Edgar Filing: Optionable Inc

optionable_10q-033109.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2009.

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ___________ to ___________

Commission File Number: 000-51837

OPTIONABLE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		52-2219407
(State or Other Jurisdiction of Incorporation or		(IRS Employer Identification No.)
Organization)

95 Croton Avenue, Suite 32, Ossining, NY		10562
(Address of Principal Executive Offices)		(Zip Code)

(914) 773-1100

(Registrant’s Telephone Number Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 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 o
Non-accelerated Filer o		Smaller reporting company x

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

The number of outstanding shares of the registrant’s Common Stock as of May 10, 2009 is 48,328,328.

OPTIONABLE, INC.

INDEX

PART I: FINANCIAL INFORMATION
ITEM 1:	FINANCIAL STATEMENTS (Unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Cash Flows	5
	Notes to the Consolidated Financial Statements	6
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	21
ITEM 3 :	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	25
ITEM 4:	CONTROLS AND PROCEDURES	25
PART II: OTHER INFORMATION
ITEM 1	LEGAL PROCEEDINGS	25
ITEM 1A :	RISK FACTORS	27
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	27
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	27
ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	27
ITEM 5	OTHER INFORMATION	28
ITEM 6:	EXHIBITS	28
SIGNATURES		29

OPTIONABLE, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2009			2008
ASSETS
	(Unaudited)			(Audited)
Current Assets:
Cash and cash equivalents	$	5,315,122		$	8,974,282
Recoverable income taxes		908,988			958,294
Notes receivable		60,000			-
Prepaid expenses		1,253,550			1,269,827
Total current assets		7,537,660			11,202,403

Total assets	$	7,537,660		$	11,202,403

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable and accrued expenses	$	541,130		$	420,590
Due to stockholder		-			97,907
Income tax payable		478,622			83,555
Total current liabilities		1,019,752			602,052

Due to stockholder, net of unamortized discount of $2,618,270 at December 31, 2008		-			2,426,240
Due to director, net of unamortized discount of $342,782 and $355,126
at March 31, 2009 and December 31, 2008, respectively		165,915			153,571
Total liabilities		1,185,667			3,181,863

Stockholders' Equity:
Preferred Stock; $.0001 par value, 5,000,000 shares authorized, none issued
and outstanding at March 31, 2009 and December 31,2008		-			-
Common stock; $.0001 par value, 100,000,000 shares authorized,
52,428,203 issued at March 31, 2009 and December 31, 2008
and 48,328,328 and 52,423,403 outstanding at March 31, 2009 and December 31, 2008, respectively		5,242			5,242
Additional paid-in capital		162,772,406			162,766,096
Treasury stock at cost, 4,099,875 and 4,800 shares at March 31, 2009 and December 31, 2008, respectively		(47,552	)		(2,506	)
Accumulated deficit		(156,378,103	)		(154,748,292	)

Total stockholders’ equity		6,351,993			8,020,540

Total liabilities and stockholders’ equity	$	7,537,660		$	11,202,403


See Notes to Unaudited Financial Statements.

OPTIONABLE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three-month period ended
	March 31
	2009			2008
	(Unaudited)			(Unaudited)

Operating expenses:
Selling, general and administrative	$	1,062,815		$	1,021,735
Research and development		-			245,045

Total operating expenses		1,062,815			1,266,780

Operating loss		(1,062,815	)		(1,266,780	)

Other income (expense):
Interest income		27,685			88,593
Interest expense to related parties		(116,058	)		(91,719	)
Total other expenses		(88,373	)		(3,126	)

Loss before income tax		(1,151,188	)		(1,269,906	)


Income tax benefit (expense)		(478,622	)		495,771
		(478,622	)		495,771

Net loss	$	(1,629,810	)	$	(774,135	)

Basic loss per common share	$	(0.03	)	$	(0.01	)

Diluted loss per common share	$	(0.03	)	$	(0.01	)

Basic weighted average common
shares outstanding		50,921,876			52,423,403

Diluted weighted average common shares outstanding		50,921,876			52,423,403


See Notes to Unaudited Financial Statements.

