**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**Form
      10-QSB**





(Mark
      One)





x
      QUARTERLY REPORT UNDER
      TO SECTION 13 OR 15(d) OF


THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended June 30, 2007





o
      TRANSITION REPORT UNDER
      SECTION 13 OR 15(d)  OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______.





Commission
      File Number: 0-09358





**IMPART
      MEDIA GROUP, INC.**







(Exact
      name of small business issuer as specified in its charter)





Nevada
            
            88-0441338(State
                or other jurisdiction of
                incorporation or organization)
            
            (I.R.S.
                Employer Identification
                No.)





1300
      North Northlake Way


Seattle,
      WA 98103







(Address
      of principal executive offices)





(206)
      633-1852







(Issuer's
      telephone number)





N/A







(Former
      name, former address and former fiscal year, if changed since last
      report)







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




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




As
      of
      August 6, 2007, 24,085,417 shares of our common stock, par value $0.001 per
      share, and 2,903,229 shares of our Series A preferred stock, par value $0.001
      per share, which shares of Series A preferred stock, were, at August 6, 2007,
      convertible into an aggregate of 8,653,856 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 o No x







1





**FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report on Form 10-QSB and the documents incorporated herein by
      reference contain forward-looking statements within the meaning of Section
      27A
      of the Securities Act of 1933, an amended (the “Securities Act”), and Section
      21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
      These forward-looking statements include, without limitation, statements
      regarding planned or expected contracts that we may enter into with regard
      to
      our proprietary hardware, including without limitation, our *Impart IQ*
      product line*;* 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. These forward-looking statements
      reflect our current views with respect to future events or our financial
      performance, and involve certain known and unknown risks, uncertainties and
      other factors, including those identified below, which may cause our or our
      industry’s actual or future results, levels of activity, performance or
      achievements to differ materially from those expressed or implied by any
      forward-looking statements or from historical results. We intend such
      forward-looking statements to be covered by the safe harbor provisions for
      forward-looking statements contained in Section 27A of the Securities Act of
      1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
      statements include information concerning our possible or assumed future results
      of operations and statements preceded by, followed by, or that include the
      words
“may,” “will,” “could,” “would,” “should,” “believe,” “expect,” “plan,”
“anticipate,” “intend,” “estimate,” “predict,” “potential” or similar
      expressions.





Forward-looking
      statements are inherently subject to risks and uncertainties, many of which
      we
      cannot predict with accuracy and some of which we might not even anticipate.
      Although we believe that the expectations reflected in such forward-looking
      statements are based upon reasonable assumptions at the time made, we can give
      no assurance that such expectations will be achieved. Future events and actual
      results, financial and otherwise, may differ materially from the results
      discussed in the forward-looking statements. Readers are cautioned not to place
      undue reliance on these forward-looking statements. We have no duty to update
      or
      revise any forward-looking statements after the date of this report or to
      conform them to actual results, new information, future events or
      otherwise.





The
      following factors, among others, could cause our or our industry’s future
      results to differ materially from historical results or those anticipated:
      (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.





2




ITEM 1. FINANCIAL
      STATEMENTS




**IMPART
      MEDIA GROUP, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**June
      30, 2007**


**(UNAUDITED)**





ASSETSCurrent
                assetsCash
            
            $
            525,312Restricted
                cash
            
            
            49,939Accounts
                receivable, net
            
            
            4,226,755Inventory
            
            
            363,466Prepaid
                expenses and other current assets
            
            
            144,655Total
                current assets
            
            
            5,310,127Fixed
                assets, net
            
            
            1,491,312Other
                AssetsGoodwill
            
            
            2,359,418Intangible
                assets, net
            
            
            2,162,887Deferred
                financing costs, net
            
            
            1,705,537Other
                assets
            
            
            165,266Total
                other assets
            
            
            6,393,108Total
                assets
            
            $
            13,194,547LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilitiesAccounts
                payable
            
            $
            7,059,744Accrued
                liabilities
            
            
            180,528Customer
                deposits
            
            
            (14,077
            )Lines
                of credit
            
            
            1,448,560Note
                payable - related parties - current portion
            
            
            39,785Capital
                lease obligation - current portion
            
            
            46,606Convertible
                debentures - current portion
            
            
            438,618Amounts
                payable to former E&M owner
            
            
            200,000Other
                liabilities
            
            
            102,061Total
                current liabilities
            
            
            9,501,825Long-term
                liabilitiesNotes
                payable - related parties - long-term portion
            
            
            150,000Convertible
                debentures
            
            
            1,026,686Capital
                lease obligation - long-term portion
            
            
            53,690Total
                long-term liabilities
            
            
            1,230,376Total
                liabilities
            
            
            10,732,201Commitments
                and contingenciesStockholders'
                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,
                23,959,148  shares issued and outstanding
            
            
            23,959Additional
                paid-in capital
            
            
            20,502,345Accumulated
                deficit
            
            
            (18,066,861
            )Total
                stockholders' equity
            
            
            2,462,346Total
                liabilities and stockholders' equity
            
            $
            13,194,547




3




**IMPART
                  MEDIA GROUP, INC.****CONSOLIDATED
                  STATEMENTS OF OPERATIONS****(UNAUDITED)**For
                  the Three
              
              
              For
                  the Three
              
              
              For
                  the six
              
              
              For
                  the sixMonths
                  Ended
              
              
              Months
                  Ended
              
              
              Months
                  Ended
              
              
              Months
                  EndedJune
                  30, 2007
              
              
              June
                  30, 2006
              
              
              June
                  30, 2007
              
              
              June
                  30, 2006RevenuesEquipment sales
              
              $
              388,279
              
              
              $
              634,553
              
              
              $
              1,163,011
              
              
              $
              1,159,189Managed subscriptions
              
              
              69,741
              
              
              
              108,031
              
              
              
              166,928
              
              
              
              261,130Consulting and design services
              
              
              20,410
              
              
              
              100,565
              
              
              
              63,182
              
              
              
              206,428Media services
              
              
              1,280,723
              
              
              
              583,188
              
              
              
              2,545,265
              
              
              
              1,022,334Total
                  revenues
              
              
              1,759,153
              
              
              
              1,426,337
              
              
              
              3,938,386
              
              
              
              2,649,081Cost
                  of revenues
              
              
              560,884
              
              
              
              703,288
              
              
              
              1,428,023
              
              
              
              1,291,728Gross
                  profit
              
              
              1,198,269
              
              
              
              723,049
              
              
              
              2,510,363
              
              
              
              1,357,353Other
                  operating expensesWages and salaries
              
              
              1,250,283
              
              
              
              1,027,150
              
              
              
              2,592,713
              
              
              
              2,372,031Selling and marketing
              
              
              84,964
              
              
              
              266,175
              
              
              
              183,197
              
              
              
              336,372General and administrative expenses
              
              
              1,139,474
              
              
              
              1,665,823
              
              
              
              2,520,897
              
              
              
              3,065,238Depreciation and amortization
              
              
              193,452
              
              
              
              321,521
              
              
              
              383,939
              
              
              
              544,602Total
                  other operating expenses
              
              
              2,668,173
              
              
              
              3,280,669
              
              
              
              5,680,746
              
              
              
              6,318,243Loss
                  from operations
              
              
              (1,469,904
              )
              
              
              (2,557,620
              )
              
              
              (3,170,383
              )
              
              
              (4,960,890
              )Other
                  income (expense)Other income and expense, net
              
              
              107
              
              
              
              (14,052
              )
              
              
              107
              
              
              
              --Gain on extinguishment of notes payable
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              106,423Interest expense
              
              
              (371,632
              )
              
              
              (269,436
              )
              
              
              (613,463
              )
              
              
              (715,277
              )Net
                  Loss
              
              $
              (1,841,429
              )
              
              $
              (2,841,108
              )
              
              $
              (3,783,739
              )
              
              $
              (5,569,744
              )Net
                  Loss - Common Stockholders:Net Loss
              
              $
              (1,841,429
              )
              
              $
              (2,841,108
              )
              
              $
              (3,783,739
              )
              
              $
              (5,569,744
              )Beneficial conversion feature of Series A preferred stock
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              (933,873
              )Revaluation of Series A preferred - conversion price
                  reduction
              
              
              (2,447,310
              )
              
              
              --
              
              
              
