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 September 30, 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 ofincorporation or organization)

(I.R.S. Employer 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
Smaller reporting company
þ(Do not check if a smaller reporting company)





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 November 12, 2010Common Stock, $0.001 par value per share

358,322,271 shares











OPTIONS MEDIA GROUP HOLDINGS, INC.





TABLE OF CONTENTS





PAGEPART I – FINANCIAL INFORMATIONItem 1.
Financial Statements


3Consolidated Balance Sheets at  September 30, 2010 (Unaudited) and December 31, 2009


3Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2010 and 2009.  (Unaudited)


4Consolidated Statements of Cash Flows for the Three and  Nine Months Ended  September 30, 2010 and 2009 (Unaudited)


5Notes to Consolidated Financial Statements (Unaudited)


7Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations


21Item 3.
Quantitative and Qualitative Disclosures about Market Risk


27Item 4.
Controls and Procedures


27PART II – OTHER INFORMATIONItem 1.
Legal Proceedings


28Item 1A
Risk Factors


28Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds


28Item 3.
Defaults Upon Senior Securities


29Item 4.
(Removed and Reserved)


29Item 5.
Other Information


29Item 6.
Exhibits


29Signature



30




2


PART I – FINANCIAL INFORMATION
 
 ITEM 1.    FINANCIAL STATEMENTS. 
 OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS


September 30,

2010


December 31,

2009(Unaudited)ASSETSCurrent Assets:Cash

$
153,172


$
1,316,067Accounts receivable, net


401,786



371,696Prepaid expenses


109,123



39,444Other current assets


4,874



12,000Total Current Assets


668,955



1,739,207Property and equipment, net


121,415



219,516Software, net


2,553,339



33,594Goodwill


3,275,415



6,372,230Intangible Assets, net


133,899



303,361Other assets


36,421



36,421Total assets

$
6,789,444


$
8,704,329LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Bank Overdraft

$
-


$
27,721Accounts payable


473,282



788,689Accounts payable, due to related parties


9,905



32,104Accrued expenses


379,787



566,523Notes payable, related parties, net of discount


-



287,000Notes payable


-



60,000Deferred revenue


60,602



21,025Obligations under capital leases


-



976Other current liabilities


66,789



80,369Total Current Liabilities


990,365



1,864,407Total liabilities

$
990,365


$
1,864,407Commitments and contingencies (Note 9)Stockholders' Equity:Preferred stock; $0.001 par value, 10,000,000 shares authorized: 
Preferred stock; $0.001 par value Series A, none and 7,830 issued and 
outstanding at September 30, 2010 and December 31, 2009, respectively

$
-


$
8Preferred stock; $0.001 par value Series B, none and 7,087 issued and outstanding at 
September 30, 2010  and December 31, 2009, respectively


-



7Preferred stock; $0.001 par value, Series C, none issued and outstanding at 
September 30, 2010 and December 31, 2009, respectively


-



-Preferred stock; $0.001 par value, Series D, 2,850,000 issued and outstanding at 
September 30, 2010 and none at December 31, 2009


2,850



-Preferred stock; $0.001 par value, Series E, none issued and outstanding at 
September 30, 2010 and December 31, 2009, respectively


-



-Common stock; $0.001 par value, 700,000,000 shares authorized, 341,122,271 
and 97,713,210 issued and outstanding, at September 30, 2010 and 
December 31, 2009, respectively


341,122



97,713Additional paid-in capital


24,133,735



19,626,357Accumulated Deficit


(18,678,628)



(12,884,163)Total Stockholders' Equity


5,799,079



6,839,922Total Liabilities and Stockholders' Equity

$
6,789,444


$
8,704,329





See accompanying unaudited notes to consolidated financial statements





3




OPTIONS MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS




For the Three Months


For the Nine MonthsEnded


EndedSeptember 30,


September 30,2010


2009


2010


2009(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Net revenues

$
1,100,631


$
1,755,280


$
3,456,498


$
6,187,652Cost of revenues


248,900



488,393



908,476



1,849,444Gross profit


851,731



1,266,887



2,548,022



4,338,208Operating expenses:Server hosting and technology services


118,300



293,431



431,821



778,220Compensation and related cost


723,324



1,029,703



2,486,422



3,712,059Commissions


107,881



215,051



456,913



803,133Advertising


72,685



12,822



158,746



63,663Bad Debt


72,374



155,684



149,980



253,245Goodwill impairment


1,530,124



25,553



3,096,815



25,553Rent


50,093



52,362



159,948



157,524


Other general and administrative


652,314



609,171



1,666,494



2,002,066Total operating expenses


3,327,095



2,393,777



8,607,139



7,795,463Income (loss) from operations


(2,475,364
)


(1,126,890
)


(6,059,117
)


(3,457,255
)Other income (expense):Interest income


-



-



-



4,204Settlement gains


-



-



267,031



-Interest expense


(70
)


(95,294
)


(2,379
)


(397,981
)Total other income (expense), net


(70
)


(95,294
)


264,652



(393,777
)Net income (loss)

$
(2,475,434
)

$
(1,222,184
)

$
(5,794,465
)

$
(3,851,032
)Net Loss Per Share Basic and Diluted

$
(0.01
)

$
(0.02
)

$
(0.02
)

$
(0.07
)Weighted Average Shares Outstanding


288,905,606



60,229,180



239,369,311



59,210,683





See accompanying unaudited notes to consolidated financial statements.





