UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the year ended December 31, 2005

                                       or

              [ ] 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.
                        ---------------------------------
                 (Name of Small Business Issuer in Its Charter)

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


      555, Pleasantville Road, Suite 110, Briarcliff Manor, New York 10510
 ------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                  (914)773-1100
                        ---------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:
         None

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value

Check whether the issuer is not required to file reports  pursuant to Section 13
or 15(d) of the Exchange Act. [ ]


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

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

Issuer's revenues for its most recent fiscal year: $5,805,143

<PAGE>

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates as of March 7, 2006, was approximately $17,546,738.


The total  number of shares of the  issuer's  common  stock,  $.0001  par value,
outstanding on March 7, was 51,406,431.

Transitional Small Business Disclosure Format:  Yes |_| No |X|













<PAGE>


                                Optionable, Inc.
                         2005 Form 10-KSB Annual Report
                                TABLE OF CONTENTS


                                     PART I

 ITEM 1.      BUSINESS. .....................................................2
 ITEM 2.      PROPERTIES. ...................................................8
 ITEM 3.      LEGAL PROCEEDINGS. ............................................8
 ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............8

                                     PART II

 ITEM 5.      MARKET FOR REGISTRANT'S COMMON.................................9
 ITEM 6.      MANAGEMENT'S DISCUSSION ......................................10
 ITEM 7.      FINANCIAL STATEMENTS. ........................................20
 ITEM 8.      CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
              ACCOUNTING AND FINANCIAL DISCLOSURE ..........................20
 ITEM 8A.     CONTROLS AND PROCEDURES.......................................21

                                    PART III

 ITEM  9.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............22
 ITEM 10.     EXECUTIVE COMPENSATION........................................23
 ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND ..........25
 ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ..............27
 ITEM 13.     EXHIBITS......................................................31
 ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES .......................34
 ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES....................31


<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


Certain statements in this Annual Report constitute  forward-looking  statements
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended  (the  "Exchange  Act").  These  include  statements  about  anticipated
financial  performance,   future  revenues  or  earnings,   business  prospects,
projected  ventures,  new products,  anticipated  market performance and similar
matters. The words "budgeted,"  "anticipate,"  "project,"  "estimate," "expect,"
"may,"  "believe,"  "potential" and similar  statements are intended to be among
the statements  that are  forward-looking  statements.  Because such  statements
reflect the reality of risk and  uncertainty  that is inherent in our  business,
actual  results may differ  materially  from those  expressed or implied by such
forward-looking statements. Some of these risks and uncertainties are related to
our current business  situation and include,  but are not limited to our lack of
sufficient  revenues  to cover  operating  expenses,  our  history of  operating
losses,  our need for additional  financing for working  capital  purposes,  the
uncertainty  about our ability to continue as a going concern and  dependence on
our current  management team.  Readers are cautioned not to place undue reliance
on these forward-looking  statements,  which are made as of the date this report
was filed with the Securities and Exchange Commission.

Readers are advised  that we  undertake no  obligation  to release  publicly any
revisions to the  forward-looking  statements to reflect events or circumstances
after the date hereof or to reflect unanticipated events or development.  To the
extent that the  information  presented in this Annual Report on Form 10-KSB for
the year ended December 31, 2005 discusses financial projections, information or
expectations about our products or markets,  or otherwise makes statements about
future  events,  such  statements  are  forward-looking.  We  are  making  these
forward-looking  statements  in reliance on the safe  harbor  provisions  of the
Private Securities  Litigation Reform Act of 1995.  Although we believe that the
expectations  reflected  in  these  forward-looking   statements  are  based  on
reasonable assumptions, there are a number of risks and uncertainties that could
cause actual results to differ materially from such forward-looking  statements.
These risks and uncertainties  are described,  among other places in this Annual
Report, in "Management's  Discussion and Analysis of Financial Condition or Plan
of Operation."










<PAGE>

                                                           PART I

ITEM 1.  DESCRIPTION OF BUSINESS


We were formed in Delaware  in  February  2000.  Our goal is to be the leader of
brokerage services provider to brokerage firms, financial  institutions,  energy
traders, and hedge funds nationwide. We specialize in providing our services for
the trading of energy derivatives.  Substantially all energy derivatives we have
brokered in the past were  natural gas  derivatives.  We are  providing  below a
summary of elements  describing  and  impacting  our  industry  to enhance  your
understanding of our business.


INDUSTRY

The markets for energy  commodities  trading  include  trading in both  physical
commodities  contracts and derivative  instruments  --  instruments  that derive
their  value  from an  underlying  energy  commodity  or index --  across a wide
variety of commodities,  including crude oil, natural gas, electricity or power,
coal, chemicals,  weather and emissions.  Derivative instruments provide a means
to manage  exposure to price risk,  asset portfolio  allocation,  speculation or
arbitrage.  Contracts for physical  commodities allow counterparties to contract
for the delivery of the underlying physical asset.

Most of the  following  discussion  will  specifically  address  the natural gas
derivatives  market.  However,  we  believe  that most of the  elements  of this
discussion apply to other energy derivative markets as well.

Natural-gas derivatives

Natural gas derivatives are characterized by its underlying  commodity  (natural
gas), the term of the contract,  and the settlement,  which can require physical
delivery or  financial  settlement.  The natural gas  derivatives  with the most
liquidity are those with shorter settlement or expiration dates (less than three
months).  Derivatives with longer settlement or expiration dates are also larger
in dollar volume and are not as liquid,  requiring more  extensive  resources to
find potential counterparties.  Accordingly,  these derivatives tend to generate
higher brokerage transaction fees.

Natural  gas is an  actively  traded  commodity.  Natural  gas  derivatives  are
primarily  traded based upon the location to which they are  delivered  ("hub").
The Henry Hub, located in Louisiana,  is the most widely-used  pricing point for
natural gas derivatives in the United States.

Market Participants

Financial institutions,  including bank brokerage houses and hedge funds as well
as eligible individual traders use natural gas derivatives market to weigh their
risk and rewards in: 1) a balanced  portfolio asset allocation without investing
in the physical  asset,  and 2)  speculate on the price  movement of natural gas
prices  or  the  related  derivatives.   Natural  gas  producers,   natural  gas
distributors  and large natural gas consumers  will use natural gas  derivatives
market to manage their exposure to future price movements for certain  quantity,
time  and  delivery  location,  and  sometimes,  with an  expectation  that  the
derivatives would ultimately provide a financial gain.

Types of Natural Gas Derivatives Markets

There are two types of natural gas derivative  markets -- the futures market and
the over-the-counter ("OTC") market.

Futures Market

Most of the  transactions  on the natural gas futures market are made through an
exchange,  such as New York Mercantile  Exchange ("NYMEX") and  Intercontinental
Exchange ("ICE").

The trading of natural gas futures is conducted either on an electronic platform
or on an open-outcry trading floor. Prices are established  publicly either on a
screen or on the floor by participants posting bids, or buying indications,  and
offers, or indications to sell.

Futures and options are two derivatives  available to trade on a futures market.
Futures consist of a contract to buy or sell a certain  quantity of natural gas,
for example,  during a specified  month and are settled  through either physical
delivery or cash settlement.  Options consist of a right, but not an obligation,
to buy or sell a futures contract at a certain price.

                                       2

<PAGE>

OTC Market

Over-the-counter,  or OTC, is a term used to describe trading activity that does
not take place on a regulated exchange.

Several  derivatives are available for trade on the OTC market, such as forwards
and swaps, spreads, basis options, and options.

Forwards are negotiated agreements between counterparties to deliver a specified
quantity of natural gas, on a specified date, and at a specified location.

Swaps are contracts  between the holders of two different  assets with differing
risk and performance  profiles in which the risk or performance  characteristics
are  exchanged.  Swaps  may be  settled  against  the  future  price of a single
commodity or against an index of commodity prices.

Spreads  are the  simultaneous  purchase  and  sale  of  forward  contracts  for
different  months,  different  commodities  or  different  grades  of  the  same
commodity.

Basis options are contracts  that allow  counterparties  to swap the physical or
financial  delivery of natural gas  commodity  between  two  different  delivery
points.

Options traded on the OTC market, unlike those traded on the futures market, are
contracts that convey to the buyer the right, but not the obligation, to require
the seller to make or take  delivery  of a stated  quantity  of natural gas at a
specified  price.  Options may also be settled in cash,  based on the difference
between  the market  price of,  for  example,  natural  gas and the price of the
commodity specified in the option.

Besides  the types of  derivatives  traded on those  markets,  there are several
inherent  differences between them. For example, the futures market is primarily
conducted through an open-outcry  market,  such as NYMEX, which imposes physical
limitations  on the  number  of  participants  who can  trade at the same  time.
Accordingly, membership on such exchanges becomes a commodity of its own and may
require significant resources. The types of derivatives traded on the OTC market
are not standardized such as those used on the futures market.  Therefore,  when
one counterparty wants to enter into OTC derivatives transactions,  the use of a
broker   facilitates  the  search  for  another   counterparty.   The  OTC-based
transactions tend to generate higher brokerage fees due to extensive involvement
of a broker.

However, there is a significant similarity between these natural gas derivatives
markets in that they lack transparency for the  participants,  unlike the equity
market.  Counterparties  to a natural gas derivative  transaction are unaware of
all  offers  available  on  either  market  at  any  given  time  under  current
conditions.

Trends

We believe that several factors will impact the natural gas  derivatives  market
in the future:

     o    Natural gas options as asset class: new market  participants,  such as
          hedge funds, and institutional  investors,  such as pension plans, are
          taking a greater  interest  in the  returns  afforded  by natural  gas
          derivatives and the asset diversification opportunities it provides.

     o    Lesser  credit  risk using the OTC  market:  since  2002,  natural gas
          derivatives feature cleared OTC contracts. Cleared OTC contracts allow
          participants to limit counterparty credit risk and lower the amount of
          capital required to trade.

     o    Larger number of new entrants:  both factors have increased the number
          of market  participants  in the natural gas  derivatives  market which
          improves its liquidity.

     o    Need for higher  transparency in the natural gas  derivatives  market:
          the natural gas derivatives market lacks transparency when compared to
          other markets,  such as the equity market.  The participants,  who are
          enjoying such  transparency in other markets,  are requesting the same
          level of transparency  in the natural gas  derivatives  market without
          obtaining it with the currently available solutions.

                                       3

<PAGE>

Current Solutions to Natural Gas Derivatives Market

The current solutions offered to natural gas derivatives market vary widely.

Some  brokerage  firms offer only  services  for the  futures  market or the OTC
markets,  but not both.  This  restricts the choice of market  participants  who
combine futures and swaps, for example,  in their hedging or investment strategy
which are not traded on the same markets. If dealing with brokers who only offer
services on one of the markets,  the market  participants are forced to use more
than  one  broker,   which   creates   further  lack  of  market   transparency,
inefficiencies  in the use of  resources  as well as  ineffectiveness  in timely
trading.

Other brokerage  firms offer services on both markets,  but most do not have the
intent  or the  resources  to  address  the  current  lack of  transparency  and
liquidity in the energy derivatives market by using an electronic platform,  for
example.

While  exchanges are used primarily for the futures  market,  they are also used
for  clearing  OTC  trades.  However,  none  of  the  larger  exchanges  provide
sufficient support for derivatives trading on the OTC market,  which reduces the
liquidity  of  such  market.  Additionally,  exchanges  do not  offer  brokerage
services which facilitate the search for counterparties.

We also  believe  that this lack of  transparency  applies to most other  energy
derivatives markets.

Other Elements of the Natural Gas Derivatives Market

The energy  natural gas  derivatives  market is also  impacted by the  following
elements:

Trading  volumes are driven  primarily by the degree of volatility in the energy
derivatives  market.  However,  if the volatility of the price of natural gas or
related  derivatives is too high, some of the market participants will wait that
it declines before entering into transactions, which reduces trading volumes.

Worldwide geopolitical  conditions impact the perceived or real supply or demand
of a particular energy commodity.

Unexpected weather conditions, such as hurricanes in the Gulf Coast or milder or
colder  weather in the  Northeast  United  States,  impact the perceived or real
supply  or  demand of a  particular  energy  commodity.  While  hurricanes  have
recently  become more  expected,  their  unpredictable  strength and  trajectory
increase the volatility of energy commodities market.

The delivery of energy commodities,  such as natural gas, is generally seasonal.
In  parallel,  the  trading  volume  of the  energy  derivatives  market,  which
historically has been higher during the winter and the summer, has been recently
skewed  by the  larger  number  of  entrants  in the  market  as well  worldwide
geopolitical events and unexpected weather conditions.

