              
              
              150
              
              
              70Proceeds
                  from notes payable
              
              
              -
              
              
              36Other
                  cash sources
              
              
              -
              
              
              109Total
                  cash sources
              
              $
              4,765
              
              $
              215**Cash
                  Uses**Cash
                  used in operating activities
              
              $
              2,000
              
              $
              35Cash
                  used in acquisitions
              
              
              1,100
              
              
              -Repayment
                  of debt obligations
              
              
              608
              
              
              -Deferred
                  financing costs
              
              
              428
              
              
              -Capital
                  expenditures
              
              
              222
              
              
              190Other
                  cash uses
              
              
              67
              
              
              26Total
                  cash uses
              
              $
              4,425
              
              $
              251(Decrease)
                  increase in cash
              
              $
              340
              
              $
              (36
              )





At
          June
          30, 2006, we had liquid assets of $7.1 million consisting of cash in the
          amount
          of $406,000, accounts receivable derived from operations in the amount
          of $4.6
          million, prepaid expenses and other current assets of $2.0 million and
          inventory
          in the amount of $477,000. Long-term assets of $9.8 million consisted primarily
          of intangible assets of $6.1 million deferred financing costs of $2.2 million
          and fixed assets, including computer servers, media players and video display
          equipment used in operations, of $1.4 million.


Current
        liabilities of $9.7 million at June 30, 2006 consisted primarily of $7.2
        million
        of accounts payable, $657,000 due under the Laurus Facility and $794,000
        of
        stock issuances payable.





Our
      working capital deficit was $2.2 million as of June 30, 2006.





*Financing
      Activities*





On
      January 27, 2006, we entered into a Security Agreement with Laurus, pursuant
      to
      which Laurus agreed to provide us with a revolving credit facility of up to
      $6
      million. The term of the Laurus Facility is three years and borrowings under
      the
      Laurus Facility accrue interest on the unpaid principal and interest at a rate
      per annum equal to the “prime rate” published in The Wall Street Journal from
      time to time, plus three percent (3%). Interest on borrowings under the Laurus
      Facility is payable monthly on the first day of each month during, commencing
      on
      February 1, 2006. All outstanding principal amounts must be paid on January
      27,
      2009. The maximum principal amount of all borrowings under the Laurus Facility
      cannot exceed ninety percent of our eligible accounts receivable minus such
      reserves that Laurus may in good faith deem necessary and appropriate.
      Outstanding amounts payable under the Laurus facility are secured by secured
      by
      a blanket lien on substantially all of our assets and our subsidiaries pursuant
      to the terms of a Security Agreement. In addition, we pledged the ownership
      interests in our subsidiaries pursuant to a stock pledge agreement executed
      in
      favor of Laurus securing our obligations under the Laurus Facility.





26




The
      Security Agreement and related documents provide that an event of default shall
      be deemed to have occurred if we default on the payment of any obligation or
      indebtedness when due, we suffer a bankruptcy or similar insolvency event or
      proceeding, we materially breach a representation or warranty or fail to observe
      any covenant or agreement, we suffer and do not discharge in a timely manner
      a
      final judgment for the payment of a sum in excess of a certain materiality
      threshold, our common stock has been delisted or trading has been suspended,
      we
      sell a substantial portion of our assets, we merge with another entity or we
      fail to timely deliver shares of our Common Stock to Laurus when due upon
      exercise of the warrants issued to Laurus in connection with the financing
      transaction. If an event of default occurs, Laurus has the right to accelerate
      payments under the Laurus Facility and, in addition to any other remedies
      available to it, to foreclose upon the assets securing any outstanding amounts
      due to Laurus. If an event of default occurs, one hundred twenty-five percent
      (125%) of the unpaid principal balance, plus accrued interest and fees, will
      become immediately due and payable. Laurus shall also be entitled to payment
      of
      a default interest rate of two percent (2%) per month on all amounts due and
      such other remedies specified in the relevant transaction documents and under
      the Uniform Commercial Code.