              (2,447,310
              )Accretion of dividends on Series A preferred stock
              
              
              --
              
              
              
              (80,675
              )
              
              
              --
              
              
              
              (104,125
              )Net
                  loss - available to common stockholders
              
              $
              (4,288,739
              )
              
              $
              (2,921,783
              )
              
              $
              (6,231,049
              )
              
              $
              (6,607,742
              )Basic
                  and diluted loss per common share
              
              $
              (0.18
              )
              
              $
              (0.13
              )
              
              $
              (0.27
              )
              
              $
              (0.33
              )Basic
                  and diluted weighted average common sharesoutstanding
              
              
              23,718,683
              
              
              
              21,750,103
              
              
              
              23,177,470
              
              
              
              20,097,470


4




**IMPART
      MEDIA GROUP, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




For
                the Six Months
              Ended
              June
                30, 2007
            
            
            For
                the Six Months
              Ended
              June
                30, 2006Cash
                flows from operating activities:Net
                loss
            
            $
            (3,783,739
            )
            
            $
            (5,569,744
            )Adjustments
                to reconcile net loss to net cash used by operating
                activities:Non-cash
                wages and salaries expense:Incentive
                stock options granted to employees
            
            
            585,750
            
            
            
            91,022Common
                stock issued to senior executives for services
            
            
            --
            
            
            
            355,637Non-cash
                general and administrative expense:Amortization
                of prepaid consulting expense
            
            
            482,408Common
                Stock issued for non-cash consulting services
            
            
            --
            
            
            
            1,000,000Warrants
                issued for earned consulting services
            
            
            --
            
            
            
            124,890Non-cash
                interest expense:Warrants
                issued to bridge lenders
            
            
            --
            
            
            
            206,186Common
                stock issued to senior executives upon conversion of notes
                payable
            
            
            --
            
            
            
            39,628Amortization
                of deferred financing costs on line of credit:Warrants
            
            
            336,227
            
            
            
            239,256Other
                deferred financing costs
            
            
            81,238
            
            
            
            50,079Amortization
                of convertible debentures discount
            
            
            59,004
            
            
            
            --Common
                stock issued to Laurus for extended filing date
            
            
            --
            
            
            
            51,900Other
                non-cash interest expense
            
            
            10,939
            
            
            
            27,219Gain
                on retirement of notes payable
            
            
            --
            
            
            
            (106,423
            )Loss
                disposal of assets
            
            
            5,688
            
            
            
            --Bad
                debt expense
            
            
            17,951
            
            
            
            --Depreciation
                and amortization
            
            
            383,939
            
            
            
            537,602Other
                adjustments
            
            
            --
            
            
            
            (118,204
            )Changes
                in operating assets and liabilities, excluding assets and liabilities
                from
                acquisitions:Accounts
                receivable
            
            
            1,046,457
            
            
            
            (3,869,596
            )Inventory
            
            
            116,232
            
            
            
            6,172Prepaid
                expenses and other current assets
            
            
            476,467
            
            
            
            (1,457,702
            )Other
                assets
            
            
            (115,345
            )
            
            
            440,527Accounts
                payable
            
            
            (776,591
            )
            
            
            3,975,794Accrued
                liabilities
            
            
            (1,062,398
            )
            
            
            1,975,520Customer
                deposits
            
            
            (37,052
            )Net
                cash used by operating activities
            
            
            (2,172,825
            )
            
            
            (2,000,237
            )Cash
                flows from investing activities:Purchase
                of fixed assets
            
            
            (25,196
            )
            
            
            (222,303
            )Purchase
                of Intransit assets
            
            
            --
            
            
            
            (500,000
            )Acquisition
                of E&M
            
            
            --
            
            
            
            (600,000
            )Net
                cash used by investing activities
            
            
            (25,196
            )
            
            
            (1,322,303
            )Cash
                flows from financing activities:Proceeds
                from sale of common stock
            
            
            --
            
            
            
            681,501Net
                proceeds from sale of convertible preferred stock and issuance of
                warrants
            
            
            --
            
            
            
            3,910,505Issuance
                of common stock for exercise of warrants
            
            
            --
            
            
            
            22,750Dividends
                on Series A Preferred
            
            
            (104,125
            )
            
            
            --Issuance
                of convertible debentures
            
            
            2,100,000
            
            
            
            --Payment
                for deferred financing costs for convertible debenture
            
            
            (50,838
            )
            
            
            --Net
                borrowings on lines of credit
            
            
            535,311
            
            
            
            (38,294
            )Principal
                payments on notes payable
            
            
            --
            
            
            
            (607,600
            )Deferred
                financing costs and commitment fees
            
            
            --
            
            
            
            (428,000
            )Proceeds
                from notes payable - related parties
            
            
            --
            
            
            
            150,000Principal
                payments on capital lease obligations
            
            
            (20,620
            )
            
            
            (28,504
            )Net
                cash provided by financing activities
            
            
            2,459,728
            
            
            
            3,662,358Net
                change in cash
            
            
            261,707
            
            
            
            339,818Cash,
                beginning of period
            
            
            263,605
            
            
            
            66,641Cash,
                end of period
            
            $
            525,312
            
            
            $
            406,459Supplemental
                cash flow informationIncome
                taxes paid
            
            $
            --
            
            
            $
            --Interest
                Expense:Interest
                Paid
            
            $
            185,059
            
            
            $
            101,009Non-cash
                Interest:Amortization
                deferred financing costs
            
            
            417,465
            
            
            
            289,335Common
                stock issued to Laurus for extended filing date
            
            
            --
            
            
            
            51,900Warrants
                issued to bridge and other lenders
            
            
            --
            
            
            
            206,186Common
                stock issued to senior executives upon conversion of notes
                payable
            
            
            --
            
            
            
            39,628Other
                non-cash interest expense
            
            
            10,939
            
            
            
            27,219Total
                Interest Expense
            
            $
            613,463
            
            
            $
            715,277Noncash
                investing and financing activitiesConvertible
                debt deferred financing expensesDeferred
                financing costs incurred  in connection with issuance of
                convertible debentures
            
            $
            (302,396
            )
            
            $
            --Issuance
                of common stock warrants to placement agent
            
            
            151,558
            
            
            
            --Fee
                paid to placement agent in prior year
            
            
            100,000
            
            
            
            --Fee
                paid to placement agent
            
            $
            (50,838
            )
            
            $
            --Conversion
                of related party and other debt:Issuance
                of common stock to repay debt, interest and wages and salaries
                expense
            
            $
            --
            
            
            $
            2,270,848Gain
                on extinguishment of debt
            
            
            --
            
            
            
            106,423Interest
                expense/accrued interest
            
            
            --
            
            
            
            (39,628
            )Compensation
                expense due to related parties
            
            
            --
            
            
            
            (355,637
            )Retirement
                of debt
            
            
            --
            
            
            
            (1,982,006
            )Net
                cash effect from conversion of related party debt
            
            $
            --
            
            
            $
            --InTransit
                asset purchase:Intangible
                assets acquired
            
            $
            --
            
            
            $
            (1,072,372
            )Common
                stock issued
            
            
            --
            
            
            
            572,372Net
                cash paid in asset purchase
            
            $
            --
            
            
            $
            (500,000
            )E&M
                Acquisition:Current
                assets acquired
            
            $
            --
            
            
            $
            (324,892
            )Fixed
                assets acquired
            
            
            --
            
            
            
            (147,000
            )Intangible
                assets acquired
            
            
            --
            
            
            
            (2,969,582
            )Other
                long term assets acquired
            
            
            --
            
            
            
            (44,750
            )Current
                liabilities assumed
            
            
            --
            
            
            
            328,970Goodwill
                from acquisition
            
            
            --
            
            
            
            (2,359,418
            )Common
                stock issued
            
            
            --
            
            
            
            4,441,874Note
                payable issued
            
            
            --
            
            
            
            200,000Stock
                issuance payable
            
            
            --
            
            
            
            274,798Net
                cash paid in acquisition
            
            $
            --
            
            
            $
            (600,000
            )




5





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1. Description of Business and History**





**Description
      of Business.** Impart Media Group, Inc. (the “Company”), headquartered in
      Seattle, Washington U.S.A., provides digital signage and information
      networks in the business-to-consumer media sector. The Company’s digital signage
      and interactive kiosk solutions consist of flat panel monitors, media
      players/servers, audio-video accessory components, enclosures/mounts/fixtures,
      web services, and software. The Company also provides consulting, design,
      integration, fabrication, assembly, IP connectivity, quality assurance, creative
      production, installation, onsite maintenance, web-data hosting, network
      monitoring and content management services throughout the United States (and
      in
      global markets through its authorized distributors). As a result of the
      Company’s acquisition of E&M Advertising, Inc. and its affiliates (E&M)
      in February 2006, the Company also provides offline and online direct response
      advertising capabilities.