Our Solutions

We  understand  that the  participants  in the energy  derivatives  market  have
various investment needs, some of which may be as simple as trading  speculative
futures, but most need a brokerage firm to provide the access to a larger amount
of  counterparties  with the  highest  transparency  possible.  We  provide  the
following services to our clients:

     o    OTC energy derivatives brokerage. Once we receive an order to trade an
          OTC market  derivative from a client,  we find through our network the
          appropriate  counterparty  for such trade.  We also offer our services
          for lesser used derivatives such as "swaptions",  which terms slightly
          vary from an option for swaps;

     o    Energy futures  derivatives  services on the floor of the NYMEX, which
          was launched in April 2004.  Such  services  are  provided  through an
          affiliate, Capital Energy Services LLC ("CES");

     o    We have  completed the initial  phase of OPEX,  which is an electronic
          brokerage   platform   automating  the  energy   derivatives   between
          counterparties.  Before we can mass market OPEX, we intend to complete
          its  integration  with  NYMEX  ClearPort  as well as our  confirmation
          system. We believe that OPEX will significantly  improve the liquidity
          and transparency of natural gas and other energy derivatives market by
          increasing  number of  participants  in a market in which they receive
          real-time market data, and;

     o    We also complement our fee-based  services with derivatives  valuation
          and mark to market services. At the request of several of our existing
          clients,  and based on our  experience and knowledge of the markets as
          well as wide network of counterparties, we can periodically assist our
          clients in valuing  their  positions  in the natural  gas  derivatives
          market.  Currently, we provide this service without additional charge.
          We believe that the demand for this  service from market  participants
          will increase possibly creating new revenue opportunities.

                                       4

<PAGE>

Those  solutions  can be applied to the trading of other energy  derivatives  as
well. Additionally,  the combination of those services provide for larger choice
of investment  opportunities for participants in the energy derivatives  market,
including natural gas.

Generally, the nature and mechanics of our business is to inquire of our clients
their  needs  in the  trade of  energy  options,  swaps,  and  futures.  Once we
understand  their needs:  in the case of NYMEX futures or options,  the trade is
presented on the NYMEX through CES; and in the case of OTC swaps and options, we
inquire of other clients  whether they are interested in  participating  in such
transaction.  Once the  counterparties  agree on a certain  trade,  we match the
counterparties  and  consummate  the trade by (i) in the case of a bilateral OTC
trade,  confirming the details of the executed trade with both counterparties or
(ii) in the case of a cleared trade, submitting such trade to an exchange.

Presently,  OTC brokerage is facilitated by brokering trades between our clients
via telephone and electronic messaging, often referred to as voice brokerage. By
building a  relationship  with our existing and potential  clients,  our brokers
learn about their  interests and  opportunities  they are seeking.  We intend to
combine traditional voice brokerage with electronic trading by offering a hybrid
combination of voice and electronic  transactions;  clients will be able to move
between voice and electronic trading with no loss in liquidity. Our clients will
be able to  transact  in the same  markets,  regardless  of  whether or not they
entered orders  electronically  or through a broker.  We aim to provide a bridge
between OTC Options and Electronic trading.  This bridge is provided by our OPEX
trading platform.

Central to OPEX is the  trade-matching  engine,  which is designed to facilitate
real-time trading of derivative  products  irrespective of a particular  market.
Based on our  experience  in trading and  brokering  OTC swaps and  options,  we
devoted   significant   attention   was  given  to  the  user   experience   and
user-interface ergonomics. In designing the system, we were cognizant of the way
traders currently execute their trades and how they could comfortably transition
to an electronic  trading  platform.  The outcome is a graphical  user interface
that is both simple and intuitive to use.

OPEX's trading  platform (for which there are pending patents) was designed with
the aid of  professional  options  traders  to  facilitate  strategies  that are
currently  executed on the OTC,  commodity  and equity  exchanges.  The user can
customize the system to execute various options trading  strategies.  We believe
that OPEX will be commercially available in the second half of 2006.

Strategy

We intend to employ the following key  strategies to achieve our goal of being a
leading facilitator of energy derivatives:

     o    Increase  revenues  from  existing  and new clients by offering  OPEX,
          which could  automate  some of the  transactions  now handled by voice
          brokerage  and  provide  more  pertinent  market  information  to  our
          clients,  improving the liquidity and  transparency  of the energy and
          natural gas derivatives market;

     o    Expand  the  number  of  clients  who  actively  trade  in the  energy
          derivatives market,  including natural gas, who become "market-makers"
          and  facilitate  our  search  of   counterparties   for  more  complex
          derivatives traded on the OTC market;

     o    Significantly  expand our depth in product  offerings  of other energy
          derivatives products such as crude oil derivatives; and

     o    Develop new strategic  relationships,  such as marketing and technical
          relationships with exchanges,  which will allow us to market their new
          solutions  to our clients as well as  integrate  our  technology  with
          theirs.

HOW WE GENERATE REVENUES

We  generate  revenues  by  charging  commissions  fees  based on the OTC market
transactions  we submit  for  trading  on behalf  of our  clients.  Our fees for
brokerage  services  for  options  and swaps are up to $5.00 per 10,000  million
British  thermal units (mmBtu) of natural gas per contract.  Our fees are earned
on the date of the trade. We anticipate that, initially,  our fees in connection
with the use of OPEX for  options  and swaps  will be less than $5.00 per 10,000
mmBtu of natural gas per contract.

We also receive  incentives from ICE and NYMEX.  The incentives are earned based
on a percentage of the total revenues  received by the exchange  attributable to
our volume of OTC market transactions submitted to the respective exchanges. For
example,  under the incentive program offered by NYMEX, 25% of the revenues from
NYMEX ClearPort are allocated to an  intermediary  incentive pool. At the end of
each month, the qualifying intermediaries,  including us, receive their pro-rata
share based on the volume for which they were  responsible.  There is no minimum
volume requirement in order to participate.  Under the incentive program offered
by ICE, we receive 50% of the revenues  earned by ICE from the  transactions  we
have  submitted  to them.  There is no minimum  volume  requirement  in order to
participate in such incentives.

                                       5

<PAGE>

Furthermore,  through CES, we generate  revenues from the futures market,  which
are  commission  fees  based on  transactions  they  broker  on  behalf of their
clients. In return for such revenues from CES, we assume all expenses associated
with the futures market incurred by CES, including brokerage commissions paid by
CES to its  employees.  The  transactions  facilitated  by CES consist mostly of
options and futures  contracts on natural gas,  which fees ranged  between $1.00
and $1.50 per 10,000 mmBtu of natural gas, per contract.

HOW WE MARKET OUR SERVICES

We market our brokerage  services  through our  broker-employees.  We market our
services by providing  information on specific transactions or market conditions
to our existing and prospective  clients. For example, we provide a daily report
of most notable  trades and an analysis of the forward  six-month  volatility of
natural  gas  and  crude  oil  derivatives  to almost 200  trading  desks.   Our
broker-employees  conduct their sales  activities from our office  facilities in
Briarcliff  Manor,  New York and on the floor of the NYMEX.  We will  market our
OPEX system primarily by providing  demonstrations,  training, sales events, and
sales collateral to our existing and potential clients.

HOW WE OPERATE

Our OTC brokerage  operations are conducted from our Briarcliff Manor, New York,
office and our floor  operations are conducted  from the floor of the NYMEX.  We
have 10 employees at the Briarcliff Manor location, and 3 employees at the NYMEX
location  who  interact  heavily  with  our  existing  and  potential   clients.
Generally, the nature and mechanics of our business is to inquire of our clients
needs in the trading of energy  derivatives.  Once we understand their needs: in
the case of futures  market  derivatives,  the trade is  presented  on the NYMEX
through  CES;  and in the case of OTC  market  derivatives,  we inquire of other
clients  whether they are interested in  participating  in such  transaction and
facilitate   the   negotiation   and   conclusion   of  an   agreement   between
counterparties.  Once the counterparties  agree on a certain trade, we match the
counterparties  and  consummate  the trade by (i) in the case of a bilateral OTC
trade,  confirming the details of the executed trade with both counterparties or
(ii) in the case of a cleared OTC trade, submitting such trade to an exchange.

Recently, we have leveraged our employees located at NYMEX, who typically handle
futures transactions, to find counterparties for OTC transactions.

We rely  heavily on  communication  technology  to  interact  with our  clients,
whether by phone, e-mail,  and/or instant messaging.  We anticipate that, in the
future, we will further rely on Internet based  communications for the operation
of OPEX.

We keep  abreast of  conditions  in the natural gas trading  market by receiving
information  using a combination  of technology,  such as analytics  software as
well as  market  data  services,  relevant  business  news from  different  wire
services and  traditional  broadcast as well as  leveraging  the presence of our
employees on the NYMEX floor.

BUSINESS ALLIANCES

In April 2004, we entered into a Master  Services  Agreement with CES. Edward J.
O'Connor,  our President,  is a shareholder of CES. Kevin P. Cassidy,  our Chief
Executive  Officer is also a shareholder  of and managing  director of CES. This
agreement  enables us to realize the benefits of brokerage  services  offered on
the floor of the NYMEX.  Only NYMEX members may offer brokerage  services on the
floor of NYMEX. For a corporation to become a member of NYMEX, it must either 1)
purchase two seats on NYMEX,  or 2) be  beneficially  owned by an individual who
has  purchased or leased a seat on NYMEX.  We are not  beneficially  owned by an
individual,  so the second method of obtaining  membership  was not available to
us. With regard to the first method, the current market value of a seat on NYMEX
is  approximately  $3.6 million,  so membership would have cost us approximately
$7.2 million.  Accordingly,  by entering into this  agreement  with CES, we were
able  to  more  efficiently  use our  resources  instead  of  making  the  large
investment of purchasing  seats on the NYMEX.  Additionally,  we could  leverage
CES'  experience  in floor  brokerage  as well as selling  our  services to CES'
client base. We provide CES with  marketing and brokerage  support  services for
the NYMEX  business.  We agreed to pay CES (a) a  minimum  fixed  annual  fee of
$50,000 payable in 24 bi-monthly installments of $2,083, for the duration of the
contract  and (b) a deferred  payment of  $1,525,000.  During  April  2005,  CES
assigned its rights to the Company's  liability of $1,525,000  equally to Edward
O'Connor and Kevin Cassidy.

CES will make  monthly  payments  to us equal to (a) the gross  receipts  of the
floor  business,  which  consists  of  commission  fees on  natural  gas  future
transactions  less (b) brokerage  expenses less the amount of the bimonthly fees
paid. If gross receipts in any month are less than  brokerage  expenses less the
amount of the bimonthly fees paid, we pay the difference to CES.

                                       6

<PAGE>

CLIENT CONCENTRATION

One of our clients, Bank of Montreal,  accounted for 18% and 10% of our revenues
during 2005 and 2004, respectively.

COMPETITION

The  natural  gas  derivatives  market  has  many  competitors  involved  in the
brokering of natural gas options.  Capital  investment for entry into the market
is low.  Accordingly,  a number of small  brokerage firms flourish along side of
larger more  established  brokerage firms such as Cantor  Fitzgerald,  L.P., MAN
Group PLC and ICAP PLC.

There are several other  well-financed  companies who do or may compete with us.
In the OTC  natural gas  derivatives  market,  our  competitors  include  Amerex
Natural Gas Ltd.,  Choice Energy LP, G.A.  Options,  MAN  Financial,  Inc. FIMAT
Internationale  Banque,  S.A.,  TFS, Inc Tullet  Natsource,  Inc. In the futures
natural gas derivatives  market,  our competitors  include Clarion Trading,  SCS
Trading  Corp.,  and ICAP PLC. When we implement  OPEX,  we anticipate  that our
potential competitors will include NYMEX, ICE, eSpeed and the Chicago Mercantile
Exchange.  To date,  we do not believe  any one company has  achieved a dominant
position.

With the advent of OTC cleared options,  we and other OTC brokers have been able
to  capitalize  on this  opportunity  by  using  the  newly  available  clearing
mechanisms to match previously  unmatchable  counterparties.  With lesser credit
concerns  resulting  from the wider  adoption of OTC  clearance,  it allows more
liquidity in the energy derivatives market.

We currently use the traditional  OTC broker approach  whereby client contact is
initiated over the phone and on the Internet instant  messaging  systems,  as do
the majority of our competitors. Instead of continuing to compete using the same
methodology  similar to our  competition in our niche market,  the OPEX platform
will  let  our  clients  interact  directly  with  each  other,   bypassing  the
traditional brokerage intermediary,  with faster and more accurate execution. We
believe that this platform will allow us to compete more  favorably.  We believe
that OPEX will be commercially available in the second half of 2006.

