UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





þ
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended March 31, 2010ORo
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from ________________ to
      ________________





Commission
file number: 333-147245




OPTIONS MEDIA GROUP HOLDINGS,
      INC.(Exact
      name of registrant as specified in its
charter)


Nevada
            
            26-0444290(State or other jurisdiction of
            
            (I.R.S. Employerincorporation or organization)
            
            Identification No.)123
      NW 13th
      Street, Ste. 300 Boca, Raton, FL
            
            33432(Address of principal executive offices)
            
            (Zip Code)





Registrant’s
telephone number, including area code:  (561) 368-5067





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o
                      No  
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer o
            Accelerated
      filer   oNon-accelerated
      filer   o   (Do
      not check if a smaller reporting company)
            Smaller
      reporting company   þ





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





Class
            
            Outstanding
      at May 12, 2010Common
      Stock, $0.001 par value per share
            
            229,943,440 shares





OPTIONS
MEDIA GROUP HOLDINGS, INC.




TABLE
OF CONTENTS






PAGEPART
      I – FINANCIAL INFORMATIONItem
    1.
            Financial
      Statements
            
            
            1Consolidated Balance
      Sheets at  March 31, 2010 (Unaudited) and December 31,
      2009
            
            
            1Consolidated
      Statements of Operations for the Three Months Ended  March 31, 2010 and
      2009.  (Unaudited)
            
            
            2Consolidated
      Statements of Cash Flows for the Three Months Ended  March 31, 2010 and 2009
      (Unaudited)
            
            
            3Notes to
      Consolidated Financial Statements (Unaudited)
            
            
            5Item 2.
            Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
            
            
            14Item 3.
            Quantitative and
      Qualitative Disclosures about Market Risk
            
            
            18Item
      4.
            Controls and
      Procedures
            
            
            18Item 4T.
            Controls and
      Procedures
            
            
            18PART II – OTHER
      INFORMATIONItem 1.
            Legal
      Proceedings
            
            
            19Item 1A
            Risk Factors
            
            
            19Item 2.
            Unregistered Sales
      of Equity Securities and Use of Proceeds
            
            
            19Item 3.
            Defaults Upon Senior
      Securities
            
            
            19Item
      4.
            (Removed and
      Reserved)
            
            
            19Item
      5.
            Other
      Information
            
            
            19Item
      6.
            Exhibits
            
            
            20Signature
            
            
            
            21










PART
I – FINANCIAL INFORMATION


ITEM
1.    FINANCIAL
STATEMENTS.






OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS




March
      31,
              2010
            
            
            December 31,
              2009(Unaudited)ASSETSCurrent
      Assets:Cash
            
            $
            708,288
            
            
            $
            1,316,067Accounts
      receivable, net
            
            
            540,443
            
            
            
            371,696Prepaid
      expenses
            
            
            134,189
            
            
            
            39,444Other
      current assets
            
            
            16,559
            
            
            
            12,000Total
      Current Assets
            
            
            1,399,477
            
            
            
            1,739,207Property
      and equipment, net
            
            
            186,701
            
            
            
            219,516Software,
      net
            
            
            25,816
            
            
            
            33,594Goodwill
            
            
            6,372,230
            
            
            
            6,372,230Intangible
      Assets, net
            
            
            249,389
            
            
            
            303,361Other
      assets
            
            
            38,722
            
            
            
            36,421Total
      assets
            
            $
            8,272,337
            
            
            $
            8,704,329LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Bank
      Overdraft
            
            $
            --
            
            
            $
            27,721Accounts
      payable
            
            
            529,652
            
            
            
            788,689Accounts
      payable, due to related parties
            
            
            6,590
            
            
            
            32,104Accrued
      expenses
            
            
            335,005
            
            
            
            566,523Notes
      payable, related parties
            
            
            --
            
            
            
            287,000Notes
      Payable
            
            
            --
            
            
            
            60,000Deferred
      revenue
            
            
            63,524
            
            
            
            21,025Obligations
      under capital leases
            
            
            13
            
            
            
            976Other
      current liabilities
            
            
            52,825
            
            
            
            80,369Total
      Current Liabilities
            
            
            987,609
            
            
            
            1,864,407Total
      liabilities
            
            $
            987,609
            
            
            $
            1,864,407Commitments
      and Contingencies (Note 7)Stockholders'
      Equity:Preferred
      stock; $0.001 par value, 10,000,000 shares authorizedPreferred
      stock; $0.001 par value
              Series
      A, none and 7,830 issued and outstanding at March 31, 2010 and December
      31, 2009, respectively
            
            $
            --
            
            
            $
            8Preferred
      stock; $0.001 par value
              Series
      B, none and 7,087 issued and outstanding at March 31, 2010 and December
      31, 2009, respectively
            
            
            --
            
            
            
            7Common
      stock; $0.001 par value, 300,000,000 shares authorized,
              229,124,867
      and 97,713,210 issued and outstanding,
              at
      March 31, 2010 and December 31, 2009, respectively
            
            
            229,124
            
            
            
            97,713Additional
      paid-in capital
            
            
            20,522,660
            
            
            
            19,626,357Accumulated
      deficit
            
            
            (13,467,056
            )
            
            
            (12,884,163
            )Total
      Stockholders' Equity
            
            
            7,284,728
            
            
            
            6,839,922Total
      Liabilities and Stockholders' Equity
            
            $
            8,272,337
            
            
            $
            8,704,329






1


OPTIONS
MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(UNAUDITED)




For
      the Three Months Ended
              March
      31,2010
            
            
            2009Net
      revenues
            
            $
            1,217,998
            
            
            $
            2,186,246Cost
      of revenues
            
            
            359,277
            
            
            
            654,006Gross
      profit
            
            
            858,721
            
            
            
            1,532,240Operating
      expenses:Server
      hosting and technology services
            
            
            135,008
            
            
            
            231,990Compensation
      and related cost
            
            
            843,887
            
            
            
            1,595,484Commissions
            
            
            161,760
            
            
            
            302,135Advertising
            
            
            34,687
            
            
            
            34,362Bad
      Debt
            
            
            5,700
            
            
            
            18,458Rent
            
            
            54,927
            
            
            
            52,826Other
      general and administrative
            
            
            463,820
            
            
            
            564,050Total
      operating expenses
            
            
            1,699,789
            
            
            
            2,799,305Income
      (loss) from operations
            
            
            (841,068
            )
            
            
            (1,267,065
            )Other
      income (expense):Other
      income
            
            
            --
            
            
            
            4,204Settlement
      gain
            
            
            260,002
            
            
            
            --Interest
      expense
            
            
            (1,827
            )
            
            
            (139,884
            )Total
      other income (expense), net
            
            
            258,175
            
            
            
            (135,680
            )Loss
      before income tax
            
            
            (582,893
            )
            
            
            (1,402,745
            )Income
      tax benefit
            
            
            --
            
            
            
            --Net
      Loss
            
            $
            (582,893
            )
            
            $
            (1,402,745
            )Net
      Loss Per Common Share- Basic and Diluted
            
            $
            (0.00
            )
            