**Note
      2. Going Concern**





The
      Company’s financial statements are prepared consistent with accounting
      principles generally accepted in the United States applicable to a going
      concern, which contemplates the realization of assets and liquidation of
      liabilities in the normal course of business. However, as shown in the financial
      statements, the Company has sustained substantial losses and has relied
      primarily on sales of securities and proceeds from borrowings for operating
      capital, which raise substantial doubt about its ability to continue as a going
      concern.





The
      Company anticipates that its existing capital resources, including amounts
      available under its revolving credit facility, will enable it to continue
      operations through June 30, 2008, assuming the Company meets its sales
      projections for such period. If the Company materially fails to meet such sales
      projections and does not raise additional capital, then the Company may be
      forced to severely curtail or cease operations. Consequently, the Company is
      actively working with investment banks and institutional investors to obtain
      additional capital through various financing options; however, the Company
      does
      not have any financing agreements at this time. There can be no assurance that
      financing will be available on favorable terms or at all. If the Company raises
      additional capital through the sale of equity or convertible debt securities,
      the issuance of such securities may result in dilution to existing
      stockholders.





The
      financial statements do not include any adjustments relating to the
      recoverability and classification of recorded asset amounts and classification
      of liabilities that might be necessary should the Company have to curtail
      operations or be unable to continue in existence.





**Note
      3. Basis of Presentation**





The
      accompanying unaudited Condensed Consolidated Financial Statements include
      the
      accounts of the Company and its majority-owned subsidiaries. All material
      intercompany balances and transactions have been eliminated. The interim
      financial statements reflect all adjustments, consisting only of normal
      recurring adjustments that, in the opinion of management, are necessary for
      a
      fair presentation of the results for the periods shown. The results of
      operations for such periods are not necessarily indicative of the results
      expected for the full fiscal year. The Condensed Consolidated Balance Sheet
      as
      of June 30, 2007 has been derived from the unaudited financial statements at
      that date. However, it does not include all of the information and notes
      required by accounting principles generally accepted in the United States for
      complete financial statements. The accompanying financial statements should
      be
      read in conjunction with the audited Consolidated Financial Statements for
      the
      fiscal year ended December 31, 2006, included in our Annual Report on Form
      10-KSB filed with the Securities and Exchange Commission on April 12,
      2007.





6





In
      February 2006, the Company completed its acquisition of E&M. E&M’s
      results of operations and cash flows are included in the Company’s Condensed
      Consolidated Statements of Operations and Cash Flows from this
      date.





Certain
      prior period balances in the Consolidated Statement of Operations for the three
      and six months ended June 30, 2006, have been reclassified to conform to current
      period presentation by combining Professional and consulting, Rent expense,
      and
      Other general and administrative expenses and reporting these expenses together
      as General and administrative expenses. Certain prior period balances in the
      Net
      cash used by operating activities section of the Consolidated Statements of
      Cash
      Flows were also reclassified. Total balance in Net cash used by operating
      activities remains unchanged.





**Note
      4. Summary of Significant Accounting Policies**





The
      significant accounting policies used in the preparation of our audited
      Consolidated Financial Statements are disclosed in our Annual Report on Form
      10-KSB for the year ended December 31, 2006, as filed with the Securities
      and Exchange Commission on April 12, 2007. Updated disclosures regarding
      such policies are set forth below.





**Loss
      per Share.** Basic loss per share is computed by dividing net loss
      attributable to common stockholders by the weighted average number of common
      stock shares outstanding during the period. Diluted loss per share, which would
      include the effect of the conversion of unexercised stock options, unexercised
      warrants to purchase common stock, and convertible Preferred Stock, is not
      separately computed because inclusion of such conversions is antidilutive.
      In
      these cases, basic and diluted loss per share is the same.





Basic
      and
      diluted weighted average common shares outstanding, and the potentially dilutive
      securities excluded from loss per share computations because they are
      antidilutive, are as follows for the three and six month periods ended June
      30,








**2007**
            
            
            **2006****Three
                Months**
            
            
            **Six
                Months**
            
            
            **Three
                Months**
            
            
            **Six
                Months**Basic
                and diluted weighted average common stock shares
                outstanding
            
            
            23,718,683
            
            
            
            23,177,470
            
            
            
            21,750,103
            
            
            
            20,097,470Potentially
                dilutive securities excluded from loss per share
                computations:Convertible
                Preferred Stock
            
            
            8,653,855
            
            
            
            8,653,855
            
            
            
            2,903,229
            
            
            
            2,903,229Common
                stock options
            
            
            4,160,000
            
            
            
            4,160,000
            
            
            
            1,295,000
            
            
            
            1,295,000Common
                stock purchase warrants
            
            
            5,539,678
            
            
            
            5,539,678
            
            
            
            5,195,443
            
            
            
            5,195,443








**Revenue
      Recognition**. The Company recognizes revenue when it has persuasive
      evidence of an arrangement, the product has been shipped or the services have
      been provided to the customer, title and risk of loss for products has passed
      to
      the customer, the sale price is fixed and determinable, no significant
      unfulfilled Company obligations exist, and collectibility is reasonable
      assured.





Revenue
      from equipment sales is generally recognized when products are shipped and/or
      the revenue is fully earned and ownership has passed to the customer. Revenue
      from management subscriptions is recorded in the month the service is provided.
      Revenue from consulting and design services, which are all short-term, is
      recognized using the completed-contract method. There were no significant
      contracts in process at June 30, 2007.





Revenues
      from media services consist of sales of brokered advertising and certain other
      consulting, content creation, and Internet-based advertising fees. Because
      the
      Company typically acts as an agent on behalf of its advertising clients,
      brokered advertising revenues are recorded based on the net commissions earned.
      Media services revenues from consulting, content creation, and Internet-based
      advertising fees are recorded at their gross billing amounts.





7





The
      gross
      and net billing amounts included in operating revenues for the three and six
      month periods ended June 30, 2007 and 2006 are follows:





Three
                Months
              Ended
                June
              30,
                2007
            
            
            Six
                Months
              Ended
                June 30,
              2007
            
            
            Three
                Months
              Ended
                June 30,
              2006
            
            
            Six
                Months
              Ended
                June 30,
              2007Consolidated
                gross revenues
            
            $
            10,300,622
            
            
            $
            20,711,843
            
            
            $
            6,242,225
            
            
            $
            8,463,000Direct
                cost of sales
            
            
            (8,541,469
            )
            
            
            (16,773,457
            )
            
            
            (4,815,888
            )
            
            
            (5,813,919
            )Consolidated
                net revenues
            
            $
            1,759,153
            
            
            $
            3,938,386
            
            
            $
            1,426,337
            
            
            $
            2,649,081





**Note
      5. Convertible Notes Payable**





Effective
      May 25, 2007, the Company
      borrowed $2.1 million pursuant to the issuance of a series of unsecured
      convertible debentures (the “Convertible Debentures) with a two year maturity to
      a group of institutional lenders (the “Purchasers”.) Interest is recorded at 6%
      per annum. The Convertible Debentures are convertible, at the option of the
      purchasers, into shares of common stock, par value $0.001 per share, at a
      conversion price of $0.75 per share (the “Conversion Price”).Purchasers
      of the Convertible Debentures will receive registration rights
      pursuant to a Registration Rights Agreement that requires the Company to file
      a
      registration statement under the Securities Act of 1933 covering the resale
      the
      shares of common stock issuable upon conversion of the principal amount and
      interest payable. This registration was filed with the SEC on July 10,
      2007.





