form10-q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-QSB

(Mark One)

x QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______.

Commission File Number: 0-09358

IMPART MEDIA GROUP, INC.

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

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

1300 North Northlake Way

Seattle, WA 98103

(Address of principal executive offices)

(206) 633-1852

(Issuer's telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

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

Due to our bankruptcy, we have no shares of common or preferred stock currently outstanding. Our common stock currently trades on the OTC Bulletin Board under the symbol “IMMG”.

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

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The unaudited consolidated financial statements of Impart Media Group, Inc. (“we,” “us,” “our,” “the Company” and “IMG”) as of the three and nine months ended June 30, 2008 and 2007 are attached hereto. Our consolidated financial statements are denominated in United States currency and are prepared in accordance with accounting principles generally accepted in the United States.

It is the opinion of management that the interim consolidated financial statements for the three and nine months ended June 30, 2008 include all adjustments necessary in order to ensure that the consolidated financial statements are not misleading. These statements reflect all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. Except where noted, these interim consolidated financial statements follow the same accounting policies and methods of their application as our September 30, 2007 audited annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim consolidated financial statements be read in conjunction with our September 30, 2007 audited annual consolidated financial statements.

Operating results for the three and nine months ended June 30, 2008 are not necessarily indicative of the results that can be expected for the year ending September 30, 2008.

IMPART MEDIA GROUP, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2008 (Unaudited)			September 30,2007 (Audited)
ASSETS	(In thousands, except share and per share data)
Current assets:
Cash	$	859		$	169
Restricted cash		—			143
Accounts receivable, net		2,532			5,468
Inventories		107			85
Prepaid expenses and other current assets		58			45

Total current assets		3,556			5,910
Fixed assets, net		309			410
Deferred financing costs, net		—			1,431
Other assets		40			40

Total assets	$	3,905		$	7,791

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	8,790		$	8,101
Accrued liabilities		1,246			260
Customer deposits		43			15
Line of credit		—			2,349
Notes payable to Novus		134			—
Notes payable to related parties — current portion		179			76
Convertible debentures		2,100			—
Capital lease obligations — current portion		47			48
Stock and other amounts payable to former IMA owners		200			200

Total current liabilities		12,739			11,049
Convertible debentures, net of current portion		—			1,609
Notes payable to related parties, net of current portion		150			150
Capital lease obligations, net of current portion		12			39

Total liabilities		12,901			12,847

Commitments and contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value; 25,000,000 shares authorized: 2,903,229 shares issued and outstanding		3			3
Common stock, $0.001 par value; 100,000,000 shares authorized:
23,959,248 shares issued and outstanding as of June 30, 2008 and September 30, 2007		24			24
Additional paid in capital		20,377			20,377
Accumulated deficit		(29,400	)		(25,460	)

Total stockholders’ equity (deficit)		(8,996	)		(5,056	)

Total liabilities and stockholders’ equity (deficit)	$	3,905		$	7,791

See notes to condensed consolidated financial statements

IMPART MEDIA GROUP, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2008			2007			2008				2007
	(In thousands, except per share data)
Revenue
Media services	$	859		$	1,281		$	3,935		$	2,656
Managed subscriptions		63			70			197			249
Consulting and design services		8			20			41			158
Equipment sales		23			388			427			2,167

Total revenue		953			1,759			4,600			6,230

Cost of revenue		253			561			1,122			2,403

Gross profit		700			1,198			3,478			3,827

Other operating expenses
Wages and salaries		733			1,251			2,779			3,748
Selling and marketing		25			85			73			363
General and administrative		348			1,139			1,458			3,857
Depreciation and amortization		39			193			129			583

Total other operating expenses		1,146			2,668			4,439			8,551

Loss from operations		(446	)		(1,470	)		(961	)		(4,724	)

Other income (expense):
Other income and expense, net		42			—			(16	)		—
Interest expense		(38	)		(372	)		(2,962	)		(848	)

Total other income (expense)		4			(372	)		(2,978	)		(848	)

Net loss	$	(442	)	$	(1,842	)	$	(3,939	)	$	(5,572	)

Net loss attributable to common stockholders:
Net loss	$	(442	)	$	(1,842	)	$	(3,939	)	$	(5,572	)
Beneficial conversion feature of Series A preferred stock		—			—			—			(25	)
Revaluation of Series A preferred stock – conversion price reduction		—			(2,447	)		—			(3,421	)
Revaluation of Series A preferred stock – warrant exercise price reduction		—			—			—			(935	)
Accretion of dividends on Series A preferred stock		—			—			—			183

Net loss attributable to common stockholders	$	(442	)	$	(4,289	)	$	(3,939	)	$	(9,770	)

Net loss per common share — basic and diluted	$	(0.02	)	$	(0.18	)	$	(0.16	)	$	(0.43	)