            $
            (0.02
            )Weighted
      Average Shares Outstanding- Basic and Diluted
            
            
            195,056,910
            
            
            
            58,254,110





2


OPTIONS
MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(UNAUDITED)




For
      the Three
              Months
      Ended
              March
      31,
              2010
            
            
            For
      the Three
              Months
      Ended March 31,
              2009Operating
      Activities:Net
      Income (Loss)
            
            $
            (582,893
            )
            
            $
            (1,402,745
            )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Stock
      Granted For Services To Non-Employees
            
            
            7,000
            
            
            
            100,000Stock
      Granted For Employee Settlement
            
            
            --
            
            
            
            4,500Stock
      Granted For Services To Employees
            
            
            15,775
            
            
            
            28,700Stock
      Options Granted For Services
            
            
            156,582
            
            
            
            197,740Stock
      Options Granted For Settlement of Debt
            
            
            29,200
            
            
            
            --Stock
      Granted  For Settlement of Debt
            
            
            197,638
            
            
            
            --Amortization
      Of Debt Discount
            
            
            --
            
            
            
            117,479Amortization
      of Stock Issued for Prepaid Expense
            
            
            (47,579)
            
            
            
            --Depreciation
            
            
            40,594
            
            
            
            32,509Amortization
      Of Intangibles
            
            
            69,470
            
            
            
            141,089Bad
      Debt
            
            
            5,700
            
            
            
            18,458Changes
      in operating assets and liabilities:Accounts
      Receivable
            
            
            (174,447
            )
            
            
            (380,869
            )Prepaids
            
            
            22,992
            
            
            
            (31,303
            )Other
      Current Assets
            
            
            (6,858
            )
            
            
            (2,220
            )Accounts
      Payable
            
            
            (268,376
            )
            
            
            103,062Accrued
      Expenses
            
            
            (231,518
            )
            
            
            379,946Deferred
      Revenues
            
            
            42,499
            
            
            
            (61,102
            )Due
      To Related Parties
            
            
            (16,175
            )
            
            
            (1,718
            )Other
      Current Liabilities
            
            
            (27,544
            )
            
            
            51,154Net
      Cash Used In Operations
            
            
            (767,940
            )
            
            
            (705,320
            )Investing
      ActivitiesPurchase
      Of Property and Equipment
            
            
            (5,000
            )
            
            
            (2,714
            )Net
      Cash Used In Investing Activities
            
            
            (5,000
            )
            
            
            (2,714
            )Financing
      ActivitiesBank
      Overdraft
            
            
            (27,721
            )
            
            
            5,805Proceeds
      from warrant exercises
            
            
            12,465
            
            
            
            --Proceeds
      From Sale of Series B preferred Stock
            
            
            568,480
            
            
            
            --Financing
      Costs
            
            
            (150,000)
            
            
            
            --Proceeds
      From Loans
            
            
            --
            
            
            
            675,000Repayment
      of Loans
            
            
            (237,100
            )
            
            
            --Principal
      Payments on Capital Lease Obligations
            
            
            (963
            )
            
            
            (4,557
            )Net
      Cash Provided by Financing Activities
            
            
            165,161
            
            
            
            676,248Net
      Increase (Decrease) In Cash
            
            
            (607,779
            )
            
            
            (31,786
            )Cash
      Beginning Of Period
            
            
            1,316,067
            
            
            
            122,165Cash
      End Of Period
            
            $
            708,288
            
            
            $
            90,379








3




OPTIONS
MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)


(UNAUDITED)




For
      the Three
              Months
      Ended
              March
      31,
              2010
            
            
            For
      the Three
              Months
      Ended
              March
      31,
              2009Supplemental
      Disclosure of Cash Flow Information:Cash
      Paid For Interest
            
            $
            1,827
            
            
            $
            5,407Cash
      Paid For Taxes
            
            $
            --
            
            
            $
            --Supplemental
      Disclosure Of Non-Cash Investingand
      Financing Activities:Refinancing
      Of Promising Notes
            
            $
            --
            
            
            $
            680,000Warrants
      Issued In Connection With Loans
            
            $
            --
            
            
            $
            239,853Shares
      Issued In Connection With Loans
            
            $
            --
            
            
            $
            15,000Prepaid
      common stock issued for services
            
            $
            70,158
            
            
            $
            --Common
      stock issued for asset acquisition
            
            $
            10,500
            
            
            $
            --Common
      stock issued for conversion of convertible debt
            
            $
            109,900
            
            
            $
            --










4


OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010


(UNAUDITED)





NOTE 1 - NATURE OF OPERATIONS
AND BASIS OF PRESENTATION




Description of
Business





Options
Media Group Holdings, Inc. (the “Company”), was incorporated in the state of
Nevada on June 27, 2007.  Prior to June 23, 2008, the Company was in the
development stage since its formation, without material assets or
activities.  Upon the consummation of the June 23, 2008 business
combination discussed below, the Company exited the development
stage.





On June
23, 2008, the Company completed a merger with Options Acquisition Sub, Inc., a
Delaware corporation (“Options”).





In
connection with this merger, the Company discontinued its former business and
succeeded to the business of Options as its sole line of business.





Options
was originally formed in Florida on February 22, 2000, under the name Options
Newsletter, Inc. and is engaged in the design of custom email delivery solutions
for commercial customers. On January 4, 2008, Options Newsletter, Inc. merged
with and into Options Acquisition Sub, Inc., a newly formed, wholly-owned
Delaware subsidiary of Customer Acquisition Network Holdings, Inc., a Delaware
company (“CAN”), with Options being the surviving corporation. Options began
selling advertising space within free electronic newsletters that it published
and emailed to subscribers. Options also generated leads for customers by
emailing its customers’ advertisements to various email addresses from within
its database. Options is also an email service provider (“ESP”) and offers
customers an email delivery platform to create, send and track email campaigns.
Options also manages and markets its customers’ lists and makes them available
to advertisers who are trying to reach customers similar to theirs. During the
years ended December 31, 2009 and 2008, the majority of Options’ revenue was
derived from being an ESP, but it continues to provide email customer
advertisements on a cost per lead generated basis.





On
September 19, 2008, the Company completed a merger with 1 Touch Marketing, LLC
(“1 Touch”). 1 Touch is an online direct marketing and data services company. 1
Touch was formed on October 23, 2003 as a Limited Liability Corporation, in the
State of Florida. 1 Touch offers its products and services to traditional
advertising agencies and online marketing agencies. These resellers/agencies
offer the 1 Touch’s products and services to their clients as a stand-alone
marketing effort or as part of a larger multi-channel marketing campaign. 1
Touch also offers its products and services to a network of list
brokers.  These organizations market postal lists and offer its email
marketing lists. 1 Touch generates revenue from its product lines, which include
email marketing campaigns, lead generation and direct mail and postal
lists.




Basis of
Presentation




The
interim condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Company’s
management, all adjustments (consisting of normal recurring adjustments and
certain non recurring adjustments and reclassifications) necessary to present
fairly our results of operations and cash flows for the three  months
ended March 31, 2010 and our financial position as of March 31, 2010 have been
made. The results of operations for such interim periods are not necessarily
indicative of the operating results to be expected for the full
year.




