**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**Form
      10-QSB**





(Mark
      One)





[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF


THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      period ended September 30, 2006





[
      ]
      TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______.





Commission
      File Number 0-09358





**IMPART
      MEDIA GROUP, INC.**





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





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





1300
      North Northlake Way


Seattle,
      WA 98103


(Address
      of principal executive offices)





(206)
      633-1852


(Issuer's
      telephone number)





N/A


(Former
      Address of principal executive offices)







Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90 days.
      Yes
      [X] No []




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




As
      of November
      17 ,
      2006,
      22,512,863 shares
      of
      our common stock, $0.001 par value per share, and 2,903,229 shares of our Series
      A preferred stock, $0.001 par value per share, which shares of Series A
      preferred stock, were, at November
      17, 2006,
      convertible into an aggregate of 2,903,229 shares of our common stock, were
      outstanding. Our common stock currently trades on the OTC Bulletin Board under
      the symbol “IMMG”.





Transitional
      Small Business Disclosure Format (check one): Yes [ ] No [X]















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





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





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










PART
      I.
      FINANCIAL INFORMATION





ITEM
      1.
      FINANCIAL STATEMENTS.




IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  BALANCE SHEETSeptember
                  30, 2006(UNAUDITED)ASSETSCurrent
                  assetsCash
              
              $
              195,067Accounts
                  receivable, net
              
              
              3,900,431Inventory
              
              
              920,899Prepaid
                  expenses and other current assets
              
              
              1,591,221Total
                  current assets
              
              
              6,607,618Fixed
                  assets, net (Note 7)
              
              
              1,396,977Other
                  AssetsIntangible
                  assets, net (Note 5, 8)
              
              
              4,769,259Deferred
                  financing costs, net (Note 10)
              
              
              2,005,267Other
                  Assets
              
              
              20,777Total
                  other assets
              
              
              6,795,303Total
                  assets
              
              $
              14,799,898LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable
              
              $
              6,703,509Accrued
                  liabilities
              
              
              330,572Customer
                  deposits
              
              
              44,812Lines
                  of credit (Note 10)
              
              
              1,340,300Note
                  payable - related parties (Note 9)
              
              
              197,243Capital
                  lease obligation - current portion
              
              
              19,907Stock
                  issuance payable (Note 5)
              
              
              308,364Other
                  liabilities
              
              
              203,215Total
                  current liabilities
              
              
              9,147,922Capital
                  lease obligation - long term
              
              
              112,245Total
                  liabilities
              
              
              9,260,167Commitments
                  and contingencies (Note 16,17)Stockholders'
                  equityPreferred
                  stock -
                  $.001 par value, 25,000,000 shares authorized,
                  2,903,229 shares issued and outstanding
              
              
              2,903Common
                  stock - $.001
                  par value, 100,000,000 shares authorized,
                  22,512,863 shares issued and outstanding
              
              
              22,431Additional
                  paid-in capital
              
              
              18,964,475Accumulated
                  deficit
              
              
              (13,450,078
              )Total
                  stockholders' equity
              
              
              5,539,731Total
                  liabilities and stockholders' equity
              
              $
              14,799,898




See
      Notes to Consolidated Financial
      Statements









IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  STATEMENTS OF OPERATIONS(UNAUDITED)For
                  the Three
              
              For
                  the Three
              
              For
                  the Nine
              
              For
                  the NineMonths
                  Ended
              
              Months
                  Ended
              
              Months
                  Ended
              
              Months
                  EndedSeptember
                  30, 2006
              
              September
                  30, 2005
              
              September
                  30, 2006
              
              September
                  30, 2005RevenuesEquipment
                  sales
              
              $
              806,619
              
              $
              1,268,839
              
              $
              1,965,808
              
              $
              3,152,876Managed
                  subscription services
              
              
              112,265
              
              
              117,216
              
              
              373,396
              
              
              117,216Consulting
                  and design services
              
              
              74,552
              
              
              36,726
              
              
              280,980
              
              
              60,017Media
                  Services
              
              
              660,852
              
              
              -
              
              
              1,683,186
              
              
              -Total
                  revenues
              
              
              1,654,288
              
              
              1,422,781
              
              
              4,303,370
              
              
              3,330,109Cost
                  of revenues
              
              
              755,421
              
              
              984,457
              
              
              2,047,149
              
              
              2,296,031Gross
                  profit
              
              
              898,867
              
              
              438,324
              
              
              2,256,221
              
              
              1,034,078General
                  and administrative expensesProfessional
                  and consulting
              
              
              243,385
              
              
              313,883
              
              
              1,816,121
              
              
              373,139Selling
                  and marketing
              
              
              126,420
              
              
              21,072
              
              
              462,792
              
              
              89,214Depreciation
                  and amortization
              
              
              750,567
              
              
              103,722
              
              
              1,830,700
              
              
              116,735Impairment
                  of intangible assets
              
              
              724,489
              
              
              -
              
              
              724,489
              
              
              -Wages
                  and salaries
              
              
              1,173,861
              
              
              306,475
              
              
              3,545,892
              
              
              740,981Rent
                  expense
              
              
              114,082
              
              
              53,899
              
              
              312,265
              
              
              161,113Other
                  general and administrative expenses
              
              
              889,769
              
              
              354,903
              
              
              1,979,551
              
              
              431,977Total
                  general and administrative expenses
              
              
              4,022,573
              
              
              1,153,954
              
              
              10,671,810
              
              
              1,913,159Loss
                  from operations
              
              
              (3,123,706
              )
              
              (715,630
              )
              
              (8,415,589
              )
              
              (879,081
              )Other
                  income (expense)Other
                  income and (expense), net
              
              
              (121
              )
              
              6,511
              
              
              (121
              )
              
              30,377Gain
                  on retirement of notes payable
              
              
              -
              
              
              -
              
              
              106,423
              
              
              -Interest
                  expense
              
              
              (239,521
              )
              
              (112,348
              )
              
              (954,797
              )
              
              (133,557
              )Net
                  Loss
              
              $
              (3,363,348
              )
              $
              (821,467
              )
              $
              (9,264,084
              )
              $
              (982,261
              )Net
                  Loss - Common Stockholders:Net
                  Loss
              
              $
              (3,363,348
              )
              $
              (821,467
              )
              $
              (9,264,084
              )
              $
              (982,261
              )Beneficial
                  conversion feature of Series A preferred stock
              
              
              
              
              
              --
              
              
              (933,873
              )
              
              --Accretion
                  of dividends on Series A preferred stock
              
              
              (78,750
              )
              
              --
              
              
              (182,875
              )
              
              --Net
                  loss - available to common stockholders
              
              $
              (3,442,098
              )
              $
              (821,467
              )
              $
              (10,380,832
              )
              $
              (982,261
              )Basic
                  and diluted loss per common share
              
              $
              (0.15
              )
              $
              (0.17
              )
              $
              (0.50
              )
              $
              (0.20
              )Basic
                  and Diluted weighted average common sharesoutstanding
              
              
              22,303,275
              
              
              4,828,831
              
              
              20,831,865
              
              
              4,828,831
  See Notes to
      Consolidated Financial Statements









IMPART
                  MEDIA GROUP, INC.(FORMERLY
                  KNOWN AS LIMELIGHT MEDIA GROUP, INC.)CONSOLIDATED
                  STATEMENTS OF CASH FLOWS(UNAUDITED)For
                  the nine months
              
              For
                  the nine monthsEnded
              
              EndedSeptember
                  30, 2006
              
              September
                  30, 2005Cash
                  flows from operating activities:Net
                  loss
              
              $
              (9,264,084
              )
              $
              (982,261
              )Adjustments
                  to reconcile net loss tonet
                  cash used by operating activities:Issuance
                  of common stock for non-cash consulting expense
              
              
              1,790,191
              
              
              --Issuance
                  of warrants for services
              
              
              467,804
              
              
              --Non-cash
                  compensation expense
              
              
              355,637
              
              
              --Non-cash
                  stock compensation expense
              
              
              215,624
              
              
              190,050Non-cash
                  interest expense
              
              
              559,610
              
              
              --Gain
                  on retirement of notes payable
              
              
              (106,423
              )
              
              --Depreciation
                  and amortization
              
              
              1,830,700
              
              
              116,735Impairment
                  of intangible assets
              
              
              724,489Other
              
              
              8,056
              
              
              --Changes
                  in operating assets and liabilities net of acquired assetsand
                  liabilities due to acquisitions:Accounts
                  receivable
              
              
              (3,288,874
              )
              
              281,733Inventory
              
              
              (437,362
              )
              
              11,716Prepaid
                  expenses and other current assets
              
              
              (1,179,876
              )
              
              2,600Other
                  assets
              
              
              366,372
              
              
              4,051Accounts
                  payable
              
              
              4,170,397
              
              
              (230,024
              )Accrued
                  liabilities
              
              
              981,967
              
              
              210,053Customer
                  deposits
              
              
              
              
              
              61,819Other
                  liabilities
              
              
              
              
              
              88,914Net
                  cash used by operating activities
              
              
              (2,805,772
              )
              
              (244,614
              )Cash
                  flows from investing activities:Cash
                  paid in acquisitions
              
              
              (500,000
              )
              
              --Acquisition
                  of E&M
              
              
              (600,000
              )
              
              --Purchase
                  of fixed assets
              
              
              (298,566
              )
              
              (217,937
              )Cash
                  acquired in reverse merger
              
              
              --
              
              
              1,968Net
                  cash used by investing activities
              
              
              (1,398,566
              )
              
              (215,969
              )Cash
                  flows from financing activities:Proceeds
                  from sale of common stock
              
              
              766,801
              
              
              --Net
                  proceeds from sale of Preferred stock and issuance of
                  warrants
              
