UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 Form
        10-QSB/A
 Amendment
        No. 1
 
 (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, 2006
 
 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 WaySeattle,
                      WA 98103(Address
                      of principal executive offices)(206)
                      633-1852(Issuer's
                      telephone number)N/A(Former
                      Address of principal executive
                      offices)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
        (or
        for such shorter period that the registrant was required to file such reports),
        and (2) has been subject to such filing requirements for the past 90 days.
        Yes 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
        June 12, 2006, 21,936,243 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 June 12, 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 o 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.*
 
 **Explanatory
        Note Regarding Amendment**
 
 We
        are
        filing this amendment to our Quarterly Report on Form 10-QSB/A for the quarter
        ended March 31, 2006, to amend in its entirety our Quarterly Report on Form
        10-QSB for the quarter ended March 31, 2006 originally filed with the U.S.
        Securities and Exchange Commission on June 22, 2006, to correct the following
        items:
 
 1.
              Part
                  I, Item 1: Financial Statements and Notes to Financial Statements;
                  and
 2.
              Part
                  I, Item 2: Management’s Discussion and Analysis of Financial Condition and
                  Results of Operations.
 
 As
        reported in our Current Report on Form 8-K, dated March 22, 2007, our management
        determined that our unaudited financial statements included in our Quarterly
        Report on Form 10-QSB for the quarter ended March 31, 2006 should be restated
        in
        order to correct amounts allocated to intangible assets, the related
        amortization expenses, and the accounting classification between goodwill
        and
        other intangible assets in connection with our purchase of substantially
        all of
        the assets of E&M Advertising, Inc. and its affiliated companies in February
        2006. As a result of the errors, the balances of intangible assets and the
        balance of Additional Paid in Capital allocated to the purchase on the
        Consolidated Balance Sheets included in our Quarterly Report were overstated
        by
        approximately $600,000. Further, approximately $3.9 million of value previously
        allocated to customer lists, amortizable over five years, has been re-allocated
        to trade names and goodwill, which are subject to periodic reviews for
        impairment in value but are not amortized. As a result of this reclassification
        of intangible assets and goodwill, our net loss for the three months ended
        March
        31, 2006 decreased by approximately $115,000 from the amounts originally
        reported.
 
 Pursuant
        to Rule 1b-15 promulgated under the Securities Exchange Act of 1934, as amended
        (the “Exchange Act”), this Amendment No. 1 presents new certifications pursuant
        to Rule 13a-14(a)/15d-14(a) and Rules 13a-14(b)/15d-14(b) under the Exchange
        Act. Except as described above, no substantive change has been made to the
        Quarterly Report as originally filed. This Amendment No. 1 does not reflect
        events occurring after the filing of the Quarterly Report as originally filed
        or
        modify or update those disclosures affected by subsequent events.
  2
 
 PART
        I.
        FINANCIAL INFORMATION
 
 ITEM
        1.
        FINANCIAL STATEMENTS.
  IMPART
        MEDIA GROUP, INC.
 (FORMERLY
        KNOWN AS LIMELIGHT MEDIA GROUP, INC.)
 CONSOLIDATED
        BALANCE SHEET (RESTATED *)
 MARCH
        31,
        2006
 (UNAUDITED)
 
 ASSETS
 
 Current
                    assetsCash
                
                $
                1,440,543Accounts
                    receivable, net
                
                
                2,135,247Inventory
                
                
                449,980Prepaid
                    expenses and other current assets
                
                
                974,500Total
                    current assets
                
                
                5,000,270Fixed
                    assets, net
                
                
                1,490,548Other
                    AssetsGoodwill
                
                
                2,359,418Intangible
                    assets, net
                
                
                3,913,010Deferred
                    financing costs, net
                
                
                2,355,780Other
                    Assets
                
                
                339,265Total
                    other assets
                
                
                8,967,473Total
                    assets
                
                $
                15,458,291LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)Current
                    liabilitiesAccounts
                    payable
                
                $
                1,998,662Accrued
                    liabilities
                
                
                70,642Customer
                    deposits
                
                
                755,221Lines
                    of credit
                
                
                1,583,647Note
                    payable
                
                
                100,000Note
                    payable - related parties
                
                
                188,060Capital
                    lease obligation - current portion
                
                
                20,873Stock
                    issuance payable
                
                
                4,940,000Other
                    liabilities
                
                
                204,000Total
                    current liabilities
                
                
                9,861,105Capital
                    lease obligation - long term
                
                
                109,663Total
                    liabilities
                
                
                9,970,768Commitments
                    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, 19,998,869
                    shares
                    issued and outstanding
                
                
                19,998Additional
                    paid-in capital
                
                
                12,379,251Accumulated
                    deficit
                
                
                (6,914,629
                )Total
                    stockholders' equity
                
                
                5,487,523Total
                    liabilities and stockholders' deficit
                
                $
                15,458,291
  *
        See
        note 1.
 See
        Notes
        to Consolidated Financial Statements
  3
  IMPART
        MEDIA GROUP, INC.
 (FORMERLY
        KNOWN AS LIMELIGHT MEDIA GROUP, INC.)
 CONSOLIDATED
        STATEMENTS OF OPERATIONS (RESTATED *)
 (UNAUDITED)
 
 For
                    the Three Months Ended
                
                For
                    the Three Months EndedMarch
                    31, 2006
                
                March
                    31, 2005RevenuesEquipment
                    sales
                
                $
                524,635
                
                $
                951,670Managed
                    subscription
                
                
                153,100
                
                
                --Consulting
                    and design services
                
                
                105,863
                
                
                78,612Media
                    Services
                
                
                439,146
                
                
                --Total
                    revenues
                
                
                1,222,744
                
                
                1,030,282Cost
                    of revenues
                
                
                588,441
                
                
                737,549Gross
                    profit
                
                
                634,303
                
                
                292,733General
                    and administrative expensesProfessional
                    and consulting
                
                
                606,553
                
                
                32,423Selling
                    and marketing
                
                
                70,198
                
                
                39,996Depreciation
                    and amortization
                
                
                223,081
                
                
                5,624Wages
                    and salaries
                
                
                1,344,880
                
                
                281,911Rent
                    expense
                
                
                88,464
                
                
                53,562Other
                    general and administrative expenses
                
                
                704,398
                
                
                58,779Total
                    general and administrative expenses
                
                
                3,037,574
                
                
                472,295Income
                    (loss) from operations
                
                
                (2,403,271
                )
                
                (179,562
                )Other
                    income (expense)Other
                    income
                
                
                8,489
                
                
                13,690Gain
                    on retirement of notes payable
                
                
                106,423
                
                
                --Interest
                    income
                
                
                5,563
                
                
                --Interest
                    expense
                
                
                (445,840
                )
                
                (16,530
                )Net
                    loss
                
                $
                (2,728,636
                )
                $
                (182,402
                )Net
                    Loss - Common Stockholders:Net
                    Loss
                
                $
                (2,728,636
                )
                $
                (182,402
                )Beneficial
                    conversion feature of series A preferred stock
                
                
                (933,873
                )
                
                --Accretion
                    of dividends on series A preferred stock
                
                
                (23,450
                )
                
                --Net
                    loss - common stockholders
                
                $
                (3,685,959
                )
                $
                (182,402
                )Basic
                    earnings (loss) per common share
                
                $
                (0.20
                )
                $
                (0.04
                )Basic
                    and Diluted weighted average common shares outstanding
                
                
                18,426,475
                
                
                4,828,831
  *
        See
        note 1.
 
 See
        Notes
        to Consolidated Financial Statements
  4
  IMPART
        MEDIA GROUP, INC.
 (FORMERLY
        KNOWN AS LIMELIGHT MEDIA GROUP, INC.)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS (RESTATED *)
 (UNAUDITED)
 
 For
                    the three months Ended
                
                For
                    the three months EndedMarch
                    31, 2006
                
                March
                    31, 2005Cash
                    flows from operating activities:Net
                    loss
                
                $
                (2,728,636
                )
                $
                (182,402
                )Adjustments
                    to reconcile net loss to net cash used by operating
                    activities:Issue
                    common stock for non-cash consulting expense
                
                
                1,000,000
                
                
                --Issue
                    warrants for servicing
                
                
                215,875
                
                
                --Non-cash
                    compensation expense
                
                
                355,637
                
                
                --Non-cash
                    stock compensation expense
                
                
                48,064
                
                
                --Non-cash
                    interest expense
                
                
                157,197
                
                
                --Gain
                    on retirement of notes payable
                
                
                (106,423
                )
                
                --Depreciation
                    and amortization
                
                
                223,081
                
                
                2,153Other
                
                
                5,204
                
                
                --Changes
                    in operating assets and liabilities net of acquired assets and
                    liabilities
                    due to acquisitions:Accounts
                    receivable
                
                
                (1,368,298
                )
                
                409,074Inventory
                
                
                33,559
                
                
                (21,839
                )Prepaid
                    expenses and other current assets
                
                
                (563,155
                )
                
                15,701Other
                    assets
                
                
                47,884
                
                
                13,430Accounts
                    payable
                
                
                370,152
                
                
                (211,593
                )Accrued
                    liabilities
                
                
                361,832
                
                
                (46,889
                )Net
                    cash used by operating activities
                
                
                (1,948,027
                )
                
                (22,365
                )Cash
                    flows from investing activities:Cash
                    paid out in acquisitions
                
                
                (500,000
                )
                
                --Acquisition
                    of E&M
                
                
                (600,000
                )
                
                --Purchase
                    of fixed assets
                
                
                (166,367
                )
                
                --Proceeds
                    from sale of assets
                
                
                --
                
                
                57,915Net
                    cash provided (used) by investing activities
                
                
                (1,266,367
                )
                
