UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-KSB


(Mark
One)


£
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
Fiscal Year Ended:





T
            TRANSITION
      REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
Transition Period from January 1, 2007 to September 30, 2007





Commission
File Number: 0-09358





IMPART
MEDIA GROUP, INC.


(Exact
name of small business issuer in its charter)





Nevada
            
            88-0441338(State
      or other jurisdiction of incorporation or organization)
              
              1300
      North Northlake Way
              Seattle,
      WA
            
            (IRS
      Employer Identification No.)
              
              
              98103Address
      of principal executive offices)
            
            (Zip
      Code)





(206)
633-1852





(Issuer’s
telephone number)




Securities
registered pursuant to Section 12(b) of the Act:





None





(Title of
Class)




Not
Applicable





(Name of
each exchange on which registered)





Securities
registered pursuant to Section 12(g) of the Exchange Act:





Common
Stock, par value $.001





(Title of
Class)





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





Check if
there is no disclosure of delinquent filers in response to Item 405 of
regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  £





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





Revenues
for the transition period ended September 30, 2007 were $5,668,434.





The
Company’s shares, options and warrants have been cancelled due to the
Bankruptcy filing as disclosed in this Transition Report on Form
10-KSB.





As of
September 30, 2007, 23,959,248 shares of our common stock and 2,903,229 shares
of our Series A convertible preferred stock, or the Series A Preferred
Stock, $.001 par value per share, which shares of Series A Preferred Stock
were, at September 30, 2007 convertible into an aggregate of 2,903,229 shares of
our common stock, were outstanding.





Transitional
Small Business Disclosure Format (Check one):  Yes  T     No  £


1
 
  TABLE OF
CONTENTS


PagePART
      IITEM
      1.
                DESCRIPTION
      OF BUSINESS
                4ITEM
      2.
                DESCRIPTION
      OF PROPERTY
                6ITEM
      3.
                LEGAL
      PROCEEDINGS
                6ITEM
      4.
                SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                7PART
      IIITEM
      5.
                MARKET
      FOR COMMON EQUITY
                7ITEM
      6.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS
                9ITEM
      7.
                FINANCIAL
      STATEMENTS
                15REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                15CONSOLIDATED BALANCE SHEETS
                16CONSOLIDATED STATEMENTS OF OPERATIONS
                17CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFECIT)
                18CONSOLIDATED
      STATEMENTS OF CASH FLOWS
                19NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                20ITEM
      8.
                CHANGES
      AND DISAGREEMENTS WITH ACCOUNTANTS
                34ITEM
      8A.
                CONTROLS
      AND PROCEDURES
                34ITEM
      8B.
                OTHER
      INFORMATION
                34PART
      IIIITEM
      9.
                DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
                35ITEM
      10.
                EXECUTIVE
      COMPENSATION
                37ITEM
      11.
                BENEFICIAL
      OWNERSHIP
                41ITEM
      12.
                RELATED
      TRANSACTIONS
                42ITEM
      13.
                EXHIBITS
                42
 2




FORWARD-LOOKING
STATEMENTS





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





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





The
following factors, among others, could cause our or our industry’s future
results to differ materially from historical results or those anticipated: (1)
the outcome of our bankruptcy hearings as filed in United States Bankruptcy
Court for the Southern District of New York, which entered an order for relief
under Chapter 11 on May 21, 2008(2)  the availability of additional
funds to enable us to successfully pursue our business plan; (3) the
uncertainties related to the effectiveness of our technologies and the
development of our products and services; (4) our ability to maintain, attract
and integrate management personnel; (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.




We assume
no obligation to update and supplement forward-looking statements that become
untrue because of subsequent events.


3




PART
I





ITEM
      1.
            DESCRIPTION
      OF BUSINESS





OVERVIEW





Impart Media Group, Inc. (the
“Company”) is a Nevada corporation formed in 1996.  The Company, which
was headquartered in Seattle, Washington, provided digital signage in the
business-to-consumer media sector.  The Company also provided
consulting, design, integration, fabrication, assembly, IP connectivity, quality
assurance, creative production, installation, onsite maintenance, web-data
hosting, network monitoring and content management services throughout the
United States (and in global markets through its authorized
distributors).  As a result of the Company’s acquisition of E&M
Advertising, Inc. and its affiliates, renamed Impart Media Advertising, Inc.
(“IMA”), in February 2006, the Company also provided offline and online direct
response advertising capabilities.




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




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




The Company currently has no business
operations and therefore, no sources of revenue.  Currently, there are
no products or services being offered and there are no plans to begin offering
products or services in the future.





CHAPTER
11 REORGANIZATION





Proceedings
under Chapter 11





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





Following
the filing of an involuntary petition on February 14, 2008, but before the Order
for Relief Date and before Impart, Inc. filed its voluntary petition, the
Debtors and the Creditor Proponents engaged in successful negotiations for a
consensual restructuring of the Debtors.  In connection with the
implementation of the restructuring, on or about May 8, 2008, the Debtors, IMA
and the Creditor Proponents entered into a Restructuring Agreement (the
“Restructuring Agreement”) which provided for consent to the involuntary Chapter
11 filing against the Company, a voluntary Chapter 11 filing by Impart,
Inc. and the Debtors’ best efforts to consummate the restructuring through
a pre-negotiated plan of reorganization.  The Company consented to
bankruptcy relief, and the Bankruptcy Court entered an order for relief under
Chapter 11 of the Bankruptcy Code on May 21, 2008.





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





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





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





Plan
of Reorganization





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


4


Sale
of Seattle Operations to Novus





In
connection with the Plan, in May 2008, the assets of the Seattle operations were
sold for $390,000.





IMA
Stock Payment





In
October 2008, in connection with the Plan, IMA was sold for
$100,000.





Default
of Principal Payment under Convertible Debentures




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





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




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




Adjustment
of Conversion Price under the Securities Purchase Agreement




On
December 3, 2007, an investor invoked the right to convert cash liquidated
damages due under the registration rights agreement into share of common stock
at a conversion price of $0.1095, or 85% of the ten day volume weighted average
price of common stock.  Pursuant to the terms of the Convertible
Debentures, conversion of liquidated damages at a conversion price lower than
the original conversion price of $0.7500 would cause a downward adjustment of
the conversion price for all of the securities offered under the securities
purchase agreement, such that the resulting conversion price would equal the
lower conversion rate.  As such, the conversion of the Convertible
Debentures and the exercise price of the warrants issued under the securities
purchase agreement shall now be equal to $0.1095.  Assuming the
conversion of all the Convertible Debentures, the adjustment will result in the
conversion of a total of approximately 16,378,000 shares of common
stock.




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




Adjustment
of Series A Preferred Conversion Rate




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




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




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




Default
of Laurus Security Agreement




In
January 2006, the Company entered into a security agreement, with Laurus Master
Fund, Ltd., a Cayman Islands corporation (“Laurus”), pursuant to which Laurus
agreed to provide a revolving credit facility of up to $6
million.  Among other things, the security agreement defines an event
of default as any default in the performance of any other agreement relating to
any indebtedness of the Company, the effect of which default is to cause, or
permit the holder or holders of such indebtedness to cause, such indebtedness to
become due prior to its stated maturity of such contingent obligation to become
payable.  Accordingly, the December 1, 2007, default on the
Convertible Debentures triggered an event of default under the Laurus Security
Agreement as of December 1, 2007, giving Laurus  the right to
accelerate payments in connection with the revolving credit facility and, in
addition to any other remedies available, to foreclose upon the assets securing
the facility.  Additionally, Laurus had the right to receive 125% of
the unpaid principal balance, plus accrued interest and fees, as the principal
became immediately due and payable upon the event of default.  Laurus
was also entitled to payment of a default interest rate of 2% per month on all
amounts due and such other remedies specified under the agreement governing the
facility and under the Uniform Commercial Code. All remaining deferred financing
costs were expensed in the quarter ended December 31, 2007.  All
amounts due to Laurus were paid as of March 31, 2008.


5





Late
Filing of 10-KSB and Trading Suspension Notice





On
December 28, 2007, we filed, on Form 12b-25, a Notification of Late Filing of
our annual report Form 10-KSB for the period ended September 30,
2007.  On January 18, 2008, pursuant to NASDAQ Marketplace Rule
6530(e)(1)(“Rule 6530”) our common stock was suspended from trading on the
Over-the-Counter Bulletin Board (“OTCBB”) and our trading symbol was changed to
IMMGE.  These measures were triggered by our failure to timely file
our 10-KSB with the SEC.  As this was our third failure to timely file
within the prior two-year period a periodic report with the SEC, our common
stock is ineligible for quotation on the OCTBB under Rule 6530; our common stock
will remain ineligible for quotation on the OCTBB until we have timely filed in
a complete form all required annual and quarterly reports due in a one-year
period.  There can be no assurance that we will be able to regain
compliance with the continued listing requirement of Rule 6530.




Change
in Executive Officers




The
Company appointed Mr. Joseph Martinez, Chief Executive Officer, to the
additional position of President and Mr. Stephen Wilson, Chief Financial
Officer, to the additional position of Corporate Secretary, both effective as of
October 1, 2007.




Effective
October 22, 2007, the Company appointed Mr. Laird Laabs to the executive office
of President.  Mr. Laabs replaced Mr. Joseph F. Martinez who served as
our Interim President since the position was vacated in September
2007.  Mr. Martinez continued to serve as our Chief Executive Office
and as a member of the board of directors.  Mr. Laabs continued to be
compensated according to his existing employment agreement.




Effective
October 15, 2007, the Company determined it was in the best interest to
streamline the management structure in order to strengthen the effective
management of the Company.  Toward that end, it was determined that
the executive officer positions of the Company shall be the offices of Chief
Executive Officer, President, Chief Financial Officer and President, Impart
Media Advertising.  Those persons holding the officers of Chief
Technology Officer, Chief Creative Officer, Chief Strategy Officer, President,
Impart Asia-Pacific (namely, Mr. Todd Weaver, Mr. J. Scott Campbell, M. Steven
Corey, and Mr. Laird Laabs, respectively) were given new, non-executive
titles.  Each such person remained with the Company although they no
longer were deemed executive officers of the Company for the purposes of
reporting obligations to the Securities and Exchange Commission.




As a
result of the Plan, in February 2009, all of the existing officers and directors
were removed from their position and were replaced by Barry Eisenberg as sole
officer and director.




REGULATION




We are
not aware of any material legal or other regulatory restrictions that may
adversely affect our digital signage and interactive media business or our
advertising and direct response media business. The furnishing of advertising
services is subject to compliance with the Robinson-Patman Act, which prohibits
price discrimination among purchasers of commodities that are competing in the
same marketing area. Our management is aware of its responsibilities under the
Robinson-Patman Act and has instructed our sales staff accordingly. We intend to
provide similar terms and service quality to all venue locations and customers
in any given market and we intend to operate our business in compliance with
this act.





AVAILABLE
INFORMATION




We are a
reporting company and file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy these
reports, proxy statements and other information at the SEC’s Public Reference
Room at 100 F Street N.E., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 or e-mail the SEC at publicinfo@sec.gov for more
information on the operation of the public reference room. Our SEC filings are
also available at the SEC’s website at http://www.sec.gov.





ITEM
      2.
            DESCRIPTION
      OF PROPERTY





We leased
space for our corporate offices in Seattle, Washington under an operating lease
expiring in November 2018.   Certain officers, directors, and
stockholders are owners of the company that owns the facility.  We
vacated these premises in March 2008 and defaulted on the lease.  We
were not billed a lease cancellation fee or held further responsible for our
obligations under the lease agreement.





We also
lease office facilities in New York for IMA under an operating lease, which was
extended through June 2011.  This lease was assumed by the new owners
of IMA in October 2008.  We also have various non-cancelable operating
leases for automobiles and equipment that expire at various dates through
2008.




ITEM
      3.
            LEGAL
      PROCEEDINGS





We are
subject to various legal proceedings and claims that arise in the ordinary
course of business. Company management currently believes that resolution of
such legal matters will not have a material adverse impact on our financial
position, results of operations or cash flows.




Proceedings
under Chapter 11





See Item
1 regarding the Company's entrance into bankruptcy under as a result of an
involuntary petition filed in February 2008.


6




Plan
of Reorganization





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






ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





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





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





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





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




Votes
      FOR
            
            Votes
      AGAINST
            
            Votes
      ABSTAINED18,330,514
            
            69,827
            
            27,346





3)
            The
      approval of our 2006 Equity Incentive
Plan:





Votes
      FOR
            
            Votes
      AGAINST
            
            Votes
      ABSTAINED12,403,155
            
            1,069,659
            
            63,930





PART
II





ITEM
      5.
            MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS





The
Company’s shares, options and warrants have been cancelled due to the
Bankruptcy filing as disclosed in this Transition Report on Form
10-KSB.




Our
common stock formerly was traded over-the-counter under the symbol
“IMMG.” On January 18, 2008, pursuant to FINRA Marketplace Rule 6530 (e) (1)
(Rule 6530) the Company’s common stock was suspended from trading on the
Over-the-Counter Bulletin Board (“OTCBB”), due to the Company’s failure to
timely file its 10-KSB with the SEC.  Under Rule 6530, the Company’s
common stock will remain ineligible for quotation on the OTCBB until the Company
has timely filed in a complete form all required annual and quarterly reports
due in a one-year period.


7





The
following table sets forth the high and low bid prices for our common stock, par
value $0.001 per share, for each fiscal quarter within our last two fiscal
years. The prices set forth below represent interdealer quotations, without
retail markup, markdown or commission and may not be reflective of actual
transactions.





HIGH
      BID
            
            
            LOW
      BIDYear
      ended December 31, 2006First
      Quarter
            
            $
            4.24
            
            
            $
            0.66Second
      Quarter
            
            
            2.90
            
            
            
            1.42Third
      Quarter
            
            
            1.75
            
            
            
            0.57Fourth
      Quarter
            
            
            1.28
            
            
            
            0.36Fiscal
      Year ended September 30, 2007Quarter
      ended March 31, 2007
            
            $
            0.91
            
            
            $
            0.37Quarter
      ended June 30, 2007
            
            
            0.75
            
            
            
            0.38Quarter
      ended September 30, 2007
            
            
            0.54
            
            
            
            0.15Quarter
      ended December 31, 2007
            
            
            0.25
            
            
            
            0.02




On
January 18, 2008, the last day of trading, the closing price of our common stock
as reported Over-the-Counter was $0.05.





As of
September 30, 2007, the authorized capital stock of the Company consisted of
100,000,000 shares of common stock, par value $.001 per share, of which
23,959,248 shares were outstanding, and 25,000,000 shares of preferred
stock, par value $.001 per share, of which 4,500,000 shares were designated
as Series A convertible preferred stock, of which 2,903,229 shares were
outstanding, and which were convertible into 8,653,856 shares of common
stock.  The number of our shareholders of record excludes any estimate by
us of the number of beneficial owners of shares held in street name, the
accuracy of which cannot be guaranteed.




Dividends





We did
not declare any cash dividends on any class of common equity during the years
ended September 30, 2007 or December 31, 2006. Under the terms of our Series A
Preferred Stock, we were required to pay (in cash or shares) a semi-annual
dividend on our outstanding shares of Series A Preferred Stock at a rate of 7%
per annum on the liquidation preference of our outstanding shares of the Series
A Preferred Stock. The terms
of our Series A Preferred Stock further provide that, for so long as any shares
of Series A Preferred Stock are outstanding, we may not declare or pay dividends
on our common stock (or any other junior stock) unless all accrued dividends on
the Series A Preferred Stock have been paid.





Under the
terms of our agreement with Laurus, we were not, without Laurus’ consent,
allowed to declare or pay dividends on any class of our capital stock, other
than pursuant to the terms of our Series A Preferred Stock.





Securities
Authorized for Issuance under Equity Compensation Plans





Information
regarding securities authorized for issuance under our equity compensation plans
is disclosed in the section captioned, “Item 11. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.”





Repurchases
of Equity Securities





None.





Recent
Sales of Unregistered Securities





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





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





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





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


8





On May
25, 2007, the Company borrowed $2.1 million pursuant to the issuance of the
Convertible Debentures, bearing 6% interest per annum, with a two year maturity
date, which the Company sold to institutional lenders (the
“Purchasers”).  The Convertible Debentures are convertible, at the
option of the Purchasers, into shares of common stock of the Company at a
conversion price of $0.75 per share (the “Conversion Price”). Purchasers of the
Convertible Debentures will received registration rights pursuant to a
Registration Rights Agreement that required the Company to file a registration
statement under the Securities Act of 1933 covering the resale the shares of
common stock issuable upon conversion of the principal amount and interest
payable, which the Company filed with the SEC on July 10, 2007.  The
registration statement has not been declared effective.




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





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





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





·
            a
      failure to make payments of principal or interest under the Convertible
      Debenture when due, subject to a three trading day cure period in the case
      of late interest payments only;·
            a
      breach by the Company of any covenant of the Convertible Debenture which
      continues for five trading days without cure after notice thereof by the
      Purchaser or ten trading days after the Company becomes (or should have
      become) aware of such breach;·
            if
      the Company’s common stock is not eligible for listing or quotation for
      five trading (5) consecutive days; and·
            if
      the Registration Statement shall not have been declared effective on or
      prior to the 270th day after the closing date for the sale of Convertible
      Debentures.




Additionally,
in connection with the Convertible Debentures, the Company issued to the
Purchasers five-year warrants (the “Warrants”) granting the right to purchase
for cash (or through a “cashless exercise” feature) up to 1,400,000 shares of
common stock (representing 50% of the number of shares initially issuable upon
conversion of the Convertible Debentures), at an initial exercise price of
$0.52. The Warrants were to expire on May 24, 2012. Subject to certain customary
exceptions, if the Company issued common stock or other securities convertible
into or exercisable for common stock at per share less than the exercise price
of the Warrants, the exercise price would be reduced to a price equal to
the price per share of such issued securities. The Conversion Price was also
subject to adjustment upon stock splits, stock dividends and the
like.




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




ITEM
      6.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS





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 Annual Report.





Background





Impart Media Group, Inc. (the
“Company”) is a Nevada corporation formed in 1996.   The Company,
which was headquartered in Seattle, Washington, provided digital signage in the
business-to-consumer media sector.  The Company also provided
consulting, design, integration, fabrication, assembly, IP connectivity, quality
assurance, creative production, installation, onsite maintenance, web-data
hosting, network monitoring and content management services throughout the
United States (and in global markets through its authorized
distributors).  As a result of the Company’s acquisition of E&M
Advertising, Inc. and its affiliates, renamed Impart Media Advertising, Inc., in
February 2006, the Company also provided offline and online direct response
advertising capabilities.





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





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





The
Company currently has no business operations and therefore, no sources of
revenue.  Currently, there are no products or services being offered
and there are no plans to begin offering products or services in the
future.


9





Chapter
11 Reorganization




Proceedings
under Chapter 11





On
February 14, 2008, an involuntary petition was filed against the Company for
relief under Chapter 11 of the Bankruptcy Code.  On May 21, 2008,
Impart filed its own voluntary petition under the Bankruptcy
Code.  Both Chapter 11 cases were jointly administered by the Hon.
Robert E. Gerber under case number 08-10510.