Shares used in computing net loss per share — basic and diluted		23,959			23,719			23,959			22,939

See notes to condensed consolidated financial statements

IMPART MEDIA GROUP, INC. AND SUBSIDIARIES

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended June 30,
	2008			2007
	(In thousands)
Operating activities:
Net loss	$	(3,939	)	$	(5,572	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash wages and salaries related to stock options		—			810
Non-cash general and administrative expenses:
Amortization of prepaid consulting expense		—			276
Warrants issued for earned consulting services		—			(342	)
Common stock issued to settle legal dispute		—			268
Non-cash interest expense:
Warrants issued to bridge lenders		—			206
Common stock issued to senior executives upon conversion of notes payable		—			40
Amortization of deferred financing costs on line of credit:
Warrants		—			875
Other deferred financing costs		1,430			195
Amortization of discount on convertible debentures		—			59
Common stock issued to Laurus for extended filing date		—			52
Other non-cash interest expense		491			(524	)
Bad debt expense		—			32
Depreciation and amortization		129			583
Loss on disposal of fixed assets		—			6
Other adjustments		6			(34	)
Changes in assets and liabilities, excluding assets and liabilities from acquisitions:
Accounts receivable		2,936			(203	)
Inventories		(23	)		557
Prepaid expenses and other current assets		(13	)		1,826
Other assets		—			(566	)
Accounts payable		359			786
Other current liabilities		1,479			(1,132	)

Net cash provided by (used in) operating activities		2,855			(1,802	)

Investing activities:
Purchases of fixed assets		(28	)		(51	)

Net cash used in investing activities		(28	)		(51	)

Financing activities:
Payments on capital lease obligations		(28	)		(36	)
Net borrowings (repayments) on line of credit		(2,109	)		51
Issuance of convertible debentures		—			2,100
Payment of deferred financing costs on convertible debentures		—			(51	)
Dividends on Series A preferred stock		—			(104	)
Proceeds from the sale of common stock, net		—			223

Net cash provided by (used in) financing activities		(2,137	)		813

Net increase in cash		690			204
Cash — beginning of period		169			195

Cash — end of period	$	859		$	399

Supplemental disclosure:
Cash paid for interest	$	901		$	94

See notes to condensed consolidated financial statements

IMPART MEDIA GROUP, INC.

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Chapter 11 Reorganization

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

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

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

Note 2. Description of Business

The Company, which was headquartered in Seattle, Washington, provided digital signage in the business-to-consumer media sector. The Company also provided consulting, design, integration, fabrication, assembly, IP connectivity, quality assurance, creative production, installation, onsite maintenance, web-data hosting, network monitoring and content management services throughout the United States (and in global markets through the Company's authorized distributors). As a result of the Company's acquisition of E&M Advertising, Inc. and its affiliates, renamed IMA, in February 2006, the Company also provided offline and online direct response advertising capabilities. In May 2008, with the approval of the Bankruptcy Court, the assets of the Seattle operations were sold for $390,000. As described in Note 7, IMA was sold in October 2008. The Company currently has no operating activities.

Note 3. Summary of Significant Accounting Policies

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

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

Basic and diluted weighted average common shares outstanding, and the potentially dilutive securities excluded from loss per share computations because they are antidilutive, are as follows for June 30, 2008 and 2007:

	June 30,
	2008		2007
Convertible debentures		16,378,000		0
Convertible Series A preferred stock		2,903,229		4,500,005
Common stock options		0		3,892,500
Common stock warrants		5,646,194		4,913,113
Total		24,927,423		13,305,618

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

Advertising Costs — The Company expenses the costs of producing advertisements at the time production occurs and expenses the costs of communicating advertisements in the period in which the advertising space or airtime is used. Advertising costs were $7,661 and $8,215 for the three months ended June 30, 2008 and 2007 and $28,920 and $39,229 for the nine months June 30, 2008 and 2007, respectively.

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

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

The gross and net billing amounts included in operating revenues for the three and nine months ended June 30, 2008 and 2007 are as follows (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2008		2007		2008		2007
Consolidated gross revenue	$	953	$	10,301	$	26,177	$	29,712
Direct cost of sales		—		8,542		21,577		23,482
Consolidated net revenue	$	953	$	1,759	$	4,600	$	6,230

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 June 30, 2008 or 2007.

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

Note 4. Certain Assets and Liabilities

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

Accounts Receivable - Accounts receivable at June 30, 2008 and September 30, 2007 is comprised as follows:

	June 30, 2008		September 30, 2007
IMG (in bankruptcy)	$	12	$	254
IMA (not in bankruptcy)		2,520		5,214
Total accounts receivable	$	2,532	$	5,468

Fixed assets, which primarily related to the Company ("IMG"), were written down to their net realizable value at September 30, 2007 and were sold pursuant to the Plan. In addition, inventory at June 30, 2008 and September 30, 2007, which solely related to IMG, was sold pursuant to the Plan.