4


OPTIONS MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)




For the Nine


For the NineMonths Ended


Months EndedSeptember 30, 2010


September 30, 2009(Unaudited)


(Unaudited)Operating Activities:Net Loss

$
(5,794,465
)

$
(3,851,032
)Adjustments to reconcile net loss to net cash(used in) operating activities:Stock Granted For Services To Non-Employees


42,000



93,958Stock Granted For Employee Settlement


-



4,500Stock Granted For Services To Employees


34,675



96,533Stock Options Granted For Services to Employees


352,290



-Stock Options Granted For Services


-



541,159Stock Options Granted For Settlement


29,200



-Stock Granted For Settlement of Debt


268,608



-Amortization Of Debt Discount


-



319,855Amortization Of Prepaid Expenses


192,368



250,833Depreciation


366,781



97,275Impairment Of Goodwill


3,096,815



25,553Amortization Of Intangibles


204,962



423,265Bad Debt


149,980



253,245Changes in operating assets and liabilities:Accounts Receivable


(180,070
)


(269,611
)Prepaids


(6,564
)


(1,882
)Other Current Assets


7,129



(5,334
)Accounts Payable


(305,502
)


710,247Accrued Expenses


(186,736
)


339,985Deferred Revenues


39,577



18,220Due To Related Parties


(32,104
)


7,388Other Current Liabilities


(13,580
)


(23,742
)Net Cash Used In Operations


(1,734,636
)


(969,585
)Investing ActivitiesPurchase Of Property And Equipment


(5,000
)


(2,714
)Purchase Of Property Intangible Asset


(20,000
)


-Purchase Of Software


(163,425
)


-Net Cash Used In Investing Activities


(188,425
)


(2,714
)Financing ActivitiesBank Overdraft


(27,721
)


(154
)Proceeds from Warrant Exercises


12,465



-Repayments of Loans


(237,100
)


-Proceeds From Sales of Stock


1,238,780



170,733Financing Costs


(225,282
)


-Proceeds From Loans


-



815,000


See accompanying unaudited notes to consolidated financial statements.


5





OPTIONS MEDIA GROUP HOLDINGS INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


(UNAUDITED)




For the Nine


For the NineMonths Ended


Months EndedSeptember 30, 2010


September 30, 2009(Unaudited)


(Unaudited)Principal Payments on Capital Lease Obligations


(976
)


(10,181
)Net Cash Provided by Financing Activities


760,166



975,398Net Increase (Decrease) In Cash


(1,162,895
)


3,099Cash Beginning Of Year


1,316,067



122,165Cash End Of Period

$
153,172


$
125,264Supplemental Disclosure of Cash Flow Information:Cash Paid For Interest

$
2,379


$
25,555Cash Paid For Taxes

$
-


$
-Supplemental Disclosure Of Non-Cash Investingand Financing Activities:Refinancing Of Promissory Notes

$
-


$
680,000Common Stock issued for debt discount

$
-


$
95,000Prepaid common stock issued for services

$
255,484


$
367,916Common stock issued for asset acquisition

$
2,635,500


$
-Common stock issued for conversion of convertible debt

$
109,900


$
-Issuance  of common stock prepaid and recorded as liability in 2008

$
-


$
200,000




See accompanying unaudited notes to consolidated financial statements.





6




OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER 30, 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 was 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, and it no longer provides 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, SMS campaigns, lead generation and direct mail and postal lists.





On April, 16, 2010, through its wholly-owned subsidiary PhoneGuard, Inc., (“PG”), the Company entered into an asset purchase agreement and sublicense agreement with Cellular Spyware Inc.  The asset acquisition gave the company rights to the name PhoneGuard whereby the Company then entered the mobile and smart phone application market. PhoneGuard is the exclusive licensee for the United States and Canada of software which safeguard cells and smart phones from the ever increasing risk posed by hackers and cyber criminals. Options Media Group acquired certain assets of PhoneGuard and became the exclusive marketer within the United States and Canada.




In addition to anti-virus and anti-malware software, the Company also acquired PhoneGuard's rights to a state-of-the-art Anti-Texting product.
 
 Studies have shown that texting and driving can be four times more dangerous than drinking and driving; 36 states currently have anti-texting laws. New research from the Insurance Institute for Highway Safety shows the number of accidents caused by distracted driving actually increased after these laws were passed. When installed on a mobile device, the PhoneGuard software prevents the user from texting while driving thereby allowing them to focus on the road. PhoneGuard's new Anti-Texting application is designed to keep teenagers, family members and people who drive for business  safe while driving by disabling texting, instant messaging, calling, web browsing and other phone-based distractions that should not be used while sitting behind the wheel of a moving vehicle.  PhoneGuard protects drivers from the dangerous temptation to use their phone while driving.  (See Note 4)


7





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)




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 (the “SEC”). 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 and nine months ended September 30, 2010 and our financial position as of September 30, 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 nine months ended September 30, 2010, the Company had a net loss of $5,794,465 and $1,734,636 of net cash used in operations. At September 30, 2010, the Company had a working capital deficit of $321,410. Additionally, at September 30, 2010, the Company had an accumulated deficit of $18,678,628. 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 unaudited 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.





The Company has financed its working capital and capital expenditure requirements primarily from the sales of common stock, Series B Preferred Stock (“Series B”), warrant exercises, issuance of short term debt securities and sales of advertising and data services. On July 28, 2010, the Company commenced a private placement of up to $1,100,000 of common stock at $0.01 per share, and this offering was increased to $1,600,000 in September 2010. As of November 5, 2010, $843,300 has been raised from this private placement. The Company continues to aggressively manage operating expenses and the growth strategy is focused toward PhoneGuard which it believes will generate high margins and strong cash flows.





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 September 30, 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, 1 Touch Marketing, LLC, Icon Term Life, Inc. and PhoneGuard. 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.





8





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





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:





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 nine months ended September 30, 2010 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.   As a result of the periodic goodwill test, the Company recorded impairment in 2010.








