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DISCONTINUED OPERATIONS
9 Months Ended
Sep. 30, 2011
Discontinued Operations: 
DISCONTINUED OPERATIONS
NOTE G – DISCONTINUED OPERATIONS

America's Minority Health Network, Inc.

On July 1, 2010, pursuant to the terms of the 4% Secured Promissory Note ("April 2010 Note"), Seatac made demand for the aggregated amount of $925,885, including principal of $900,000 and interest through June 30, 2010.  On July 11, 2010, Seatac added a one-time late charge equivalent to six percent (6%) of the unpaid amount, or $55,553, bringing the amount payable and past due under the April 2010 Note to $981,438.  The Company's obligation to repay the April 2010 Note was (i) secured by a pledge by the Company of all of the capital stock of the Company's subsidiaries owned as of or acquired after the date of the April 2010 Note, pursuant to the terms of a Stock Pledge and Escrow Agreement dated April 1, 2010; (ii) guaranteed by the Company's subsidiary, America's Minority Health Network pursuant to a Guaranty Agreement dated April 1, 2010; and (iii) secured by a blanket lien encumbering the assets of the Company and the Company's subsidiaries pursuant to Security Agreements dated April 1, 2010. Payment of principal, interest and late charges under the April 2010 Note became past due, and as a result of the default, on July 30, 2010, Seatac informed the Company that it intended to exercise its remedies pursuant to which it could accept collateral in satisfaction of the Company's obligations.  More particularly, Seatac stated that it intended to accept the following collateral in full satisfaction of the $981,438 due under the April 2010 Note: (i) all rights, title and interest of the Company in the 1,000 shares of common stock of America's Minority Health Network, (ii) all rights, title and interest of the Company in the mark "America's Minority Health Network, Inc." and the goodwill associated with such mark, and (iii) all books and records of America's Minority Health Network held by the Company (collectively, the "Collateral").

Given the Company’s unsuccessful attempts to obtain additional financing or agree to alternative arrangements with Seatac, it agreed and consented to Seatac's exercise of its remedies under the April 2010 Note and the foreclosure upon the Collateral. As part of the agreement and consent, the Company and its subsidiaries acknowledged that the Company and its subsidiaries were in default in payment of principal, interest, and late fees under the April 2010 Note and related loan documents in the aggregate of $981,438, and that the debt was secured by a first priority security interest in all of the assets of the Company and its subsidiaries. Accordingly, on July 30, 2010, the Company and Seatac sent joint instruction to the escrow agent, pursuant to which the escrow agent was instructed to transfer the stock certificate representing all of the outstanding shares of America's Minority Health Network being held in escrow to Seatac. The Company also entered into a trademark assignment with Seatac whereby the Company transferred all rights, title and interest in the mark "America's Minority Health Network, Inc." and the goodwill associated with such mark.  The Company's settlement with Seatac did not include the surrender of Spectrum or the satisfaction of a trade payable to Seatac in the amount of $480,465.

As a result of this transaction, the Company’s financial statements have been prepared with the results of operations and cash flows of this disposed property shown as discontinued operations.  All historical statements have been restated in accordance with GAAP.
 
Summarized financial information for discontinued operations for the periods listed below is as follows:

   
Three Months Ended September 30, 2010
    
Nine Months Ended September 30, 2010
  
             
Operating revenues
   $ 16,382     $ 60,645  
Operating expenses:
                
   Operating costs
     12,267       81,084  
   General and administration
     7,067       101,673  
   Sales and marketing
     25,330       168,544  
   Depreciation and amortization
     23,189       145,974  
       Total operating expense
     67,853       497,275  
Other expense
                
   Interest expense
     -0-       (8,531 )
       Total other income and (expense)
     -0-       (8,531 )
Loss from discontinued operations
   $ (51,471 )   $ (445,161 )

Spectrum Health Network, Inc.

On December 16, 2010, the Company and Seatac entered into a Note Purchase Agreement and issued the Spectrum Note in the principal amount of $487,532 and subsequent advances by Seatac brought the total principal amount due to $543,531.  As security for the Company’s obligations under the Note Purchase Agreement and Spectrum Note, the Company pledged all of the capital stock of Spectrum pursuant to the terms of a Stock Pledge and Escrow Agreement dated December 16, 2010.  Repayment of the Spectrum Note was guaranteed by Spectrum and secured by a blanket lien encumbering the assets of Spectrum.

In February 2011, Seatac notified the Company that it intended to make demand for payment under the Spectrum Note; however, the Company was unable to pay the balance. In an effort to satisfy the Spectrum Note in full, Seatac and the Company: (i) acknowledged that the Company and Spectrum were unable to pay the aggregated principal and interest of $547,155 due to Seatac under the Spectrum Note which was secured by a first priority security interest in all of the assets of the Company and Spectrum; (ii) sent joint instruction to the escrow agent, pursuant to which the escrow agent transferred the stock certificate representing all of the outstanding shares of Spectrum being held in escrow to Seatac; (iii) entered into a trademark assignment to transfer all rights, title and interest in the mark "Spectrum Health Network, Inc." and the goodwill associated with that mark; and (iv) entered into an Exclusive Licensing, Distribution and Advertising Sales Agreement wherein Seatac and Spectrum licensed the Company to sell subscriptions to and advertising spots on the Spectrum digital-media network.

As a result of this transaction, the Company’s financial statements have been prepared with the results of operations and cash flows of this disposed property shown as discontinued operations.  All historical statements have been restated in accordance with GAAP.

 
THERAPEUTICSMD, INC. AND SUBSIDIARIES
f/k/a AMHN, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011

NOTE G – DISCONTINUED OPERATIONS (Continued)

Summarized financial information for discontinued operations for the periods listed below is as follows:

   
July 1, 2010 through September 30, 2010
    
June 11, 2010 through
September 30, 2010
  
             
Operating revenues
   $ 22,120     $ 27,854  
Operating expenses:
                
   Operating costs
     32,625       39,568  
   General and administration
     15,326       22,964  
   Depreciation and amortization
     29,909       38,642  
       Total operating expense
     77,860       101,174  
Loss from discontinued operations
   $ (55,740 )   $ (73,320 )

Summarized financial information for discontinued operations for the period January 1, 2011 through February 14, 2011 is as follows:

Operating revenues
   $ 12,573  
Operating expenses:
        
   Operating costs
     16,356  
   General and administration
     32,989  
   Depreciation
     9,819  
       Total operating expense
     59,164  
Loss from discontinued operations
   $ (46,591 )

The components of the gain on disposal of discontinued operations during the period January 1, 2011 through February 14, 2011 is as follows:

Assets:
      
 Cash
   $ 5,817  
 Accounts receivable
     12,573  
 Fixed assets, net
     186,569  
 Intangible assets, net
     288,443  
    Total assets transferred
   $ 493,402  
         
Liabilities:
        
 Accounts payable
   $ 634,965  
 Other liabilities
     16,950  
 Secured promissory note and accrued interest
     547,155  
    Total liabilities of discontinued operations
   $ 1,199,070  
Net gain on disposal of discontinued operations
   $ 705,668