As  the  emerging  market  for  electronic  energy  derivatives  develops,  more
competitors are likely to emerge.

We believe that the principal competitive factors in our market include:

     o    Access to a large number of financially-sound participants;
     o    Timeliness in finding willing counterparties;
     o    Client service and support;
     o    Service  functionality,  quality  and  performance  of the  electronic
          trading system;
     o    Ease of use, reliability and security of electronic trading system;
     o    Establishing a significant sales force;
     o    Ability to introduce new products to the market in a timely manner;
     o    Pricing.

We currently  differentiate  from the  competition by offering access to natural
gas  derivatives  on  both  the  futures  market  and the  OTC  market.  We also
differentiate by offering derivatives products,  such as swaptions which are not
offered by other  brokerage  firms.  Furthermore,  we have a number of blue-chip
clients which actively and regularly trade in this market which  facilitates our
search  of  counterparties  and  allows  us to trade  quickly  on  behalf of our
clients. Once OPEX is mass-marketed,  we will differentiate from our competitors
by offering a higher  level of  liquidity  and  transparency  in the natural gas
derivatives market which may extend to other energy derivatives markets as well.

EMPLOYEES

We currently have 13 full-time employees.  The Company also has a consultant who
serves as the Chief Technology Officer, and a consultant who serves as our Chief
Financial  Officer.  The number of employees that the Company intends to hire is
dependent on our clients' needs and the infrastructure  required to support such
needs. We believe that our relationship with our employees is good.

                                       7

<PAGE>

PATENTS, TRADEMARKS AND LICENSES

On March 1, 2001, we were assigned  rights to a patent  pending for a system and
method for  real-time  trading over a computer  network from Mark A.  Nordlicht,
Yechiel Abraham  Zucker,  Howard A. Feder and David Boim. This patent is pending
as of the date of this  Annual  Report  on Form  10-KSB.  Mr.  Nordlicht  is our
Chairman and Mr. Zucker is our Executive Vice President.

On August 10, 2001, we were assigned rights to a patent pending for a system and
method for trading  selectable  market  transactions over a network from Mark A.
Nordlicht. This patent is pending as of the date of this annual report.

We have registered a trademark for "Optionable" and use OPEX as a service mark.

Although we have several patents pending which relate to our electronic  trading
system,  we do not solely  depend on those  patents to protect our  intellectual
property.  Furthermore,  the benefit that would be afforded by those patents has
not been relied upon in our business plan,  although we do feel that the patents
would  benefit our position in the  marketplace.  We have taken various steps to
protect  our  intellectual   property   including   non-disclosure   agreements,
confidentiality  agreements  and  other  general  precautions  taken to keep the
information confidential.

RESEARCH AND DEVELOPMENT

We incurred  approximately  $450,000  and  $116,000 in expenses on research  and
development  during  2005 and 2004.  We  resumed in late 2004 our  research  and
development  efforts to  complete  the OPEX  system  and  intend to enhance  its
features and functionalities.

GOVERNMENT REGULATION

The OTC brokerage business is not officially  regulated.  However, we have given
notice to the Commodity Futures Trading Commission  ("CFTC") of our intention to
operate the OPEX electronic  trading  platform as an Exempt  Commercial  Market.
Exempt  Commercial  Markets  are  subject to certain  information  access  rules
established by the CFTC.

The  futures  derivatives  market  in which  our  affiliate,  CES,  operates  is
regulated by the CFTC and National Futures Association.


ITEM 2. DESCRIPTION OF PROPERTY

We  lease  our  executive  offices  located  at 555  Pleasantville  Road,  South
Building,  Suite  110,  Briarcliff  Manor,  NY 10510.  The  offices  consist  of
approximately 2,930 square feet.

The lease  commenced on October 30, 2001,  and it expires in January  2007.  The
annual rent is $66,817 payable in monthly  installments  of $5,568.  We also pay
our  proportionate  share of any  increase in real  estate  taxes or common area
maintenance charges.

We  believe  our  space is  adequate  for our  current  and  foreseeable  future
operations.


ITEM 3.         LEGAL PROCEEDINGS

None


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

None.

                                       8

<PAGE>

                                     PART II

ITEM 5.   MARKET FOR COMMON  EQUITY,  RELATED  STOCKHOLDER  MATTERS AND SMALL
          BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES


Our common stock is quoted on the  Over-the-Counter  Bulletin  Board operated by
the National Association of Securities Dealers, Inc. Our shares are listed under
the symbol "OPBL."


The following table sets forth, for the fiscal quarters indicated,  the high and
low  closing   prices  per  share  of  our  common  stock  as  reported  on  the
Over-the-Counter  Bulletin  Board.  The quotations  reflect inter dealer prices,
without retail mark-up,  mark-down or commissions  and may not represent  actual
transactions.


       Year Ended December 31, 2005            High                    Low
       ----------------------------            ----                    ---
         First Quarter                          N/A                    N/A

         Second Quarter                         N/A                    N/A

         Third Quarter                         1.25                   1.00

         Fourth Quarter                        1.40                   0.85





At March 7, 2006, the closing price for our common stock was $0.95.

At March 7, 2006,  there were  51,406,431  shares of our common stock issued and
outstanding as well as 791,000 options and 550,000 warrants  outstanding.  There
are  approximately  43 stockholders of record at March 7, 2006.  During the last
two fiscal years,  no cash  dividends have been declared on our common stock and
management  does not anticipate  that dividends will be paid in the  foreseeable
future.

Equity Compensation Plan Information

Optionable, Inc.   2004 Stock Option Plan and warrants issued for services
<TABLE>
<CAPTION>

                           Number of securities               Weighted-average          Number of securities
                           to be issued uponexercise          price of                  remaining available for
                           exercise of outstanding            outstanding options,      future issuance under
                           options, warrants,                 warrants, and rights      equity compensation
                           and rights                                                   plans ( excluding
                                                                                        securities reflected in column (a))

                                     (a)                                (b)                      (c)
Equity compensation plans

<S>                                 <C>                                 <C>                     <C>
approved by security holders        791,000                             $0.21                   6,709,000

Equity compensation plans not

approved by security holders        550,000                              0.20                           -
                                  ---------                              ----                   ---------
Total                             1,341,000                             $0.21                   6,709,000
</TABLE>

                                       9

<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
          OF OPERATION OVERVIEW AND PLAN OF OPERATIONS

In recent  years,  the  energy  trading  industry  changed  drastically.  Long a
volatile industry, high profile bankruptcies, such as Enron, sparked a flight of
capital and a lack of  confidence in the  financial  position of energy  related
market  participants,  which  forced  energy  companies  to  depart  the  energy
derivatives  trading  markets.  We believe  that the flow of  investment  out of
energy  trading  markets was mostly felt during 2003.  During 2004 and 2005,  we
have observed a higher level of participants  within the financial  institutions
and  hedge  fund  community  committing  capital  to energy  trading,  which has
increased the level of volume  within the energy  trading  markets.  Such higher
level of  participation  has also increased our revenues,  net income,  and cash
flow from operating  activities which has improved our financial  condition.  We
also  believe  that we will  need to  continue  to  increase  our  research  and
development  expenditures in the  foreseeable  future which would be financed by
our cash flows from operations.

We are  developing  our  electronic  trading  system,  OPEX. We had  temporarily
discontinued  such  efforts  in 2003  and  resumed  them in late  2004.  We have
substantially  completed the development of the initial version of OPEX. We will
actively market its use once we finalize its integration  with NYMEX  ClearPort,
enable its  electronic  confirmation  and  billing  system,  and ensure that all
transactions entered in OPEX are properly processed.  We believe this will occur
in the second half of 2006.  We  anticipate  that we will  continue to invest in
research  development for the foreseeable future to at least comparable level of
expenditures  we incurred  during  2005,  which is  approximately  $500,000.  We
believe that the marketing  costs  associated with the initial launch will be at
least $100,000.

We believe that a majority of our futures and OTC related revenues will continue
to be generated through voice-brokerage for the foreseeable future. Once OPEX is
commercially  launched,  we expect that  revenues  generated  through  OPEX will
constitute a small but growing portion of our revenues.

We expect that our cost of revenues will increase in the foreseeable future as a
result of the new 50-month  employment  contract we entered  with Kevin  Cassidy
which provides fixed and variable compensation exceeding the amounts we paid him
as a consultant.  For example, Kevin Cassidy's fixed compensation will gradually
increase  from the  $215,000  we paid him as a  consultant  to $350,000 by 2009.
Additionally,  Kevin's Cassidy's  employment  agreement  provides that beginning
with the first month of the quarter in which the amount payable to Kevin Cassidy
is fully paid, he will be paid additional cash  compensation  amounting to 5% of
our gross revenues and stock compensation amounting to 2% of our gross revenues.
Furthermore,  we will issue  options to Kevin Cassidy equal to 20% of the number
of shares of common stock  issuable  under  warrants  which  become  exercisable
pursuant to any Order Flow Agreements  (Order Flow Agreements are the agreements
under  which we issue  warrants to a firm based on the volume of orders the firm
placed with us). Finally, we will issue to Kevin Cassidy 5,000 options each time
a firm  registers  with and executes its first 10,000 lots on our OPEX platform.
The total number of such options will be limited to 2,500,000.

This  discussion  and  analysis  of our  financial  condition  should be read in
connection with our financial  statements and accompanying notes thereto for the
fiscal  year  ended  December  31,  2005,   including  without   limitation  the
information  set forth  under the  heading  "Critical  Accounting  Policies  and
Estimates".

                                       10

<PAGE>

<TABLE>
<CAPTION>

            Results of Operations

                                                                                                Increase/        Increase/
                                                                For the Year Ended             (Decrease)       (Decrease)
                                                                   December 31,                 in $ 2005        in % 2005
                                                             2005               2004             vs 2004          vs 2004
                                                         --------------    ---------------    --------------    ------------
<S>                                                        <C>                <C>               <C>                   <C>
Brokerage fees                                             $ 3,085,296        $ 1,885,489       $ 1,199,807           63.6%
Brokerage fees-related party                                 1,981,560          1,011,014           970,546           96.0%
Incentives                                                     738,558            597,734           140,824           23.6%
                                                         --------------    ---------------    --------------    ------------
Net revenues                                                 5,805,414          3,494,237         2,311,177           66.1%

Cost of revenues                                             2,264,110          1,614,073           650,037           40.3%
Cost of revenues-related party                                 856,763            466,610           390,153           83.6%
                                                         --------------    ---------------    --------------    ------------
                                                             3,120,873          2,080,683         1,040,190           50.0%

Gross profit                                                 2,684,541          1,413,554         1,270,987           89.9%

Operating expenses:
  Selling, general and administrative                          695,718            776,908           (81,190)         -10.5%
  Research and development                                     450,488            116,520           333,968          286.6%
                                                         --------------    ---------------    --------------    ------------
     Total operating expenses                                1,146,206            893,428           252,778           28.3%

     Operating income                                        1,538,335            520,126         1,018,209          195.8%

  Other income (expense):
  Gain on extinguishment of debt                                     -            238,282          (238,282)        NM
  Interest income                                               21,548              1,836            19,712         1073.6%
  Interest expense-related parties                            (300,319)          (276,471)           23,848            8.6%
                                                         --------------    ---------------    --------------    ------------
                                                              (278,771)           (36,353)          242,418         NM

Net income                                                 $ 1,259,564          $ 483,773         $ 775,791          160.4%
                                                         ==============    ===============    ==============    ============
</TABLE>

NM:  Not meaningful

                                       11

<PAGE>

RESULTS OF OPERATIONS

Revenues

Revenues  consist   primarily  of  fees  earned  from  natural  gas  derivatives
transactions and related incentives arrangements. The increase in brokerage fees
during  2005  when  compared  to 2004 is  primarily  due to an  increase  in the
brokerage fees resulting from increased  volume of  transactions  of natural gas
derivatives traded on the OTC market on behalf of existing clients. The increase
in brokerage  fees-related  party during 2005 when compared to 2004 is primarily
due to our futures  market  operations  launched in April 2004,  of which a full
year was reported  during 2005 and nine months were reported during 2004 and, to
a lesser  degree,  an increase in brokerage fees resulting from higher volume of
natural gas  derivatives  traded on the futures market on behalf of our clients.
The increase in incentives  earned pursuant to agreements with two exchanges was
due to a higher volume of transactions handled by us on such exchanges, slightly
offset by a decrease of the incentive rate offered by NYMEX.