9





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)
 
 The following table summarizes our financial assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2010:




Balance at

Quoted Prices in

Significant other

SignificantSeptember 30,

Active Markets for

Observable

Unobservable2010

Identical Assets

Inputs

Inputs(Level 1)

(Level 2)

(Level 3)Assets:Goodwill

$
3,275,415


$
-


$
-


$
3,275,415Intangible assets


133,899



-



-



133,899Total financial assets

$
3,409,314


$
-


$
-


$
3,409,314





The following is a summary of activity for non-financial assets measured under level 3 through September 30, 2010:





Goodwill:Balance at January 1, 2010

$
6,372,230Goodwill Impairment


(3,096,815
)Ending balance at September 30, 2010

$
3,275,415Intangible assets:Balance at January 1, 2010

$
303,361Fiscal 2010 additions


35,500Amortization of intangible assets


(204,962
)Ending balance at September 30, 2010

$
133,899





Net Earnings (Loss) Per Share





Basic earnings (loss) per common share are 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 September 30, 2010, there were 29,345,217 options 6,495,665 warrants, and 146,540 shares of unvested restricted stock which may dilute future earnings per share.





Segments





The Company follows ASC 280-10 for, "Disclosures about Segments of an Enterprise and Related Information." Prior to April 2010, the Company operated in one segment; therefore, segment information is presented for only three months and nine months ended September 30, 2010 (See Note 8).





Recently Issued Accounting Standards





In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”.  This update provides amendments to Topic 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3.  The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated results of operations or financial condition.





10





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”.  This update addresses both the interaction of the requirements of Topic 855, “Subsequent Events”, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events (paragraph 855-10-50-4).  The amendments in this update have the potential to change reporting by both private and public entities, however, the nature of the change may vary depending on facts and circumstances.  The adoption of ASU 2010-09 did not have a material impact on the Company’s consolidated results of operations or financial condition.





In April 2010, the FASB issued ASU No. 2010-13, “Compensation – Stock Compensation”.  This update will clarify the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades.  This update will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted.  The Company does not expect the provisions of ASU 2010-13 to have a material effect on the Company’s consolidated results of operations or financial condition.


\


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 September 30, 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.





At March 31, 2010 the Company had paid all the related and unrelated party notes.





Activity for notes payable, related parties was as follows for nine months ended September 30, 2010:





Ending balance as of December 31, 2009

$
287,000Note Conversions


(50,000
)Note Repayments


(237,000
)Balance as of September 30, 2010

$
-




Activity for notes payable, unrelated parties was as follows for the nine months ended September 30, 2010:





Ending balance as of December 31, 2009

$
60,000Note Conversions


(59,900
)Note Repayments


(100
)Balance as of September 30, 2010

$
-




11





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





NOTE 4 –ASSET ACQUISITION





In April, 2010, PG a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement and Sublicense Agreement (the “Agreement”) with Cellular and Mr. 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.




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 23.52941 per share of Series D and votes on an as converted basis with the common stock.  The fair value of this licensing agreement is $2,625,000 (based on contemporaneous private placement sales price of $0.035 per share) and for accounting purposes is being amortized over the estimated life of five years.  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 receives a base salary of $240,000 per year and the Company issued to him 675 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.  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 129,629 shares of the Company's 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; provided, however, the holder may waive this limitation to increase the limitation to 9.99%.  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.  As of September 30, 2010 none of the Series C Preferred Stock have vested.  Based on recent transactions, if all the milestones are met, the fair value of these 675 Series C Preferred shares as determined on April 16, 2010 was 87,499,575 shares of common stock at $0.035 or $3,062,485 (based on contemporaneous private placement sales price).  This amount will be expensed over time based on our periodic estimate of the probability of achieving these milestones.


In September 2010, 400 shares of Series C Preferred stock were forfeited. A balance of 675 Series C Preferred Shares remain however, they are not considered issued and outstanding for accounting purposes. In addition, the conversion ratio of the Series C to common shares was increased from 100,000 to 129,629.  (See Note 5)





NOTE 5 - STOCKHOLDERS’ EQUITY





Capital Structure





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





In April 2010, the shareholders approved to increase the authorized common shares to 700,000,000 par value $0.001 per share; in April 2010, the Company amended its Articles of Incorporation to reflect this increase. In September 2010, the board recommended that the Company amend its Articles of Incorporation to increase its authorized shares of common stock to 950,000,000; the Company is waiting shareholders’ approval.




12




OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)


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 was issued in May, 2010 and vested upon issuance. 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.





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.





In April 2010 the Company entered into a two month consulting services agreement and issued 1,000,000 shares of restricted common stock valued at $0.035 per share (based on contemporaneous private placement sales price) or $35,000 for the services.





In May 2010, the Company issued 1,295,500 shares of common stock valued at $0.035 per share (based on contemporaneous private placements sales price) or $45,343 for an investor  relation agreement.





In May 2010, the Company issued 2,027,700 shares of common stock valued at $0.035 per share (based on a contemporaneous private placements sales price) or $70,970 to settle outstanding liabilities to suppliers.  No gain or loss was recorded as the conversion price was equal to the fair market value of the common stock.





In May 2010, the Company entered into a new six month investor relations agreement and agreed to issue a total of 4,000,000 immediately vested shares of common stock. The shares were valued at $0.035 per share (based on a contemporaneous private placement sales price) or $140,000.





In June 2010, the Company issued 600,000 shares of common stock to an existing investor for no consideration effectively reducing the per share purchase price of the investors original investment in common stock. The shares we issued to an investor as an incentive to provide additional funding to the Company.





On July 28, 2010, the Company commenced a private placement of up to 110 million shares of common stock at $0.01 per share or $1,100,000.  In connection with the new private placement, the Company agreed that for each investor in the Series B offering who purchases an amount in the new private placement equal to the lesser of (i) 50% of what he invested in the Series B offering or (ii) $100,000, he will receive a number of shares of common stock in order to reduce his purchase price per share derived from the Series B offering from $0.035 per share to $0.02 per share.





13





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)




In July 2010, the Company issued 20,000,000 shares of common stock at $0.01 per unit pursuant to the private placement, which generated net proceeds of approximately $200,000.