OPTIONABLE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the three-month period ended
	March 31,
	2009			2008
	(Unaudited)			(Unaudited)

Cash flows from operating activities:
Net loss	$	(1,629,810	)	$	(774,135	)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation		-			24,089
Amortization of debt discount		116,058			91,719
Provision for doubtful accounts		-			(625	)
Fair value of warrants and options		6,310			5,685
Changes in operating assets and liabilities:
Accounts receivable		-			625
Other current assets		16,277			(49,460	)
Accounts payable and accrued expenses		120,539			13,600
Due to stockholder		(97,907	)		-
Income tax payable		395,067			-
Recoverable income taxes		49,306			1,154,229

Net cash (used in) provided by operating activities		(1,024,160	)		465,727

Cash flows used in investing activities:
Purchase of notes receivable		(60,000	)		-

Net cash used in investing activities		(60,000	)		-

Cash flows from financing activities:
Repurchase of shares of common stock		(45,046	)		-
Principal repayment of due to stockholder		(2,529,954	)		-

Net cash used in financing activities		(2,575,000	)		-

Net (decrease) increase in cash		(3,659,160	)		465,727

Cash, beginning of period		8,974,282			9,919,727

Cash, end of period	$	5,315,122		$	10,385,454

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	-		$	-

Cash paid for interest	$	-		$	-

See Notes to Unaudited Financial Statements.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1-Organization, Description of Business and Going Concern

Optionable, Inc. (“the “Company”) was formed in Delaware in February 2000. Between April 2001 and July 2007, a substantial portion of its revenues were generated from providing energy derivative brokerage services to brokerage firms, financial institutions, energy traders, and hedge funds worldwide. A substantial portion of all energy derivatives brokered in the past were natural gas derivatives.

The Company has not generated any revenues since the third quarter of 2007 as a result of the suspension of the business relationship by its largest customer and the succession of events since then. In addition, the matters discussed in Note 7 and Item 1 of Part II of this Report "Legal Proceedings" have had a significant adverse impact its business, including current and, likely, future results of operations and financial condition. The Company’s management continues to seek out possible business transactions and new business relationships.

The Company is considering merging with businesses outside of the financial service industry. The Company is also considering whether or not to satisfy existing obligations with current creditors and distribute its remaining assets to its stockholders.

While the Company believes that it is likely that it will sell its technology, it is currently unable to determine whether it will continue to have any significant continuing involvement in the development or operations of OPEX.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Going Concern

The Company believes it has sufficient funds to meet its obligations, based on its internal projections, for at least the next twelve months. However, the Company cannot guarantee that it will do so. If there are unforeseen expenses or financial obligations which occur during that period, such as those that could result from matters discussed in Note 11, the Company may not be able to meet such obligations. Additionally, if the Company enters into a transaction with a brokerage or trading firm or a technology company which could be instrumental in the Company's long-term growth, this could hamper the Company's ability to continue as a going concern, both from a short-term and a long-term perspective, and the Company may have to resort to financing, through either debt or equity placements, for the funding of either such acquisitions or unforeseen expenses or financial obligations. There can be no assurance that any such financing would be available on acceptable terms, or at all, especially in light of the pending litigation against the Company and the current economic conditions.

Principles of consolidation

The accompanying consolidated financial statements include the results of operations of Opex International, Inc. and Hydra Commodity Services, Inc. for the three-month periods ended March 31, 2009 and 2008. All material intercompany accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies

Cash and Cash Equivalents

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

Concentration of Credit Risks

The Company is subject to concentrations of credit risk primarily from cash and cash equivalents.

The Company's cash and cash equivalents accounts are held at financial institutions and are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000 between January 2007 and October 2008 and $250,000 for interest-bearing accounts and an unlimited amount for noninterest-bearing accounts after October 2008. During the three-month periods ended March 31, 2009 and 2008, the Company has reached bank balances exceeding the FDIC insurance limit. While the Company periodically evaluates the credit quality of the financial institutions in which it holds deposits, it cannot reasonably alleviate the risk associated with the sudden failure of such financial institutions. The Company’s cash and cash equivalents held at financial institutions exceeding the FDIC insurance limit amounted to $4.6 million and $7.3 million at March 31, 2009 and December 31, 2008, respectively.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, recoverable income taxes and accounts payable and accrued expenses approximate their fair value due to their short-term maturities. The carrying amount of due to director approximates its fair value based on the Company's incremental borrowing rate.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Income Taxes

Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the recognition of deferred tax assets and liabilities to reflect the future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting bases and tax bases of the Company's assets and liabilities result in a deferred tax asset, SFAS No. 109 requires an evaluation of the probability of being able to realize the future benefits indicated by such assets. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or all deferred tax assets will not be realized. Penalties and interest on underpayment of taxes are reflected in the Company’s effective tax rate.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but are not limited to, the realization of receivables and share-based payments. Actual results will differ from these estimates.

