**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 March 31, 2007


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


SECURITIES
      EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______.





Commission
      File Number 0-09358





**IMPART
      MEDIA GROUP, INC.**





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





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





1300
      North Northlake Way


Seattle,
      WA 98103





(Address
      of principal executive offices)





(206)
      633-1852




(Issuer's
      telephone number)





N/A







(Former
      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 o




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 o No x




As
      of May
      08, 2007, 23,959,248 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 May 08, 2007, convertible
      into an aggregate of 4,500,005 shares of our common stock, were outstanding.
      Our
      common stock currently trades on the OTC Bulletin Board under the symbol
“IMMG”.





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








1




**FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report on Form 10-QSB and the documents incorporated herein by
      reference contain forward-looking statements within the meaning of Section
      27A
      of the Securities Act of 1933, an amended (the “Securities Act”), and Section
      21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
      These forward-looking statements reflect our current views with respect to
      future events or our financial performance, and involve certain known and
      unknown risks, uncertainties and other factors, including those identified
      below, which may cause our or our industry’s actual or future results, levels of
      activity, performance or achievements to differ materially from those expressed
      or implied by any forward-looking statements or from historical results. We
      intend such forward-looking statements to be covered by the safe harbor
      provisions for forward-looking statements contained in Section 27A of the
      Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
      Forward-looking statements include information concerning our possible or
      assumed future results of operations and statements preceded by, followed by,
      or
      that include the words “may,” “will,” “could,” “would,” “should,” “believe,”
“expect,” “plan,” “anticipate,” “intend,” “estimate,” “predict,” “potential” or
      similar expressions.





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





The
      following factors, among others, could cause our or our industry’s future
      results to differ materially from historical results or those anticipated:
      (1)
      the availability of additional funds to enable us to successfully pursue our
      business plan; (2) the uncertainties related to the effectiveness of our
      technologies and the development of our products and services; (3) our ability
      to maintain, attract and integrate management personnel; (4) our ability to
      complete the development of our proposed services in a timely manner; (5) our
      ability to effectively market and sell our services to current and new
      customers; (6) our ability to negotiate and maintain suitable strategic licenses
      and corporate relationships; (7) the intensity of competition; and (8) general
      economic conditions. As a result of these and other factors, we may experience
      material fluctuations in future operating results on a quarterly or annual
      basis, which could materially and adversely affect our business, financial
      condition, operating results and stock price.




2


**IMPART
        MEDIA GROUP, INC.**
 **CONSOLIDATED
        BALANCE SHEET**
 **March
        31, 2007**
   ASSETSCurrent
                  assetsCash
              
              $
              398,624Restricted
                  cash
              
              
              212,899Accounts
                  receivable, net
              
              
              7,554,647Inventory
              
              
              509,161Prepaid
                  expenses and other current assets
              
              
              282,916Total
                  current assets
              
              
              8,958,247Fixed
                  assets, net
              
              
              1,256,785Other
                  AssetsGoodwill
              
              
              2,359,418Intangible
                  assets, net
              
              
              2,578,286Deferred
                  financing costs, net
              
              
              1,629,206Other
                  assets
              
              
              265,246Total
                  other assets
              
              
              6,832,156Total
                  assets
              
              $
              17,047,188LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilitiesAccounts
                  payable
              
              $
              10,459,571Accrued
                  liabilities
              
              
              535,270Customer
                  deposits
              
              
              1,897Lines
                  of credit
              
              
              2,115,003Note
                  payable - related parties - current portion
              
              
              78,008Capital
                  lease obligation - current portion
              
              
              46,606Amounts
                  payable to former E&M owners
              
              
              200,000Other
                  liabilities
              
              
              61,979Total
                  current liabilities
              
              
              13,498,334Notes
                  payable - related parties - long-term portion
              
              
              150,000Capital
                  lease obligation - long-term portion
              
              
              62,959212,959Total
                  liabilities
              
              
              13,711,293Commitments
                  and contingenciesStockholders'
                  equityPreferred
                  stock - $.001 par value, 25,000,000 shares authorized, 2,903,229
                  shares
                  issued and outstanding
              
              
              2,903Common
                  stock - $.001 par value, 100,000,000 shares authorized, 23,007,269
                  shares
                  issued and outstanding
              
              
              23,007Additional
                  paid-in capital
              
              
              19,535,417Accumulated
                  deficit
              
              
              (16,225,432
              )Total
                  stockholders' equity
              
              
              3,325,895Total
                  liabilities and stockholders' equity
              
              $
              17,047,188
  See
        Notes
        to Consolidated Financial Statements
  3
 **IMPART
                    MEDIA GROUP, INC.****CONSOLIDATED
                    STATEMENTS OF OPERATIONS****For
                    the Three Months Ended March 31, 2007 and 2006**2007
                