In July 2010, the Company issued 6,540,000 shares of common stock to two existing investors for no consideration effectively reducing the per share purchase price of the investors original investment in common stock. The shares we issued to two investors as an incentive to provide additional funding to the Company.





In August 2010, the Company issued 43,530,000 shares of common stock at $0.01 per unit pursuant to the private placement, which generated net proceeds of approximately $435,300.





In August 2010, the Company issued 10,788,188 shares of common stock related to anti-dilution protection clauses.





In August 2010, the Company entered into an investment banking agreement with a New York based broker-dealer and issued it 2,000,000 shares of common stock and paid $35,000 as a non-refundable retainer. The shares were valued at $0.01 per share (based on a contemporaneous private placement sales price) or $20,000 and recorded as an offering cost.





In September 2010, the Company issued 3,500,000 shares of common stock at $0.01 per unit pursuant to the private placement, which generated net proceeds of approximately $35,000.





In September 2010, the Company issued 16,574,286 shares of common stock to some existing investors for no consideration effectively reducing the per share purchase price of the investors original investment in common stock. The shares were issued as an incentive to provide additional funding to the Company.





In September 2010, 142,230 shares of employee restricted stock vested.




See below for additional discussion of conversions of preferred stock to common stock.





Series A Convertible preferred stock





In January 2010, the Company completed a private placement of Series A. 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.





In September 2010, the Company authorized the supplement of the July 28, 2010 Offering to (i) increase the maximum number of shares of common stock offered under the Offering from 110,000,000 to 160,000,000; (ii) extend the termination date of  the Offering from October 31, 2010 to November 30, 2010; (iii) as of the effective date of the Consent, issuer Series A Preferred Stock in lieu of common stock under the Offering; (iv) provide investors in the private placements in June 2008 through September 2008 the opportunity to effectively reprice their currently held shares from such offerings from $0.30 to $0.05 and (v) provide the investors who received convertible Series A Preferred Stock pursuant to that certain Agreement to Restructure Debt Dated December 15, 2009 the opportunity to effectively reprice their currently held shares from the conversion of the Series A Preferred Stock from $0.035 to $0.02; provided that the investors referenc3ed in (iv) and (v) above must invest at least (the lesser of): $100,000 or 50% of their prior investment.  It is further, the Company allows currently held shares from such offerings from $0.30 to $0.05 and (v) provide the investors who received convertible Series A Preferred Stock pursuant to that certain Agreement to Restructure Debt dated December 15, 2009 the opportunity to effectively reprice their currently held shares from the conversion of the Series A Preferred Stock from $0.035 to $0.02; provided that the investors referenced in (iv) and (v) above must invest at least (lesser of): $100,000 or 50% of their prior investment. As of September 30, 2010, no shares were issued under this Offering.





Series B preferred stock





In January 2010, the Company issued 70,880,000 shares of common stock sold in connection with the conversion of 7,087 previously issued Series B.





14





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)




In January 2010, the Company in a private placement sold Series B. The Company issued 1,301 shares and received $455,480 gross. In January 2010, the preferred shares automatically converted to 13,010,000 shares of common stock. The conversion formula to common stock was 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 its private placement of Series B. The Company issued 300 shares and received $105,000 net. In February 2010, the preferred shares automatically converted to 3,000,000 shares of common stock. The conversion formula was the same as the above paragraph.




Series C preferred stock





In April 2010, the Company authorized the issuance of Series C in conjunction with the asset acquisition as described in Note 4.





In August 2010, the Company entered into an agreement with each of Mr. Anthony Sasso, President of PG, Scott Frohman, Chief Executive Officer of the Company and PG and Mr. Paul Taylor.  Under the agreement, Mr. Sasso surrendered his 1,750 shares of Series C and the Company reissued to each of Messrs. Sasso and Frohman 675 shares of Series C and to Mr. Taylor 400 shares of Series C.  In exchange, Mr. Frohman cancelled 70,000,000 options that were granted to him in April 2010.  Finally, in August 2010, the Company entered into a two-year employment agreement with Mr. Taylor and appointed Mr. Taylor President of the Company. Under the terms of the employment agreement, Mr. Taylor is receiving a monthly salary of $8,333.  The Company issued him the 400 shares of Series C referred to above.  Vesting of the Series C is subject to the same performance milestones as when the shares were issued solely to Mr. Sasso.




In September 2010, Mr. Taylor resigned from the Company and forfeited 400 shares of Series C preferred Shares.




In September 2010, the Board of Directors agreed to increase the conversion ratio for each share of Series C Preferred Stock from 100,000 to 129,629 shares of common stock.  The filing in Nevada was effective October 4, 2010.


In September 2010, the Chief Executive Officer of the Company agreed to exchange his 675 shares of Series C Preferred Stock for 675 shares of Series E Preferred Stock.  The actual exchange has not occurred due to an administrative delay.


As of September 30, 2010, no Series C shares have been issued or accounted for as the contingent requirements for issuance had not yet been met.





Series D preferred stock





As a result of the Company entering into the asset acquisition as described in Note 4, the Company issued 2,850,000 shares of 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 23.52941 per share of Series D (total of approximately 67 million common shares) and votes on an as converted basis with the common stock.  The Series D is convertible after October 20, 2010.  The fair value of the preferred stock grant is $2,625,000 or $0.035 per share (based on contemporaneous private placement sales price).


Series E preferred stock





In September 2010, the Company authorized the issuance of Series E Preferred Stock consisting of 2,000 shares, par  value $0.001 per share with the same rights and preferences as the Series C Preferred Stock except without the voting and conversion limitations.





15





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





As of September 30, 2010, no Series E shares have been issued or accounted for as described above under Series C preferred stock.





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.





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%.





Vesting based on the future performance of the asset agreement described in Note 4, our CEO was granted 70,000,000 five year non-Plan unvested 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%.