Basic and Diluted Earnings per Share

Basic earnings per share are calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method). The outstanding options amounted to 1,483,000 and 983,000 at March 31, 2009 and December 31, 2008, respectively. The outstanding warrants amounted to 100,000 at March 31, 2009 and December 31, 2008. The options and warrants outstanding at March 31, 2009 and March 31, 2008, respectively, have been excluded from the computation of diluted earnings per share due to their antidilutive effect.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Share-Based Payments

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R), "Share-Based Payment," which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued SAB 107. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods. On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS 123. Effective January 1, 2006, the Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107 prospectively. As such, compensation cost is measured on the date of grant as its fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

Note 3- Prepaid expenses

Prepaid expenses primarily consists of retainers paid to certain law firms which represent the Company and certain former and current directors and officers in connection with legal proceedings which are described in Note 7- Litigation and contingencies.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4- Notes receivable

The Company purchased three notes receivable aggregating $60,000 from its former chief technical officer and an affiliate. The notes can be either redeemed in cash or in kind for services performed, at the Company’s option. The notes can be redeemed in cash within six-month of issuance or within a year from issuance if redeemed in-kind.

Note 5-Due to Related Parties

The terms and amounts of due to related parties at March 31, 2009 and December 31, 2008 are as follows:

Due to Stockholder and former Chairman of the Board, non-interest bearing, unsecured, payable by March 12, 2014, if the Company obtains additional equity or debt financing of at least $1,000,000 following the private placement which closed in September 2004 ("Capital Raise"), the Company will repay its former Chairman of the Board up to 39.33% of the Capital Raise, up to $2,810,877, with the remaining balance and accrued interest of 4.68% from the date of the Capital Raise due on March 12, 2014:

	March 31,			December 31,
	2009			2008

		$	-		$	5,044,510
Discount, using initial implied rate of 12%			-			(2,618,270	)
		$	-		$	2,426,240

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Due to Director and former President, non-interest bearing, unsecured, payable by March 12, 2014, if the Company obtains additional equity or debt financing of at least $1,000,000 following a Capital Raise, the Company will repay its Director up to 5.3% of the Capital Raise, up to $381,250, with the remaining balance and accrued interest of 4.68% from the date of the Capital Raise due on March 12, 2014:

	March 31,				December 31,
	2009				2008

		$	508,697			$	508,697
Discount, using initial implied rate of 12%			(342,782	)			(355,126	)
		$	165,915			$	153,571

During April 2005, the Company modified the terms of its due to related parties. The modified terms provide that, in the event of a Capital Raise, among other things, the annual interest rate accrued after such event is reduced from 12% to 4.68%. Additionally, the modified terms provide that the Company may make principal repayments towards the due to a stockholder and former Chairman of the Board and the due to Director amounting to approximately 25% of its cash flows from operating cash flows less capital expenditures. During April 2006, the Company modified the terms of its due to related parties to allow the Company to make principal repayments at its discretion.

The amortization of the discount on the due to related parties amounted to approximately $116,000 and $92,000 during the three-month period ended March 31, 2009 and 2008, respectively.

During the three-month period ended March 31, 2009, the Company satisfied its obligations under the due to Stockholder and former Chairman of the Board by paying him $2,575,000, including the repurchase of 4,095,075 shares of the Company’s common stock, valued at approximately $45,000 based on the closing price of the Company’s stock on the date of repurchase.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At December 31, 2008, the Company owed approximately $98,000 to a Stockholder for certain legal fees incurred and paid by such Stockholder for matters discussed in Note 11 of the financial statements. As of March 31, 2009, the Company has paid the amount to the Stockholder.

Note 6- Stockholders' Equity

Stock Compensation Plan

During November 2004, the Company adopted the 2004 Stock Option Plan ("2004 Plan"). The 2004 Plan allows for the grant of both incentive stock options and nonstatutory stock options. The 2004 Plan may be administered, interpreted and constructed by the Board of Directors or a compensation committee. The maximum number of shares of common stock which may be issued pursuant to options granted under the 2004 Plan may not exceed 7,500,000 shares. The options outstanding vest over periods of up to twenty-four months.

The Company recorded share-based payment expenses amounting to approximately $6,000 and $6,000 during the three-month periods ended March 31, 2009 and 2008, respectively, in connection with all options outstanding at the respective measurement dates. The amortization of share-based payment was recorded in selling, general, and administrative expenses during such periods.

The Company granted 500,000 options during the three-month period ended March 31, 2009.

The fair value of the options granted during the three-month period ended March 31, 2009 is based on the Black Scholes Model using the following assumptions:

Exercise price :	$0.016-0.025
Market price at date of grant :	$0.016-0.025
Volatility :	104.5%
Expected dividend rate :	0%
Expected terms:	3.3 years
Risk-free interest rate :	1.22-1.44%

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following activity occurred under our plan:

	Three-month periods ended March 31,
	2009		2008
Weighted-average grant-date fair value of options granted	$	0.015		N/A
Fair value of options recognized as expense:	$	6,310	$	5,685

The total compensation cost related to nonvested options not yet recognized amounted to approximately $16,000 at March 31, 2009 and the Company expects that it will be recognized over the following weighted-average period of 8 months.