Following
the filing of an involuntary petition on February 14, 2008, but before the Order
for Relief Date and before Impart filed its voluntary petition, the Debtors and
the Creditor Proponents engaged in successful negotiations for a consensual
restructuring of the Debtors.  In connection with the implementation
of the restructuring, on or about May 8, 2008, the Debtors, IMA and the Creditor
Proponents entered into a Restructuring Agreement (the “Restructuring
Agreement”) which provided for consent to the involuntary Chapter 11 filing
against the Company, a voluntary Chapter 11 filing by Impart and the Debtors’
best efforts to consummate the restructuring through a pre-negotiated plan of
reorganization.  The Company consented to bankruptcy relief, and the
Bankruptcy Court entered an order for relief under Chapter 11 of the Bankruptcy
Code on May 21, 2008.





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





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





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





Plan
of Reorganization





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





Sale
of Seattle Operations to Novus





In
connection with the Plan, in May 2008, the assets of the Seattle operations were
sold for $390,000.





IMA
Stock Payment





In
October 2008, in connection with the Plan, IMA was sold for
$100,000.





Default
of Principal Payment under Convertible Debentures




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




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




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


10




Adjustment of Conversion Price under
the Securities Purchase Agreement




On
December 3, 2007, an investor invoked the right to convert cash liquidated
damages due under the registration rights agreement into share of common stock
at a conversion price of $0.1095, or 85% of the ten day volume weighted average
price of common stock.  Pursuant to the terms of the Convertible
Debentures, conversion of liquidated damages at a conversion price lower than
the original conversion price of $0.7500 would cause a downward adjustment of
the conversion price for all of the securities offered under the securities
purchase agreement, such that the resulting conversion price would equal the
lower conversion rate.  As such, the conversion of the Convertible
Debentures and the exercise price of the warrants issued under the securities
purchase agreement shall now be equal to $0.1095.  Assuming the
conversion of all the Convertible Debentures, the adjustment will result in the
conversion of a total of approximately 16,378,000 shares of common
stock.




In
connection with the Plan, all equity interests existing at the time of the
bankruptcy filing, including common stock, preferred stock, options, and
warrants, were cancelled, and the convertible debentures were satisfied through
issuance of equity in the Reorganized Company.




Adjustment of Series A Preferred
Conversion Rate




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




The
Company believes the issuance of shares of common stock through the conversion
of the aforementioned liquidated damages, as a per share price of $0.1095,
triggers a downward adjustment of the Series A conversion rate from $0.5200 to
$0.1095.  Consequently, assuming the conversion of approximately
2,891,000 Series A shares currently issued and outstanding, the adjusted
conversion rate of $0.1095 will result in the total conversion of approximately
40,919,000 shares of common stock of the Company.   In connection
with the Plan, all equity interests existing at the time of the bankruptcy
filing, including common stock, preferred stock, options, and warrants, were
cancelled.




Default of Laurus Security
Agreement




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




Accordingly,
the December 1, 2007, default on the Convertible Debentures triggered an event
of default under the Laurus Security Agreement as of December 1, 2007, giving
Laurus  the right to accelerate payments in connection with the
revolving credit facility and, in addition to any other remedies available, to
foreclose upon the assets securing the facility.  Additionally, Laurus
had the right to receive 125% of the unpaid principal balance, plus accrued
interest and fees, as the principal became immediately due and payable upon the
event of default.  Laurus was also entitled to payment of a default
interest rate of 2% per month on all amounts due and such other remedies
specified under the agreement governing the facility and under the Uniform
Commercial Code. All remaining deferred financing costs were expensed in the
quarter ended December 31, 2007.  All amounts due to Laurus were paid
as of March 31, 2008.




Critical
Accounting Estimates and New Accounting Pronouncements


We
prepare our consolidated financial statements in conformity with accounting
principles generally accepted in the U.S. As such, we are required to make
certain estimates, judgments and assumptions that we believe are reasonable
based upon the information available. These estimates and assumptions affect the
reported amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the
periods presented. Actual results could differ significantly from those
estimates under different assumptions and conditions. We believe that the
following discussion addresses our most critical accounting estimates, which are
those that we believe are most important to the portrayal of our financial
condition and results of operations and which require our most difficult and
subjective judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. Other key estimates and
assumptions that affect reported amounts and disclosures include depreciation
and amortization, asset impairments, requirements for and computation of
allowances for doubtful accounts and expense accruals. We also have other
policies that we consider key accounting policies; however, these policies do
not meet the definition of critical accounting estimates because they do not
generally require us to make estimates or judgments that are difficult or
subjective.




Revenue
Recognition





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





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


11
 
 The gross and net billing amounts included in operating revenues for the nine
months ended September 30, 2007 and twelve months ended December 31, 2006 are as
follows (amounts in thousands):





2007
            
            
            2006Consolidated
      gross revenue
            
            $
            34,898
            
            
            $
            21,223Direct
      cost of sales
            
            
            (29,230
            )
            
            
            (14,628
            )Consolidated
      net revenue
            
            $
            5,668
            
            
            $
            6,595





Revenue
from equipment sales is generally recognized when products were shipped and
ownership passes to the customer.  Revenue from management
subscriptions is recorded in the month the service was
provided.  Revenue from consulting and design services, which are all
short-term, is recognized using the completed-contract method under SOP
81-1.  There were no significant contracts in process at September 30,
2007 or December 31, 2006.




Impairment of Long-Lived
Assets




Long-lived
assets, such as fixed assets and inventory, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, in accordance with Statement of SFAS 144. Conditions
that would necessitate an impairment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or any other significant adverse change that
would indicate that the carrying amount of an asset or group of assets is not
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset.





Income Taxes





The
Company follows the liability method of accounting for income
taxes.  Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and on the expected future tax benefits to be derived
from net operating loss 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 carry forwards and temporary differences are
expected to be recovered or settled.  The effect on the deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.  A valuation allowance is recorded on
deferred tax assets if it is more likely than not that such deferred tax assets
will not be realized.




The
Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”)
on January 1, 2007. The Company believes its income tax filing positions
and deductions will be sustained on audit and does not anticipate any
adjustments that would result in a material change to the Company’s financial
position. Therefore, no reserves for uncertain income tax positions have been
recorded pursuant to FIN 48, nor did the Company record a cumulative effect
adjustment related to the adoption of FIN 48. The Company’s policy for
recording interest and penalties associated with audits is to record such items
as a component of income (loss) before taxes.





Recent
Accounting Pronouncements




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




In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair Value Measurements” (“SFAS 157”).  SFAS 157 defines
fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements but does not require any new fair
value measurements.  FASB Staff Position No. SFAS 157-2 was issued in
February 2008.  SFAS 157-2 delayed the application of SFAS 157 for
non-financial assets and non-financial liabilities, except items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis, until fiscal years beginning after November 15, 2008.  The
Company does not expect the application of SFAS 157 to have a material effect on
the Company’s consolidated financial position or results of
operations.





In
February 2007, the FASB issued SFAS No. 159,“The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”).  SFAS 159
permits an instrument by instrument election to account for selected financial
assets and liabilities at fair value.  This election is
irrevocable.  SFAS 159 provides an opportunity to mitigate volatility
in reported earnings that is caused by measuring hedged assets and liabilities
that were previously required to use a different accounting method than the
related hedging contracts when the complex hedge accounting provisions of SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities”,are not
met.  SFAS 159 is effective for fiscal years beginning after
November 15, 2007.  The Company does not expect the application
of SFAS 159 to have a material effect on the Company’s consolidated
financial position or results of operations.


12





In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS
141R”), which replaces SFAS 141.  The statement retains the purchase
method of accounting for acquisitions, but requires a number of changes,
including changes in the way assets and liabilities are recognized in the
purchase accounting.  It also requires the capitalization of
in-process research and development at fair value and requires the expensing of
acquisition-related costs as incurred.  SFAS 141R is effective
beginning October 1, 2009 and will apply prospectively to business combinations
completed on or after that date.  The impact of SFAS 141R will depend
on the nature of acquisitions completed after adoption.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”),
which changes the accounting and reporting for minority
interests.  Minority interests will be recharacterized as
non-controlling interests and will be reported as a component of equity separate
from the parent’s equity, and purchases or sales of equity interests that do not
result in a change in control will be accounted for as equity
transactions.  In addition, net income attributable to the
non-controlling interest will be included in net income and, upon a loss of
control, the interest sold, as well as any interest retained, will be recorded
at fair value with any gain or loss recognized in net income.  SFAS
160 is effective beginning October 1, 2009 and will apply prospectively,
except for the presentation and disclosure requirements, which will apply
retrospectively. The Company believes the adoption of SFAS No. 160 will not have
a material impact on the Company’s consolidated financial position or results of
operations.





In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities”(“SFAS 161”), which is
effective January 1, 2009.  SFAS 161 requires enhanced
disclosures about derivative instruments and hedging activities to allow for a
better understanding of their effects on an entity’s financial position,
financial performance, and cash flows.  Among other things, SFAS 161
requires disclosure of the fair values of derivative instruments and associated
gains and losses in a tabular format.  Since SFAS 161 requires only
additional disclosures about derivatives and hedging activities, the adoption of
SFAS 161 will not affect the Company’s financial position or results of
operations, should the Company acquire derivatives in the future.





In April
2008, the FASB issued Staff Position No. 142-3, “Determination of the
Useful Life of Intangible Assets”(“FSP 142-3”).  FSP 142-3 amends
the factors to be considered in assumptions used to determine the useful lives
of recognized intangible assets recognized under SFAS 142.  The new
guidance applies to intangible assets with contractual lives that are acquired
individually or with a group of assets as well as those assets acquired in a
business combination.  The new guidance is effective for fiscal years
beginning after December 15, 2008 and interim periods.  The
Company will adopt the statement October 1, 2009 which is the beginning of the
Company’s 2010 fiscal year.  The Company does not expect adoption of
FSP No. 142-3 to have a significant impact on the Company’s consolidated
financial position or results of operations.





Change
of Company Fiscal Year End




On September 12, 2007, the Company’s
board of directors approved a change in its fiscal year ending December 31 to a
fiscal year ending on September 30.  This is a transition report and
includes information for the transitional nine-month period from January 1, 2007
to September 30, 2007.  The following table sets forth, for the
periods indicated, the Company’s selected consolidated statements of operations
data:




Nine
      Months Ended
              September
      30,2007
            
            
            2006(In thousands, except per share data)Revenue
            
            $
            5,668
            
            
            $
            4,303Gross
      profit
            
            
            3,408
            
            
            
            2,256Net
      loss
            
            
            11,177
            
            
            
            9,264Net
      loss attributable to common stockholders
            
            
            13,728
            
            
            
            10,380Loss
      per common share — basic and diluted:Net
      loss per common share — basic and diluted
            
            $
            (0.59
            )
            
            $
            (0.50
            )Shares
      used in computing net loss per share — basic and diluted
            
            
            23,441
            
            
            
            20,833




13


Results
of Operations




As a
result of the change in fiscal year, the current period is nine months, as
compared to a twelve month period in 2006.   The Company’s
operations for the nine months ended September 30, 2007 reflected a net loss of
$11.2 million as compared to a net loss of $10.1 million for the year ended
December 31, 2007.  Decreases in wages and salaries, selling and
marketing, general and administrative and depreciation and amortization expenses
were offset by an increase in impairment charges related to the Chapter 11
filing.




Liquidity, Going Concern and Capital
Resources





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




As of
September 30, 2007, the Company had an accumulated deficit of approximately
$25.5 million and expects to incur additional losses in the future. The
Company’s working capital deficit was approximately $5.1 million as of September
30, 2007 and it had approximately $0.3 million in cash, including $0.1 million
in restricted cash. We have received an opinion for the fiscal year ended
September 30, 2007 from our independent registered accounting firm noting the
substantial doubt about our ability to continue as a going concern due to our
significant recurring operating losses and negative cash flows.





In
January 2006, the Company entered into a security agreement, among other
agreements, with Laurus, pursuant to which Laurus agreed to provide a revolving
credit facility of up to $6 million.  Among other things, the security
agreement defines an event of default as any default in the performance of any
other agreement relating to any indebtedness of the Company, the effect of which
default is to cause, or permit the holder or holders of such indebtedness to
cause, such indebtedness to become due prior to its stated maturity of such
contingent obligation to become payable.  Accordingly, the December 1,
2007, default on the debentures triggered an event of default under the Laurus
Security Agreement as of December 1, 2007, giving Laurus the right to accelerate
payments in connection with the revolving credit facility and, in addition to
any other remedies available to it, to foreclose upon the assets securing the
facility.  Additionally, Laurus had the right to receive 125% of the
unpaid principal balance, plus accrued interest and fees, as said principal
became immediately due and payable upon any event of default.  Laurus
also was entitled to payment of a default interest rate of 2% per month on all
amounts due and such other remedies specified under the agreement governing the
facility and under the Uniform Commercial Code.  All amounts due to
Laurus were paid before the end of March 2008.  During December 2007,
all remaining deferred financing costs were expensed.




In May
2007, the Company entered into a Securities Purchase Agreement with six
institutional investors (five of which are Creditor Proponents  to the
Chapter 11 Plan), pursuant to which the Company agreed to sell Convertible
Debentures in the aggregate principal amount of $2.1 million.  The
Convertible Debentures were convertible, at the option of the Purchasers, into
shares of common stock, par value $0.001 per share, at a conversion price of
$0.75 per share (the “Conversion Price”). Purchasers of the Convertible
Debentures received registration rights pursuant to a Registration
Rights Agreement that required us to file a registration statement under the
Securities Act of 1933 covering the resale the shares of common stock issuable
upon conversion of the principal amount and interest payable. We filed the
registration statement on Form SB-2 with the SEC on July 10, 2007, which
registration statement has not yet been declared effective. Under the terms of
the debentures, the Company was required to commence monthly redemption against
the principal debenture amount on December 1, 2007.  In lieu of making
such principal payment on December 1, 2007, the Company commenced negotiations
to restructure the obligations of the Company under the terms of the debentures
on December 3, 2007.  The Company has not obtained a waiver and was
declared in default.





In
connection with the Convertible Debentures, we also issued to the Purchasers
five-year warrants (the “Warrants”) to purchase up to 1,400,000 shares of our
common stock (representing 50% of the number of shares initially issuable upon
conversion of the Convertible Debentures), at an initial exercise price of
$0.52, which  Warrants were contractually due to expire on May 24,
2012. In connection with our role as placement agent with respect to the
Convertible Debentures, we paid cash fees of approximately $150,000 and issued
to the placement agent five-year warrants to purchase an aggregate of 280,000
shares of common stock with an exercise price of $0.52 per share, which
contractually were due to expire on May 24, 2012.  In connection with
the Chapter 11 Plan, all warrants were cancelled on the Effective
Date.




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




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




On
December 28, 2007, the Company filed, on Form 12b-25, a Notification of Late
Filing of our annual report Form 10-KSB for the period ended September 30,
2007.  On January 18, 2008, pursuant to NASDAQ Marketplace Rule
6530(e)(1)(“Rule 6530”) the Company’s common stock was suspended from trading on
the Over-the-Counter Bulletin Board (“OTCBB”) and our trading symbol was changed
to IMMGE.  These measures were triggered by the Company’s failure to
timely file its 10-KSB with the Securities and Exchange Commission
(“SEC”).  As this was the Company’s third failure to timely file
within the prior two-year period a periodic report with the SEC, the Company’s
common stock is ineligible for quotation on the OCTBB under Rule 6530; the
Company’s common stock will remain ineligible for quotation on the OCTBB until
it have timely filed in a complete form all required annual and quarterly
reports due in a one-year period.  There can be no assurance that the
Company will be able to regain compliance with the continued listing requirement
of Rule 6530.


14




ITEM
      7.
            FINANCIAL
      STATEMENTS




REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors
 Impart
Media Group, Inc.
 Seattle,
Washington
 
 We have
audited the accompanying consolidated balance sheets of Impart Media Group,
Inc., (Debtors-In-Possession as of May  21, 2008) ("the Company") as of
September 30, 2007 and December 31, 2006, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the nine
months ended September 30, 2007 and the year ended December 31,
2006.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Impart Media Group, Inc.
(Debtors-In-Possession as of May 21, 2008), as of September 30, 2007 and
December 31, 2006, and the results of its operations and its cash flows for
the nine months ended September 30, 2007 and the year ended
December 31, 2006, in conformity with accounting principles generally
accepted in the United States.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  As discussed in Note 1
to the consolidated financial statements, the Company filed a petition for
reorganization under Chapter 11 of Title 11 of the United States Code (the
Bankruptcy Code), and this raises substantial doubt about the Company's ability
to continue as a going concern.  Management's plans concerning this
matter are also discussed in Note 1 to the consolidated financial
statements.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 /S/
PETERSON SULLIVAN LLP
 
 Seattle,
Washington
 March 30,
2009
 15


IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


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


CONSOLIDATED
BALANCE SHEETS




September 30,
      2007
            
            
            December 31,
      2006ASSETS
            
            (In thousands, except share and per share data)Current
      assets:Cash
            
            $
            169
            
            
            $
            264Restricted
      cash
            
            
            143
            
            
            
            135Accounts
      receivable, net
            
            
            5,468
            
            
            
            5,291Inventories
            
            
            85
            
            
            
            480Prepaid
      expenses and other current assets
            
            
            45
            
            
            
            579Total
      current assets
            
            
            5,910
            
            
            
            6,749Fixed
      assets, net
            
            
            410
            
            
            
            1,309Goodwill
            
            
            —
            
            
            
            2,359Intangible
      assets, net
            
            
            —
            
            
            
            2,700Deferred
      financing costs, net
            
            
            1,431
            
            
            
            1,821Other
      assets
            
            
            40
            
            
            
            159Total
      assets
            
            $
            7,791
            
            
            $
            15,097LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
      liabilities:Accounts
      payable
            
            $
            8,101
            
            
            $
            8,302Accrued
      liabilities
            
            
            260
            
            
            
            361Customer
      deposits
            
            
            15
            
            
            
            23Line
      of credit
            
            
            2,349
            
            
            
            998Notes
      payable to related parties — current portion
            
            
            76
            
            
            
            65Capital
      lease obligations — current portion
            
            
            48
            
            
            
            46Stock
      and other amounts payable to former IMA owners
            
            
            200
            
            
            
            475Stock
      payable to consultants
            
            
            —
            
            
            
            155Total
      current liabilities
            
            
            11,049
            
            
            
            10,425Convertible
      debentures, net of current portion
            
            
            1,609
            
            
            
            —Notes
      payable to related parties, net of current portion
            
            
            150
            
            
            
            150Capital
      lease obligations, net of current portion
            
            
            39
            
            
            
            75Total
      liabilities
            
            
            12,847
            
            
            
            10,650Commitments
      and contingenciesStockholders’
      equity (deficit):Preferred
      stock, $0.001 par value; 25,000,000 shares authorized: 2,903,229 shares
      issued and outstanding
            
            
            3
            
            
            
            3Common
      stock, $0.001 par value; 100,000,000 shares authorized:23,959,248
      shares issued and outstanding as of September 30, 2007 and 22,469,511
      shares issued and outstanding as of December 31, 2006
            
            
            24
            
            
            
            22Additional
      paid in capital
            
            
            20,377
            
            
            
            18,705Accumulated
      deficit
            
            
            (25,460
            )
            
            
            (14,283
            )Total
      stockholders’ equity (deficit)
            
            
            (5,056
            )
            
            
            4,447Total
      liabilities and stockholders’ equity (deficit)
            
            $
            7,791
            
            
            $
            15,097




See notes
to consolidated financial statements
 16




IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


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


CONSOLIDATED
STATEMENTS OF OPERATIONS




Nine
      Months Ended
              September
      30,
            
            
            Twelve
      Months Ended
              December
    31,2007
            
            
            2006(In thousands, except per share data)RevenueMedia
      services
            
            $
            3,797
            
            
            $
            2,794Managed
      subscriptions
            
            
            280
            
            
            
            456Consulting
      and design services
            
            
            89
            
            
            
            375Equipment
      sales
            
            
            1,502
            
            
            
            2,970Total
      revenue
            
            
            5,668
            
            
            
            6,595Cost
      of revenue
            
            
            2,260
            
            
            
            3,023Gross
      profit
            
            
            3,408
            
            
            
            3,572Other
      operating expensesWages
      and salaries
            
            
            3,928
            
            
            
            4,701Selling
      and marketing
            
            
            301
            
            
            
            643General
      and administrative
            
            
            3,203
            
            
            
            5,444Depreciation
      and amortization
            
            
            566
            
            
            
            1,074Impairment
      of assets
            
            
            5,462
            
            
            
            724Total
      other operating expenses
            
            
            13,460
            
            
            
            12,586Loss
      from operations
            
            
            (10,052
            )
            
            
            (9,014
            )Other
      income (expense):Other
      income and expense, net
            
            
            (15
            )
            
            
            —Gain
      on extinguishment of notes payable
            
            
            —
            
            
            
            106Interest
      expense
            
            
            (1,110
            )
            
            
            (1,189
            )Net
      loss
            
            $
            (11,177
            )
            
            $
            (10,097
            )Net
      loss attributable to common stockholders:Net
      loss
            
            $
            (11,177
            )
            
            $
            (10,097
            )Dividends
      on Series A preferred
            
            
            (104
            )
            
            
            —Beneficial
      conversion feature of Series A preferred
            
            
            —
            
            
            
            (934
            )Revaluation
      of Series A preferred – conversion price reduction
            
            
            (2,447
            )
            
            
            (974
            )Revaluation
      of Series A preferred – warrant exercise price reduction
            
            
            —
            
            
            
            (935
            )Net
      loss attributable to common stockholders
            
            $
            (13,728
            )
            
            $
            (12,940
            )Net
      loss per common share — basic and diluted
            
            $
            (0.59
            )
            
            $
            (0.61
            )Shares
      used in computing net loss per share — basic and diluted
            
            
            23,441
            
            
            
            21,298




See notes
to consolidated financial statements


17


IMPART MEDIA GROUP, INC. AND
SUBSIDIARIES


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


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)





TotalAdditional
            
            
            
            
            
            Stockholders’Preferred Stock
            
            
            Common Stock
            
            
            Paid-In
            
            
            Accum.
            