Certain
information and disclosures normally included in the notes to the annual
consolidated financial statements have been condensed or omitted from these
interim financial statements.




Going
Concern




As
reflected in the accompanying unaudited consolidated financial statements for
the three months ended March 31, 2010, the Company had a net loss of $582,893
and $767,940 of net cash used in operations. At March 31, 2010, the Company had
a positive working capital of $411,868. Additionally, at March 31, 2010, the
Company had an accumulated deficit of $13,467,056. These matters and the
Company’s expected needs for capital investments and working capital required to
support operational growth raise substantial doubt about its ability to continue
as a going concern. The Company’s consolidated financial statements do not
include any adjustments to reflect the possible effects on recoverability and
classification of assets or the amounts and classification of liabilities that
may result from its inability to continue as a going concern.





5





OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)





Based on
actions being taken to improve liquidity as discussed above, management believes
that the Company will meet its expected needs required to continue as a going
concern through March 31, 2011.




NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Principles of
Consolidation




The
accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, Options Acquisition Sub, Inc., 1 Touch Marketing,
LLC and Icon Term Life Inc. All material inter-company balances and transactions
have been eliminated in consolidation.




Use of
Estimates




The
unaudited consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”). These
accounting principles require us to make certain estimates, judgments and
assumptions. The Company believes that the estimates, judgments and assumptions
upon which the Company relies are reasonable based upon information available at
the time that these estimates, judgments and assumptions are made. These
estimates, judgments and assumptions can affect the reported amounts of assets
and liabilities as of the date of our unaudited consolidated financial
statements as well as the reported amounts of revenues and expenses during the
periods presented. Our unaudited consolidated financial statements would be
affected to the extent there are material differences between these estimates
and actual results. In many cases, the accounting treatment of a particular
transaction is specifically dictated by GAAP and does not require management’s
judgment in its application. There are also areas in which management’s judgment
in selecting any available alternative would not produce a materially different
result.





The most
significant estimates include the valuation of accounts
receivable,  estimates of depreciable lives and valuation of property
and equipment, valuation of discounts on debt, valuation of beneficial
conversion features in convertible debt, valuation and amortization periods of
intangible assets, valuation of goodwill, valuation of stock based compensation
and the deferred tax valuation allowance.





Cash and Cash
Equivalents





The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.




Fair Value of Financial
Instruments




We
measure our financial assets and liabilities in accordance with generally
accepted accounting principles. For certain of our financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities, the carrying amounts approximate fair value due to their
short maturities.  Amounts recorded for notes payable, also
approximate fair value because current interest rates available to us for debt
with similar terms and maturities are substantially the same.





Effective January 1, 2008, we adopted accounting guidance (ASC 820) for
financial assets and liabilities.  The adoption did not have a
material impact on our results of operations, financial position or
liquidity.  These guidelines define fair value, provide guidance for
measuring fair value and require certain disclosures.  This standard
does not require any new fair value measurements, but rather applies to all
other accounting pronouncements that require or permit fair value
measurements.  This guidance does not apply to measurements related to
share-based payments.  This guidance discusses valuation techniques,
such as the market approach (comparable market prices), the income approach
(present value of future income or cash flow), and the cost approach (cost to
replace the service capacity of an asset or replacement cost).  The
guidance utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad
levels.  The following is a brief description of those three
levels:




6


OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)


Level
    1:
            Observable inputs
      such as quoted prices (unadjusted) in active markets for identical
      assets or liabilities.Level
    2:
            Inputs other than
      quoted prices that are observable, either directly or
      indirectly.  These include quoted prices for similar assets or
      liabilities in active markets and quoted prices for identical or similar
      assets or liabilities in markets that are not active.Level 3:
            Unobservable
      inputs in which little or no market data exists, therefore developed using
      estimates and assumptions developed by us, which reflect those that a
      market participant would use.





On
January 1, 2009, we adopted a newly issued accounting standard for fair value
measurements of all nonfinancial assets and nonfinancial liabilities not
recognized or disclosed at fair value in the financial statements on a recurring
basis.  The Company has significant nonfinancial assets for the years
ended December 31, 2009 that require recognition and disclosure at fair
value.





We currently measure and report at fair
value our intangible assets and goodwill.  The fair value of
intangible assets has been determined using the present value of estimated
future cash flows method.  For goodwill, the Company compares the
implied fair value of the reporting unit, using the market capitalization
method, with the carrying amount of the goodwill. The following table summarizes
our non-financial asses and liabilities measured at fair value on a
non-recurring basis as of March 31, 2010:




Balance
      at
            
            Quoted
      Prices in
            
            Significant
      other
            
            SignificantMarch
      31,
            
            Active
      Markets for
            
            Observable
            
            Unobservable2010
            
            Identical
      Assets
            
            Inputs
            
            Inputs(Level
      1)
            
            (Level
      2)
            
            (Level
      3)Assets:Goodwill
            
            $
            6,372,230
            
            
            $
            -
            
            
            $
            -
            
            
            $
            6,372,230Intangible
      assets
            
            
            249,389
            
            
            
            -
            
            
            
            -
            
            
            
            249,389Total
      Non-financial Assets
            
            $
            6,621,619
            
            
            $
            -
            
            
            $
            -
            
            
            $
            6,621,619The
      following is a summary of activity for non-financial assets measured under
      level 3 through March 31, 2010:







Goodwill:Balance
      at January 1, 2010
            
            $
            6,372,230Goodwill
      Impairment
            
            
            -Ending
      balance at March 31, 2010
            
            $
            6,372,230Intangible
      assets:Balance
      at January 1, 2010
            
            $
            303,361Amortization
      of intangible assets
            
            
            (53,972
            )Ending
      balance at March 31, 2010
            
            $
            249,389




Net Earnings (Loss) Per
Share




Basic
earnings (loss) per common share is based on the weighted-average number of all
common shares outstanding.  The computation of diluted earnings (loss)
per share does not assume the conversion, exercise or contingent issuance of
securities that would have an anti-dilutive effect on earnings (loss) per
share.  As of March 31, 2010, there were 23,365,097 options, 6,495,665
warrants, and 387,000 shares of unvested restricted stock which may dilute
future earnings per share.




7


OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 Segments




The
Company follows ASC 280-10 for, "Disclosures about Segments of an
Enterprise and Related Information." During 2010, the Company only
operated in one segment; therefore, segment information has not been
presented.




Recently Issued Accounting
Standards




There have been no material changes
or additions to the recently issued accounting pronouncements as previously
reported in Note 1 to our Consolidated Financial Statements of our Annual Report
on Form 10-K for the year ended December 31, 2009 which affect or may
affect our interim consolidated financial statements.