If any options granted under the 2004 Plan expire or terminate without having been exercised or cease to be exercisable, such options will be available again under the 2004 Plan. All employees of the Company and its subsidiaries, if any, are eligible to receive incentive stock options and nonstatutory stock options. Non-employee directors and outside consultants who provided bona-fide services not in connection with the offer or sale of securities in a capital raising transaction are eligible to receive nonstatutory stock options. Incentive stock options may not be granted below the fair market value of the Company's common stock at the time of grant or, if to an individual who beneficially owns more than 10% of the total combined voting power of all stock classes of the Company or a subsidiary, the option price may not be less than 110% of the fair value of the common stock at the time of grant. The expiration date of an incentive stock option may not be longer than ten years from the date of grant. Option holders, or their representatives, may exercise their vested options up to three months after their employment termination or one year after their death or permanent and total disability. The 2004 Plan provides for adjustments upon changes in capitalization.

The Company's policy is to issue shares pursuant to the exercise of stock options from its available authorized but unissued shares of common stock. It does not issue shares pursuant to the exercise of stock options from its treasury shares.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7- Litigation and Contingencies

Regulatory Matters

On November 18, 2008, a complaint was filed in the United States District Court for the Southern District of New York by the Commodity Futures Trading Commission (the “CFTC”) against the Company, current and former employees of the Company, including its former Chief Executive Officer and its former President and a Director, Edward O’Connor, David Lee, a former Bank of Montreal (“BMO”) trader (“Lee”), and Robert Moore, a former executive managing director of BMO’s Commodity Derivatives Group.

The complaint alleges, among other things, that Lee, through the assistance of Moore, and employees of the Company, engaged in a scheme to mis-mark Lee’s natural gas options positions between at least May 2003 to May 2007, and mis-value other natural gas option positions from October 2006 until May 2007. The complaint further alleges that based upon the scheme, in April 2007, BMO announced anticipated losses of approximately C$350 million and C$450 million.

The CFTC alleges, among other things, violations of, Section 4c(b) of the Commodity Exchange Act, as amended (the “Act”) and Commission Regulations 33.10(a),(b) and (c). The CFTC seeks an order of permanent injunction restraining and enjoining, among others, the Company from directly or indirectly violating Section 6c(b) of the Act and Commission Regulations 33.10(a), (b) and (c). The CFTC further seeks an order directing, among others, the Company to pay civil monetary penalties in an amount not to exceed $120,000 or triple the monetary gain for each violation of the Act during the time period between October 23, 2000 and October 22, 2004 and $130,000 or triple the monetary gain for each violation of the Act on or after October 23, 2004.

On March 20, 2009, the Company and certain other of the defendants filed motions to dismiss the CFTC complaint. On April 3, 2009, the CFTC filed briefs in opposition to the motions to dismiss. On April 15, 2009, the Company and certain other of the defendants filed reply briefs.

The Company also understands that on November 18, 2008, a complaint was filed in the United States District Court for the Southern District of New York by the Securities and Exchange Commission (“SEC”) against Lee, Scott Connor, the Company’s former President and a Director, Edward O’Connor and its former Chief Executive Officer. The Company was not named in the SEC complaint. Like the action brought by the CFTC, the complaint is based upon allegations that the defendants engaged in a scheme to overvalue Lee’s commodity derivates trading portfolio at BMO.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The SEC alleges causes of action against the Company’s former President and a Director, Edward O’Connor, for violations of Sections 10(b), 13(a), 13(b)(2), 13(b)(5), Rules 13b2-2 and 13a-14 of the Securities and Exchange Act of 1934 (the “Exchange Act”), and Section 17(a) the Securities Act of 1933 (the “Securities Act”). The complaint seeks a permanent injunction against, among others, Mr. O’Connor and an order to pay civil penalties and disgorgement. The complaint also seeks an order prohibiting, among others, Mr. O’Connor from acting as an officer or director of a public company.