              
              3,910,505
              
              
              --Issuance
                  of common stock for exercise of warrants
              
              
              22,750
              
              
              --Deferred
                  financing costs and commitment fees
              
              
              (428,000
              )
              
              --Net
                  change in line of credit
              
              
              551,347
              
              
              103,653Proceeds
                  from notes payable
              
              
              --
              
              
              70,000Principal
                  payments on notes payable
              
              
              (607,600
              )
              
              (25,170
              )Net
                  change in bank overdraft
              
              
              --
              
              
              19,449Proceeds
                  from Sales-leaseback transaction
              
              
              --
              
              
              62,000Change
                  in due to related parties
              
              
              --
              
              
              133,174Proceeds
                  from notes payable - related parties
              
              
              150,000
              
              
              56,000Proceeds
                  from receivable related to issuance of common stock
              
              
              --
              
              
              5,000Principal
                  payments on capital lease obligations
              
              
              (33,039
              )
              
              --Net
                  cash provided by financing activities
              
              
              4,332,764
              
              
              424,106Net
                  change in cash
              
              
              128,426
              
              
              (36,477
              )Cash,
                  beginning of period
              
              
              66,641
              
              
              36,477Cash,
                  end of period
              
              $
              195,067
              
              $
              --Supplementary
                  cash flow information:Cash
                  payments for income taxes
              
              $
              --
              
              $
              --Cash
                  payments for interest
              
              $
              138,335
              
              $
              40,323Schedule
                  of non-cash investing and financing activities:Common
                  stock issued for acquisition
              
              $
              572,500
              
              $
              --




See
      Notes
      to Consolidated Financial Statements





**IMPART
      MEDIA GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.
      Description of Business and History**





**Description
      of Business.** Impart
      Media Group, Inc. (formerly known as Limelight Media Group, Inc. and hereinafter
      referred to as “Impart Media Group” or "the “Company") sells dynamic digital
      media solutions consisting of monitors, media servers, and associated
      technological hardware, web services, and software. The Company provides design,
      integration, fabrication, assembly, quality assurance, creative production,
      installation, and onsite maintenance services throughout the United States.
      As a
      result of the Company’s acquisition of E&M Advertising, Inc. and its
      affiliates in February 2006, Impart Media Group, Inc. now provides advertising
      capability to the digital elements it deploys for its customers.





Impart
      Media Group has developed and offers for sale a digital media network that
      is
      based on a unique architecture called Impart IQ, a web-based portal suite of
      services, coupled with enabling, proprietary hardware, that the Company believes
      no other company in the sector provides. The products are targeted to businesses
      desiring digital signage and interactive media systems in one or more locations.
      This centrally managed network has the capability to deliver relevant
      information to any location where a message benefits from real time delivery
      to
      one or numerous displays. The network may be managed either by the Company
      or
      its customers.





The
      Company is currently marketing its product and network offerings into multiple
      vertical markets, to potentially to realize revenue from multiple sources.
      For
      example, airports, mass transit facilities, malls, financial institutions,
      retail stores and government agencies can be media property venue owners for
      directory services and the distribution of advertisements, marketing messages
      and information and entertainment content. Revenues are derived from network
      monitoring, server hosting, equipment sales, maintenance and installation fees,
      content management, creative development fees, advertising sales and
      sponsorships. Advertising revenue may be used to offset the costs of deployment
      media property venue owners or the owners may receive a portion of the
      advertising revenue on a negotiated basis.





For
      the
      three month period and nine month period ended September 30, 2006, the Company’s
      primary source of revenue was derived from media services, equipment sales,
      and
      managed subscription services. For the three month period and nine month period
      ended September 30, 2005, the Company’s primary source of revenue was derived
      from equipment sales and managed subscription services.





**History.**T he
      Company was incorporated in the State of Nevada on May 17, 1996 under the name
      "Multinet International Corporation." On October 3, 2003, the Company’s name was
      changed to "Limelight Media Group, Inc." ("Limelight"). On June 30, 2005, the
      Company changed its name to Impart Media Group, Inc.





On
      June
      30, 2005, Limelight acquired all of the outstanding capital stock of Impart,
      Inc., a Washington corporation ("Impart, Inc.” and the “Impart Transaction").
      Impart, Inc. was a privately-held company that sold dynamic media solutions
      consisting of monitors, computers, mounting systems, and associated
      technological hardware. The acquisition of the Impart, Inc. stock was a "reverse
      acquisition" in which all of the outstanding capital stock of Impart, Inc.
      was
      effectively exchanged for a controlling interest in Limelight.





Immediately
      prior to the Impart Transaction, Impart, Inc. purchased all of the assets of
      iPoint Networks, LLC, a Washington limited liability company ("iPoint"),
      pursuant to an asset purchase agreement. Impart, Inc issued a promissory note
      in
      the amount of $250,000 to the seller of iPoint and issued shares of common
      stock
      having an aggregate value of $750,000.





Prior
      to
      the Impart Transaction, Limelight was a public company with nominal operations,
      which had $106,000 in assets (including cash totaling $2,000); liabilities
      totaling $891,000, a cash equivalent credit valued at $125,000, previously
      purchased through the issuance of shares of the Company’s common stock, a
      receivable related to the issuance of its common stock totaling $125,000 and
      7.1
      million shares of common stock issued with 6.9 million shares outstanding.







As
      the
      Company did not have a sufficient number of duly authorized shares on the date
      of the acquisition, the parties agreed to holdback 2.9 million shares ("Holdback
      Shares") of the 8.1 million of Limelight shares to be issued to owners of
      Impart, Inc. and iPoint. During the 4th quarter of 2005, the Company entered
      into agreements to convert the 2.9 million Holdback Shares into a liability
      totaling $4.6 million. This balance later was satisfied in exchange for the
      issuance of the same number of shares as was originally defined as the Holdback
      Shares.





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





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








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





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





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





On
      February 28, 2006, the Company purchased substantially all of the assets E&M
      Advertising, Inc., E&M West/Camelot, Inc. and NextReflex, Inc.
      (collectively, “E&M”), through a newly formed subsidiary, Impart Media
      Advertising, Inc. E&M was engaged in the placement and marketing of direct
      response media. In consideration for the purchase of the assets, Impart Media
      Group agreed (i) to pay an aggregate of $800,000, of which $200,000 was paid
      on
      the closing date, $400,000 was paid in March 2006 and the remaining $200,000
      is
      required to be paid on the first anniversary of the closing date and (ii) to
      issue an aggregate of 1.6 million restricted shares of Impart Media Group common
      stock **.** In
      April
      2006 and July 2006 **** the
      Company issued 1.47 million and .047 million shares, respectively, **** of
      the
      1.6 million restricted shares. The fair value of the shares issued at the
      measurement date was approximately $4.8 million.




1  The
          Impart Transaction is considered to be a capital transaction in substance,
          rather than a business combination. The transaction is equivalent to the
          issuance of stock by a private company (Impart) for the net monetary assets
          of a
          public shell company, (Limelight), accompanied by a recapitalization. Thus,
          the
          4.95 million shares (net of Holdback Shares) of common stock issued to
          the
          shareholders of Impart are retroactively applied. The accounting for the
          Impart
          Transaction is identical to that resulting from a reverse acquisition,
          except
          that neither goodwill nor other intangible assets was recorded. Accordingly,
          these financial statements are the historical financial statements of Impart,
          Inc. Impart, Inc. was incorporated on June 19, 1984, in the State of
          Washington.
 2  The
          Ipoint Transaction resulted in the acquisition of certain fixed assets
          in
          exchange for 302,885 shares (net of Holdback Shares) and a promissory note
          totaling $250,000. The note was satisfied in January
          2006.





**2.
      Basis of Presentation**





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





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




**3.
      Liquidity: Going Concern**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. The Company has incurred net losses of
      approximately $9.3 million and $982,000 for the nine months ended September
      30,
      2006 and September 30, 2005, respectively. Current liabilities exceed current
      assets by approximately $2.5 million as of September 30, 2006. Net cash used
      in
      operating activities approximated $2.8 million for the nine months ended
      September 30, 2006.





The
      Company has limited capital resources. At September 30, 2006, total cash was
      approximately $195,000. During the nine months ended September 30, 2006, the
      Company funded operations with the proceeds from sales and services, draw-downs
      on the Company’s $6 million accounts receivable-based credit facility from
      Laurus (the “Laurus Facility”) and proceeds from the issuance and sale
      of equity securities. At September 30, 2006, $1.3 million was outstanding
      under the Laurus Facility and $418,000 was available for draw-down.




The
      Company anticipates that its existing capital resources, including amounts
      available under the Laurus Facility, will enable it to continue operations
      through September 30, 2007, 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 commitments. 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.





As
      of
      September 30, 2006, the accumulated deficit was $13.4 million. The net loss
      was
      $3.4 million for the quarter ended September 30, 2006 and $9.3 million for
      the
      nine month period ending September 30, 2006. These conditions raise substantial
      doubt about the Company’s ability to continue as a going concern. The audit
      report prepared by the Company’s independent registered public accounting firm
      relating to the Company’s consolidated financial statements for the year ended
      December 31, 2005 includes an explanatory paragraph expressing the substantial
      doubt about the Company’s ability to continue as a going concern.





The
      Company’s ability to continue as a going concern is dependent on additional
      sources of capital and the success of its operating plan. The financial
      statements do not include any adjustments that might be necessary if it is
      unable to continue as a going concern.