                2006RevenuesEquipment
                    sales
                
                $
                774,732
                
                $
                524,635Managed
                    subscriptions
                
                
                97,187
                
                
                153,100Consulting
                    and design services
                
                
                42,772
                
                
                105,863Media
                    services
                
                
                1,264,542
                
                
                439,146Total
                    revenues
                
                
                2,179,233
                
                
                1,222,744Cost
                    of revenues
                
                
                867,139
                
                
                588,441Gross
                    profit
                
                
                1,312,094
                
                
                634,303Other
                    operating expensesWages
                    and salaries
                
                
                1,342,430
                
                
                1,344,880Selling
                    and marketing
                
                
                98,233
                
                
                70,198General
                    and administrative expenses
                
                
                1,381,424
                
                
                1,399,415Depreciation
                    and amortization
                
                
                190,488
                
                
                223,081Total
                    other operating expenses
                
                
                3,012,575
                
                
                3,037,574Loss
                    from operations
                
                
                (1,700,481
                )
                
                (2,403,271
                )Other
                    income (expense)Other
                    income and expense, net
                
                
                --
                
                
                14,052Gain
                    on extinguishment of notes payable
                
                
                --
                
                
                106,423Interest
                    expense
                
                
                (241,831
                )
                
                (445,840
                )Net
                    Loss
                
                $
                (1,942,312
                )
                $
                (2,728,636
                )Net
                    Loss - Common Stockholders:Net
                    Loss
                
                $
                (1,942,312
                )
                $
                (2,728,636
                )Beneficial
                    conversion feature of Series A preferred stock
                
                
                --
                
                
                (933,873
                )Accretion
                    of dividends on Series A preferred stock
                
                
                (25,375
                )
                
                (23,450
                )Net
                    loss - available to common stockholders
                
                $
                (1,967,687
                )
                $
                (3,685,959
                )Basic
                    and diluted loss per common share
                
                $
                (0.09
                )
                $
                (0.20
                )Basic
                    and diluted weighted average commmon shares outstanding
                
                
                22,630,263
                
                
                18,426,475
 See
          Notes to Consolidated Financial
          Statements
  4
 **IMPART
                      MEDIA GROUP, INC.****CONSOLIDATED
                      STATEMENTS OF CASH FLOWS****For
                      the Three Months Ended March 31, 2007 and 2006**2007
                  
                  2006Cash
                      flows from operating activities:Net
                      loss
                  
                  $
                  (1,942,312
                  )
                  $
                  (2,728,636
                  )Adjustments
                      to reconcile net loss to net cash used by operating
                      activities:Non-cash
                      wages and salaries expense:Incentive
                      stock options granted to employees
                  
                  
                  359,004
                  
                  
                  48,064Common
                      stock issued to senior executives for services
                  
                  
                  --
                  
                  
                  355,637Non-cash
                      general and administrative expense:Amortization
                      of prepaid consulting expense
                  
                  
                  319,938
                  
                  
                  --Common
                      Stock issued for non-cash consulting services
                  
                  
                  --
                  
                  
                  1,000,000Non-cash
                      interest expense:Warrants
                      issued to bridge lenders
                  
                  
                  --
                  
                  
                  206,186Common
                      stock issued to senior executives upon conversion of notes
                      payable
                  
                  
                  --
                  
                  
                  39,628Amortization
                      of deferred financing costs on line of credit:Warrants
                  
                  
                  158,288
                  
                  
                  97,230Other
                      deferred financing costs
                  
                  
                  33,112
                  
                  
                  20,339Other
                      non-cash interest expense
                  
                  
                  13,162
                  
                  
                  9,689Gain
                      on retirement of notes payable
                  
                  
                  --
                  
                  
                  (106,423
                  )Bad
                      debt expense
                  
                  
                  1,233
                  
                  
                  --Depreciation
                      and amortization
                  
                  
                  190,488
                  
                  
                  223,081Other
                      adjustments
                  
                  
                  --
                  
                  
                  5,204Changes
                      in operating assets and liabilities, excluding assets and liabilities
                      from
                      acquisitions:Accounts
                      receivable
                  
                  
                  (2,264,717
                  )
                  
                  (1,368,298
                  )Inventory
                  
                  
                  (29,463
                  )
                  