            
            EquityShares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            (Deficit)(In
      thousands, except share data)Balance
      December 31, 2005
            
            
            —
            
            
            $
            —
            
            
            
            15,337,483
            
            
            $
            15
            
            
            $
            1,370
            
            
            $
            (4,186
            )
            
            $
            (2,801
            )Proceeds
      from the sale of common stock and warrants
            
            
            —
            
            
            
            —
            
            
            
            927,151
            
            
            
            1
            
            
            
            989
            
            
            
            —
            
            
            
            990Proceeds
      from the sale of convertible Series A preferred stock and issuance of
      warrants, net
            
            
            2,903,229
            
            
            
            3
            
            
            
            —
            
            
            
            —
            
            
            
            3,908
            
            
            
            —
            
            
            
            3,911Proceeds
      from the exercise of warrants
            
            
            —
            
            
            
            —
            
            
            
            232,500
            
            
            
            —
            
            
            
            23
            
            
            
            —
            
            
            
            23Issuance
      of common stock and warrants in connection with Laurus credit
      facility
            
            
            —
            
            
            
            —
            
            
            
            30,000
            
            
            
            —
            
            
            
            2,097
            
            
            
            —
            
            
            
            2,097Issuance
      of common stock to senior executives
            
            
            —
            
            
            
            —
            
            
            
            2,394,873
            
            
            
            2
            
            
            
            2,268
            
            
            
            —
            
            
            
            2,270Issuance
      of common stock and warrants for consulting services
            
            
            —
            
            
            
            —
            
            
            
            1,744,000
            
            
            
            2
            
            
            
            2,124
            
            
            
            —
            
            
            
            2,126Issuance
      of common stock in settlement of legal dispute
            
            
            —
            
            
            
            —
            
            
            
            141,000
            
            
            
            —
            
            
            
            268
            
            
            
            —
            
            
            
            268Issuance
      of common stock in connection with InTransit asset
purchase
            
            
            —
            
            
            
            —
            
            
            
            146,762
            
            
            
            —
            
            
            
            572
            
            
            
            —
            
            
            
            572Issuance
      of common stock for IMA acquisition
            
            
            —
            
            
            
            —
            
            
            
            1,515,150
            
            
            
            2
            
            
            
            4,440
            
            
            
            —
            
            
            
            4,442Compensation
      related to stock options
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            440
            
            
            
            —
            
            
            
            440Issuance
      of warrants to bridge lenders
            
            
            —
            
            
            
            —
            
            
            
            592
            
            
            
            —
            
            
            
            206
            
            
            
            
            
            
            
            206Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (10,097
            )
            
            
            (10,097
            )Balance
      December 31, 2006
            
            
            2,903,229
            
            
            
            3
            
            
            
            22,469,511
            
            
            
            22
            
            
            
            18,705
            
            
            
            (14,283
            )
            
            
            4,447Issuance
      of common stock for IMA acquisition
            
            
            —
            
            
            
            —
            
            
            
            93,240
            
            
            
            —
            
            
            
            275
            
            
            
            —
            
            
            
            275Issuance
      of common stock warrants in connection with convertible
      debentures
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            708
            
            
            
            —
            
            
            
            708Beneficial
      conversion feature – convertible debentures
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            137
            
            
            
            —
            
            
            
            137Preferred
      stock dividend payable
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (104
            )
            
            
            —
            
            
            
            (104
            )Proceeds
      from the exercise of warrants
            
            
            —
            
            
            
            —
            
            
            
            1,269,497
            
            
            
            2
            
            
            
            (2
            )
            
            
            —
            
            
            
            —Issuance
      of common stock for consulting services
            
            
            —
            
            
            
            —
            
            
            
            127,000
            
            
            
            —
            
            
            
            197
            
            
            
            —
            
            
            
            197Compensation
      related to stock options
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            461
            
            
            
            —
            
            
            
            461Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (11,177
            )
            
            
            (11,177
            )Balance
      September 30, 2007
            
            
            2,903,229
            
            
            $
            3
            
            
            
            23,959,248
            
            
            $
            24
            
            
            $
            20,377
            
            
            $
            (25,460
            )
            
            $
            (5,056
            )





See notes
to consolidated financial statements


18





IMPART
MEDIA GROUP, INC. AND SUBSIDIARIES


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


CONSOLIDATED
STATEMENTS OF CASH FLOWS




Nine
      Months ended September 30,
            
            
            Twelve
      Months ended
              December
      31,2007
            
            
            2006(In
      thousands)Operating
      activities:Net
      loss
            
            $
            (11,177
            )
            
            $
            (10,097
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Non-cash
      wages and salaries expense:Incentive
      stock options granted to employees
            
            
            461
            
            
            
            440Common
      stock issued to senior executives for services
            
            
            —
            
            
            
            356Non-cash
      general and administrative expenses:Amortization
      of prepaid consulting expense
            
            
            197
            
            
            
            1,584Warrants
      issued for earned consulting services
            
            
            —
            
            
            
            125Common
      stock issued to settle legal dispute
            
            
            —
            
            
            
            268Non-cash
      interest expense:Warrants
      issued to bridge lenders
            
            
            —
            
            
            
            206Common
      stock issued to senior executives upon conversion of notes
      payable
            
            
            —
            
            
            
            40Amortization
      of deferred financing costs on line of credit:Warrants
            
            
            692
            
            
            
            539Other
      deferred financing costs
            
            
            —
            
            
            
            114Common
      stock issued to Laurus for extended filing date
            
            
            —
            
            
            
            52Other
      non-cash interest expense
            
            
            203
            
            
            
            25Gain
      on extinguishment of notes payable
            
            
            —
            
            
            
            (107
            )Bad
      debt expense
            
            
            24
            
            
            
            14Depreciation
      and amortization
            
            
            566
            
            
            
            1,074Loss
      on disposal of fixed assets
            
            
            6
            
            
            
            —Impairment
      of assets
            
            
            5,462
            
            
            
            724Other
            
            
            —
            
            
            
            (26
            )Changes
      in assets and liabilities, excluding assets and liabilities from
      acquisitions:Accounts
      receivable
            
            
            (201
            )
            
            
            (4,539
            )Inventory
            
            
            395
            
            
            
            4Prepaid
      expenses and other current assets
            
            
            534
            
            
            
            170Other
      assets
            
            
            101
            
            
            
            (84
            )Accounts
      payable
            
            
            714
            
            
            
            5,733Accrued
      liabilities
            
            
            (1,179
            )
            
            
            949Net
      cash used in operating activities
            
            
            (3,202
            )
            
            
            (2,436
            )Investing
      activities:Purchases
      of fixed assets
            
            
            (58
            )
            
            
            (324
            )Purchase
      of InTransit assets
            
            
            —
            
            
            
            (500
            )Acquisition
      of IMA
            
            
            —
            
            
            
            (600
            )Net
      cash used in investing activities
            
            
            (58
            )
            
            
            (1,424
            )Financing
      activities:Proceeds
      from the sale of common stock
            
            
            —
            
            
            
            990Proceeds
      from the sale of convertible preferred stock and warrants
            
            
            —
            
            
            
            3,911Proceeds
      from the exercise of warrants for common stock
            
            
            —
            
            
            
            23Principal
      payments on notes payable
            
            
            —
            
            
            
            (458
            )Deferred
      financing costs and commitment fees
            
            
            (152
            )
            
            
            (428
            )Preferred
      stock dividends paid
            
            
            (104
            )
            
            
            —Payments
      on capital lease obligations
            
            
            (34
            )
            
            
            (48
            )Net
      borrowings (repayments) on line of credit
            
            
            1,355
            
            
            
            67Proceeds
      from the sale of convertible debentures
            
            
            2,100
            
            
            
            —Net
      cash provided by financing activities
            
            
            3,165
            
            
            
            4,057Net
      increase (decrease) in cash
            
            
            (95
            )
            
            
            197Cash—
      beginning of period
            
            
            264
            
            
            
            67Cash
      — end of period
            
            $
            169
            
            
            $
            264Supplemental
      disclosure:Cash
      paid for interest
            
            $
            215
            
            
            $
            214Non-cash
      investing and financing activities:Conversion
      of related party and other debt:Issuance
      of common stock to repay debt, interest and wages and salaries
      expense
            
            $
            —
            
            
            $
            2,271Gain
      on extinguishment of debt
            
            
            —
            
            
            
            107Interest
            
            
            —
            
            
            
            (40
            )Compensation
      due to related parties
            
            
            —
            
            
            
            (356
            )Retirement
      of debt
            
            
            —
            
            
            
            (1,982
            )Net
            
            $
            —
            
            
            $
            —InTransit
      asset purchase:Intangible
      assets acquired
            
            $
            —
            
            
            $
            (1,072
            )Common
      stock issued
            
            
            —
            
            
            
            572Net
            
            $
            —
            
            
            $
            (500
            )IMA
      acquisition:Current
      assets acquired
            
            $
            —
            
            
            $
            (325
            )Fixed
      assets acquired
            
            
            —
            
            
            
            (147
            )Intangible
      assets acquired
            
            
            —
            
            
            
            (2,970
            )Other
      long-term assets acquired
            
            
            —
            
            
            
            (45
            )Current
      liabilities assumed
            
            
            —
            
            
            
            329Goodwill
            
            
            —
            
            
            
            (2,359
            )Note
      payable issued
            
            
            —
            
            
            
            4,442Stock
      issuance payable
            
            
            (275
            )
            
            
            275Common
      stock issued
            
            
            275
            
            
            
            200Net
            
            $
            —
            
            
            $
            (600
            )Issuance
      of common stock warrants in connection with debt, recorded as deferred
      financing costs
            
            $
            845
            
            
            $
            2,045




See notes
to consolidated financial statements


19


IMPART
MEDIA GROUP, INC.


(Debtors in
Possession as of May 21, 2008)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Note
1.  Chapter 11 Reorganization





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





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





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





Note
2.  Description of Business and History





The
Company, which was headquartered in Seattle, Washington, provided digital
signage in the business-to-consumer media sector.  The Company also
provided consulting, design, integration, fabrication, assembly, IP
connectivity, quality assurance, creative production, installation, onsite
maintenance, web-data hosting, network monitoring and content management
services throughout the United States (and in global markets through its
authorized distributors).  As a result of the Company’s acquisition of
E&M Advertising, Inc. and its affiliates, renamed IMA, in February 2006, the
Company also provided offline and online direct response advertising
capabilities.  As described in Note 20, the Company's Seattle
operations were sold in May 2008 and IMA was sold in October
2008.  The Company currently has no operating activities.





Note
3. Summary of Significant Accounting Policies





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





Fiscal Year End.On September
12, 2007, the Company’s board of directors approved a change in its fiscal year
ending December 31 to a fiscal year ending on September 30.  This is a
transition report and includes information for the transitional nine-month
period from January 1, 2007 to September 30, 2007.  The following
table sets forth, for the periods indicated, the Company’s selected consolidated
statements of operations data:





Nine
      Months Ended
              September
      30,2007
            
            
            2006(In thousands, except per share data)Revenue
            
            $
            5,668
            
            
            $
            4,303Gross
      profit
            
            
            3,408
            
            
            
            2,256Net
      loss
            
            
            11,177
            
            
            
            9,264Net
      loss attributable to common stockholders
            
            
            13,728
            
            
            
            10,380Loss
      per common share — basic and diluted:Net
      loss per common share — basic and diluted
            
            $
            (0.59
            )
            
            $
            (0.50
            )Shares
      used in computing net loss per share — basic and diluted
            
            
            23,441
            
            
            
            20,833





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





Cash.The Company maintained
cash balances with financial institutions in accounts insured by the Federal
Deposit Insurance Corporation.  Occasionally there were balances in
excess of the insured limits.





Restricted Cash.At September
30, 2007, the Company held $143,031 in cash identified as restricted under
the Laurus credit facility (see Note 10).  This restricted cash is
comprised of customer payments received into bank lockbox
accounts.  The restricted funds are swept from the accounts and
applied against the revolving credit line balance in accordance with the terms
of the agreement.


20


Financial Instruments.The
Company’s financial instruments consisted of cash, accounts receivable, accounts
payable, accrued liabilities, line of credit, related party notes payable, and
capital lease obligations.  The fair value of all financial
instruments approximated the recorded value based on the short-term nature and
market interest rates of these financial instruments.





Accounts Receivable.Accounts
receivable are reviewed quarterly to determine whether their carrying value has
become impaired.  In the media industry, accounts receivable are
commonly paid over extended periods.  Thus, the Company does not
consider a receivable to be impaired until the balance is more than one year
old.  The Company had established an allowance for doubtful accounts
of approximately $38,000 and $65,000 as of September 30, 2007 and December 31,
2006, respectively.  When receivables are written off, they are
charged against the allowance.  Generally, the Company does not assign
past due status to receivables.  Also, receivables generally are not
collateralized and do not bear interest.





Concentration of Credit Risk.As of September 30, 2007, approximately 11% of accounts receivable was
due from one customer.  This customer represented 2% of total revenues
during the nine months ended September 30, 2007.  As of December 31,
2006, approximately 19% of accounts receivable is due from one
customer.  This customer represented 10% of total revenues during the
year ended December 31, 2006.





Inventory.  Inventory
was stated at lower of cost or market.  Cost is principally determined
by using the average cost method.  Inventory consisted of raw
materials as well as finished goods held for sale.  The Company
monitors 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
calculated principally on the straight-line method over the estimated useful
lives of the assets, which are generally 2 to 7 years.  The cost of
repairs and maintenance is charged to expense as
incurred.  Expenditures for property betterments and renewals are
capitalized.  Gain or loss upon disposal of an asset is recorded in
other operating income (expense).





The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful lives of fixed assets or
whether the remaining balance of fixed assets should be evaluated for possible
impairment under Statement of Financial Accounting Standards (“SFAS”) No. 144,
Accounting for the Impairment
or Disposal of Long-Lived Assets (“SFAS 144”).  The Company
uses an estimate of the related undiscounted cash flows over the remaining life
of the fixed assets in measuring recoverability.  As further discussed
in Note 20, the fixed assets of the Seattle operations were sold in May
2008.  The Company has recorded an impairment charge of approximately
$610,000 to reflect the sale value of these assets.





Goodwill and Intangible Assets.Goodwill and intangible assets arose from the acquisition of IMA in 2006
and consisted primarily of a customer list and trade names.  In
accordance with SFAS No. 142, Goodwill and Intangible
Assets (“SFAS 142”), goodwill and intangible assets were reviewed
periodically for possible impairment. As further discussed in Note 20, IMA was
sold in October 2008.  All goodwill and intangible assets associated
with IMA were deemed to be impaired in value and were written off as of
September 30, 2007.  This impairment write off totaled
$4,840,000.  As further discussed in Note 7, certain other intangible
assets were deemed to be impaired in value and were written off during the year
ended December 31, 2006.





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





Basic and
diluted weighted average common shares outstanding, and the potentially dilutive
securities excluded from loss per share computations because they are
antidilutive, are as follows for the nine months ended September 30, 2007 and
the year ended December 31, 2006:





2007
            
            2006Potentially
      dilutive securities excluded from loss per share
    computations:Convertible
      debentures
            2,800,000
            
            -Convertible
      preferred stock
            2,903,229
            
            2,903,229Common
      stock options
            4,272,084
            
            1,911,250Common
      stock purchase warrants
            5,646,194
            
            5,235,694





Income Taxes.  The
Company follows the liability method of accounting for income
taxes.  Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax basis of
assets and liabilities and on the expected future tax benefits to be derived
from net operating loss 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 carry forwards and temporary differences are
expected to be recovered or settled.  The effect on the deferred tax
assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date.  A valuation allowance is recorded on
deferred tax assets if it is more likely than not that such deferred tax assets
will not be realized.





The
Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”) on
January 1, 2007. The Company believes its income tax filing positions and
deductions will be sustained on audit and does not anticipate any adjustments
that would result in a material change to the Company’s financial position.
Therefore, no reserves for uncertain income tax positions have been recorded
pursuant to FIN 48, nor did the Company record a cumulative effect
adjustment related to the adoption of FIN 48. The Company’s policy for
recording interest and penalties associated with audits is to record such items
as a component of income (loss) before taxes.





Advertising
Costs.  The Company expenses the costs of producing
advertisements at the time production occurs and expenses the costs of
communicating advertisements in the period in which the advertising space or
airtime is used.  Advertising costs were $50,000 and $113,000 for the
nine months ended September 30, 2007 and the year ended December 31, 2006,
respectively.


21





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





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


·
            Other
      stock options, stock purchase warrants, and issuances of common stock to
      employees and others.




ISOs. Prior to January 1, 2006,
the Company accounted for share-based wages and salaries expense under the
recognition and measurement principles of SFAS No. 123, Accounting for Stock-Based
Compensation.  Effective January 1, 2006, the Company began
recording share-based wages and salaries expense in accordance with SFAS No. 123
(revised 2004), Share-Based
Payment (“SFAS 123(R)”).  The Company
adopted SFAS 123(R) using the modified prospective method.  The
adoption of SFAS 123(R) did not have any effect on earnings or per share
amounts.  The Company recognizes this expense on a straight-line basis
over the service period of the award.