                57,915Cash
                    flows from financing activities:Proceeds
                    from sale of common stock
                
                
                666,801
                
                
                --Proceeds
                    from sale of Preferred stock and issuance of warrants
                
                
                3,910,505
                
                
                --Issuance
                    of common stock for exercise of warrants
                
                
                20,000
                
                
                --Deferred
                    financing costs and commitment fees
                
                
                (428,000
                )
                
                --Net
                    change in line of credit
                
                
                888,217
                
                
                110,494Proceeds
                    from notes payable
                
                
                --
                
                
                308,460Principal
                    payments on notes payable
                
                
                (607,600
                )
                
                --Proceeds
                    from notes payable - related parties
                
                
                150,000
                
                
                167,310Principal
                    payments on notes payable - related parties
                
                
                --
                
                
                (655,734
                )Principal
                    payments on capital lease obligations
                
                
                (11,627
                )
                
                --Net
                    cash provided (used) by financing activities
                
                
                4,588,296
                
                
                (69,470
                )Net
                    change in cash
                
                
                1,373,902
                
                
                (33,920
                )Cash,
                    beginning of period
                
                
                66,641
                
                
                62,345Cash,
                    end of period
                
                $
                1,440,543
                
                $
                28,425Supplementary
                    cash flow information:Cash
                    payments for income taxes
                
                $
                --
                
                $
                --Cash
                    payments for interest
                
                $
                --
                
                $
                --Schedule
                    of non-cash investing and financing activities:Common
                    stock issued for acquisition
                
                $
                572,500
                
                $
                --Issuance
                    of common stock for accrued compensation
                
                $
                --
                
                $
                268,346
  *
        See
        note 1.
 
 See
        Notes
        to Consolidated Financial Statements
  5
  **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
  **Note
        1. Description of Business, History and Summary of Significant
        Policies**
 
 **Description
        of Business**
 
 Impart
        Media Group, Inc. (formerly known as Limelight Media Group, Inc.) (hereinafter
        referred to as "we, us or our company") sells dynamic digital media solutions
        consisting of monitors, media servers, and associated technological hardware
        and
        software for the growing Out-of-Home (OOH) digital signage and interactive
        self
        service industries. We provide design, integration, fabrication, assembly,
        QA,
        creative production, and turnkey installation services throughout the United
        States. As a result of our acquisition of E&M Advertising, Inc. and its
        affiliates in February 2006, we now provide advertising capability to the
        digital elements we deploy and other media services.
 
 We
        have
        developed a digital OOH media network based on a unique architecture called
        Impart IQ, with web-based services that we believe no other company in the
        sector provides. This centrally managed (by us or the client) solution has
        the
        capability to deliver relevant information for businesses desiring digital
        signage and interactive media systems to any location where a message benefits
        from real time delivery to one or numerous displays.
 
 Our
        company is currently developing networks in multiple vertical markets. By
        diversifying the markets, we may realize revenue from multiple sources.
        Airports, mass transit, malls, financial institutions, retail stores and
        government agencies can be location partners for way-finding, directory services
        and the distribution of advertisements, marketing messages and infotainment
        content. Revenues are derived from network monitoring, hosting, equipment
        sales,
        maintenance & installation fees, content management, creative development
        fees, advertising sales and sponsorships. Advertising revenue may be used
        to
        offset the costs of deployment for location partners or the partners may
        receive
        a portion of the advertising revenue on a negotiated basis.
 
 For
        the
        quarter ended March 31, 2006, our primary source of revenue was derived from
        media services, equipment sales, and managed subscription services. For the
        quarter ended March 31, 2005, our primary source of revenue was derived from
        equipment sales and consulting and design services.
 
 **History**
 
 We
        were
        incorporated in the State of Nevada on May 17, 1996 under the name "Multinet
        International Corporation." On October 3, 2003, we changed our name to
        "Limelight Media Group, Inc." ("Limelight").
 
 On
        June
        30, 2005, we acquired all of the outstanding capital stock of Impart, Inc.,
        a
        Washington corporation ("Impart, Inc. Transaction"). This transaction was
        a
        "reverse acquisition" in which all of the outstanding capital stock of Impart,
        Inc. was effectively exchanged for a controlling interest in our company.
        Also,
        on June 30, 2005, concurrently with the Impart, Inc. Transaction, we entered
        into an Agreement with iPoint Networks, LLC, a Washington limited liability
        company, ("iPoint") whereby we purchased the assets of iPoint ("iPoint
        Transaction"). The total consideration for these transactions was 8,125,000
        shares ("Merger Consideration") of our common stock and a promissory note
        of
        $250,000.
 
 As
        we did
        not have a sufficient number of duly authorized shares on the date of the
        acquisition, the parties agreed to holdback 2,875,000 shares ("Holdback Shares")
        of the 8,125,000 to be issued to owners of Impart, Inc. and iPoint not later
        than ten days following the later of (i) the effective date of a merger by
        Impart, Inc. with and into a Nevada corporation to be formed by Limelight
        or
        (ii) Limelight's receipt of audited financial statements of Impart, Inc.
        Prior
        to the Impart, Inc. Transaction, Limelight was a public company with nominal
        operations, that had $105,868 in assets (including cash totaling $1,968);
        liabilities totaling $890,924, a cash equivalent credit valued at $125,000
        previously purchased through the issuance of shares of our common stock,
        a
        receivable related to the issuance of our common stock totaling $12,500 and
        7,081,425 shares of common stock issued and 6,941,483 shares outstanding.
        Impart, Inc. was a privately-held company that sold dynamic media solutions
        consisting of monitors, computers, mounting systems, and associated
        technological hardware. The following table reflects the stock issued in
        relation to the Impart, Inc. Transaction and iPoint Transaction:
 
 Impart
                    Transaction
                
                iPoint
                    Transaction
                
                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
 6
  During
        the 4th quarter of 2005, we entered into agreements to transfer the Holdback
        Shares into a liability totaling $4.6 million; however this balance was
        satisfied in exchange for the same number of shares as was originally defined
        as
        the Holdback Shares. The issuance of these Holdback Shares has been included
        in
        the accompanying Statements of Stockholders' Deficit for the consideration
        of
        these related transactions. The Holdback Shares of 2,709,135 for the Impart,
        Inc. Transaction have been included as part of the consideration for the
        acquisition of Impart, Inc. during the year ended December 31,
        2005.
 
 We
        issued
        81,440 shares of our common stock as part of the Impart Inc. Transaction
        that
        are held in escrow. Some or all of these shares will be used to settle
        liabilities outstanding at the time of the transaction that are still being
        negotiated.
 
 On
        June 30, 2005, we entered into an agreement with Media Sidestreet Support
        Corporation ("Media Sidestreet") whereby we purchased the assets of Media
        Sidestreet in exchange for the issuance of notes in the aggregate principal
        amount of $1,027,965 to the owners of Media Sidestreet ("Media Sidestreet
        Asset
        Acquisition"). The notes were satisfied in January of 2006 with issuance
        of our
        common stock at a value of $1.00 per share. This transaction resulted in
        a gain
        on retirement of debt of $ 106,423. Prior to the Impart, Inc. Transaction,
        the
        majority owners of Impart, Inc. were also owners in Media Sidestreet, thus
        this
        is a related party transaction. Accordingly, these financial statements include
        the combined historical financial statements of Impart, Inc. and Media
        Sidestreet.
 
 In
        October 2003, a Certificate of Amendment to the Articles of Incorporation
        changed our company's name to Limelight Media Group, Inc. During February
        2004,
        a Certificate of Amendment to the Articles of Incorporation increased the
        authorized shares of our common stock from 25,000,000 to 100,000,000. During
        January 2005, a Certificate of Amendment to the Articles of Incorporation
        increased the authorized shares of our common stock from 100,000,000 to
        250,000,000. During December 2005, a Certificate of Amendment to the Articles
        of
        Incorporation effected a one-for-twenty reverse stock split and decreased
        the
        authorized shares of our common stock from 250,000,000 to 100,000,000. This
        amendment also changed our company’s name to "Impart Media Group, Inc." and
        created “blank check” preferred stock. The preferred stock may be divided into
        series with preferences, limitations and relative rights defined by the Board
        of
        Directors.
 
 On
        February 2, 2006, we purchased from Marlin Capital Partners II, LLC (doing
        business as InTransit Media) all of the assets used in its digital advertising
        services business, including the right to manage the PATHVISION digital signage
        system owned by the Port Authority’s PATHVISION broadcasting system and the
        equipment, computer servers and software used by them in the delivery of
        such
        services.
 
 On
        February 28, 2006, we purchased substantially all of the assets E&M
        Advertising, Inc., E&M West/Camelot, Inc. and NextReflex, Inc., which were
        engaged in the placement and marketing of direct response media. In conjunction
        with this acquisition, we changed the name of E&M Advertising, Inc. to
        Impart Media Advertising, Inc. In consideration for the purchase of the assets,
        we agreed (i) to pay an aggregate of $800,000, of which $200,000 was paid
        on the
        closing date, $400,000 was paid in March 2006 and the remaining $200,000
        is
        required to be paid on the first anniversary of the closing date and (ii)
        to
        issue an aggregate of 1,608,392 restricted shares of our common stock. In
        April
        2006 we issued 1,468,532 of the 1,608,392 shares to be issued in connection
        with
        the acquisition of E&M Advertising, Inc., E&M West/Camelot, Inc. and
        NextReflex, Inc. The fair value of the shares issued at measurement date
        is
        approximately $4.8 million.
 