                  33,559Prepaid
                      expenses and other current assets
                  
                  
                  338,207
                  
                  
                  (563,155
                  )Other
                      assets
                  
                  
                  (110,074
                  )
                  
                  47,884Accounts
                      payable
                  
                  
                  2,043,083
                  
                  
                  370,152Accrued
                      liabilities
                  
                  
                  (31,094
                  )
                  
                  361,832Customer
                      deposits
                  
                  
                  (21,078
                  )
                  
                  --Net
                      cash used by operating activities
                  
                  
                  (942,223
                  )
                  
                  (1,948,027
                  )Cash
                      flows from investing activities:Purchase
                      of fixed assets
                  
                  
                  (12,180
                  )
                  
                  (166,367
                  )Purchase
                      of Intransit assets
                  
                  
                  --
                  
                  
                  (500,000
                  )Acquisition
                      of E&M
                  
                  
                  --
                  
                  
                  (600,000
                  )Net
                      cash used by investing activities
                  
                  
                  (12,180
                  )
                  
                  (1,266,367
                  )Cash
                      flows from financing activities:Proceeds
                      from sale of common stock
                  
                  
                  --
                  
                  
                  666,801Net
                      proceeds from sale of convertible preferred stock and issuance
                      of
                      warrants
                  
                  
                  --
                  
                  
                  3,910,505Issuance
                      of common stock for exercise of warrants
                  
                  
                  --
                  
                  
                  20,000Net
                      borrowings on lines of credit
                  
                  
                  1,100,773
                  
                  
                  888,217Principal
                      payments on notes payable
                  
                  
                  --
                  
                  
                  (457,600
                  )Deferred
                      financing costs and commitment fees
                  
                  
                  --
                  
                  
                  (428,000
                  )Principal
                      payments on capital lease obligations
                  
                  
                  (11,351
                  )
                  
                  (11,627
                  )Net
                      cash provided by financing activities
                  
                  
                  1,089,422
                  
                  
                  4,588,296Net
                      change in cash
                  
                  
                  135,019
                  
                  
                  1,373,902Cash,
                      beginning of period
                  
                  
                  263,605
                  
                  
                  66,641Cash,
                      end of period
                  
                  $
                  398,624
                  
                  $
                  1,440,543Supplemental
                      cash flow informationIncome
                      taxes paid
                  
                  $
                  --
                  
                  $
                  --Interest
                      Expense:Interest
                      Paid
                  
                  $
                  37,269
                  
                  $
                  72,768Non-cash
                      Interest:Amortization
                      deferred financing costs
                  
                  
                  191,400
                  
                  
                  117,569Warrants
                      issued to bridge and other lenders
                  
                  
                  --
                  
                  
                  206,186Common
                      stock issued to senior executives upon conversion of notes
                      payable
                  
                  
                  --
                  
                  
                  39,628Other
                      non-cash interest expense
                  
                  
                  13,162
                  
                  
                  9,689Total
                      Interest Expense
                  
                  $
                  241,831
                  
                  $
                  445,840Noncash
                      investing and financing activitiesConversion
                      of related party and other debt:Issuance
                      of common stock to repay debt, interest and wages and salaries
                      expense
                  
                  $
                  --
                  
                  $
                  2,270,848Gain
                      on extinguishment of debt
                  
                  
                  --
                  
                  
                  106,423Interest
                      expense/accrued interest
                  
                  
                  --
                  
                  
                  (39,628
                  )Compensation
                      expense due to related parties
                  
                  
                  --
                  
                  
                  (355,637
                  )Retirement
                      of debt
                  
                  
                  --
                  
                  
                  (1,982,006
                  )Net
                      cash effect from conversion of related party debt
                  
                  $
                  --
                  
                  $
                  --InTransit
                      asset purchase:Intangible
                      assets acquired
                  
                  $
                  --
                  
                  $
                  (1,072,372
                  )Common
                      stock issued
                  
                  
                  --
                  
                  
                  572,372Net
                      cash paid in asset purchase
                  
                  $
                  --
                  
                  $
                  (500,000
                  )E&M
                      Acquisition:Current
                      assets acquired
                  
                  $
                  --
                  
                  $
                  (324,892
                  )Fixed
                      assets acquired
                  
                  
                  --
                  
                  
                  (147,000
                  )Intangible
                      assets acquired
                  
                  
                  --
                  
                  
                  (2,969,582
                  )Other
                      long term assets acquired
                  
