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 December 31, 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




Due to
the Company's bankruptcy, the Company has no shares of common or preferred stock
currently outstanding. The Company's common stock currently trades on the OTC
Bulletin Board under the symbol “IMMG”.





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










1





PART
I - FINANCIAL INFORMATION




ITEM
1.                       
FINANCIAL STATEMENTS.




The unaudited consolidated financial statements of Impart Media
Group, Inc. (“we,” “us,” “our,” “the Company” and “IMG”) as of the three months
ended December 31, 2007 and 2006 are attached hereto.  The Company's
consolidated financial statements are denominated in United States currency and
are prepared in accordance with accounting principles generally accepted in the
United States.





It is the
opinion of management that the interim consolidated financial statements for the
three months ended December 31, 2007 include all adjustments necessary in order
to ensure that the consolidated financial statements are not
misleading.  These statements reflect all adjustments, which are, in
the opinion of management, necessary to present fairly the financial position,
results of operations and cash flows for the interim periods presented in
accordance with accounting principles generally accepted in the United States of
America.  Except where noted, these interim consolidated financial
statements follow the same accounting policies and methods of their application
as the Company's September 30, 2007 audited annual consolidated financial
statements.  All adjustments are of a normal recurring
nature.  It is suggested that these interim consolidated financial
statements be read in conjunction with the Company's September 30, 2007 audited
annual consolidated financial statements.





Operating
results for the three months ended December 31, 2007 are not necessarily
indicative of the results that can be expected for the year ending September 30,
2008.


2




IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


(Debtors-In-Possession
as of May 21, 2008)


CONDENSED
CONSOLIDATED BALANCE SHEETS




December 31,
      2007
              (Unaudited)
            
            
            September 30,2007
              (Audited)ASSETS
            
            (In thousands, except share and per share data)Current
      assets:Cash
            
            $
            227
            
            
            $
            169Restricted
      cash
            
            
            84
            
            
            
            143Accounts
      receivable, net
            
            
            7,421
            
            
            
            5,468Inventories
            
            
            84
            
            
            
            85Prepaid
      expenses and other current assets
            
            
            37
            
            
            
            45Total
      current assets
            
            
            7,853
            
            
            
            5,910Fixed
      assets, net
            
            
            374
            
            
            
            410Deferred
      financing costs, net
            
            
            —
            
            
            
            1,431Other
      assets
            
            
            40
            
            
            
            40Total
      assets
            
            $
            8,267
            
            
            $
            7,791LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
            
            $
            11,246
            
            
            $
            8,101Accrued
      liabilities
            
            
            1,085
            
            
            
            260Customer
      deposits
            
            
            12
            
            
            
            15Line
      of credit
            
            
            1,419
            
            
            
            2,349Notes
      payable to related parties — current portion
            
            
            120
            
            
            
            76Convertible
      debentures
            
            
            2,100
            
            
            
            —Capital
      lease obligations — current portion
            
            
            48
            
            
            
            48Stock
      and other amounts payable to former IMA owners
            
            
            200
            
            
            
            200Total
      current liabilities
            
            
            16,230
            
            
            
            11,049Convertible
      debentures, net of current portion
            
            
            —
            
            
            
            1,609Notes
      payable to related parties, net of current portion
            
            
            150
            
            
            
            150Capital
      lease obligations, net of current portion
            
            
            27
            
            
            
            39Total
      liabilities
            
            
            16,407
            
            
            
            12,847Commitments
      and contingenciesStockholders’
      equity (deficit):Preferred
      stock, $0.001 par value; 25,000,000 shares authorized: 2,903,229 shares
      issued and outstanding
            
            
            3
            
            
            
            3Common
      stock, $0.001 par value; 100,000,000 shares authorized:23,959,248
      shares issued and outstanding as of December 31, 2007 and September
      30, 2007
            
            
            24
            
            
            
            24Additional
      paid in capital
            
            
            20,377
            
            
            
            20,377Accumulated
      deficit
            
            
            (28,544
            )
            
            
            (25,460
            )Total
      stockholders’ equity (deficit)
            
            
            (8,140
            )
            
            
            (5,056
            )Total
      liabilities and stockholders’ equity (deficit)
            
            $
            8,267
            
            
            $
            7,791




See notes
to condensed consolidated financial statements


3




IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


(Debtors-In-Possession
as of May 21, 2008)


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)




Three
      Months Ended
              December
    31,2007
            
            
            2006(In thousands, except per share data)RevenueMedia
      services
            
            $
            1,438
            
            
            $
            1,110Managed
      subscriptions
            
            
            68
            
            
            
            82Consulting
      and design services
            
            
            14
            
            
            
            94Equipment
      sales
            
            
            321
            
            
            
            1,005Total
      revenue
            
            
            1,841
            
            
            
            2,291Cost
      of revenue
            
            
            479
            
            
            
            975Gross
      profit
            
            
            1,362
            
            
            
            1,316Other
      operating expensesWages
      and salaries
            
            
            1,203
            
            
            
            1,155Selling
      and marketing
            
            
            25
            
            
            
            180General
      and administrative
            
            
            494
            
            
            
            1,336Depreciation
      and amortization
            
            
            46
            
            
            
            199Total
      other operating expenses
            
            
            1,768
            
            
            
            2,870Loss
      from operations
            
            
            (406
            )
            
            
            (1,554
            )Other
      income (expense):Other
      income and expense, net
            
            
            (39
            )
            
            
            —Interest
      expense
            
            
            (2,639
            )
            
            
            (235
            )Total
      other expense
            
            
            (2,678
            )
            
            
            (235
            )Net
      loss
            
            $
            (3,084
            )
            
            $
            (1,789
            )Net
      loss attributable to common stockholders:Net
      loss
            
            $
            (3,084
            )
            
            $
            (1,789
            )Revaluation
      of Series A preferred – conversion price reduction
            
            
            —
            
            
            
            (974
            )Revaluation
      of Series A preferred – warrant exercise price reduction
            
            
            —
            
            
            
            (935
            )Accretion
      of dividends on Series A preferred stock
            
            
            —
            
            
            
            183Net
      loss attributable to common stockholders
            
            $
            (3,084
            )
            
            $
            (3,515
            )Net
      loss per common share — basic and diluted
            
            $
            (0.13
            )
            
            $
            (0.16
            )Shares
      used in computing net loss per share — basic and diluted
            
            
            23,959
            
            
            
            22,470




See notes
to condensed consolidated financial statements


4




IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


(Debtors-In-Possession
as of May 21, 2008)