 **Restatement.** Our
        management determined that our unaudited interim consolidated financial
        statements as of and for the three months ended March 31, 2006 should be
        restated in order to correct amounts allocated to intangible assets, the
        related
        amortization expenses, and the accounting classification between goodwill
        and
        other intangible assets in connection with our purchase of substantially
        all of
        the assets of E&M Advertising, Inc. and its affiliated companies in February
        2006.
  The
        Statement of Operations has been restated to reflect the following changes
        to
        the three months ended March 31, 2006:
  Three
                    Months Ended March 31, 2006As
                    amended
                
                As
                    previously
                  filed
                
                Change(in
                    thousands)Depreciation
                    and amortization
                
                
                (223
                )
                
                (338
                )
                
                115Net
                    loss
                
                
                (2,729
                )
                
                (2,844
                )
                
                115Loss
                    per share
                
                
                (0.20
                )
                
                (0.21
                )
                
                0.01
 
 The
        Balance Sheet has been restated to reflect the following changes to the balances
        as of March 31, 2006:
  7
 
 As
                    of March 31, 2006As
                    amended
                
                As
                    previously
                  filed
                
                Change(in
                    thousands)Goodwill
                
                
                2,359
                
                
                --
                
                
                2,359Intangible
                    assets, net
                
                
                3,913
                
                
                6,749
                
                
                (2,836
                )Stock
                    issuance payable
                
                
                4,940
                
                
                5,532
                
                
                (592
                )Accumulated
                    deficit
                
                
                6,915
                
                
                7,030
                
                
                (115
                )
  **Unaudited
        Interim Financial Statements**
 
 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 March 31, 2006 and its results of operations and cash flows for the
        three
        months ended March 31, 2006 and 2005. Pursuant to the rules and regulations
        of
        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
        10-KSB.
 
 The
        results of the Company’s operations for the three months ended March 31, 2006
        are not necessarily indicative of the results of operations for the full
        year
        ending December 31, 2006.
 
 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.
 
 **Going
        Concern**
 
 The
        accompanying financial statements have been prepared on a going concern basis,
        which contemplates the realization of assets and the satisfaction of liabilities
        in the normal course of business. We have incurred a net loss of approximately
        $2,729,000 and $182,000 for the quarters ended March 31, 2006 and March 31,
        2005, respectively. Our company’s current liabilities exceed its current assets
        by approximately $4,861,000 as of March 31, 2006. Our company’s net cash used
        from operating activities approximated $1,948,027 during the quarter ended
        March
        31, 2006.
 
 Our
        ability to continue as a going concern is dependent on additional sources
        of
        capital and the success of our company’s plan. The financial statements do not
        include any adjustments that might be necessary if we are unable to continue
        as
        a going concern.
 
 To
        realize our growth strategy and business plans, we will likely seek additional
        borrowings under our line of credit with Laurus or through sales of additional
        shares of our capital stock to institutional investors, or a combination
        of
        both. Both Laurus and the investors in the Series A Financing have rights
        of
        first refusal with respect to certain new sales of our securities.
 
 **Principles
        of Consolidation**
 
 The
        accompanying consolidated financial statements include the accounts at the
        Company and its subsidiaries. All significant intercompany accounts and
        transactions have been eliminated.
 
 **Accounts
        Receivable**
 
 Accounts
        receivables of the company are reviewed quarterly as to whether their carrying
        value has become impaired. The company considers the assets to be impaired
        if
        the balances are greater than one year old. Management regularly reviews
        accounts receivable and has established an allowance for doubtful accounts
        of
        $35,988 as of March 31, 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.
  8
  **Concentration
        of Credit Risk**
 
 Financial
        instruments, which potentially subject us to concentrations of credit risk,
        consist principally of accounts receivable. As of March 31, 2006, three
        customers represent approximately 21% of accounts receivable. Two customers
        represented 29% and 27% of total revenues during the three months ending
        March
        31, 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. Our company’s management monitors the inventory for excess
        and obsolete items and makes necessary valuation adjustments when
        required.
 
 **Fixed
        Assets**
 
 Fixed
        assets are stated at cost less accumulated depreciation. Depreciation is
        provided 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 expenses as incurred. Expenditures for property
        betterments and renewals are capitalized. Upon sale or other disposition
        of a
        depreciable asset, cost and accumulated depreciation are removed from the
        accounts and any gain or loss is reflected in other income
        (expense).
 
 We
        periodically evaluate whether events and circumstances have occurred that
        may
        warrant revision of the estimated useful lives of fixed assets or whether
        the
        remaining balance of fixed assets should be evaluated for possible impairment.
        We use an estimate of the related undiscounted cash flows over the remaining
        life of the fixed assets in measuring their recoverability.
 
 Fixed assets acquired through the E&M Acquisition are recorded at their
        estimated fair value at the time of acquisition. Depreciation is recorded
        utilizing approximately a three-year life.
 
 **Intangibles**
 
 Intangible
        assets are recorded in accordance with Statement of Financial Accounting
        Standards (“SFAS”) No 141. Infinite
        lived assets consist of goodwill and trade names, which are subject to
        impairment tests at least annually. Finite lived assets consist
        of  customer lists and contractual rights, which we amortize over a
        period of 5 and 2 years, respectively.
  **Fair
        Value of Financial Instruments**
 
 The
        carrying amounts and estimated fair values of our company’s financial
        instruments approximate their fair value due to the short-term
        nature.
 
 **Net
        Loss per Common Share**
 
 Net
        loss
        per 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 during the applicable period. Diluted earnings
        (loss)
        per share is computed using the weighted average number of common and common
        stock equivalent shares outstanding during the period. Common stock equivalent
        shares are excluded from the computation if their effect is
        antidilutive.
 
 **Income
        Taxes**
 
 We
        account for our income taxes in accordance with Statement of Financial
        Accounting Standards (“SFAS”) No 109, 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 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 in other comprehensive loss.
  9
  **Segment
        Information**
 
 We
        disclose segment information in accordance with SFAS No. 131, “Disclosures about
        Segments of an Enterprise and Related Information,” which uses the management
        approach to determine reportable segments. We operate under one
        segment.
 
 **Advertising
        Costs**
 
 We
        recognize advertising expenses in accordance with Statement of Position 93-7
        “Reporting on Advertising Costs.” Accordingly, the company expenses the costs of
        producing advertisements at the time production occurs, and expenses the
        costs
        of communicating advertisements in the period in which the advertising space
        or
        airtime is used.
 
 **Stock-based
        Compensation**
 
 Prior
        to
        Jan 1, 2006, we accounted for stock-compensation under the recognition and
        measurement principles of Statement of Financial Accounting Standards (“SFAS”)
        123, “Accounting for Stock-Based Compensation” (SFAS 123”). Effective January 1,
        2006, we began recording compensation expense associated with stock options
        and
        other equity-based compensation in accordance with SFAS 123 (revised 2004),
        “Share-Based Payment” (“SFAS 123R”). We recognize these compensation costs on a
        straight-line basis over the requisite service period of the award. Total
        compensation cost recognized for fair value options issued was $48,064 and
        $0
        for the quarters March 31, 2006 and 2005, respectively.
 
 SFAS
        123R
        requires that cash flows resulting from tax deductions in excess of the
        cumulative compensation cost recognized for options exercised (excess tax
        benefits) be classified as cash inflows from financing activities and cash
        outflows from operating activities. Due to our net loss position, no tax
        benefits have been recognized in the cash flow statement.
 
 We
        also apply SFAS No. 123R and the consensus in Emerging Issues Task Force
        No.
        96-18 "Accounting for Equity Instruments That Are Issued to Other Than Employees
        for Acquiring, or in Conjunction with Selling, Goods or Services" for stock
        based compensation to non-employees.
 
 **Revenue
        Recognition**
 
 Revenue
        from product sales are generally recognized when our company’s products are
        shipped and/or the revenue are fully earned and ownership has passed to the
        customer. Revenue from management fees are 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
        March 31, 2006.
 
 Our
        advertising division derives substantially all revenue from fees for services.
        Additionally, commissions are earned based upon the placement of advertisements
        in various media. Revenue is realized when the service is performed in
        accordance with the terms of each client arrangement and upon completion
        of the
        earnings process. Revenue recognition policies are in compliance with the
        Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) 101,
        Revenue and Recognition in Financial Statements, as updated by SAB 104. In
        July
        2000, the Emerging Issues Task Force (EITF) of the Financial Accounting
        Standards Board (FASB) released Issue 99-19 (EITF 99-19). This Issue summarized
        the EITF’s views on when revenue should be recorded at the gross amount billed
        because revenue has been earned from the sale of goods or services, or the
        net
        amount retained because revenue has been earned from a fee or commission.
        We
        typically act as an agent on behalf of our clients in their primary lines
        of
        business. Accordingly, most revenues are recorded based upon the net commissions
        earned. We record non-media and Internet services at a gross billing amount,
        due
        to the actual services we perform or provide. The net billing amounts included
        in the operating revenues for the quarters ended March 31, 2006 and 2005
        were
        approximately $276,835 and $0, respectively.
 
 **Note
        2. Acquisitions**
 
 **InTransit
        Media**
 
 On
        February 6, 2006, we purchased from Marlin Capital Partners II, LLC (doing
        business as InTransit Media) all of the assets used in its digital advertising
        services business, including the right to manage the PATHVISION digital signage
        system owned by the Port Authority of New York and New Jersey. In consideration
        for the assets, we paid $500,000 in cash and delivered 146,762 shares of
        our
        common stock valued at $572,372 for a total of $1,072,372. The purchased
        assets
        consisted of the assets used in their digital advertising services business,
        including its exclusive right to provide digital advertising services to
        the
        Port Authority of New York and New Jersey for the Port Authority's PATHVISION
        broadcasting system and the equipment, computer servers and software used
        by
        them in the delivery of such services.
  10
  The
        operations of InTransit are consolidated with the Company as of the date
        of
        acquisition. The unaudited pro forma financial information presented reflects
        the estimated pro forma effect of the InTransit transaction as if it occurred
        on
        January 1, 2006 and 2005, respectively.
 