16




OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)


In July, 2010, in connection with the Series C Agreement, the Company’s CEO agreed to cancel 70 million unvested stock options which we previously granted. No expense had been recognized on the grant and accordingly there was no expense adjustment upon cancellation.





In July 2010, the Company granted to the former Chief Technology Officer 200,000 new five-year non-qualified stock options exercisable at $0.017 per share.  Vesting semi-annually over a three-year period beginning on December 31, 2010. The options were valued on the grant date at $0.017 per option for a total of $4,000 using a Black-Sholes option pricing model with the following assumptions: stock price at $0.02 (based on the grant date quoted trading price of the Company’s common stock), volatility of 278% (based on historical volatility), expected term of five years, and a risk free interest rate of 1.66%.





In August 2010, the Company granted to the Senior Vice President of the Company 7,000,000 Non-Plan five-year options exercisable at $0.017 per share and vesting over a three-year period on each calendar quarter with the first vesting date being December 31, 2010. The options were valued on the grant date at $0.017 per option for a total of $119,000 using a Black-Sholes option pricing model with the following assumptions: stock price at $0.017 (based on the grant date quoted trading price of the Company’s common stock), volatility of 213% (based on historical volatility), expected term of five years, and a risk free interest rate of 1.66%.




For the nine months ended September 30, 2010, the Company recorded a stock option expense of $376,496. At September 30, 2010, there was approximately $529,689 of unrecognized compensation expense to non-vested options based compensation.





A summary of the Company’s stock option activity during the nine months ending September 30, 2010, is presented below:





No. of

Shares


Weighted

Average

Exercise Price


Weighted

Average

Remaining

Contractual Term


Aggregate

Intrinsic ValueBalance Outstanding December 31, 2009


22,865,097


$
0.27



6.3


$
––Granted*


78,200,000


$
0.03



3.97


$
––Exercised


––


$
––



––


$
––E   Cancelled*


(70,000,000
)

$
0.036



––


$
––Fortified


(1,719,880
)

$
0.035



––


$
––Expired


––


$
––



––


$
––Balance Outstanding September 30, 2010


29,345,217


$
0.07



3.97


$
––Exercisable September 30, 2010


7,418,406


$
0.14



3.47


$
––





*- See Note 4 for cancellation of 70,000,000 options





A summary of the quantity of employee common stock unvested, granted, vested and cancelled for the nine months ended September30, 2010, is presented below:





Unvested shares outstanding December 31, 2009


457,667Shares vested in 2010


(142,230
)Unvested shares cancelled in 2010


(168,897
)Unvested shares at September 30, 2010


146,540





As of September 30, 2010, there was $51,500 of total unrecognized compensation costs related to unvested common stock.





17





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)




Warrants





During 2010, the Company issued warrants pursuant to a private placement. Activity during 2010 was as follows:





No. of Shares

Weighted

Average

Exercise Price

Weighted

Average

Remaining

Contractual TermBalanced Outstanding December 31, 2009
6,520,665

$
0.038

2.62 YearsGranted
333,333

$
0.035

2.41 YearsExercised
(358,333)

$
0.035

2.51 YearsExpired
--

$
--

--Balance Outstanding at September 30, 2010
6,495,665

$
0.38

2.37 YearsExercisable, September 30, 2010
6,495,665

$
0.38

2.37 Years





In April 2010, the Company authorized to reduce the exercise price to $0.035 per share of those outstanding warrants selected by the Company’s management.


.


NOTE 6 – 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. No amounts exceeded the federally insured limits at September 30, 2010.





Concentration of Revenues





During the nine months ended September 30, 2010, no individual customer represented more than 10% of the Company’s revenue. During the nine months ended September 30, 2009 no individual customer represented more than 10% of the Company’s revenue.





Concentration of Accounts Receivable





As of September 30, 2010, one customer accounted for 19% of the total consolidated accounts receivable and one customer accounted for 10% of the consolidated accounts receivable. In the quarter ended September 30, 2009, we had no 10% customers.





NOTE 7 – 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.





On August 11, 2010, Daniel Lansman resigned as President and was appointed Senior Vice President of the Company.  Mr. Lansman remains a director of the Company.  In connection with his new position, Mr. Lansman has agreed to amend his employment agreement which he and the Company are in the final stages of executing. Based on the thus far agreed upon terms, Mr. Lansman will receive an annual salary of $125,000 per year and 7,000,000 Non-Plan five-year options exercisable at $0.017 per share and vesting over a three-year period on each calendar quarter with the first vesting date being December 31, 2010.





18





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





During the first nine 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)





NOTE 8 – SEGMENTS





The Company operates under two business segments, which are evaluated on a revenue and net income basis. Expenses for professional services, stock compensation and certain interest costs are considered corporate expenses. The direct marketing segment includes revenues and associated costs for E-Mail/CPM, SMS, Leads and ESP. PhoneGuard is the sales of anti-virus and anti-text cellular software. Prior to the acquisition of PhoneGuard in April 2010, the Company operated under one business segment.





The tables below present certain financial information by business segment for the nine months and three months ended September 30, 2010.