Cost of revenues

Cost of revenues  consists  primarily  of  compensation  of  personnel  directly
associated  with handling the natural gas derivative  transactions  on behalf of
our clients as well as expenses associated with our floor brokerage  operations.
The increase in cost of revenues and cost of revenues-related  party during 2005
when compared to 2004 is primarily attributable to increased commissions paid to
our brokers  resulting from higher brokerage fees we earned.  Additionally,  the
increase in cost of revenues-related  party during 2005 when compared to 2004 is
also  attributable  to increase in costs  associated  with having a full year of
futures market operations during 2005 and nine-months of operations during 2004.

Selling, general, and administrative expenses

Selling, general, and administrative expenses consists primarily of compensation
of personnel  supporting our operations as well as  professional  fees,  such as
legal fees,  incurred to handle certain matters which occur during the course of
operations.  The decrease in selling,  general,  and administrative  expenses of
approximately   $80,000   during  2005  when   compared  to  2004  is  primarily
attributable  to a decrease in legal fees incurred in connection  with a dispute
related to our contract with the software  development firm hired to develop our
electronic trading system. This dispute was settled in early 2004.

Research and development

Research and development expenses consist primarily of compensation of personnel
and  consultants  associated  with the  development of our automated  electronic
trading system.  The increase in research and  development  expenses during 2005
when  compared to 2004 is primarily  due to the  resumption of our OPEX research
and  development  efforts  in late 2004 and the  continuation  of these  efforts
during 2005.

Interest expense to related parties

Interest expense to related parties consists of interest charges associated with
amounts due to related parties, Mark Nordlicht, our Chairman, Kevin Cassidy, our
Chief Executive Officer, and Edward O'Connor, our President. Interest expense to
related parties has remained consistent during 2005 and 2004.

Gain on extinguishment of debt

Gain on  extinguishment  of debt  consists of gain  resulting  from the one-time
settlement of professional fees owed to our former legal counsel. The settlement
occurred during 2004 and no such settlement occurred during 2005.


LIQUIDITY AND CAPITAL RESOURCES

Historically,  we have funded our  operations  primarily  from proceeds of notes
payable to Mark Nordlicht,  our Chairman and one of our principal  stockholders,
through a private placement of our common stock,  and, more recently,  from cash
generated from operating activities.

During 2005,  we generated  cash of  approximately  $1.4 million from  operating
activities, primarily resulting from:

     o    net  income of  approximately  $1.3  million,  adjusted  for  non-cash
          interest  expense  and the fair  value  of  warrants  issued  to Kevin
          Cassidy,  our Chief Executive  Officer of  approximately  $300,000 and
          $160,000, respectively;

     o    an  increase  in  accounts   receivable  of  approximately   $130,000,
          resulting from an increase in related revenues;

     o    an  increase  of  $150,000  in other  receivable,  resulting  from our
          funding of security  deposits  held for the benefit of the NYMEX and a
          clearing house,  to facilitate the trading of futures  transactions we
          submit on behalf of our clients;

                                       12

<PAGE>

We  used  our  cash  generated  from  operating  activities  to  make  principal
repayments  of  approximately  $200,000,  $50,000 and $180,000 on amounts due to
Kevin Cassidy, our Chief Executive Officer,  Edward O'Connor,  our President and
former  Chief  Executive  Officer,  and to Mark  Nordlicht,  our Chairman of the
Board, respectively.

During 2004, we generated cash flows from operations of  approximately  $120,000
in our operating activities, primarily resulting from:
     o    Our net  income of  approximately  $500,000,  adjusted  by a  non-cash
          interest  expense  of  approximately   $203,000,   the  forfeiture  of
          officers'  compensation of $375,000,  and a gain on extinguishments of
          debt of approximately $240,000;
     o    an  increase  in  accounts   receivable  of  approximately   $130,000,
          resulting from an increase in related revenues;
     o    an  increase  in due from  related  party of  approximately  $300,000,
          resulting from an increase in related revenues;
     o    an  increase  in  incentives  receivable  of  approximately  $130,000,
          resulting from an increase in related revenues;
     o    a decrease in accounts  payable and accrued  expenses of approximately
          $560,000 primarily resulting from the settlement of amounts due to our
          former outside counsel and to a software developer; and
     o    an  increase  in  accrued  compensation  of  approximately   $330,000,
          resulting from an increase in commissions related to higher revenues.

     We funded our cash used in operating  activities by generating  proceeds of
     approximately  $1.3 million from the issuance of shares of our common stock
     and by  generating  proceeds  of  $350,000  from the  issuance of a line of
     credit  and a note  payable  to Mark  Nordlicht.  We also  satisfied  notes
     payable of $800,000 to Mark Nordlicht.

     We believe that the  employment  arrangement  with our new Chief  Executive
     Officer,  Kevin  Cassidy,  may  decrease  our  cash  flows  from  operating
     activities  if our  revenues  decrease or if we are unable to increase  our
     revenues in an amount  sufficient to cover the additional cash compensation
     we will pay to Kevin  Cassidy.  Kevin  Cassidy's  fixed  compensation  will
     gradually  increase  from  the  $215,000  we paid  him as a  consultant  to
     $350,000 by 2009.  Additionally,  Kevin's Cassidy's  compensation agreement
     provides  that  beginning  with the first month of the quarter in which the
     amount payable to Kevin Cassidy is fully paid, he will be paid  incremental
     cash compensation amounting to 5% of our gross revenues.

     During  January 2006, we paid $600,000 to reduce our debt to Kevin Cassidy,
     Edward O'Connor, and Mark Nordlicht.

We believe that our office  facilities  and equipment will be sufficient to meet
our  needs for the  foreseeable  future.  Accordingly,  we  anticipate  that our
capital expenditures over the next twelve months will not be significant.

We believe that our cash available and estimated  cash flows from  operations in
2006 will be sufficient to meet our obligations when they become due.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A summary  of  significant  accounting  policies  is  included  in Note 3 of the
accompanying  audited financial statements for the year ended December 31, 2005.
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 revenue recognition.


REVENUE RECOGNITION

Revenue is  recognized  when  earned.  Our revenue  recognition  policies are in
compliance  with the  Securities  and  Exchange  Commission's  Staff  Accounting
Bulletin ("SAB") No. 104 "Revenue  Recognition".  The application of SAB No. 104
requires  us to apply  our  judgment,  including  whether  our  clients  receive
services over a period of time.

We generally invoice our clients monthly,  for all transactions  which have been
executed  during such month.  Revenues are  recognized on the day of trade-trade
date basis.  Our revenues derive from a certain  predetermined  fixed fee of the
transactions we execute on behalf of our clients. The fee is based on the volume
of financial  instruments traded. We base our fees on oral and written contracts
and confirm the fees in writing upon the execution of each transaction.

                                       13

<PAGE>

We also receive incentives from NYMEX and ICE for the volume of OTC transactions
we submit to their clearing  platforms on behalf of our clients.  The incentives
are  based on a  percentage  of the  total  revenues  received  by the  exchange
attributable  to  our  volume  of  transactions   submitted  to  the  respective
exchanges.  We also apply our  judgment  when making  estimates  monthly of such
incentives  based on the volumes of  transactions  submitted  to the  respective
exchanges and the exchanges' published revenues by type of transaction.

We, pursuant to SAB 104, realize the incentive  revenues  realized or realizable
when all of the following criteria are met:

1)   Persuasive  evidence of an arrangement  exists.  We have a written separate
     agreement  with one of the  exchanges.  The  other  exchange  has  publicly
     published  the  initial  terms of its  incentive  program  in 2003 which it
     modified  in  2005  and is  offered  to all  intermediaries  in the  select
     transactions;

2)   Delivery has occurred or services have been  rendered.  Under  arrangements
     with  both  exchanges,  the  incentives  are  earned  on the day we  submit
     transactions to the respective  exchanges  based on the revenues  generated
     from such  transactions  and are no longer  subject  to  minimum  volume of
     transactions to the respective  exchanges.  We account for all transactions
     submitted to each  exchange on a daily basis.  Accordingly,  we are able to
     determine  when the  incentives  are  earned  based  on the date we  submit
     transactions  to  the  exchanges.  We  have  no  other  obligations  to the
     exchanges to earn the incentives;

3)   "Seller's"  price  to the  buyer is  fixed  or  determinable.  Based on the
     incentive  program terms of each exchange,  their published  prices for the
     type of transactions we submit to them, and our  transactions  records,  we
     are able to determine an estimate for the revenues each  exchange  earns in
     connection with the transactions it submits,  and accordingly,  the amount,
     if any of the incentives we earn in connection with such transactions; and

4)   Collectibility  is reasonably  assured.  Both exchanges have paid us timely
     during  2005  for  incentives  earned  in the  prior  quarter.  We  have no
     knowledge that they do not intend to pay these  incentives,  if earned,  in
     the future. Furthermore, we intend to enforce the payment of any incentives
     receivable under the incentive programs.

Certain risk factors  which may impact our business,  results of operations  and
financial condition

Our business plan relies on market acceptance of our OPEX system,  which has not
been commercially launched, to increase our revenues.

While we are presently engaged  primarily in voice brokerage,  our business plan
calls for OPEX to be a major  contributor  to our success.  We must  continue to
grow our revenues through our existing services and by gaining market acceptance
of our OPEX  system  when it is  commercially  launched.  When  OPEX  system  is
commercially  launched,  we must gain market  acceptance of the OPEX system with
our  existing  and  potential  clients to  achieve  acceptable  revenue  growth.
However, OPEX might not be successful when it is launched.  Our failure to fully
launch OPEX may have a material negative effect on our financial prospects.

Our quarterly  financial  results will continue to fluctuate making it difficult
to forecast our operating results.

Our quarterly  operating  results have  fluctuated in the past and we expect our
revenues and operating  results may vary  significantly  from quarter to quarter
due to a number of factors, many of which are beyond our control,  including the
following: geopolitical events, weather, perceived supply and demand imbalances,
and the number of trading days in each quarter

We have historically lost money and our losses may continue in the future, which
may  cause  us to  curtail  our  current  operations  and  our  development  and
implementation of OPEX.

We have incurred losses through fiscal 2004 and have since become profitable. We
may again  operate at a loss in the future and we cannot assure you that we will
be  successful in  maintaining  positive  cash flow and  profitable  operations.
Accordingly,  our ability to operate our current business and implement OPEX may
be hampered by negative cash flows and liquidity problems in the future, and the
value of our stock  may  decline  as a  result.  For  example,  in the past,  we
suspended the development and implementation of OPEX for a year, in part because
of our negative cash flow.

                                       14

<PAGE>

Our  pricing  model  for  OPEX  services  is  unproven  and  may  be  less  than
anticipated, which may harm our gross margins.

The pricing model of our OPEX services may be lower than expected as a result of
competitive  pricing pressures,  promotional  programs and clients who negotiate
price reductions in exchange for longer term purchase  commitments or otherwise.
Our pricing model depends on the specific  requirements  of the order,  purchase
volumes,  the sales and service  support and other  contractual  agreements.  We
expect to experience  pricing  pressure and anticipate  that the average selling
prices and gross margins for our products may decrease over product life cycles.
We may not be  successful in developing  and  introducing  on a timely basis new
products  with  enhanced  features and services that can be sold at higher gross
margins.

The terms of the employment  agreement with our new Chief Executive  Officer may
erode our profitability  and dilute the price our shareholders  could receive in
the event another company acquires us.

We believe that the employment arrangement with our new Chief Executive Officer,
Kevin  Cassidy,  may decrease our  profitability  and cash flows from  operating
activities if our revenues decrease or if we are unable to increase our revenues
in  an  amount   sufficient  to  cover  the  additional   cash  and  stock-based
compensation we will pay to Kevin Cassidy.  Kevin  Cassidy's fixed  compensation
will  gradually  increase  from  the  $215,000  we paid him as a  consultant  to
$350,000 by 2009. Also,  Kevin Cassidy's  compensation  agreement  provides that
beginning  with the first  month of the  quarter in which the amount  payable to
Kevin Cassidy is fully paid,  he will be paid  additional  cash and  stock-based
compensation  amounting  to 5% and  2%,  respectively,  of our  gross  revenues.
Furthermore,  we will issue  options to Kevin Cassidy equal to 20% of the number
of shares of common stock  issuable  under  warrants  which  become  exercisable
pursuant to any Order Flow Agreements  (Order Flow Agreements are the agreements
under  which we issue  warrants to a firm based on the volume of orders the firm
placed with us). Finally, we will issue to Kevin Cassidy 5,000 options each time
a firm  registers  with and executes its first 10,000 lots on our OPEX platform.
The total number of such options will be limited to 2,500,000.