Shareholder Class Action Lawsuit

On May 11, 2007, two lawsuits, captioned Alexander Fleiss v. Optionable Inc., Mark Nordlicht, Kevin Cassidy, Edward J. O'Connor, Albert Helmig and Marc-Andre Boisseau, 07 CV 3753 (LAK) ("Fleiss") and Robert Rastocky v. Optionable, Inc., Kevin Cassidy and Edward O'Connor, 07 CV 3755 (CLB) (“Rastocky”), were filed in the United States District Court for the Southern District of New York. Subsequently, five additional lawsuits were filed in the United States District Court for the Southern District of New York. Rastocky was voluntarily dismissed. The other lawsuits were consolidated under In re Optionable Securities Litigation, 07 CV 3753 (LAK). The class action named as defendants the Company and some of the Company’s past and present directors and officers, including Mark Nordlicht, the former Chairman of the Board of Directors of the Company; Kevin Cassidy, the former Chief Executive Officer and Vice-Chairman of the Board of Directors of the Company; Edward J. O'Connor, the former President of the Company and a current member of the Board of Directors; Albert Helmig, a former member of the Board of Directors; and Marc-Andre Boisseau, the Chief Financial Officer of the Company.

The class action sought unspecified damages arising from alleged violations of the federal securities laws, including the Securities Exchange Act of 1934, 15 U.S.C. ss. 78a et seq., (the "Exchange Act"), and Rule 10b-5 under the Exchange Act, 17 C.F.R. ss. 240.10b -5.The complaint alleged, among other things, that during the class period of January 22, 2007 to May 14, 2007, defendants failed to disclose certain information in public filings and statements, made materially false and misleading statements and misrepresentations in public filings and statements, sold artificially inflated stock and engaged in improper deals, had an improper relationship with and “schemed” with its customer Bank of Montreal ("BMO"), and understated

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

the Company's reliance on its relationship with BMO. The Complaint alleged that while the Company's stock was trading at artificially inflated prices, certain defendants sold shares of common stock of the Company.

On September 15, 2008, Judge Kaplan granted the defendants’ motions to dismiss the complaint and denied the plaintiffs’ request for leave to amend, without prejudice to a motion for leave to amend supported by a proposed amended complaint. Plaintiffs’ subsequently filed a motion for a partial lifting of the PSLRA discovery stay, which Defendants opposed. On October 20, 2008, the Court denied Plaintiff’s motion in all respects, and a final Judgment of dismissal was entered on October 23, 2008.

On January 13, 2009, the plaintiff filed a motion pursuant to Rule 60(b) for relief from the October 23, 2008 Final Judgment and seeking to file an amended complaint

CMEG NYMEX Inc. v. Optionable, Inc. et. al

On April 10, 2009, CMEG NYMEX Inc. filed suit against the Company, several past and present officers and directors, and other defendants in the United States District Court for the Southern District of New York (09-3677). The complaint alleges that defendants committed securities and common law fraud, and breach of warranties and other wrongdoing, in connection with an April 2007 transaction in which the officers and directors sold $28.9 million of their Optionable stock to NYMEX, and the Company issued warrants to NYMEX for the purchase of additional stock. The plaintiff seeks rescission and restitution and/or damages.

The Company and the other defendants have not yet responded to the complaint. Their responses are due on or before June 15, 2009.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Claim from the Company’s former Chief Executive Officer

On October 15, 2007, and as subsequently reiterated, the Company received a letter from the Company's former Chief Executive Officer in which he states, among other things, that the Company is in breach of certain obligations pursuant to an Amended and Restated Employment Agreement, dated April 10, 2007, and the Company should:

1) continue to pay him his base salary, amounting to $25,000 per month for fiscal 2007, $325,000 for fiscal 2008, and $350,000 for fiscal 2009;

2) continue to pay him a cash consideration equal to 5% of the Company's revenues and a stock consideration equal to 2% of the Company's revenues. The aggregate value of the unpaid consideration based on the Company's revenues amounted to approximately $289,000 at September 30, 2007;

3) Continue to provide to him health, welfare, and pension plan benefits as well as the payment of an annual premium for his life insurance through October 2009.

Possible seizure of a bank account

In November 2008, the Assistant United States Attorney sought to seize one of the Company’s bank accounts by a warrantless seizure. The bank account balance at March 31, 2009 amounts to approximately $530,000. In December 2008, the financial institution sent a notice asking that the funds held in this bank account be transferred to a different financial institution but has since frozen the funds. The warrantless seizure lapsed in January 2009. While the warrantless seizure lapsed, the Company believes that it is possible that the Assistant United States Attorney may try to seize such funds by other means.

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

While the Company intends to vigorously defend these matters, there exists the possibility of adverse outcomes that the Company cannot determine. These matters are subject to inherent uncertainties and management's view of these matters may change in the future.