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




Three
      Months Ended
              December
      31,2007
            
            
            2006(In
      thousands)Operating
      activities:Net
      loss
            
            $
            (3,084
            )
            
            $
            (1,789
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Non-cash
      wages and salaries related to stock options
            
            
            —
            
            
            
            224Non-cash
      general and administrative expenses:Amortization
      of prepaid consulting expense
            
            
            —
            
            
            
            (206
            )Warrants
      issued for earned consulting services
            
            
            —
            
            
            
            (342
            )Common
      stock issued to settle legal dispute
            
            
            —
            
            
            
            268Non-cash
      interest expense:Warrants
      issued to bridge lenders
            
            
            —
            
            
            
            206Common
      stock issued to senior executives upon conversion of notes
      payable
            
            
            —
            
            
            
            40Amortization
      of deferred financing costs on line of credit:Warrants
            
            
            —
            
            
            
            539Other
      deferred financing costs
            
            
            1,430
            
            
            
            114Common
      stock issued to Laurus for extended filing date
            
            
            —
            
            
            
            52Other
      non-cash interest expense
            
            
            491
            
            
            
            (535
            )Bad
      debt expense
            
            
            —
            
            
            
            14Depreciation
      and amortization
            
            
            46
            
            
            
            199Other
      adjustments
            
            
            —
            
            
            
            (34
            )Changes
      in assets and liabilities, excluding assets and liabilities from
      acquisitions:Accounts
      receivable
            
            
            (1,953
            )
            
            
            (1,249
            )Inventories
            
            
            1
            
            
            
            441Prepaid
      expenses and other current assets
            
            
            8
            
            
            
            1,350Other
      assets
            
            
            —
            
            
            
            (451
            )Accounts
      payable
            
            
            3,015
            
            
            
            1,563Other
      current liabilities
            
            
            952
            
            
            
            (33
            )Net
      cash provided by operating activities
            
            
            906
            
            
            
            371Investing
      activities:Purchases
      of fixed assets
            
            
            (10
            )
            
            
            (26
            )Net
      cash used in investing activities
            
            
            (10
            )
            
            
            (26
            )Financing
      activities:Payments
      on capital lease obligations
            
            
            (11
            )
            
            
            (15
            )Net
      borrowings (repayments) on line of credit
            
            
            (827
            )
            
            
            (484
            )Proceeds
      from the sale of common stock
            
            
            —
            
            
            
            223Net
      cash used in financing activities
            
            
            (838
            )
            
            
            (276
            )Net
      increase in cash and cash equivalents
            
            
            58
            
            
            
            69Cash
      — beginning of period
            
            
            169
            
            
            
            195Cash
      — end of period
            
            $
            227
            
            
            $
            264Supplemental
      disclosure:Cash
      paid for interest
            
            $
            87
            
            
            $
            44




See notes
to condensed consolidated financial statements


5


IMPART
MEDIA GROUP, INC.


(Debtors-In-Possession
as of May 21, 2008)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Note
1.  Chapter 11 Reorganization





Following
the filing of an involuntary petition on February 14, 2008, Impart Media Group,
Inc. (the "Company") consented to bankruptcy relief, and the United States
Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
entered an order for relief under Chapter 11 on May 21,
2008.  Thereafter, the Company has operated as a debtor-in-possession
pursuant to 11 U.S.C. Sections 1107 and 1108.  Additionally, one of
the Company’s subsidiaries, Impart, Inc. (“Impart”), filed its own voluntary
petition under Chapter 11 on May 21, 2008 and the two bankruptcy cases were
administered jointly.  The Company’s subsidiary, Impart Media
Advertising, Inc. ("IMA"), was not included in the bankruptcy filing and the
Company subsequently sold its ownership interest to IMA’s management, with
Bankruptcy Court approval.




On
September 17, 2008, the Company and Impart (together, the “Debtors”) and Enable
Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
Strategy Master Fund, ENA, Hudson Bay Fund, L.P., and Hudson Overseas Fund, Ltd.
(the “Creditor Proponents”) filed with the Bankruptcy Court a plan of
reorganization (“the Plan”) consolidating the two cases.  On January
29, 2009, the Plan was confirmed by the Bankruptcy Court and went effective on
February 11, 2009 (the “Effective Date”).  Pursuant to the Plan,
administrative and priority creditors will be paid 100% of their claims and
general unsecured creditors will receive their pro-rata share of the remaining
cash.  The Creditor Proponents waived cash distributions on all of
their claims and will receive equity in the reorganized
company.  Pursuant to the Plan, all equity interests existing at the
time of the bankruptcy filing, including common stock, preferred stock, options,
and warrants, were cancelled, and the convertible debentures were
satisfied.




The
Company's unaudited condensed consolidated financial statements are prepared
consistent with accounting principles generally accepted in the United States
applicable to a going concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.  However,
as shown in the unaudited condensed consolidated financial statements, the
Company has sustained substantial losses and has relied primarily on sales of
securities and proceeds from borrowings for operating capital, which, along with
the Chapter 11 filing under the Bankruptcy Code, raise substantial doubt about
the Company's ability to continue as a going concern.





Note  2.  Description
of Business





The
Company, which was headquartered in Seattle, Washington, provided digital
signage in the business-to-consumer media sector.  The Company also
provided consulting, design, integration, fabrication, assembly, IP
connectivity, quality assurance, creative production, installation, onsite
maintenance, web-data hosting, network monitoring and content management
services throughout the United States (and in global markets through the
Company's authorized distributors).  As a result of the Company's
acquisition of E&M Advertising, Inc. and its affiliates, renamed IMA, in
February 2006, the Company also provided offline and online direct response
advertising capabilities.  As described in Note 11, the Company's
Seattle operations were sold in May 2008 and IMA was sold in October
2008.  The Company currently has no operating
activities.




Note 3.  Summary of
Significant Accounting Policies





Basis of Preparation —The
accounting policies used in the preparation of the Company's audited
Consolidated Financial Statements are disclosed in the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 2007.  The
accompanying unaudited interim financial statements should therefore be read in
conjunction with the audited Consolidated Financial Statements for the fiscal
year ended September 30, 2007 included in the Company's Annual Report on Form
10-KSB.  In the opinion of management, the interim financial
statements include all adjustments of a normal recurring nature considered
necessary to present fairly the financial position for the periods
shown.  Quarterly results are not necessarily indicative of the
results which may be expected for the full fiscal year.