In the event we are acquired by another  company,  we would have to pay to Kevin
Cassidy  up to  approximately  $650,000,  which  could  reduce  the  amount  our
shareholders   would  have   otherwise   received  as  part  of  this  potential
acquisition.


We may face  difficulties in  transitioning  our clients from voice brokerage to
electronic trading or a combination of both.

By launching OPEX, we intend to retain existing  clients and attract new clients
to our services.  Our experience in marketing and supporting  electronic trading
services is limited. We may need to supplement our existing staff with marketing
and support personnel with more extensive experience in these areas, which would
increase our operating expenses and cost of revenues.  Additionally,  management
will need to expend significant time and resources to ensure a smooth transition
from voice brokerage to electronic trading or a combination of both, which could
distract management from maintaining or expanding our operations.

Existing  clients  may resist the  transition  to  electronic  trading.  New and
existing  clients may be unsatisfied  with the support we provide for electronic
trading  and may prefer  continuing  with voice  brokerage  or  discontinue  our
relationship based on actual or perceived problems they experienced in using our
services.  The  loss  of new or  existing  clients  could  decrease  the  market
acceptance of our  products,  harm our  reputation  and reduce our revenues from
existing clients. This could have a negative effect on our business, operations,
and financial condition.

We may face  increased  credit  risks when  expanding  our client  base and from
volatile fluctuations in prices of natural gas and related derivatives.

One of our  clients  accounted  for  18% of our  revenues  during  2005.  On OTC
transactions, we bill our services to both counterparties.  Accordingly, if this
client would not have entered into a portion or all of the OTC  transactions  in
which they were involved,  our 2005 revenues would have been lower.  To mitigate
our reliance on this client,  we are  attempting  to expand our client base.  In
attempting  to diversify  and expand our client  base,  some of our new clients,
such as hedge funds and  individual  traders,  may have higher credit risks than
certain of our existing clients, which are financial institutions. The financial
positions  of these new  clients  may  impact our  ability  to collect  our fees
generated  from  the  transactions  we  submit  on their  behalf.  Additionally,
volatile  fluctuations  in prices of natural  gas and  related  derivatives  may
adversely impact the financial  position of certain of our clients which may not
have the  resources  to pay us for past  services  or may  reduce  the volume of
transactions  we would handle on their  behalf in the future.  This could have a
negative effect on our business, operations, and financial condition.

                                       15

<PAGE>

We cannot be certain that we will be able to protect our proprietary information
and  intellectual  property,  which  we  rely  on to  maintain  our  competitive
position.

We rely on our proprietary information and intellectual property to maintain our
competitive position. We may not be able to protect a significant portion of our
proprietary  information,  such  as our  client  lists,  since  we do  not  have
confidentiality agreements with some of our employees.  Accordingly,  we may not
be able to effectively prevent disclosure of our proprietary  information and we
may not have an adequate remedy in the event of unauthorized  disclosure of such
information.  We  cannot  assure  you  that  measures  we  take to  protect  our
proprietary  information  and  intellectual  property will be successful or that
third parties will not develop  alternative  solutions that do not infringe upon
our intellectual property.

We also have patent applications pending,  which are intended to protect certain
of our  proprietary  technology  relating to our planned OPEX business.  We have
been cautious in seeking to obtain  patent  protection  for our products,  since
patents often provide only narrow  protection  that may not prevent  competitors
from  developing  products that function in a manner similar to those covered by
our patents. In addition, some of the foreign countries in which we plan to sell
our OPEX  system do not  provide the same level of  protection  to  intellectual
property as the laws of the United States.


Potential  liability for infringement  claims might deter clients from using our
OPEX system.

We could be  subject to  intellectual  property  infringement  claims by others.
Potential  clients  may be  deterred  from  using  our OPEX  system  for fear of
infringement  claims.  If, as a result,  potential clients forego using our OPEX
system,  demand for our services and  applications  could be reduced which would
harm our business.  Claims against us, and any resulting  litigation,  should it
occur in regard to any of our services  and  applications,  could  subject us to
significant   liability  for  damages   including  treble  damages  for  willful
infringement.   In   addition,   even  if  we  prevail,   litigation   could  be
time-consuming  and expensive to defend and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our ability to use the intellectual  property subject to these claims. Claims
that we are infringing the  intellectual  property rights of third parties could
have a  negative  effect on our  business,  revenues,  financial  condition  and
results of operations.

We may rely on strategic relationships to promote our OPEX system and for access
to  licensed  technology;  if we fail to  develop,  maintain  or  enhance  these
relationships,  our ability to serve our clients  and develop new  features  and
functionalities could be harmed.

Due to the evolving nature of our industry, we may need to develop relationships
to adapt to changing  technologies and standards and to work with newly emerging
companies with whom we do not have pre-existing  relationships.  For example, it
may be  important  to our  clients  that  OPEX  integrates  seamlessly  with the
technology used by exchanges.  While we have a  technology-sharing  relationship
with NYMEX,  we do not have one with other  exchanges  to ensure  such  seamless
meshing  of our  respective  technologies  as they  now  exist or as they may be
enhanced  in the  future.  We cannot be certain  that we will be  successful  in
maintaining or developing new relationships, technological or otherwise, or that
such  relationships  will view them as significant to their own business or that
they will continue  their  commitment  to us in the future.  If we are unable to
maintain or enhance these  relationships,  we may have difficulty  strengthening
our technology development and increasing the adoption of our OPEX system.

If we  fail  to  enhance  our  OPEX  system  by  introducing  new  features  and
functionalities  in a timely manner to meet  changing  client  requirements  and
emerging  industry  trends or  standards,  our ability to grow our business will
suffer.

The market for electronic  trading systems is  characterized by rapidly changing
technologies  and short product life cycles.  These market  characteristics  are
heightened by the emerging  nature of the Internet and the  continuing  trend of
companies  from  many  industries  to  offer  Internet-based   applications  and
services. The widespread adoption of the Internet, networking, electronic option
trading, or telecommunications technologies or other technological changes could
require us to incur  substantial  expenditures  to modify or adapt our operating
practices or  infrastructure.  Our future success will depend in large part upon
our ability to:

     o    identify and respond to emerging technological trends in the market;

     o    enhance our products by adding innovative  features that differentiate
          services and applications from those of our competitors;

     o    acquire and license leading technologies;

     o    bring new services and  applications  to market and scale our business
          on a timely basis at competitive prices; and

     o    respond  effectively  to new  technological  changes  or  new  product
          announcements by others.

                                       16

<PAGE>

We will not be competitive unless we introduce new features and  functionalities
to our OPEX system that meet evolving  industry  standards and client needs.  In
the future,  we may not be able to address  effectively  the  compatibility  and
interoperability  issues  that arise as a result of  technological  changes  and
evolving industry standards. The technical innovations required for us to remain
competitive are inherently complex,  require long development  schedules and are
dependent  in some  cases  on sole  source  suppliers.  We will be  required  to
continue to invest in research and  development  in order to attempt to maintain
and enhance our  existing  technologies  and  products,  but we may not have the
funds available to do so. Even if we have sufficient  funds,  these  investments
may not serve the needs of clients or be compatible with changing  technological
requirements or standards. Most development expenses must be incurred before the
technical  feasibility or commercial  viability of new or enhanced  services and
applications  can be ascertained.  Revenue from future services and applications
or  enhancements to services and  applications  may not be sufficient to recover
the associated development costs.

The  technology  underlying  our OPEX system is complex and may contain  unknown
defects that could harm our reputation,  result in product liability or decrease
market acceptance of our services and applications.

The technologies  underlying financial services and applications are complex and
include  software that is internally  developed.  Software  products using these
technologies may contain errors or defects,  particularly  when first introduced
or when new versions or enhancements are released.  We may not discover software
defects that affect our current or new services and applications or enhancements
until after they are sold.  Furthermore,  because our services and  applications
are designed to work in conjunction with various platforms and applications,  we
are susceptible to errors or defects in third-party applications that can result
in a lower quality product for our clients. Because our clients depend on us for
digital media management, any interruptions could:

     o    damage our reputation;

     o    cause our clients to initiate product liability suits against us;

     o    increase our product development resources;

     o    cause us to lose revenues; and

     o    delay market acceptance of our products.


A  significant  portion  of our  revenues  is  from  incentives  from  two  U.S.
exchanges. We may not receive those incentives in the future.

We receive incentives from ICE and NYMEX which accounted collectively for 13% of
our revenues during 2005. The incentives are earned based on a percentage of the
total  revenues  received  by  the  exchange   attributable  to  our  volume  of
transactions  submitted to the respective  exchanges.  The incentives are earned
based on a written  agreement  with ICE  expiring by June 2006 or earlier if our
separate brokerage agreement with ICE is terminated.  The incentives earned from
NYMEX are based on a program offered to all brokers, traders, and energy traders
initially launched in 2003. NYMEX has amended the terms of its initial incentive
program by decreasing  the incentive  rate by 50%.  NYMEX may amend the terms of
the  incentives or cancel this program at any time. ICE also may request that we
amend the terms of our  agreement.  We may agree to some or all of any requested
changes.  Accordingly,  we cannot guarantee that we will continue to receive the
level of such  incentives  in the future,  if at all. If we do not receive these
incentives, our revenues will decrease.

We depend on our  relationship  with  Capital  Energy  Services to maintain  our
futures market operations.

Our income  from floor  brokerage  operations  amounted  to  approximately  $2.0
million during fiscal 2005. We depend on our  relationship  with CES to maintain
or increase  the  profitability  of such  operations.  Edward J.  O'Connor,  our
President and a director, is a 50% shareholder of CES. Kevin P. Cassidy, our new
Chief  Executive  Officer and a director  since  October  2005,  is the Managing
Director of CES. To maintain  our  futures  market  operations,  CES may need to
provide certain  financial  guarantees to NYMEX or other exchanges.  CES may not
have the resources to provide such  financial  guarantees and we may not be able
to assist CES financially. Additionally, CES may be prevented from trading based
on certain government regulations. If CES loses its ability to trade on NYMEX or
other  exchanges,  we cannot maintain our futures market  operations.  If we are
unable to maintain our futures market operations, our revenues will decrease and
it would adversely impact our financial condition.

                                       17

<PAGE>

We rely heavily on the services of our overseas  technical staff and consultants
which may delay or jeopardize the development and enhancement of OPEX

We rely  heavily on the services of our  technical  staff and  consultants.  Our
technical  employees are not presently  employed on a full time basis.  With the
exception of our chief technology  officer,  all our technical staff,  including
our software  engineers  and our software  quality  assurance  team,  is located
overseas.  If we are unable to maintain our relationship  with these individuals
and if we have to replace them with individuals with similar capabilities,  this
could delay or jeopardize the development and the enhancement of OPEX.

We face intense and increasing  competition in the electronic energy derivatives
market.  If we do not compete  effectively  or if we experience  reduced  market
share from increased competition, our business will be harmed.

The  natural  gas  derivatives  market  has  many  competitors  involved  in the
brokering of natural gas options.  Capital  investment for entry into the market
is low.  Accordingly,  a number of small  brokerage firms flourish along side of
larger more  established  brokerage firms such as Cantor  Fitzgerald,  L.P., MAN
Group PLC and ICAP PLC.

There are several other  well-financed  companies who do or may compete with us.
In the OTC  natural gas  derivatives  market,  our  competitors  include  Amerex
Natural Gas Ltd., Choice Energy LP, G.A. Options, MAN Financial, Inc. and Tullet
Natsource,  Inc. In the futures natural gas derivatives  market, our competitors
include  Clarion  Trading,  SCS Trading  Corp.,  and ICAP PLC. When we implement
OPEX, we anticipate  that our potential  competitors  will include  NYMEX,  ICE,
eSpeed and the Chicago Mercantile Exchange.

Substantially  all  of our  competitors  have  more  capital,  longer  operating
histories,  greater brand  recognition,  larger  client bases and  significantly
greater  financial,   technical  and  marketing  resources  than  we  do.  These
competitors may also engage in more extensive development of their technologies,
adopt  more  aggressive   pricing  policies  and  establish  more  comprehensive
marketing and  advertising  campaigns than we can. Our  competitors  may develop
products  and  service  offerings  that  we  do  not  offer  or  that  are  more
sophisticated  or more cost effective than our own. For these and other reasons,
our  competitors'  products and services may achieve  greater  acceptance in the
marketplace  than our own,  limiting our ability to gain market share and client
loyalty and to generate  sufficient  revenues to achieve a  profitable  level of
operations.  Our failure to  adequately  address any of the above  factors could
harm our business and operating results.