NINE MONTHS ended September 30, 2010

Direct Marketing


PhoneGuard


Segment Totals


Corporate


Consolidated TotalsRevenue from external customers

$
3,455,658


$
840


$
3,456,498


$
—


$
3,456,498Interest expense

$
(1,137
)

$
—


$
(1,137
)

$
(1,242
)

$
(2,379
)Depreciation and amortization

$
(326,220
)

$
(245,523
)

$
(571,743
)

$
—


$
(571,743
)Income tax expense

$
—


$
—


$
—


$
—


$
—Net income (loss)

$
(4,096,440
)

$
(691,420
)

$
(4,787,860
)

$
(1,006,605
)

$
(5,794,465
)Segment fixed assets, intangibles & goodwill

$
3,521,165


$
2,562,903


$
6,084,068


$
—


$
6,084,068Fixed asset, intangibles & goodwill additions (disposals) (net)

$
(3,081,315
)

$
2,808,426


$
(272,889
)

$
—


$
(272,889
)Total assets

$
4,176,541


$
2,563,377


$
6,739,918


$
49,526


$
6,789,444THREE MONTHS ended September 30, 2010

Direct Marketing


PhoneGuard


Segment Totals


Corporate


Consolidated TotalsRevenue from external customers

$
1,100,155


$
476


$
1,100,631


$
—


$
1,100,631Interest expense

$
—


$
—


$
—


$
(70
)

$
(70
)Depreciation and amortization

$
(97,037
)

$
(133,921
)

$
(230,958
)

$
—


$
(230,958
)Income tax expense

$
—


$
—


$
—


$
—


$
—Net income (loss)

$
(1,787,958
)

$
(368,892
)

$
(2,156,850
)

$
(318,584
)

$
(2,475,434
)Segment fixed assets, intangibles & goodwill

$
5,180,887


$
2,562,936


$
7,743,823


$
—


$
7,743,823Fixed asset, intangibles & goodwill additions (disposals) (net)

$
(1,530,124
)

$
110,000


$
(1,420,124
)

$
—


$
(1,420,124
)Total assets

$
4,176,541


$
2,563,377


$
6,739,918


$
49,526


$
6,789,444




19





OPTIONS MEDIA GROUP HOLDINGS, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2010
 (UNAUDITED)





NOTE 9 - 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.





On April 16, 2010, Hydra Group LLC (“Hydra”) filed a complaint against the Company in the Superior Court of Los Angeles (West District) seeking $93,698 for breach of contract.  The complaint relates to a contract between Hydra and Abbeysco, LLC, the Company’s co-defendant.  Hydra is claiming that the contract was assigned to the Company and that there was an implied contract.  The Company was not a party to this agreement and disputes that Abbeysco was acting as an agent of the Company.The Company responded by filinga Notice of Demurrer which was denied.The Company has filed an Answer to the compliant and has filed a Cross-Complaint for indemnification and contribution rights against Abbeysco.  The Company intends on vigorously fighting what it believes is a meritless claim.





To our knowledge, no other 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.





NOTE 10- SUBSEQUENT EVENTS





In connection with the July 28, 2010 private placement of up to 110,000,000 shares, the Company has raised $122,000 at $0.01 or 12,200,000 shares from October 1, 2010 to November 4, 2010.




On November 4, 2010,in connection with the July 28, 2010 offering, the Company modified the offering to offer Series A since the Company lacks authorized capital.  The price per share of common stock is identical and if all shares of Series A in this offering are fully subscribed, the Series A shares will be convertible into 17,670,000 shares of common stock.


In connection with the amended offering, we offered each investor in the 2008 private placement who invests at least the lesser of (i) 50% of the previous investment or (ii) $50,000 will receive additional shares of common stock to effectively reprice their original investment to $0.05 per share.  Additionally, investors who received Series A preferred stock as part of our debt restructuring in December 2009 – January 2010 who invests the lesser of (i) 50% of the debt or (ii) $50,000 will have the original investment repriced to $0.02 per share.
 
 The performance milestones for vesting Mr. Sasso’s Series C were revised in August 2010 so that the Series C vest as follows: (i) 39 shares vest for each 100,000 software licenses sold, not to exceed an aggregate of 1,000,000 software licenses; (ii) 193 shares upon the aggregate sales of 1,000,000 software licenses; and (iii) 77 shares for each 100,000 software licenses sold over 1,000,000 software licenses.  To the extent that any shares are not vested by April 16, 2015 or the earlier termination of employment of Mr. Sasso, such unvested shares shall be cancelled. In the event Mr. Sasso elects to convert the Series C into common stock, the vesting schedule shall be appropriately adjusted to reflect the conversion formula.


20





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, PhoneGuard, Inc., or PG, and Icon Term Life Inc.





Options Media is focusing its efforts on cell phones and text messaging.
 
 On April 16, 2010, Options Media acquired PG, which held an exclusive sublicense for the U.S. and Canada to market cellular mobile, anti-texting and anti-virus products.


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.





21





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.





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.





22





PhoneGuard currently markets anti-virus and anti-texting cellular software. Revenue is recognized at the time the software is downloaded to the end user’s mobile phone or when the product is shipped to a client who purchases the software for its own use or for resale.


Results of Operations





Revenue:





Our revenue for the three months and nine months ended September 30, 2010 was $1,100,631 and $3,456,498 respectively.





For the three months and nine months ended September 30, 2009 revenue was $1,755,280 and $6,187,652 respectively.





The following is the percentage of total revenue earned by each product for the three months and nine months ended September 30, 2010 and 2009:





Three Months ended September 30,


Nine months ended September 30,2010


2009


2010


2009ProductEmail/CPM


60
%


42
%


60
%


44
%Leads


31
%


20
%


25
%


23
%ESP


7
%


24
%


10
%


22
%List


0
%


9
%


0
%


6
%SMS


2
%


4
%


4
%


4
%Other


0
%


1
%


1
%


1
%





The Company’s Email/CPM revenue for the three months and nine months ended September 30, 2010 represented approximately 60% of the total revenue for each period.  The Email/CPM revenue for the three months and nine months ended September 30, 2009 represented approximately 42% and 44% of the total revenue, respectively.  The Company’s Email/CPM revenue in dollar volume for the three months ended September 30, 2010, compared to the three months ended September 30, 2009 decreased approximately 18% and for the nine months ended September 30, 2010, compared to the nine months ended September 30, 2009 decreased approximately 16%.  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 for the three months and nine months ended September 30, 2010 represented approximately 31% and 25% respectively of the total revenue. The lead revenue for the three months and nine months ended September 30, 2009 represented approximately 20% and 23% of the total revenue. The Company’s lead revenue for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 increased approximately 11% and for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, decreased approximately 2%. 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.