Note 8-Income Taxes

The components of the benefit (provision) for income taxes are as follows:

		March 31, 2009	December 31, 2008

Current and deferred:
Federal	$	(478,622)	$	426,891
State		(-)		68,880
Total benefit (provision) for income taxes	$	(478,622)	$	495,771

A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:

	Three-month period ended March 31,
	2009			2008
Federal statutory taxes		(35.0	%)		(35.0	)%
State income taxes, net of federal tax benefit		(5.7	)		(5.7	)
Utilization of slate net operating loss		5.7			-
Permanent differences (taxable gain on extinguishment of due to Stockholder in 2009)		76.5			1.7
		41.5	%		(39.0	) %

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The recoverable income tax amounting to approximately $430,000 is recoverable from applications for carryback refund from the Company’s 2006 federal tax returns.

The Company has net operating losses of approximately $1.2 million for both federal and state tax purposes.

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

Overview

Optionable, Inc. (“the “Company”) was formed in Delaware in February 2000. Between April 2001 and July 2007, a substantial portion of our revenues were generated from providing energy derivative brokerage services to brokerage firms, financial institutions, energy traders, and hedge funds worldwide. A substantial portion of all energy derivatives we brokered in the past were natural gas derivatives.

We launched our electronic trading system, OPEX, in 2006 and we enhanced its features and functionalities during 2007 and 2008. Users of OPEX can execute on the platform mostly energy-related derivative trades. A significant portion of the contracts executable on OPEX are those offered by NYMEX, a US exchange. However, we believe that OPEX features and functionalities can be ported to other derivatives as well, such as credit default swaps, interest-related derivatives, metals and other commodities. Additionally, we believe that OPEX, with appropriate enhancements, may be able to execute transactions offered by other exchanges as well. Effective November 4, 2008, the Company has suspended the development of OPEX. However, we intend to maintain OPEX and explore its possible sale or licensing.

A significant portion of our revenues through the third quarter of 2007 was derived from our business relationship with BMO Financial Group ("BMO"). We have not generated any revenues since the third quarter of 2007 as a result of the suspension of the business relationship with us by BMO together with the combined succession of events since then. In addition, the matters discussed in Item 1 of Part II of this Report "Legal Proceedings" have had a significant adverse impact on our business, including current and, likely, future results of operations and financial condition. Our management continues to seek out possible business transactions and new business relationships. Accordingly, we have refined our business strategy by seeking the following options:

(1) to get advice from investment bankers as to whether we could or should sell our technology;

(2) to license our technology to joint ventures with other brokerage or software development firms; and

(3) to merge with another company in a business outside the financial services industry.

We are also considering whether we should satisfy our existing obligations with current creditors and distribute our remaining assets to our stockholders.

While we have been in discussions for strategic transactions with certain companies from time to time, none of these discussions have materialized into a definitive agreement with any of these parties. We cannot guarantee that we will be able to enter into a strategic transaction with a third party in the foreseeable future.

While we believe that it is likely that we will sell our technology, we are currently unable to determine whether we will continue to have any significant continuing involvement in the development or operations of OPEX .

GOING CONCERN

The Company believes it has sufficient funds to meet its obligations, based on its internal projections, for at least the next twelve months. However, the Company cannot guarantee that it will do so. If there are unforeseen expenses or financial obligations which occur during that period such as those related to matters disclosed in Part II, Item 1- Legal Proceedings, the Company may not be able to meet such obligations. Additionally, if the Company acquires a brokerage or trading firm or a technology company which could be instrumental in the Company's long-term growth, this could hamper the Company's ability to continue as a going concern, both from a short-term and a long-term perspective, and the Company would have to resort to financing, through either debt or equity placements, for the funding of either such acquisitions or unforeseen expenses or financial obligations. There can be no assurance that any such financing would be available on acceptable terms, or at all, especially in light of the pending litigation against the Company and recent economic conditions.

Three month period ended March 31, 2009 and March 31, 2008

Results of Operations

(Unaudited)

							Increase/			Increase/
	For the period ended						(Decrease)			(Decrease)
	March 31,						in $ 2009			in % 2009
	2009			2008			vs 2008			vs 2008


Operating expenses:
Selling, general and administrative		1,062,815			1,021,735			41,080			4.0%
Research and development		-			245,045			(245,045	)		-100.0%
Total operating expenses		1,062,815			1,266,780			(203,965	)	(16.0%		)

Operating loss		(1,062,815	)		(1,266,780	)		(203,965	)	(16.0%		)

Other income (expense):
Interest income		27,685			88,593			(60,908	)		-68.8%
Interest expense-related parties		(116,058	)		(91,719	)		24,339			26.5%
		(88,373	)		(3,126	)		85,247		NM

Net loss before income tax		(1,151,188	)		(1,269,906	)		(118,718	)	9.3%

Income tax (provision) benefit		(478,622	)		495,771			(974,393	)		NM

Net loss	$	(1,629,810	)	$	(774,135	)	$	855,675		NM


NM: Not meaningful

Selling, general, and administrative expenses

Selling, general, and administrative expenses consists primarily of legal fees, incurred in connection with the Company’s attention to matters described in Part II, Item 1- Legal Proceedings or to handle certain matters which occur during the course of our operations, and compensation of personnel supporting our operations.