                  
                  --
                  
                  
                  (44,750
                  )Current
                      liabilities assumed
                  
                  
                  --
                  
                  
                  328,970Goodwill
                      from acquisition
                  
                  
                  --
                  
                  
                  (2,359,418
                  )Common
                      stock issued
                  
                  
                  --
                  
                  
                  4,441,874Note
                      payable issued
                  
                  
                  --
                  
                  
                  200,000Stock
                      issuance payable
                  
                  
                  --
                  
                  
                  274,798Net
                      cash paid in acquisition
                  
                  $
                  --
                  
                  $
                  (600,000
                  )


5





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





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





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





**Note
      2. Going Concern**





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





The
      Company anticipates that its existing capital resources, including amounts
      available under its revolving credit facility, will enable it to continue
      operations through March 31, 2008, assuming the Company meets its sales
      projections for such period. If the Company materially fails to meet such sales
      projections and does not raise additional capital, then the Company may be
      forced to severely curtail or cease operations. Consequently, the Company is
      actively working with investment banks and institutional investors to obtain
      additional capital through various financing options; however, the Company
      does
      not have any financing agreements. There can be no assurance that financing
      will
      be available on favorable terms or at all. If the Company raises additional
      capital through the sale of equity or convertible debt securities, the issuance
      of such securities may result in dilution to existing stockholders.





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





**Note
      3. Basis of Presentation**




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





6




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




Certain
      prior period balances in the Consolidated Statement of Operations for the three
      months ended March 31, 2006, have been reclassified to conform to current period
      presentation by combining Professional and consulting, Rent expense, and Other
      general and administrative expenses and reporting these expenses together as
      General and administrative expenses. Certain prior period balances in the Net
      cash used by operating activities section of the Consolidated Statements of
      Cash
      Flows were also reclassified. Total balance in Net cash used by operating
      activities remains unchanged.





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




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





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





Basic
      and
      diluted weighted average common shares outstanding, and the potentially dilutive
      securities excluded from loss per share computations because they are
      antidilutive, are as follows for the periods ended March 31,








**2007**
            
            **2006**Basic
                and diluted weighted average common stock shares
                outstanding
            
            
            22,630,263
            
            
            18,426,475Potentially
                dilutive securities excluded from loss per share
                computations:Convertible
                Preferred Stock
            
            
            4,500,005
            
            
            2,903,229Common
                stock options
            
            
            3,892,500
            
            
            1,295,000Common
                stock purchase warrants
            
            
            4,913,113
            
            
            5,235,694





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


Revenue
        from equipment sales is generally recognized when products are shipped and/or
        the revenue is fully earned and ownership had passed to the customer. Revenue
        from management subscriptions is recorded in the month the service is provided.
        Revenue from consulting and design services, which are all short-term, is
        recognized using the completed-contract method. There were no significant
        contracts in process at March 31, 2007.
 
 Revenues
        from media services consist of sales of brokered advertising and certain
        other
        consulting, content creation, and Internet-based advertising fees. Because
        the
        Company typically acts as an agent on behalf of its advertising clients,
        brokered advertising revenues are recorded based on the net commissions earned.
        Media services revenues from consulting, content creation, and Internet-based
        advertising fees are recorded at their gross billing amounts.


The
      gross
      and net billing amounts included in operating revenues for the periods ended
      March 31, 2007 and 2006 are follows:





Consolidated
                gross revenues
            
            $
            10,411,221
            
            $
            2,220,775Direct
                cost of sales
            
            
            (8,231,988
            )
            
            (998,031
            )Consolidated
                net revenues
            
            $
            2,179,233
            
            $
            1,222,744





**Note
      5. Lines of Credit**





On
      January 27, 2006, the Company entered into an agreement with Laurus Master
      Fund,
      Ltd. (“Laurus”) pursuant to which Laurus agreed to provide the Company with a
      revolving credit facility of up to $6 million (the “Facility”). The term of the
      Facility is three years and borrowings accrue interest on the unpaid principal
      and interest at a rate per annum equal to the “prime rate” published in The Wall
      Street Journal from time to time, plus three percent (11.25% at March 31, 2007).
      The maximum principal amount of all borrowings under the Facility cannot exceed
      ninety percent (90%) of the Company’s eligible accounts receivable minus such
      reserves that Laurus may in good faith deem necessary and
      appropriate.





7




**Note
      6. Series A Preferred Stock**





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





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





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





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





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





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





• Waived
      their right to any dividends with respect to the Series A Preferred Stock up
      to
      and including accruals through March 2, 2007, but will be entitled to dividends
      thereafter.





As
      a
      result of the reduction in the conversion price, the holders of the Series
      A
      Preferred Stock can convert the preferred shares into an additional 1,596,775
      shares. The value related to the reduction in the conversion price was
      determined to be $974,033 and was recorded as of December 31, 2006.