NOTE 3 – NOTES PAYABLE AND NOTES
PAYABLE, RELATED PARTIES




On
December 3, 2008, the Company borrowed $50,000, $80,000 and $100,000 from
three related parties pursuant to Board authorized bridge loans with warrants.
The Notes bear interest of 6% and becomes due in 6 months or pro rata as funds
from a planned equity financing are received. The Company issued 230,000
three-year warrants with the notes exercisable at $0.75 per share. The warrants
contain a cashless exercise provision. The relative fair value of the warrants
was not material. On December 31, 2009, two of the note holders converted
$180,000 of notes payable and accrued interest to Series A convertible
preferred stock. In January 2010, the remaining $50,000 balance due to related
parties was sold and converted into shares of the Company’s Common Stock and the
accrued interest was paid in full. As of March 31, 2010, the Company had paid or
the investors converted all notes from related party from the December 2008
borrowings.





In
January 2010, $59,900 of principal of a previously issued unrelated party note
was sold and converted into common stock of the Company. The $100 remaining
principal balance of the unrelated party note and $1,657 of accrued interest was
paid.





In
January 2010, the Company repaid $237,000 due under previously issued
convertible notes.





As of
March 31, 2010 the Company has paid all the related and unrelated party
notes.





Activity
for notes payable, related parties activity was as follows for the three months
ended March 31, 2010:





Ending
      balance as of December 31, 2009
            
            $
            287,000Note
      Conversions
            
            
            (50,000)Note
      Repayments
            
            
            (237,000)Balance
      as of March 31, 2010
            
            $
            --




Activity
for notes payable, unrelated parties was as follows for the three months ended
March 31, 2010:




Ending
      balance as of December 31, 2009
            
            $
            60,000Note
      Conversions
            
            
            (59,900)Note
      Repayments
            
            
            (100)Balance
      as of March 31, 2010
            
            $
            --





8





OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)


NOTE
4 - STOCKHOLDERS’ EQUITY




Capital
Structure




The
Articles of Incorporation authorized the issuance of 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock having a par value of
$0.001 per share.





In
December 2009, the shareholders approved to increase the authorized common
shares to 300,000,000; on January 12, 2010, the Company amended its Articles
of  Incorporation to reflect this increase.




Common
stock





In
January 2010, the Company issued 358,333 shares of common stock upon the
exercise of 358,333 warrants and received proceeds of $12,465.





In
January 2010, the Company issued 1,500,000 shares of common stock valued at
$0.035 per share (based on a contemporaneous private placements sales price) or
$52,500 to settle outstanding liabilities to suppliers.





In
January 2010, the Company issued 1,896,800 shares of common stock valued at
$0.035 per share (based on a contemporaneous private placements sales price) or
$66,388 to settle outstanding liabilities for legal fees.





In
January 2010, the Company issued 3,140,000 shares of common stock to convert
$109,900 of convertible debt.





In
January 2010, the Company issued 2,500,595 shares of common stock related to
anti-dilution protection clauses.





In
January 2010, the Company entered into a six month investor relations agreement
and agreed to issue a total of 3,300,000 shares of common stock of which
2,004,500 immediately vested and were issued as of March, 31, 2010. The
remaining balance will be issued after May 5, 2010. The shares were valued at
$0.035 per share (based on a contemporaneous private placement sales price) or
$70,158.




In
January 2010, the Company entered into a one year investor relations agreement
and agreed to issue 200,000 immediately vested shares of common stock. The
shares were valued at $0.035 per share (based on a contemporaneous private
placement sales price) or $7,000.




9





OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)


In March 2010, the Company issued
2,250,000 shares of common stock valued at $0.035 per share (based on a
contemporaneous private placement sales price) or $78,750 to settle an
outstanding liability to a supplier.





In March
2010, the Company issued 300,000 immediately vested shares of common stock at
$0.035 per unit or $10,500 (based on a contemporaneous private placement sales
price) related to an asset purchase.





See below
conversion of Series A preferred stock to common stock.





Series A Convertible
preferred stock





In
January 2010, the Company completed a private placement of Series A convertible
preferred stock. The Company issued 2,800 shares and received $8,000 gross
proceeds. The Series A shares were subsequently converted into 8,000,000 shares
of common stock.





In
January 2010, the Company issued 22,371,429 shares of common stock for the
conversion of 7,830 previously issued Series A convertible preferred
stock.





Series B preferred
stock





In
January 2010, the Company issued 70,880,000 shares of common stock for the
conversion of 7,087 previously issued Series B preferred stock.





In
January 2010, the Company completed a private placement of Series B preferred
stock. The Company issued 1,301 shares and received $455,480 gross. In January
of the same year, the preferred shares automatically converted to 13,010,000
shares of common stock. The conversion formula to common stock is as follows:
Series B shares (1,301) x $350/0.035= 13,010,000 common stock par value $0.001.
The Company paid $150,000 in offering costs related to the Series B
offering.





In
February 2010, the Company completed a private placement of Series B preferred
stock. The Company issued 300 shares and received $105,000 net. In February of
the same year, the preferred shares automatically converted to 3,000,000 shares
of common stock. The conversion formula to common stock is as follows: Series B
shares (300) x $350/0.035= 3,000,000 common stock par value
$0.001.




Stock
options




2008 Equity Incentive
Plan




On
June 23, 2008, our Board of Directors adopted the 2008 Equity Incentive
Plan (the “Plan”) under which we may issue up to 8,000,000 shares of restricted
stock and stock options to our directors, employees and
consultants.





The Plan
is to be administered by a Committee of two or more independent directors, or in
their absence by the Board. The identification of individuals entitled to
receive awards, the terms of the awards, and the number of shares subject to
individual awards, are determined by our Board or the Committee, in their sole
discretion. The total number of shares with respect to which options or stock
awards may be granted under the Plan and the purchase price per share, if
applicable, shall be adjusted for any increase or decrease in the number of
issued shares resulting from a recapitalization, reorganization, merger,
consolidation, exchange of shares, stock dividend, stock split, reverse stock
split, or other subdivision or consolidation of shares.





The Plan
provides for the grant of incentive stock options (“ISOs”) as defined by the
Internal Revenue Code. For any ISOs granted, the exercise price may not be less
than 110% of the fair market value in the case of 10% shareholders. Options
granted under the Plan shall expire no later than 10 years after the date of
grant, except for ISOs granted to 10% shareholders, which must expire not later
than five years from grant. The option price may be paid in United States
dollars by check or other acceptable instrument including wire transfer or, at
the discretion of the Board or the Committee, by delivery of our common stock
having fair market value equal as of the date of exercise to the cash exercise
price or a combination thereof.





Our Board
or the Committee may from time to time alter, amend, suspend, or discontinue the
Plan with respect to any shares as to which awards of stock rights have not been
granted. However, no rights granted with respect to any awards under the Plan
before the amendment or alteration shall not be impaired by any such amendment,
except with the written consent of the grantee.





10


OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)





Under the
terms of the Plan, our Board or the Committee may also grant awards, which will
be subject to vesting under certain conditions. In the absence of a
determination by the Board or Committee, options shall vest and be exercisable
at the end of one, two and three years, except for ISOs, which are subject to a
$100,000 per calendar year limit on becoming first exercisable. The vesting may
be time-based or based upon meeting performance standards, or both. Recipients
of restricted stock awards will realize ordinary income at the time of vesting
equal to the fair market value of the shares. We will realize a corresponding
compensation deduction. Upon the exercise of stock options other than ISOs, the
holder will have a basis in the shares acquired equal to any amount paid on
exercise plus the amount of any ordinary income recognized by the holder. For
ISOs, which meet certain requirements, the exercise is not taxable upon sale of
the shares, the holder will have a capital gain or loss equal to the sale
proceeds minus his or her basis in the shares.