Other
stock options, stock purchase warrants, and issuances of common
stock.  The Company also
applies SFAS 123(R) and the consensus in Emerging Issues Task Force (“EITF”) 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 share-based payments in
the form of other stock options, warrants, and common stock issued to
non-employees.





Revenue
Recognition.  The Company recognized revenue when it had
persuasive evidence of an arrangement, the product had been shipped or the
services had been provided to the customer, title and risk of loss for products
had passed to the customer, the sale price was fixed and determinable, no
significant unfulfilled Company obligations existed, and collectability was
reasonable assured.





Revenue
from equipment sales was generally recognized when products were shipped and/or
the revenue was fully earned and ownership had passed to the
customer.  Revenue from management subscriptions was recorded in the
month the service was provided.  Revenue from consulting and design
services, which are all short-term, was recognized using the completed-contract
method.  There were no significant contracts in process at September
30, 2007 or December 31, 2006.





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





The gross
and net billing amounts included in operating revenues for the nine months ended
September 30, 2007 and twelve months ended December 31, 2006 are as follows
(amounts in thousands):





2007
            
            
            2006Consolidated
      gross revenue
            
            $
            34,898
            
            
            $
            21,223Direct
      cost of sales
            
            
            (29,230
            )
            
            
            (14,628
            )Consolidated
      net revenue
            
            $
            5,668
            
            
            $
            6,595





Shipping and Handling. Costs
incurred by the Company for shipping and handling were included in cost of
revenues.





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





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, Fair Value
Measurements (“SFAS 157”).  SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements but does not require any new fair value
measurements.  FASB Staff Position No. SFAS 157-2 was issued in
February 2008.  SFAS 157-2 delayed the application of SFAS 157 for
non-financial assets and non-financial liabilities, except items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis, until fiscal years beginning after November 15, 2008.  The
Company does not expect the application of SFAS 157 to have a material effect on
the Statements of Operations and Balance Sheet.





In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (“SFAS 159”).  SFAS
159 permits an instrument by instrument election to account for selected
financial assets and liabilities at fair value.  This election is
irrevocable.  SFAS 159 provides an opportunity to mitigate volatility
in reported earnings that is caused by measuring hedged assets and liabilities
that were previously required to use a different accounting method than the
related hedging contracts when the complex hedge accounting provisions of SFAS
No. 133, Accounting for
Derivative Instruments and Hedging Activities,are not
met.  SFAS 159 is effective for fiscal years beginning after
November 15, 2007.  The Company is does not expect the
application of SFAS 159 to have a material effect on the Statements of
Operations and Balance Sheet.


22





In
December 2007, the FASB issued SFAS No. 141R, Business Combinations (“SFAS
141R”), which replaces SFAS No. 141.  The statement retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting.  It also requires the capitalization of
in-process research and development at fair value and requires the expensing of
acquisition-related costs as incurred.  SFAS 141R is effective for the
Company beginning October 1, 2009 and will apply prospectively to business
combinations completed on or after that date.  The impact of SFAS 141R
will depend on the nature of acquisitions completed after adoption.





In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51 (“SFAS
160”), which changes the accounting and reporting for minority
interests.  Minority interests will be recharacterized as
non-controlling interests and will be reported as a component of equity separate
from the parent’s equity, and purchases or sales of equity interests that do not
result in a change in control will be accounted for as equity
transactions.  In addition, net income attributable to the
non-controlling interest will be included in net income and, upon a loss of
control, the interest sold, as well as any interest retained, will be recorded
at fair value with any gain or loss recognized in net income.  SFAS
160 is effective beginning October 1, 2009 and will apply prospectively,
except for the presentation and disclosure requirements, which will apply
retrospectively.  The Company believes the adoption of SFAS 160 will
not have a material impact on its financial statements.





In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities(“SFAS 161”), which is effective
January 1, 2009 for the Company.  SFAS 161 requires enhanced
disclosures about derivative instruments and hedging activities to allow for a
better understanding of their effects on an entity’s financial position,
financial performance, and cash flows.  Among other things, SFAS 161
requires disclosure of the fair values of derivative instruments and associated
gains and losses in a tabular format.  Since SFAS 161 requires only
additional disclosures about derivatives and hedging activities, the adoption of
SFAS 161 will not affect the Company’s financial position or results of
operations, should the Company acquire derivatives in the future.




In April 2008, the FASB issued Staff Position No. 142-3, Determination of the Useful Life of
Intangible Assets(“FSP 142-3”).  FSP 142-3 amends
the factors to be considered in assumptions used to determine the useful lives
of recognized intangible assets recognized under SFAS 142.  The new
guidance applies to intangible assets with contractual lives that are acquired
individually or with a group of assets as well as those assets acquired in a
business combination.  The new guidance is effective for fiscal years
beginning after December 15, 2008 and interim periods.  The
Company will adopt the statement October 1, 2009 which is the beginning of the
Company’s 2010 fiscal year.  The Company does not expect adoption of
FSP 142-3 to have a significant impact on the Company’s consolidated financial
position or results of operations.





Note
4.  Accounts Receivable





Accounts
receivable consists of balances due from customers for IMG (in bankruptcy) and
for its subsidiary IMA (not in bankruptcy) as follows as of September 30, 2007
and December 31, 2006 (amounts in thousands):





2007
            
            
            2006Customers
      of IMG
            
            $
            254
            
            
            $
            356Customers
      of IMA
            
            
            5,214
            
            
            
            4,935$
            5,468
            
            
            $
            5,291





The
receivables from customers of IMG have all been collected subsequent to year end
except for those that were specifically covered by the allowance for bad debts
in the amount of approximately $38,000.





Note
5.  Inventory





Inventory
totaling $84,774 and $479,698 consisted of finished goods of IMG (in bankruptcy)
as of September 30, 2007 and December 31, 2006, respectively.  As
discussed in Note 20, all inventory was sold in May 2008.





Note
6.  Fixed Assets





Fixed
assets consisted of the following as of September 30, 2007 and December 31, 2006
(in thousands):





Useful
      Life
            
            2007
            
            
            2006Furniture
      and fixtures
            2-7
      years
            
            $
            166
            
            
            $
            140Computer
      and other equipment
            2-5
      years
            
            
            340
            
            
            
            335Demo
      equipment
            3-4
      years
            
            
            72
            
            
            
            72Kiosks
            5
      years
            
            
            412
            
            
            
            412Other
            3-5
      years
            
            
            118
            
            
            
            117Leasehold
      improvements
            4
      years
            
            
            20
            
            
            
            41,128
            
            
            
            1,080Less:
      accumulated depreciation
            
            
            
            (625
            )
            
            
            (455
            )Fixed
      assets, net
            
            
            
            503
            
            
            
            625Acquired
      software
            5
      years
            
            
            977
            
            
            
            977Less:
      accumulated amortization
            
            
            
            (460
            )
            
            
            (293
            )Software,
      net
            
            
            
            517
            
            
            
            684Impairment
      reserve
            
            
            
            (610
            )Total
      fixed assets, net
            
            
            $
            410
            
            
            $
            1,309





Total
depreciation expense was approximately $341,000 for the nine months ended
September 30, 2007 and $432,000 for the year ended December 31,
2006.





As
further discussed in Note 20, fixed assets of IMG (in bankruptcy) have been
written down to their impaired value as of September 30, 2007 and were sold in
May 2008.


23


Note
7.  Other Assets





Other
assets at December 31, 2006, consisted primarily of an obligation by a funding
placement agent to reimburse the Company for certain placement
fees.





In
February 2006, the Company purchased from Marlin Capital Partners II, LLC (doing
business as InTransit Media) all of the assets used in InTransit Media’s digital
advertising services business for $1,072,000, paid by $500,000 in cash and
146,762 shares of common stock valued at $572,000.  In its review of
the value of these assets, the net book value of which was $724,000, the Company
determined that they were impaired in their entirety.  As a result,
they were written off in the year ended December 31, 2006.




Note
8.  Accounts Payable and Accrued Liabilities





Accounts
payable consists of balances payable to vendors of IMG (in bankruptcy) and IMA
(not in bankruptcy) as follows as of September 30, 2007 and December 31, 2006
(in thousands):





2007
            
            
            2006Vendors
      of IMG
            
            $
            603
            
            
            $
            908Vendors
      of IMA
            
            
            7,498
            
            
            
            7,394$
            8,101
            
            
            $
            8,302





Accrued
liabilities for IMG (in bankruptcy) and IMA (not in bankruptcy) are as follows
as of September 30, 2007 and December 31, 2006 (in thousands):





2007
            
            
            2006IMG
            
            $
            169
            
            
            $
            243IMA
            
            
            91
            
            
            
            118$
            260
            
            
            $
            361





As a result of the Company’s bankruptcy
filing discussed in Note 1, the balances payable to vendors and accrued
liabilities of IMG may be settled at amounts less than shown in the balance
sheet.





Note
9.  Note Payable - Related Parties





Notes
payable due to related parties as of September 30, 2007 and December 31, 2006,
are comprised of the following (in thousands):





2007
            
            
            2006Related
      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
            
            
            $
            150Accrued
      expenses to various stockholders, unsecured, bearing
    interest
            
            
            22
            
            
            
            22Accrued
      interest on related party loans
            
            
            54
            
            
            
            43Total
      due to related parties
            
            
            226
            
            
            
            215Less:
      current portion of notes payable - related parties
            
            
            (76
            )
            
            
            (65
            )Total
      long-term notes payable - related parties
            
            $
            150
            
            
            $
            150





As a
result of the Company’s bankruptcy filing as discussed in Note 1, these notes
may be settled at amounts less than shown in the balance sheet.





Note
10.  Lines of Credit





On
January 27, 2006, the Company entered into an agreement with Laurus Master Fund,
Ltd. (“Laurus”) pursuant to which Laurus agreed to provide the Company with a
revolving credit facility of up to $6 million (the “Facility”).  The
term of the Facility was three years and borrowings accrued 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.  Interest on borrowings under the Facility was payable
monthly on the first day of each month, commencing on February 1,
2006.  The maximum principal amount of all borrowings under the
Facility could not exceed ninety percent (90%) of the Company’s eligible
accounts receivable minus such reserves that Laurus may have in good faith
deemed necessary and appropriate.





On
January 27, 2006, the Company obtained an initial draw under the Facility of $2
million, of which approximately $782,000 was used to satisfy bank loans in
full.  The draws under the Facility were used for general corporate
and working capital purposes.  As of September 30, 2007 the balance
due to Laurus was $2,349,548.85.


24


In
connection with the Facility, the Company paid Laurus approximately $248,000,
comprised of a Facility management fee of $216,000 and reimbursement of $32,000
in due diligence and documentation expenses.  The Facility management
fee is being amortized to interest expense over the three-year term of the
Facility.  The Company further issued to Laurus a seven-year warrant
(“the Warrant”) valued at $ 1.6 million, entitling Laurus to purchase up to
750,000 shares of the Company’s common stock at an exercise price of $.01 per
share, subject to certain adjustments.  The value of the Warrant was
recorded as deferred financing costs and was amortized as interest expense over
the three-year term of the Facility.





The
Company also paid a cash fee of $ 180,000 and issued three-year warrants valued
at $443,000 to purchase 231,000 shares of common stock to GunnAllen Financial,
Inc. for investment banking services.  These fees were recorded as
deferred financing costs amortized as interest expense over the three-year term
of the Facility.





The total
deferred financing costs were $2.5 million, of which $1.2 million remained to be
amortized as of September 30, 2007.





The
Facility was secured by a blanket lien on substantially all of the Company’s
assets and those of its subsidiaries.  In addition, the Company
pledged the ownership interests in its subsidiaries pursuant to a stock pledge
agreement executed in favor of Laurus.  If an event of default
occurred, Laurus had the right to accelerate payments under the Facility and, in
addition to any other remedies available to Laurus, foreclose upon the assets
securing the Facility.  If an event of default occurred, one hundred
twenty-five percent (125%) of the unpaid principal balance of the Facility, plus
accrued interest and fees, were to become immediately due and
payable.  Among other remedies, Laurus also was entitled to payment of
a default interest rate of two percent (2%) per month on all amounts
due.  The Facility also contained certain negative covenants that
required the Company to obtain the prior written consent or other actions of
Laurus in order for the Company to take certain actions at any time when
borrowings remained outstanding.





Pursuant
to the terms of the Facility, the Company was obligated to file a registration
statement on Form SB-2 or S-3 to register the shares of common stock issuable
upon exercise of the Warrant or as a result of adjustments made to the exercise
price of the Warrant.  The Company was required to file the
registration statement in connection with the exercise of the Warrant on or
prior to April 15, 2006.  During the second quarter of 2006, the
Company issued 30,000 shares of common stock valued at $51,900, recorded as
non-cash interest expense, to obtain a waiver from Laurus with respect to this
requirement.  The Company filed a registration statement on July 31,
2006, which was declared effective on October 3, 2006.  In the event
of adjustments made to the exercise price of the Warrant, the Company was
required to file an amended registration statement within 30 days of such
event.





See Note
20 for further discussion of the Default of the Laurus Security Agreement,
repayment of all amounts due to Laurus, and expensing all remaining deferred
financing costs in December 2007.





Note
11.  Convertible Debentures





On May
24, 2007, the Company entered into a Securities Purchase Agreement with six
institutional investors (five of which are the Creditor Proponents described in
Note 1), pursuant to which, the Company agreed to sell unsecured
convertible debentures (the “Convertible Debentures”) in the aggregate principal
amount of $2.1 million.  The Convertible Debentures were convertible,
at the option of the investors, into shares of common stock, at an initial
conversion price of $0.75 per share.  The convertible debentures
mature on the second anniversary of the issuance date.  Interest
accrues on the unpaid principal and interest at a rate of 6% per annum, which
amount is payable semiannually.  Beginning on the six month
anniversary of the issuance date, the Company was required to begin making
monthly repayments of principal and accrued interest.





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





In
connection with its role as placement agent with respect to the Convertible
Debentures, the Company paid cash fees of approximately $150,000 and issued to
the placement agent five-year warrants to purchase an aggregate of 280,000
shares of common stock with an exercise price of $0.52 per
share.  These warrants expire on May 24, 2012.  The value of
these warrants on the date of grant was approximately $152,000.  The fair
value of the warrants was determined using the Black-Scholes option pricing
model with the following assumptions: expected divided yield of 0%, risk-free
interest rate of 4.8%, volatility of 139%, and a contractual life of 5
years.  The cash fees paid and the value of the warrants were recorded as
deferred finance costs totaling approximately $302,000, which are being
amortized over the life of the notes.  Approximately $206,000 remains
to be amortized as of September 30, 2007.





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





See Note
20 for further discussion of the Default of Principal Payment relative to the
Convertible Debentures.  As discussed in Note 1, in February 2009,
these debentures were satisfied in exchange for equity in the Reorganized
Company.


25


Note
12.  Series A Preferred Stock





During
March 2006, the Company sold 2,903,229 shares of Series A Preferred Stock at a
price of $1.55 per share for total gross proceeds of $4.5
million.  Further, the purchasers of the Series A Preferred Stock
received three-year warrants to purchase 2,903,229 shares of common stock at
$2.25 per share.  The Company allocated $2.8 million of the $4.5
million gross proceeds to the Series A Preferred Stock and $1.7 million to the
warrants, based on their relative fair values.  The Company paid
$589,500 in cash issuance costs and realized net cash proceeds of $3.9
million.  In addition, five-year warrants to purchase 290,323 shares
of common stock at $2.25 per share, valued at $903,000, were issued to a
placement agent and 3-year warrants to purchase 145,162 shares of common stock
at $2.25 per share, valued at $409,000, were issued to a second placement
agent.  The values of the warrants issued to the placement agents,
which are an increase in additional paid-in capital, were recorded as a cost of
the financing, which reduces additional paid-in capital.





In
accordance with the provisions of EITF 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, and EITF 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments, the Company determined that there was a
beneficial conversion feature of $934,000 at the time the Series A Preferred
Stock was sold due to the conversion price being less than the market price of
the Company’s common stock.  The calculation of this beneficial
conversion feature follows (in thousands):





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


26


This
beneficial conversion feature increased additional paid-in capital attributable
to the holders of the Series A Preferred Stock and, at the same time, is
considered to be a deemed dividend to those holders.  Because the
Company has an accumulated deficit, this dividend reduced additional paid-in
capital rather than increased the accumulated deficit.  This amount
also increased net loss attributable to common stockholders.





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





In the
event of the Company’s liquidation, dissolution, or winding up, the holders of
Series A Preferred Stock are generally entitled to receive a liquidation
preference over the holders of common stock equal to $ 1.00 per share of Series
A Preferred Stock held plus any declared but unpaid dividends.





The
Series A Preferred Stock was convertible by the holder at any time and
automatically converted to common stock three years from the date of issuance or
in the event of an underwritten public offering of $20 million or more at a
stock price of $4.00 or more.  The Series A Preferred Stock was
subject to mandatory conversion and mandatory redemption in certain
circumstances, but only if the share price was higher than the conversion
price.





The
Company registered the Series A Preferred Stock in a Form SB-2 that went
effective October 3, 2006.  On December 13, 2006, the Company
determined that the registration had lapsed and the Company was in violation of
the Series A Preferred Stock Purchase agreement.  As a result, the
Series A Preferred Stock was determined to be subject to mandatory redemption
into common shares.  In addition, the holders of the Series A
Preferred Stock became entitled to certain liquidated damages.





The
holders of the Series A Preferred Stock granted a waiver to the Company in
consideration for a decrease in the conversion price of the Series A Preferred
Stock from $1.55 to $1.00 and a reduction in the warrant exercise price from
$2.25 to $0.01.  This waiver also extended the time period the Company
had in order to file another registration statement and have it declared
effective by the SEC.





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





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





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





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





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





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





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





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





In
connection with the issuance of the Convertible Debentures on May 24, 2007, an
additional reduction in the conversion price was
triggered.  Accordingly, the holders of the Series A Preferred Stock
can convert the preferred shares into an additional 4,153,850
shares.  The value related to this further reduction in the Series A
Preferred Stock conversion price was determined to be $2,447,310 and was
recorded during the quarter ended June 30, 2007.





The
values of the reductions of the Series A Preferred Stock conversion price and
the exercise price of the warrants increased additional paid-in capital
attributable to the holders of the Series A Preferred Stock and, at the same
time, were considered to be deemed dividends to those holders.  As
with the beneficial conversion feature, because the Company had an accumulated
deficit, these dividends reduced additional paid-in capital rather than
increased the accumulated deficit.  These amounts also increased net
loss attributable to common stockholders.





The
Company has reviewed its Series A Preferred Stock in accordance with SFAS 150,
Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity, and has determined that such shares are properly classified in
Stockholders’ Equity as of September 30, 2007.





As a
result of the Company’s bankruptcy filing as discussed in Note 1, this stock was
cancelled in February 2009.


27


Note
13.  Share-Based Payments





As a
result of the Company’s bankruptcy discussed in Note 1, the options, warrants,
and common shares discussed below and in Note 14 were cancelled in February
2009.





Stock
Option Plans





As discussed in Note 3, the Company made share-based payments in the form
of:





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


•
            Other
      stock options and stock purchase warrants and issuances of common stock to
      employees and others.