Dependence on outside clearinghouses for increased revenue.

We are  dependent  on  outside  clearinghouses  such as  NYMEX  and,  through  a
relationship  with the ICE,  the  London  Clearinghouse  to  provide us with OTC
Clearing  services.  We can give no assurance that these companies will continue
to offer  this  service  to  trades  brokered  by us and  should  those  outside
clearinghouses  cease to offer this service,  it would have a material  negative
effect on us and our prospects.

Reliance on natural gas derivatives.

While our plan is to  leverage  success of energy  options and expand into other
markets  while  maintaining  our status as an "exempt  commercial  market",  the
success of this plan is  subject to market  forces  outside of our  control.  At
present,  substantially  all of our revenues are derived from trading in natural
gas  derivatives.  If there should be a significant  slowdown in the natural gas
derivatives market, it would have a significant negative impact on us.

The continued  operations of our business are dependent on the  performance  and
continued service of our executive  officers and key employees,  and our ability
to attract and retain skilled personnel.

Our performance and future operating results are substantially  dependent on the
continued service and performance of Kevin Cassidy, our Chief Executive Officer,
Edward J. Connor, our President, and Mark Nordlicht, our Chairman. To the extent
that  the  services  of those  persons  become  unavailable,  our  business  and
prospects would be adversely affected. Should we be required to do so, we do not
know whether we would be able to employ equally qualified persons to replace any
of these persons.  Moreover, we do not currently maintain "key man" insurance on
any of our executive officers or other key employees and do not intend to obtain
this type of insurance in the near future. Additionally,  we do not have written
agreements  with most of our staff  and,  other  than  traditional  compensation
packages and stock options we contemplate  granting to our staff, we do not have
other means to ensure the retention of their  services.  If we are successful in
implementing and developing our business, we will require additional managerial,
administrative and support personnel. Competition for highly qualified personnel
is intense,  and we can make no assurances  that we can retain our key employees
or that we will be able to attract or retain qualified  personnel in the future.
To the  extent  we have  fewer  financial  resources  available  to us than  our
competitors  we may not be able to  attract  and retain a  sufficient  number of
qualified personnel.  The loss of the services of any of our management or other
key employees and our inability to attract and retain other necessary  personnel
could have a  material  adverse  effect on our  financial  condition,  operating
results, and cash flows.

                                       18

<PAGE>

Certain  employees'  efforts currently  account for a significant  amount of our
revenues.  Should the services of these individuals,  including and particularly
Kevin Cassidy,  no longer be available to us, and suitable  replacements  not be
hired or retained, we would experience adverse effects of varying degrees.

We could become subject to increased governmental and organizational regulation.

We intend  for our OPEX  platform,  when  implemented,  to qualify as an "exempt
commercial market" under the rules of the CFTC.  Although an ECM may be required
to provide  certain trade volume and pricing  information to the CFTC, an ECM is
not required to register with the CFTC. However, if we were to no longer qualify
for the exemption  from  registration,  either  because of changes in law or the
scope  of our  business,  our  businesses  would  become  subject  to  extensive
regulation  at both the federal and state levels.  In addition,  self-regulatory
organizations,  such as NYMEX  and the  National  Futures  Association,  require
compliance with their extensive rules and regulations. Among other things, these
regulatory authorities impose restrictions on sales methods,  trading practices,
use and  safekeeping  of client  funds and  securities,  record  keeping and the
conduct  of  principals  and  employees.   The  extensive  regulatory  framework
applicable to the  commodities  brokerage  industry,  the purpose of which is to
protect  clients and the  integrity  of the  commodities  markets,  would impose
significant  compliance burdens and attendant costs on us. The regulatory bodies
that  administer  these  rules do not attempt to protect  the  interests  of our
stockholders  as such, but rather the public and markets  generally.  Failure to
comply with any of the laws, rules or regulations of any  independent,  state or
federal regulatory  authority to which we become subject could result in a fine,
injunction,  suspension or expulsion from the industry,  which could  materially
and adversely  impact us.  Furthermore,  amendments to existing state or federal
statutes,  rules and  regulations  or the  adoption of new  statutes,  rules and
regulations  could  require us to alter our methods of  operation at costs which
could be substantial.


Our cash  flows and  capital  resources  may be  insufficient  to make  required
payments on our substantial indebtedness and future indebtedness.

We have a significant amount of debt. At December 31, 2005, we had approximately
$2.7 million of debt,  a  substantial  portion of which is due to our  Chairman,
Mark Nordlicht.

Our substantial debt could have important  consequences to you. For example,  it
could:

     o    make it difficult for us to satisfy our debt obligations;

     o    make us more  vulnerable  to general  adverse  economic  and  industry
          conditions;

     o    limit our ability to obtain additional  financing for working capital,
          capital   expenditures,   acquisitions  and  other  general  corporate
          requirements;

     o    require  us to  dedicate a  substantial  portion of our cash flow from
          operations to payments on our debt,  thereby reducing the availability
          of our cash flow for operations and other purposes;

     o    limit our  flexibility in planning for, or reacting to, changes in our
          business and the industry in which we operate; and

     o    place us at a competitive  disadvantage  compared to competitors  that
          may have proportionately less debt.

If our cash  flows  and  capital  resources  are  insufficient  to fund our debt
service obligations,  we may be forced to reduce or delay capital  expenditures,
sell material assets or operations, obtain additional capital or restructure our
debt.  In the event  that we are  required  to  dispose  of  material  assets or
operations to meet our debt service and other obligations, the value realized on
such assets or operations will depend on market  conditions and the availability
of buyers.  Accordingly,  any such sale may not,  among other  things,  be for a
sufficient dollar amount.

The Penny Stock Rules apply to our common stock. This may make it more difficult
for holders of our common stock to resell their shares.

At the  present  time,  our common  stock is not listed for trading on any stock
exchange.

                                       19

<PAGE>

The Securities  Enforcement and Penny Stock Reform Act of 1990 requires  special
disclosure  relating to the market for penny stocks in connection with trades in
any stock defined as a "penny stock." Commission  regulations generally define a
penny stock to be an equity  security that has a market price of less that $5.00
per  share  and is not  listed  on  Nasdaq  or a  major  stock  exchange.  These
regulations subject all broker-dealer  transactions involving such securities to
the  special  "Penny  Stock  Rules"  set forth in Rule  15g-9 of the  Securities
Exchange  Act of 1934.  It may be  necessary  for the  Selling  Stockholders  to
utilize the services of broker-dealers  who are members of the NASD. The current
market  price of our common  stock is  substantially  less that $5 per share and
such stock can, for the foreseeable  future, be expected to continue to trade in
the  over-the-counter  market at a per share market price of substantially  less
than $5.  Accordingly,  any broker-dealer sales of our shares will be subject to
the Penny Stock Rules.  These Rules affect the ability of broker-dealers to sell
our securities and also may affect the ability of purchasers of our common stock
to sell their shares in the secondary market.

The Penny  Stock  Rules also  impose  special  sales  practice  requirements  on
broker-dealers  who sell  securities  to persons  other  than their  established
clients or  "accredited  investors."  Among other things,  the Penny Stock Rules
require that a broker-dealer make a special suitability determination respecting
the purchaser and receive the purchaser's  written  agreement to the transaction
prior  to  the  sale.  In  addition,  the  Penny  Stock  Rules  require  that  a
broker-dealer deliver, prior to any transaction,  a disclosure schedule prepared
in accordance  with the  requirements  of the  Commission  relating to the penny
stock market. Finally,  monthly statements have to be sent to any holder of such
penny stocks disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Accordingly,  for
so long as the Penny Stock Rules are  applicable to our common stock,  it may be
difficult to trade such stock  because  compliance  with such Rules can delay or
preclude certain trading transactions.  This could have an adverse effect on the
liquidity and price of our common stock.

Management  substantially  controls us and their interests may be different from
yours and may be in conflict with yours.

The  interests  of our  management  could  conflict  with the  interests  of our
stockholders.  Our officers and directors  beneficially own approximately 50% of
our outstanding  common stock.  Accordingly,  if they exercise all their options
and warrants,  they will have the power to approve  corporate  transactions  and
control the  election  of all of our  directors  and other  issues for which the
approval of our  stockholders is required.  This  concentration of ownership may
also  delay,  deter or  prevent  a change  in  control  of us and may make  some
transactions  more  difficult or impossible  to complete  without the support of
these  stockholders.  As a  result,  you may  have  no  effective  voice  in our
management.

Our  majority  stockholders  will be able to take  stockholder  actions  without
giving  prior  notice  to any of you.  You may,  therefore,  be  unable  to take
preemptive measures that you believe are necessary to protect your investment in
the company.

The majority  stockholders are able to take  stockholder  actions in conformance
with Section 228 of the Delaware General  Corporation Law and our Certificate of
Incorporation,  which  permits  them to take any action which is required to, or
may, be taken at an annual or special meeting of the stockholders, without prior
notice and without a vote of our  stockholders.  Instead of a vote,  stockholder
actions can be authorized by the written consents to such actions, signed by the
holders of the number of shares  which  would have been  required to be voted in
favor of such  action at a duly  called  stockholders  meeting.  We would not be
required to give prior notice to all  stockholders  of actions taken pursuant to
the written  consents  of the  majority  stockholders  and our  obligations  are
limited  to giving  notice of such  actions  promptly  after any action has been
taken.

ITEM 7.  FINANCIAL STATEMENTS


Response  to  this  item is  submitted  as a  separate  section  of this  report
immediately following the signature page.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE


None

                                       20

<PAGE>

ITEM 8A.          CONTROLS AND PROCEDURES

Our Chief  Executive  Officer and Chief  Financial  Officer  (collectively,  the
"Certifying   Officers")  are  responsible  for   establishing  and  maintaining
disclosure  controls and procedures  which include  controls and procedures that
are designed to ensure that information  required to be disclosed in the reports
which we file with or submit to the SEC is recorded,  processed,  summarized and
reported within the time periods  specified by the SEC. The Certifying  Officers
have evaluated these controls and procedures and they have concluded (based upon
their  evaluation of these  controls and  procedures as of the end of the period
covered  by this  report)  that  our  disclosure  controls  and  procedures  are
effective to: i) ensure that information  required to be disclosed by us in this
report is accumulated and  communicated  to management,  including our principal
executive officers as appropriate,  to allow timely decisions regarding required
disclosure;  and ii) ensure that  information  required to be  disclosed  in the
reports which we file or submit with the SEC is recorded, processed,  summarized
and reported within the time periods specified by the SEC.

The  Certifying  Officers  have  indicated  that  there  were no  changes in our
internal  controls  which  occurred  during our last  fiscal  quarter  that have
materially affected, or are reasonably likely to materially affect, our internal
control over  financial  reporting,  and there were no  corrective  actions with
regard to significant deficiencies and material weaknesses.

Our  management,  including the  Certifying  Officers,  does not expect that our
disclosure  controls or our  internal  controls  will  prevent all error and all
fraud. A control system, no matter how well conceived and operated,  can provide
only  reasonable,  not absolute,  assurance  that the  objectives of the control
system are met. In  addition,  the design of a control  system must  reflect the
fact that there are resource  constraints,  and the benefits of controls must be
considered relative to their costs.  Because of the inherent  limitations in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control  issues and instances of fraud,  if any,  within a company have been
detected.  These  inherent  limitations  include the realities that judgments in
decision-making  can be faulty,  and that breakdowns can occur because of simple
error or mistake.  Additionally,  controls can be circumvented by the individual
acts of some  persons,  by  collusion  of two or more  people  or by  management
override of the control.  The design of any systems of controls is also based in
part upon certain  assumptions about the likelihood of future events,  and there
can be no assurance  that any design will succeed in achieving  its stated goals
under all potential future conditions.  Because of these inherent limitations in
a cost-effective  control system,  misstatements due to error or fraud may occur
and not be detected.

ITEM 8B.          OTHER INFORMATION.


None.













                                       21

<PAGE>

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Directors  serve until the next  annual  meeting of the  stockholders  and until
their  successors are elected or appointed and  qualified,  or until their prior
resignation or removal. Officers serve for such terms as determined by our board
of  directors.  Each  officer  holds office  until such  officer's  successor is
elected or appointed and qualified or until such officer's  earlier  resignation
or removal. Our board currently does not have any committees.