On March
9, 2010, the Company granted 1,000,000 stock options to a former employee in
connection with a liability settlement. The options have an exercise price of
$0.035 and were valued on the grant date at $0.029 per option for a total of
$29,200 using a Black-Sholes option pricing model with the following
assumptions: stock price at $0.035 (based on the grant date quoted trading price
of the Company’s common stock), volatility of 121% (based on historical
volatility), expected term of five years, and a risk free interest rate of
2.34%.





For the
three months ended March 31, 2010, the Company recorded a stock based
compensation expense of $156,582. At March 31, 2010, there was approximately
$778,711 of unrecognized compensation expense to non-vested options based
compensation.




A summary
of the Company’s stock option activity during the three months ending
March 31, 2010, is presented below:




No. of
              Shares
            
            
            Weighted
              Average
              Exercise
      Price
            
            
            Weighted
              Average
              Remaining
              Contractual
      Term
            
            
            AggregateIntrinsic
      ValueBalance
      Outstanding December 31, 2009
            
            
            22,865,097
            
            
            $
            0.27
            
            
            
            6.6
            
            
            $
            ––Granted
            
            
            1,000,000
            
            
            $
            0.035
            
            
            
            0.21
            
            
            $
            ––Exercised
            
            
            ––
            
            
            $
            ––
            
            
            
            ––
            
            
            $
            ––Fortified
            
            
            (500,000
            )
            
            $
            0.035
            
            
            
            0
            
            
            $
            ––Expired
            
            
            ––
            
            
            $
            ––
            
            
            
            ––
            
            
            $
            ––Balance
      Outstanding March 31, 2010
            
            
            23,365,097
            
            
            $
            0.08
            
            
            
            5.89
            
            
            $
            0Exercisable
      March 31, 2010
            
            
            8,996,171
            
            
            $
            0.13
            
            
            
            6.22
            
            
            $
            0




A summary
of the quantity of employee common stock unvested, granted, vested and cancelled
for the three months ended March 31, 2010, is presented below:




Unvested shares outstanding December 31, 2009
            
            
            457,667Shares vested in 2010
            
            
            --Unvested shares cancelled in 2010
            
            
            (70,667
            )Unvested shares at March 31, 2010
            
            
            387,000




As of
March 31, 2010, there was $99,650 of total unrecognized compensation costs
related to unvested common stock.







11


OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
  Warrants
  During 2010, the
Company issued warrants pursuant to a private placement. Activity during 2010
was as follows:


No. ofShares
            
            Weighted
              Average
              Exercise
      Price
            
            Weighted
              Average
              Remaining
              Contractual
      TermBalanced
      Outstanding December 31, 2009
            6,520,665
            
            $
            0.038
            
            3.16
      YearsGranted
            333,333
            
            $
            0.035
            
            2.95
      YearsExercised
            (358,333)
            
            $
            0.035
            
            3.05
      YearsExpired
            --
            
            $
            --
            
            --Balance
      Outstanding at March 31, 2010
            6,495,665
            
            $
            0.38
            
            2.91
      YearsExercisable,
      March 31, 2010
            6,495,665
            
            $
            0.38
            
            2.91
      Years





NOTE
5 – CONCENTRATIONS




Concentration of Credit
Risk





Financial
Instruments which potentially subject the Company to concentrations of credit
risk consist principally of cash and accounts receivable.  Management
believes the financial risks associated with these financial instruments are not
material.  The Company places its cash with high credit quality
financial institutions.  The Company maintains its cash in bank
deposit accounts that, at times, may exceed federally insured limits. At March
31, 2010 the Company had $282,511 in banks, which exceeded the federally insured
limits.





Concentration of
Revenues





During
the three months ended March 31, 2010, three customers represented 16%, 15%, and
11% of the subsidiary's revenues. In the
quarter ended March 31, 2009, we had no 10% customers.





Concentration of Accounts
Receivable





As of
March 31, 2010, two clients accounted for 15% and 20% of the total consolidated
accounts receivable. In the
quarter ended March 31, 2009, we had no 10% customers.





NOTE
6 – RELATED PARTY TRANSACTIONS




On
March 31, 2009, the Company terminated an officer without cause.
Additionally, on May 20, 2009, the Company terminated an officer with
cause. The Company recognized $250,000 severance expense. The unpaid portion of
the severance payments at March 31, 2010 is $0 as the Company repaid one officer
in 2009 and settled with the other officer in 2010. The terms of the 2010
settlement are as follows; the Company paid $30,000 and issued 1,000,000 five
year stock options with an exercise price of $0.035, the options were valued on
the grant date at $0.029 per option for a total of $29,200 using a Black-Sholes
option pricing model. The Company recognized a $27,803 gain on this
settlement.





During
the first three months of 2010, the Company repaid $237,000 of related parties
convertible promissory notes and a related party investor converted $50,000 of a
convertible promissory note. (See Note 3)





At March
31, 2010, the Company owed one of the officers and directors $6,590 for expenses
they personally advanced on behalf of the Company.




NOTE
7 - COMMITMENTS AND CONTINGENCIES




From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business.




To our
knowledge, no legal proceedings, government actions, administrative actions,
investigations or claims are currently pending against us or involve us that, in
the opinion of our management, could reasonably be expected to have material
effect on our business and financial condition.




12





OPTIONS
MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 NOTE 8 - SUBSEQUENT EVENTS




On April
15, 2010, PG Acquisition Corp, Inc. (the “PG”), a wholly-owned subsidiary of the
Company, entered into an Asset Purchase Agreement and Sublicense Agreement (the
“Agreement”) with Cellular Spyware Inc. (“Cellular”) and Anthony Sasso , the
majority shareholder of Cellular.





Under the
Agreement, PG acquired an exclusive sublicense to distribute, sell and
sublicense certain anti-virus software marketed under the name PhoneGuard (the
“Software”) in the United States and Canada and a non-exclusive license to
distribute, sell and sublicense the Software over the Internet. The Agreement
shall remain effective unless PG fails to sell 1,000,000 units of the Software
in a 12 month period.





In
consideration for entering into the Agreement, the Company issued 2,850,000
shares of Series D Preferred Stock (the “Series D”) to Cellular. The Series D
has a liquidation preference equal to $1.00 per share, is convertible into
common stock at a rate of 26.315789 per share of Series D and votes on an as
converted basis with the common stock. Once the Company’s authorized capital is
increased to at least 600,000,000 shares, the Series D are automatically
converted into shares of the Company’s common stock. The fair value of this
licensing agreement is $2,625,000 (based on contemporaneous private placement
sales price) and for accounting purposes will be amortized over the estimated
life of the Agreement, Cellular will receive a royalty on the renewals of the
Software equal to 20% of the net profit for each renewal.