**4.
      Summary of Significant Accounting Policies**





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





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





**Accounts
      Receivable.** Accounts
      receivables are reviewed quarterly to determine whether their carrying value
      has
      become impaired. The Company considers the assets to be impaired if the balances
      are more than one year old. The Company has established an allowance for
      doubtful accounts of $50,000 as of September 30, 2006. When accounts are written
      off, they are charged against the allowance. Generally, the Company does not
      assign past due status to receivables. Also, receivables generally are not
      collateralized and do not bear interest.





**Concentration
      of Credit Risk.** Financial
      instruments, which potentially are subjected to concentrations of credit risk,
      consist principally of accounts
      receivable. As of September 30, 2006, two customers represented approximately
      58% of accounts receivable. These two customers represented 3% and 18% and
      4%
      and 15% of total revenues during the three and nine months ending September
      30,
      2006 and 2005, respectively.





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





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





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





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





**Intangibles.** Intangible
      assets are recorded in accordance with Statement of Financial Accounting
      Standards (“SFAS”) No. 141, “Business Combinations.” Finite lived assets consist
      of customer lists and contractual rights, which the Company amortizes over
      a
      period of 3 and 2 years, respectively.





**Impairment
      of Long-lived Assets.** In
      accordance with the provisions of Statement of Financial Accounting Standards
      No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      Company reviews the carrying value and fair value of its long-lived assets
      whenever events or changes in business circumstances indicate that there may
      be
      an impairment in value. Conditions that would necessitate an impairment
      assessment include a significant decline in the observable market value of
      an
      asset, a significant change in the extent or manner in which an asset is used,
      or a significant adverse change that would indicate that the carrying amount
      of
      an asset or group of assets is not recoverable. Long-lived assets to be held
      and
      used, including assets to be disposed of other than by sale, for which the
      carrying amount is not recoverable are adjusted to their estimated fair value
      at
      the date an impairment is indicated, which establishes a new basis for the
      assets for depreciation purposes. Long-lived assets to be disposed of by sale
      are reported at the lower of carrying amount or fair value less cost to sell.
      During the nine months ended September 30, 2006, the Company recorded an asset
      impairment of $724,000 related to the write-off of intangible assets due to
      an unexpected decrease in sold advertising. This impairment is further described
      in Note 5. The Company has not recorded any other material impairment losses.





**Net
      Loss per Common Share.** Net
      loss
      per common share excludes any dilutive effects of options, warrants and
      convertible securities. Net loss per share is computed using the
      weighted-average number of outstanding common shares and common stock equivalent
      shares during the applicable period. Common stock equivalent shares are excluded
      from the computation if their effect is antidilutive.





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





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





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





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





**Stock-based
      Compensation.** Prior
      to
      Jan 1, 2006, the Company accounted for stock-based compensation under the
      recognition and measurement principles of SFAS No. 123, “Accounting for
      Stock-Based Compensation.” Effective January 1, 2006, the Company began
      recording compensation expense associated with stock options and other
      equity-based compensation in accordance with SFAS No. 123 (revised 2004),
“Share-Based Payment”. The Company adopted FAS 123(R) using the modified
      prospective method. The Company recognizes these compensation costs on a
      straight-line basis over the requisite service period of the award. Total
      compensation cost recognized for fair value options issued was $216,000 and
      $0
      for the nine months ended September 30, 2006 and 2005, respectively. Total
      compensation cost recognized for fair value options issued was $124,000 and
      $0
      for the three months ended September 30, 2006 and 2005,
      respectively.





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





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





**Revenue
      Recognition.** The
      Company derives substantially all advertising revenue from fees for services.
      Additionally, commissions are earned based upon the placement of advertisements
      in various media. Revenue is realized when the service is performed in
      accordance with the terms of each client arrangement and upon completion of
      the
      earnings process. Revenue recognition policies are in compliance with the
      Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) 101,
“Revenue and Recognition in Financial Statements”, as updated by SAB 104. In
      July 2000, the Emerging Issues Task Force (EITF) of the Financial Accounting
      Standards Board (FASB) released Issue 99-19 (EITF 99-19). This Issue summarized
      the EITF’s views on when revenue should be recorded at the gross amount billed
      because revenue has been earned from the sale of goods or services, or the
      net
      amount retained because revenue has been earned from a fee or commission. The
      Company typically acts as an agent on behalf of its clients in their primary
      lines of business. Accordingly, most revenues are recorded based upon the net
      commissions earned. The Company records non-media and Internet services at
      a
      gross billing amount, based on the actual services performed or provided. The
      net billing amounts included in operating revenues for the three months and
      nine
      months ended September 30, 2006 and 2005 were approximately $494,000 and $0,
      and
      $1.3 million and $0, respectively.







Revenue
      from product 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 fees is recorded in the month the service is provided. Revenue from
      design and installation contracts is recognized using the completed-contract
      method. There were no significant contracts in process at September 30,
      2006.





**5.
      Acquisitions**




InTransit
      Media





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





In
      its
      recent review of intangible assets, the Company determined that its evaluation
      of net present value of cash flows indicates an impairment of this asset in
      its
      entirety. This impairment was caused by the accelerated and
      unexpected decrease in sold advertising. Therefore, this asset has been
      written down from the net book value of $724,000 to $0 as of September 30,
      2006.




E&M
      Advertising





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





In
      April
      2006 and July 2006, the Company issued 1.47 million and 46,000 of the 1.6
      million shares of the Company’s common stock to be issued in connection with the
      acquisition of E&M. The fair value of the remaining shares to be issued as
      determined based on the measurement date is approximately $308,000. The fair
      value of these shares has been recorded as “Stock Issuance Payable” as of
      September 30, 2006.





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





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





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





Pro
      forma Statement of Operations (Unaudited)





For
                the Nine Months Ended September 30, 2006Actual
            
            Adjustments
                *
            
            ProformaRevenues
            
            $
            4,303,370
            
            $
            689,247
            
            $
            4,992,617Operating
                loss
            
            
            (8,415,589
            )
            
            (49,708
            )
            
            (8,465,297
            )Net
                loss
            
            
            (9,264,084
            )
            
            (378,622
            )
            
            (9,642,706
            )Beneficial
                Conversion Feature of Series A Preferred
            
            
            (933,873
            )
            
            
            
            
            (933,873
            )Accretion
                of Dividends on Series A Preferred Stock
            
            
            (182,875
            )
            
            
            
            
            (182,875
            )Net
                loss - Common Stockholders
            
            
            (10,380,832
            )
            
            (378,622
            )
            
            (10,759,454
            )Loss
                per share - basic and diluted
            
            $
            (0.50
            )
            
            
            
            $
            (0.51
            )





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





Proforma
      Statement of Operations (Unaudited)





For
                the Nine Months Ended September 30, 2005Actual
            
            Adjustments
                *
            
            ProformaRevenues
            
            $
            3,330,109
            
            $
            3,579,931
            
            $
            6,910,040Operating
                loss
            
            
            (879,081
            )
            
            (627,800
            )
            
            (1,506,881
            )Net
                loss
            
            
            (982,261
            )
            
            (537,815
            )
            
            (1,520,076
            )Loss
                per share - basic and diluted
            
            $
            (0.20
            )
            
            
            
            $
            (0.31
            )





*
      The
      proforma adjustment to the historical financial statements reflects an increase
      in revenue of $3.6 million and operating expenses of $4.1 million which includes
      amortization expense of $1.1 million related to the acquisition. The loss per
      share is calculated using 246,749,665 shares outstanding as of September 30,
      2006 factored by the twenty to one reverse stock split effected in December
      2006.





**6.
      Inventory.**




Inventory
      totaling $921,000 consists of finished goods as of September 30,
      2006.





**7.
      Fixed Assets**





Fixed
      assets consist of the following as of September 30, 2006:





Computer
                and other equipment
            
            $
            910,736Furniture
                and fixtures
            
            
            139,825Software
            
            
            977,199Leasehold
                equipment
            
            
            3,853Less:
                accumulated depreciation
            
            
            (634,636
            )Fixed
                assets, net
            
            $
            1,396,977





**8.
      Intangibles**





Intangibles
      consist of the following as of September 30, 2006:





Finite
                lived:
              Customer
                List
            
            $
            5,920,459Less:
                accumulated amortization
            
            
            (1,151,200
            )Intangibles,
                net
            
            $
            4,769,259





**9.
      Note Payable - Related Parties**





Due
      to
      Related Parties totaling $197,000 as of September 30, 2006, consist of the
      following:





Related
                party agreement in which stockholder will receive a revenue share
              of
                $18,000 per year and an additional 5% of net ad revenues as it
                pertains
              to
                a specific airport project for a period of 3 years******
            
            $
            150,000Accrued
                expenses to various stockholders, unsecured, bearing interest
            
            
            21,962Accrued
                interest on related party loans
            
            
            25,281Total
                due to related parties
            
            $
            197,243




**10.
      Line of Credit**





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




On
      January 27, 2006, the Company obtained an initial draw under the Facility of
      $2
      million, of which approximately $782,000 was used to satisfy bank loans in
      full.
      The draws under the Facility are used for general corporate and working capital
      purposes. As of September 30, 2006, the balance due to Laurus was approximately
      $1.3 million.





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









***The
      Warrant*** .
      The
      Company issued to Laurus a common stock purchase warrant, entitling Laurus
      to
      purchase up to 750,000 shares of the Company’s common stock, par value $.001 per
      share at an exercise price of $.01 per share, subject to certain adjustments.
      The Company determined the fair value of the warrant to be $1.6 million as
      determined by using the Black-Scholes option-pricing model. The Company issued
      the warrant to obtain the Laurus Facility. As such, the Company recorded the
      full value of the warrant as deferred debt issue costs upon entering the
      Facility agreement with Laurus. Debt issue costs are amortized to interest
      expense over the three-year term of the Laurus Facility. The Laurus warrant
      expires on January 27, 2013.