The following  table sets forth certain  information,  as of March 7, 2006, with
respect to our directors and executive officers.
<TABLE>
<CAPTION>

                                                                                   Date of Election
                                                                                    or Appointment
Name                       Positions Held                                Age          as Director
----                       -------------                             -----------   ---------------
<S>                                                                       <C>                <C>
Mark Nordlicht             Chairman                                       36        February 2000
Kevin Cassidy              Chief Executive Officer and Vice Chairman      46         October 2005
Edward J. O'Connor         President, Treasurer, and Director             52          March 2001
Albert Helmig              Director                                       53        September 2004
Yechiel Abraham Zucker     Executive Vice President and Secretary         31             n.a.
Marc-Andre Boisseau        Chief Financial Officer                        41             n.a.
</TABLE>

The  following  is a brief  account of the  business  experience  of each of our
directors and executive officers during the past five years or more.

Mark Nordlicht:  Mr. Nordlicht is a founder of the Company and has served as our
Chairman of the Board of Directors  since 2000. Mr.  Nordlicht has also been the
Managing  Partner of the General  Partner of Platinum  Partners Value  Arbitrage
Fund, a market-neutral hedge fund, since January 2003. Mr. Nordlicht also served
as Managing  Partner of West End Capital from 1998 through  2002. In his various
positions,  Mr.  Nordlicht is also the Chairman of the Board of Platinum  Energy
Resources,  Inc., a publicly-traded company, since April 2005. Mr. Nordlicht has
been  responsible  for the  oversight of all of our  operations.  Mr.  Nordlicht
earned a BA degree from Yeshiva University in 1989.

Kevin  Cassidy:  Mr.  Cassidy has served as our Chief  Executive  Officer  since
October  2005 and from  March  2001 to  March  2004.  From  April  2004  through
September 2005, Mr. Cassidy provided  consulting  services to us. Since December
1996,  Mr. Cassidy has served as Managing  Director of Capital Energy  Services,
LLC ( formerly Orion Energy Services,  LLC), an energy options brokerage firm on
the NYMEX. Mr. Cassidy's primary  responsibilities include business development,
sales and  marketing,  and oversight of our brokerage  operations.  Mr.  Cassidy
attended Catholic University

Edward J. O'Connor:  Mr.  O'Connor has served as our President and as a director
since  March 2001 and as our CEO  between  March 2004 and  October  2005.  Since
December  1996, Mr.  O'Connor has served as Managing  Director of Capital Energy
Services, LLC (formerly Orion Energy Services, LLC), an energy options brokerage
business  on  the  NYMEX.  Mr.  O'Connor's  primary   responsibilities   include
negotiating  and entering into contracts for our business and accounting for our
funds.  Mr.  O'Connor  graduated  from  Georgetown  University in 1977 with a BS
degree in Business Administration.

Albert  Helmig.  Mr. Helmig was elected as a director in September  2004.  Since
2000,  Mr.  Helmig has been a principal of Gray House  Consulting,  a consulting
firm to the  energy  industry.  From 1991  through  2000,  Mr.  Helmig  held the
following positions with the New York Mercantile  Exchange (NYMEX):  Chairman or
Vice Chairman of over 20  committees,  1991-2000;  Member of Board of Directors,
1991-2000;  Member  of  Executive  Committee,   1993-2000;  and  Vice  Chairman,
1998-2000.  Mr.  Helmig is also on the Board of Directors  of the  International
Precious Metals  Institute,  a member of the  International  Advisory  Committee
Board, Energy Intelligence Group, a member of the National Committee on US/China
Relations, and a member of the National Futures Association.  Mr. Helmig is also
a Director of Platinum Energy Resources,  Inc., a publicly-traded company, since
April  2005.  Mr.  Helmig  earned a B.S.  degree in Finance and  Economics  from
Philadelphia University.

Yechiel  Abraham  Zucker:  Mr. Zucker has served as our Executive Vice President
and  Secretary  since  April  2004.  Previously,  he served as our  Senior  Vice
President from 2000 through March 2004. Mr.  Zucker's  responsibilities  include
operations  and product  development.  Mr. Zucker also served as Executive  Vice
President of iDerive, Inc. from February 2000 to January 2001. Prior to that, he
served as an analyst at West End Capital,  a private  investment fund, from 1999
through January 2000. Mr. Zucker graduated from Yeshiva  University in 1997 with
a B.A. degree.

Marc-Andre  Boisseau.  Mr.  Boisseau has served as our Chief  Financial  Officer
since  December  2004.  Since January 2002, he has served as an advisor to small
and  medium  publicly  traded  and  private  companies  on  financial,  tax  and
accounting  matters.  Between  January  2000 and  December  2001,  he  served as
Vice-President  Finance of DataCore  Software,  Inc., a privately  held software
developer.  Prior to that, he served as Chief Accounting  Officer (from May 1997
to  December  1999)  and Vice  President  Controller  (from  January  1, 1998 to
December 1999) of Citrix Systems, Inc. a publicly traded software developer. Mr.
Boisseau is a certified  public  accountant.  Mr.  Boisseau  graduated with a BA
degree in Business Administration in 1987 from the University of Montreal.

                                       22

<PAGE>

ITEM 10.     EXECUTIVE COMPENSATION

                             EXECUTIVE COMPENSATION

The following  table sets forth  information  concerning the total  compensation
paid or accrued by us during the three  fiscal  years ended  December  31, 2005,
2004, 2003 to (i) all individuals that served as our chief executive  officer or
acted in a similar  capacity  for us at any time  during the  fiscal  year ended
December 31, 2005 and (ii) all individuals that served as executive  officers of
ours at any time during the fiscal year ended  December  31, 2005 that  received
annual compensation during the fiscal year ended December 31, 2005, in excess of
$100,000.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                       Annual Compensation                     Long-Term Compensation
                                                                            Awards                     Payouts
                                                         Other Annual  Restricted  Securities          All Other
                               Fiscal   Salary    Bonus  Compensation   Stock      Underlying LTIP    Compensation
Name and Principal Position     Year     ($)      ($)      ($)          Awards ($) Options (#)Payouts     ($)
---------------------------    ------   --------  -----  ------------  ----------- ---------- ------- ------------
<S>                             <C>     <C>        <C>      <C>         <C>          <C>       <C>        <C>
Edward J. O'Connor,             2005    $200,000   $-0-     $-0-        $-0-        -0-        $-0-       $-0-
President, Director (1)         2004    $150,000   $-0-     $-0-        $-0-        -0-        $-0-       $-0-
                                2003    $442,308   $-0-     $-0-        $-0-        -0-        $-0-       $-0-

Kevin Cassidy, CEO (1)          2005    $ 58,333   $-0-     $-0-        $-0-        -0-        $-0-       $-0-
                                2004    $ -0-      $-0-     $-0-        $-0-        -0-        $-0-       $-0-
                                2003    $442,308   $-0-     $-0-        $-0-        -0-        $-0-       $-0-

Yechiel Abraham Zucker          2005    $120,000    $-0-    $-0-        $-0-        -0-        $-0-       $-0-
                                2004    $109,103    $-0-    $-0-        $-0-        175,000    $-0-       $-0-
                                2003    $100,000    $-0-    $-0-        $-0-        -0-        $-0-       $-0-
</TABLE>

(1)  Mr. Cassidy served as our Chief Executive  Officer from March 2001 to March
     2004 and from October  2005 to present.  Mr.  O'Connor  served as our Chief
     Executive Officer from April 2004 to October 2005.

BOARD OF DIRECTORS

Our directors do not receive cash  compensation  for their services as directors
but are reimbursed for their  reasonable  expenses for attending board and board
committee  meetings.  Mr.  Helmig,  however,  was granted  options to purchase a
maximum of 250,000 shares of our common stock in connection with his election to
our board of directors in 2004. These options vest as follows:  20% in September
2004,  and 40% every year  thereafter as long as Mr.  Helmig  remains one of our
director.

STOCK OPTION GRANTS

There  were no  individual  grants of stock  options to any  Executive  Officers
during the fiscal  year ended  December  31,  2005,  and  791,000  options  were
outstanding at December 31, 2005.

During 2005, the board of directors granted 150,000 stock options under our 2004
Stock Option Plan. All of the options issued are exercisable at $.30 per share.

STOCK OPTIONS EXERCISED IN 2005 AND RELATED PERIOD-ENDED STOCK OPTION VALUES

The following table sets forth selected option exercise information for the year
ended  December 31, 2005 and the number of value of stock options as of December
31, 2005 related to our Chief Executive  Officer and each of our two most highly
compensated executive officers.

<TABLE>
<CAPTION>

                                                        Number of Unexercised             Value of Unexercised
                              Shares                    Options at Period-End           Options at Period-End (a)
                            Acquired on    Value      ---------------------------     -----------------------------
              Name           Exercise     Realized    Exercisable   Unexercisable     Exercisable     Unexercisable
              ----          -----------   --------    ---------------------------     -----------------------------
<S>                            <C>          <C>               <C>            <C>            <C>             <C>
Kevin Cassidy                   -            -                 -              -              -               -

Edward O'Connor                 -            -                 -              -              -               -

Yechiel Abraham Zucker          -            -           116,667         59,333         87,500          43,750
</TABLE>

(a) Value of unexercised "in the money" options is determined by multiplying the
number of shares subject to such options by the difference  between the exercise
price per share and $0.95,  the  average of the bid and asked price per share of
the Common Stock on The OTC Bulletin Board on December 30, 2005.

                                       23

<PAGE>

2004 STOCK OPTION PLAN

We adopted our 2004 Stock Option Plan in November  2004.  The plan  provides for
the grant of options  intended  to  qualify as  "incentive  stock  options"  and
options that are not intended to so qualify or "nonstatutory stock options." The
total number of shares of common stock  reserved for issuance  under the plan is
7,500,000,  subject to adjustment in the event of a stock split, stock dividend,
recapitalization or similar capital change.

The plan is presently administered by our board of directors,  which selects the
eligible  persons to whom  options  shall be granted,  determines  the number of
common  shares  subject to each  option,  the  exercise  price  therefor and the
periods during which options are  exercisable,  interprets the provisions of the
plan and,  subject  to  certain  limitations,  may amend the plan.  Each  option
granted  under the plan is evidenced by a written  agreement  between us and the
optionee.

Options may be granted to our employees  (including  officers) and directors and
certain of our consultants and advisors.

The exercise price for incentive stock options granted under the plan may not be
less than the fair  market  value of the common  stock on the date the option is
granted,  except  for  options  granted to 10%  stockholders  which must have an
exercise  price of not less than  110% of the fair  market  value of the  common
stock on the date the option is granted.  The  exercise  price for  nonstatutory
stock options is determined by the board of directors.  Incentive  stock options
granted  under  the  plan  have a  maximum  term of ten  years,  except  for 10%
stockholders  who are  subject  to a  maximum  term of five  years.  The term of
nonstatutory  stock options is  determined  by the board of  directors.  Options
granted  under  the plan are not  transferable,  except  by will and the laws of
descent and distribution.

Employment   Contracts,   Termination  of  Employment,   and   Change-in-Control
Arrangements

On March 1, 2001, we entered into an employment  agreement with Edward O'Connor,
our President and CEO and a member of the
board of directors. The agreement was amended on April 1, 2004.

The terms of the agreement, as amended, provide that we will employ Mr. O'Connor
for a term of five  years  with the duties of Chief  Executive  Officer  with an
annual salary of $200,000 per year. If we terminate  Mr.  O'Connor's  employment
without "cause" or if Mr. O'Connor  terminates his employment with "good reason"
(as both  terms are  defined in Mr.  O'Connor's  employment  agreement),  we are
required  to pay him a lump sum equal to nine  months'  base  salary.  Following
termination of employment for any reason,  other than  expiration of the term of
employment,  Mr. O'Connor has agreed not to engage in an electronic OTC business
in  competition  with us for a 90 day  period,  provided  we pay him  bi-monthly
installments  of $8,333.33  and provide full health  benefits  during the 90 day
period. We hen Kevin Cassidy became our Chief Executive Officer in October 2005,
as discussed below, we continued to employ Mr.O'Connor as our President with the
same compensation package as when he was our Chief Executive Officer.

Effective  October 30, 2005,  Optionable,  Inc. (the  "Company")  named Kevin P.
Cassidy its Chief Executive Officer, elected him a director.  Simultaneously, we
entered into an employment  agreement  with him (the  "Agreement").  The initial
term of the  Agreement  is for fifty  months,  subject  to  renewal  or  earlier
termination.