These
payments were recorded in the financial statements as follows, for the nine
months ended September 30, 2007 and the year ended December 31, 2006 (in
thousands):





Recorded
in the Balance Sheets, other than asset purchases and acquisitions (amounts in
thousands):




Paid
      to
            Recorded
      as
            
            2007
            
            
            2006Other stock options and
      warrantsLaurus
            Deferred
      financing costs
            
            $
            --
            
            
            $
            2,045Convertible
      debentures
            Deferred
      financing costs
            
            
            845Total
      other stock options and warrants
            
            
            
            845
            
            
            
            2,045Issuances of common stockSenior
      executives
            Repayment
      of debt less wages and salaries and interest
            
            
            --
            
            
            
            1,875Consultants
            Prepaid
      expense
            
            
            197
            
            
            
            2,001Total
      issuances of common stock
            
            
            
            197
            
            
            
            3,876Total
      share-based payments recorded in Balance Sheets
            
            
            
            1,042
            
            
            
            5,921  Recorded
in the Statements of Operations (amounts in thousands):





Paid
      to
              Recorded
      as
              
              2007
              
              
              2006Incentive stock optionsEmployees
      and directors
              Wages
      and salaries
              
              $
              461
              
              
              $
              440Total
      incentive stock options
              
              
              
              461
              
              
              
              440Other stock options and
      warrantsConsultants
              General
      and administrative
              
              
              0
              
              
              
              125Bridge
      lenders
              Interest
              
              
              0
              
              
              
              206Laurus
              Interest
      (amortization of deferred financing costs)
              
              
              595
              
              
              
              539Convertible
      debentures
              Interest
      (amortization of deferred financing costs)
              
              
              97Convertible
      debentures
              Interest
      (amortization of debt discount)
              
              
              203Total
      other stock options and warrants
              
              
              
              895
              
              
              
              870Issuances of common stockConsultants
              General
      and administrative (amortization of prepaid expense)
              
              
              614
              
              
              
              1584Institutional
      investor
              General
      and administrative (settle legal dispute)
              
              
              0
              
              
              
              268Senior
      executives
              Wages
      and salaries
              
              
              0
              
              
              
              356Senior
      executives
              Interest
              
              
              0
              
              
              
              40Laurus
              Interest
      (extended filing date)
              
              
              0
              
              
              
              52Total
      issuances of common stock
              
              
              
              614
              
              
              
              2,300Total
      share-based payments recorded in Statements of Operations
              
              
              $
              1,970
              
              
              $
              3,610


28


Incentive
Stock Options





Options
were granted during 2007 and 2006 under the Plan at exercise prices ranging from
$.40 to $1.10 as follows:





Shares
      Available for Grant
            
            
            Options
      Outstanding
            
            
            Weighted
      Average
              Exercise
      PriceBalance,
      January 1, 2006
            
            
            1,295,000
            
            
            
            705,000
            
            
            $
            .73Granted
            
            
            (1,255,000
            )
            
            
            1,255,000
            
            
            
            1.10Exercised
            
            
            -
            
            
            
            -
            
            
            
            --Forfeited
            
            
            
            
            
            
            (19,583
            )
            
            
            1.00Expired
            
            
            -
            
            
            
            (29,167
            )
            
            
            .87Balance,
      December 31, 2006
            
            
            40,000
            
            
            
            1,911,250
            
            
            
            .97Authorized
            
            
            3,000,000
            
            
            
            -
            
            
            
            -Granted
            
            
            (2,482,500
            )
            
            
            2,482,500
            
            
            
            .42Exercised
            
            
            -
            
            
            
            --
            
            
            
            --Forfeited
            
            
            121,666
            
            
            
            (121,666
            )
            
            
            .44Balance
      at September 30, 2007
            
            
            679,166
            
            
            
            4,272,084
            
            
            
            .66Options
      exercisable as of September 30, 2007
            
            
            
            
            
            
            1,572,750
            
            
            $
            .78





At
September 30, 2007 the weighted average remaining contractual lives of
outstanding and exercisable options was 9.0 years and 8.7 years,
respectively.  As of September 30, 2007, the market price of the
Company’s common stock was less than the exercise price on all outstanding
options.  Therefore, such options had no intrinsic value at that
date.




The fair
value for options granted during 2007 and 2006 was estimated using the
Black-Scholes option valuation model with the following weighted average
assumptions:





2007
            
            2006Expected
      life in years
            5.0
      - 10.0
            
            5.0Volatility
            141%
      - 190%
            
            141%Interest
      rate
            4.8%
      - 5.9%
            
            4.8%Yield
      rate
            0%
            
            0%





A summary
of the Company’s unvested stock grants and changes during the periods ended
September 30, 2007 and December 31, 2006 is as follows:





Shares
            
            
            Weighted
      Average Grant Date Fair ValueOutstanding
      at January 1, 2006
            
            
            470,000
            
            
            $
            .73Granted
      during 2006
            
            
            1,255,000
            
            
            
            1.10Vested
      during 2006, and other changes
            
            
            (484,362
            )Unvested
      at December 31, 2006
            
            
            1,240,638
            
            
            
            1.04Granted
      during 2007
            
            
            2,482,500
            
            
            
            .34Vested
      during 2007, and other changes
            
            
            (1,023,804
            )Unvested
      at September 30, 2007
            
            
            2,699,334
            
            
            $
            .58





At
September 30, 2007, due to the financial position of the Company, management
reassessed the assumptions used in valuing its stock options, including
primarily the assumed forfeiture rate.  A forfeiture rate of 100% was
determined to be appropriate and as such, all expense recognition associated
with the stock option plan ceased and current year expense recognition was
limited to amounts related to fully vested options as of September 30, 2007,
which totaled $460,671.  As a result of the default under the
Convertible Debentures as discussed in Note 20, all incentive stock options were
deemed forfeited in December 2007.





Warrants





Warrants
to purchase common stock were issued in 2007 and in 2006 as
follows:





Warrants
      Outstanding
            
            
            Weighted
      Average
              Exercise
      PriceBalance,
      January 1, 2006
            
            
            447,566
            
            
            $
            .95Granted:Series
      A Preferred Stock transaction
            
            
            3,338,714
            
            
            
            1.64Laurus
      revolving line of credit
            
            
            981,000
            
            
            
            .48Other
            
            
            643,164
            
            
            
            1.67Exercised
            
            
            (113,750
            )
            
            
            .20Expired
            
            
            (58,500
            )
            
            
            5.00Other
      adjustments
            
            
            (2,500
            )
            
            
            -Balance,
      December 31, 2006
            
            
            5,235,694
            
            
            
            .56Granted
            
            
            1,680,000
            
            
            
            .52Exercised
            
            
            (1,269,497
            )
            
            
            .01Balance,
      September 30, 2007
            
            
            5,646,197
            
            
            
            .67Warrants
      exercisable as of September 30, 2007
            
            
            5,646,197
            
            
            $
            .67




29


The fair
value for warrants issued during 2007 and 2006 was estimated using the
Black-Scholes option valuation model with the following weighted average
assumptions:





2007
            2006Expected
      life in years
            5
      yrs
            2
      yrsVolatility
            139%
            139%Interest
      rate
            4.8%
            4.7%Yield
      rate
            0%
            0%





Issuances
of Common Stock





During
2007, the Company issued 127,000 shares of common stock pursuant to consulting
agreements.  The shares had a fair value of $196,850 and were recorded
as prepaid expenses, of which all was recognized as non-cash general and
administrative expenses in the nine months ended September 30,
2007.





During
2006, the Company issued 1,744,000 shares of common stock pursuant to consulting
agreements.  The shares had a fair value of $2.0 million and were
recorded as prepaid expenses, of which $.4 million and $1.6 million was
recognized as non-cash general and administrative expenses in the nine months
ended September 30, 2007 and the year ended December 31, 2006,
respectively.





During
2006, the Company issued 2.4 million shares of common stock to related parties
in satisfaction of outstanding notes payable totaling $2.0 million, related
accrued interest totaling approximately $40,000 and accrued wages and salaries
expense totaling approximately $356,000 for an aggregate total of $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
extinguishment of notes payable.




In March
2006, the Company issued 141,000 shares of common stock to an institutional
investor in full satisfaction of amounts such investor claimed were due under a
convertible debenture, dated February 17, 2004.  These shares had a
fair value of $267,900 and were recorded as non-cash general and administrative
expense.





As
discussed in Note 10, in July 2006, the Company issued 30,000 shares of common
stock, valued at $51,900, to Laurus in exchange for Laurus agreeing to extend a
filing due date.  This value was recorded as non-cash interest
expense.





Note
14.  Sale of Common Stock and Warrants





In the
year ended December 31, 2006, the Company issued 927,151 shares in private
placements pursuant to common stock purchase agreements.  The common
stock was sold at prices ranging from $0.75 to $2.48 per share.  In
connection with these common stock sales, the Company issued warrants to
purchase an aggregate of 221,613 shares of common stock at an exercise price
ranging from $1.50 to $3.18 per share.  The warrants vested
immediately and expire at varying dates in 2009.  The Company received
approximately $990,000 in connection with these sales and issuance of common
stock and the related warrants.  The Company allocated $836,700 of the
$990,000 gross proceeds to common shares sold and $153,300 to the warrants,
based on their relative fair value.





Note
15.  Income Taxes





The
Company has not recorded income tax expense or benefit for the nine months ended
September 30, 2007 or the year ended December 31, 2006.  At September
30, 2007 the Company has net operating loss carryforwards of approximately
$23,585,000 for federal tax purposes.  Such losses may not be fully
deductible due to the change in ownership rules under Section 382 of the
Internal Revenue Code.  The federal net operating loss carryforwards
expire between 2018 and 2027.  At September 30, 2007 and December 31,
2006, deferred income tax balances and the related valuation allowance are as
follows (amounts in thousands):





Deferred
      income tax assets resulting from:
            
            2007
            
            
            2006Net
      operating loss carryforwards
            
            $
            8,019
            
            
            $
            6,601Unearned
      stock compensation
            
            
            676
            
            
            
            372Other
            
            
            11
            
            
            
            33Depreciation
            
            
            108
            
            
            
            24Intangibles
      – impairment and amortization
            
            
            1,991
            
            
            
            323Total
            
            
            10,805
            
            
            
            7,353Less:
      valuation allowance
            
            
            (10,805
            )
            
            
            (7,353
            )Deferred
      tax asset, net
            
            $
            --
            
            
            $
            --





A full
valuation allowance has been established for deferred income tax assets, as it
is more likely than not that the deferred tax assets will not be
realized.





A
reconciliation between the federal income tax rate (34%) and the effective rate
of income tax expense for the nine months ended September 30, 2007 and the year
ended December 31, 2006 is as follows (amounts in thousands):





2007
            
            
            2006Tax
      (benefit) at statutory tax rate
            
            $
            (3,801
            )
            
            $
            (3,433
            )Stock
      compensation – incentive stock options
            
            
            157
            
            
            
            150Other
            
            
            192
            
            
            
            -Increase
      in valuation allowance
            
            
            3,452
            
            
            
            3,283Tax
      expense (benefit)
            
            $
            --
            
            
            $
            --




30


Note
16.  Capital Lease Obligations





The
Company was obligated under two capital leases for equipment with a cost of
$122,000 at September 30, 2007 and December 31, 2006 and accumulated
depreciation of $54,900 and $36,600 at September 30, 2007 and December 31, 2006,
respectively.  Amortization of the equipment is included with
depreciation expense.  The capital lease obligations require a minimum
lease payment of approximately $4,800 per month with an interest rate of
approximately 8.3%.  Future minimum lease payments, including
interest, are as follows (amounts in thousands):





2008
            
            $
            482009
            
            
            3987Less:
      current portion
            
            
            48Capital
      lease obligations – long-term portion
            
            $
            39





See Note
20 for further discussion of the default under the lease
agreements.





Note
17.  Commitments and Contingencies





Leased
Facilities





The
Company utilized leased facilities in Seattle under a noncancellable-operating
lease.  The lease called for a base monthly rent of $ 17,000 through
November 30, 2018.  Total rent expense for this operating lease was
$167,000 for the period ended September 30, 2007 and $200,000 for the year ended
December 31, 2006.  Certain of the Company’s officers, directors, and
stockholders are owners of the company that owns the facility.  The
Company vacated these premises in March 2008 and defaulted on the
lease.





The
Company leases office facilities in New York for IMA under an operating lease,
which was extended through June 2011.  Rental expense for this lease
was approximately $175,000 for the nine months ended September 30, 2007 and
$205,000 for the year ended December 31, 2006.  This lease was assumed
by the new owners of IMA in October 2008.  The Company also has
various non-cancelable operating leases for automobiles and equipment that
expire at various dates through 2008.





Total
rent expense for the nine months ended September 30, 2007 was $345,000 and
$422,000 for the year ended December 31, 2006.





Future
minimum rental payments for the leased facilities as of September 30,
2007, were as follows (amounts in thousands):





2008
            
            $
            4342009
            
            
            4392010
            
            
            4442011
            
            
            304Thereafter
            
            
            1,422$
            3,043





See Note
20 for further discussion of the default under the lease
agreements.





Contingencies





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





Note
18.  Employment Agreements





The
Company entered into employment agreements with the following executives for a
term of three years from June 30, 2005, subject to termination
provisions.  Each receives an annual base salary of $120,000, plus
benefits.





Joseph
Martinez - Chairman of the Board, Chief Executive Officer


Laird
Laabs - Chief Marketing Officer


Thomas
Muniz - President, Chief Operating Officer


Steven
Corey - Chief Strategy Officer





On
February 28, 2006, the Company entered into an employment agreement with Michael
Medico, the Company’s Executive Vice President and President of the Company’s
IMA division, for a term beginning February 28, 2006, and expiring on December
31, 2008, subject to termination provisions.  He will receive an
annual base salary of $125,000, plus benefits, sales commissions, and yearly
bonus based on the division’s performance.





On
September 6, 2006, the Company entered into an employment agreement with Todd
Weaver, the Company’s Chief Technology Officer, for a term of three years from
September 1, 2006, subject to termination provisions.  He will receive
an annual base salary of $120,000, plus benefits.





See Note
20 for further discussion regarding Changes in the Executive
Officers.


31


Note
19.  Related Party Transactions





In March,
2007, the Company entered into an agreement with the former owners of IMA to
further defer the final cash payment relating to the purchase of IMA until
September 2007.  This final $200,000 payment is shown as “Stock
Issuance and Other Amounts Payable to Former IMA Owners” on the accompanying
consolidated balance sheets.  As a result of the Company’s bankruptcy
filing as discussed in Note 1, this note may be settled for less than its
carrying amount.





See Note
9 for notes payable to related parties.





See Note
17 regarding facilities leased from certain officers, directors, and
stockholders.





Note
20.  Subsequent Events





Chapter
11 Bankruptcy Proceedings





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





Changes
in Executive Officers





The
Company appointed Mr. Joseph Martinez, Chief Executive Officer, to the
additional position of President and Mr. Stephen Wilson, Chief Financial
Officer, to the additional position of Corporate Secretary, both effective as of
October 1, 2007.





Effective
on October 22, 2007, the Company appointed Mr. Laird Laabs to the executive
office of President.  Mr. Laabs replaced Mr. Joseph F. Martinez who
served as Interim President since the position was vacated in September
2007.  Mr. Martinez continued to serve as Chief Executive Office and
as a member of the board of directors.  Mr. Laabs continued to be
compensated according to his existing employment agreement.





Effective
October 15, 2007, the Company determined it was in the best interest to
streamline the management structure in order to strengthen the effective
management of the Company.  Toward that end, it was determined that
the executive officer positions of the Company shall be the offices of Chief
Executive Officer, President, Chief Financial Officer and President, Impart
Media Advertising.  Those persons holding the officers of Chief
Technology Officer, Chief Creative Officer, Chief Strategy Officer, President,
Impart Asia-Pacific (namely, Mr. Todd Weaver, Mr. J. Scott Campbell, M. Steven
Corey, and Mr. Laird Laabs, respectively) were given new, non-executive
titles.  Each such person remained with the Company although they no
longer were deemed executive officers of the Company for the purposes of
reporting obligations to the SEC.





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





Default
of Principal Payment on Convertible Debentures





In May
2007, the Company entered into, among other agreements, a securities purchase
agreement and a registration rights agreement with six institutional investors
(five of which are Creditor Proponents), pursuant to which, the Company agreed
to sell unsecured convertible debentures.  Under the terms of the
debentures, the Company was required to commence monthly redemption against the
principal debenture amount on December 1, 2007.  In lieu of making
such principal payment on December 1, 2007, the Company commenced negotiations
to restructure the obligations of the Company under the terms of the debentures
on December 3, 2007.  The Company has not obtained a waiver or
forbearance and, hence, considers itself in default of the
debentures.





Accordingly,
pursuant to the terms of the debenture, the default gives each investor the
option to declare immediately due and payable all obligations under the
debentures at an amount equal to all costs, fees and liquidated damages plus the
greater of (i) 130% of the outstanding principal amount of the debenture plus
accrued interest thereon (approximately $2.8 million  in total
obligations) or (ii) the outstanding principal amount of the debenture plus
accrued interest thereon divided by the conversion price on the date of the
default (approximately 25,890,000 shares).  To date, none of the
investors have exercised such options.  Pursuant to the Plan, all
equity interests existing at the time of the bankruptcy filing, including common
stock, preferred stock, options, and warrants, were cancelled, and the
convertible debentures, including all accrued interest and penalties, were
satisfied.




Adjustment
of Conversion Price under the Securities Purchase Agreement





On
December 3, 2007, an investor invoked the right to convert cash liquidated
damages due under the registration rights agreement into share of common stock
at a conversion price of $0.1095, or 85% of the ten day volume weighted average
price of common stock.  Pursuant to the terms of the debentures,
conversion of liquidated damages at a conversion price lower than the original
conversion price of $0.7500 would cause a downward adjustment of the conversion
price for all of the securities offered under the securities purchase agreement,
such that the resulting conversion price would equal the lower conversion
rate.  As such, the conversion of the debentures and the exercise
price of the warrants issued under the securities purchase agreement shall now
be equal to $0.1095.  Assuming the conversion of all such debentures,
the adjustment will result in the conversion of a total of approximately
16,378,000 shares of common stock. Pursuant to the Plan, all equity interests
existing at the time of the bankruptcy filing, including common stock, preferred
stock, options, and warrants, were cancelled, and the convertible debentures
were satisfied.


32


Adjustment
of Series A Preferred Conversion Rate





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





The
Company believed the issuance of shares of common stock through the conversion
of the aforementioned liquidated damages, as a per share price of $0.1095,
triggered a downward adjustment of the Series A conversion rate from $0.5200 to
$0.1095.  Consequently, assuming the conversion of approximately
2,891,000 Series A shares currently issued and outstanding, the adjusted
conversion rate of $0.1095 will result in the total conversion of approximately
40,919,000 shares of common stock of the Company. Pursuant to the Plan, all
equity interests existing at the time of the bankruptcy filing, including common
stock, preferred stock, options, and warrants, were cancelled, and the
convertible debentures were satisfied.




Default
of Laurus Security Agreement





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





Notice
of Delisting





On
December 28, 2007, the Company filed, on From 12b-25, a Notification of Late
Filing of its annual report Form 10-KSB for the period ended September 30,
2007.  On January 18, 2008, pursuant to NASD Marketplace Rule
6530(e)(1)(Rule 6530) the Company’s common stock was suspended from trading on
the Over-the-Counter Bulletin Board (“OTCBB”) and the Company’s trading symbol
was changed to IMMGE.  These measures were triggered by the Company’s
failure to timely file its 10-KSB with the Securities and Exchange
Commission.  As this was the Company’s third failure to timely file
within the prior two-year period a periodic report with the Securities and
Exchange Commission, the Company’s common stock was ineligible for quotation on
the OCTBB under Rule 6530; the Company’s common stock will remain ineligible for
quotation on the OCTBB until the Company has timely filed in a complete form all
required annual and quarterly reports due in a one-year period.