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




***Security
      Agreement.*** The
      Laurus Facility is secured by a blanket lien on substantially all of the
      Company’s assets and those of its subsidiaries pursuant to the terms of a
      Security Agreement. In addition, the Company pledged the ownership interests
      in
      its subsidiaries pursuant to a stock pledge agreement executed in favor of
      Laurus. If an event of default occurs under any of the Transaction Documents,
      Laurus has the right to accelerate payments under the Note and, in addition
      to
      any other remedies available to Laurus, foreclose upon the assets securing
      the
      Note. If an event of default occurs under any of the Transaction Documents,
      one
      hundred twenty-five percent (125%) of the unpaid principal balance, plus accrued
      interest and fees, will become immediately due and payable Laurus also will
      be
      entitled to payment of a default interest rate of two percent (2%) per month
      on
      all amounts due, and to such other remedies specified in the Transaction
      Documents and under the Uniform Commercial Code. As of September 30, 2006,
      the
      Company is in compliance with all covenants.





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





***Registration
      Rights Agreement*** **.** Pursuant
      to the terms of a Registration Rights Agreement , the Company is obligated
      to
      file a registration statement on Form SB-2 or S-3 to register the resale of
      the
      shares of Common Stock issuable upon exercise of the Warrant and as a result
      of
      adjustments made to the Exercise Price of the Warrant pursuant to the
      Transaction Documents. The Company was required to file the registration
      statement in connection with the exercise of the Warrant (the “Original
      Registration Statement) on or prior to April 15, 2006. During the second quarter
      of 2006, the Company obtained a waiver from Laurus with respect to this
      requirement. Accordingly, the initial filing date of the Original Registration
      Statement was postponed to on or prior to July 15, 2006. The Company filed
      the
      Original Registration Statement with the SEC on July 31, 2006 and it was
      declared effective by the SEC as of August 15, 2006. In the event of adjustments
      made to the Exercise Price of the Warrant, the Company is required to file
      a
      registration statement (the “Additional Registration Statement”) within thirty
      (30) days of such event resulting in the adjustment of the Exercise Price or
      the
      actual date of the adjustment of the Exercise Price.





**11.
      Stock Option Plans and Warrants**





In
      2005,
      the Company’s Board of Directors adopted an incentive stock plan for its
      employees and consultants (“2006 Stock Option Plan”). Options granted under the
      2006 Stock Option Plan are as follows:




Shares
                Available for Grant
            
            Options
                Outstanding
            
            Weighted
                Average Exercise PriceBalance,
                December 31, 2005
            
            
            1,295,000
            
            
            705,000
            
            $
            0.73Grants
            
            
            (1,255,000
            )
            
            1,255,000
            
            
            1.10Expired
            
            
            
            
            
            (26,750
            )
            
            0.77Cancelled
            
            
            -
            
            
            (74,167
            )
            
            0.84Balance,
                September 30, 2006
            
            
            40,000
            
            
            1,859,083
            
            $
            0.98Options
                exercisable as ofSeptember
                30, 2006
            
            
            
            
            
            443,133
            
            $
            0.79







Options
      outstanding are summarized as follows:


Range
                of Exercise Prices
            
            Stock
                Options Outstanding
            
            Stock
                Options Exercisable
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Life$0.70
                - $1.10
            
            1,859,083
            
            443,133
            
            $0.79
            
            4.99





The
      weighted-average fair value for options granted during 2006 and 2005 was $0.82
      and was estimated using the Black-Scholes option valuation model with the
      following weighted-average assumptions:





**2005**
            
            **2006**Expected
                life in years
            
            2.50
            
            10.00Volatility
            
            256.18%
            
            141.23%Interest
                rate
            
            4.35%
            
            4.82%Dividend
                yield rate
            
            0%
            
            0%





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


Warrants
                Outstanding
            
            Weighted
                Average Exercise PriceBalance,
                December 31, 2005
            
            
            447,566
            
            $
            0.95Granted
            
            
            4,962,877
            
            
            1.38Exercised
            
            
            (100,000
            )
            
            0.20Forfeited
            
            
            -
            
            
            -Expired
            
            
            -
            
            
            -Balance,
                September 30, 2006
            
            
            5,310,443
            
            $
            1.34Warrants
                exercisable as of September 30, 2006
            
            
            5,310,443
            
            $
            1.34





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





Expected
                life in years
            
            3.0Volatility
            
            139%Interest
                rate
            
            4.41%-4.75%Dividend
                rate
            
            0%





**12.
      Separation Agreements**





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





**13.
      Series A Convertible Preferred Stock**





During
      March 2006, the Company sold 2,903,229 shares of Series A Convertible
      Preferred Stock (“Series A Shares”) at a price of $1.55 per share for total
      gross proceeds of $4.5 million. The Company paid $562,000 in issuance costs,
      and
      realized net proceeds of $3.9 million. In addition, the purchasers of the
      Series A Shares received warrants to purchase an aggregate of 2,903,229
      shares of common stock with an exercise price of $2.25 per share and a 3-year
      term.










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





The
      Series A Shares provide that dividends will accrue at an annual rate of seven
      percent (7%) of the gross issuance price of the stock ($4.5 million), payable
      semi-annually on January 1 and July 1 of each year. Dividends on the Series
      A
      Shares 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 Company’s registration statement was declared effective on
      September 1, 2006. Through September 30, 2006, the Company has accrued
      approximately $183,000 in dividends payable. The Company is presently in arrears
      with respect to dividends due July 1, 2006 in the amount of approximately
      $104,000 and is in currently in discussions with shareholders regarding
      payment.





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





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





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




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







In
      accordance with the provisions of EITF 98-5 “Accounting for Convertible
      Securities with Beneficial Conversion Features or Contingently Adjustable
      Conversion Ratios” and EITF 00-27 “Application of Issue No. 98-5 to Certain
      Convertible Instruments,” the Company separately valued the in-the-money
      conversion feature embedded in the Series A and allocated $933,873 to this
      embedded beneficial conversion feature. As described in EITF 00-27, EITF 98-5
      and Accounting Series Release No. 268 “Presentation in Financial Statements of
      Redeemable Preferred Stocks”, the beneficial conversion feature is amortized as
      a deemed dividend with a corresponding increase in the carrying value of the
      Series A shares on the date of issuance as there is no stated redemption
      date and the shares are immediately convertible upon issuance. In light of
      the
      Company’s retained deficit, the deemed dividend remains in additional paid in
      capital. The beneficial conversion cost of $934,000 and the accreted dividends
      of $183,000 are added to net loss to determine the net loss available to common
      stockholders. Accreted dividends of $79,000 are added to net loss for the three
      months ended September 30, 2006 to determine the net loss available to common
      stockholders.





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


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








**14.
      Common Stock Transactions**





In
      the
      three months ended March 31, 2006, the company’s warrant holders exercised
      warrants for an aggregate 100,000 shares of common stock, with net proceeds
      of
      $20,000.





In
      January 2006, the Company issued and sold to eight purchasers in a private
      placement, warrants to purchase an aggregate of 216,072 shares of common
      stock at $1.12 per share pursuant to a common stock purchase agreement, together
      with warrants to purchase an aggregate of 83,479 shares of common stock at
      an
      exercise price of $1.50 per share and warrants to purchase an aggregate of
      23,066 shares of common stock at an exercise price of $3.18 per share. These
      warrants immediately vest and expire in January 2009. The Company received
      approximately $242,000 in connection with the sale and issuance of the common
      stock and related warrants. The relative fair value of the common stock was
      estimated to be approximately $172,000 and the relative fair value of the
      warrants was estimated to be $70,000 as determined based on the relative fair
      value allocation of the proceeds received. The warrants were valued using the
      Black-Scholes valuation model.





In
      January 2006 the Company issued and sold to five purchasers in a private
      placement, an aggregate of 400,002 shares of common stock at a purchase price
      of
      $.75 per share pursuant to a common stock purchase agreement for net proceeds
      of
      $300,000.





In
      January 2006, the Company issued 500,000 and 700,000 shares of common stock
      pursuant to two consulting agreements. The shares had a fair value of $1.0
      million.


In
        January 2006, the Company issued 2,394,873 shares of common stock to related
        parties in satisfaction of outstanding notes payable and other certain accrued
        expenses totaling $2.4 million. These shares had a fair value of $2.3 million.
        The difference of $106,000 has been recorded as a gain on retirement of notes
        payable.




In
      February 2006, the Company issued 146,762 shares of its common stock, valued
      at
      $572,372, in consideration for the transaction with Intransit.




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





In
      February 2006, the Company sold to five purchasers in a private placement,
      an
      aggregate of 199,400 shares of common stock at a purchase price of $1.12 per
      share pursuant to a common stock purchase agreement, together with warrants
      to
      purchase an aggregate of 100,000 shares of common stock at an exercise price
      of
      $1.50 per share. These warrants immediately vest and expire in February 2009.
      The relative fair value of the common stock to be issued was estimated to be
      approximately $154,800 and the relative fair value of the warrants was estimated
      to be $69,200 as determined based on the relative fair value allocation of
      the
      proceeds received. The warrants were valued using the Black-Scholes valuation
      model. In April 2006, the Company issued the 200,000 shares of the common stock
      together with warrants to purchase an aggregate of 100,000 shares of common
      stock.




In
      March
      2006, the Company issued 141,000 shares of common stock to an institutional
      investor in full satisfaction of amounts such investor claimed were due under
      a
      convertible debenture, dated February 17, 2004. These shares had a fair value
      of
      $267,900, which we recorded as Legal Settlement Fees.




In
      February 2006, the Company issued 31,540 shares of common stock valued at
      $50,000 to a consultant in consideration for the provision of consulting
      services.