 The
        unaudited pro forma condensed financial statements include specific assumptions
        and adjustments related to the purchase of the assets. These pro forma
        adjustments have been made to illustrate the anticipated financial effect
        of the
        purchase of the assets. The adjustments are based upon available information
        and
        assumptions that our company believes are reasonable as of the date of this
        filing. However, actual adjustments may differ materially from the information
        presented. Assumptions underlying the pro forma adjustments are described
        in the
        accompanying notes, which should be read in conjunction with the unaudited
        pro
        forma condensed financial statements.
 
 The
        unaudited pro forma financial statements are presented for informational
        purposes only and do not purport to be indicative of the financial position
        which would actually have been obtained if the transaction had occurred in
        the
        periods indicated below or which may exist or be obtained in the future.
        The
        information is not representative of future results of operations or financial
        position. The unaudited condensed pro forma financial information is qualified
        in its entirety and should be read in conjunction with the more detailed
        information and financial data appearing in our company's historical financial
        statements and notes thereto included herein. In the opinion of management,
        all
        material adjustments necessary to reflect the acquisition of the assets by
        us
        have been made.
 
 **Proforma
        Statement of Operations (Unaudited)**
 
 For
                    the Quarter Ended March 31, 2006Actual
                
                Adjustments
                    *
                
                ProformaRevenues
                
                $
                1,222,744
                
                $
                9,000
                
                $
                1,231,744Operating
                    loss
                
                
                (2,403,271
                )
                
                (43,220
                )
                
                (2,446,491
                )Net
                    loss
                
                
                (2,728,636
                )
                
                (43,220
                )
                
                (2,771,856
                )Beneficial
                    Conversion Feature of Series A Preferred
                
                
                (933,873
                )
                
                -
                
                
                (933,873
                )Accretion
                    of Dividends on Series A Preferred Stock
                
                
                (23,450
                )
                
                -
                
                
                (23,450
                )Net
                    loss - Common Stockholders
                
                
                (3,685,959
                )
                
                (43,220
                )
                
                (3,729,179
                )Loss
                    per share - basic and diluted
                
                $
                (0.20
                )
                
                
                
                $
                (0.20
                )
  *
        The
        proforma adjustment to the historical financial statements reflects an increase
        in revenue of $9,000 and operating expenses of $4,600 from January 2006 through
        February 5, 2006, as well as an increase in amortization expense of $47,620
        related to the acquisition.
 
 **Proforma
        Statement of Operations (Unaudited)**
 
 For
                    the Quarter Ended March 31, 2005Actual
                
                Adjustments
                    *
                
                ProformaRevenues
                
                $
                1,030,282
                
                $
                9,000
                
                $
                1,039,282Operating
                    loss
                
                
                (179,562
                )
                
                (129,646
                )
                
                (309,208
                )Net
                    loss
                
                
                (182,402
                )
                
                (129,646
                )
                
                (312,048
                )Loss
                    per share - basic and diluted
                
                $
                (0.04
                )
                
                
                
                $
                (0.06
                )
 
 *
        The
        proforma adjustment to the historical financial statements reflects an increase
        in revenue of $9,000 and operating expenses of $4,600 as well as amortization
        expense of $134,046 related to the acquisition.
 
 **E&M
        Advertising**
 
 In
        February, 2006, we purchased substantially all of the assets E&M
        Advertising, Inc., E&M West/Camelot, Inc. and NextReflex, Inc. (collectively
“E&M”), which were engaged in the placement and marketing of direct response
        media. In consideration for the purchase of the assets, we agreed (i) to
        pay an
        aggregate of $800,000, of which $200,000 was paid on the closing date, $400,000
        was paid in March 2006 and the remaining $200,000 is required to be paid
        on the
        first anniversary of the closing date and (ii) to issue an aggregate of
        1,608,392 restricted shares of our common stock. The majority of these shares
        were issued during the second quarter 2006.
  11
  In
        April 2006, we issued 1,468,532 of the 1,608,392 shares of our common stock
        in
        connection with the acquisition of E&M. The fair value of the all shares to
        be issued as determined based on the measurement date is approximately
        $4,716,000. The fair value of these shares was recorded as “Stock Issuance
        Payable” as of March 31, 2006. In connection with the issuance of these shares
        the “Stock Issuance Payable” balance has been decreased as reflected in Note 16,
        Subsequent Events.
 
 The
        Company consolidated the operations of IMA as of the date of acquisition
        and has
        included IMA’s operations in the 2006 consolidated results from that date. The
        unaudited pro forma financial information presented below (in thousands)
        reflects the estimated effect of the E&M transaction as if it had occurred
        on January 1, 2006 and 2005, respectively.
 
 For
                    the Quarter Ended March 31,2006
                
                2005Revenues
                
                $
                1,408
                
                $
                2,003Operating
                    loss
                
                $
                (2,418
                )
                $
                210Net
                    loss
                
                $
                (2,804
                )
                $
                (79
                )Beneficial
                    Conversion Feature of Series A Preferred
                
                
                (934
                )
                
                -Accretion
                    of Dividends on Series A Preferred Stock
                
                
                (23
                )
                
                -Net
                    loss - Common Stockholders
                
                $
                (3,761
                )
                $
                (79
                )Loss
                    per share - basic and diluted
                
                $
                (0.20
                )
                $
                (0.02
                )
 
 **Note
        3. Inventory**
 
 Inventory
        totaling $449,980 consists of finished goods as of March 31, 2006.
 
 **Note
        4. Fixed Assets**
 
 Fixed
        assets consist of the following as of March 31, 2006:
 
 Computer
                    and other equipment
                
                $
                787,123Furniture
                    and fixtures
                
                
                131,238Software
                
                
                977,199Leasehold
                    equipment
                
                
                3,8531,899,413Less:
                    accumulated depreciation
                
                
                (408,865
                )Fixed
                    assets, net
                
                $
                1,490,548
 
 **Note
        5. Goodwill and Intangible assets**
 
 Goodwill
        arose from the acquisition of E&M discussed in Note 2. It is not subject to
        amortization, but is periodically reviewed for impairment in value.
 
 Intangibles
        consist of the following as of March 31, 2006:
 
 Customer
                    List
                
                
                1,443,582Trade
                    names
                
                
                1,502,000Contractual
                    Rights
                
                
                1,072,372Other
                
                
                24,0004,041,954Less:
                    accumulated amortization
                
                
                (128,944
                )Intangibles,
                    net
                
                $
                3,913,010
  12
  **Note
        6. Due to/from Related Parties**
 
 Due
        to
        related parties totaling $188,060 as of March 31, 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
                
                $
                150,000Unreimbursed
                    expenses to various stockholders, unsecured, bearing interest
                
                
                19,965Unreimbursed
                    expenses to various stockholders, unsecured, bearing interest
                    at the rate
                    of 8.5 % due June 2, 2006
                
                
                15,794Accrued
                    interest on related party loans
                
                
                2,301Total
                    due to related parties
                
                $
                188,060
 
 Due
        from
        related parties totaling $271,013 as of March 31, 2006, included in other
        assets
        consist of the following:
 Related
                    party receivable assumed as part of E&M Acquisition
                
                $
                271,013
  **Note
        7. Other Liabilities**
 
 **Clickplay,
        Inc** .
 
 During
        March 2006, we entered into a settlement agreement with Clickplay, Inc. whereby
        we settled all outstanding balances related to Clickplay, Inc. in consideration
        of our cash payment of approximately $152,000.
 
 **Note
        8. Line of Credit**
 
 On
        January 27, 2006, we entered into a Security Agreement with Laurus Master
        Fund,
        Ltd., a Cayman Islands corporation (“ Laurus ”),
        pursuant to which Laurus agreed to provide the Company with a revolving credit
        facility of up to $6 million (“Facility”). The term of the Facility is three (3)
        years and borrowings under the Facility shall 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 Note is
        payable monthly on the first day of each month during the term of the Note,
        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
        Facility cannot exceed ninety percent (90%) of our eligible accounts receivable
        minus such reserves that Laurus may in good faith deem necessary and
        appropriate.
 
 On
        January 27, 2006, we obtained an initial draw under the Facility of $2 million,
        of which approximately $682,000 and $100,000 was used to satisfy in full,
        our
        indebtedness to Key Bank National Association and Columbia State Bank,
        respectively. The balance of the initial draw, less expenses of the Facility,
        will be used for general corporate and working capital purposes. As of March
        31,
        2006, the balance due to Laurus was approximately $1.6 million.
 
 In
        connection with the Facility, we 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 loan. We also
        paid
        a cash fee of $180,000 and issued a warrant 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 line of
        credit.
 
 ***Warrant*** .
        We
        issued a common stock purchase warrant, entitling Laurus to purchase up to
        750,000 shares of our common stock, par value $.001 per share at an exercise
        price of $.01 per share, subject to certain adjustments. We determined the
        fair
        value of the warrant to be $1.6 million as determined by using the Black-Scholes
        option-pricing model. This warrant was issued to secure this line of credit
        from
        Laurus. As such, we recorded the full value of the warrant as deferred debt
        issue costs upon entering the Facility agreement with Laurus. Debt issue
        costs
        are to be amortized to interest expense over the three-year term of the
        Facility.
 