Sale
of Seattle Operations and IMA Subsidiary





In May
2008, with the approval of the Bankruptcy Court, the assets of the Seattle
operations were sold for $390,000.  As such, these assets, primarily
inventory and fixed assets, were written down to these values as of September
30, 2007.





In
October 2008, with the approval of the Bankruptcy Court, the stock of IMA was
sold for $100,000.  This value indicated that all intangible assets
were completely impaired.  As such, these intangible assets were
written off as of September 30, 2007.





Default
on Certain Leases





As
described in Notes 16 and 17, the Company defaulted on its Seattle office lease
in 2008.  Certain of the Company’s officers, directors, and
stockholders are owners of the company that owned the facility.  The
Company vacated these premises in March 2008 and defaulted on the
lease.  Due to the related party relationship with the lessors, the
Company was not billed a lease cancellation fee or held further responsible for
its obligations under the lease agreement.





The
Company also leased office facilities in New York for IMA under an operating
lease.  This lease was assumed by the new owners of IMA in October
2008.  In connection with the Chapter 11 proceedings, the Company
defaulted on its capital leases.


33




ITEM
      8.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM
      8A.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Exchange Act, as of September 30, 2007. Our principal executive and financial
officers supervised and participated in the evaluation. Based on the evaluation,
our principal executive and financial officers each concluded that our
disclosure controls and procedures were effective in providing reasonable
assurance that information required to be disclosed by us in the reports we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s forms and rules as of September
30, 2007.





Management’s
Annual Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a
process designed by, or under the supervision of, a company’s principal
executive and principal financial officers and effected by a company’s board of
directors, management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:




·  pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets;




·  provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors;
and




· provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect
on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.




Our
management, including the chief executive officer and principal financial
officer,concluded
that we did not maintain appropriate internal control over financial reporting
at September 30, 2007. In arriving at that conclusion, we considered the
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and we
did not perform a complete assessment as outlined in Commission Guidance
Regarding Management’s Report on Internal Control Over Financial Reporting Under
Section 13(a) or 15(d) of the Exchange Act.





Review
of Practices and Results





In
summary, the Company did not conduct sufficient testing of internal controls in
2007 to satisfy COSO requirements. As a result, we intend to put an
implementation plan in place whereby sufficient testing to satisfy COSO
requirements will be performed, but given
the bankruptcy proceedings discussed elsewhere in this Form 10-KSB each plan
will not be put in place until we emerge from bankruptcy.





Despite
the insufficient testing, we believe that the Company’s consolidated financial
statements contained in this Form 10-KSB filed with the SEC fairly present our
financial position, results of operations and cash flows for the transition
period ending September 30, 2007 in all material respects. This annual report
does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial reporting. Our
internal controls were not subject to attestation by our independent registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit us to provide only management’s report in this
annual report.








Changes
in Internal Controls




There
were no changes in the Company’s internal control over financial reporting that
occurred during the Company’s fiscal year nor subsequent last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.





ITEM
      8B.
            OTHER
      INFORMATION




Late
Filing of 10-KSB and Trading Suspension Notice


On
December 28, 2007, we filed, on Form 12b-25, a Notification of Late Filing of
our annual report Form 10-KSB for the period ended September 30,
2007.  On January 18, 2008, pursuant to NASDAQ Marketplace Rule
6530(e)(1)(“Rule 6530”) our common stock was suspended from trading on the
Over-the-Counter Bulletin Board (“OTCBB”) and our trading symbol was changed to
IMMGE.  These measures were triggered by our failure to timely file
our 10-KSB with the SEC.  As this was our third failure to timely file
within the prior two-year period a periodic report with the SEC, our common
stock is ineligible for quotation on the OCTBB under Rule 6530; our common stock
will remain ineligible for quotation on the OCTBB until we have timely filed in
a complete form all required annual and quarterly reports due in a one-year
period.
 34


PART
III




ITEM
      9.
            DIRECTORS,
      EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a) OF THE EXCHANGE ACT





Management
and Board of Directors





As
described in Part I, Item 1, of this Form 10-KSB, as a result of the Plan, in
February 2009, all of the officers and directors set forth below were removed
from their positions and were replaced by Barry Eisenberg as sole officer and
director.




The
following sets forth the name, age and position of each director and executive
officer of our company as of September 30, 2007:





Name
            
            Age
            
            Position(s)Joseph
      F. Martinez
            
            58
            
            Chairman
      of the Board, Chief Executive OfficerLaird
      Laabs
            
            53
            
            PresidentStephen
      M. Wilson*
            
            52
            
            Chief
      Financial OfficerTodd
      Weaver
            
            33
            
            Chief
      Technology OfficerMichael
      Medico
            
            61
            
            President,
      Impart Media Advertising, Inc.Steven
      Corey
            
            53
            
            Chief
      Strategy OfficerJ.
      Scott Campbell
            
            48
            
            Chief
      Creative OfficerLarry
      Calkins
            
            53
            
            DirectorRonald
      Elgin
            
            66
            
            DirectorJoachim
      Kempin
            
            64
            
            Director








*On
      February 14, 2008, Steven Wilson resigned from his position as Chief
      Financial Officer.





All
directors serve for terms of one year and until their successors are elected and
qualified. All officers serve at the pleasure of the board of directors. There
are no family relationships among any of the officers and
directors.





Biographical
information concerning the director nominees is set forth on page 8 under the
caption “Election of Directors - Director Nominees”. Biographical information
concerning our remaining executive officers is set forth below:








Joseph F. Martinez . Mr.
Martinez has served as our Chief Executive Officer since March 2006. He has
served as our Chief Financial Officer and the Chairman of our board of directors
since June 2005, when we acquired Impart, Inc. in a reverse acquisition. From
August 2004 until June 2005, Mr. Martinez served as a director of Impart, Inc.
and as its Chief Executive Officer. From 2002 until 2004, he was a financial
advisor to Impart, Inc. In 2002, Mr. Martinez formed Core Venture Partners, LLC,
a merchant-banking and financial advisory firm. Prior to that, Mr. Martinez was
the President and Chief Executive Officer of Centaur Partners, a Silicon
Valley-based investment bank, from 1998 to 2002.





Todd Weaver.Mr. Weaver has
served as our Chief Technology Officer since February 2006. From September 2005
until February 2006, he served as our Vice President of Technology. From 2003
until February 2005, Mr. Weaver served as a senior design engineer of
Amazon.com, Inc. From 1999 until 2003, Mr. Weaver served as Lead Developer of
Entertainment Works and, from 1999 until 2006, he was employed as an Internet
developer by The American Lung Association.





Laird Laabs. Mr. Laabs has
served as our Chief Sales Officer since October 2006 and as a member of our
board of directors since June 2005, when we acquired Impart, Inc. in a reverse
acquisition. Prior to serving as our Chief Sales Officer, Mr. Laabs served as
our President from June 2005 until June 2006 and Chief Marketing Officer from
June 2006 to October 2006. Mr. Laabs was a co-founder of Impart, Inc. and, prior
to the acquisition, he served as one of its directors and as an executive
officer since its incorporation in 1984. From 2001 until the acquisition in June
2005, he served as Impart Inc.’s President. Mr. Laabs also served as Vice
President and a director of Media SideStreet Corporation, a provider of
subscription-based media content, from May 1995 until June 2005, until it was
acquired by Impart, Inc. in June 2005.





Michael Medico. Mr. Medico
has served as an Executive Vice President of our company and President of Impart
Media Advertising, Inc., our wholly owned subsidiary, since March 2006. Mr.
Medico was the founder of E&M Advertising, Inc., NextReflex, Inc. and
E&M West/Camelot Media, Inc., the assets of which we purchased in February
2006, and served as a director and chief executive officer of such companies
since their respective dates of incorporation in 1981, 2000 and
2002.





Steven Corey.Mr. Corey has
served as our Chief Strategy Officer since June 2005, when we acquired Impart,
Inc. in a reverse acquisition. Mr. Corey was a co-founder of Impart, Inc. and,
prior to the acquisition, served as one of its directors and as its Chairman
since its incorporation in 1984. From 1995 until our acquisition of Impart, Inc.
in June 2005, Mr. Corey also served as a director of Media SideStreet
Corporation, a provider of subscription-based media content that was acquired by
Impart, Inc. in June 2005.





J. Scott Campbell. Mr.
Campbell has served as our Chief Creative Officer since April 2007. From
September 2005 until April 2007, Mr. Campbell served as our Vice President of
Creative and Product Design. Prior to joining our company in 2005, Mr. Campbell
served as President of Springbrain Inc. since 2001.


35
 Independence
of the Board of Directors





The board
of directors have adopted Nasdaq’s standards for determining the independence of
its members and believes that it interprets these requirements conservatively.
In applying these standards, the board of directors considers commercial,
industrial, banking, consulting, legal, accounting, charitable and familial
relationships, among others, in assessing the independence of directors, and
must disclose any basis for determining that a relationship is not material. The
board of directors has determined that a majority of its members, namely Messrs.
Calkins, Elgin, and Kempin, are independent directors within the meaning of such
Nasdaq independence standards in terms of independence from management, such
members constituting three (3) of the five (5) members of the board of
directors. In making these independence determinations, the board of directors
did not exclude from consideration as immaterial any relationship potentially
compromising the independence of any of the above directors.





Committees
of the Board of Directors





Our board
of directors has one standing committee, the Audit Committee, which was
established in April 2007. Our board of directors does not have a compensation
committee or a nominating committee, or any committee performing similar
functions. Our entire board of directors is responsible for these functions. Due
to the relatively small size of our company and the resulting efficiency of a
board of directors that is also limited in size, our board of directors has
determined that it is not necessary or appropriate at this time to establish a
separate nominating committee. Our board of directors intends to review
periodically whether such committees should be established.





Nominating
Committee





As stated
above, we do not have a standing nominating committee or any committee
performing similar functions. Our board of directors performs the functions
typically performed by such a committee and does not act pursuant to the terms
of a written charter.





In the
absence of a charter, our board of directors uses a variety of methods for
identifying and evaluating nominees for director. It regularly assesses the
appropriate size of our board of directors, and whether any vacancies exist or
are expected due to retirement or otherwise. If vacancies exist, are anticipated
or otherwise arise, our board of directors considers various potential
candidates for director. The board also determines whether the incumbent
directors whose terms expire at the annual meeting of stockholders desire and
are qualified to continue their service on our board of directors. We are of the
view that the continuing service of qualified incumbents promotes stability and
continuity in the board room, giving us the benefit of the familiarity and
insight into our affairs that our directors have accumulated during their
tenure, while contributing to the board of directors’ ability to work as a
collective body.





Candidates
may come to their attention through current members of our board of directors,
stockholders or other persons. Stockholders are encouraged to submit their
nominations directly to the board, or to named executive officers, for
consideration. These candidates are evaluated at regular or special meetings of
our board of directors, and may be considered at any point during the year.
Additionally, candidates may be evaluated independently and informally through
telephonic communications. In evaluating such recommendations, our board of
directors uses the qualifications and standards discussed below and seeks to
achieve a balance of knowledge, experience and capability on our board of
directors. Our company does not solicit assistance in the identification and
evaluation of nominees for director from third parties.




Qualifications
for consideration as a director nominee may vary according to the particular
areas of expertise that may be desired in order to complement the qualifications
that already exist among our board of directors. Among the factors that our
directors consider when evaluating proposed nominees are their independence,
financial literacy, business experience, character, judgment and strategic
vision. Other considerations would be their knowledge of issues affecting our
business, technical or market insight into our industry, inside involvement as
an executive officer or other informed person in our company, their leadership
experience and their time available for meetings and consultation on company
matters. Our directors seek a diverse group of candidates who possess the
background skills and expertise to make a significant contribution to our board
of directors, our company and our stockholders. All candidates for the board of
directors must be of the highest personal and professional integrity and have
demonstrated exceptional ability and judgment.





While our
company is not currently listed on a national securities exchange, the board of
directors has adopted Nasdaq’s standards for determining the independence of its
members and believes that it interprets these requirements conservatively. In
applying these standards, the board of directors considers commercial,
industrial, banking, consulting, legal, accounting, charitable and familial
relationships, among others, in assessing the independence of directors, and
must disclose any basis for determining that a relationship is not material. The
board of directors has determined that a majority of its members, namely Messrs.
Calkins, Elgin, and Kempin, are independent directors within the meaning of such
Nasdaq independence standards in terms of independence from management, such
members constituting three (3) of the five (5) members of the board of
directors. In making these independence determinations, the board of directors
did not exclude from consideration as immaterial any relationship potentially
compromising the independence of any of the above directors.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
requires our directors and executive officers, and persons who own more than ten
percent of a registered class of our equity securities (“Reporting Persons”), to
file reports of initial reports of ownership and changes in ownership of our
securities. Reporting Persons are required by the Commission to furnish us with
copies of all Section 16(a) forms they file.





Based
solely on our review of the copies of such forms received or written
representations from Reporting Persons, we believe that, with respect to the
fiscal year ended December 31, 2006, all the Reporting Persons complied with all
applicable filing requirements.


36




ITEM
      10.
            EXECUTIVE
      COMPENSATION




Summary
of Cash and Certain Other Compensation





The
following Summary Compensation Table sets forth certain information concerning
the compensation of our Chief Executive Officer and our most highly compensated
executive officers, other than the Chief Executive Officer (collectively, the
“Named Executive Officers”), for the transitional nine-month period ended
September 30, 2007:





SUMMARY
COMPENSATION TABLE








Name
      and Principal Position
            Year
            Salary
              ($)
            Bonus
              ($)
            Stock
              Awards
              ($)
            Option
              Awards
              ($)
      *
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            Nonqualified
              Deferred
              Compensation
              Earnings
              ($)
            All
      Other
              Compensation
              ($)
            Total
              ($)Joseph
      Martinez(1)
              Chief
      Executive Officer and Chief Financial Officer*
            2007
            120,000
            -0-
            61,139
            538,950
            N/A
            N/A
            -0-
            720,089Laird
      Laabs(2)
              Chief
      Sales Officer*
            2007
            119,940
            -0-
            -0-
            
            N/A
            N/A
            -0-
            119,940Steven
      Corey(3)
              Chief
      Strategy Officer
            2007
            90,850
            -0-
            -0-
            -0-
            N/A
            N/A
            -0-
            90,850Thomas
      Muniz(4)
              Chief
      Operating Officer and Chief Technology Officer
            2007
            120,000
            -0-
            -0-
            269,475
            N/A
            N/A
            -0-
            269,475Michael
      Medico(5)
              Executive
      Vice President And President, Impart Media Advertising,
    Inc.
            2007
            118,145
            -0-
            -0-
            -0-
            N/A
            N/A
            -0-
            118,145Todd
      Weaver(6)
              Chief
      Technology Officer
            2007
            120,000
            -0-
            -0-
            134,738
            N/A
            N/A
            -0-
            254,738J.
      Scott Campbell(7)
              Chief
      Creative Officer
            2007
            100,000
            -0-
            -0-
            134,738
            N/A
            N/A
            -0-
            234,738





(1)
            All
      of Mr. Martinez’ cash salary represented above for the was accrued but
      unpaid. We paid $297,491 of such salary (representing the entire
      outstanding amount) to Mr. Martinez through the issuance of shares of our
      common stock in January 2006. In addition, we paid Mr. Martinez $61,139
      for additional 2007 compensation through the issuance of shares of our
      common stock in January 2006. The closing price of our common stock on the
      issuance date as reported on the over-the-counter bulletin board was $0.95
      per share. See section caption “Outstanding Equity Awards at Fiscal
      Year-End” for a discussion with respect to grants of options to purchase
      shares of our common stock.





(2)
            Mr.
      Laabs was appointed Executive President on August 22, 2007, having
      previously served as our Chief Sales Officer since October 1, 2006 our
      Chief Marketing Officer prior to such date.  Mr. Laabs
      previously served as President of Impart from June 2005 until June 2006.
      As of June 30, 2005, we entered into a three-year employment agreement
      with Mr. Laabs that provides an annual base salary of $120,000, plus
      benefits, and is subject to termination provisions. See section caption
      “Outstanding Equity Awards at Fiscal Year-End” for a discussion with
      respect to grants of options to purchase shares of our common
      stock.





(3)
            Mr.
      Corey was appointed as our Chief Strategy Officer effective June 30, 2005.
      Prior to June 30, 2005, Mr. Corey served as the Chief Strategy Officer of
      Impart, which we acquired on June 30, 2005. Compensation paid to Mr. Corey
      in 2005 included a salary of $40,000 paid by our company after the
      acquisition of Impart and a salary of $40,000 paid by Impart prior to the
      acquisition. In 2004, $40,000 of Mr. Corey’s salary represented accrued
      but unpaid salary. On January 30, 2006, we issued 80,000 shares of our
      common stock to Mr. Corey in full satisfaction of the $80,000 in accrued
      but unpaid salary. The closing price of our common stock on the issuance
      date as reported on the over-the-counter Bulletin Board was $0.95 per
      share. As of June 30, 2005, we entered into a three-year employment
      agreement with Mr. Corey that provides an annual base salary of $120,000,
      plus benefits, and is subject to termination provisions. See section
      caption “Outstanding Equity Awards at Fiscal Year-End” for a discussion
      with respect to grants of options to purchase shares of our common
      stock.





(4)
            Mr.
      Muniz was as appointed as our Chief Operating Officer and Chief Technology
      Officer effective June 30, 2005. As of June 30, 2005, we entered into a
      three-year employment agreement with Mr. Muniz that provides an annual
      base salary of $120,000, plus benefits, and is subject to termination
      provisions. See section caption “Outstanding Equity Awards at Fiscal
      Year-End” for a discussion with respect to grants of options to purchase
      shares of our common stock.  On September 12, 2007, Mr. resigned
      from his positions as President and Corporate Secretary of our company,
      effective as of October 1, 2007.




37


(5)
            Mr.
      Medico was appointed as the Executive Vice President of our company and
      President of Impart Media Advertising, Inc., our wholly owned subsidiary,
      effective March 1, 2006. Prior to that time, Mr. Medico served as
      President of E&M Advertising, Inc. On February 28, 2006, we entered
      into an employment agreement with Mr. Medico that provides for an annual
      base salary of $125,000, plus benefits, sales commissions, and yearly
      bonus based on the divisions performance and is subject to termination
      provisions.





(6)
            Mr.
      Weaver was appointed as our Chief Technology Officer, effective February
      2006. In September 2006, we entered into a three-year employment agreement
      with Mr. Weaver that provides an annual base salary of $120,000, plus
      benefits, and is subject to termination provisions. See section caption
      “Outstanding Equity Awards at Fiscal Year-End” for a discussion with
      respect to grants of options to purchase shares of our common
      stock.





(7)
            Mr.
      Campbell was appointed as our Chief Creative Officer, effective April
      2007. Mr. Campbell receives an annual salary of $100,000 and does not
      currently have a formal employment agreement with us. See section caption
      “Outstanding Equity Awards at Fiscal Year-End” for a discussion with
      respect to grants of options to purchase shares of our common
      stock.




Employment
Agreements





We had
employment agreements with six of our executives: Mr. Michael Medico, Mr. Joseph
F. Martinez, Mr. Thomas C. Muniz, Mr. Laird Laabs, Mr. Steven Corey, and Mr.
Todd Weaver. These agreements are summarized below and include the ability to
receive certain payments from us in the event of certain change of control or
termination events.