In
      April
      2006, the Company issued 1.47 million of the 1.6 million shares of common stock
      in connection with the acquisition of E&M Advertising, Inc., E&M
      West/Camelot, Inc. and NextReflex, Inc. The fair value of the all shares to
      be
      issued as determined based on the measurement date is approximately $5.3
      million. During the second quarter 2006, the Company issued 46,620 of the
      remaining common stock payable. In connection with the issuance of these shares,
      the “Stock Issuance Payable” balance has been decreased to $308,000 as of
      September 30, 2006.





In
      April
      2006, the Company issued 6,000 shares of common stock to one of its board
      members for consulting services previously rendered. The fair market value
      of
      those shares is $15,000.





In
      April
      2006, the Company issued and sold in a private placement, an aggregate of 50,000
      shares of common stock at $2 per share pursuant to a common stock purchase
      agreement. the Company received net proceeds of $100,000.





In
      April
      2006, a warrant holder exercised warrants for a total of 132,500 shares of
      common stock, with net proceeds to the Company of $2,750.





On
      June
      2, 2006, the Company received a waiver from Laurus with respect to its default
      of certain covenants relating to the registration of shares underlying warrants
      held by Laurus. In consideration of the waiver, the Company issued to Laurus
      30,000 shares of common stock. The Company filed the registration statement
      on
      July 31, 2006.





During
      second quarter 2006, the Company entered a service agreement with a one year
      term in exchange for the issuance of 150,000 shares of restricted common stock.
      As of June 30, 2006, these shares had not been issued and accordingly, the
      fair
      value of these shares was recorded as “Stock Issuance Payable” as of that date.
      The shares were issued during third quarter 2006.





During
      second quarter 2006, the Company entered a service agreement with a one year
      term in exchange for the issuance of 200,000 warrants to purchase shares of
      restricted common stock at an exercise price of $2.60 per share.





During
      third quarter 2006, the Company entered a service agreement with a one year
      term
      in exchange for the issuance of 350,000 shares of restricted common stock.
      The
      shares were issued during third quarter 2006.







In
      addition to the shares described above, 81,441 shares of the Company’s common
      stock as part of the Impart Transaction were held in escrow. Some or all of
      these shares may be used to settle liabilities that were outstanding at the
      time
      of the transaction and that are still being negotiated. These shares are
      considered issued as of December 31, 2005, but not outstanding.








**15.
      Capital Lease Obligations**





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





October
                1, 2006 through December 31, 2006
            
            $
            11,2352007
            
            
            46,1192008
            
            
            48,1332009
            
            
            26,665132,152Less:
                current portion
            
            
            (19,907
            )Capital
                lease obligations - long-term portion
            
            $
            112,245







**16.
      Commitments and Contingencies**





**Leased
      Facilities.** The
      Company utilizes leased facilities under a noncancellable-operating lease.
      The
      lease calls for a base monthly rent of $15,000 through November 30, 2018. Total
      rent expense for this operating lease was $45,000 for both the three month
      periods ended September 30, 2006 and 2005, and $135,000 for both the nine month
      periods ended September 30, 2006 and September 30, 2005. Certain officers,
      directors and stockholders are owners of the company that owns the
      facility.





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





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





October
                1, 2006 through December 31, 2006
            
            $
            101,1282007
            
            
            407,1272008
            
            
            411,6592009
            
            
            416,2822010
            
            
            420,997Thereafter
            
            
            1,545,136$
            3,302,329





**17.
      Legal Proceedings**




An
      action
      was commenced on April 21, 2006 in Division No.1 of the Warren Circuit Court
      of
      the Commonwealth of Kentucky and titled William
      H. Funk, II and All American Investors Group, Inc. v. Limelight Media Group,
      Inc., David Lott, Impart Mobile Media Division/OTR Media, Inc. and Stewart
      Layton ,
      case
      number 06-CI-854 alleging unfair competition by the Company with OTR Media,
      Inc.
      via utilization of trade secrets and other confidential information. On May
      18,
      2006, such action was removed to federal court in the Western District of
      Kentucky, titled Funk
      v. Limelight Media Group, Inc. et al. ,
      No.:
      1:06-CV-72-M (W.D. Ky.) and on June 6, 2006, the Company filed a motion to
      dismiss such action. On October 16, 2006, the federal court in the Western
      District of Kentucky granted the Company’s motion to dismiss such action on the
      grounds that plaintiffs lacked standing to assert their claims of unfair
      competition and misappropriation of trade secrets, and that plaintiffs had
      not
      proffered any other viable theory of recovery in the complaint. Plaintiffs
      in
      the action have the right to appeal the judgment not later than November 15,
      2006.







**18.
      Subsequent Events**





Effective
      September 30, 2006, the Company implemented a cost reduction program that
      focused on decreasing administrative expenses and the number of sales and
      operations staff. The Company expects these efforts to reduce expenses by
      approximately $150,000 for the third quarter of 2006 and $1.0 million in
      2007.





**19.
      New Accounting Pronouncements**





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





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value Measurements (“FAS 157”). FAS 157 defines fair value,
      establishes a framework for measuring fair value and expands disclosures about
      fair value measurements but does not require any new fair value measurements.
      FAS 157 is effective for financial statements issued for fiscal years beginning
      after November 15, 2007, and interim periods within those fiscal years. The
      Company has not yet determined the impact of applying FAS 157.









**ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS**
 
 Certain
        statements made in this Management’s Discussion and Analysis of Financial
        Condition and Results of Operations, as well as statements made from time
        to
        time by our representatives, may constitute “forward-looking statements” within
        the meaning of the Private Securities Litigation Reform Act of 1995. These
        forward-looking statements include, without limitation, statements regarding
        planned or expected contracts that we may enter into with regard to our
        proprietary hardware, 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. We do not undertake any obligation to publicly update
        any
        forward-looking statement, whether as a result of new information, future
        events, or otherwise, except as required by law. Such forward-looking statements
        involve known and unknown risks, uncertainties and other factors which may
        cause
        our actual results or achievements to be materially different from any future
        results or achievements expressed or implied by such forward-looking statements.
        Such factors include the factors described in our Annual Report on Form 10-KSB
        for the year ending December 31, 2005 under the caption “Management’s Discussion
        and Analysis or Plan of Operation” and the other factors discussed in connection
        with any forward-looking statements.
 
 **General**
  Impart
        Media Group, Inc. (formerly known as Limelight Media Group, Inc. and hereinafter
        referred to as “we”, “us” or “our company”) sells dynamic digital media
        solutions consisting of monitors, media servers, associated technological
        hardware, web services, and software. We provide design, integration,
        fabrication, assembly, quality assurance, creative production, installation
        and
        onsite maintenance services throughout North America. Through our Impart
        Media
        Advertising division (created as a result of our acquisition of E&M
        Advertising, Inc. and its affiliates (“E&M”) in February 2006), we provide
        direct response media services, as well as advertising capability to the
        digital
        elements we deploy for our customers.
 
 We
        have
        developed and offer a digital media network that is based on a unique
        architecture called *Impart
        IQ* ,
        a
        web-based portal suite of services, coupled with enabling, proprietary hardware,
        that we believe no other competitor in the out-of-home media sector provides.
        Our products are targeted to businesses desiring digital signage and interactive
        media systems in one or more locations. Our centrally-managed network has
        the
        capability to deliver relevant information to any location where a message
        benefits from real-time delivery to one or numerous displays. The network
        may be
        managed either by our customers or by us. We believe that *Impart
        IQ* provides
        superior network and grid computing services with online diagnostic and network
        wide load balancing capabilities. Management believes that as traditional
        media
        transfer advertising and information content to the types of digital networks
        we
        deploy and company information system and information technology departments
        take advantage of digital media services in the out-of-home market, demand
        for
        our digital signage and interactive media systems will increase.
 
 We
        are
        currently marketing products and network offerings into multiple vertical
        markets in order to potentially to realize revenue from multiple sources.
        For
        example, airports, mass transit facilities, malls, financial institutions,
        retail stores and government agencies can be media property venue owners
        for
        directory services and the distribution of advertisements, marketing messages
        and information and entertainment content. Revenues are derived from network
        monitoring, server hosting, equipment sales, maintenance and installation
        fees,
        content management, creative development fees, advertising sales and
        sponsorships. Advertising revenue may be used to offset the costs of deployment
        for media property venue owners or the owners may receive a portion of the
        advertising revenue on a negotiated basis.
 
 For
        the
        three-month period and nine-month period ended September 30, 2006, our primary
        source of revenue was derived from media services, equipment sales, and
        managed subscription services. For the three-month period and nine-month
        period
        ended September 30, 2005, our primary source of revenue was derived from
        equipment sales and managed subscription services.
  
  **Critical
        Accounting Estimates and New Accounting Pronouncements**
 
 Critical
        Accounting Estimates
 
 The
        preparation of financial statements in accordance with accounting principles
        generally accepted in the United States requires management to make estimates
        and assumptions that affect reported amounts and related disclosures in the
        financial statements. Management considers an accounting estimate to be critical
        if:
 •
                It
                    requires assumptions to be made that were uncertain at the time
                    the
                    estimate was made, and
 •
                Changes
                    in the estimate or different estimates that could have been selected
                    could
                    have a material impact on our consolidated results of operations
                    or
                    financial condition.
 *Share-Based
        Payments* **** -
        On
        January 1, 2006, we adopted SFAS 123(R), “Share-Based Payment”, which
        establishes standards for share-based transactions in which an entity receives
        employee’s services for (a) equity instruments of the entity, such as stock
        options, or (b) liabilities that are based on the fair value of the entity’s
        equity instruments or that may be settled by the issuance of such equity
        instruments. SFAS 123(R) supersedes the option of accounting for share-based
        compensation transactions using APB Opinion No. 25, “Accounting for Stock Issued
        to Employees”, and requires that companies expense the fair value of stock
        options and similar awards, as measured on the awards’ grant date. SFAS 123(R)
        applies to all awards granted after the date of adoption, and to awards
        modified, repurchased or cancelled after that date. We have elected to apply
        SFAS 123(R) using a modified prospective method, under which compensation
        cost is recognized only for the portion of awards outstanding for which the
        requisite service has not been rendered as of the adoption date, based on
        the
        grant date fair value of those awards calculated under SFAS 123(R) for pro
        forma
        disclosures.
 