The increase in selling, general, and administrative expenses during the three-month period ended March 31, 2009, when compared to the prior year period is primarily due to the following:

Higher legal fees incurred in connection with an increased number of litigations as well as legal fees incurred in connection with our annual meeting of stockholders in March 2009 and the satisfaction of our obligations to Mark Nordlicht, a stockholder and our former Chairman of the Board, which occurred in February 2009.

As a result of the matters discussed above and in Item 1 of Part II of this Report, we believe that our legal fees for 2009 will continue to constitute of a large share of our selling, general, and administrative expenses.

Research and development

Research and development expenses consist primarily of compensation of personnel and consultants associated with the development and testing of our automated electronic trading system. The decrease in research and development expenses during the three month period ended March 31, 2009 when compared to the prior year periods is primarily due to the following:

We suspended our OPEX development efforts in November 2008.

Interest income

Interest income consists primarily of interest earned on interest-bearing cash and cash equivalents. The decrease in interest income during the three month period ended March 31, 2009 when compared to the prior year period is primarily due to a decrease in interest rate we earned as well as a lower weighted average interest-bearing cash balance.

Interest expense to related parties

Interest expense to related parties consists of interest charges associated with amounts due to related parties, including Mark Nordlicht, our former Chairman of the Board and Edward O’Connor, our former President and current Director. The increase in interest expense to related parties during the three month period ended March 31, 2009 is primarily due to a loss on extinguishment of debt to Mark Nordlicht of approximately $45,000 which was recognized as interest expenses during the three-month period ended March 31, 2009. No such loss occurred during the comparable prior year period.

Income tax

Income tax benefit/expense consists of federal and state current and deferred income tax or benefit based on our net income. The increase in income tax provision during the three month period ended March 31, 2009 when compared to the income tax expense we incurred during the comparable prior year period is primarily due to a tax gain we incurred on the satisfaction of the due to Mark Nordlicht. The tax gain amounted to approximately $2.5 million.

LIQUIDITY AND CAPITAL RESOURCES

Our cash balance as of March 31, 2009 amounts to approximately $5.3 million.

During the three-month period ended March 31, 2009, we used cash from operating activities of approximately $1.0 million, primarily resulting from:

net loss of approximately $1.6 million, adjusted for the amortization of debt discount of approximately $116,000; and

a decrease in recoverable income taxes resulting from the taxable gain of $2.5 million resulting from the satisfaction of our obligations to Mark Nordlicht, offset by the current pre-tax quarter losses of $1.2 million.

During the three-month period ended March 31, 2009, we used cash in investing activities, resulting from purchases of three notes receivable aggregating $60,000;

During the three-month period ended March 31, 2009, we satisfied our obligations of approximately $5.0 million to a stockholder and our former Chairman of the Board, Mark Nordlicht and repurchased 4,095,075 shares of our common stock hold for a consideration aggregating $2,575,000.

During the three-month period ended March 31, 2008, we generated cash from operating activities of approximately $466,000, primarily resulting from:

net loss of approximately $770,000, adjusted for the amortization of debt discount of approximately $92,000; and

a decrease in prepaid income taxes assets resulting from the reimbursement during the three-month period ended March 31, 2008 of the 2007 federal estimated tax payments /income tax payable of 3.6 million resulting from the payment of estimated income taxes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A summary of significant accounting policies is included in Note 2 of unaudited financial statements included in this Quarterly Report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. Our financial statements and accompanying notes are prepared in accordance with U.S. GAAP. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. Critical accounting policies for us include the following:

Share-based payment

We account for share-based payments in accordance with SFAS No. 123(R), Share-Based Payment. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating expected volatility. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

Contingencies

The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. SFAS No. 5, Accounting for Contingencies, requires that an estimated loss from a loss contingency such as a legal proceeding or claim should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred.

In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

n/a

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of March 31, 2009, our management our President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our President and our Chief Financial Officer concluded that, as of March 31, 2009, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed 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 Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our President and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2009, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART 2 OTHER INFORMATION

ITEM 1. Legal Proceedings

Shareholder Class Action Lawsuit

On May 11, 2007, two purported class action lawsuits were filed against the Company and certain past and present officers and directors in the United States District Court for the Southern District of New York and were consolidated under In re Optionable Securities Litigation, 07 CV 3753 (LAK).