In
accordance with the Agreement, Mr. Sasso entered into a two-year employment
agreement with PG to perform sales and marketing services. Mr. Sasso will
receive a base salary of $240,000 per year and the Company issued to him 1,750
shares of Series C Preferred Stock (the “Series C”). The Series C is restricted
and vesting is subject to certain performance milestones of the sales of the
Software being met. Of the Series C: (i) 1,500 shares vest upon PG selling
1,000,000 units of the Software, (ii) another 200 shares vest upon PG selling
1,100,000 units of the Software and (iii) the remaining Series C vest upon PG
selling 1,125,000 units of the Software. The Series C has the same liquidation
rights as the shares of the Company’s common stock and each share of Series C is
convertible into 100,000 shares of the Company common stock. Once the Company
authorized capital is increased to at least 600,000,000 shares, the holder of
the Series C is entitled to convert its shares of Series C into common stock. A
holder of Series C cannot exercise their shares until such time as the holder
would not beneficially own, after such exercise, more than 4.99% of the
outstanding shares of common stock of the Company. Additionally, a holder of
Series C cannot vote any shares beneficially owned by the holder in excess of
4.99% of the outstanding shares of common stock of the Company. Mr. Sasso
entered into a Lockup/Leakout Agreement limiting his right to sell the Company’s
shares of common stock and preferred stock for a six month period.





Based on
recent transactions, if all the milestones are met, the fair value of these
shares will be 175,000,000 shares of common stock at $0.035 or $6,125,000 (based
on contemporaneous private placement sales price). This amount will be expensed
over time base on our periodic estimate of the probability of achieving these
milestones.





Based on
the future performance of the asset agreement described above, our CEO was
granted 70,000,000 5 year stock options with an exercise price of $0.036 per
option using a Black-Sholes option price model with the following assumptions:
Stock price $0.035 per share (based on contemporaneous private placement sales
price), volatility of 204% (based on recent historical volatility), expected
term 5 years, and a risk free interest rate of 2.56%.  These options
vest based on the achievement of milestones as follows:





(i)
            4,000,000
      shares for each 100,000 software licenses that are sold by the Company,
      its subsidiaries or its reseller(s)
      not to exceed an aggregate of 1,000,000 software
      licenses.




(ii)
            20,000,000
      shares upon the aggregate sales of 1,000,000 software licenses by
      the Company, its subsidiaries or its
  reseller(s).






(iii)
            8,000,000
      shares for each 100,000 software licenses that are sold by the Company,
      its subsidiaries or its reseller(s) over 1,000,000 software
      licenses.





On April
19, 2010 the Company entered into a two month consulting services agreement and
shall issue 1,000,000 shares of restricted common stock valued at $0.035 per
share or $35,000 for the services.









13





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






Company
Overview





Options
Media Group Holdings, Inc. is a multi-channel marketing firm that historically
has specialized in the acquisition and retention of customers through direct and
digital, and Internet marketing programs.  Options Media does business
through its wholly-owned subsidiaries: 1Touch Marketing, LLC, or 1
Touch,  Options Acquisition Sub, Inc., PG Acquisition Corp, Inc.
and Icon Term Life Inc.





Recently
Options Media has begun focusing its efforts on cell phones and text messaging
as users in the United States have begun using their phones to access the
Internet and for other purposes.





On April
15, 2010, Options Media acquired from Cellular Spyware, Inc., an exclusive
sublicense for the U.S. and Canada to market cellular mobile anti-virus and
safety products in exchange for 2,850,000 shares of new Series D preferred
stock, which is convertible into shares of the Company’s common stock. See Note
8 to our unaudited
condensed consolidated financial statements included in this
report.





Critical
Accounting Policies





This
discussion and analysis of our consolidated financial condition presented in
this section is based upon our unaudited consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted
in the United States.  The preparation of our unaudited consolidated
financial statements and related disclosures requires us to make estimates,
assumptions and judgments that affect the reported amount of assets,
liabilities, revenue, costs and expenses, and related disclosures.  We
believe that the estimates, assumptions and judgments involved in the accounting
policies described below have the greatest potential impact on our unaudited
consolidated financial statements and, therefore, consider these to be our
critical accounting policies.  On an ongoing basis, we evaluate our
estimates and judgments, including those related to accrued expenses, allowance
for accounts receivable, purchase price fair value allocation for business
combinations, estimates of depreciable lives and valuation of property and
equipment, valuations of discounts on debt,  valuation of beneficial
conversion features in convertible debt, valuation and amortization periods of
intangible assets, valuation of goodwill, valuation of stock based compensation
and the deferred tax valuation allowance.  We based our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources.  Actual results may differ
from these estimates under different assumptions or conditions.





Stock
Based Compensation





We
recognize the cost resulting from all stock-based payment transactions including
shares issued under our stock option plans in the financial
statements.  Stock based compensation is measured at fair value at the
time of the grant.





Valuation
of Long-Lived and Intangible Assets and Goodwill





We assess
the impairment of identifiable intangibles, long-lived assets and goodwill
annually or whenever events or circumstances indicate that the carrying value of
these assets may not be recoverable. Factors we consider include and are not
limited to the following:





●
            Significant
      changes in performance relative to expected operating
    results


●
            Significant
      changes in the use of the assets or the strategy of our overall
      business




●
            Significant
      industry or economic trends





If the
carrying amount of goodwill of a reporting unit exceeds its fair value, the
impairment loss is measured as the amount by which the carrying amount exceeds
the fair market value of the assets.  In determining if impairment
exists, we estimate the undiscounted cash flows to be generated from the use and
ultimate disposition of these assets.  The impairment loss is measured
as the amount by which the carrying amount of the assets exceeds the fair market
value of the assets.




Revenue
Recognition





We
recognize revenue when the following criteria have been met: persuasive evidence
of an arrangement exists, the fees are fixed or determinable, no significant
company obligations remain, and collection of the related receivable is
reasonably assured.





14





We report
revenues for transactions in which we are the primary obligor on a gross basis
and revenues in which we act as an agent on and earn a fixed percentage of
the sale on a net basis, net of related costs.  Credits or refunds are
recognized when they are determinable and estimable.





The
following policies reflect specific criteria for our various revenue
streams:





Revenues
for sending direct emails of customer advertisements to our owned database of
email addresses are recognized at the time the customer’s advertisement is
emailed to recipients by us.





Revenues
from ESP activities which allow the customer to send the emails themselves, to
our database of email addresses include a monthly fee charged for the customer’s
right to send a fixed number of emails per month.  ESP revenues are
generally collected upfront from customers for service periods of one to six
months.  Thus, ESP revenues are deferred and recognized over the
respective service period.  Overage charges apply if the customer
sends more emails in one month than is allowed per the
contract.  Accordingly, overage charges are accrued in the month of
occurrence.





Revenue
from list management services, which principally includes email transmission
services of third party promotional and e-commerce offers to a licensed email
list, is recognized when Internet users visit and complete actions at an
advertiser’s website. Revenue consists of the gross value in accordance with
EITF 99-19 of billings to clients.  We report these revenues gross
because we are responsible for fulfillment of the service, have substantial
latitude in setting price and assume the credit risk for the entire amount of
the sale, and are responsible for the payment of all obligations incurred with
advertiser email list owners.  Costs of revenue from list management
services are cost incurred to license email lists.