 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 September 30, 2006
        was
        $216,000. At September 30, 2006, total unrecognized estimated compensation
        expense related to non-vested stock options granted prior to that date was
        $1.2
        million, of which approximately $144,000 is expected to be recognized over
        the
        remaining three months of 2006.
 
 We
        estimate the value of stock option awards on the date of grant using the
        Black-Scholes option-pricing model (the “Black-Scholes model”). The
        determination of the fair value of share-based payment awards on the date
        of
        grant is affected by our stock price as well as assumptions regarding a number
        of complex and subjective variables. These variables include our expected
        stock
        price volatility over the term of the awards, expected term, risk-free interest
        rate, expected dividends and expected forfeiture rates.
 
 If
        factors change and we employ different assumptions in the application of
        SFAS
        123(R) in future periods, the compensation expense that we record under SFAS
        123(R) may differ significantly from what we have recorded in the current
        period. There is a high degree of subjectivity involved when using option
        pricing models to estimate share-based compensation under SFAS 123(R).
        Consequently, there is a risk that our estimates of the fair values of our
        share-based compensation awards on the grant dates may bear little resemblance
        to the actual values realized upon the exercise, expiration, early termination
        or forfeiture of those share-based payments in the future. Employee stock
        options may expire worthless or otherwise result in zero intrinsic value
        as
        compared to the fair values originally estimated on the grant date and reported
        in our financial statements. Alternatively, value may be realized from these
        instruments 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 Securities and Exchange Commission’s Staff
        Accounting Bulletin No. 107 (SAB 107) is relatively new and best practices
        are
        not well established. There are significant differences among valuation models,
        and there is a possibility that we will adopt a different valuation model
        in the
        future. Theoretical valuation models are evolving and may result in lower
        or
        higher fair value estimates for share-based compensation. The timing, readiness,
        adoption, general acceptance, reliability and testing of these methods is
        uncertain. Sophisticated mathematical models may require voluminous historical
        information, modeling expertise, financial analyses, correlation analyses,
        integrated software and databases, consulting fees, customization and testing
        for adequacy of internal controls. The uncertainties and costs of these
        extensive valuation efforts may outweigh the benefits to investors.
  
 
 *Revenue
        Recognition* Revenue
        from design and installation contracts is recognized using the
        completed-contract method under which the amount of revenue recognized is
        the
        lower of the percentage complete applied to expected contractual payments
        or the
        total non-refundable cash received to date. Changes in the projected hours
        or
        cost to complete the project could significantly change the amount of revenue
        recognized. There were no significant contracts in process during the three
        and
        nine months ended September 30, 2006.
 
 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 accountants had recorded revenue on a gross basis, but to
        insure compliance with GAAP and upon other accounting considerations, we
        have
        elected to utilize the more conservative net revenue recognition calculations.
        This method of net revenue recognition will have no effect on any recognition
        of
        net profits.
  We
          have
          significant intangible assets acquired in the purchase of E&M which we have
          recorded in compliance with SFAS 142 "Goodwill and Other Intangible Assets."
          The
          accounting treatment under SFAS 142 has required significant
          estimates.
 **Results
        of Operations**
 
 *Three
        Months Ended September 30, 2006 Compared to Three Months Ended September
        30,
        2005*
 
 *Revenues* .
  **Three
                    Months Ended September 30,****2006**
                
                **2005**
                
                **Change**
                
                **%
                    Change****(in
                    thousands)**Revenue
                
                $
                1,654
                
                $
                1,423
                
                $
                231
                
                
                16
                %Cost
                    of revenue
                
                
                (755
                )
                
                (984
                )
                
                229
                
                
                23
                %General
                    and administrative expenses
                
                
                (3,271
                )
                
                (1,050
                )
                
                (2,221
                )
                
                (212
                )%Interest
                    expense
                
                
                (240
                )
                
                (112
                )
                
                (128
                )
                
                (114
                )%Depreciation
                    and amortization
                
                
                (751
                )
                
                (104
                )
                
                (647
                )
                
                (720
                )%Other
                    income and (expenses)
                
                
                0
                
                
                6
                
                
                (6
                )Net
                    loss
                
                
                (3,363
                )
                
                (821
                )
                
                (2,542
                )
                
                (309
                )%
 Revenue
        increased $231,000, from $1,423,000 to $1,654,000 during the three months
        ended
        September 30, 2006, as compared to the three months ended September 30, 2005.
        The increase was primarily due to increased media services revenues of $659,000
        derived as a result of our acquisition of E&M in February 2006, and
        increased subscription revenues of approximately $90,000 derived as a result
        our
        acquisition of Media SideStreet Corp. (“Media SideStreet”) in June 2005, offset
        by a decrease of $462,000 in revenues from sales of digital signage equipment.
 
 The
        decrease of $462,000 in revenues from sales of digital signage equipment
        was
        primarily due to a shift in our long-term business strategy which we began
        implementing beginning in the third quarter of 2005. Historically, one
        significant component of our business has been the sale and distribution
        of
        brackets and fixtures to support the deployment of plasma screens and LCD
        screens. During the third quarter of 2005, we began to reduce our emphasis
        on
        the distribution of these products and began shifting our primary focus to
        a
        more full-service digital media offering. For example, in the first quarter
        of
        2006 we launched several advertising-based programs whereby we derive revenue
        from the sale of advertising time on the digital signage networks that we
        manage
        for our venue providers. Advertisers pay us a negotiated fee for advertising
        time slots and for content creation and network management services and we
        often
        pay a percentage of such fees to the relevant venue provider.
  
 
 Additionally,
        as of the conclusion of the three-month period ended September 30, 2006,
        in an
        effort to reduce expenditures, we have curtailed the use of our “Network Owner”
revenue model, whereby we, rather than the venue providers, pay for the
        installation of digital signage equipment and displays in venues. The “Network
        Owner” revenue model requires us to expend a large amount of capital upfront and
        the bulk of these revenue arrangements were not immediately profitable to
        us.
        For example, in the Seattle-Tacoma airport, we were unable to facilitate
        a large
        roll-out of our iPoint kiosks and hardware and thus were not able to attract
        large scale national advertisers, resulting in little or no return on
        investment. Consequently, we removed numerous iPoint kiosks and other related
        hardware and firmware originally deployed in such airport venues. In other
        airport venues, such as the Detroit Metropolitan Airport, we are working
        to
        modify the “Network Owner” revenue model by transferring the capital expenditure
        burden to the airport, while we focus on equipment sales, provision of
        networking services and management services to such venues. We continue to
        believe that iPoint products and related technology offers many advantages
        over
        the expensive and outdated forms static and fixed signage deployments airports
        currently employ, and we intend to identify ways that we and airport venue
        providers can both realize the benefits that such iPoint network systems
        provide.
 
 We
        are
        now focusing on placing our own proprietary *Impart
        IQ* hardware
        and interactive media products in selected vertical markets and venues to
        minimize initial outlay of capital and to achieve a shorter path to
        profitability. Many of our clients (such as Microsoft, AT&T, Nordstrom,
        RediClinic, Bell Canada) are currently participating in test pilot programs
        or
        are transitioning into large-scale deployments of our *Impart
        IQ* products.
 
 During
        the third quarter, we also disbanded our truckside advertising business unit,
        which was not generating projected market revenues. However, we intend to
        maintain our strategic relationships with the traditional out-of-home billboard
        companies that we formed in connection with our truckside advertising business,
        and we hope to enter into contracts with such companies to provide digital
        signage products and services.
 
 As
        a
        result, our sources of revenue now include site monitoring, server hosting,
        content management, subscription services, on-site service, third-party
        advertising, direct response marketing, custom development, design and
        fabrication and, to a lesser extent, integration and equipment sales. We
        believe
        our broad offering of products and services will maximize our earnings potential
        because it enables us to deliver a one-stop digital signage and interactive
        media solution to our customers whereby they can secure all necessary equipment
        and services from one source rather than from multiple vendors. We believe
        these
        offerings will position our company as a reliable full-service digital media
        solution provider.
 
 *Cost
        of Revenues* .
        Cost of
        revenues primarily consists of the amounts we pay for hardware (e.g. video
        displays and components for our custom-built *IQ
        Box* media
        players and servers) that we integrate and install for our customers. Additional
        cost of revenues pertains to costs resulting from our increased revenues
        in
        media services such as server hosting and bandwidth, content royalties,
        advertising commission fees and third-party services such as installation labor
        costs. Our cost of revenues decreased by $229,000 during the three months
        ended
        September 30, 2006 as compared with the three months ended September 30,
        2005
        primarily due to the decrease in equipment sales.
 
 *General
        and Administrative Expenses* .
        General
        and administrative expenses for the quarter ended September 30, 2006 increased
        by $2.2 million as compared with the quarter ended September 30, 2005, from
        $1.1
        million to $3.3 million. This increase was primarily due to the significant
        increase in compensation expenses, professional and consulting fees, the
        impairments to intangible assets acquired in the transaction with InTransit
        and
        other general and administrative expenses resulting from the doubling of
        personnel now employed by our company as a result of the acquisition of
        E&M.
 