 The
        Laurus warrant expires on January 27, 2013. In connection with the Security
        Agreement, Laurus is restricted from selling any shares of common stock it
        receives through the exercise of the warrant shares 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.
  13
  ***Security
        Agreement*** .
        The
        Note is secured by a blanket lien on substantially all of the assets of our
        company and our subsidiaries pursuant to the terms of our 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 Note. If an event of default occurs under the any of the Security
        Agreement, the Warrant (as herein defined), the Stock Pledge Agreement, the
        Registration Rights Agreement (as herein defined), or the Note (collectively,
        the “ Transaction
        Documents ”),
        Laurus has the right to accelerate payments under the Note and, in addition
        to
        any other remedies available to it, to foreclose upon the assets securing
        the
        Note. If an event of default occurs under any of the Transaction Documents,
        one
        hundred twenty-five percent (125%) of the unpaid principal balance, plus
        accrued
        interest and fees, will become immediately due and payable. Laurus 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 Transaction Documents
        and under the Uniform Commercial Code. Such events of default include, without
        limitation, the following:
  ·
              a
                  failure to make payments of principal and interest under the Note
                  within
                  three (3) days of when due;
 ·
              a
                  breach by us of any material representation, warranty or statement
                  contained in any of the Transaction Documents (that is not cured
                  within
                  the stated cure period);
 ·
              the
                  filing of any money judgment or similar final process against us
                  for more
                  than $100,000, which remains unvacated, unstayed or unbonded for
                  a period
                  of thirty (30) days;
 ·
              if
                  we make an assignment for the benefit of our creditors, or a receiver
                  or
                  trustee is appointed for us, or any form of bankruptcy or insolvency
                  proceeding is instituted by us, or any involuntary proceeding is
                  instituted against us if not vacated within thirty (30)
                  days;
 ·
              if
                  our Common Stock is suspended for five (5) consecutive days or
                  for five
                  (5) days during a ten (10) day consecutive period from a principal
                  market
                  or pursuant to a stop order issued by the Securities and Exchange
                  Commission (the “SEC”);
                  and
 ·
              a
                  failure by us to timely deliver shares of our Common Stock to Laurus
                  when
                  due upon exercise of the Warrant.
 
 The
        Security Agreement contains certain negative covenants that require us to
        obtain
        the prior written consent or other actions of Laurus in order for us to take
        certain actions at any time when borrowings remain outstanding under the
        Facility. These negative covenants include, without limitation, restrictions
        on
        our ability to:
 
 ·
              incur
                  or assume indebtedness (exclusive of trade
                  debt);
 ·
              guarantee
                  or assume any liability in connection with any obligations of another
                  person or entity (except on behalf of the Subsidiary in the ordinary
                  course of business);
 ·
              pay
                  or make any dividend or distribution on any class of our capital
                  stock or
                  the capital stock of the Subsidiary or issue any preferred stock;
                  and
 ·
              enter
                  into any merger, consolidation or reorganization, with limited
                  exceptions.
 
 ***Registration
        Rights Agreement*** .
        Pursuant to the terms of a Registration Rights Agreement between Laurus and
        the
        company (the “ Registration
        Rights Agreement ”),
        we
        are obligated to file a registration statement on Form SB-2 or S-3 to register
        the resale of the shares of Common Stock issuable (i) upon exercise of the
        Warrant and (ii) as a result of adjustments made to the Exercise Price pursuant
        to the Warrant. With respect to the registration statement required to be
        filed
        in connection with the exercise of the Warrant (the “ Original
        Registration Statement ”),
        we
        were initially required to file the Original Registration Statement on or
        prior
        to April 15, 2006. During the second quarter of 2006, we obtained a waiver
        from
        Laurus with respect to this requirement. Accordingly, the initial filing
        date of
        the Original Registration Statement is on or prior to July 15, 2006. We are
        also
        required to use our best efforts to have the Original Registration Statement
        declared effective by the SEC as promptly as possible after filing, but on
        or
        prior to November 13, 2006. In the event of clause (ii) set forth above,
        we are
        required to file such registration statement (the “ Additional
        Registration Statement ”)
        within
        thirty (30) days of (i) such event resulting in the adjustment of the Exercise
        Price or (ii) the actual date of the adjustment of the Exercise Price. Each
        such
        Additional Registration Statement shall be declared effective within thirty
        (30)
        days following the applicable filing date of such Additional Registration
        Statement. We are obligated to use our reasonable commercial efforts to maintain
        the effectiveness of the Original Registration Statement and any Additional
        Registration Statement until the earliest of the date on which (i) all shares
        registered thereunder have been sold or (ii) all shares registered thereunder
        may be sold immediately without registration under the Act and without volume
        restrictions pursuant to Rule 144(k) of the Securities and Exchange Act of
        1934
        (the “ Act ”)
        (as
        determined by a our counsel pursuant to a written opinion letter.
 
 **Note
        9. Notes Payable**
 
 During
        January 2006, we repaid our debt obligation to a financial institution for
        a
        long-term note payable and revolving line of credit for approximately $510,000
        and $72,000 respectively.
  14
  During
        January 2006, we satisfied our debt obligation to outstanding related-party
        notes payable and other certain accrued expenses totaling $2.0 million. We
        issued 2.4 million shares of common stock that had a fair value of $1.9 million.
        The difference of $106,000 has been recorded as a gain on retirement of notes
        payable.
 
 During
        January 2006, the accrued interest on the bridge loans was satisfied in exchange
        for warrants to acquire 90,200 shares of our common stock for $0.20 per share.
        These warrants immediately vest and 75,000 expire in October 2006 with the
        remainder expiring in January 2009. Using the Black-Scholes valuation model
        shown in Note. 10 we recorded interest expense of $166,447 and $49,427
        respectively, during the three months ended March 31, 2006. Additionally,
        during
        1 st Quarter
        2006, we repaid our bridge loans totaling $217,000 in exchange for
        cash.
 
 **Note
        10. Stock Option Plans and Warrants**
 
 The
        Company adopted a 2005 Stock Option Plan. Options granted under the 2005
        Stock
        Option Plan:
  Shares
                    Available for Grant
                
                Options
                    Outstanding
                
                Weighted
                    Average Exercise PriceBalance,
                    December 31, 2005
                
                
                1,295,000
                
                
                705,000
                
                
                .73Grants
                
                
                -
                
                
                -
                
                
                -Cancelled
                
                
                -
                
                
                -
                
                
                -Balance,
                    March 31, 2006
                
                
                1,295,000
                
                
                705,000
                
                $
                0.73Options
                    exercisable as of March 31, 2006
                
                
                
                
                
                234,998
                
                $
                0.73
 
 Options
        outstanding are summarized as follows:
  Range
                    of Exercise Prices
                
                Stock
                    Options Outstanding
                
                Stock
                    Options Exercisable
                
                Weighted
                    Average Exercise Price
                
                Weighted
                    Average Remaining Contractual Life$0.70
                    - $0.77
                
                
                630,000
                
                
                234,998
                
                $
                0.73
                
                
                4.99
 
 The
        weighted-average fair value for options granted during 2005 was $0.82 and
        was
        estimated using the Black-Scholes option valuation model with the following
        weighted-average assumptions:
 
 Expected
                    life in years
                
                2.50Volatility
                
                256.18%Interest
                    rate
                
                4.35%Yield
                    rate
                
                0%
 
 In
        addition, our company granted warrants in 2006 (to non-employees). These
        warrants were outside the 2005 Stock Option Plan. The following are the warrants
        granted:
 
 Warrants
                    Outstanding
                
                Weighted
                    Average Exercise PriceBalance,
                    December 31, 2005
                
                
                447,566
                
                
                0.95Granted
                
                
                4,647,877
                
                
                1.33Exercised
                
                
                (100,000
                )
                
                .20Forfeited
                
                
                -
                
                
                -Expired
                
                
                -
                
                
                -Balance,
                    March 31, 2006
                
                
                4,995,443
                
                $
                1.29Warrants
                    exercisable as of March 31, 2006
                
                
                4,995,443
                
                $
                1.29
 
 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%Yield
                    rate
                
                0%
  15
  **Note
        11. Separation Agreements**
 
 During
        March 2006, David V. Lott resigned from his position as our Chief Executive
        Officer and from our board of directors. In accordance with his separation
        agreement dated March 15, 2006, Mr. Lott will receive a base salary of $120,000
        for a period of one year following his resignation date.
 
 **Note
        12. Series A Convertible Preferred Stock**
 
 During
        March 2006, the Company sold 2,903,229 shares of our newly designated
        Series A Convertible Preferred Stock at $1.55 per share for a total of $4.5
        million. In addition, the purchasers of the Series A Convertible Preferred
        Stock 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. The
        company paid $562,000 in issuance costs, for net proceeds of $3.9 million.
 
 Each
        share of Series A Convertible Preferred Stock is currently convertible into
        one share of common stock, subject to adjustment for certain dilutive events.
        Shares of Series B Convertible Preferred Stock are convertible by the
        holder at any time. The Preferred Shares will automatically convert into
        shares
        of Common Stock on the third anniversary of the issuance date or mandatorily
        convert 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), at a conversion
        price of $1.55 (subject to certain adjustments). The Series A Convertible
        Preferred Stock provides that the consent or affirmative vote of the holders
        of
        at least seventy-five percent (75%) of the Preferred 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 Preferred Shares to adversely affect the rights,
        preferences and voting powers of such Preferred Shares, (c) repurchase, redeem
        or pay dividends on any shares of Common Stock; (d) amend the Company’s Articles
        of Incorporation or By-Laws; (e) effect any distribution with respect to
        any
        junior stock; (f) reclassify the Company’s outstanding securities, and (g)
        voluntarily file for bankruptcy, liquidate the Company’s assets or change the
        nature of the business.
 