Each
      Purchaser may, at any time, convert all or any portion of the outstanding
      principal amount and/or accrued interest under its Convertible Debenture into
      fully paid and nonassessable shares of the Company’s common stock at the
      Conversion Price. Unless waived by the Purchaser, neither the Company nor such
      Purchaser may convert such Purchaser’s Convertible Debenture if, as a result of
      the issuance of the underlying shares of common stock, such Purchaser would
      beneficially own more than 4.99% of the issued and outstanding shares of the
      Company’s common stock. If so waived, such Purchaser’s Convertible Debenture may
      not be converted if, as a result of the issuance of the underlying shares of
      common stock, such Purchaser would beneficially own more than 9.99% of the
      issued and outstanding shares of the Company’s common stock.





Beginning
      on the six month anniversary of the issuance date of the Convertible Debentures,
      the Company is required to begin making monthly repayments of principal and
      accrued interest. The amount of the principal payments will be equal to 1/18
      of
      the aggregate principal amount of Convertible Debentures issued in the offering
      ($116,666 per month).





Subject
      to certain customary exceptions, if the Company issues common stock or other
      securities convertible into or exercisable for common stock at per share less
      than the Conversion Price then in effect, the Conversion Price will be reduced
      to a price equal to the price per share of such issued securities. The
      Conversion Price is also subject to adjustment upon stock splits, stock
      dividends and the like.





Subject
      to certain notice and other provisions, the Company may prepay each Convertible
      Debenture at any time.





If
      an
      event of default occurs under the Convertible Debentures, each Purchaser has
      the
      option to declare immediately due and payable all obligations under the
      Convertible Debenture at an amount equal to all costs, fees and liquidated
      damages plus the greater of (i) 130% of the outstanding principal amount of
      the
      Convertible Debenture plus accrued interest thereon or (ii) the outstanding
      principal amount of the Convertible Debenture plus accrued interest thereon
      divided by the Conversion Price on the date of the default. Such events of
      default include, without limitation, the following:





·
            a
                failure to make payments of principal or interest under the Convertible
                Debenture when due, subject to a three trading day cure period in
                the case
                of late interest payments only;


·
            a
                breach by the Company of any covenant of the Convertible Debenture
                which
                continues for five trading days without cure after notice thereof
                by the
                Purchaser or ten trading days after the Company becomes (or should
                have
                become) aware of such breach;





8





·
            if
                the Company’s common stock is not eligible for listing or quotation for
                five trading (5) consecutive days;
                and


·
            if
                the Registration Statement shall not have been declared effective
                on or
                prior to the 270th day after the closing date for the sale of Convertible
                Debentures





In
      connection with the Convertible Debentures, the Company issued to the Purchasers
      five-year warrants (the “Warrants”) granting the right to purchase for cash (or
      through a “cashless exercise” feature) up to 1,400,000 shares of common stock
      (representing 50% of the number of shares initially issuable upon conversion
      of
      the Convertible Debentures), at an initial exercise price of $0.52. The Warrants
      expire on May 24, 2012. Subject to certain customary exceptions, if the Company
      issues common stock or other securities convertible into or exercisable for
      common stock at per share less than the exercise price of the Warrants, the
      exercise price will be reduced to a price equal to the price per share of such
      issued securities. The Conversion Price is also subject to adjustment upon
      stock
      splits, stock dividends and the like. Unless waived by the Purchaser, such
      Purchaser may not exercise its Warrant if, as a result of the issuance of the
      underlying shares of common stock, such Purchaser would beneficially own more
      than 4.99% of the issued and outstanding shares of the Company’s common
      stock.  If so waived, such Purchaser may not exercise its Warrant if,
      as a result of the issuance of the underlying shares of common stock, such
      Purchaser would beneficially own more than 9.99% of the issued and outstanding
      shares of common stock.





In
      connection with its role as
      placement agent with respect to the Convertible Debentures, the Company issued
      to the placement agent (and its designees) five-year warrants to purchase an
      aggregate of 280,000 shares of common stock with an exercise price of $0.52
      per
      share. These warrants expire on May 24, 2012. The
      value of these warrants on the date of grant was approximately $152,000. 
The fair value of the warrants was determined using the Black-Scholes option
      pricing model with the following assumptions: expected divided yield of 0%,
      risk-free interest rate of 4.8%, volatility of 139%, and a contractual life
      of 5
      years.  The value of the warrants was recorded as deferred finance costs,
      and will be amortized over the life of the loan.





Proceeds
      from the issuance of $2.1 million convertible promissory notes and warrants
      were
      allocated between the notes and warrants on a relative fair value basis. The
      value allocated to the warrants on the date of the grant was approximately
      $557,000. The fair value of the warrants was determined using the Black-Scholes
      option pricing model with the following assumptions: expected dividend yield
      of
      0%, risk-free interest rate of 4.8%, volatility of 139%, and a contractual
      life
      of 5 years. The value of the warrants was recorded as a deferred debt discount
      against the $2.1 million proceeds of the notes. In addition, a beneficial
      conversion feature related to the notes was determined to be approximately
      $137,000. As a result, the total discount on the notes equaled $694,000 which
      is
      being amortized over the three year term of the notes. Amortization of deferred
      debt discount of approximately $59,000 was recorded for the three and six months
      ended June 30, 2007. Interest expense on the notes of approximately $13,000
      was
      recorded for the three and six months ended June 30, 2007.





**Note
      6. Lines of Credit**





On
      January 27, 2006, the Company entered into an agreement with Laurus Master
      Fund,
      Ltd. (“Laurus”) pursuant to which Laurus agreed to provide the Company with a
      revolving credit facility of up to $6 million (the “Facility”). The term of the
      Facility is three years and borrowings 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 (11.25% at June 30, 2007).
      The maximum principal amount of all borrowings under the Facility cannot exceed
      ninety percent (90%) of the Company’s eligible accounts receivable minus such
      reserves that Laurus may in good faith deem necessary and
      appropriate.





**Note
      7. Series A Preferred Stock**





During
      March 2006, the Company sold 2,903,229 shares of Series A Preferred Stock at
      a
      price of $1.55 per share for total gross proceeds of $4.5 million. Further,
      the
      purchasers of the Series A Preferred Stock received three-year warrants to
      purchase 2,903,229 shares of common stock at $2.25 per share. The Company
      registered the shares of common stock underlying the Series A Preferred Stock
      and warrants in a Form SB-2 which was declared effective by the Securities
      and
      Exchange Commission on September 1, 2006. On December 13, 2006, the Company
      issued a stop order for sales pursuant to the registration statement in order
      to
      allow the Company to restate certain financial statements. As a result, the
      Series A Preferred Stock was determined to be subject to mandatory redemption.
      In addition, the holders of the Series A Preferred Stock became entitled to
      certain liquidated damages.





9





Effective
      March 23, 2007, the holders of the Series A Preferred Stock granted certain
      waivers to the Company in consideration for a decrease in the conversion price
      of the Series A Preferred Stock from $1.55 to $1.00 and a reduction in the
      warrant exercise price from $2.25 to $0.01. This waiver also extended the time
      period the Company has in order to file a post effective amendment to the
      registration statement.





In
      return
      for the consideration described above, the holders of the Series A Preferred
      Stock:





•           Waived
      their right to receive convertible preferred stock as a one-time dividend to
      holders of the stock in the event of the Company’s failure to achieve aggregate
      gross revenues of $50,000,000 or more during the four (4) calendar quarters
      commencing on April 1, 2006, and ending on March 31, 2007;





•           Waived
      any and all breaches and the right to receive liquidated damages and redemption
      rights related to the Company’s failure to obtain an effective registration
      statement as mandated by the original registration rights agreement that was
      executed in connection with the issuance of the Series A Preferred
      Stock;





•           Agreed
      to a reduction in the Series A Preferred Stock redemption price from 200% of
      the
      liquidation preference amount to 100% of such amount; and





•           Waived
      their right to any dividends with respect to the Series A Preferred Stock up
      to
      and including accruals through March 2, 2007, but will be entitled to dividends
      thereafter. As of July1, 2007, the Company has declared and paid dividends
      through June 30, 2007.





As
      a
      result of the reduction in the conversion price, the holders of the Series
      A
      Preferred Stock can convert the preferred shares into an additional 1,596,777
      shares. The value related to the reduction in the conversion price was
      determined to be $974,033 and was recorded as of December 31, 2006.





On
      May 22, 2007, the Company filed a Post Effective Amendment to Form SB-2
      covering the shares of common stock underlying the Series A Preferred Stock
      and
      the warrants issued to the purchasers of the Series A Preferred Stock. The
      registration statement was declared effective as of June 26,
      2007.