 Other
        general and administrative expenses were $890,000 during the three months
        ended
        September 30, 2006, an increase of $535,000 over the same period in 2005
        and was
        primarily due to increased investor relations expenses and additional ongoing
        administrative expenses resulting from the acquisition of E&M.
 
 *Wages
        and Salaries* .
        Wages
        and salary expense for the quarter ended September 30, 2006 was $1.2 million,
        an
        increase of $867,000 over the comparable period in 2005 and was primarily
        due to
        the addition of executive, sales and administrative personnel resulting from
        acquisitions since the three months ended September 30, 2005, including our
        acquisitions of E&M, iPoint Networks LLC (“iPoint”) and Media
        SideStreet.
  
 
 *Other
        Expenses* .
        Interest expense was $240,000 for the quarter ended September 30, 2006, an
        increase of $127,000 over the same period last year primarily due to interest
        expense incurred in connection with the line of credit from Laurus.
 
 Depreciation
        and amortization costs increased by $647,000 compared to the same quarter
        of
        2005. This increase resulted mainly from the acquisitions of E&M, iPoint and
        InTransit.
 
 Based
        on
        the above, we had a net loss of $3.4 million for the three months ended
        September 30, 2006 as compared to a net loss of $821,000 for the three months
        ended September 30, 2005.
 
 
 *Nine
        Months Ended September 30, 2006 Compared to Nine Months Ended September 30,
        2005*
 
 *Revenues* .
  **Nine
                    Months Ended September 30,****2006**
                
                **2005**
                
                **Change**
                
                **%
                    Change****(in
                    thousands)**Revenue
                
                $
                4,303
                
                $
                3,330
                
                $
                973
                
                
                29
                %Cost
                    of revenue
                
                
                (2,047
                )
                
                (2,296
                )
                
                249
                
                
                11
                %General
                    and administrative expenses
                
                
                (8,840
                )
                
                (1,795
                )
                
                (7,045
                )
                
                (392
                )%Interest
                    expense
                
                
                (955
                )
                
                (134
                )
                
                (821
                )
                
                (612
                )%Depreciation
                    and amortization
                
                
                (1,831
                )
                
                (117
                )
                
                (1,714
                )
                
                (1,464
                )%Other
                    income and (expenses)
                
                
                106
                
                
                30
                
                
                76
                
                
                253
                %Net
                    loss
                
                
                (9,264
                )
                
                (982
                )
                
                (8,282
                )
                
                (843
                )%
   Revenue
        increased from the same period of 2005 primarily due to increased media services
        revenues of $1.7 million derived as a result of our acquisition of E&M in
        February 2006, and increased subscription revenues of $290,000 derived as
        a
        result our acquisition of Media SideStreet in June 2005, offset by a decrease
        of
        $1.2 million in revenues from sales of digital signage equipment.
 
 The
        decrease of $1.2 million in revenues from sales of digital signage equipment
        was
        primarily due to a shift in our long-term business strategy as referenced
        above
        in our discussion of the three months ended September 30, 2006.
 
 *Cost
        of Revenues* .
        Cost of
        revenues decreased from the comparable period last year despite increased
        sales
        revenue because we increased our sales of higher margin products and services
        with improved margins such as *Impart
        IQ* .
        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 cost of revenues decreased by $249,000 during the nine months
        ended September 30, 2006 as compared with the same period in 2005 due to
        the
        decrease in equipment sales and the resultant costs.
 
 *General
        and Administrative Expenses* .
        General
        and administrative expenses for the nine months ended September 30, 2006
        increased by $7.0 million as compared with the nine months ended September
        30,
        2005 primarily due to the significant increase in compensation expenses,
        professional and consulting fees and other general and administrative expenses.
        Wages and salary expense for the nine months ended September 30, 2006 was
        $3.5
        million, an increase of $2.8 million over the comparable period last year
        and
        was primarily due to the addition of executive, sales and administrative
        personnel resulting from acquisitions since the nine months ended September
        30,
        2005, including our acquisitions of E&M, iPoint and Media
        SideStreet.
  
  *Other
        Expenses* .
        Interest expense was $955,000 for the nine months ended September 30, 2006,
        an
        increase of $821,000 over the same period last year primarily due to interest
        expense incurred in connection with the Laurus Facility and due to interest
        expense resulting from the issuance of common stock warrants in lieu of the
        payment of accrued interest on loans payable.
 
 Depreciation
        and amortization costs increased by $1.7 million compared to the same quarter
        of
        2005. This increase resulted mainly from our acquisitions of E&M, iPoint and
        InTransit.
 
 Based
        on
        the above, we had a net loss of $9.3 million for the nine months ended September
        30, 2006 as compared to a net loss of $982,000 for the nine months ended
        September 30, 2005.
  **Liquidity
        and Capital Resources**
  We
        have
        limited capital resources. At September 30, 2006, total cash was approximately
        $195,000. During the nine months ended September 30, 2006, we funded operations
        with the proceeds from sales and services, draw-downs on our $6 million accounts
        receivable-based credit facility from Laurus (the “Laurus Facility”) and
        proceeds from the issuance and sale of our equity securities. At September
        30,
        2006, $1.3 million was outstanding under the Laurus Facility and $418,000
        was
        available for draw-down.
  We
          anticipate that our existing capital resources, including amounts available
          under the Laurus Facility, will enable us to continue operations through
          September 30, 2007, assuming we meet our sales projections for such
          period. If we materially fail to meet such sales projections and we do not
          raise additional capital, then we may be forced to severely curtail or
          cease
          operations. Consequently, we are actively working with investment banks
          and
          institutional investors to obtain additional capital through various financing
          options; however, we do not have any financing commitments. There can be
          no
          assurance that financing will be available on favorable terms or at all.
          If we
          raise additional capital through the sale of equity or convertible debt
          securities, the issuance of such securities may result in dilution to existing
          stockholders.
 As
        of
        September 30, 2006, our accumulated deficit was $13.5 million. Our net loss
        was
        $3.4 million for the quarter ended September 30, 2006 and $9.3 million for
        the
        nine-month period ending September 30, 2006. Additionally, we anticipate
        that we
        will incur significant losses from operations through the end of 2007. However,
        many of the expense items that will generate 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 first six 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. In addition, the audit report prepared
        by our independent registered public accounting firm relating to our
        consolidated financial statements for the year ended December 31, 2005 includes
        an explanatory paragraph expressing 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.
 
 
 *Cash
        Sources and Uses*
 
 Cash
        inflows during the nine months ended September 30, 2006 include net proceeds
        of
        $3.9 million from a private placement of shares of our Series A preferred
        convertible stock, draw-downs under the Laurus Facility and proceeds from
        product sales. We used approximately $782,000 of the proceeds from the Laurus
        draw-down to satisfy in full our then-existing bank debt. Our remaining cash
        balances have been used for general corporate and working capital purposes.
        The
        following table summarizes cash flow activity for the nine months ended
        September 30, 2006 and 2005:
  
  
 **Nine
                  months ended September 30,****2006**
              
              **2005**(in
                  thousands)**Cash
                  Sources**Proceeds
                  from issuance of equity securities
              
              $
              4,677
              
              $
              0Proceeds
                  from notes payable - related parties
              
              
              150
              
              
              56Proceeds
                  from notes payable
              
              
              -
              
              
              70Net
                  change due to related parties
              
              
              -
              
              
              133Net
                  change from line of credit
              
              
              551
              
              
              104Other
                  cash sources
              
              
              23
              
              
              89Total
                  cash sources
              
              $
              5,401
              
              $
              452**Cash
                  Uses**Cash
                  used in operating activities
              
              $
              2,805
              
              $
              245Cash
                  used in acquisitions
              
              
              1,100
              
              
              -Repayment
                  of debt obligations
              
              
              608
              
              
              25Deferred
                  financing costs
              
              
              428
              
              
              -Capital
                  expenditures
              
              
              298
              
              
              218Other
                  cash uses
              
              
              33
              
              
              -Total
                  cash uses
              
              $
              5,272
              
              $
              488(Decrease)
                  increase in cash
              
              $
              129
              
              $
              (36
              )
 
 At
        September 30, 2006, we had liquid assets of $6.6 million consisting of cash
        in
        the amount of $0.2 million, accounts receivable derived from operations in
        the
        amount of $3.9 million, prepaid expenses and other current assets of $1.6
        million and inventory in the amount of $8.2 million. Long-term assets of
        $6.8
        million consisted primarily of intangible assets of $4.8 million, deferred
        financing costs of $2.0 million and fixed assets of $1.4 million, including
        computer servers, media players and video display equipment used in operations.
 
 Current
        liabilities of $9.1 million at September 30, 2006 consisted primarily of
        $6.7
        million of accounts payable, $0.3 million of accrued liabilities, $1.3 million
        due under the Laurus Facility and $0.3 million of stock issuances
        payable.
 
 Our
        working capital deficit was $2.5 million as of September 30, 2006.
 
 *Financing
        Activities*
 
 On
        January 27, 2006, we entered into a Security Agreement with Laurus, pursuant
        to
        which Laurus agreed to provide us with a revolving credit facility of up
        to $6
        million. The term of the Laurus Facility is three years and borrowings under
        the
        Laurus Facility accrue interest on the unpaid principal and interest at a
        rate
        per annum equal to the “prime rate” published in The Wall Street Journal from
        time to time, plus three percent (3%). Interest on borrowings under the Laurus
        Facility is payable monthly on the first day of each month during, commencing
        on
        February 1, 2006. All outstanding principal amounts must be paid on January
        27,
        2009. The maximum principal amount of all borrowings under the Laurus Facility
        cannot exceed ninety percent of our eligible accounts receivable minus such
        reserves that Laurus may in good faith deem necessary and appropriate.
        Outstanding amounts payable under the Laurus facility are secured by secured
        by
        a blanket lien on substantially all of our assets and our subsidiaries pursuant
        to the terms of a Security Agreement. In addition, we pledged the ownership
        interests in our subsidiaries pursuant to a stock pledge agreement executed
        in
        favor of Laurus securing our obligations under the Laurus
        Facility.
  