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





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




8





The
      Series A Preferred Stock provides that dividends are cumulatively payable at
      an
      annual rate of seven percent (7%) of the gross issuance price of the stock
      ($4.5
      million), payable semi-annually on January 1 and July 1 of each year. Dividends
      on the Series A Preferred Stock are payable in either cash or shares of common
      stock at the Company’s discretion, provided that the Company has an effective
      registration statement providing for the resale of the shares of its common
      stock that would be paid as a dividend. The amount of dividends payable on
      July
      1, 2007 is $104,125.





**Note
      7. Share-Based Payments**




The
      Company made share-based payments in the form of:





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


•
            Issuances
                of common stock to others.





***Incentive
      Stock Options***





During
      the first quarter 2007, the Company granted 2,182,500 options under the Plan
      at
      an exercise price of $0.40 per common share. The total fair value of the options
      as of the grant date was $814,000 of which $197,299 was expensed as General
      and
      Administrative Expenses in the three months ended March 31, 2007.





The
      fair
      value for options granted during the three months ended March 31, 2007 was
      estimated using the Black-Scholes option valuation model with the following
      weighted average assumptions:





**2007**Expected
                life in years
            
            
            5.0Volatility
            
            
            140
            %Interest
                rate
            
            
            4.8
            %Yield
                rate
            
            
            0
            %





There
      were no options granted in the three months ended March 31, 2006.





***Issuances
      of Common Stock***





During
      the first quarter 2007, the Company issued 127,000 shares of common stock
      pursuant to two consulting agreements. The shares had a fair value of $196,850
      and were recorded as prepaid expenses, of which $98,425 was recognized as
      non-cash general and administrative expenses in the three month period ended
      March 31, 2007.




Note
      8. Common Stock




During
      March 2007, the Company issued 317,618 shares of common stock upon the cashless
      exercise of 322,581 $0.01 warrants held by certain holders of Series A Preferred
      Stock.




9





**Note
      9. Commitments and Contingencies**





In
      March
      2007, the Company received notice of a possible lawsuit against it by a former
      employee and consultant to the Company alleging breach of contract and wrongful
      termination, among other claims. In May, the Company settled with claimant
      in
      the amount of $45,000 which has been recorded as General and Administrative
      Expenses in the three month period ended March 31, 2007.





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





**Note
      10. Subsequent Events**





During
      April 2007, the Company issued 951,879 shares of common stock upon the cashless
      exercise of 967,743 warrants held by certain holders of Series A Preferred
      Stock. The exercise price of the warrants was $0.01 per share.





10





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





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, 2006 under the caption “Management’s Discussion
      and Analysis or Plan of Operation” and the other factors discussed in connection
      with any forward-looking statements.





**Critical
      Accounting Estimates and New Accounting Pronouncements**





Critical
      Accounting Estimates





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





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





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





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





We
      grant
      options to purchase our common stock to our employees and directors under our
      2006 Equity Incentive Plan. The benefits provided under this plan are
      share-based payments subject to the provisions of SFAS 123(R). Share-based
      compensation expense recognized under SFAS 123(R) through the three months
      ended
      March 31, 2007 and 2006 was $359,004 and $48,064, respectively. At March 31,
      2007, total unrecognized estimated compensation expense related to unvested
      stock options granted prior to that date was $1.2 million.




11





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





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





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





*Revenue
      Recognition* -
      Revenue from design and installation contracts is recognized using the
      completed-contract method under which the amount of revenue recognized is the
      lower of the percentage complete applied to expected contractual payments or
      the
      total non-refundable cash received to date. Changes in the projected hours
      or
      cost to complete the project could significantly change the amount of revenue
      recognized. There were no significant contracts in process during the three
      months ended March 31, 2007.





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





The
      gross
      and net billing amounts included in operating revenues for the periods ended
      March 31, 2007 and 2006 are follows:





2007
            
            2006Consolidated
                gross revenues
            
            $
            10,411,221
            
            $
            2,220,775Direct
                cost of sales
            
            
            (8,231,988
            )
            
            (998,031
            )Consolidated
                net revenues
            
            $
            2,179,233
            
            $
            1,222,744




12





**Liquidity
      and Capital Resources**





We
      have
      limited capital resources. At March 31, 2007, total unrestricted cash was
      approximately $400,000. In the three months ended March 31, 2007, we funded
      operations with the proceeds from sales and services, borrowings on our $6
      million accounts receivable-based credit facility from Laurus (the “Laurus
      Facility”). At March 31, 2006, the balance was $2.1 million which was near the
      capacity for the facility based upon the Company’s balances in accounts
      receivable at that date.