In
      connection with the issuance of the Convertible Debentures on May 25, 2007,
      an
      additional reduction in the conversion price was triggered. Accordingly, the
      holders of the Series A Preferred Stock can convert the preferred shares into
      an
      additional 4,153,850 shares. The value related to this further reduction in
      the
      Series A Preferred Stock conversion price was determined to be $2,447,310 and
      was recorded during the quarter ended June 30, 2007.





The
      value
      of the reduction of the exercise price of the warrants was determined to be
      $934,856. This incremental value is measured as the difference between (a)
      the
      fair value of the modified warrant and (b) the value of the old warrant
      immediately before the terms were modified, determined based on the remaining
      expected life of the warrant and was recorded as of December 31,
      2006.





The
      values of the reductions of the Series A Preferred Stock conversion price and
      the exercise price of the warrants increase additional paid-in capital
      attributable to the holders of the Series A Preferred Stock and, at the same
      time, are considered to be deemed dividends to those holders. Because the
      Company has an accumulated deficit, these dividends reduce additional paid-in
      capital rather than increase the accumulated deficit. These amounts also
      increase net loss attributable to common stockholders.





The
      Series A Preferred Stock provides that dividends are cumulatively payable 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 Preferred Stock are payable in either cash or shares of common
      stock at the Company’s discretion, provided that the Company has an effective
      registration statement providing for the resale of the shares of its common
      stock that would be paid as a dividend.  The amount of dividends paid
      prior to or on June 30, 2007 was $104,125.





10





**Note
      8. Share-Based Payments**





During
      the three and six months ended June 30, 2007, the Company made share-based
      payments in the form of:





•
            Incentive
                stock options (“options”) under its 2006 Equity Incentive Plan (“the
                Plan”), to employees, directors, and
                others;


•
            Issuances
                of common stock to consultants


•
            Issuances
                of remaining common stock payable in connection with the 2006 purchase
                of
                E&M Advertising, Inc.





***Incentive
      Stock Options***





During
      the second quarter 2007, the Company granted 300,000 options under the Plan
      at
      an exercise price of $0.56 per common share.  The total fair value of
      the options as of the grant date was $165,000.





During
      the first quarter 2007, the Company granted 2,182,500 options under the Plan
      at
      an exercise price of $0.40 per common share. The total fair value of the options
      as of the grant date was $814,000.





During
      the three and six months ended June 30, 2007, $226,746 and $585,750,
      respectively, was expensed as General and Administrative Expenses.





The
      fair
      value for options granted during the six months ended June 30, 2007 was
      estimated using the Black-Scholes option valuation model with the following
      weighted average assumptions:





**2007**Expected
                life in years
            
            
            7.2Volatility
            
            
            146.3
            %Interest
                rate
            
            
            4.9
            %Yield
                rate
            
            
            0
            %





There
      were no options granted in the six months ended June 30, 2006.





***Issuances
      of Common Stock***





During
      the first six months of 2007, the Company issued 127,000 shares of common stock
      pursuant to two consulting agreements. The shares had a fair value of $196,850
      and were recorded as prepaid expenses, of which $145,183 was recognized as
      non-cash general and administrative expenses in the six month period ended
      June
      30, 2007.





**Note
      9. Common Stock**





During
      the six months ended June 30, 2007, the Company issued 1,269,497 shares of
      common stock upon the cashless exercise of 1,290,324 $0.01 warrants held by
      certain holders of Series A Preferred Stock.





**Note
      10. Commitments and Contingencies**





In
      March
      2007, the Company received notice of a possible lawsuit against it by a former
      employee and consultant to the Company alleging breach of contract and wrongful
      termination, among other claims. In May, the Company settled with the claimant
      in the amount of $45,000 which has been recorded as General and Administrative
      Expenses in the six month period ended June 30, 2007.





11





In
      February 2006, the Company was assigned an agreement (the “PATH Contract”),
      dated as of December 2, 2002, between Black Experience, Inc., BX Media Group,
      Inc. and Port-Authority Trans-Hudson Corporation (“PATH”), as amended, pursuant
      to which the Company obtained the rights to provide PATH with certain
      advertising and marketing services in connection with its PATHVision system.
      Effective February 2007, the Company and PATH mutually agreed to terminate
      the
      PATH Contract.








**ITEM
      2. MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





The
      following discussion and analysis of the financial condition and results of
      operations should be read in conjunction with our financial statements and
      notes
      appearing elsewhere in this Quarterly Report. 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,
      2006 under the caption “Management’s Discussion and Analysis or Plan of
      Operation” and the other factors discussed in connection with any
      forward-looking statements.





**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
                the estimate or different estimates that could have been selected
                may have
                made a material impact on our consolidated results of operations
                or
                financial condition.





*Share-Based
      Payments* - Prior to January 1, 2006, we accounted for stock options to
      employees under the fair value provision of SFAS 123. 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 the modified 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.





We
      grant
      options to purchase our common stock to our employees and directors under our
      2006 Equity Incentive Plan. The benefits provided under this plan are
      share-based payments subject to the provisions of SFAS 123(R). Share-based
      compensation expense recognized under SFAS 123(R) through the first six months
      of 2007 and 2006 was $585,750 and $91,000, respectively. At June 30, 2007,
      total
      unrecognized estimated compensation expense related to unvested stock options
      granted prior to that date was $1.6 million.





12





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 which 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 the 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.





*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 months and six months ended June 30, 2007.





In
      addition, after consultation with our auditors, we account for revenue
      attributable to contracts acquired in conjunction with our acquisition of
      E&M on a net basis, as opposed to gross basis. Historically, over a twenty
      year period, E&M’s management had recorded revenue on a gross basis, but to
      insure compliance with GAAP and upon other accounting considerations, we have
      elected to utilize the net revenue recognition calculations. This method of
      net
      revenue recognition will have no effect on net income or loss. Although we
      recorded revenues on a net basis, we do record accounts receivable invoices
      and
      vendor payables at gross because these are legitimate receivables and payables
      in those amounts.





The
      gross
      and net billing amounts included in operating revenues for the three and six
      months ended June 30, 2007 and 2006 are follows:





Three
                Months
              Ended
                June
              30,
                2007
            
            
            Six
                Months
              Ended
                June 30,
              2007
            
            
            Three
                Months
              Ended
                June 30,
              2006
            
            
            Six
                Months
              Ended
                June 30,
              2007Consolidated
                gross revenues
            
            $
            10,300,622
            
            
            $
            20,711,843
            
            
            $
            6,242,225
            
            
            $
            8,463,000Direct
                cost of sales
            
            
            (8,541,469
            )
            
            
            (16,773,457
            )
            
            
            (4,815,888
            )
            
            
            (5,813,919
            )Consolidated
                net revenues
            
            $
            1,759,153
            
            
            $
            3,938,386
            
            
            $
            1,426,337
            
            
            $
            2,649,081




13


**Results
        of Operations**
 
 *Three
        Months Ended June 30, 2007 Compared to Three Months Ended June 30,
        2006*
 
 Three
                  Months Ended June 30,2007
              
              
              2006
              
              
              Change
              
              
              %Change(in
                  thousands)Revenue
              
              $
              1,759
              
              
              $
              1,426
              
              
              $
              333
              
              
              
              23
              %Cost
                  of revenue
              
              
              561
              
              
              
              703
              
              
              
              (142
              )
              
              
              (20
              %)Other
                  operating expenses
              
              
              2,668
              
              
              
              3,281
              
              
              
              (613
              )
              
              
              (19
              %)Interest
                  expense
              
              
              371
              
              
              
              269
              
              
              
              102
              
              
              
              38
              %Other
                  (income) and expenses
              
              
              0
              
              
              
              14
              
              
              
              (14
              )
              
              
              -Net
                  Loss
              
              
              1,841
              
              
              
              2,841
              
              
              
              (1,000
              )
              
              
              (35
              %)


*Revenue**.*
      Revenue increased by $333,000, or 23%, from $1.4 million to $1.8 million for
      the
      three months ended June 30, 2007 and 2006, respectively. Approximately $698,000
      of that increase was derived from additional media services revenue generated
      by
      our direct response media advertising division whose assets we acquired in
      February 2006. This was offset by a $247,000 decrease in equipment sales and
      an
      $118,000 decrease in managed subscriptions and consulting design services
      related to legacy products that we discontinued.