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





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 as of December 31, 2007 and 2006:





2007
            
            
            2006Convertible
      debentures
            
            
            16,378,000
            
            
            
            0Convertible
      Series A preferred stock
            
            
            2,903,229
            
            
            
            106,763Common
      stock options
            
            
            0
            
            
            
            1,911,250Common
      stock warrants
            
            
            5,646,194
            
            
            
            5,235,694Total
            
            
            24,927,423
            
            
            
            7,253,707





6


As more
fully described in the Form 10-KSB for September 30, 2007, all incentive
stock options were deemed forfeited in December 2007. Pursuant to the Plan, all
equity interests existing at the time of the bankruptcy filing, including common
stock, preferred stock, options, and warrants, were
cancelled.




Advertising Costs— The
Company expenses the costs of producing advertisements at the time production
occurs and expenses the costs of communicating advertisements in the period in
which the advertising space or airtime is used. Advertising costs were $12,813
and $22,614 for the three months ended December 31, 2007 and 2006,
respectively.





Revenue Recognition — The Company's
revenue recognition policies are based on the requirements of Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104
“Revenue Recognition,” the provisions of AICPA Statement of Position (“SOP”) No.
81-1, “Accounting for Performance of Construction-Type and Certain
Production-Type Contracts” (“SOP 81-1”) and the guidance set forth in EITF Issue
99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent”. Revenue
is recognized when there is persuasive evidence that an arrangement exists,
delivery has occurred, collectability is reasonably assured, and fees are fixed
or determinable.





Substantially
all of the Company's revenues are generated from media services which consist of
sales of brokered advertising and certain other consulting, content creation,
and Internet-based advertising fees.  Because the Company typically
acted as an agent on behalf of the Company's advertising clients, brokered
advertising revenues were recorded based on the net commissions
earned.  Media services revenues from consulting, content creation,
and Internet-based advertising fees were recorded at their gross billing
amounts.





The gross
and net billing amounts included in operating revenues for the three months
ended December 31, 2007 and 2006 are as follows (in thousands):





Three Months ended December
    31,2007
            
            
            2006Consolidated
      gross revenues
            
            $
            10,693
            
            
            $
            9,000Direct
      cost of sales
            
            
            (8,852
            )
            
            
            (6,709
            )Consolidated
      net revenues
            
            $
            1,841
            
            
            $
            2,291





Revenue
from equipment sales is generally recognized when products were shipped and
ownership passes to the customer.  Revenue from management
subscriptions is recorded in the month the service was
provided.  Revenue from consulting and design services, which are all
short-term, is recognized using the completed-contract method under SOP
81-1.  There were no significant contracts in process at December 31,
2007 or December 31, 2006.





Recent Accounting Pronouncements— In accordance with Release No. 8760 of the Securities Act of 1933,
commencing with the Company's fiscal year ending September 30, 2009, the Company
will become subject to the requirement to include in the Company's annual report
management’s assessment of internal controls over financial
reporting.  This assessment will require us to document and test the
Company's internal control procedures in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002.  The Company's independent registered
public accountants will be required to audit the Company's assessment of
internal controls for the Company's fiscal year ending September 30,
2010.





Note
4. Certain Assets and Liabilities





As a
result of the Plan, certain assets and liabilities will be settled for less than
amounts shown on the accompanying balance sheet, as follows:





Accounts Receivable -Accounts receivable at December 31, 2007 and September 30, 2007 is
comprised as follows:





December 31,
              2007
            
            
            September
      30,
              2007IMG
      (in bankruptcy)
            
            $
            218
            
            
            $
            254IMA
      (not in bankruptcy)
            
            
            7,203
            
            
            
            5,214Total
      accounts receivable
            
            $
            7,421
            
            
            $
            5,468





Fixed assets, which primarily related
to the Company, were written down to their net realizable value at September 30,
2007 and were sold pursuant to the Plan.  In addition, inventory at
December 31, 2007 and September 30, 2007, which solely related to the Company,
was sold pursuant to the Plan.





Accounts Payable-Accounts
payable at December 31, 2007 and September 30, 2007 is comprised as
follows:





December
      31,
              2007
            
            
            September
      30,
              2007IMG
      (in bankruptcy)
            
            $
            622
            
            
            $
            603IMA
      (not in bankruptcy)
            
            
            10,624
            
            
            
            7,498Total
      accounts payable
            
            $
            11,246
            
            
            $
            8,101


7





Accrued Expenses –Accrued
expenses at December 31, 2007 and September 30, 2007 is comprised as
follows:





December
      31,
              2007
            
            
            September
      30,
              2007IMG
      (in bankruptcy)
            
            $
            819
            
            
            $
            169IMA
      (not in bankruptcy)
            
            
            266
            
            
            
            91Total
      accrued expenses
            
            $
            1,085
            
            
            $
            260





All of the remaining liabilities on the
balance sheet as of December 31, 2007 and September 30, 2007 relate solely to
the Company and are subject to compromise due to the bankruptcy as described in
Note 1.


Note
5.  Line of Credit





In
January 2006, the Company entered into an agreement with Laurus Master Fund,
Ltd. (“Laurus”) pursuant to which Laurus agreed to provide us with a revolving
credit facility of up to $6 million (the “Facility”).





The
security agreement under the Facility defines an event of default as any default
in the performance of any other agreement relating to any of the Company's
indebtedness, the effect of which default is to cause, or permit the holder or
holders of such indebtedness to cause, such indebtedness to become due prior to
its stated maturity of such contingent obligation to become
payable.  Accordingly, the default on the debentures (as discussed in
Note 6) triggered an event of default under the Laurus Security Agreement as of
December 1, 2007, giving Laurus the right to accelerate payments in connection
with the Facility and, in addition to any other remedies available, to foreclose
upon the assets securing the facility.  Additionally, Laurus had the
right to receive 125% of the unpaid principal balance, plus accrued interest and
fees, as said principal became immediately due and payable upon any event of
default.  Laurus also was entitled to payment of a default interest
rate of 2% per month on all amounts due and such other remedies specified under
the agreement governing the facility and under the Uniform Commercial
Code.  All remaining deferred financing costs were expensed in the
quarter ended December 31, 2007.





At
December 31, 2007 and September 30, 2007, respectively, the Company held $0.2
million and $0.1 million in cash identified as restricted under the
Facility.  This restricted cash is comprised of customer payments
received into bank lockbox accounts.  The restricted funds are swept
from the accounts and applied against the revolving credit line balance in
accordance with the terms of the agreement.





See Note
11 as to the repayment of all amounts due to Laurus in March 2008.





Note
6.  Convertible Debentures





In
February 2009, the Convertible Debentures, including all accrued interest and
penalties, were satisfied in exchange for equity in the Reorganized
Company.