The
Company offers lead generation programs to assist a variety of businesses with
customer acquisition for the products and services they are
selling.  The Company pre-screens the leads through its online surveys
to meet its clients’ exact criteria.  Revenue from generating and
selling leads to customers is recognized at the time of delivery and acceptance
by the customer.





Revenue
from SMS is broken down into the three services offered.  SMS Push is
recognized at the time the message is sent to the cell phone user, SMS Pull is
recognized as revenue when the cell phone user responds to the advertisement,
and SMS Bluetooth Proximity Marketing is recognized once a month as the client
leases the box and the delivery platform on a monthly basis.




Results
of Operations for the three months ended March 31, 2010 compared with March 31,
2009





Revenue:




Our
revenue for the three months ended March 31, 2010 and 2009 was $1,217,998 and
$2,186,246 respectively.




The
following is the  percentage of total revenue earned by each product for
the three months ended March 31, 2010 and 2009:




Three
      Months Ended
              March
      31, 2010
            
            
            Three
      Months Ended
              March
      31, 2009Product
            
            Percentage
      of Total RevenueEmail/CPM
            
            
            61
            %
            
            
            43
            %Leads
            
            
            18
            %
            
            
            24
            %ESP
            
            
            15
            %
            
            
            22
            %List
            
            
            2
            %
            
            
            5
            %SMS
            
            
            3
            %
            
            
            5
            %Other
            
            
            1
            %
            
            
            1
            %




The
Company’s Email/CPM revenue has decreased by approximately 22%. The Company has
made several recent investments in technology including a new email mailing
platform and data. As we monetize these investments we expect our Email/CPM
revenue to increase in the future.





The
Company’s lead revenue has decreased by approximately 58%. The Company has
scaled back on this product line, raised the minimum gross margin for order
acceptance, and reduced staff and additional expenses related to this product.
However, we expect revenues from this product to grow from the first quarter
2010 levels.





15





The
Company’s ESP revenue has decreased by approximately 61%. The Company lost one
large customer that exited the market as well as some smaller customers. We
expect our ESP revenue will decline in the future. The Company has significantly
reduced expenses related to this product and expects it to continue to be
profitable on a smaller scale.





The List
revenue has decreased by approximately 73%. The Company does not plan on
continuing business in this product in the future.





Our SMS
revenue has not been material. However, as we combine our SMS growth strategy
with that of our recent mobile software acquisition, we expect revenue to
increase for our mobile products and become a significant portion of our
revenues.




Cost
of Revenue




Cost of
revenue includes fees due to list owners for the use of their data in list
management advertising campaigns, outsourced leads, and outsourced data and data
services. Cost of revenue for the three months ended March 31, 2010 and 2009 was
$359,277 and $654,006, respectively. This represents 29% and 30% of revenue
respectively with a gross margin of 71% and 70% respectively.




The
Company settled a lengthy dispute with a service provider for approximately
$40,000 in cash and common stock valued at approximately $78,750. This
settlement was recorded as a cost of revenue for the three months ended March
31, 2010. This had the impact of reducing our gross margin from 78% to
71%.




Operating
Expenses:




Three
      Months
              ended
              March
      31,
              2010
            
            
            Three
      Months
              ended
              March
      31,
              2009Server
      hosting and technology services
            
            $
            135,008
            
            
            $
            231,990Compensation
      and related cost
            
            
            843,887
            
            
            
            1,595,484Commissions
            
            
            161,760
            
            
            
            302,135Advertising
            
            
            34,687
            
            
            
            34,362Bad
      debt
            
            
            5,700
            
            
            
            18,458Rent
            
            
            54,927
            
            
            
            52,826Other
      general and administrative
            
            
            463,820
            
            
            
            564,050Total
      operating expenses
            
            $
            1,699,789
            
            
            $
            2,799,305




Sever
hosting and technology services expense for the three months ended March 31,
2010 and 2009 was $135,008 and $231,990 respectively, which consisted of
outsourced hosting, outsourced server costs, and other technology costs required
to operate our ESP and list management product lines.




Compensation
and related costs for the three months ended March 31, 2010 and 2009 was
$843,887 and $1,595,484 respectively, which includes salaries and related costs
such as payroll taxes. In addition, this expense includes non-cash stock based
compensation of $172,357 and $226,439 respectively. The stock compensation
represents expenses for employee restricted stock grants for services
approximately of $15,775 and $28,700 and the fair value of option grants to
employees of $156,582 and $541,160 respectively. At March 31, 2010, we had
approximately of $774,696 of unrecognized stock based compensation expense,
which we expect to recognize over the next two to three years.




Commission
expense for the three months ended March 31, 2010 and 2009 was $161,760 and
$302,135 respectively, which represent the amounts we incurred for sales
commissions on sales made during the respective periods.




16





Advertising
expense for the three months ended March 31, 2010 and 2009 was $34,687 and
$34,362, respectively.   This expense primarily consists of
expenses to attend trade shows which include travel expenses and trade show
fees.




Bad debt
expense for the three months ended March 31, 2010 and 2009 was $5,700 and
$18,458, respectively. The Company reviews the accounts receivables which are 30
days or more past due in order to identify specific customers with known
disputes or collectability issues. During the three months ended March 31, 2010,
the Company determined that a bad debt provision was required.




Rent
expense for the three months ended March 31, 2010 and 2009 was $54,927 and
$52,826, respectively. Our operations are based in one facility located in Boca
Raton, Florida at a monthly cost of approximately $18,000.




Other
general and administrative expenses for the three months ended March 31, 2010
and 2009 was $463,820 and $546,050, respectively. The major items included in
other general and administrative expenses for these periods were consulting and
professional services of approximately $216,112 and $205,000, and amortization
of intangible assets of $110,065 and $141,090.




Other
income (expense) for the three months ended March 31, 2010 and 2009 was $258,175
and ($135,680), respectively. For the three months ended March 31, 2010 other
income (expense) included $1,827 of interest expense on notes and capital leases
and $260,002 non-cash gain on extinguishment of liabilities.




The net
loss for the three months ended March 31, 2010 and 2009 was $582,893 and
$1,402,745 respectively, and the net loss per share basic and diluted was $0.00
and $0.02 respectively.




Liquidity
and Capital Resources




In the
three months ended March 31, 2010, we used $767,940 to fund our operating
activities. This consisted of our net loss $582,893 offset by certain larger
non-cash items including stock for services to non-employees of $7,000, stock
options expense of $185,782, stock granted for settlements of $197,638 and
amortization of intangibles of $69,470. We also used $5,000 in investing
activities.




As of
March 31, 2010, we had no outstanding loans.  As of May 12, 2010, we
had approximately $470,000 in available cash, and $670,000 in accounts
receivable.