We
      derive
      our revenues from (i) equipment sales (e.g., sales of digital signage displays,
      Impart IQ media players and servers, audio-video-data accessories, touch
      screens and enclosures), (ii) managed subscription revenues (e.g.,
      monthly recurring fees for contracted digital signage serviced
      network sites, content management, status monitoring,
      Impart IQ Streams infotainment web service, and web/server
      data hosting), (iii) consulting and design services (e.g., fees
      for creative production, project consulting, installation,
      and onsite servicing) and (iv)  media services (e.g., media sales and
      direct response).





*Equipment
      Sales.*During the three months ended June 30, 2007, equipment
      sales decreased by 39% compared with the same period in 2006. We attribute
      this
      decrease primarily to fewer sales of our legacy audio-video business products.
      We expect overall equipment sales to increase each succeeding quarter in
      2007 and to represent a larger percentage of our total revenues, due
      to anticipated demand and increased sales of our new Concierge kiosk
      system, our upgraded iPoint system, the economical and expanded IQ
      mini product line, and newly designed graphical user interfaces
      for print system kiosks and other, to be announced,
      product applications.





*Managed
      Subscriptions.* During the three months ended June 30, 2007, managed
      subscription fees decreased by 35% compared with the same period in 2006.
      We attribute this decrease primarily to the natural,
      end-of-life attrition of legacy eyeFRAMES platform dial-up
      networks at the end of 2006. With recent
      subscription renewals and anticipated increases in managed services for the
      IQ platform, including Concierge, we expect the overall subscription
      revenue category to increase in the remaining two quarters of
      2007.





*Consulting
      and Design Services.*  During the three months ended June 30, 2007,
      consulting and design services fees decreased by 80% as compared with the
      same period in 2006. We attribute this decrease primarily to the higher
      non-recurring creative and content production activity occurring during the
      three months ended June 30, 2006. In recent deployments of our Impart IQ digital
      signage and interactive kiosks, clients have elected to manage much of the
      creative and content production. However, we anticipate an increase in creative
      design and content production services in the second half of 2007 in conjunction
      with the release of specialized web portal user interfaces such as our Concierge
      and related print system products. We also anticipate, as Impart High
      IQ enterprise development efforts in 2007 translate into sales, that ancillary
      consulting revenues will increase in 2008.





*Media
      Services.*During the three months ended June 30, 2007, revenues
      from media and direct response services increased by 120% compared with the
      same period in 2006. We attribute this increase primarily to an increase in
      sales staff and aggressive business development efforts. The direct response
      advertising market has been strong and we expect revenues to continue
      at current levels for the remainder of 2007. Media and direct response services
      represented 73% of total revenues this quarter. We anticipate that revenues
      from
      media and direct response services will represent a smaller percentage of our
      overall revenues for the remaining two quarters of 2007 as a result of an
      expected increase in equipment sales connected with our new Concierge &
related print system kiosks, 3D displays, IQ mini, and IQ interactive
      systems.





14





*Cost
      of Revenues.* Our cost of revenues decreased by $142,000 during the
      three months ended June 30, 2007 compared with the same period in
      2006 primarily as a result of lower equipment sales. Cost of revenues
      primarily consists of amounts we pay for hardware (i.e., video displays, media
      players and servers) that we integrate and install for our customers. Our direct
      response advertising division’s cost of revenues were relatively low
      as a percentage of sales due to the manner in which we recognize revenue where
      most sales are recorded at the net amount billed, rather than gross, on
      revenues earned from a fee or commission. As these media sales became a greater
      portion of our sales in the second quarter of 2007, the resulting cost of
      revenues fell as a percentage of total sales when compared with the same period
      in 2006.





*Other
      Operating Expenses**.* General and administrative expenses for the
      three months ended June 30, 2007 decreased by 32% from the same period
      in 2006 to $1.1 million. Within general and administrative expenses,
      professional and consulting expenses declined by $563,000 mainly due to reduced
      legal and consulting expenses in conjunction with certain acquisition and
      financing activities in 2006.





Selling
      and marketing expenses for the three months ended June 30, 2007 decreased by
      $181,000 as compared to the same period in 2006 primarily due to PATHvision
      (“PATHvision) related expenses incurred in 2006, but not in 2007. As reported
      in
      our 2006 Annual Report on Form 10-KSB, the PATHvision intangible asset was
      determined to be entirely impaired in 2006.





Wages
      and
      salaries expenses in the three months ended June 30, 2007 were $1.3
      million, an increase of $223,000 as compared to the same period in 2006. This
      was primarily due to additional executive compensation plus increased wages
      expenses in the direct response media advertising business.





Depreciation
      and amortization expenses for the three months ended June 30, 2007 were
      $193,000, a decrease of $128,000 from the same period in 2006. This was
      primarily due to expenses related to PATHvision amortization that were incurred
      in 2006, but not in 2007.





*Other
      Expenses.* Interest expense for the three months ended June 30, 2007 were
      $372,000, an increase of $102,000 over the same period in 2006. The
      increase was primarily due to a higher interest rate, higher average credit
      line
      balances, plus interest recorded in connection with our convertible debt
      financing.








*Six
      Months Ended June 30, 2007 Compared to Six Months Ended June 30,
      2006*





Six
                Months Ended June 30,2007
            
            
            2006
            
            
            Change
            
            
            %Change(in
                thousands)Revenue
            
            $
            3,938
            
            
            $
            2,649
            
            
            $
            1,289
            
            
            
            49
            %Cost
                of revenue
            
            
            1,428
            
            
            
            1,292
            
            
            
            136
            
            
            
            (11
            %)Other
                operating expenses
            
            
            5,681
            
            
            
            6,318
            
            
            
            (637
            )
            
            
            (10
            %)Interest
                expense
            
            
            613
            
            
            
            715
            
            
            
            (102
            )
            
            
            (14
            %)Other
                (income) and expenses
            
            
            0
            
            
            
            (106
            )
            
            
            106
            
            
            
            -Net
                Loss
            
            
            3,784
            
            
            
            5,570
            
            
            
            (1,786
            )
            
            
            (32
            %)





*Revenue**.*
      Revenue increased by $1.3 million, or 49%, from $2.6 million to $3.9 million
      for
      the six months ended June 30, 2007 and 2006, respectively. Approximately $1.5
      million of that increase was derived from additional media services revenue
      generated by our direct response media advertising division whose assets we
      acquired in February 2006. This was offset by a $237,000 decrease in managed
      subscriptions and consulting design services mainly related to legacy products
      that we discontinued.





15





*Equipment
      Sales.*During the six months ended June 30, 2007, equipment
      sales were level compared with the same period in 2006. This was primarily
      a combination of additional sales resulting from the product release and sales
      of the IQ miniZ product line and reduced sales of our legacy audio-video
      business products





*Managed
      Subscriptions.* During the six months ended June 30, 2007, managed
      subscription fees decreased by 36% compared with the same period in 2006.
      We attribute this decrease primarily to the natural,
      end-of-life attrition of legacy eyeFRAMES platform dial-up
      networks at the end of 2006.





*Consulting
      and Design Services.*  During the six months ended June 30, 2007,
      consulting and design services fees decreased by 69% as compared with the
      same period in 2006. We attribute this decrease primarily to the higher
      non-recurring creative and content production activity occurring during the
      six
      months ended June 30, 2006.





*Media
      Services.*During the six months ended June 30, 2007, revenues
      from media and direct response services increased by 149% compared with the
      same period in 2006. We attribute this increase primarily to an increase in
      sales staff and aggressive business development efforts. Also, we began our
      media services division in February 2006 and, thus, revenues for the six months
      ended June 30, 2006 did not reflect a comparable time period as in
      2007. Media and direct response services represented 65% of total revenues
      during the six months ended June 30, 2007.





*Cost
      of Revenues.* Our cost of revenues increased by $136,000 during
      the six months ended 2007 compared with the same period in 2006 primarily
      as a result of the increased cost of services connected with increased media
      services revenues. This amount was offset somewhat by lower equipment costs
      of
      sales as a percentage of total equipment sales. Cost of revenues primarily
      consists of amounts we pay for hardware (i.e., video displays, media players
      and
      servers) that we integrate and install for our customers. Our direct
      response advertising division’s cost of revenues were relatively low
      as a percentage of sales due to the manner in which we recognize revenue where
      most sales are recorded at the net amount billed, rather than gross, on
      revenues earned from a fee or commission. As these media sales became a greater
      portion of our sales for the six months ended June 30, 2007, the resulting
      cost
      of revenues fell as a percentage of total sales when compared with the same
      period in 2006.