In May
2007, the Company entered into a Securities Purchase Agreement with six
institutional investors, pursuant to which the Company agreed to
sell unsecured convertible debentures (the “Convertible Debentures”) in the
aggregate principal amount of $2.1 million.  In connection with the
issuance of the Convertible Debentures, the Company paid to a placement agent
cash fees of approximately $150,000 and issued five-year warrants to purchase an
aggregate of 280,000 shares of common stock with an exercise price of $0.52 per
share, which contractually were due to expire on May 24, 2012.





Purchasers
of the Convertible Debentures received registration rights pursuant to
a Registration Rights Agreement that required us to file a registration
statement under the Securities Act of 1933 covering the resale the shares of
common stock issuable upon conversion of the principal amount and interest
payable, which the Company filed with the SEC on July 10, 2007.  The
registration statement has not been declared effective.





The cash
fees paid and the value of the warrants in association with the issuance of
Convertible Debentures were recorded as deferred finance costs totaling
approximately $302,000.  Due to the default described in the following
paragraphs, all remaining deferred finance costs have been expensed in the
quarter ended December 31, 2007.  As a result, the total discount on
the notes equaled $694,000.  Due to the default described in the
following paragraphs, all remaining debt discount has been expensed in the
quarter ended December 31, 2007.





Under the
terms of the debentures, the Company was required to commence monthly redemption
against the principal debenture amount on December 1, 2007.  In lieu
of making such principal payment on December 1, 2007, the Company commenced
negotiations to restructure the Company's obligations under the terms of the
Convertible Debentures on December 3, 2007.  The Company did not
obtain a waiver and was declared in default.





Pursuant
to the terms of the Convertible Debentures, the default gave each investor the
option to declare immediately due and payable all obligations under the
Convertible Debentures at an amount equal to all costs, fees and liquidated
damages plus the greater of (i) 130% of the outstanding principal amount of the
debenture plus accrued interest thereon or (ii) the outstanding principal amount
of the debenture plus accrued interest thereon divided by the conversion price
on the date of the default (approximately 25,890,000 shares).  As of
December 31, 2007, the Company accrued the 30% penalty totaling $630,000, which
is reflected as additional interest expense.


8





On
December 3, 2007, one investor invoked the right to convert cash liquidated
damages into shares of common stock at a conversion price of $0.1095, or 85% of
the ten day volume weighted average price of common stock.  Pursuant
to the terms of the debentures, conversion of liquidated damages at a conversion
price lower than the original conversion price of $0.75 would cause a downward
adjustment of the conversion price for all of the securities offered under the
Securities Purchase Agreement, such that the resulting conversion price would
equal the lower conversion rate.  As such, the conversion of the
debentures and the exercise price of the warrants issued under the securities
purchase agreement are equal to $0.1095 at December 31,
2007.  Assuming the conversion of all such debentures, the adjustment
would have resulted in the conversion of a total of approximately 16,378,000
additional shares of common stock.


Note 7.  Stockholders’
Equity





In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled.




Adjustment of Series A Conversion
Rate— Pursuant to provision of the Series A Preferred Stock, in the event
the Company issued additional shares of common stock at a price per share less
than the conversion price of Series A shares into shares of common stock, then
the conversion price upon such issuance is reduced to a price equal to the
consideration per share paid for such additional shares of common
stock.




As a
result of the default on the Convertible Debentures discussed in Note 6, the
conversion rate on the Series A Preferred Stock was adjusted from $0.5200 to
$0.1095 per share.  Consequently, assuming the conversion of
approximately 2,891,000 Series A shares currently issued and outstanding, the
adjusted conversion rate of $0.1095 would have resulted in the conversion to
approximately 40,919,000 shares of common stock of the Company.




Note
8.  Share-Based Payments





In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled.




Stock Options—Stock options
to purchase shares of the Company's common stock were granted under the
Company's 2006 Equity Incentive Plan at prices at or above the fair market value
on the date of grant.  The following summarizes stock option activity
during the three month period ended December 31, 2007:





Shares
      Available for Grant
            
            
            Options
      Outstanding
            
            
            Weighted
      Average
              Exercise
      PriceBalance
      at September 30, 2007
            
            
            679,166
            
            
            
            4,272,084
            
            
            $
            0.66Granted
            
            
            (400,000
            )
            
            
            400,000
            
            
            
            0.24ExercisedForfeited
            
            
            4,672,084
            
            
            
            (4,672,084
            )ExpiredBalance
      at December 31, 2007
            
            
            4,951,250
            
            
            
            0Options
      exercisable as of December 31, 2007
            
            
            
            
            
            
            0





At
December 31, 2007, there were no options outstanding and 4,951,250 shares were
available for future grants or awards under the Company's 2006 Equity Incentive
Plan.





A summary
of the Company's unvested stock grants and changes during the quarter ended
December 31, 2007 is as follows:





SharesUnvested
      at October 1, 2007
            
            
            2,699,334Granted
      during 2007
            
            
            400,000Vested
      during 2007, and other changes
            
            
            (3,099,334
            )Unvested
      at December 31, 2007
            
            
            0





At
September 30, 2007, management determined that a forfeiture rate of 100% was
determined to be appropriate, and as such, all expense recognition associated
with the Company's 2006 Equity Incentive Plan ceased.  As a result, no
stock-based compensation was recognized during the three months ended December
31, 2007.  In addition, in connection with the default under the
Convertible Debentures as described in Note 6, all options were considered
forfeited under their terms in December 2007.  Pursuant to the Plan,
all equity interests existing at the time of the bankruptcy filing, including
common stock, preferred stock, options, and warrants, were
cancelled.


9




The fair
value of stock-based awards was estimated at the date of grant using the
Black-Scholes option valuation model with the following weighted average
assumptions for the three months ended December 31, 2007 as
follows:





2007Expected
      life in years
            
            
            5.0
      – 10.0Volatility
            
            
            141%
      - 190
            %Interest
      rate
            
            
            4.8%
      - 5.9
            %Yield
      rate
            
            
            0
            %




Note
9.  Commitments and Contingencies





Contingencies— The Company
is subject to various legal proceedings and claims that arise in the ordinary
course of business. The Company's management currently believes that resolution
of such legal matters will not have a material adverse impact on the Company's
consolidated financial position, results of operations or cash
flows.





Note
10. Late Filing of SEC Report





On
December 28, 2007, the Company filed, on Form 12b-25, a Notification of Late
Filing of the Company's annual report Form 10-KSB for the period ended September
30, 2007.