We
      anticipate that our existing capital resources, including amounts available
      under the Laurus Facility, will enable us to continue operations through March
      31, 2008, assuming we meet our sales projections for the year. If we materially
      fail to meet such sales projections and we do not raise additional capital,
      then
      we may be forced to severely curtail or cease operations by March 31, 2008.
      Consequently, we are actively working with investment banks and institutional
      investors, and strategic investors to obtain additional capital through various
      financing options; however, we do not have any financing agreements. 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
      March 31, 2007, our accumulated deficit was $16.2 million. Our net loss for
      the
      three months ended March 31, 2007 was $1.9 million. Additionally, we anticipate
      that we will incur significant losses from operations through the end of 2007.
      However, many of the expense items that generated these losses are non-cash
      charges such as non-cash interest, depreciation and amortization. Accordingly,
      if we meet our sales forecast for 2007, we anticipate that we will generate
      positive earnings before interest, taxes, depreciation, and amortization
      (EBITDA) during the last three months of 2007.





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





**Results
      of Operations**





Three
      Months Ended March 31,





2007
            
            2006
            
            Change
            
            %Change(in
                thousands)Revenue
            
            $
            2,179
            
            $
            1,223
            
            $
            956
            
            
            78
            %Cost
                of Revenue
            
            
            867
            
            
            588
            
            
            279
            
            
            47
            %General
                and administrative expenses
            
            
            3,013
            
            
            3,037
            
            
            (25
            )
            
            (1
            %)Interest
                expense
            
            
            242
            
            
            446
            
            
            (204
            )
            
            (46
            %)Other
                income and (expenses)
            
            
            0
            
            
            120
            
            
            (120
            )
            
            -Net
                Loss
            
            
            1,942
            
            
            2,729
            
            
            (786
            )
            
            (29
            %)




*Revenue.* Revenue
      increased by $956,000, or 78%, from $1,223,000 to $2,179,000 for the three
      months ended March 31, 2007 and 2006, respectively. Of that the first quarter
      revenue, approximately $825,000 came from the media services revenue generated
      by our E&M division whose assets we acquired in February 2006. In addition
      we had an increase in equipment sales of $250,000 offset by a $119,000 decrease
      in managed subscription services and consulting design services related to
      legacy products that we discontinued.





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




13





*Equipment
      Sales.* During
      the three months ended March 31, 2007, equipment sales increased by 48% as
      compared to equipment sales during the three months ended March 31, 2006. We
      attribute this increase primarily to the product release and sales of the IQ
      miniZ product line. We expect overall equipment sales to increase each
      succeeding quarter in 2007 and to represent a larger percentage of our
      total revenues due to anticipated growth of the digital signage industry,
      generally, and customer awareness of digital signage capabilities and
      advantages.




*Managed
      Subscription.*  During
      the three months ended March 31, 2007, managed subscription fees decreased
      by
      36 % as
      compared to managed
      subscription fees during
      the three months ended March 31, 2006. We attribute this decrease primarily
      to
      the natural, end-of-life attrition of legacy eyeFRAMES
      platform dial-up networks at the end of 2006. We anticipate
      that the overall subscription revenue category will remain flat this
      year.




*Consulting
      and Design Services.*  During
      the three months ended March 31, 2007, consulting and design services fees
      decreased by 60 % as
      compared to consulting
      and design services fees during
      the three months ended March 31, 2006. We attribute this decrease primarily
      to
      low activity of billable consulting and an increase of client-managed,
      digital signage network deployments utilizing the IQ platform.
      Client-managed IQ deployments typically can enable client in-house creative
      production, instead of outsourcing their creative production needs to Impart.
      Consequently, creative production design services revenues were adversely
      impacted, when compared to a year ago. We do anticipate an increase of
      consultation revenues, later this year, as High IQ enterprise consultation
      services sales strategies are implemented.




*Media
      Services.* During
      the three months ended March 31, 2007, revenues from media and direct response
      services increased by 188 % as
      compared to media services
      revenues during
      the three months ended March 31, 2006. We attribute this increase primarily
      to
      the fact
      that we commenced our media services division in February 2006 and, thus,
      revenues for the period ended March 31, 2006 did not include revenues for the
      fully quarterly period. We
      believe the revenue generation potential in the direct response business
      unit category is extremely market healthy and tracking with
      revenue consistency for future reporting quarters in 2007.  Media and
      direct response services represented 58% of total revenues this quarter. We
      anticipate that revenues from media and direct response services will represent
      a smaller percentage of our overall revenues for the remaining three quarters
      of
      2007 as a result of increased equipment sales of our new Concierge, IQ mini,
      and
      IQ interactive systems.