*Other
      Operating Expenses**.* General and administrative expenses for the
      six months ended June 30, 2007 decreased by 18% from the same period
      in 2006 to $2.5 million. Within general and administrative expenses,
      professional and consulting expenses declined by $886,000 mainly due to reduced
      legal and consulting expenses in conjunction with certain acquisition and
      financing activities in 2006.





Selling
      and marketing expenses for the six months ended June 30, 2007 decreased by
      $153,000 as compared to the same period in 2006 primarily due to PATHvision
      (“PATHvision) related expenses incurred in 2006, but not in 2007. As reported
      in
      our 2006 Annual Report on Form 10-KSB, the PATHvision intangible asset was
      determined to be entirely impaired in 2006.





Wages
      and
      salaries expenses in the six months ended June 30, 2007 were $2.6 million,
      an
      increase of $221,000 as compared to the same period in 2006. This was primarily
      due to additional executive compensation plus increased wages expenses in the
      direct response media advertising business.





Depreciation
      and amortization expenses for the six months ended 2007 were $384,000, a
      decrease of $160,000 from the same period in 2006. This was primarily due to
      expenses related to PATHvision amortization that were incurred in 2006, but
      not
      in 2007.





*Other
      Expenses.* Interest expense for the six months ended June 30, 2007 was
      $613,000 a decrease of $102,000 from the same period 2006. Although we
      experienced a higher interest rate, higher average credit line balances, and
      interest connected with our convertible debt financing in the second quarter
      2007, the resulting increase in interest expense was more than offset by the
      increased first quarter interest expense in 2006 that resulted from the issuance
      of common stock warrants in lieu of the payment of accrued interest on loans
      payable.





16





*Cash
      Sources and Uses*





The
      following table summarizes the Company’s 2007 and 2006 cash flow activity for
      the six months ended June 30, 2007 and 2006, respectively.





**June
                30,****2007**
            
            
            **2006**(in
                thousands)Cash
                SourcesProceeds
                from issuance of equity securities
            
            $
            -
            
            
            $
            4,615Net
                borrowings from line of credit
            
            
            535
            
            
            
            -Net
                proceeds from issuance of convertible debentures
            
            
            2,049
            
            
            
            -Proceeds
                from notes payable – related parties
            
            
            
            
            
            
            150Total
                cash sources
            
            $
            2,584
            
            
            $
            4,765Cash
                UsesCash
                used in operating activates
            
            $
            2,173
            
            
            $
            2,000Cash
                used in acquisitions
            
            
            -
            
            
            
            1,100Net
                pay downs on line of credit
            
            
            
            
            
            
            38Repayment
                of debt obligations
            
            
            -
            
            
            
            608Deferred
                financing costs
            
            
            -
            
            
            
            428Capital
                expenditures
            
            
            25
            
            
            
            222Other
                cash uses
            
            
            124
            
            
            
            29Total
                cash uses
            
            $
            2,322
            
            
            $
            4,425Increase
                in cash
            
            $
            262
            
            
            $
            340








At
      June
      30, 2007, we had current assets of approximately $5.3 million consisting of
      restricted and unrestricted cash in the amount of $575,000, accounts receivable
      in the amount of $4.2 million, prepaid expenses and other current assets of
      $144,000, and inventory in the amount of $363,000. Long-term assets of $7.9
      million consisted primarily of goodwill and intangible assets of $4.5 million,
      deferred financing costs of $1.7 million and fixed assets of $1.5 million,
      including computer servers, media players and video display equipment used
      in
      operations.





Our
      current liabilities of $9.6 million at June 30, 2007 consisted primarily of
      $7.1
      million of accounts payable, $282,000 of accrued and other liabilities, $1.4
      million due under the Laurus Facility, $438,000 for the current portion of
      convertible debentures outstanding, and $200,000 of amounts payable to a former
      E&M owner.





Long
      term liabilities consist primarily
      of $1.0 million convertible debentures, long-term portion and $150,000 of a
      long-term related-party note payable.





Our
      working capital deficit was approximately $4.2 million as of June 30,
      2007.





*Financing
      Activities*





Effective
      May 25, 2007, we borrowed $2.1 million pursuant to the issuance of a series
      of
      unsecured convertible debentures (the “Convertible Debentures) with a two year
      maturity to a group of institutional lenders (the “Purchasers”). Interest is
      recorded at 6% per annum. The Convertible Debentures are convertible, at the
      option of the purchasers, into shares of common stock, par value $0.001 per
      share, at a conversion price of $0.75 per share (the “Conversion Price”).
      Purchasers of the Convertible Debentures  received registration rights
      pursuant to a Registration Rights Agreement that required us to file a
      registration statement under the Securities Act of 1933 covering the resale
      the
      shares of common stock issuable upon conversion of the principal amount and
      interest payable. We filed the registration statement Form SB-2 with the SEC
      on
      July 10, 2007. This registration is yet to be declared effective by the
      SEC.





17





Each
      Purchaser may, at any time, convert all or any portion of the outstanding
      principal amount and/or accrued interest under its Convertible Debenture into
      fully paid and nonassessable shares of our common stock at the Conversion Price.
      Unless waived by the Purchaser, neither we nor the Purchaser may convert the
      Purchaser’s Convertible Debenture if, as a result of the issuance of the
      underlying shares of common stock, the holder would beneficially own more than
      4.99% of the issued and outstanding shares of our common stock. If so waived,
      the Purchaser’s Convertible Debenture may not be converted if, as a result of
      the issuance of the underlying shares of common stock, the Purchaser would
      beneficially own more than 9.99% of the issued and outstanding shares of our
      common stock.





Beginning
      on the six month anniversary of the issuance date of the Convertible Debentures,
      we are required to begin making monthly repayments of principal and accrued
      interest. The amount of the principal payments will be equal to 1/18 of the
      aggregate principal amount of Convertible Debentures issued in the offering,
      which is $116,666 per month.





Subject
      to certain customary exceptions, if we issue common stock or other securities
      convertible into or exercisable for common stock at a per share price less
      than
      the Conversion Price then in effect, the Conversion Price will be reduced to
      a
      price equal to the price per share of such issued securities. The Conversion
      Price is also subject to adjustment upon stock splits and stock
      dividends.





Subject
      to certain notice and other provisions, we may prepay each Convertible Debenture
      at any time.





If
      an
      event of default occurs under the Convertible Debentures, each Purchaser has
      the
      option to declare immediately due and payable all obligations under the
      Convertible Debenture at an amount equal to all costs, fees and liquidated
      damages plus the greater of (i) 130% of the outstanding principal amount of
      the
      Convertible Debenture plus accrued interest thereon or (ii) the outstanding
      principal amount of the Convertible Debenture plus accrued interest thereon
      divided by the Conversion Price on the date of the default. Such events of
      default include, without limitation, the following:





·
            a
                failure to make payments of principal or interest under the Convertible
                Debenture when due, subject to a three trading day cure period in
                the case
                of late interest payments only;


·
            a
                breach by us of any covenant of the Convertible Debenture which continues
                for five trading days without cure after notice thereof by the Purchaser
                or ten trading days after we become (or should have become) aware
                of such
                breach;


·
            if
                our common stock is not eligible for listing or quotation for five
                trading
                (5) consecutive days; and


·
            if
                the registration statement shall not have been declared effective
                on or
                prior to the 270th day after the closing date for the sale of Convertible
                Debentures





In
      connection with our Convertible Debentures, we also issued to the Purchasers
      five-year warrants (the “Warrants”) granting the right to purchase for cash (or
      through a “cashless exercise” feature) up to an aggregate of 1,400,000 shares of
      our common stock (representing 50% of the number of shares initially issuable
      upon conversion of the Convertible Debentures), at an initial exercise price
      of
      $0.52. The Warrants expire on May 24, 2012. Subject to certain customary
      exceptions, if we issue common stock or other securities convertible into or
      exercisable for common stock at per share less than the exercise price of the
      Warrants, the exercise price will be reduced to a price equal to the price
      per
      share of such issued securities. The Conversion Price is also subject to
      adjustment upon stock splits, stock dividends and similar adjustments. Unless
      waived by the Purchaser, such Purchaser may not exercise its Warrant if, as
      a
      result of the issuance of the underlying shares of common stock, such Purchaser
      would beneficially own more than 4.99% of the issued and outstanding shares
      of
      our common stock.  If so waived, such Purchaser may not exercise its
      Warrant if, as a result of the issuance of the underlying shares of common
      stock, such Purchaser would beneficially own more than 9.99% of the issued
      and
      outstanding shares of our common stock.