Note
11. Subsequent Events





Chapter 11 Bankruptcy
Proceedings— See Note 1 regarding the Company's entrance into bankruptcy
under Chapter 11 as a result of involuntary petition filed in February
2008.





Changes in Executive Officers— As a result of the Plan discussed in Note 1, in February 2009, all of
the existing officers and directors were removed from their positions and were
replaced by Barry Eisenberg as sole officer and director.




Lines of Credit — All amounts
due to Laurus were paid as of March 31, 2008.





Notice of Delisting— On
January 18, 2008, pursuant to NASDAQ Marketplace Rule 6530(e)(1)(“Rule 6530”)
the Company's common stock was suspended from trading on the Over-the-Counter
Bulletin Board (“OTCBB”) and the Company's trading symbol was changed to
IMMGE.  These measures were triggered by the Company's failure to
timely file the Company's 10-KSB with the SEC.  As this was the
Company's third failure to timely file within the prior two-year period a
periodic report with the SEC, the Company's common stock is ineligible for
quotation on the OCTBB under Rule 6530; the Company's common stock will remain
ineligible for quotation on the OCTBB until the Company have timely filed in a
complete form all required annual and quarterly reports due in a one-year
period.  There can be no assurance that the Company will be able to
regain compliance with the continued listing requirement of Rule
6530.





Sales of Seattle Operations and IMA
Subsidiary— In May 2008, with the approval of the Bankruptcy Court, the
assets of the Seattle operations were sold for $390,000.  In October
2008, with the approval of the Bankruptcy Court, the stock of IMA was sold for
$100,000.





Leases— The Company leased
space for the Company's corporate offices in Seattle, Washington under an
operating lease expiring in November 2018.  Certain of the Company's
officers, directors, and stockholders are owners of the company that owns the
facility.  The Company vacated these premises in March 2008 and
defaulted on the lease.  Due to the Company's related party
relationship, the Company were not billed a lease cancellation fee or held
further responsible for the Company's obligations under the lease
agreement.





The
Company also leases office facilities in New York for IMA under an operating
lease, which was extended through June 2011.  This lease was assumed
by the new owners of IMA in October 2008.  The Company also has
various non-cancelable operating leases for automobiles and equipment that
expire at various dates through 2008.  These leases were cancelled on
the Effective Date pursuant to the Plan.


10


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





Statements
contained herein that are not historical fact may be forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, an amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended, that are subject to a variety of risks and uncertainties.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which the Company cannot predict with accuracy and some of which the
Company might not even anticipate. Although the Company believe that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions at the time made, the Company can give no assurance that
such expectations will be achieved. Factors that would cause actual results to
differ materially from those projected or suggested in any forward-looking
statements are contained in the Company's filings with the Securities and
Exchange Commission, including those factors discussed under the captions
“Forward-Looking Information” in the Company's most recent Annual Report on Form
10-K, as may be supplemented or amended by the Company's Quarterly Reports on
Form 10-Q, which the Company urge investors to consider. The Company undertake
no obligation to publicly release revisions in such forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events or circumstances, except as
otherwise required by securities and other applicable laws.





Overview





Impart
Media Group, Inc. (the “Company”) is a Nevada corporation formed in
1996.  The Company, which was headquartered in Seattle, Washington,
provided digital signage in the business-to-consumer media
sector.  The Company also provided consulting, design, integration,
fabrication, assembly, IP connectivity, quality assurance, creative production,
installation, onsite maintenance, web-data hosting, network monitoring and
content management services throughout the United States (and in global markets
through the Company's authorized distributors).  As a result of the
Company's acquisition of E&M Advertising, Inc. and its affiliates, renamed
Impart Media Advertising, Inc. (“IMA”), in February 2006, the Company also
provided offline and online direct response advertising
capabilities.  The Company currently has no business operations, and
therefore, no sources of revenue.  Currently, there are no products or
services being offered and there are no plans to begin offering products or
services in the future.




Following
the filing of an involuntary petition on February 14, 2008, the Company
consented to bankruptcy relief, and the United States Bankruptcy Court for the
Southern District of New York (the “Bankruptcy Court”) entered an order for
relief under Chapter 11 on May 21, 2008.  Thereafter, IMG has operated
as a debtor-in-possession pursuant to 11 U.S.C. Sections 1107 and
1108.  Additionally, one of IMG’s subsidiaries, Impart, Inc.
(“Impart”), filed its own voluntary petition under Chapter 11 on May 21, 2008
and the two bankruptcy cases were administered jointly.  IMG’s
subsidiary, IMA, was not included in the bankruptcy filing and IMG subsequently
sold its ownership interest to IMA’s management, with Bankruptcy Court
approval.




On
September 17, 2008, the Company and Impart (together, the “Debtors”) and Enable
Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
Strategy Master Fund, ENA, Hudson Bay Fund, L.P., and Hudson Overseas Fund, Ltd.
(the “Creditor Proponents”) filed with the Bankruptcy Court a plan of
reorganization (“the Plan”) consolidating the two cases.  On January
29, 2009, the Plan was confirmed by the Bankruptcy Court and went effective on
February 11, 2009 (the “Effective Date”).  Pursuant to the Plan,
administrative and priority creditors will be paid 100% of their claims and
general unsecured creditors will receive their pro-rata share of the remaining
cash.  The Creditor Proponents waived cash distributions on all of
their claims and will receive equity in the reorganized
company.  Pursuant to the Plan, all equity interests existing at the
time of the bankruptcy filing, including common stock, preferred stock, options,
and warrants, were cancelled, and the convertible debentures were
satisfied.




Proceedings
under Chapter 11





On
February 14, 2008, an involuntary petition was filed against IMG for relief
under Chapter 11 of the Bankruptcy Code.  On May 21, 2008, the
Company's wholly-owned subsidiary, Impart, Inc. (“Impart”) filed its own
voluntary petition under the Bankruptcy Code.  Both Chapter 11 cases
were jointly administered by the Hon. Robert E. Gerber under case number
08-10510.





Following
the filing of an involuntary petition on February 14, 2008, but before the Order
for Relief Date and before Impart filed its voluntary petition, the Debtors and
Enable Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce
Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas
Fund, Ltd. (the “Creditor Proponents”) engaged in engaged in successful
negotiations for a consensual restructuring of the Debtors.  In
connection with the implementation of the restructuring, on or about May 8,
2008, the Debtors, E&M and the Creditor Proponents entered into a
Restructuring Agreement (the “Restructuring Agreement”) which provided for
consent to the involuntary Chapter 11 filing against IMG, a voluntary Chapter 11
filing by Impart and the Debtors’ best efforts to consummate the restructuring
through a pre-negotiated plan of reorganization.  IMG consented to
bankruptcy relief, and the Bankruptcy Court entered an order for relief under
Chapter 11 of the Bankruptcy Code on May 21, 2008.