During
      March 2006, we sold 2.9 million shares of Series A convertible preferred stock
      (the “Series A Shares”) at $1.55 per share for total gross proceeds of $4.5
      million. In addition, the purchasers of the Series A Shares received warrants
      to
      purchase an aggregate of 2.9 million shares of common stock with an exercise
      price of $2.25 per share and a 3 year term. We paid $562,000 in issuance costs,
      for net proceeds of $3.9 million.





Each
      Series A Share is convertible by the holder, at any time, into one share of
      common stock, subject to adjustment for certain dilutive events. The Series
      A
      Shares will automatically convert into shares of common stock at a conversion
      price of $1.55 (subject to certain adjustments) on the third anniversary of
      the
      issuance date or upon the date of a consummation of a bona fide firm
      underwritten public offering of the our securities of at least $20 million
      in
      which the price per share is at least $4.00 (subject to certain
      restrictions).





The
      Series A Shares provide that dividends will accrue at an annual rate of seven
      percent (7%) of the gross issuance price of the stock ($4.5 million), payable
      semi-annually on January 1 and July 1 of each year. Dividends on the preferred
      stock will be paid in either cash or shares of common stock at our discretion,
      provided that we have an effective registration statement providing for the
      resale of the shares of common stock. If a registration is not then effective,
      we must pay the dividends in cash. Accrued dividends payable through June 30,
      2006 are approximately $23,000.





On
      July
      31, 2006, we filed a registration statement on Form SB-2 covering the shares
      of
      common stock underlying the Series A Shares and the warrants issued to the
      purchasers of the Series A Shares. The registration statement has not been
      declared effective as of August 15, 2006.





In
      the
      event of our liquidation, dissolution or winding up, the holders of Series
      A
      Shares are generally entitled to receive a liquidation preference over the
      holders of common stock equal to $1.55 per share of Series A Shares held and
      any
      declared but unpaid dividends.





**ITEM
                3.**
            **CONTROLS
                AND PROCEDURES**





DISCLOSURE
      CONTROLS AND PROCEDURES. ****** Our
      management, with the participation of our chief executive officer and chief
      financial officer along with senior accounting staff have evaluated the
      effectiveness of our disclosure controls and procedures (as such term is defined
      in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934,
      as
      amended (the "Exchange Act")) as of the end of the period covered by this
      Report. Based on such evaluation, our chief executive officer and chief
      financial officer has concluded that, as of the end of such period, our
      disclosure controls and procedures are effective in recording, processing,
      summarizing and reporting, on a timely basis, information required to be
      disclosed by us in the reports that we file or submits under the Exchange
      Act.





INTERNAL
      CONTROL OVER FINANCIAL REPORTING ***.*** As
      previously reported in our Quarterly Report on Form 10-QSB for the quarter
      ended
      March 31, 2006, we were actively recruiting additional financial and accounting
      personnel to better implement effective internal control over our financial
      reporting procedures. During the three months ended June 30, 2006, we engaged
      a
      consultant to provide services as an acting chief financial officer, hired
      a new
      vice president of finance and controller and engaged a sufficient number of
      supporting financial and accounting personnel. As of June 30, 2006 and for
      the
      period covered by this Report, the retention of these additional experienced
      financial and accounting personnel has materially affected, and is reasonably
      likely to materially affect, our internal control over financial reporting
      (as
      such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange
      Act).