To remain
operational through the next six months, we will need to improve our cash
flows.  To accomplish this, our management has been focused on
shifting our business to higher margin products which produce stronger cash
flows such as email platforms and our recent entry into the mobile software
market and continues to reduce and control expenses.  If we are unable
to improve our cash flow, we may need to raise additional funds through equity
or debt financings.  If required, additional financing may not be
available on terms that are favorable to us, if at all.  Any equity
financing may be very dilutive to our existing shareholders.  If we
are unsuccessful in our attempts to increase cash flows to cover our
expenditures or raise additional funds in a financing, we may not be able to
remain operational through the next six months.




Related
Party Transactions




See Note
6 to our unaudited condensed consolidated financial statements included in this
report for discussion of related party transactions.




New
Accounting Pronouncements




See Note
2 to our unaudited condensed consolidated financial statements included in this
report for discussion of recent accounting pronouncements.




Cautionary
Note Regarding Forward-Looking Statements





This report
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 including expected revenues of our business units,
profitability of our ESP business, plans with regard to our list revenue
business, expectations regarding our mobile products business and our future
liquidity.


17





Forward-looking
statements are based on our current expectations and assumptions regarding our
business, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Our actual
results may differ materially from those contemplated by the forward-looking
statements. We caution you therefore against relying on any of these
forward-looking statements. They are neither statements of historical fact nor
guarantees or assurances of future performance. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include the impact of intense competition, the continuation or
worsening of current economic conditions and the condition of the domestic and
global credit and capital markets, the failure to enter into distribution
agreements with major retailers, wireless carriers or security software vendors
to distribute our newly acquired software and the failure to gain market
acceptance of the software.





Further information on our risk factors
is contained in our filings with the SEC, including our Form 10-K for the year
ended December 31, 2009.  Any forward-looking statement made by us in
this report speaks only as of the date on which it is made.  Factors
or events that could cause our actual results to differ may emerge from time to
time, and it is not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement, whether as a result
of new information, future developments or otherwise.


ITEM
3.    QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




Not
applicable to smaller reporting companies


ITEM
4.    CONTROLS
AND PROCEDURES.






Not
applicable to smaller reporting companies


ITEM
4T.    CONTROLS
AND PROCEDURES.






Evaluation of Disclosure
Controls.





We
carried out an evaluation with the participation of our Principal Executive
Officer and Principal Financial Officer, required by Rule 15d-15 of the
Securities Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our
disclosure controls and procedures as defined in Rule 15d-15(e) under the
Exchange Act.  Based on their evaluation, our Principal Executive
Officer and Principal Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this report to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms and is accumulated and communicated to our management, including our
Principal Executive Officer and Principal Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.





Changes in Internal Controls
Over Financial Reporting.





There
were no changes in our internal control over financial reporting as defined in
Rule 15d-15(f) under the Exchange Act that occurred during the period
covered by this report that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.





18


PART
II – OTHER INFORMATION


ITEM
1.    LEGAL
PROCEEDINGS.






None.





ITEM
1A.    RISK
FACTORS.






Not
applicable to smaller reporting companies


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






None




ITEM
3.    DEFAULTS
UPON SENIOR SECURITIES.






None


ITEM
4.    (REMOVED
AND RESERVED).






None


ITEM
5.    OTHER
INFORMATION.






None




19





ITEM
6. EXHIBITS.






Exhibit
            
            
            
            Incorporated
      by Reference
            
            Filed
      or Furnished#
            
            Exhibit
      Description
            
            Form
            
            Date
            
            Number
            
            Herewith2.1
            
            Customer
      Acquisition Network Holdings – Merger and Plan of
      Reorganization
            
            8-K
            
            6/25/08
            
            2.12.2
            
            Options
      Acquisition - Certificate of Merger
            
            8-K
            
            6/25/08
            
            2.22.3
            
            1
      Touch – Plan of Merger**
            
            10-K
            
            10/6/08
            
            2.32.4
            
            1
      Touch – Certificate of Merger
            
            10-K
            
            10/6/08
            
            2.43.1
            
            Amended
      and Restated Articles of Incorporation
            
            8-K
            
            6/25/08
            
            3.13.2
            
            Certificate
      of Amendment – Name Change
            
            8-K
            
            6/25/08
            
            3.23.3
            
            Certificate
      of Change – Stock Split
            
            8-K
            
            6/25/08
            
            3.33.4
            
            Certificate
      of Designation – Series A & B
            
            10-K
            
            3/31/10
            
            3.43.5
            
            Amendment
      to Certificate of Designation – Increased Number of Authorized Series
      B
            
            10-K
            
            3/31/10
            
            3.53.6
            
            Certificate
      of Amendment – Increasing
      Capital
            
            10-K
            
            3/31/10
            
            3.63.7
            
            Bylaws
            
            Sb-2
            
            11/8/07
            
            3.23.8
            
            First
      Amendment to Bylaws
            
            8-K
            
            9/25/08
            
            3.13.9
            
            Second
      Amendment to Bylaws
            
            10-K
            
            3/31/10
            
            3.910.
            
            Form
      of Subscription Agreement – Series B
            
            10-K
            
            3/31/10
            
            10.731.1
            
            Certification
      of Principal Executive Officer (Section 302)
            
            
            
            
            
            
            
            Filed31.2
            
            Certification
      of Principal Financial Officer (Section 302)
            
            
            
            
            
            
            
            Filed32.1
            
            Certification
      of Principal Executive Officer and Principal Financial Officer
      (Section 906)
            
            
            
            
            
            
            
            Furnished





** The confidential disclosure
schedules are not filed in accordance with SEC Staff policy, but will be
provided to the Staff upon request.  Certain material agreements contain
representations and warranties, which are qualified by the following
factors:





a.
            the
      representations and warranties contained in any agreements filed with this
      report were made for the purposes of allocating contractual risk between
      the parties and not as a means of establishing facts;b.
            the
      agreement may have different standards of materiality than standards of
      materiality under applicable securities laws;c.
            the
      representations are qualified by a confidential disclosure schedule that
      contains nonpublic information that is not material under applicable
      securities laws;d.
            facts
      may have changed since the date of the agreements; ande.
            only
      parties to the agreements and specified third-party beneficiaries have a
      right to enforce the agreements.





Notwithstanding
the above, any information contained in a schedule that would cause a reasonable
investor (or that a reasonable investor would consider important in making a
decision) to buy or sell our common stock has been included. We have been
further advised by our counsel that in all instances the standard of materiality
under the federal securities laws will determine whether or not information has
been omitted; in other words, any information that is not material under the
federal securities laws may be omitted. Furthermore, information which may have
a different standard of materiality will nonetheless be disclosed if material
under the federal securities laws.





Copies of
this report (including the financial statements) and any of the exhibits
referred to above will be furnished at no cost to our shareholders who make a
written request to Options Media Group Holdings, Inc., 123 NW 13th Street, Suite 300, Boca
Raton, Florida 33432, Attention: Marnie Goldberg.





20


SIGNATURES




Pursuant
to the requirements 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.




OPTIONS
      MEDIA GROUP HOLDINGS, INC.May
      14, 2010/s/ Scott FrohmanScott
      FrohmanChief
      Executive Officer
              (Principal
      Executive Officer)May
      14, 2010
            
            /s/ Steven StowellSteven
      StowellChief
      Financial Officer
              (Principal
      Financial Officer)




21