Joseph
F. Martinez





On June
30, 2005, we entered into an employment agreement with Mr. Joseph F. Martinez,
pursuant to which Mr. Martinez serves as Chief Financial Officer of our company.
The agreement provides for a term of three-years, commencing on June 30,
2005and
terminating on June 29, 2008, with an annual base salary of $120,000. The
employment agreement also provides that, in the event his employment is
terminated for any reason other than (i) by us for “cause” (as defined) or (ii)
by Mr. Martinez for “good reason” (as defined), we will pay to Mr. Martinez a
severance amount equal to his annual base salary, pro-rated, for the lesser of
(x) the remainder of the original term of the agreement or (y) the 12-month
period following the effective date of termination. The terms of his employment
agreement were unchanged as a result of his appointment as Chief Executive
Officer.





Michael
Medico





On
February 28, 2006, we entered into an employment agreement with Mr. Michael
Medico, pursuant to which Mr. Medico serves as an Executive Vice President of
our company and President of our advertising division. The terms of the
agreement expire on December 31, 2008. The agreement provides that Mr. Medico
will receive an annual base salary of $125,000. In addition to his base salary,
Mr. Medico will be entitled to receive an annual cash bonus based on a
percentage of our Advertising Division’s EBITDA (as defined) and cash
commissions equal to a percentage of the advertising sales by our Advertising
Division and of certain hardware sales by our company. In the event his
employment is terminated for any reason other than (i) by us for “cause” (as
defined) or (ii) by him for “good reason” (as defined), we are required to pay
Mr. Medico a severance amount equal to his annual base salary, pro-rated, for
the lesser of (x) the remainder of the original term of the agreement or (y) the
12-month period following the effective date of termination.




Laird
Laabs





On June
30, 2005, we entered into an employment agreement with Mr. Laird Laabs, pursuant
to which Mr. Laabs serves as President of our company. The agreement provides
for a term of three-years, commencing on June 30, 2005and terminating on June
29, 2008, with an annual base salary of $120,000. His employment agreement also
provides that, in the event his employment is terminated for any reason other
than (i) by us for “cause” (as defined) or (ii) by Mr. Laabs for “good reason”
(as defined), we will pay to Mr. Laabs a severance amount equal to his annual
base salary, pro-rated, for the lesser of (x) the remainder of the original term
of the agreement or (y) the 12-month period following the effective date of
termination. Mr. Laabs resigned from his position of President in June 2006,
concurrent with his appointment as our Chief Marketing Officer. Mr. Laabs
resigned from his position as Chief Marketing Officer in October 2006,
concurrent with his appointment as our Chief Sales Officer. The terms of his
employment agreement were unchanged as a result of his resignation as President
and appointment as Chief Marketing Officer and resignation as Chief Marketing
Officer and appointment as Chief Sales Officer.





Steven
Corey





On June
30, 2005, we entered into an employment agreement with Mr. Steven Corey,
pursuant to which Mr. Corey serves as Chief Strategy Officer of our company. The
agreement provides for a term of three-years, commencing on June 30, 2005 and
terminating on June 29, 2008, with an annual base salary of $120,000. The
employment agreement also provides that, in the event his employment is
terminated for any reason other than (i) by us for “cause” (as defined) or (ii)
by Mr. Corey for “good reason” (as defined), we will pay to Mr. Corey a
severance amount equal to his annual base salary, pro-rated, for the lesser of
(x) the remainder of the original term of the agreement or (y) the 12-month
period following the effective date of termination.





Todd
Weaver





On
September 1, 2006, we entered into an employment agreement with Mr. Todd Weaver,
pursuant to which Mr. Weaver serves as Chief Technology Officer of our company.
The agreement provides for a term of three-years, commencing on September 1,
2006 and terminating on August 31, 2009, with an annual base salary of $120,000.
The employment agreement also provides that, in the event his employment is
terminated for any reason other than (i) by us for “cause” (as defined) or (ii)
by Mr. Weaver for “good reason” (as defined), we will pay to Mr. Weaver a
severance amount equal to his annual base salary, pro-rated, for the lesser of
(x) the remainder of the original term of the agreement or (y) the 12-month
period following the effective date of termination.





Outstanding
Equity Awards at Fiscal Year-End





As
described in Part I, Item 1 of this Form 10-KSB, all outstanding equity award
set forth below have been cancelled.


38


The
following table sets forth information with respect to the outstanding equity
awards for each named executive officer, including unexercised options, stock
that has not vested, and equity incentive plan awards, outstanding as of
September 30, 2007:





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END





Option
      Awards
            Stock
      AwardsName
            Number
      of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Exercisable
            Number
      of
              Securities
              Underlying
              Unexercised
              Options
              (#)
              Unexercisable
            Equity
              Incentive
              Plan
      Award:
              Number
      of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
            Option
              Exercise
              Price
              ($)
            Option
              Expiration
              Date
            Number
      of
              Shares
      or
              Units
      of
              Stock
      That
              Have
      Not
              Vested
              (#)
            Market
              Value
      of
              Shares
      or
              Units
      of
              Stock
      That
              Have
      Not
              Vested
              ($)
            Equity
              Incentive
              Plan
      Awards:
              Number
      of
              Unearned
              Shares,
      Units
              or
      Other
              Rights
      That
              Have
      Not
              Vested
              (#)
            Equity
              Incentive
              Plan
      Awards:
              Market
      or
              Payout
      Value
              of
      Unearned
              Shares,
      Units
              or
      Other
              Rights
      That
              Have
      Not
              Vested
              ($)Joseph
      Martinez(1)
            50,000
            -0-
            25,000
              
              500,000
            0.77
              
              1.10
            12/28/10
              
              8/21/16
            N/A
            N/A
            N/A
            N/AThomas
      C. Muniz(2)
            50,000
            -0-
            25,000
              
              250,000
            0.77
              
              1.10
            12/28/10
              
              8/21/16
            N/A
            N/A
            N/A
            N/ALaird
      Laabs(3)
            50,000
            -0-
            25,000
            0.77
            12/28/10
            N/A
            N/A
            N/A
            N/ASteven
      Corey(4)
            50,000
            -0-
            25,000
            0.77
            12/28/10
            N/A
            N/A
            N/A
            N/ATodd
      Weaver(5)
            40,000
            -0-
            20,000
              
              125,000
            0.70
              
              1.10
            12/28/10
              
              8/21/16
            N/A
            N/A
            N/A
            N/AJ.
      Scott Campbell(6)
            40,000
            -0-
            20,000
            0.70
            12/28/10
            N/A
            N/A
            N/A
            N/A




(1)
            On
      August 21, 2006, we granted Mr. Martinez options to purchase 500,000
      shares of our common stock at an exercise price of $1.10 per share. These
      options shall vest in three equal installments of 33.3% of the amount
      granted with the first installment vesting August 21, 2007 and the
      remaining installments vesting on each of the next two anniversaries
      thereafter, subject to his continued employment. These options expire
      August 21, 2016. On December 28, 2005, we also granted Mr. Martinez
      options to purchase 75,000 shares of our common stock at an exercise price
      of $0.77 per share. These options shall vest in three equal installments
      of 33.3% of the amount granted with the first installment vesting December
      28, 2005 and the remaining installments vesting on each of the next two
      anniversaries thereafter, subject to his continued employment. These
      options expire December 28, 2010.





(2)
            On
      August 21, 2006, we granted Mr. Muniz options to purchase 250,000 shares
      of our common stock at an exercise price of $1.10 per share. These options
      shall vest in three equal installments of 33.3% of the amount granted with
      the first installment vesting August 21, 2007 and the remaining
      installments vesting on each of the next two anniversaries thereafter,
      subject to his continued employment. These options expire August 21, 2016.
      On December 28, 2005, we also granted Mr. Muniz options to purchase 75,000
      shares of our common stock at an exercise price of $0.77 per share. These
      options shall vest in three equal installments of 33.3% of the amount
      granted with the first installment vesting December 28, 2005 and the
      remaining installments vesting on each of the next two anniversaries
      thereafter, subject to his continued employment. These options expire
      December 28, 2010.  On September 12, 2007, Mr. Muniz resigned
      from his positions as President and Corporate Secretary of our company,
      effective as of October 1, 2007.





(3)
            On
      December 28, 2005, we granted Mr. Laabs options to purchase 75,000 shares
      of our common stock at an exercise price of $0.77 per share. These options
      shall vest in three equal installments of 33.3% of the amount granted with
      the first installment vesting December 28, 2005 and the remaining
      installments vesting on each of the next two anniversaries thereafter,
      subject to his continued employment. These options expire December 28,
      2010.





(4)
            On
      December 28, we granted Mr. Corey options to purchase 75,000 shares of our
      common stock at an exercise price of $0.77 per share. These options shall
      vest in three equal installments of 33.3% of the amount granted with the
      first installment vesting December 28, 2005 and the remaining installments
      vesting on each of the next two anniversaries thereafter, subject to his
      continued employment. These options expire December 28,
    2010.





(5)
            On
      August 21, 2006, we granted Mr. Weaver options to purchase 125,000 shares
      of our common stock at an exercise price of $1.10 per share. These options
      shall vest in three equal installments of 33.3% of the amount granted with
      the first installment vesting August 21, 2007 and the remaining
      installments vesting on each of the next two anniversaries thereafter,
      subject to his continued employment. These options expire August 21, 2016.
      On December 28, 2005, we also granted Mr. Weaver options to purchase
      60,000 shares of our common stock at an exercise price of $0.70 per share.
      These options shall vest in three equal installments of 33.3% of the
      amount granted with the first installment vesting December 28, 2005 and
      the remaining installments vesting on each of the next two anniversaries
      thereafter, subject to his continued employment. These options expire
      December 28, 2010.





(6)
            On
      August 21, 2006, we granted Mr. Campbell options to purchase 125,000
      shares of our common stock at an exercise price of $1.10 per share. These
      options shall vest in three equal installments of 33.3% of the amount
      granted with the first installment vesting August 21, 2007 and the
      remaining installments vesting on each of the next two anniversaries
      thereafter, subject to his continued employment. These options expire
      August 21, 2016. On December 28, 2005, we also granted Mr. Campbell
      options to purchase 60,000 shares of our common stock at an exercise price
      of $0.70 per share. These options shall vest in three equal installments
      of 33.3% of the amount granted with the first installment vesting December
      28, 2005 and the remaining installments vesting on each of the next two
      anniversaries thereafter, subject to his continued employment. These
      options expire December 28, 2010.


39




Board
of Directors Compensation




Although
we currently do not have a formal policy with respect to board of director
compensation, we have granted our non-employee directors options to purchase
shares of our common stock in an effort to attract, motivate and retain high
performing independent members of our board of directors. We do not pay any of
our directors cash fees in consideration for their services, attendance at board
of director or committee meetings nor do we pay our directors in consideration
for chairing a committee.





Employee
directors are not additionally compensated for board services. Upon being
elected to our board of directors, non-employee independent directors are
eligible to receive a grant of ten-year stock options to purchase 6,000 shares
of our common stock, which vest over a three-year period and have an exercise
price equal to the fair market value of our common stock on the date of
grant.





Directors
who also serve as our executive officers do not receive additional compensation
in respect of their services as directors. For further information on individual
issuances and grants to executive officers, please see the “Summary Compensation
Table” above.





The
following table sets forth information with respect to director compensation
during the transition period ended September 30, 2007:





DIRECTOR
COMPENSATION




Name
            Fees
      Earned or Paid in Cash
              ($)
            Stock
      Awards
              ($)
            Option
      Awards
              ($)
            Non-Equity
      Incentive Plan Compensation
              ($)
            Nonqualified
      Deferred Compensation
              Earnings
              ($)
            All
      Other Compensation
              ($)
            Total
              ($)Joseph
      Martinez
            -0-
            -0-
            -0-
            N/A
            N/A
            -0-
            N/ALaird
      Laabs
            -0-
            -0-
            -0-
            N/A
            N/A
            -0-
            N/ALarry
      Calkins(1)
            -0-
            -0-
            26,948
            N/A
            N/A
            -0-
            26,948Ronald
      Elgin(3)
            -0-
            -0-
            26,948
            N/A
            N/A
            -0-
            26,948Joachim
      Kempin(3)
            -0-
            14,700
            26,948
            N/A
            N/A
            -0-
            41,648





(1)
            On
      August 21, 2006, we granted Mr. Calkins options to purchase 25,000 shares
      of our common stock, valued at an exercise price of $1.10 per share. These
      options vest in three equal installments of 33.3% of the amount granted,
      with the first installment vesting on August 21, 2007 and the remaining
      installments vesting on each of the subsequent anniversaries thereafter,
      subject to his continued participation as a board member. These options
      expire on August 21, 2016.





(2)
            On
      August 21, 2006, we granted Mr. Elgin options to purchase 25,000 shares of
      our common stock at an exercise price of $1.10 per share. These options
      vest in three equal installments of 33.3% of the amount granted, with the
      first installment vesting August 21, 2007 and the remaining installments
      vesting on each of the subsequent anniversaries thereafter, subject to his
      continued participation as a board member. These options expire August 21,
      2016.





(3)
            On
      August 21, 2006, we granted Mr. Calkins options to purchase 25,000 shares
      of our common stock at an exercise price of $1.10 per share. These options
      vest in three equal installments of 33.3% of the amount granted, with the
      first installment vesting August 21, 2007 and the remaining installments
      vesting on each of the subsequent anniversaries thereafter, subject to his
      continued participation as a board member. These options expire August 21,
      2016. We had previously issued 6,000 shares of our common stock, valued at
      $14,700 to Mr. Kempin on April 21, 2006 in consideration for the
      performance of consulting and advisory services prior to becoming a member
      of our board of directors. On February 11, 2008, Joachim Kempin resigned
      from the Board of
Directors.





Securities
Authorized for Issuance under Equity Compensation Plans





On
February 24, 2006, our board of directors adopted and approved our Incentive
Plan (as amended, the “Incentive Plan”). Amended on December 29, 2006, the
Incentive Plan allows for awards of stock options, restricted stock grants and
share appreciation rights for up to an aggregate of 5,000,000 shares of our
common stock.





As of
April 16, 2007, we granted options to purchase 4,214,500 shares of our common
stock under the Incentive Plan. Options granted in the future under the
Incentive Plan are within the discretion of our board of directors.


40





The
following table summarizes the number of securities to be issued upon exercise
of outstanding options, warrants, and rights, as well as number of securities
remaining available for future issuance under our Incentive Plan, as of the
transition period ended September 30, 2007:





EQUITY
COMPENSATION PLAN INFORMATION




Plan
      Category
            (a)
              Number
      of securities to be issued upon exercise of outstanding options, warrants,
      and rights
            (b)
              Weighted-
      average exercise price of outstanding options, warrants, and
      rights
            (c)
              Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflect in column
      (a))Equity
      compensation plans approved by security holders
            -0-
            N/A
            -0-Equity
      compensation plans not approved by security holders(1)
            1,245,270
            N/A
            -0-2006
      Equity Incentive Plan(2)
            1,911,250
            0.97
            88,750Laurus
      Master Funds Ltd. (3)
            981,000
            0.48
            -0-Series
      A Preferred transaction (4)
            3,338,714
            1.64
            -0-Total
            4,985,694
            N/A
            88,750





(1)
            Equity
      compensation plans not approved by security holders includes all options,
      warrants, and rights unexercised as of transition period ended September
      30, 2007.





(2)
            Our
      Incentive Plan allows for the granting of share options to members of our
      board of directors, officers, non-officer employees and
      consultants.





(3)
            We
      also issued warrants to Laurus Master Fund, Ltd. in connection with
      financing they provided to us.





(4)
            We
      also issued warrants to certain holders of our Series A Preferred Stock in
      connection with the issuance of Series A Preferred
  Stock.




ITEM
      11.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





As
described in Part I, Item 1 of this Form 10-KSB, all of the equity interests set
forth below have been cancelled.




The
following table sets forth the names, addresses and number of shares of our
common stock and Series A Preferred Stock beneficially owned by all persons
known to us to formerly be beneficial owners of more than 5% of the outstanding
shares of common stock, and the names and number of shares beneficially owned by
all of our directors and all of our executive officers and directors as a
group:




Name
      of beneficial owner
            Amount
      and nature of beneficial ownership(1)
            Percent
      of class(1)Steven
      Corey
            3,136,998(2)
            13.2
      %Laird
      Laabs
            2,605,913(3)
            11.0
      %Joseph
      F. Martinez
            1,039,186(4)
            4.4%Thomas
      C. Muniz
            947,969
      (5)
            4.0
      %Michael
      Medico
            931,453(6)
            3.9
      %Todd
      Weaver
            84,667(7)
            *J.
      Scott Campbell
            84,667
      (8)
            *Joachim
      Kempin
            18,333
      (9)
            *Larry
      Calkins
            12,333(10)
            *Stephen
      M. Wilson(12)
            0
            *Ronald
      Elgin
            8,333(11)
            *All
      directors and named executive officers as a group (10 persons)(13)
            8,869,852
            37.4
      %


_________________





*
            Constitutes
      less than 1%.





(1)
            For
      purposes of this table, information as to the beneficial ownership of
      shares of our common stock is determined in accordance with the rules of
      the SEC and includes general voting power and/or investment power with
      respect to securities. Except as otherwise indicated, all shares of our
      common stock and Series A Preferred Stock are beneficially owned, and sole
      investment and voting power is held, by the person named. The percentages
      in this table are based upon a total of 23,703,702 shares outstanding as
      of April 16, 2007, not including 2,903,229 shares issuable upon conversion
      of the outstanding shares of our Series A Preferred Stock. For purposes of
      this table, a person or group of persons is deemed to have “beneficial
      ownership” of any shares of our common stock that such person has the
      right to acquire within 60 days after April 16, 2007. For purposes of
      computing the percentage of outstanding shares of our common stock held by
      each person or group of persons named above, any shares which such person
      or persons has the right to acquire within 60 days after April 16, 2007 is
      deemed to be outstanding but is not deemed to be outstanding for the
      purpose of computing the percentage ownership of any other person. The
      inclusion herein of such shares listed beneficially owned does not
      constitute an admission of beneficial
ownership.





(2)
            Includes
      2,510,913 shares of our common stock owned of record and 50,000 shares of
      our common stock issuable upon the exercise of outstanding
      options.





(3)
            Includes
      2,510,913 shares of our common stock owned of record, 50,000 shares of our
      common stock issuable upon the exercise of outstanding options, 20,000
      shares of our common stock held of record by Mr. Laabs’ wife and an
      aggregate of 25,000 shares of our common stock held of record by Mr.
      Laabs’ children.





(4)
            Includes
      822,519 shares of our common stock owned of record and 216,667 shares of
      our common stock issuable upon the exercise of outstanding
      options.





(5)
            Includes
      814,636 shares of our common stock owned of record and 133,333 shares of
      our common stock issuable upon the exercise of outstanding
      options.  On August 12, 2007, Mr. Muniz resigned from his
      positions of President and Secretary of the
  Company.





(6)
            Includes
      881,453 shares of our common stock owned of record and 50,000 shares of
      our common stock issuable upon the exercise of outstanding
      options.





(7)
            Includes
      3,000 shares of our common stock owned of record and 81,667 shares of our
      common stock issuable upon the exercise of outstanding
      options.





(8)
            Includes
      3,000 shares of our common stock owned of record and 81,667 shares of our
      common stock issuable upon the exercise of outstanding
      options.





(9)
            Includes
      6,000 shares of our common stock owned of record and 12,333 shares of our
      common stock issuable upon the exercise of outstanding
      options.  On February 11, 2008, Joachim Kempin resigned from the
      Board of Directors.





