Options Media Group Holdings, Inc.

CIK:0001413993|SEC Filings

Discontinued Operations

9 Months Ended

Sep. 30, 2012

11. DISCONTINUED OPERATIONS

In February 2011, the Company sold its e-mail business, databases, and its 1 Touch Marketing business for $175,000 in cash and settlement of $14,000 of accounts payable plus a percentage of all revenue generated over a 24 month period from our sales force, most of whom were hired by the purchaser and from customers on a customer list. The maximum additional payment of sales royalties is capped at $1.5 million in the first year and $1.5 million in the second year. The operating amounts associated with these product lines are reported as discontinued operations in the accompanying consolidated financial statements. The Company recorded a net gain on the asset sale of $116,218 which is presented in discontinued operations for the nine months ended September 30, 2011. Our continuing operations are from our PhoneGuard subsidiary and lead generation business.

Revenues and pretax income (loss) from discontinued operations for the three and nine months ended September 30, 2012 and 2011, respectively, were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Revenue	$	–	$	6,584	$	–	$	163,775
Net income (loss) before income taxes	$	–	$	3,597	$	–	$	(102,277	)

Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities:
Net loss	$ (4,849,622)	$ (11,930,263)
Adjustments to reconcile net loss to net cash used in operating activities:
Employee restricted stock vesting	134,481	1,188,096
Shares issued to employees	350,000	40,074
Shares issued voluntarily as ratchet	300,001
Amortization of equity based prepaid expenses	357,121	221,353
Asset impairment	28,793
Intangible asset impairment	20,000	1,999,889
Stock options granted for services	333,207	1,508,257
Warrants for services	17,111
Shares granted for services	102,500	40,000
Change in fair market value of warrant derivative liability	816,995	2,670,194
Depreciation	22,928	31,430
Amortization of debt discount	201,351	58,055
Loss on debt extinguishment	360,386	16,117
Gain on shares issued in settlement	(22,323)
Shares issued for settlement		18,795
Warrants price adjustment		200,423
Write-off of prepaid royalties		135,808
Amortization of intangibles		364,926
Bad debt		61,266
Extinguishment of debt		16,117
Changes in operating assets and liabilities:
Accounts receivable		330,759
Prepaid expenses	35,185	(61,092)
Other current assets	26,158	(7,776)
Other non-current assets		(1,795)
Accounts payable	571,585	105,041
Accrued expenses	607,528	(107,211)
Deferred revenue	(849)	(10,115)
Due to related parties	(125,726)	39,502
Other liabilities	(6,718)	(29,095)
Customer deposits		241,973
Cash used in discontinued operating activities		(108,107)
Net cash used in operating activities	(719,908)	(2,983,496)
Investing activities:
Purchases of property and equipment, net		(14,987)
Purchase of anti-texting software		(300,000)
Proceeds from sale of intangible asset		175,000
Net cash used in investing activities		(139,987)
Financing activities:
Proceeds from sales of preferred stock Series A		1,860,000
Proceeds from sales of preferred stock Series G		2,074,966
Proceeds from sales of preferred stock Series H	350,000
Proceeds from sales common stock		234,200
Proceeds from loans	681,250	145,500
Dividends paid		(41,735)
Repayment of loans	200,000	(93,688)
Financing costs	(11,500)	(259,800)
Net cash provided by financing activities	819,750	3,919,443
Net increase in cash and cash equivalents	99,842	795,960
Cash at beginning of period	15,232	35,756
Cash at end of period	115,074	831,716
Supplemental disclosure of cash flow information:
Cash paid for interest	5,066	3,326
Cash paid for taxes
Supplemental disclosure of non-cash investing and financing activities:
Embedded conversion option liability		59,671
Settlement of accounts payable in exchange for intangible asset		14,000
Settlement of accounts payable in exchange for note payable		210,000
Converted preferred stock Series A to common stock	100,497
Dividends declared on Series A	70,758
Converted preferred stock Series D to common stock	11,380	30,936
Converted preferred stock Series E to common stock	5,469
Converted preferred stock Series G to common stock	2,014,966	207,479
Converted preferred stock Series H to common stock	350,000
Converted debt to common stock	250,000	50,000
Converted accrued interest to common stock		10,675
Issued note payable for asset acquisition		450,000
Issued common stock for asset acquisition		375,000
Issued prepaid common stock for services to be rendered		153,000
Issued common stock in exchange for current liability		15,000
Issued common stock for warrants exercised		10,748
Issued ratchet shares of common stock		77,394
Issued warrants and debt with derivative characteristics	1,391,350	1,275,495
Issued common stock for payment of accounts payable	22,677
Issued common stock for release of customer deposit	140,000
Issued common stock for payment of accrued dividends	2,368
Capitalization of accrued interest to note balance	14,614
Reclassification of derivative instruments to equity	158,965
Common stock and warrant loan fees recorded as debt discounts	$ 154,601

Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash	$ 115,074	$ 15,232
Accounts receivable, net of allowance for doubtful accounts of $200,311 at September 30, 2012 and December 31, 2011
Prepaid expenses	58,100	131,532
Prepaid marketing expense	425,165	425,165
Other current assets	16,668	58,800
Total current assets	615,007	630,729
Property and equipment, net of accumulated depreciation of $0 and $90,183 at September 30, 2012 and December 31, 2011, respectively		51,721
Prepaid marketing expense, net of current portion	258,642	577,516
Intangible assets, net of accumulated amortization of $187,500 and $187,500 at September 30, 2012 and December 31, 2011		20,000
Other non-current assets	53,343	37,368
Total assets	962,992	1,317,334
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Accounts payable	1,039,511	717,926
Accrued expenses	1,001,207	453,293
Customer deposits	101,035	241,035
Deferred revenue		849
Warrant liabilities	4,304,757	2,414,168
Embedded conversion option liabilities	365,609	206,817
Convertible notes payable	765,000	240,000
Note payable	717,500	225,000
Bridge notes payable	11,500
Due to related parties	40,000	165,726
Other current liabilities	37,627	44,345
Dividends payable	100,949	32,558
Total current liabilities	8,484,695	4,741,717
Notes payable, net of current portion		137,500
Total liabilities	8,484,695	4,879,217
Commitments and contingencies (Note 12)
Options Media Group Holdings, Inc. (OPMG) stockholders’ (deficit) equity:
Preferred stock; $0.001 par value, 10,000,000 shares authorized
Preferred stock; $0.001 par value Series A, 12,360 and 16,650 issued and outstanding at September 30, 2012 and December 31, 2011 respectively (liquidation value of $1,236,000 as of September 30, 2012)	13	17
Preferred stock; $0.001 par value Series B, C, D, E, F, G none issued and outstanding at both June 30, 2012 and December 31, 2011
Preferred stock; $0.001 par value Series D, nil and 483,633 issued and outstanding at September 30, 2012 and December 31, 2011		484
Preferred stock; $0.001 par value Series I, 100 and none issued and outstanding at September 30, 2012 and December 31, 2011, respectively
Common stock; $0.001 par value, 8,500,000,000 shares authorized, 4,359,271,369 and 993,859,509 issued and outstanding at September 30, 2012 and December 31, 2011, respectively	4,359,272	993,860
Additional paid-in capital	28,497,827	30,938,191
Accumulated deficit	(40,414,815)	(35,494,435)
Total stockholders’ (deficit) equity	(7,557,703)	(3,561,883)
Total liabilities and stockholders’ (deficit) equity	$ 926,992	$ 1,317,334