 The
        Series A Convertible 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. Dividends
        on the preferred stock will be paid 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 common stock.
        If a registration is not currently effective, the Company must pay the dividends
        in cash. Through March 31, 2006 the company has accreted approximately $23,000
        in dividends payable.
 
 In
        the
        event of our liquidation, dissolution or winding up, the holders of
        Series A Convertible Preferred Stock, are generally entitled to receive a
        liquidation preference over the holders of Common Stock equal to $1.55 per
        share
        of Series A Convertible Preferred Stock held and any declared but unpaid
        dividends.
 
 The
        shares of Series A Convertible Preferred Stock 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 Company’s suspension from listing, the Company’s 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 Convertible
        Preferred Stock, the shares become mandatorily redeemable at a price equal
        to
        120% of $1.55 per share, plus any accrued and unpaid dividends and certain
        other
        adjustments.
 
 Of
        the
        $4.5 million in gross proceeds from the stock sale we allocated
        $2.8 million to the Series A Convertible Preferred Stock 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 Convertible
        Preferred Stock was based upon a valuation that considered, among other things,
        the closing price of the common stock on the date of closing, the impact
        of the
        preferred stock on market capitalization on an as converted basis, dividend
        rights, liquidation preferences and redemption rights. The fair value used
        to
        allocate the proceeds to the warrants to purchase common stock was based
        on a
        Black Scholes valuation model and the following assumptions: exercise price
        $2.25; no dividends; term of 3 years; risk free interest rate of 4.75%; and
        volatility of 136.5%.
 
 In
        accordance with the provisions of EITF 98-5 “Accounting for Convertible
        Securities with Beneficial Conversion Features or Contingently Adjustable
        Conversion Ratios” and EITF 00-27 “Application of Issue No. 98-5 to Certain
        Convertible Instruments,” we separately valued the in-the-money conversion
        feature embedded in the Series A Convertible Preferred Stock and allocated
        $933,873 to this embedded beneficial conversion. As described in EITF 00-27,
        EITF 98-5 and ASR 268, the beneficial conversion feature is amortized as
        a
        deemed dividend with a corresponding increase in the carrying value of the
        Series A Convertible Preferred Stock on the date of issuance as there is no
        stated redemption date and the shares are immediately convertible upon issuance.
        In light of the Company’s retained deficit, the deemed dividend remains in
        additional paid in capital. The beneficial conversion cost of $933,873 and
        the
        accreted dividends of $23,000 are added to net loss to determine the net
        loss
        attributable to common stockholders.
  16
 
 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 B Convertible Preferred Stock based
                    on relative fair value (prior to the allocation of issuance
                    costs)
                
                $
                2,836Shares
                    of common stock into which the Series B 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 B 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
  **Note
        13. Common Stock Transactions**
 
 In
        the
        three months ended March 31, 2006, our warrant holders exercised warrants
        for an
        aggregate 100,000 shares of common stock, with net proceeds to us of $20,000.
 
 In
        January 2006, we issued and sold to eight purchasers in a private placement,
        an
        aggregate of 216,072 shares of our 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 our common stock at an exercise price of $1.50 per share
        and
        an aggregate of 23,066 shares of our 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 we issued and sold to five purchasers in a private placement,
        an
        aggregate of 400,002 shares of our common stock at a purchase price of $.75
        per
        share pursuant to a common stock purchase agreement.
 
 In
        January 2006, we issued 500,000 and 700,000 shares of our common stock pursuant
        to two consulting agreements. The shares had a fair value of $1.0 million.
        An
        amortization expense in the amount of $392,943 has been recorded in the first
        quarter of 2006. Amortization has been calculated using a straight-line basis
        over the 6-month and 12-month terms of the respective contracts.
 
 In
        January 2006, we issued 2.4 million shares of our 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, we issued and sold to two purchasers in a private placement
        an
        aggregate of 30,137 shares of our 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 our 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, we sold to five purchasers in a private placement, an aggregate
        of 200,000 shares of our 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 our common stock at an exercise
        price
        of $1.50 per share. These warrants immediately vest and expire in February
        2009.
        Due to these shares not being issued in first quarter 2006, the net proceeds
        of
        $224,000 was recorded as “Stock Issuance Payable” as of March 31, 2006. 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.
  17
 
 In
        March
        2006, we issued 141,000 shares of our 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.
 
 **Note
        14. Capital Lease Obligations**
 
 We
        are
        obligated under two capital leases for equipment with a cost of $122,000
        and
        accumulated depreciation of $18,300 at March 31, 2006. Amortization of the
        equipment is included in depreciation expense. The capital lease obligations
        require a minimum lease payment of $4,468 per month with an interest rate
        of
        approx. 31%. Future minimum lease payments are as follows:
 
 2006
                
                $
                40,2082007
                
                
                53,6112008
                
                
                53,6112009
                
                
                31,414178,844Less:
                    amounts representing interest
                
                
                48,308130,536Less:
                    current portion
                
                
                20,873Capital
                    lease obligations - long-term portion
                
                $
                109,663
 
 **Note
        15. Commitments and Contingencies**
 
 Leased
        Facilities
 
 We
        utilize leased facilities under a noncancellable-operating lease. The lease
        calls for a base monthly rent of $15,000 through November 30, 2018. Total
        rent
        expense for this operating lease for the quarter ended March 31, 2006 and March
        31, 2005, approximated $45,000 and $55,000 respectively. The facility is
        owned
        by certain stockholders.
 
 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 $35,800 for the quarter ended March 31, 2006. We
        also
        have various non-cancelable operating leases for automobiles and equipment
        that
        expire at various dates through 2008.
 
 Future
        minimum rental payments for the leased facilities as of March 31, 2006, are
        as
        follows:
 
 2007
                
                $
                304,7852008
                
                
                412,2002009
                
                
                415,3002010
                
                
                415,4002011
                
                
                420,100Thereafter
                
                
                1,546,200$
                3,513,985
 
 **Note
        16. Subsequent Events**
 
 On
        April
        22, 2006, an action was filed against our company in Division No. 1 of the
        Warren Circuit Court of the Commonwealth of Kentucky styled 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. Such
        complaint alleges that our company unfairly competed with OTR Media, Inc.
        by
        utilizing its trade secrets and other confidential information in our mobile
        media business, thus depriving the shareholders of OTR Media, Inc. of the
        full
        value of their shares and pecuniary interest in OTR Media, Inc. The plaintiffs
        in such action are seeking an injunction against our company to enjoin the
        alleged use and appropriation of such trade secrets, as well as monetary
        damages
        of a yet unspecified amount. We are currently preparing our response to such
        complaint and plan to vigorously defend such action.
  18
 
 In
        April
        2006, we issued 1,468,532 of the 1,608,392 shares of our common stock in
        connection with the acquisition of E&M Advertising, Inc., E&M
        West/Camelot, Inc. and NextReflex, Inc. The fair value of all shares to be
        issued as determined based on the measurement date is approximately $4,716,000.
        The fair value of these shares was recorded as “Stock Issuance Payable” as of
        March 31, 2006.
  In
        April
        2006, we issued to five purchasers in a private placement, an aggregate of
        200,000 shares of our 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 our common stock at an exercise
        price
        of $1.50 per share. The fair value of these shares was recorded as “Stock
        Issuance Payable” as of March 31, 2006. In connection with the issuance of these
        shares the “Stock Issuance Payable” balance has been decreased.
 
 In
        April
        2006, we issued 6,000 shares of our common stock to one of our board members
        for
        consulting services already rendered. The fair market value of those shares
        is
        $15,000.
 
 In
        April
        2006, we issued to five warrant holders exercised warrants for 332,500 shares
        of
        common stock, with net proceeds to us of $226,750.
 
 In
        April
        2006, we issued and sold in a private placement, an aggregate of 50,000 shares
        of our common stock at $2 per share pursuant to a common stock purchase
        agreement. We received net proceeds of $100,000.
 
 In
        April
        2006, a warrant holder exercised warrants for a total of 132,500 shares of
        our
        common stock, with net proceeds to us of $2,750.
 
 On
        June
        2, 2006, we received a waiver from Laurus Master Fund Ltd. with respect to
        our
        default of certain debt covenants. As part of that waiver, we are now required
        to file a registration statement in connection with the January 27, 2006,
        Laurus
        transaction by July 15, 2006 and issue 30,000 shares of our common
        stock.
 
 19
  ITEM
        2.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
 
 **General**
 
 The
        following discussion and analysis of the financial condition and results
        of
        operations should be read in conjunction with our financial statements and
        notes
        appearing elsewhere in this Report. As a result of our acquisition of all
        of the
        outstanding capital stock of Impart, Inc., a Washington corporation (“Impart”),
        on June 30, 2005, as we previously reported on our Current Report on Form
        8-K
        filed with the Securities and Exchange Commission (the “Commission”) on July 7,
        2005, upon which Impart was considered to be the acquirer for financial
        reporting purposes, our historical financial statements for any period prior
        to
        June 30, 2005 are those of Impart.
  **Results
        of Operations - Three months ended March 31, 2006 compared to the three months
        ended March 31, 2005.**
 
 ***Revenue.*** For the three months ended March 31, 2006, we had revenues of $1,222,744
        as
        compared to $1,030,282 for the three months ended March 31, 2005, representing
        an increase of $192,462, or 18.7%. Historically, our revenues have been derived
        primarily from a combination of (i) the sale price of hardware components
        and
        software products used in our proprietary digital signage network and(iii)
        the
        fees we receive in connection with the delivery of consulting, maintenance
        and
        other digital signage services to our customers. As a result of our acquisition
        of substantially all of the assets and operating business of E&M
        Advertising, Inc., an advertising and direct response media company, and
        its
        affiliated companies on February 28, 2006, we also derive a portion of our
        revenue from fees and commissions received from the media services we provide,
        including the placement of advertising, production of advertising content
        and
        delivery of advertising and marketing services. In most instances, we recognize
        the net amount we receive from the sale of media spots to our customers after
        subtracting the price we pay to acquire such media spots.
 