The Company’s ESP revenue for the three months and nine months ended September 30, 2010 represented approximately 7% and 10% respectively of the total revenue. The ESP revenue for the three months and nine months ended September 30, 2009 represented approximately 24% and 22% respectively of the total revenue. The Company’s ESP revenue for the three months ended September 30, 2010, compared to the three months ended September 30, 2009 decreased approximately 17% and for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009  the ESP revenue decreased approximately 12%.   The Company lost one large customer that exited the market as well as several 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 much smaller scale.





23


The Company’s list product line was discontinued. As a result there was no revenue for the three months ended September 30, 2010.





Our SMS revenue for the three months and nine months ended September 30, 2010 represented approximately 2% and 4% respectively of the total revenue. The SMS revenue for the three months and nine months ended September 30, 2009 represented approximately 4% and 4% of the total revenue. The Company’s SMS revenue for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 decreased approximately 2% and for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 the SMS revenue was unchanged. We expect to increase the revenue for this product line in the future.




The Company has made significant investments in its mobile software product lines. The development of its Anti-Texting software has been completed and it is operational on Blackberry and Android smartphones, the Company is developing this application for Symbian Windows and IPhone operating systems.





Our investments in sales, marketing and advertising are concentrated on large national retailers, mobile retail stores, DRTV, internet and viral social networking. Based on our focus and commitments to our mobile software applications, we expect our mobile software product lines to become a significant portion of our revenue as we implement our marketing strategies later this year and early next year.


Cost of Revenue





The cost of revenue for the three months and nine months ended September 30, 2010 was $248,900 and $908,476; this represents 23% and 26% of revenue respectively. The cost of revenue for the three months and nine months ended September 30, 2009 was $488,393 and $1,849,444; this represents 28% and 30% of revenue respectively. The improvement on the cost of sales is related to the changed of our product mix to higher margin products.





The cost of revenue include fees due to list owners for the use of their data in list management advertising campaigns, outsourced leads, and outsourced data and data services.




Operating Expenses:




Three Months ended

September 30,

2010


Three Months ended

September 30,

2009


Nine Months ended

September 30,

2010


Nine Months ended

September 30,

2009(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Server hosting and technology services

$
118,300


$
293,431


$
431,821


$
778,220Compensation and related cost


723,324



1,029,703



2,486,422



3,712,059Commissions


107,881



215,051



456,913



803,133Advertising


72,685



12,822



158,746



63,663Rent


50,093



52,362



159,948



157,524Goodwill impairment


1,530,124



25,553



3,096,815



25,553Bad debt


72,374



155,684



149,980



253,245Other general and administrative


652,314



609,171



1,666,494



2,002,066Total operating expenses

$
3,327,095


$
2,393,777


$
8,607,139


$
7,795,463




Sever hosting and technology services expense for the three months and nine months ended September 30, 2010 was $118,300 and $ 431,821respectively, which consists of outsourced hosting, outsourced server costs, and other technology costs required to operate our ESP and list management product lines.  The sever hosting and technology services expense for the three months and nine months ended September 30, 2009 was $293,431 and $778,220 respectively.  The reduction on the server hosting and technology expense is mainly attributed to the decrease of the ESP revenue as well our effort on reducing the expense.





24





Compensation and related costs for the three months and nine months ended September 30, 2010 was $723,324 and $2,486,422 respectively, which includes salaries and related costs such as payroll taxes. In addition, this expense includes non-cash stock based compensation of $ 61,972 and $ 386,966 respectively. The stock compensation represents expenses for employee restricted stock grants for services approximately of $ (1,575) and $34,675 and the fair value of option grants of $ 63,547 and $352,291 respectively, for employee services. At September 30, 2010, we had approximately of $ 581,189 of stock based compensation expense, which we expect to recognize over the next two to three years. Compensation for the three months and nine months ended September 30, 2009 was $1,029,703 and $3,712,059 respectively of which $ 201,643 and $ 637,692 respectively were related to stock based compensation expense which is attributable to shares issued and stock options granted to our chief executive officer pursuant to an employment agreement. These options were cancelled after the quarter ended June 30, 2010.





Commission expense for the three months and nine months ended September 30, 2010 was $107,881 and $ 456,913 respectively, which represent the amounts we incurred for sales commissions on sales made during the respective periods. This expense will increase as we grow our revenues. Commission expense for the three months and nine months ended September 30, 2009 was $ 215,051 and $ 803,133 respectively, which represent the amounts we incurred for sales commissions on sales made during the respective periods; the decrease of the commission expense from 2009 to 2010 is due to the decrease in the sales.





Advertising expense for the three months and nine months ended September 30, 2010 was and $72,685 and $158,746 respectively.   Advertising expense for the three months and nine months ended September 30, 2009 was $12,822 and $63,663 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 and nine months ended September 30, 2010 was $72,374 and $149,980 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. Bad debt expense for the three months and nine months ended September 30, 2009 were $155,684 and $253,245 respectively.





In connection with the preparation of the financial statements for the three and nine months ended September 30, 2010, the Company performed its impairment test on goodwill.  As a result of the quarterly test, the Company recorded a non-cash impairment of goodwill of $1,530,124.  The goodwill impairment charge for the nine months ended September 30, 2009 was $25,553.





Rent expense for the three months and nine months ended September 30, 2010 was $ 50,093 and $ 159,948 respectively. Our operations are based in a facility located in Boca Raton, Florida. Rent expense for the three months and nine months ended September 30, 2009 were $ 52,362 and $ 157,524 respectively.





Other general and administrative expense for the three months and nine months ended September 30, 2010 was $652,314 and $1,666,494 respectively. The major items included in other general and administrative expense are approximately $224,209 and $630,986 respectively, for investor’s relation, consulting and professional services, and amortization of intangible assets of $199,405 and $450,485 respectively.