(10)
            Represents
      12,333 shares of our common stock issuable upon the exercise of
      outstanding options.





(11)
            Represents
      8,333 shares of our common stock issuable upon the exercise of outstanding
      options.(12)
            On
      February 14, 2008, Steven Wilson resigned from his position as Chief
      Financial Officer.







(13)
            None
      of the shares held by Management are subject to pledge as
      security.




41


ITEM
      12.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





Registration
Rights Agreement





Mr. Laird
Laabs and Mr. Steven Corey, each formerly an officer of the Company and formerly
a beneficial holder of more than 10% of the outstanding shares of the
Company, were parties to a Registration Rights Agreement, dated as of June
30, 2005, with the Company, pursuant to which such persons have demand and
“piggyback” registration rights with respect to certain shares of our common
stock owned by them.





Promissory
Notes and Other Financing Arrangements





On June
30, 2005, the Company issued a promissory note to Mr. Tom O’Rourke, our former
Executive Vice President of Marketing, in the principal amount of $250,000 as
payment in part of the purchase price paid by Impart, Inc. for substantially all
of the assets of iPoint Networks, LLC, a company owned by Mr. O’Rourke. The
promissory note bore interest at the rate of 8% per year and matured on June 30,
2006. We paid all outstanding amounts due under this promissory note in January
2006.





On April
20, 2005, the Company issued a three year promissory note to Bruce Corey, Steven
Cory’s father, in the principal amount of $150,000 in consideration for a loan
made by Bruce Corey in the principal amount, at an interest rate of 12% per
year. The amounts due under this promissory note are
currently outstanding.




On
November 4, 2005, we entered into an agreement (the “Letter Agreement”) with
certain stockholders of our company, including Joseph Martinez, our Chief
Executive Officer, Chief Financial Officer and Chairman, Laird Laabs, our Chief
Sales Officer and one of our directors, Steven Corey, our Chief Strategy
Officer, and Tom Muniz, our Chief Operating Officer and Chief Technology
Officer, pursuant to which we agreed to issue to each of such stockholders a
promissory note in lieu of the issuance of the additional shares of our common
stock that were required to be issued under the terms of the Agreement and Plan
of Merger, dated as of June 30, 2005, among Impart, our company and Limelight
Merger II Corp., a Washington corporation (the “Merger Agreement”). Pursuant to
the terms of the Merger Agreement, each stockholder who owned shares of Impart
(the “Impart Stockholders”) as of June 30, 2005 was entitled to receive a
certain number of additional shares of our common stock following the
consummation of such transaction. The aggregate number of shares issuable was
approximately 2,875,000 million shares. The Letter Agreement provided that the
principal amount of each such promissory note issued in lieu of shares would
equal the number of additional shares of common stock that such IMPART
Stockholder was entitled to receive pursuant to the Merger Agreement multiplied
by $.08. In connection with the Letter Agreement, we issued promissory notes to
the IMPART Stockholders in the aggregate principal amount of $4.6 million. The
principal amount of such promissory notes, together with accrued interest
thereon at the rate of 6% per annum, was to be paid on or before November 4,
2007. Effective December 30, 2005, the IMPART Stockholders agreed to cancel such
promissory notes and to convert the outstanding principal and interest
represented thereby into an aggregate of 2,934,991 shares of our common
stock.





During
April 2005, we issued two promissory notes to Laird Laabs, our Chief Sales
Officer and a director of our company, and Steven Corey, our Chief Strategy
Officer, in the amounts of $16,000 and $20,000, respectively, to pay for
equipment we purchased from Impart. The promissory note issued to Mr. Laabs
accrued interest at the rate of 20% per annum. The promissory note issued to Mr.
Corey accrued interest at the rate of 8.5% percent per annum. We paid both of
these promissory notes in full on April 11, 2006.





On June
30, 2005, Impart entered into an asset purchase agreement with Media Side Street
Corporation (“MSSCO”) to purchase substantially all of the assets of MSSCO for a
purchase price of $1,027,965. Laird Laabs, who also serves as our Chief Sales
Officer, and Steven Corey, who serves as our Chief Strategy Officer, were
stockholders of MSSCO at the time. Thomas Muniz, our Chief Operating Officer and
Chief Technology Officer was the founder and served as the President of
MSSCO.





Certain
Relationships





Anthony
Medico, the son of Michael Medico, our Executive Vice President and President of
our wholly-owned subsidiary, Impart Media Advertising, Inc., is employed by us
as our Executive Vice President of Operations for Impart Media Advertising, Inc.
He was paid $118,145 in consideration of services performed during the fiscal
year ended 2006.





Lease
Agreement





We were
the tenant under a lease agreement, dated June 24, 1998, with 1300 North
Northlake Way LLC, a Washington limited liability company (the “Landlord”). The
principals of the Landlord were Laird Laabs, our Chief Sales Officer and a
director of our company, and Steven Corey, our Chief Strategy Officer. Mr. Laabs
and Mr. Corey were each beneficial owners of in excess of 10% of the
outstanding common stock of our company. During fiscal years ended 2005 and
2006, we paid to the Landlord rent in the aggregate amounts of $177,200 and
$180,000, respectively.





ITEM
      13.
            EXHIBITS





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


42








SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.





Dated:
            
            Impart
      Media Group, Inc.April
      3, 2009By:
      /s/ Joseph MartinezJoseph
      MartinezChief
      Executive Officer








In
accordance with the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.





Signature/Date
            
            Title/s/
      Joseph
      Martinez
            
            Chief
      Executive Officer (principal executive officer),Joseph
      Martinez
            
            Chief
      Financial Officer (principal accounting officer)April
      3, 2009
            
            and
      Chairman of the Board of Directors




43


EXHIBIT
INDEX




Exhibit
              Number
            
            Exhibit
      Title2.1
            
            Agreement
      and Plan of Merger, dated as of June 30, 2005, by and among our company,
      Limelight Merger II Corp. and IMPART, Inc. (incorporated by reference to
      Exhibit 2.1 to our Current Report on Form 8-K, dated June 30, 2005, as
      filed with the Commission on July 7, 2005).2.2
            
            Asset
      Purchase Agreement, dated as of February 28, 2006, by and among our
      company, Impart Media Advertising, Inc., E&M Advertising, Inc.,
      E&M West/Camelot Media, Inc. and NextReflex, Inc (incorporated by
      reference to Exhibit 2.1 to our Current Report on Form 8-K, dated February
      28, 2006, as filed with the Commission on March 6,
  2006).2.4
            
            Order
      Confirming Plan Of Reorganization. Incorporated by reference to the
      Company’s Form 8-K filed February 27, 20092.5
            
            Plan
      Of Reorganization. Incorporated by reference to the Company’s Form 8-K
      filed February 27, 20093.1
            
            Articles
      of Incorporation dated as of May 17, 1996 (incorporated by reference to
      Exhibit 3.1 to our Current Report on Form 8-K, as filed with the
      Commission on October 27, 2000).3.2
            
            Certificate
      of Amendment to Articles of Incorporation dated as of October 3, 2002
      (incorporated by reference to Exhibit 3.2 to our Current Report on Form
      8-K, dated October 2, 2002, as filed with the Commission on October 7,
      2002).3.3
            
            Certificate
      of Amendment to Articles of Incorporation dated as of February 29, 2004
      (incorporated by reference to Exhibit 3.3 to our Annual Report on Form
      10-KSB for our fiscal year ended December 31,
  2004).3.4
            
            Certificate
      of Amendment to Articles of Incorporation dated as of January 6, 2005
      (incorporated by reference to Exhibit 3.4 to our Annual Report on Form
      10-KSB for our fiscal year ended December 31,
  2004).3.5
            
            Certificate
      of Amendment to our Articles of Incorporation dated December 22, 2005
      (incorporated by reference to Exhibit 3.1 to our Current Report on Form
      8-K, dated December 22, 2005, as filed with the Commission on December 22,
      2005).3.6
            
            Certificate
      of Designation of the Relative Rights and Preferences of the Series A
      Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to
      our Current Report on Form 8-K, dated March 3, 2006, as filed with the
      Commission on March 7, 2006).3.7
            
            By-laws
      (incorporated by reference to Exhibit 3.1 to our Current Report on Form
      8-K, dated September 28, 2005, as filed with the Commission on January 6,
      2006).3.8
            
            Certificate
      of Amendment to Certificate of Designation of the Relative Rights and
      Preferences of the Series A Convertible Preferred Stock of Impart Media
      Group, Inc., dated as of March 26, 2007 (incorporated by reference to
      Exhibit 3.1 to our Form 8-K, dated March 22, 2007, as filed with the
      Commission on March 28, 2007).4.1
            
            Impart
      Media Group, Inc. 2006 Equity Incentive Plan, dated as of March 1, 2006
      (incorporated by reference to Exhibit 10.29 to our Annual Report on Form
      10-KSB for our fiscal year ended December 31, 2005, as filed with the
      Commission on April 17, 2006).4.2
            
            Amendment
      No. 1 to Impart Media Group, Inc. 2006 Equity Incentive Plan, dated as of
      December 29, 2006 (incorporated by reference to Exhibit 10.2 to our
      Registration Statement on Form S-8, dated as of January 22, 2007, as filed
      with the Commission on January 22, 2007).10.1
            
            Registration
      Rights Agreement, dated as of June 30, 2005, among our company and the
      other signatory parties thereto (incorporated by reference to Exhibit 10.1
      to our Current Report on Form 8-K, dated June 30, 2005, as filed with the
      Commission on July 7, 2005).10.2
            
            Lock
      Up Agreement, dated as of June 30, 2005, among our company and Laird
      Laabs, Steven Corey, Steven Boscacci, Shane Bumbalo and Stretton Brown
      (incorporated by reference to Exhibit 10.2 to our Current Report on Form
      8-K, dated June 30, 2005, as filed with the Commission on July 7,
      2005).10.3
            
            Employment
      Agreement, dated as of June 30, 2005, between our company and Laird Laabs
      (incorporated by reference to Exhibit 10.5 to our Current Report on Form
      8-K, dated June 30, 2005, as filed with the Commission on July 7,
      2005).10.4
            
            Employment
      Agreement, dated as of June 30, 2005, by and between our company and
      Joseph Martinez (incorporated by reference to Exhibit 10.6 to our Current
      Report on Form 8-K, dated June 30, 2005, as filed with the Commission on
      July 7, 2005).10.5
            
            Employment
      Agreement, dated as of June 30, 2005, by and between our company and
      Steven Corey (incorporated by reference to Exhibit 10.7 to our Current
      Report on Form 8-K, dated June 30, 2005, as filed with the Commission on
      July 7, 2005).




10.6
            
            Employment
      Agreement, dated as of June 30, 2005, by and between our company and
      Thomas Muniz (incorporated by reference to Exhibit 10.8 to our Current
      Report on Form 8-K, dated June 30, 2005, as filed with the Commission on
      July 7, 2005).10.7
            
            Warrant,
      dated June 30, 2005, by our company in favor of Philip Worack
      (incorporated by reference to Exhibit 10.9 to our Current Report on Form
      8-K, dated June 30, 2005, as filed with the Commission on July 7,
      2005).10.8
            
            Warrant,
      dated June 30, 2005, by our company in favor of Kirk Krajewski
      (incorporated by reference to Exhibit 10.10 to our Current Report on Form
      8-K, dated June 30, 2005, as filed with the Commission on July 7,
      2005).10.9
            
            Security
      Agreement, dated as of January 27, 2006, executed by company and Impart,
      Inc. in favor of Laurus Master Fund, Ltd. (incorporated by reference to
      Exhibit 10.1 to our Current Report on Form 8-K, dated January 27, 2006, as
      filed with the Commission on February 1, 2006).10.10
            
            Secured
      Non-Convertible Revolving Note, dated as of January 27, 2006, executed by
      our company in favor of Laurus Master Fund, Ltd. (incorporated by
      reference to Exhibit 10.2 to our Current Report on Form 8-K, dated January
      27, 2006, as filed with the Commission on February 1,
    2006).10.11
            
            Stock
      Pledge Agreement, dated as of January 27, 2006, executed by our company in
      favor of Laurus Master Fund, Ltd. (incorporated by reference to Exhibit
      10.3 to our Current Report on Form 8-K, dated January 27, 2006, as filed
      with the Commission on February 1, 2006).10.12
            
            Subsidiary
      Guaranty, dated as of January 27, 2006, executed by IMPART, Inc.
      (incorporated by reference to Exhibit 10.4 to our Current Report on Form
      8-K, dated January 27, 2006, as filed with the Commission on February 1,
      2006).10.13
            
            Registration
      Rights Agreement, dated as of January 27, 2006, between our company and
      Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.5 to our
      Current Report on Form 8-K, dated January 27, 2006, as filed with the
      Commission on February 1,
2006).




10.14
            
            Common
      Stock Purchase Warrant, dated as of January 27, 2006, between our company
      and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.6 to
      our Current Report on Form 8-K, dated January 27, 2006, as filed with the
      Commission on February 1, 2006).10.15
            
            Asset
      Purchase Agreement, dated as of February 6, 2006, between our company and
      Marlin Capital Partners II, LLC (incorporated by reference to Exhibit 10.1
      to our Current Report on Form 8-K, dated February 6, 2006, as filed with
      the Commission on February 7, 2006).10.16
            
            Registration
      Rights Agreement, dated as of February 3, 2006, between our company and
      Marlin Capital Partners II, LLC (incorporated by reference to Exhibit 10.2
      to our Current Report on Form 8-K, dated February 6, 2006, as filed with
      the Commission on February 7, 2006).10.17
            
            Employment
      Agreement, dated as of February 28, 2006, between our company and Michael
      Medico (incorporated by reference to Exhibit 10.1 to our Current Report on
      Form 8-K, dated February 28, 2006, as filed with the Commission on March
      6, 2006).10.18
            
            Securities
      A Convertible Preferred Stock Purchase Agreement, dated as of March 3,
      2006, among our company and the purchasers listed therein (incorporated by
      reference to Exhibit 10.1 to our Current Report on Form 8-K, dated March
      3, 2006, as filed with the Commission on March 7,
2006).10.19
            
            Registration
      Rights Agreement, dated as of March 3, 2006, between our company and the
      purchasers listed therein (incorporated by reference to Exhibit 10.2 to
      our Current Report on Form 8-K, dated March 3, 2006, as filed with the
      Commission on March 7, 2006).10.20
            
            Form
      of Warrant Certificate (incorporated by reference to Exhibit 10.3 to our
      Current Report on Form 8-K, dated March 3, 2006, as filed with the
      Commission on March 7, 2006).10.21
            
            Form
      of Unsecured Promissory Note (incorporated by reference to Exhibit 10.22
      to our Annual Report on Form 10-KSB for our fiscal year ended December 31,
      2005, as filed with the Commission on April 17,
  2006).




10.22
            
            Form
      of Warrant Certificate (incorporated by reference to Exhibit 10.23 to our
      Annual Report on Form 10-KSB for our fiscal year ended December 31, 2005,
      as filed with the Commission on April 17, 2006).10.23
            
            Form
      of Warrant Certificate to purchase shares of common stock (incorporated by
      reference to Exhibit 10.24 to our Annual Report on Form 10-KSB for our
      fiscal year ended December 31, 2005, as filed with the Commission on April
      17, 2006).10.24
            
            Absolute
      Net Lease, dated June 24, 1998 between 1300 North Northlake Way, LLC and
      Impart, Inc. (incorporated by reference to Exhibit 10.25 to our Annual
      Report on Form 10-KSB for our fiscal year ended December 31, 2005, as
      filed with the Commission on April 17, 2006).10.25
            
            Agreement
      of Lease, dated January 29, 1999, between S.I.K. Associates c/o Kaufman
      Management Company, LLC and E&M Advertising, Inc. (incorporated by
      reference to Exhibit 10.26 to our Annual Report on Form 10-KSB for our
      fiscal year ended December 31, 2005, as filed with the Commission on April
      17, 2006).10.26
            
            Extension
      of Lease Agreement, dated March 30, 2004 between S.I.K. Associates c/o
      Kaufman Management Company, LLC and E&M Advertising, Inc.
      (incorporated by reference to Exhibit 10.21 to our Annual Report on Form
      10-KSB for our fiscal year ended December 31, 2005, as filed with the
      Commission on April 17, 2006).10.27
            
            Joinder
      Agreement, dated as of February 9, 2006, executed by Impart Media
      Advertising, Inc. and our company in favor of Laurus Master Fund, Ltd.
      (incorporated by reference to Exhibit 10.28 to our Annual Report on Form
      10-KSB for our fiscal year ended December 31, 2005, as filed with the
      Commission on April 17, 2006).10.28
            
            Form
      of Common Stock Purchase Agreement (incorporated by reference to Exhibit
      10.29 to our Registration Statement on Form SB-2, as filed with the
      Commission on August 1, 2006).10.29
            
            Amendment
      No. 1 and Waiver to the Registration Rights Agreement between Impart Media
      Group, Inc. and Laurus Master Fund, Ltd., dated as of June 12, 2006
      (incorporated by reference to Exhibit 10.30 to our Registration Statement
      on Form SB-2, as filed with the Commission on August 1,
    2006).




10.30
            
            Amendment
      No. 2 and Waiver to the Registration Rights Agreement between Impart Media
      Group, Inc. and Laurus Master Fund, Ltd., dated as of July 17, 2006
      (incorporated by reference to Exhibit 10.31 to our Registration Statement
      on Form SB-2, as filed with the Commission on August 1,
    2006).10.31
            
            Employment
      Agreement, dated as of September 1, 2006, between our company and Todd
      Weaver (incorporated by reference to Exhibit 10.1 to our Current Report on
      Form 8-K, dated September 6, 2006, as filed with the Commission on
      September 12, 2006).10.32
            
            Waiver
      and Amendment to Certificate of Designation of Series A Convertible
      Preferred Stock, Warrants and Registration Rights Agreement, dated March
      23, 2007 (incorporated by reference to Exhibit 10.1 to our Form 8-K, dated
      March 22, 2007, as filed with the Commission on March 28,
      2007).10.33
            
            Form
      of Amended and Restated Series A Warrant (incorporated by reference to
      Exhibit 10.2 to our Form 8-K, dated March 22, 2007 as filed with the
      Commission on March 28, 2007).10.34
            
            Restructuring
      Agreement. Incorporated by reference to the Company’s Form 8-K filed June
      12, 2008.14.1
            
            Impart
      Media Group, Inc. Code of Ethics (incorporated by reference to Exhibit
      14.1 to our Annual Report on Form 10-KSB for our fiscal year ended
      December 31, 2004, as filed with the Commission on April 15,
      2005).16.1
            
            Letter
      regarding Change in Certifying Accountant, dated March 9, 2006, from L.L.
      Bradford & Company to the company (incorporated by reference to
      Exhibit 16.1 to our Current Report on Form 8-K, dated March 9, 2006, as
      filed with the Commission on March 9, 2006).21.1
            
            List
      of Subsidiaries.Impart,
      Inc., a Washington corporation.Impart
      Media Advertising, Inc., a Nevada corporation.31.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002.*99.1
            
            Press
      Release dated October 26, 2007. Incorporated by reference to the Company’s
      Form 8-k filed October 26, 200799.1.1
            
            Press
      Release filed January 3, 2008.  Incorporated to the Company’s
      Form 8-K filed January  24, 2008.99.2
            
            Disclosure
      Statement.  Incorporated by reference to the Company’s Form 8-k
      filed February 27, 2009.


_________________





*
      Filed herewith











44