 The
        overall increase in our revenues for the three months ended March 31, 2006
        as
        compared to the comparable period in 2005 was primarily due to increased
        media
        services revenues of $439,146 derived as a result of our acquisition of E&M
        Advertising, Inc. in February 2006 and increased subscription revenues of
        $153,100 derived as a result our acquisition of Media SideStreet Corp. in
        June
        2005, offset by a decrease of $427,034 in revenues from sales of digital
        signage
        equipment. During the three months ended March 31, 2005, we did not generate
        revenues from media services or subscription services as our business model
        did
        not include such services during that period.
 
 The
        decrease in equipment sales for the three months ended March 31, 2006, as
        compared to the comparable period in 2005 was primarily due to a shift in
        our
        long-term business strategy. Historically, one significant component of our
        business has been the sale and distribution of brackets and fixtures to support
        the deployment of plasma screens and LCD screens. During the third quarter
        of
        2005, we began to reduce our emphasis on the distribution of these products
        and
        began shifting our primary focus to a more full-service digital media offering.
        For example, we recently launched several advertising-based revenue models
        whereby we derive revenue from the sale of advertising time on the digital
        signage networks that we manage for our venue providers. Advertisers pay
        us a
        negotiated fee for advertising time slots and for content creation and network
        management services and we often pay a percentage of such fees to the relevant
        venue provider. As a result, in addition to integration and equipment sales,
        our
        revenue models now include subscription and management services, revenues
        from
        third-party advertising and marketing and content management with development
        services. We believe this vertical and horizontal integration will equate
        to a
        one-stop digital signage solution for our customers whereby they can secure
        all
        necessary equipment and services from one source rather than from multiple
        vendors. We believe these offerings will position our company as a full-service
        digital media solution. As we had not fully implemented our new
        advertising-based revenue models during the three months ended March 31,
        2006,
        we received nominal revenues from such models during this period.
 
 ***Cost
        of Revenue.*** For the
        three months ended March 31, 2006, the cost of sales was $588,441 as compared
        to
        $737,549 for the three months ended March 31, 2005, representing a decrease
        of
        $149,108, or 20.2%. Cost of revenues primarily consists of the amounts we
        pay
        for hardware (e.g. video displays, media players and servers) that we integrate
        and install for our customers. The decrease was primarily the result of the
        decrease in the revenues from equipment sales outlined above. With such a
        decrease in revenue from equipment sales, the cost of revenue from equipment
        sales similarly decreased.  We have also experienced a reduction in the
        cost of plasma screens, LCD screens and other network digital components
        that we
        sell to our customers under our “turn-key” (or “utility”) model. In this model,
        we purchase standard, off-the-shelf hardware components that we integrate
        and
        custom configure before deployment to our customers and we earn a profit
        on the
        difference between the sale price and our cost, in addition to the fees we
        receive for integrating, installing and operating the customer’s digital signage
        network.
 
 ***General
        and Administrative Expenses.*** For the
        three months ended March 31, 2006, we incurred general and administrative
        expenses of $3,037,574 as compared to $472,295 for three months ended March
        31,
        2005, an increase of $2,565,279. This increase was primarily attributable
        to
        significant increases we incurred in wages and salaries expense, professional
        and consulting fees and other general and administrative
        expenses.
  20
  We
        incurred an increase of $1,062,969 in wages and salaries expense, to $1,344,880
        for the three months ended March 31, 2006 from $281,911 for the three months
        ended March 31, 2005. This increase was primarily due to the addition of
        executive, sales and administrative personnel resulting from acquisitions
        since
        the three months ended March 31, 2005, including our acquisitions of E&M
        Advertising, Inc., iPoint Technologies, Inc. and Media SideStreet
        Corp.
 
 We
        incurred an increase of $574,130 professional and consulting fees expense,
        to
        $606,553 for the three months ended March 31, 2006 from $32,423 for the three
        months ended March 31, 2005. This increase was primarily due to the legal
        and
        accounting expenses we incurred relating to our filings with the Commission
        related to our reporting obligations under the Securities and Exchange Act
        of
        1934 and in connection with several significant acquisition and financing
        transactions in the three months ended March 31, 2006 and to the amortization
        of
        a portion of stock issuances to two investor relations consulting firms during
        the three months ended March 31, 2006.
 
 In
        addition, we incurred an increase of $645,619 in other general and
        administrative expenses, to $704,398 during the three months ended March
        31,
        2006 from $58,779 during the three months ended March 31, 2005. This increase
        was primarily due our payment of finders’ fees in connection with our two
        financing transactions during the three months ended March 31, 2006.
 
 ***Interest
        Expense.*** Interest
        expense was $445,840 for the three months ended March 31, 2006, as compared
        to
        $16,530 for the three months ended March 31, 2005, resulting in an increase
        of
        $429,310. This increase was primarily due to interest expense of $215,875
        resulting from the issuance of common stock warrants in lieu of the payment
        of accrued interest on loans payable. This amount represents the difference
        between the fair market value of our common stock at the time of issuance
        and
        the exercise price of the warrants multiplied by the number of shares issuable
        pursuant to such warrants. We also incurred interest expense of $117,001
        under
        our credit facility with Laurus.
 
 ***Beneficial
        Conversion Feature of Series A Preferred Stock.*** During
        the three months ended March 31, 2006, we incurred an expense of $933,873
        resulting from the recognition of the beneficial conversion feature (the
        right
        to convert debt into shares of our capital stock at a discount to the fair
        market value of our capital stock) of our outstanding shares of Series A
        convertible preferred stock. During the three months ended March 31, 2006,
        we
        issued 2,903,229 shares of our Series A convertible preferred stock in
        connection with a private placement having gross proceeds to us of $4.5 million.
        During the three months ended March 31, 2005, we did not issue any shares
        of our
        Series A convertible preferred stock or any other securities having a beneficial
        conversion feature.
 
 ***Net
        Income (Loss).*** For the
        reasons described above, we had a net loss of $3,685,959 for the three months
        ended March 31, 2006 as compared to a net loss of $182,402 for the three
        months
        ended March 31, 2005.
 
 **Liquidity
        and Capital Resources**
 
 At
        March
        31, 2006, we had a cash balance of $1.4 million. Since 2002, our principal
        sources of liquidity have been revenue from operations, the issuance of debt
        and
        equity securities and borrowings from related parties. In the three months
        ended
        March 31, 2006, we consummated two financing transactions, a $6 million secured,
        revolving credit facility with Laurus (the “Laurus Facility”) and a private
        placement of shares of our Series A preferred convertible stock for gross
        proceeds of $4.5 million (the “Series A Financing”).
 
 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%). The maximum principal amount of all borrowings
        under the Laurus Facility cannot exceed ninety percent (90%) of our eligible
        accounts receivable minus such reserves that Laurus may in good faith deem
        necessary and appropriate. On January 27, 2006, we requested and Laurus agreed
        to lend an initial draw under the Laurus Facility of $2 million, of which
        approximately $782,000 was used to satisfy in full, our then-existing bank
        debt.
        The balance of the initial draw, less expenses of the Laurus Facility, is
        being
        used for general corporate and working capital purposes.
 
 Under
        the
        Series A Financing, which was consummated on March 3, 2006, we received gross
        proceeds of $4.5 million from the sale of 2,903,229 shares of our Series
        A
        convertible preferred stock to six institutional investors, along with
        three-year warrants to purchase a like number of shares of our common stock.
        The
        net proceeds of the financing are being used for general corporate and working
        capital purposes.
 
 To
        realize our growth strategy and business plans, we will likely seek additional
        borrowings under our line of credit with Laurus or through sales of additional
        shares of our capital stock to institutional investors, or a combination
        of
        both. Both Laurus and the investors in the Series A Financing have rights
        of
        first refusal with respect to certain new sales of our securities. In the
        event
        that our operations do not generate sufficient cash flow, or we cannot obtain
        additional funds if and when needed, we may be forced to curtail or cease
        our
        activities, which would likely result in the loss to investors of all or
        a
        substantial portion of their investment.
  21
  There
        can
        be no assurance that we will be able to consummate any of additional financing
        transactions, or that any such transaction will be consummated on terms
        favorable to us. If we are unsuccessful in our efforts to raise additional
        capital when needed, we may not be able to implement certain aspects of our
        growth strategy. Even if we successfully obtain such financing, we will still
        require additional capital to execute our growth strategy of expanding our
        digital signage network, developing our direct response media business,
        facilitating additional investments in research and development and consummating
        strategic acquisitions of such digital signage companies that we believe
        are
        financially accretive with our company, of which there can be no assurance.
 
 At
        March
        31, 2006, we had liquid assets of $5 million, consisting of cash in the amount
        of $1.4 million, accounts receivable derived from operations in the amount
        of
        $2.1 million, prepaid expenses and other current assets of 1.0 million and
        inventory in the amount of $0.5 million. Long-term assets of $10.5 million
        consisted primarily of goodwill of $2.4 million, intangible assets of $3.9
        million, deferred financing costs of $2.3 million and fixed assets, including
        computer servers, media players and video display equipment used in operations,
        of $1.5 million.
 
 Current
        liabilities of $9.9 million at March 31, 2006 consisted primarily of $2.0
        million of accounts payable, $1.5 million due under the Laurus Facility and
        $5.0
        million of stock issuances payable, the majority of which was payable to
        E&M
        Advertising, Inc. or its designees as a result of our acquisition of the
        assets
        E&M Advertising, Inc. in the three months ended March 31, 2006.
 