11


Pursuant
to the Restructuring Agreement, the Debtors entered into an Asset Purchase
Agreement (“APA”) for the sale (the “Sale”) of the Seattle operations to Novus
Communication Technologies, Inc. (“Novus”) for $390,000.  In addition,
the Debtors entered into a Management Agreement with Novus, by which Novus not
only managed the Seattle Business before closing on the APA, but assumed
substantial post-petition obligations.  By Order dated June 20,
2008, the Bankruptcy Court approved the rejection of the lease for Debtors’
warehouse and office facilities located at 1300 N. Northlake Way, Seattle,
Washington as the premises would not be used by Novus.





In
addition, IMG sought Bankruptcy Court approval of the sale of its stock in IMA
to an entity controlled by IMA’s president (the “Purchaser”) for $100,000 (the
“IMA Stock Payment”).  Pursuant to the IMA agreement, IMA, the
Purchaser, and the Debtors exchanged mutual releases.  By so doing,
IMA waived potential claims against the Debtors of approximately $5.0
million.  As the purchaser of the Debtors’ stock in IMA, the Purchaser
assumed responsibility for IMA’s liabilities.  The IMA Stock Payment
was to be made over four months and was secured by all of the assets of IMA and
the Purchaser entity.





Through
February 11, 2009 (the "Effective Date"), the Company operated the Company's
business as a debtor-in-possession subject to the provisions of the Bankruptcy
Code.  Pursuant to the provisions of the Bankruptcy Code, the Company
was not permitted to pay any claims or obligations which arose prior to the
Filing date (pre-petition claims) unless specifically authorized by the
Bankruptcy Court.  Similarly, claimants could not enforce any
prepetition claims unless specifically authorized by the Bankruptcy
Court.





Plan
of Reorganization





Pursuant
to the involuntary petition and subsequent voluntary petition under Chapter 11,
IMG and the Creditor Proponents filed the Plan with the Bankruptcy Court on
September 17, 2008 and a plan supplement dated January 26, 2009.  On
January 29, 2009, the Plan was confirmed by the Bankruptcy Court.  The
Plan went effective on February 11, 2009.





Default of Principal Payment under Convertible
Debentures




In May 2007, the
Company entered into a securities purchase agreement and a registration rights
agreement with six institutional investors (five of which are Creditor
Proponents to the Plan), pursuant to which the Company agreed to sell unsecured
convertible debentures (the “Convertible Debentures”).  Under the
terms of the Convertible Debentures, the Company was required to commence
monthly redemption against the principal amount on December 1,
2007.  In lieu of making such principal payment, the Company commenced
negotiations to restructure the Company's obligations under the terms of the
Convertible Debentures on December 3, 2007.  The Company did not
obtain a waiver and was declared in default.




Pursuant
to the terms of the Convertible Debentures, the default gives each investor the
option to declare immediately due and payable all obligations under the
Convertible Debentures at an amount equal to all costs, fees and liquidated
damages plus the greater of (i) 130% of the outstanding principal amount of the
debenture plus accrued interest thereon or (ii) the outstanding principal amount
of the debenture plus accrued interest thereon divided by the conversion price
on the date of the default (approximately 25,890,000 shares).  In
December 2007, the Company accrued the 30% penalty totaling $630,000 as
additional interest expense.




In
February 2009, the Convertible Debentures, including all accrued interest and
penalties, were satisfied in exchange for equity in the Reorganized Company in
accordance with the provisions of the Plan.




Adjustment
of Conversion Price under the Securities Purchase Agreement




In
December 2007, an investor invoked the right to convert cash liquidated damages
due under the registration rights agreement into share of common stock at a
conversion price of $0.1095, or 85% of the ten day volume weighted average price
of common stock.  Pursuant to the terms of the Convertible Debentures,
conversion of liquidated damages at a conversion price lower than the original
conversion price of $0.7500 would cause a downward adjustment of the conversion
price for all of the securities offered under the securities purchase agreement,
such that the resulting conversion price would equal the lower conversion
rate.  As such, the conversion of the Convertible Debentures and the
exercise price of the warrants issued under the securities purchase agreement
shall now be equal to $0.1095.  Assuming the conversion of all the
Convertible Debentures, the adjustment will result in the conversion of a total
of approximately 16,378,000 shares of common stock.




In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled.


12


Adjustment
of Series A Preferred Conversion Rate




Pursuant
to the Certificate of Designation of the Relative Rights and Preferences of the
Series A Preferred Stock, in the event the Company issue additional shares of
common stock at a price per share less than the conversion price of Series A
shares into shares of common stock, then the conversion price upon such issuance
shall be reduced to a price equal to the consideration per share paid for such
additional shares of common stock.




The
Company believe the issuance of shares of common stock through the conversion of
the aforementioned liquidated damages, as a per share price of $0.1095, triggers
a downward adjustment of the Series A conversion rate from $0.5200 to
$0.1095.  Consequently, assuming the conversion of approximately
2,891,000 Series A shares currently issued and outstanding, the adjusted
conversion rate of $0.1095 will result in the total conversion of approximately
40,919,000 shares of the Company's common stock.




In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled.




Default
of Laurus Security Agreement




In
January 2006, the Company entered into a security agreement, with Laurus Master
Fund, Ltd. (“Laurus”), pursuant to which Laurus agreed to provide a revolving
credit facility of up to $6 million.  Among other things, the security
agreement defines an event of default as any default in the performance of any
other agreement relating to any indebtedness, the effect of which default is to
cause, or permit the holder or holders of such indebtedness to cause, such
indebtedness to become due prior to its stated maturity of such contingent
obligation to become payable.




Accordingly,
the default on the Convertible Debentures triggered an event of default under
the Laurus Security Agreement as of December 2007, giving Laurus the right to
accelerate payments in connection with the revolving credit facility and, in
addition to any other remedies available, to foreclose upon the assets securing
the facility.  Additionally, Laurus had the right to receive 125% of
the unpaid principal balance, plus accrued interest and fees, as the principal
became immediately due and payable upon the event of default.  Laurus
was also entitled to payment of a default interest rate of 2% per month on all
amounts due and such other remedies specified under the agreement governing the
facility and under the Uniform Commercial Code. All remaining deferred financing
costs were expensed in the quarter ended December 31, 2007.  All
amounts due to Laurus were paid as of March 31, 2008.