The suit sought unspecified damages arising from alleged violations of the federal securities laws, including the Securities Exchange Act of 1934, 15 U.S.C. ss. 78a et seq., (the “Exchange Act”), and Rule 10b-5 under the Exchange Act, 17 C.F.R. ss. 240.10b-5. The complaint alleged, among other things, that during the period January 22, 2007 to May 14, 2007, defendants made materially false and misleading statements concerning the Company’s relationship with its customer Bank of Montreal (“BMO”), and concealed a “scheme” to assist a former trader at BMO in concealing trading losses from his employer. As a result, according to Plaintiff, the Company’s stock sold at “inflated” prices.

On September 15, 2008, the Court granted the defendants’ motions to dismiss the complaint. Plaintiffs subsequently filed a motion to take discovery they claimed would permit them to file an amended complaint. On October 20, 2008, the Court denied plaintiffs’ motion, and a final judgment of dismissal was entered on October 23, 2008.

On January 13, 2009, plaintiffs filed a motion pursuant to Rule 60(b) for relief from the October 23, 2008 judgment and seeking to file an amended complaint on the basis of newly discovered evidence. On February 12, 2009, defendants filed an opposition to the motion. The plaintiffs filed a reply on March 3, 2009. Oral argument on the motion is scheduled for May 21, 2009.

Commodity Futures Trading Commission v. Cassidy et al.

On November 18, 2008, the U.S. Commodity Futures Trading Commission (“CFTC”) filed a Complaint in the United States District Court for the Southern District of New York against the Company, two past and present officers and directors, and two Bank of Montreal employees. (08 cv 9962). The complaint seeks injunctive relief restraining defendants from future violations of CFTC regulations, disgorgement, and civil monetary penalties under the Commodity Exchange Act.

The complaint alleges that that the defendants violated Section 4c(b) of the CEA, 7 U.S.C. § 6c(b), and Rule 33.10 thereunder, 17 C.F.R. § 33.10. On March 20, 2009, the Company and certain other of the defendants filed motions to dismiss the CFTC complaint. On April 3, 2009, the CFTC filed briefs in opposition to the motions to dismiss. On April 15, 2009, the Company and certain other of the defendants filed reply briefs.

CMEG NYMEX Inc. v. Optionable, Inc. et. al

The Company and the other defendants have not yet responded to the complaint. Their responses are due on or before June 15, 2009.

Possible seizure of a bank account

ITEM 1A. RISK FACTORS

N/A

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

During January 2009, we issued 250,000 options to our new Chief Executive Officer. 50,000 options of such grant vested upon the date of grant and the remainder will vest at a rate of 50,000 options on each six-month anniversary of the grant through January 28, 2011. The options expire on the five year anniversary of the grant. The exercise price of such options is $0.016 per share.

During February 2009, we issued 250,000 options to one of our new directors. 50,000 options of such grant vested upon the date of grant and the remainder will vest at a rate of 50,000 options on each six-month anniversary of the grant through February 6, 2011. The options expire on the five year anniversary of the grant. The exercise price of such options is $0.025 per share.

All of the aforementioned securities were issued pursuant to the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Company’s annual meeting of stockholders held on March 31, 2009, the Company’s stockholders took the following actions:

The Company’s stockholders elected Marc-Andre Boisseau, Thomas Burchill, Edward O’Connor, and Andrew Samaan to serve as directors until the next annual meeting or until his successor has been duly elected and qualified or until his earlier resignation or removal. The directors were elected by the votes cast at the 2009 annual meeting as follows:

	FOR		WITHHELD
Marc-Andre Boisseau		33,588,785		1,011,290
Thomas F Burchill		33,579,574		1,020,501
Edward O’Connor		33,583,685		1,016,390
Andrew Samaan		33,601,999		998,076

ITEM 5. OTHER INFORMATION

None for this reporting period. The Company’s by-laws were amended after the Board adopted in April 2009 certain procedures for stockholders to propose nominees to the Board. The amended and restated by-laws were filed as an exhibit to Form 8-K in April 2009.

ITEM 6. EXHIBITS

	31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934*
	31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934*
	32.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350*
	32.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350*

* Filed herewith

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.

May 15, 2009

	Optionable, Inc.


	By:	/s/ Thomas Burchill
		Thomas Burchill Chief Executive Officer and President (Principal Executive Officer)



	By:	/s/ Marc Andre-Boisseau
		Marc Andre-Boisseau Chief Financial Officer (Principal Financial Officer)