Other general and administrative expenses for the three months and nine months ended September 30, 2009 were $609,171 and $2,002,066 respectively.





Other income (expense) for the three months and nine months ended September 30, 2010 was ($70) and $264,652 net respectively. This included $ 70 and $2,379 respectively of interest expense and $ 0 and $ 267,031 respectively for settlement gain of liabilities. Other income (expense) for the three and nine months ended September 30, 2009 was ($95,294) and ($393,777) respectively. This included a $4,204 gain on extinguishment of a liability and $397,981 of interest expense on notes and capital leases, which included $319,855 for amortization of debt discounts.





The net loss for the three months and nine months ended September 30, 2010 was $2,475,434 and $5,794,465 respectively, and the net loss per share basic and diluted was $0.01 and $0.02 respectively. However, approximately $2.3 million of this loss was non-cash. The net loss for the three months and nine months ended September 30, 2009 was $1,222,184 and $3,851,032 respectively, and the net loss per share basic and diluted was $0.02 and $0.07 respectively.





25





Liquidity and Capital Resources





In the nine months ended September 30, 2010, we used $1,734,636 to fund our operating activities. This consisted of our net loss $5,794,465 offset by certain larger non-cash items including stock for services to non-employees of $42,000, stock options expense of $352,290 stock granted for settlements of $268,608, impairment of goodwill of $3,096,815 and amortization of intangibles of $204,962. We also used $188,425 in investing activities and had $760,166 provided by financing activities.





As of September 30, 2010, we had no outstanding loans.  As of November 09, 2010, we had approximately $130,000 in available cash, and $654,000 in accounts receivable.




To remain operational through the next 12 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. We continue to focus on reducing and controlling expenses.  We have launched our PhoneGuard marketing program and are seeking to introduce it to nationally including in “big box” stores.  We need to raise additional funds through equity or debt financings. On July 28, 2010 we commenced a private placement of up to $1,100,000 of common stock at $0.01 per share to fund our cash requirement to support our entry into the cellular software market.  As of November 5, 2010, we raised $843,300 under the private placement.  We have amended the offering to provide for $1,000,000 of gross proceeds with Series A preferred stock offered in lieu of common stock for the last $600,000.  The Series A will convert once we increase our authorized common stock to 950,000,000 shares from 700,000,000.  The price per share of common stock is unchanged.  Any equity financing is 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 12 months.





Related Party Transactions





See Note 7 to our unaudited consolidated financial statements included in this report for discussion of related party transactions.





New Accounting Pronouncements





See Note 2 to our unaudited 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  including expectations regarding our revenues and our liquidity.





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.




26





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.





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.





27





PART II – OTHER INFORMATION





ITEM 1.   LEGAL PROCEEDINGS.





On April 16, 2010, Hydra Group LLC (“Hydra”) filed a complaint against the Company in the Superior Court of Los Angeles (West District) seeking $93,698 for breach of contract.  The complaint relates to a contract between Hydra and Abbeysco, LLC, the Company’s co-defendant.  Hydra is claiming that the contract was assigned to the Company and that there was an implied contract.  The Company was not a party to this agreement and disputes that Abbeysco was acting as an agent of the Company.  The Company responded by filing a Notice of Demurrer which was denied.The Company has filed an Answer to the compliant and has filed a Cross-Complaint for indemnification and contribution rights against Abbeysco.  The Company intends on vigorously fighting what it believes is a meritless claim.








ITEM 1A.  RISK FACTORS.





Not applicable to smaller reporting companies





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





In addition to those unregistered securities previously disclosed in filings with the SEC, the Company has sold securities that are not registered under the Securities Act of 1933 (“the Act”) in reliance upon the exemption provided by Section 4(2) of the Act and Rule 506 thereunder.





Name or Class of Investor
Date of Sale
No. of Securities
Reason for IssuancePrivate Placement Investors
7/28/2010 through 9/30/2010
67,030,000 shares of common stock
Investment of $670,300Private Placement Investors
7/28/2010 through 9/30/2010
33,902,474 shares of common stock
Anti-dilution provision from prior investmentConsultant (1)
8/11/2010
200,000 five-year stock options exercisable at $0.017 per share
Consulting ServicesConsultant
8/11/2010
2,000,000 shares of common stock
Investment Banking Agreement





(1) Former employee.





28





ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.





None





ITEM 4.  (REMOVED AND RESERVED).





ITEM 5.  OTHER INFORMATION.








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


2.23.1

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 Amendment – Increasing Capital – 310,000,000 shares


10-K

3/31/10


3.63.4

Certificate of Amendment – Increasing Capital – 710,000,000 shares


10-Q

8/13/10


3.43.5

Certificate of Designation – Series A & B


10-K

3/31/10


3.43.6

Amendment to Certificate of Designation – Increased Number of Authorized Series B


10-K

3/31/10


3.53.7

Certificate of Designation – Series C & D


10-Q

8/13/10


3.73.8

Certificate of Correction – Series D


10-Q

8/13/10


3.83.9

Amendment to Certificate of Designation – Series D


10-Q

8/13/10


3.93.10

Amendment to Certificate of Designation – Series A









Filed3.11

Amendment to Certificate of Designation –Series C









Filed3.12

Certificate of Designation – Series E









Filed3.13

Bylaws


SB-2

11/8/07


3.23.14

First Amendment to Bylaws


8-K

9/25/08


3.13.15

Second Amendment to Bylaws


10-K

3/31/10


3.910.1

Form of Subscription Agreement – Series B


10-K

3/31/10


10.710.2

Form of Subscription Agreement – July Private Placement









Filed31.1

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




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.




29





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.November  15, 2010/s/ Scott FrohmanScott FrohmanChief Executive Officer

(Principal Executive Officer)November  15, 2010

/s/ Steve StowellSteve StowellChief Financial Officer

(Principal Financial Officer)