*Cost
      of Revenues.* Cost of
      revenues from our Impart Media Group division increased by $279,000 from 2006
      mainly due to the increase in equipment sales and due to the increased cost
      of
      sales for media services not considered to be brokered media sales. Cost of
      revenues primarily consists of amounts we pay for hardware (i.e., video
      displays, media players and servers) that we integrate and install for our
      customers. Our direct response advertising division’s cost of revenues were
      relatively low as a percentage of sales due to the manner in which we recognize
      revenue where most sales are recorded at the net amount billed, rather than
      gross, on revenues earned from a fee or commission.





*Other
      Operating Expenses.* General
      and administrative expenses for the three months ended March 31, 2007 decreased
      minimally from the same period in 2006 to $1.4 million. Within general and
      administrative expenses, professional and consulting expenses declined by
      $346,000 mainly due to reduced legal and consulting expenses in conjunction
      with
      certain acquisition and financing activities in 2006. Also, expenses for legal
      settlement fees decreased by $223,000 since there were no similar legal
      settlements in 2007. These decreases were offset by an increase to investor
      relations expenses of $172,000 and an increase in share based compensation
      expenses of $311,000.




14





Wages
      and
      salaries decreased minimally in 2007 to $1.3 million with 2006 additional
      executive compensation being offset mostly by the additional 2007 wages
      resulting from the Company’s acquisition of its media advertising
      division.





Depreciation
      and amortization expenses in 2007 decreased by $32,000 to $191,000 from the
      same
      period in 2006 primarily due to reduction of depreciation expense for assets
      that have reached the end of their useful lives.





*Other
      Expenses.* Interest
      expense decreased $204,000 from $446,000 in 2006 to $242,000 in 2007. The
      decrease was primarily due to 2006 interest expense of $216,000 that resulted
      from the issuance of common stock warrants in lieu of the payment of accrued
      interest on loans payable. Our Other Income (expenses) decreased from $120,000
      to $0 for 2007 primarily as a result of a one-time gain on retirement of debt
      in
      2006.





Our
      net
      loss for 2007 compared to 2006 declined from $2,729,000 to $1,942,000 for a
      net
      decrease of $786,000, or an approximately 29%.





*Cash
      Sources and Uses*





The
      following table summarizes the Company’s 2007 and 2006 cash flow activity for
      the three months ended March 31,




**2007**
            
            **2006**(in
                thousands)Cash
                SourcesProceeds
                from issuance of equity securities
            
            $
            -
            
            $
            4,598Net
                borrowings from line of credit
            
            
            1,101
            
            
            888Total
                cash sources
            
            $
            1,101
            
            $
            5,486Cash
                UsesCash
                used in operating activates
            
            $
            942
            
            $
            1,948Cash
                used in acquisitions
            
            
            -
            
            
            1,100Repayment
                of debt obligations
            
            
            -
            
            
            458Deferred
                financing costs
            
            
            -
            
            
            428Capital
                expenditures
            
            
            12
            
            
            166Other
                cash uses
            
            
            12
            
            
            12Total
                cash uses
            
            $
            966
            
            $
            4,112Increase
                in cash
            
            $
            135
            
            $
            1,374




At
      March
      31, 2007, we had current assets of $9.0 million consisting of restricted and
      unrestricted cash in the amount of $612,000, accounts receivable in the amount
      of $7.6 million, prepaid expenses and other current assets of $283,000, and
      inventory in the amount of $509,000. Long-term assets of $8.1 million consisted
      primarily of goodwill and intangible assets of $4.9 million, deferred financing
      costs of $1.6 million and fixed assets of $1.3 million, including computer
      servers, media players and video display equipment used in
      operations.





Current
      liabilities of $13.5 million at March 31, 2007 consisted primarily of $10.5
      million of accounts payable, $560,000 of accrued and other liabilities, $2.1
      million due under the Laurus Facility, and $200,000 of amounts payable to former
      E&M owners.





Our
      working capital deficit was approximately $4.6 million as of March 31, 2007.