Results
of Operations




The
Company's operations for the three months ended December 31, 2007 reflected a
net loss of $3.1 million as compared to a net loss of $1.8 million for the three
months ended December 31, 2006, due primarily to decreased revenue.





Liquidity, Going Concern and Capital
Resources





The
Company has prepared the Company's consolidated financial statements assuming
that the Company will continue as a going concern, which contemplates
realization of assets and the satisfaction of liabilities in the normal course
of business.  However, as shown in the unaudited condensed
consolidated financial statements, the Company had sustained substantial losses
and has relied primarily on sales of securities and proceeds from borrowings for
operating capital, which, along with the Chapter 11 filing under the Bankruptcy
Code, raise substantial doubt about the Company's ability to continue as a going
concern.  The Company currently has no business operations and
therefore, no sources of revenue.  Currently, there are no products or
services being offered and there are no plans to begin offering products or
services in the future.




As of
December 31, 2007, the Company had an accumulated deficit of approximately
$28.5 million, the Company had approximately $0.2 million in cash,
including $0.1 million in restricted cash, and the Company's working capital
deficit was approximately $8.4 million.  The Company has received an
opinion for the fiscal year ended September 30, 2007 from the Company's
independent registered accounting firm noting the substantial doubt about the
Company's ability to continue as a going concern due to the Company's
significant recurring operating losses and negative cash flows.





In May
2007, the Company entered into a Securities Purchase Agreement with six
institutional investors (five of which are Creditor Proponents to the Plan),
pursuant to which the Company agreed to sell Convertible Debentures in the
aggregate principal amount of $2.1 million.  The Convertible
Debentures were 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.  The
Company filed the registration statement on Form SB-2 with the SEC on July 10,
2007, which registration statement has not yet been declared
effective.  Under the terms of the debentures, the Company was
required to commence monthly redemption against the principal debenture amount
on December 1, 2007.  In lieu of making such principal payment in
December 2007, the Company commenced negotiations to restructure the Company's
obligations under the terms of the debentures.  The Company did not
obtain a waiver and was declared in default in December 2007.





In
connection with the Convertible Debentures, the Company also issued to the
Purchasers five-year warrants (the “Warrants”) to purchase up to 1,400,000
shares of the Company's 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, which Warrants were contractually due to expire on May
24, 2012.  In connection with the Company's role as placement agent
with respect to the Convertible Debentures, the Company paid cash fees of
approximately $150,000 and issued to the placement agent five-year warrants to
purchase an aggregate of 280,000 shares of common stock with an exercise price
of $0.52 per share, which contractually were due to expire on May 24,
2012.  Pursuant to the Plan, all warrants were cancelled on the
Effective Date.


13


Pursuant
to the terms of the Convertible Debentures, the default gives each investor the
option to declare immediately due and payable all obligations under the
Convertible Debentures at an amount equal to all costs, fees and liquidated
damages plus the greater of (i) 130% of the outstanding principal amount of the
debenture plus accrued interest thereon or (ii) the outstanding principal amount
of the debenture plus accrued interest thereon divided by the conversion price
on the date of the default (approximately 25,890,000 shares).  As of
December 31, 2007, the Company had accrued the 30% penalty totaling
$630,000.




In
December 2007, an investor invoked the right to convert cash liquidated damages
due under the registration rights agreement into share of common stock at a
conversion price of $0.1095, or 85% of the ten day volume weighted average price
of common stock.  Pursuant to the terms of the Convertible Debentures,
conversion of liquidated damages at a conversion price lower than the original
conversion price of $0.7500 would cause a downward adjustment of the conversion
price for all of the securities offered under the securities purchase agreement,
such that the resulting conversion price would equal the lower conversion
rate.  As such, the conversion of the debentures and the exercise
price of the warrants issued under the Securities Purchase Agreement shall now
be equal to $0.1095.  Assuming the conversion of all such debentures,
the adjustment will result in the conversion of a total of approximately
16,378,000 shares of common stock.  The Convertible Debentures were
converted into equity of the Reorganized Company in February 2009.




Pursuant
to the Certificate of Designation of the Relative Rights and Preferences of the
Series A Preferred Stock, in the event the Company issues additional shares of
common stock at a price per share less than the conversion price of Series A
shares into shares of common stock, then the conversion price upon such issuance
shall be reduced to a price equal to the consideration per share paid for such
additional shares of common stock.




The
Company believe the issuance of shares of common stock through the conversion of
the aforementioned liquidated damages, as a per share price of $0.1095, triggers
a downward adjustment of the Series A conversion rate from $0.5200 to
$0.1095.  Consequently, assuming the conversion of approximately
2,891,000 Series A shares currently issued and outstanding, the adjusted
conversion rate of $0.1095 will result in the total conversion of approximately
40,919,000 shares of the Company's common stock.




Pursuant
to the Plan, all equity interests existing at the time of the bankruptcy filing,
including common stock, preferred stock, options, and warrants, were
cancelled.




In
January 2006, the Company entered into a security agreement, among other
agreements, with Laurus, pursuant to which Laurus agreed to provide a revolving
credit facility of up to $6 million.  Among other things, the security
agreement defines an event of default as any default in the performance of any
other agreement relating to any indebtedness, the effect of which default is to
cause, or permit the holder or holders of such indebtedness to cause, such
indebtedness to become due prior to its stated maturity of such contingent
obligation to become payable.  Accordingly, the December 2007 default
on the debentures triggered an event of default under the Laurus Security
Agreement as of December 2007, giving Laurus the right to accelerate payments in
connection with the revolving credit facility and, in addition to any other
remedies available, to foreclose upon the assets securing the
facility.  Additionally, Laurus had the right to receive 125% of the
unpaid principal balance, plus accrued interest and fees, as said principal
became immediately due and payable upon any event of default.  Laurus
also was entitled to payment of a default interest rate of 2% per month on all
amounts due and such other remedies specified under the agreement governing the
Facility and under the Uniform Commercial Code.  During December 2007,
all remaining deferred financing costs were expensed.  All amounts due
to Laurus were paid before the end of March 2008.




In
December 2007, the Company filed, on Form 12b-25, a Notification of Late Filing
of the Company's annual report Form 10-KSB for the period ended September 30,
2007.  On January 18, 2008, pursuant to NASDAQ Marketplace Rule
6530(e)(1)(“Rule 6530”) the Company's common stock was suspended from trading on
the Over-the-Counter Bulletin Board (“OTCBB”) and the Company's trading symbol
was changed to IMMGE.  These measures were triggered by the Company's
failure to timely file the Company's 10-KSB with the Securities and Exchange
Commission (“SEC”).  As this was the Company's third failure to timely
file within the prior two-year period a periodic report with the SEC, the
Company's common stock is ineligible for quotation on the OCTBB under Rule 6530;
the Company's common stock will remain ineligible for quotation on the OCTBB
until the Company have timely filed in a complete form all required annual and
quarterly reports due in a one-year period.  There can be no assurance
that the Company will be able to regain compliance with the continued listing
requirement of Rule 6530.