18





In
      connection with its role as
      placement agent with respect to our Convertible Debentures, we issued to the
      placement agent (and its designees) five-year warrants to purchase an aggregate
      of 280,000 shares of our common stock with an exercise price of $0.52 per share.
      These warrants expire on May 24, 2012.





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 Laurus Facility has a term of 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 the term
      of
      the facility. 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 a 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.





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, 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 our Series A preferred stock, par
      value $0.001 per share (the “Series A Preferred Stock”), at $1.55 per share for
      total gross proceeds of $4.5 million. In addition, the purchasers of the Series
      A Preferred Stock received warrants to purchase an aggregate of 2.9 million
      shares of our common stock with an exercise price of $2.25 per share and for
      a
      term of three years. In March 2007, we entered into a Waiver and Amendment
      to
      the Series A Preferred Stock agreement whereby we agreed to reduce the
      exercise price of such warrants to $0.01 per share in consideration of certain
      waivers granted by the holders of Series A Preferred Stock.





Each
      Series A Preferred Stock share is convertible by the holder at any time. As
      a
      result of the Convertible Debentures issuance in the second quarter of 2007,
      the
      conversion price for each Series A Preferred Stock share was adjusted to $0.52
      per share. Therefore, each Series A Preferred Stock share is convertible
      into 2.98 shares of common stock. The Series A Preferred Stock will
      automatically convert into shares of our common stock at the conversion price
      of
      $0.52 (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
      terms
      of the Certificate of Designation of the Series A Preferred Stock provides
      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. In March 2007, the Series A Preferred Stock holders
      waived their right to any dividends with respect to the Series A Preferred
      Stock
      up to and including accruals through March 2, 2007, but will be entitled to
      dividends thereafter.





19





On
      May 22, 2007, we filed a Post Effective Amendment to Form SB-2 covering the
      shares of common stock underlying the Series A Preferred Stock and the warrants
      issued to the purchasers of the Series A Preferred Stock. The registration
      statement was declared effective as of June 26, 2007.





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 $0.52 per share of Series A Share held and
      any
      declared but unpaid dividends.





**Off-Balance
      Sheet Arrangements**





We
      do not have any off-balance sheet
      arrangements that are reasonably likely to have a current or future effect
      on
      our financial condition, revenues, results of operations, liquidity, or capital
      expenditures.





**Liquidity
      and Capital Resources**





We
      have
      limited capital resources. At June 30, 2007, total unrestricted cash was
      approximately $525,000. In the six months ended June 30, 2007, we funded
      operations with the proceeds from sales and services, borrowings on our $6
      million accounts receivable-based credit facility from Laurus (the “Laurus
      Facility”), and the proceeds from our $2.1 million debenture offering. At June
      30, 2007, the balance under the Laurus Facility was $1.45 million with $274,000
      available for additional draw-down.





We
      anticipate that our existing capital resources, including amounts available
      under the Laurus Facility, will enable us to continue operations through June
      30, 2008, assuming we meet our sales projections for the year. 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 by June 30, 2008.
      Consequently, we are actively working with investment banks, institutional
      investors, and strategic investors to obtain additional capital through various
      financing options; however, we currently do not have any such financing
      agreements. There can be no assurance that financing will be available to us
      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.





As
      of
      June 30, 2007, our accumulated deficit was $18.1 million. Our net loss was
      $1.9
      million for the quarter ended June 30, 2007 and $3.8 million and $5.6 million
      for the six months ended June 30, 2007 and 2006, respectively. Additionally,
      we
      anticipate that we will incur significant losses from operations through the
      end
      of 2007. However, many of the expense items that generated these losses are
      non-cash charges such as non-cash interest, depreciation and amortization.
      Accordingly, if we meet our sales forecast for 2007, we anticipate that we
      will
      generate positive earnings before interest, taxes, depreciation, and
      amortization (EBITDA) during the last three months of 2007.





Our
      limited capital resources and recurring losses from operations raise substantial
      doubt about our ability to continue as a going concern and may adversely affect
      our ability to raise additional capital. The audit report prepared by our
      independent registered public accounting firm relating to our consolidated
      financial statements for the year ended December 31, 2006 includes an
      explanatory paragraph expressing substantial doubt about our ability to continue
      as a going concern. The financial statements do not include any adjustments
      that
      might be necessary if we are unable to continue as a going concern.








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





**Disclosure
      Controls and Procedures.** Our company’s management, with the
      participation of our chief executive officer and our chief financial officer,
      has 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 June 30, 2007, the
      end of the period covered by this Report. Based on such evaluation, our chief
      executive officer and our chief financial officer have concluded that, as of
      June 30, 2007, our disclosure controls and procedures were effective in
      recording, processing, summarizing and reporting, on a timely basis, information
      required to be disclosed by our company in the reports that we file or submit
      under the Exchange Act.





20





**Internal
      Control Over Financial Reporting.**  There have not been any
      material changes in our internal control over financial reporting (as such
      term
      is defined in Rules 13a-15(f) and 15d-15(f) under the Act) during the second
      quarter of 2007 that have materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.








**PART
      II**





**OTHER
      INFORMATION**








**ITEM
      1. LEGAL PROCEEDINGS**





Claims
      and lawsuits have been filed against us and our subsidiaries from time to time.
      Although the results of pending claims are always uncertain, we do not believe
      the results of any such actions, individually or in the aggregate, will have
      a
      material adverse effect on our financial position or results of operation.
      Additionally, we believe that we have insurance coverage in respect of these
      claims, but no assurance can be given as to the sufficiency of such insurance
      in
      the event of any unfavorable outcome resulting from these actions.




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





In April
      2007, we issued 951,879 shares of common stock upon the cashless exercise of
      warrants having a $0.01 per share exercise price. These shares were issued
      in
      reliance on the exemption from registration provided by Section 3(a)(9) of
      the
      Act.





**ITEM
      4– SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





Our
      stockholders approved the following proposals of our Annual Meeting of
      Stockholders held on Thursday, June 14, 2007:





1)
            The
                election of the following five (5) directors, each to hold office
                for a
                term of one (1) year or until their respective successors have been
                duly
                elected or appointed:





**Nominee**
            **Votes
                FOR**
            **Votes
                WITHHELD**Joseph
                F. Martinez
            16,794,397
            1,636,142Laird
                Laabs
            18,235,026
            195,513Larry
                Calkins
            18,342,802
            87,737Ronald
                Elgin
            18,342,802
            87,737Joachim
                Kempin
            17,755,216
            643,408





2)
            The
                appointment of Peterson Sullivan PLLC as our independent registered
                public
                accountants for the year ending December 31,
                2007:





**Votes
                  FOR**
              
              **Votes
                  AGAINST**
              
              **Votes
                  ABSTAINED**18,330,514
              
              69,827
              
              27,346





21





3)
            The
                approval of our 2006 Equity Incentive
                Plan:





**Votes
                FOR**
            
            **Votes
                AGAINST**
            
            **Votes
                ABSTAINED**12,403,155
            
            1,069,659
            
            63,930





**ITEM
      5.  OTHER INFORMATION**





None.




**ITEM
      6. EXHIBITS.**





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





22





**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:
                August 8, 2007
            IMPART
                MEDIA GROUP,
                INC.By:
            /s/Joseph
                F. MartinezJoseph
                F. MartinezChief
                Executive Officer(principal
                executive officer)








Dated:
                August 8, 2007
            IMPART
                MEDIA GROUP,
                INC.By:
            /s/Stephen
                M. WilsonStephen
                M. WilsonChief
                Accounting Officer(principal
                financial officer)




23





**EXHIBIT
      INDEX**








31.1
            Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350,
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350,
                as
                adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32.1
            Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.