Accounts Payable - Accounts payable at June 30, 2008 and September 30, 2007 is comprised as follows:

	June 30, 2008		September 30, 2007
IMG (in bankruptcy)	$	1,090	$	603
IMA (not in bankruptcy)		7,700		7,498
Total accounts payable	$	8,790	$	8,101

Accrued Expenses - Accrued expenses at June 30, 2008 and September 30, 2007 is comprised as follows:

	June 30, 2008		September 30, 2007
IMG (in bankruptcy)	$	783	$	169
IMA (not in bankruptcy)		463		91
Total accrued liabilities	$	1,246	$	260

All of the remaining liabilities on the balance sheet as of June 30, 2008 and September 30, 2007 relate solely to IMG and are subject to compromise due to the bankruptcy as described in Note 1.

Note 5. Convertible Debentures

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

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

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

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

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

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

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

Note 6. Commitments and Contingencies

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

Note 7. Subsequent Events

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

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

Sale of IMA Subsidiary — In October 2008, with the approval of the Bankruptcy Court, the stock of IMA was sold for $100,000.

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

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

Overview

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

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

Proceedings under Chapter 11

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

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

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

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

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

Plan of Reorganization

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

Default of Principal Payment under Convertible Debentures

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

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

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

Default of Laurus Security Agreement

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

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

Results of Operations

Our operations for the three months ended June 30, 2008 reflected a net loss of $0.4 million which was consistent with the prior quarter. Net loss was $4.3 million for the three months ended June 30, 2007, reflecting significantly higher operating and interest expense and conversion price reduction due to the revaluation of Series A preferred stock. Net loss for the nine months ended June 30, 2008 was $3.9 million, compared to $9.8 million in the prior year nine-month period. Net loss decreased significantly as compared to the prior year nine-month period due to lower operating expenses partially offset by higher interest expense as compared to the prior year nine-month period. As discussed above, the deferred financing costs related to the Laurus Facility were expensed in the first fiscal quarter of 2008.

Liquidity, Going Concern and Capital Resources

We have prepared our consolidated financial statements assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. However, as shown in the unaudited condensed consolidated financial statements, we have sustained substantial losses and have 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 our ability to continue as a going concern. We currently have 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 June 30, 2008, we had an accumulated deficit of approximately $29.4 million, we had approximately $859,000 in cash, and our working capital deficit was approximately $9.2 million. 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 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. The Convertible Debentures were converted into equity of the Reorganized Company in February 2009.

Critical Accounting Policies and Estimates

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

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

The gross and net billing amounts included in operating revenues for the three and nine months ended June 30, 2008 and 2007are as follows (in thousands):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2008		2007		2008		2007
Consolidated gross revenue	$	953	$	10,301	$	26,177	$	29,712
Direct cost of sales		—		8,542		21,577		23,482
Consolidated net revenue	$	953	$	1,759	$	4,600	$	6,230

New Accounting Pronouncements

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

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity, or capital expenditures.

ITEM 3. CONTROLS AND PROCEDURES

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

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

Internal Control Over Financial Reporting. There were no changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II -OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 2. DEFAULTS UPON SENIOR SECURITIES

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

ITEM 3. EXHIBITS.

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

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

Dated: May 1, 2009	IMPART MEDIA GROUP, INC.


	By:	/s/Joe Martinez

		Chief Executive Officer
		(Principal Executive Officer)

Dated: May 1, 2009	IMPART MEDIA GROUP, INC.


	By:	/s/Alan Chaffee

		Chief Accounting Officer
		(Principal Financial Officer)

EXHIBIT INDEX




2.4		Order Confirming the Plan of Reorganization Proposed by the Debtors and Co-Plan Proponents (filed as Exhibit 2.4 to our Current Report on Form 8-K dated February 11, 2009, and incorporated herein by reference).

10.34		Plan of Reorganization Proposed by the Debtors and Co-Plan Proponents Enable Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas Fund, Ltd. (filed as Exhibit 2.5 to our Current Report on Form 8-K dated February 11, 2009, and incorporated herein by reference).

10.35		Amended Disclosure Statement Accompanying Plan of Reorganization Dated September 17, 2008 Proposed by the Debtors and Co-Plan Proponents Enable Growth Partners, L.P., Enable Opportunity Partners, L.P., Pierce Diversified Strategy Master Fund, ENA, Hudson Bay Fund, L.P., Hudson Overseas Fund, Ltd. (filed as Exhibit 99.2 to our Current Report on Form 8-K dated February 11, 2009, and incorporated herein by reference).

31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.