Critical
Accounting Policies and Estimates





The
accounting policies used in the preparation of the Company's audited
Consolidated Financial Statements are disclosed in the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 2007.  The
Company prepared its consolidated financial statements in conformity with
accounting principles generally accepted in the U.S.  As such, the
Company is required to make certain estimates, judgments, and assumptions that
the Company believes are reasonable based upon the information
available.  These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the periods
presented.  Actual results could differ significantly from those
estimates under different assumptions and conditions.  The Company
believes that the following discussion addresses the Company's most critical
accounting estimates, which are those that the Company believes are most
important to the portrayal of the Company's financial condition and results of
operations and which require the Company's most difficult and subjective
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.  Estimates having relatively
greater significance include revenue recognition, allowance for bad debts,
impairment of long-lived assets, and income taxes.  Actual results
could differ from those estimates.





Revenue Recognition — The Company's
revenue recognition policies are based on the requirements of SEC Staff
Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition,” the provisions
of AICPA Statement of Position (“SOP”) No. 81-1, “Accounting for Performance of
Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”) and the
guidance set forth in EITF Issue 99-19, “Reporting Revenue Gross as a Principal
versus Net as an Agent”. Revenue is recognized when there is persuasive evidence
that an arrangement exists, delivery has occurred, collectibility is reasonably
assured, and fees are fixed or determinable.


14


Substantially
all of the Company's revenues are generated from media services which consist of
sales of brokered advertising and certain other consulting, content creation,
and Internet-based advertising fees.  Because the Company typically
acted as an agent on behalf of the Company's advertising clients, brokered
advertising revenues were recorded based on the net commissions
earned.  Media services revenues from consulting, content creation,
and Internet-based advertising fees were recorded at their gross billing
amounts.





The gross
and net billing amounts included in operating revenues for the three months
ended December 31, 2007 and 2006 are as follows (in thousands):





Three Months ended December
    31,2007
            
            
            2006Consolidated
      gross revenues
            
            $
            10,693
            
            
            $
            9,000Direct
      cost of sales
            
            
            (8,852
            )
            
            
            (6,709
            )Consolidated
      net revenues
            
            $
            1,841
            
            
            $
            2,291





Revenue
from equipment sales is generally recognized when products were shipped and
ownership passes to the customer.  Revenue from management
subscriptions is recorded in the month the service was
provided.  Revenue from consulting and design services, which are all
short-term, is recognized using the completed-contract method under SOP
81-1.  There were no significant contracts in process at December 31,
2007 or December 31, 2006.




New
Accounting Pronouncements





In
accordance with Release No. 8760 of the Securities Act of 1933, commencing with
the Company's fiscal year ending September 30, 2009, the Company will become
subject to the requirement to include in the Company's annual report
management’s assessment of internal controls over financial
reporting.  This assessment will require us to document and test the
Company's internal control procedures in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002.  The Company's independent registered
public accountants will be required to audit the Company's assessment of
internal controls for the Company's fiscal year ending September 30,
2010.





Off-Balance
Sheet Arrangements





The
Company did not have any off-balance sheet arrangements that are reasonably
likely to have a current or future effect on the Company's financial condition,
revenues, results of operations, liquidity, or capital
expenditures.





ITEM
3.    CONTROLS AND
PROCEDURES





Disclosure Controls and
Procedures. The Company maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed in the
Company's Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions in accordance with the required
“disclosure controls and  procedures” as defined in Rule
13a-15(e).  The Company's disclosure and control procedures are
designed to provide reasonable assurance of achieving their objectives, and the
Company's principal executive officer and principal financial officer concluded
that the Company's disclosure controls and procedures were effective at the
reasonable assurance level.





At the
end of the period covered by this Quarterly Report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's principal executive officer and principal
financial officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures.  Based on the foregoing,
the Company's principal executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures were effective
to ensure that the information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, and that such information
is accumulated and communicated to the Company's management including the
Company's principal executive officer and principal financial officer to allow
timely decisions regarding required disclosure.





Internal Control
Over Financial Reporting.  There were no changes in the
Company's internal control over financial reporting that occurred during the
fiscal quarter ended December 31, 2007 that has materially affected, or is
reasonably likely to materially affect, the Company's  internal
control over financial reporting.


15


PART
II -OTHER INFORMATION





ITEM
1.                      LEGAL
PROCEEDINGS





See Item
2, Operations, "Proceedings under Chapter 11," and "Plan of
Reorganization."





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





In
December 2007, in connection with the Certificate of Designation of the Relative
Rights and Preferences of the Series A Preferred Stock of Impart Media Group,
Inc., the Company received a conversion notice from Hudson Bay Fund LP (“Hudson
Bay Fund”) for the conversion of 6,542 shares of the Company's Series A
Preferred stock into 92,604 shares of the Company's Common Stock which the
Company subsequently issued under Section 4(2) of the Securities
Act.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





See
discussion regarding the Chapter 11 filing and the Company’s default on its
obligations above.




ITEM
4. EXHIBITS.





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





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:
      May 1, 2009
            IMPART
      MEDIA GROUP, INC.By:
            /s/  Joseph
      MartinezChief
      Executive Officer(Principal
      Executive Officer)




16





EXHIBIT
INDEX


2.4
            
            Order
      Confirming the Plan of Reorganization Proposed by the Debtors and Co-Plan
      Proponents (filed as Exhibit 2.4 to the Company's Current Report on Form
      8-K dated February 11, 2009, and incorporated herein by
      reference).10.34
            
            Plan
      of Reorganization Proposed by the Debtors and Co-Plan Proponents Enable
      Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce
      Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson
      Overseas Fund, Ltd. (filed as Exhibit
      2.5 to the Company's Current Report on Form 8-K dated February 11, 2009,
      and incorporated herein by reference).10.35
            
            Amended
      Disclosure Statement Accompanying Plan of Reorganization Dated September
      17, 2008 Proposed by the Debtors and Co-Plan Proponents Enable Growth
      Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified
      Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas Fund,
      Ltd. (filed
      as Exhibit 99.2 to the Company's Current Report on Form 8-K dated February
      11, 2009, and incorporated herein by reference).31.1
            
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.









17