27




**PART
      II**




**ITEM
                1.**
            **LEGAL
                PROCEEDINGS**




On
      April
      21, 2006, an action was filed against our company in Division No. 1 of the
      Warren Circuit Court of the Commonwealth of Kentucky titled William
      H. Funk, II and All American Investors Group, Inc. v. Limelight Media Group,
      Inc., David Lott, Impart Mobile Media division/OTR Media, Inc. and Stewart
      Layton, case
      number 06-CI-854. Such complaint alleges that our company unfairly competed
      with
      OTR Media, Inc. by utilizing its trade secrets and other confidential
      information in our mobile media business, thus depriving the stockholders of
      OTR
      Media, Inc. of the full value of their shares and pecuniary interest in OTR
      Media, Inc. The plaintiffs in such action are seeking an injunction against
      our
      company to enjoin the alleged use and appropriation of such trade secrets,
      as
      well as monetary damages of a yet unspecified amount. On May 18, 2006, the
      action was removed to federal court in the Western District of Kentucky, C.V.
      No.: 1:06-CV-72-M. On June 6, 2006, we filed a motion to dismiss the complaint
      on the basis of plaintiffs’ lack of standing to bring a direct claim against us,
      plaintiffs’ failure to state a claim upon which relief may be granted and lack
      of personal jurisdiction over us and the other defendants, among other bases.
      As
      of August 15, 2006, we await a final ruling on the matter.




**ITEM
                2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS.**




In
      June
      2006, we issued 30,000 shares of our common stock to Laurus in consideration
      for
      its waiver and amendment of various terms of a registration rights agreement
      with our company. The shares were issued on the exemption provided by Section
      4(2) of the Securities Act of 1933, as amended (the “Act”), on the basis that
      its issuance did not involve a public offering, no underwriting fees or
      commissions were paid by us in connection with such issuance and Laurus
      represented to us that it is an “accredited investor” as defined in Regulation D
      under the Act.





In
      May
      2006, we issued 150,000 shares of our common stock to a consultant as
      consideration for the performance of consulting services. The shares were issued
      on the exemption provided by Section 4(2) of the Act, on the basis that the
      issuance of such shares did not involve a public offering, no underwriting
      fees
      or commissions were paid by us in connection with such issuance and such
      consultant represented to us that it is an “accredited investor” as defined in
      Regulation D under the Act.





During
        the second quarter 2006, we issued common stock purchase warrants to a
        consultant as consideration for the performance of services. The warrants
        provide for the purchase of up to 200,000 shares of our common stock at an
        exercise price of $2.60 per share. The warrants expire in 2009. The warrants
        were issued in reliance on the exemption from registration provided by Section
        4(2) of the Act, on the basis that their issuance did not involve a public
        offering, no underwriting fees or commissions were paid by us in connection
        with
        such issuance and certain representations were made to us by the
        consultants.





In
      April
      2006, we issued and sold 50,000 shares of our common stock to an investor for
      a
      purchase price of $100,000. The shares were issued in reliance on the exemption
      from registration provided by Section 4(2) of the Act, on the basis that its
      issuance did not involve a public offering, no underwriting fees or commissions
      were paid by us in connection with such sale and issuance and certain
      representations were made to us by the investor that he was an “accredited
      investor” as defined in Regulation D under the Act.





In
      April
      2006, we issued a three-year warrant to purchase 145,162 shares of our common
      stock exercisable at $1.55 per share, to a consulting firm in consideration
      for
      services rendered in connection with our Series A Preferred Financing. The
      warrant was issued in reliance on the exemption from registration provided
      by
      Section 4(2) of the Act, on the basis that the issuance did not involve a public
      offering and the consultant represented to us that it was an “accredited
      investor," as defined in Regulation D under the Act.





In
      April
      2006, we issued 6,000 shares of our common stock to one of the members of our
      board of directors for consulting services previously rendered. These shares
      were issued in reliance on the exemption from the registration provided by
      Section 4(2) of the Act, on the basis that its issuance did not involve a public
      offering, no underwriting fees or commissions were paid by us in connection
      with
      such sale and issuance and certain representations were made to us by such
      director that he is an “accredited investor” as defined in Regulation D under
      the Act.





**ITEM
                6.**
            **EXHIBITS.**





The
      exhibits required by this item are listed on the Exhibit Index attached
      hereto .





28





**SIGNATURES**





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:
                  December 19, 2006
              IMPART
                  MEDIA GROUP, INC.By:
                  /s/Joseph F. MartinezJoseph
                  F. MartinezChief
                  Executive Officer(principal
                  executive officer)Chief
                  Accounting Officer(principal
                  financial officer)




29





**EXHIBIT
      INDEX**





31.1
            Certification
                of Chief Executive Officer and 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.






30