 
 The
        Security Agreement and related documents provide that an event of default
        shall
        be deemed to have occurred if we default on the payment of any obligation
        or
        indebtedness when due, we suffer a bankruptcy or similar insolvency event
        or
        proceeding, we materially breach a representation or warranty or fail to
        observe
        any covenant or agreement, we suffer and do not discharge in a timely manner
        a
        final judgment for the payment of a sum in excess of a certain materiality
        threshold, our common stock has been delisted or trading has been suspended,
        we
        sell a substantial portion of our assets, we merge with another entity or
        we
        fail to timely deliver shares of our Common Stock to Laurus when due upon
        exercise of the warrants issued to Laurus in connection with the financing
        transaction. If an event of default occurs, Laurus has the right to accelerate
        payments under the Laurus Facility and, in addition to any other remedies
        available to it, to foreclose upon the assets securing any outstanding amounts
        due to Laurus. If an event of default occurs, one hundred twenty-five percent
        (125%) of the unpaid principal balance, plus accrued interest and fees, will
        become immediately due and payable. Laurus shall also be entitled to payment
        of
        a default interest rate of two percent (2%) per month on all amounts due
        and
        such other remedies specified in the relevant transaction documents and under
        the Uniform Commercial Code.
 
 During
        March 2006, we sold 2.9 million shares of Series A convertible preferred
        stock
        (the “Series A Shares”) at $1.55 per share for total gross proceeds of $4.5
        million. In addition, the purchasers of the Series A Shares received warrants
        to
        purchase an aggregate of 2.9 million shares of our common stock with an exercise
        price of $2.25 per share and a three-year term. We paid $562,000 in issuance
        costs, for net proceeds of $3.9 million.
 
 Each
        Series A Share is convertible into one share of common stock, subject to
        adjustment for certain dilutive events. Each Series A Share is convertible
        by
        the holder at any time. The Series A Shares will automatically convert into
        shares of our common stock at a conversion price of $1.55 (subject to certain
        adjustments) on the third anniversary of the issuance date or upon the date
        of a
        consummation of a bona fide firm underwritten public offering of the our
        securities of at least $20 million in which the price per share is at least
        $4.00 (subject to certain restrictions).
 
 The
        Series A Shares provide that dividends will accrue at an annual rate of seven
        percent (7%) of the gross issuance price of the stock ($4.5 million), payable
        semi-annually on January 1 and July 1 of each year. Dividends on the preferred
        stock will be paid in either cash or shares of common stock at our discretion,
        provided that we have an effective registration statement providing for the
        resale of the shares of common stock. If a registration is not then effective,
        we must pay the dividends in cash. Accrued dividends payable through September
        30, 2006 are approximately $183,000. We are presently in arrears with respect
        to
        dividends due July 1, 2006 in the amount of approximately $104,000 and currently
        are in discussions with the holders of Series A Shares regarding
        payment.
 
 On
        August
        1, 2006, we filed a registration statement on Form SB-2 covering the shares
        of
        common stock underlying the Series A Shares and the warrants issued to the
        purchasers of the Series A Shares. The registration statement was declared
        effective as of September 1, 2006.
 
 In
        the
        event of our liquidation, dissolution or winding up, the holders of Series
        A
        Shares, are generally entitled to receive a liquidation preference over the
        holders of common stock equal to $1.55 per share of Series A Shares held
        and any
        declared but unpaid dividends.
 
 
 **ITEM
        3. CONTROLS AND PROCEDURES**
 
 DISCLOSURE
        CONTROLS AND PROCEDURES. Our management, with the participation of our chief
        executive officer, chief financial officer and senior accounting staff have
        evaluated the effectiveness of our disclosure controls and procedures (as
        such
        term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
        Act of 1934, as amended (the "Exchange Act")) as of the end of the period
        covered by this Report. Based on such evaluation, our chief executive officer
        and chief financial officer has concluded that, as of the end of such period,
        our disclosure controls and procedures are effective in recording, processing,
        summarizing and reporting, on a timely basis, information required to be
        disclosed by us in the reports that we file or submits under the Exchange
        Act.
  
 
 INTERNAL
        CONTROLS OVER FINANCIAL REPORTING. During the quarter ended September 30,
        2006,
        our management and financial staff has implemented several additive internal
        controls including the increased oversight and required approval by management
        and senior financial personnel of all financial transactions, consistent
        and
        mandated communications with our independent registered public accountants,
        and
        improvements in cataloging and retention of all financial documents and
        instruments. As of September 30, 2006 and for the period covered by this
        Report,
        the implementation of these controls has materially affected, and is reasonably
        likely to materially affect, in a positive manner, our internal control over
        financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f)
        under the Exchange Act).
 
  **PART
        II**
 
 **OTHER
        INFORMATION**
 
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 As
        previously reported in our Current Report on Form 8-K, dated October 16,
        2006,
        filed with the U.S. Securities and Exchange Commission on October 19, 2006,
        an
        action was commenced on April 21, 2006 in Division No.1 of the Warren Circuit
        Court of the Commonwealth of Kentucky and titled William
        H. Funk, II and All American Investors Group, Inc. v. Limelight Media Group,
        Inc., David Lott, Impart Mobile Media Division/OTR Media, Inc. and Stewart
        Layton ,
        case
        number 06-CI-854 alleging unfair competition by our company with OTR Media,
        Inc.
        via utilization of trade secrets and other confidential information. On May
        18,
        2006, such action was removed to federal court in the Western District of
        Kentucky, titled Funk
        v. Limelight Media Group, Inc. et al. ,
        No.:
        1:06-CV-72-M (W.D. Ky.) and on June 6, 2006, our company filed a motion to
        dismiss such action. On October 16, 2006, the federal court in the Western
        District of Kentucky granted our company’s motion to dismiss such action on the
        grounds that plaintiffs lacked standing to assert their claims of unfair
        competition and misappropriation of trade secrets, and that plaintiffs had
        not
        proffered any other viable theory of recovery in the complaint. Plaintiffs
        in
        the action have the right to appeal the judgment not later than November
        15,
        2006.
    **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS.**
 
  In
        July
        2006, we issued 350,000 shares of our common stock together with three-year
        warrants to purchase 100,000 shares of our common stock at an exercise price
        of
        $1.55 per share, to a consulting firm for financial advisory and public
        relations services. These shares and warrants were issued in reliance on
        the
        exemption from registration provided by Section 4(2) of the Act, on the basis
        that the issuances did not involve a public offering and the consultant
        represented to us that it was an “accredited investor”, as defined in Regulation
        D under the Act.
  
  **ITEM
        5. OTHER INFORMATION.**
  On
        February 6, 2006, as previously reported in our Current Report on Form 8-K,
        filed with the SEC on February 7, 2006, we purchased from Marlin Capital
        Partners II, LLC d/b/a InTransit Media (“InTransit”) all of the assets related
        to InTransit’s digital advertising services business, including the right to
        manage the PATHVision digital signage network owned by the Port Authority
        of New
        York and New Jersey (the “PATH”) along with the equipment, computer servers and
        software utilized in connection with the delivery of such advertising services.
        In consideration for such assets and the assignment of the PATHVision contract,
        we paid $500,000 in cash and issued 146,762 shares of our common stock valued
        at
        $572,372 as of the transaction date for a total purchase price of $1,072,372.
  Upon
        our
        most recent review of the intangible assets acquired from InTransit, which
        was
        performed in connection with the preparation of our financial statements
        for the
        third quarter of 2006, we determined that our initial calculation of the
        net
        present value of cash flow from the PATHVision network and related intangible
        assets indicates a material impairment of these assets. Such impairment is
        attributable to an accelerated and significant decrease in advertising time
        sold
        to both historical and future projected advertisers, due to the severely
        compromised image and screen quality of the technologically-outdated and
        often-malfunctioning 270 cathode ray tube (CRT) displays comprising the
        PATHVision network.
  
  At
        the
        time we consummated the asset acquisition with InTransit, to realize the
        maximum
        value of the PATHVision system, we anticipated that technological and hardware
        updates would be required. Accordingly, we sought a commitment by PATH to
        refurbish the network but PATH declined. In the summer of 2006, we proposed
        to
        extend the term of the PATHVision contract until April 2012 from its current
        expiration date of April 2008. In consideration for such an extension of
        the
        PATHVision contract, we offered to assume all capital expenditures and labor
        costs related to the replacement of the antiquated CRT displays and obsolete
        network control center with state-of-the-art flat panel LCD displays along
        with
        our *Impart
        IQ* digital
        signage platform and network. PATH declined our offer.
  As
        a
        result, as of the three and nine months ended September 30, 2006, the net
        book
        value of such intangible assets is $0, representing a decrease of $724,000
        from
        its previous net book valuation.
  
 **ITEM
        6. 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:
                  November 21, 2006
              IMPART
                  MEDIA GROUP, INC.By:
              /s/Joseph
                  F. MartinezJoseph
                  F. MartinezChief
                  Executive Officer(principal
                  executive officer)Chief
                  Accounting Officer(principal
                  financial officer)
  
  **EXHIBIT
        INDEX**
 
 
 31.1 Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
        1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002.
 
 32.1 Certification
        of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
        1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002.