 Our
        working capital deficit was $4.9 million as of March 31, 2006 for the reasons
        described above.
 
 During
        the three months ended March 31, 2006, we used cash of $1.9 million in operating
        activities, primarily as a result of the net loss we incurred during this
        period.
 
 During
        the three months ended March 31, 2006, we used cash of $1.3 million in investing
        activities, primarily in connection with our acquisition of the media services
        assets of E&M Advertising, Inc. and the digital signage assets of Marlin
        Capital Partners, II LLC.
 
 Financing
        activities, consisting primarily of proceeds from the Laurus Facility and
        the
        Series A Financing, provided net cash of $4.6 million during the three months
        ended March 31, 2006.
  22
 
 ITEM
        3.
        CONTROLS AND PROCEDURES.
 
 DISCLOSURE
        CONTROLS AND PROCEDURES. In connection with the preparation and review of
        our
        financial statements included in this Report, our management, including our
        chief executive officer/chief financial officer, 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 quarter ended March 31, 2006. Based on such
        evaluation, our management has concluded that, at March 31, 2006, our disclosure
        controls and procedures were not effective to ensure that the information
        required to be disclosed by us is recorded, processed, summarized and reported
        on a timely basis. Since reaching such conclusions, our management has taken
        immediate steps to improve the effectiveness of our disclosure controls and
        procedures.
 
 Management
        determined that the ineffectiveness of our disclosure controls and procedures,
        at March 31, 2006, was primarily due to delays in consolidating our books
        and
        records and certain corporate functions following our acquisition of Impart,
        Inc. in June 2005, as well as a general shortage of qualified financial and
        accounting personnel.
 
 From
        June
        2005 until March 15, 2006, copies of certain contracts, securities, ledgers,
        receipts and other corporate records relating to our company were maintained
        at
        our former executive offices in Memphis, Tennessee and at our former chief
        executive officer’s home office, rather than at our current executive and
        operational offices in Seattle, Washington. Thus, such materials were not
        readily accessible to the financial, accounting and managerial personnel
        that
        required access to them. Upon the resignation of our former chief executive
        officer on March 15, 2006, the books and records were consolidated and, in
        the
        future, we plan to maintain all such materials at our executive offices where
        they will be available and accessible to the appropriate parties within our
        company.
 
 During
        the quarter ended March 31, 2006, we lacked a sufficient number of qualified
        financial and accounting personnel to timely record and process the numerous
        corporate transactions we consummated during such period and to prepare the
        reports required of us as a public company. Once management recognized this
        shortcoming, we began to recruit experienced personnel. We hired a new vice
        president of finance in February 2006 and four independent certified public
        accountants on a consulting basis. We also retained an outside accounting
        firm
        to provide us with accounting consulting services to meet our short-term
        needs.
        Management is working closely with one of our directors who serves as a
        financial officer with a large public company to design and implement more
        stringent disclosure controls and procedures and internal controls over
        financial reporting that are similar to those found in larger public companies.
        Finally, management is seeking to hire a chief financial officer who will
        oversee all financial and accounting functions and all reporting obligations
        to
        the Securities and Exchange Commission. The new chief financial officer will
        assume these duties from Mr. Joseph Martinez who has been acting as our chief
        executive officer and chief financial officer since March 15, 2006. We believe
        that the corrective actions described above will greatly improve our disclosure
        controls and procedures.
 
 INTERNAL
        CONTROL OVER FINANCIAL REPORTING. The deficiencies described above with regard
        to our disclosure controls and procedures at March 31, 2006, as well as the
        corrective actions we have undertaken and continue to undertake, have materially
        affected, or are reasonably likely to materially affect, our internal control
        over financial reporting (as such term is defined in Rules 13a-15(f) and
        15d-15(f) under the Exchange Act).
  23
 
 PART
        II.
        OTHER INFORMATION
 
 ITEM
        1.
        LEGAL PROCEEDINGS
 
 On
        April
        21, 2006, an action was filed against our company in Division No. 1 of the
        Warren Circuit Court of the Commonwealth of Kentucky styled William
        H. Funk, II and All American Investors Group, Inc. v. Limelight Media Group,
        Inc., David Lott, Impart Mobile Media division/OTR Media, Inc. and Stewart
        Layton ,
        case
        number 06-CI-854. Such complaint alleges that our company unfairly competed
        with
        OTR Media, Inc. by utilizing its trade secrets and other confidential
        information in our mobile media business, thus depriving the shareholders
        of OTR
        Media, Inc. of the full value of their shares and pecuniary interest in OTR
        Media, Inc. The plaintiffs in such action are seeking an injunction against
        our
        company to enjoin the alleged use and appropriation of such trade secrets,
        as
        well as monetary damages of a yet unspecified amount. On May 18, 2006, the
        action was removed to federal court in the Western District of Kentucky,
        C.V.
        No.: 1:06-CV-72-M. On June 6, 2006, we filed a motion to dismiss the complaint
        on the basis of plaintiffs’ lack of standing to bring a direct claim against us,
        plaintiffs’ failure to state a claim upon which relief may be granted and lack
        of personal jurisdiction over us and the other defendants, among other bases.
        We
        plan to vigorously defend such action.
  ITEM
        2.
        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  In
        January 2006, we issued and sold to eight purchasers in a private placement,
        an
        aggregate of 216,072 shares of our 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 our common stock at an exercise price of $1.50 per share
        and
        warrants to purchase an aggregate of 23,066 shares of our common stock at
        an
        exercise price of $3.18 per share. Such securities were issued in reliance
        on
        the exemption from registration provided by Section 4(2) of the Act, on the
        basis that their issuance did not involve a public offering, no underwriting
        fees or commissions were paid by us in connection with such sale and certain
        investor representations were made to us by the purchasers in the purchase
        agreement.
 
 In
        January 2006, we issued warrants to purchase an aggregate of up to 90,200
        shares
        of our common stock at an exercise price of $0.20 per share to thirteen
        purchasers in connection with their investment in our company. The warrants
        were
        issued in reliance on the exemption from registration provided by Section
        4(2)
        of the Act, on the basis that their issuance did not involve a public offering,
        no underwriting fees or commissions were paid by us in connection with such
        sale
        and, certain representations were made to us by the purchasers.
 
 In
        January 2006, we sold an aggregate of 400,002 shares of our common stock
        at a
        purchase price of $0.75 per share pursuant to a common stock purchase agreement.
        The shares were issued in reliance on the exemption from registration provided
        by Section 4(2) of the Act, on the basis that their issuance did not involve
        a
        public offering, no underwriting fees or commissions were paid by us in
        connection with such sale and, certain representations were made to us by
        the
        purchasers in the purchase agreement.
 
 In
        January 2006, we issued 1,200,000 shares of our common stock as consideration
        for the performance of consulting services pursuant to two consulting
        agreements. The shares were issued in reliance on the exemption from
        registration provided by Section 4(2) of the Act, on the basis that their
        issuance did not involve a public offering, no underwriting fees or commissions
        were paid by us in connection with such sale and, certain representations
        were
        made to us by the consulting firms in the consulting agreements.
  24
 
 In
        January 2006, we issued 2,400,000 shares of our common stock to certain of
        our
        officers and shareholders in satisfaction of outstanding notes payable and
        other
        accrued expenses. The shares were issued in reliance on the exemption from
        registration provided by Section 4(2) of the Act, on the basis that their
        issuance did not involve a public offering, no underwriting fees or commissions
        were paid by us in connection with such sale and, certain representations
        were
        made to us by such related parties.
  In
        February 2006, we issued and sold to five purchasers in a private placement,
        an
        aggregate of 200,000 shares of our 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 our common stock at an exercise
        price
        of $1.50 per share. Such securities were issued in reliance on the exemption
        from registration provided by Section 4(2) of the Act, on the basis that
        their
        issuance did not involve a public offering, no underwriting fees or commissions
        were paid by us in connection with such sale and certain investor
        representations were made to us by the purchasers in the purchase
        documents.
  In
        February 2006, we issued and sold to two purchasers in a private placement,
        an
        aggregate of 30,137 shares of our common stock at a purchase price of $2.48
        per
        share pursuant to a common stock purchase agreement, together with warrants
        to
        purchase an aggregate of 15,068 shares of our common stock at an exercise
        price
        of $3.00 per share. Such securities were issued in reliance on the exemption
        from registration provided by Section 4(2) of the Act, on the basis that
        their
        issuance did not involve a public offering, no underwriting fees or commissions
        were paid by us in connection with such sale and certain investor
        representations were made to us by the purchasers in the purchase agreement.
 
 In
        March
        2006, we issued 141,000 shares of our common stock to an institutional investor
        in full satisfaction of amounts such investor claimed were due under a
        convertible debenture, dated February 17, 2004. The shares were issued in
        reliance on the exemption from registration provided by Section 4(2) of the
        Securities Act, on the basis that the issuance did not involve a public
        offering, no underwriting fees or commissions were paid by us in connection
        with
        such sale and the investor made certain representations to us that it was
        an
        "accredited investor," as defined in the Securities Act.
  ITEM
        6.
        EXHIBITS.
 
 The
        exhibits required by this item are listed on the Exhibit Index attached
        hereto.
  25
  **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:
                    April 20, 2007
                
                IMPART
                    MEDIA GROUP, INC.By:
                /s/Joseph
                    F. MartinezJoseph
                    F. MartinezChief
                    Executive Officer(principal
                    executive officer)Chief
                    Financial Officer(principal
                    financial officer)
  26
 
 **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.
   27