15





*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 the term
      of
      the facility. All outstanding principal amounts must be paid on January 27,
      2009. The maximum principal amount of all borrowings under the Laurus Facility
      cannot exceed ninety percent of our eligible accounts receivable minus such
      reserves that Laurus may in good faith deem necessary and appropriate.
      Outstanding amounts payable under the Laurus Facility are secured by a lien
      on
      substantially all of our assets and our subsidiaries pursuant to the terms
      of a
      Security Agreement. In addition, we pledged the ownership interests in our
      subsidiaries pursuant to a stock pledge agreement executed in favor of Laurus
      securing our obligations under the Laurus Facility.





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





During
      March 2006, we sold 2.9 million shares of Series A Preferred Stock at $1.55
      per
      share for total gross proceeds of $4.5 million. In addition, the purchasers
      of
      the Series A Preferred Stock received warrants to purchase an aggregate of
      2.9
      million shares of our common stock with an exercise price of $2.25 per share
      and
      a three-year term. We paid $562,000 in issuance costs, for net proceeds of
      $3.9
      million. As described above under “Recent Developments”, in March 2007, we
      agreed to reduce the exercise price of such warrants $.01 per share in
      consideration of certain waivers granted by the holders of Series A Preferred
      Stock.





Also,
      as
      a result of the amendments described above under “Recent Developments”, each
      Series A Preferred Stock share is convertible into 1.55 shares of our common
      stock (subject to certain adjustments). Each Series A Preferred Stock share
      is
      convertible by the holder at any time. The Series A Preferred Stock will
      automatically convert into shares of our common stock at a conversion price
      of
      $1.00 (subject to certain adjustments) on the third anniversary of the issuance
      date or upon the date of a consummation of a bona fide firm underwritten public
      offering of our securities of at least $20 million in which the price per share
      is at least $4.00 (subject to certain restrictions).





The
      Series A Preferred Stock provides that dividends will accrue at an annual rate
      of seven percent (7%) of the gross issuance price of the stock ($4.5 million),
      payable semi-annually on January 1 and July 1 of each year. As described above
      under “Recent Developments”, the Series A Preferred Stock holders waived their
      right to any dividends with respect to the Series A Preferred Stock up to and
      including accruals through March 2, 2007 but will be entitled to dividends
      thereafter.





On
      August
      1, 2006, we filed a registration statement on Form SB-2 covering the shares
      of
      common stock underlying the Series A Preferred Stock and the warrants issued
      to
      the purchasers of the Series A Preferred Stock. The registration statement
      was
      declared effective as of September 1, 2006. On December 13, 2006, we notified
      our Series A Preferred Stock shareholders that, due to the restatement of our
      financial statements included in our Form 10-QSB for June 30, 2006. referenced
      in the registration, the registration statement was unavailable for the sale
      of
      their shares. In connection with the waivers described above under “Recent
      Developments”, we have additional time to amend and refile the registration
      statement and have it declared effective.




16





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 Share held and
      any
      declared but unpaid dividends.




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





**Disclosure
      Controls and Procedures.** Our
      company’s management, with the participation of our chief executive
      officer/chief financial officer, has evaluated the effectiveness of our
      disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
      and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) as of March 31, 2007, the end of the period covered by this
      Report. Based on such evaluation, our chief executive officer/chief financial
      officer has concluded that, as of March 31, 2007, our disclosure controls and
      procedures were effective in recording, processing, summarizing and reporting,
      on a timely basis, information required to be disclosed by our company in the
      reports that we file or submit under the Exchange Act.





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





**PART
      II**





**OTHER
      INFORMATION**





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





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




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





In
      January 2007, we issued 100,000 shares of our common stock pursuant to a
      consulting agreement entered into in November 2006 for financial advisory and
      public relations services. These shares were issued in reliance on the exemption
      from registration provided by Section 4(2) of the Securities Act of 1933 (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.





17




In
      February 2007, the Company issued an aggregate of 93,240 common shares in
      satisfaction of stock issuance payable pertaining to the February 2006 purchase
      of E&M Advertising, Inc. and affiliates. These
      shares were issued in reliance on the exemption from registration provided
      by
      Section 4(2) of the Securities Act of 1933 (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.





During
      March 2007, the Company issued 317,618 shares of common stock upon the cashless
      exercise of 322,581 of $0.01 warrants held by certain holders of Series A
      Preferred Stock. These shares were issued in reliance on the exemption from
      registration provided by section 3(a)(9) of the Act.




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





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




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**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





Dated:
                May 14, 2007
            
            IMPART
                MEDIA GROUP, INC.By:
            /s/Joseph
                F. MartinezJoseph
                F. MartinezChief
                Executive Officer(principal
                executive officer)Chief
                Accounting Officer(principal
                financial officer)




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**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.






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