Mr. Cassidy's  salary ("Fixed  Compensation")  will be as follows:  $20,833 upon
entering into the Agreement, $46,875 from October 30, 2005 to December 31, 2005,
$275,000  from January 1 to December 31, 2006,  $300,000 from January 1, 2007 to
December 31, 2007,  $325,000 from January 1 to December 31, 2008,  $350,000 from
January 1, 2009 to December 31, 2009.


In addition,  beginning  with the first month of the quarter in which the amount
payable to Mr.  Cassidy,  pursuant to the Addendum to Master Service  Agreement,
dated  April  12,  2005,  is  fully  paid,  Mr.  Cassidy  will be paid  (i) cash
compensation  amounting to five  percent (5%) of Gross  Revenues of the Company,
and (ii) stock compensation  amounting to two percent (2%) of the Gross Revenues
of the Company.  Gross Revenue is defined as the total gross revenue  related to
any and all aspects of the brokerage business, including incentive received from
exchanges,  based on generally accepted accounting principles. The shares of our
common stock will be granted at fair value at the date of grant.


The Company will issue options to Mr.  Cassidy equal to twenty  percent (20%) of
the  number of shares of common  stock  issuable  under  warrants  which  become
exercisable pursuant to any Order Flow Agreements (Order Flow Agreements are the
agreements  for the  Company to issue  warrants to a firm based on the volume of
orders the firm placed with the  Company).  Those  options  will be fully vested
Non-Statutory  Stock Options  granted under the Company's 2004 Stock Option Plan
at fair value at the date of grant.  Also, the Company will issue to Mr. Cassidy
5,000 options each time a firm registers with and executes its first 10,000 lots
on the Company's OPEX platform. The total number of such options will be limited
to 2,500,000.  Such options will be fully vested  Non-Statutory  Options granted
under the plan at fair value at the date of grant.


Mr.  Cassidy  will be  entitled  to paid  annual  vacation,  personal  leave and
holidays in accordance with the policies of the Company, and will be entitled to
participate in health, welfare, and pension plans and any other employee benefit
plan of the Company.  In addition,  the Company will advance to or reimburse Mr.
Cassidy for the annual or monthly  premium of his life  insurance  policy of one
million  dollars  ($1,000,000)  where the  beneficiary is Mr.  Cassidy's  estate
(immediate family).

                                       24

<PAGE>

Upon the sale or merger or other business combination of the Company and another
company or companies,  Mr. Cassidy will be entitled to a lump sum payment of 50%
of the unpaid Fixed  Compensation  should he desire not to be employed  with the
new or successor entity.

We have a  consulting  agreement  with Mr.  Boisseau,  who  serves  as our Chief
Financial  Officer.  The oral agreement  provides that we compensate him at $145
per hour. This agreement may be terminated at will by both parties.

We have an employment  agreement  with Mr. Zucker.  The oral agreement  provides
that we compensate him at $120,000 per year. This agreement may be terminated at
will by both parties.

Committees

We do not have an audit committee or a compensation committee. We intend to form
such committees once we have selected  directors who shall meet the independence
requirements and audit committee  financial expert requirements under applicable
Securities and Exchange Commission rules and regulations.  We are developing the
criteria we will use in identifying,  attracting,  and retaining such directors.
We are unable to determine  when and if we will  complete the  recruiting of new
directors during fiscal year 2006.

Code of Business Conduct and Ethics

The Company has  adopted a Code of Business  Conduct and Ethics that  applies to
its directors,  officers and employees.  A copy of the Code of Business  Conduct
and Ethics is attached as an exhibit to our Annual Report on Form 10-KSB. If the
Company  grants any waiver  from a  provision  of this Code,  the  Company  will
disclose the nature of such waiver in a Current Report on Form 8-K.

CERTAIN LEGAL PROCEEDINGS


To the knowledge of the Company,  there are no material proceedings to which any
director,  executive officer or beneficial owner of more than 5% of any class of
voting securities of the Company.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE


The Company 's directors,  executive officers,  and 10% or greater  stockholders
were not subject to the beneficial  ownership reporting  requirements of Section
16(a) during the year ended December 31, 2005.



ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding the beneficial ownership of
our common stock as of March 7, 2006. The information in this table provides the
ownership information for:

     o    each person known by us to be the beneficial  owner of more than 5% of
          our common stock;
     o    each of our directors;
     o    each of our executive officers; and
     o    our executive officers, directors and director nominees as a group.

The  percentages  in the table have been  calculated on the basis of treating as
outstanding for a particular  person, all shares of our common stock outstanding
on that date and all shares of our common  stock  issuable to that holder in the
event of  exercise  of  outstanding  options,  warrants,  rights  or  conversion
privileges  owned by that  person at that date which are  exercisable  within 60
days of that date. Except as otherwise indicated,  the persons listed below have
sole voting and investment  power with respect to all shares of our common stock
owned by them, except to the extent that power may be shared with a spouse.

                                       25

<PAGE>
<TABLE>
<CAPTION>

                                     Name and Address            Number of Shares        Percentage
     Title of Class                Of Beneficial Owner          Beneficially Owned     Outstanding(1)
     --------------                -------------------          ------------------     --------------
<S>                                                                 <C>        <C>            <C>
Common Stock, par value       Mark Nordlicht                        16,440,150 (1)            31.4%
$.0001 per share              555 Pleasantville Road
                              South Building, Suite 110
                              Briarcliff Manor, NY 10510

Common Stock, par value       Edward J. O'Connor                     5,708,016 (2)            10.9%
$.0001 per share              555 Pleasantville Road
                              South Building, Suite 110
                              Briarcliff Manor, NY 10510

                              Yechiel Abraham Zucker                 1,958,167 (3)             3.7%
Common Stock, par value       555 Pleasantville Road
$.0001 per share              South Building, Suite 110
                              Briarcliff Manor, NY 10510

Common Stock, par value       Albert Helmig                            150,000 (4)             0.3%
$.0001 per share              15 Deer Run Circle
                              Chatham, NJ 07928

Common Stock, par value       Kevin P. Cassidy                       2,468,665 (5)             4.7%
$.0001 per share              555 Pleasantville Rd., Ste 110
                              Briarcliff Manor, NY 10510

Common Stock, par value       Steel Styles Sales, Inc.               4,451,350                 8.5%
$.0001 per share              401 South Water Street
                              Newburgh, NY

Common Stock, par value       East Holdings LLC                      4,318,000                 8.2%
$.0001 per share              4 Gel Court
                              Monsey, NY 10952

Common Stock, par value       Marc-Andre Boisseau                          -0-                 0.0%
$.0001 per share              555 Pleasantville Rd., Ste. 110
                              Briarcliff Manor, NY 10510

All directors and officers                                          26,724,998                51.0%
as a group                                                          (1)(2)(3)(4)(5)
(5 persons)
</TABLE>



(1)  Excludes 2,190,750 shares owned by Jules Nordlicht, Mr. Nordlicht's father,
     with respect to which Mr. Nordlicht disclaims beneficial ownership.

(2)  Includes  3,904,158  shares  owned by  Ridgecrest  Capital  Corp.,  Inc., a
     corporation  wholly  owned by Mr.  O'Connor,  901,929  shares  owned by Mr.
     O'Connor's  daughter  Kathleen  O'Connor  and 901,929  shares  owned by Mr.
     O'Connor's daughter Erin O'Connor.

(3)  Includes  95,250  shares owned by AYD Equity  Group,  Ltd.,  a  corporation
     wholly owned by Mr. Zucker and 116,667 options which are exercisable within
     60 days.

(4)  Includes 150,000 shares issuable  pursuant to the exercise of stock options
     exercisable within 60 days.

(5)  Includes    1,905,000    shares   owned   by   Pierpont    Capital   Corp.,
     Inc.("Pierpont"),  as well as 450,000  warrants,  exercisable at a price of
     $0.20 per share, issued to Pierpont,  of which Mr. Cassidy is a stockholder
     and 113,665 shares owned by Kerry Cassidy, who is Mr. Cassidy's daughter.

                                       26

<PAGE>

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 3, 2003,  we entered into a Prepaid  Commission  Agreement  with Mr.
Nordlicht (the "Prepaid  Commission  Agreement") whereby Mr. Nordlicht agreed to
pay us non-refundable  prepaid commission  payments of not less than $1,200,000.
In consideration  thereof, we agreed to extend a 20% discount on all commissions
charged  by us to Mr.  Nordlicht.  The  agreement  terminates  when the  prepaid
commission  balance is brought  to $0. We are no longer  obligated  to grant the
discount  upon the first to occur of 24 months  passing  since the last  prepaid
commission is received by us or there is a change in control of the Company. The
original intent of the Prepaid Commission  Agreement was to grant the additional
20% commission  discounts to Mark Nordlicht for services  performed  using OPEX.
OPEX was not launched in the  timeframe  originally  planned.  Accordingly,  the
Prepaid Commission Agreement has never materialized. In the interest of pursuing
a fruitful  relationship with Mark Nordlicht,  we agreed to consolidate  amounts
due under the  Prepaid  Commission  Agreement  with  other  amounts  due to Mark
Nordlicht.  Amounts  paid to us under  the  Prepaid  Commission  Agreement  were
consolidated into the Loan Agreement dated March 22, 2004, described below.

On June 5, 2003,  we entered into a Revolving  Credit  Facility  Agreement  (the
"Agreement") with Platinum Value Arbitrage Fund LP ("Platinum") whereby Platinum
agreed to make loans to us, on a revolving  basis,  in the  aggregate  principal
amount of up to  $500,000.  $75,000  of the loan  amount was  provided  to us in
advance of the Agreement.  Mr. Nordlicht,  our chairman, is the Managing Partner
of Platinum.  In connection with that Agreement,  we issued a $500,000 Revolving
Promissory Note to Platinum dated June 5, 2003. The promissory  note,  which was
unsecured,  bore  interest  at the  rate of 20% per  year  and  was  payable  by
September  30, 2004.  The  Agreement  was  confirmed  on March 8, 2004,  and all
amounts owed thereunder ($570,000) were paid in full on September 9, 2004.

On June 9, 2003 we entered into a Prepaid  Commission  Agreement  with  Platinum
whereby Platinum agreed to pay us  non-refundable  prepaid  commission  payments
totaling  $500,000 no later than  December 31, 2003.  In  consideration  of that
Agreement,  we agreed to extend a 20% discount on all commissions  charged by us
to Platinum.  The agreement  terminates when the prepaid  commission  balance is
brought to $0. We are no longer  obligated to grant the discount  upon the first
to occur of 24 months  passing since the last prepaid  commission is received by
broker  or there is a change in  control  of the  Company.  Mr.  Nordlicht,  our
chairman is the Managing  Partner of Platinum.  This  agreement was cancelled on
March 8, 2004.

On February  13,  2004,  we entered into a Loan  Agreement  with Mr.  Nordlicht,
whereby Mr. Nordlicht loaned us $250,000 for the purpose of funding a settlement
agreement with Random Walk  Computing,  Inc.. In connection with that Agreement,
we issued a $250,000 promissory note to Mr. Nordlicht,  dated February 13, 2004.
The promissory note we issued to Mr.  Nordlicht in connection with this loan was
unsecured  and did not bear  interest.  The loan was repayable on the earlier of
February  13,  2014 or the 15th day after we  received a cash  investment  of at
least $250,000. On October 27, 2004, this loan was repaid out of the proceeds of
a private placement of our securities which closed in October 2004.

On March 8, 2004, we entered into a Loan  Agreement with Mr.  Nordlicht  whereby
Mr. Nordlicht loaned us $50,000 for the purpose of retaining securities counsel.
In connection  with that Agreement,  we issued a $50,000  promissory note to Mr.
Nordlicht,  dated March 8, 2004.  This promissory note was unsecured and did not
bear  interest.  The loan was  repayable  on the earlier of March 9, 2014 or the
15th day after we received a cash investment of at least $300,000. This loan was
repaid out of the proceeds of the private  placement of our securities closed in
October 2004.

On March 22, 2004, we entered into a Loan Agreement with Mark Nordlicht pursuant
to which we  consolidated  (a)  $3,722,561.48  of principal and  $519,191.70  in
accrued and unpaid  interest  of loans  previously  made to us by Mr.  Nordlicht
pursuant to the Credit Facility entered into on March 1, 2001 and (b) $1,380,000
that Mr.  Nordlicht  previously  paid to us pursuant  to the Prepaid  Commission
Agreement,  into a single loan of  $5,621,753.18.  In  connection  with the Loan
Agreement,  we issued a $5,621,753.18  promissory note to Mr.  Nordlicht,  dated
March 22,  2004.  This  promissory  note,  which is  unsecured,  will be due and
payable on the first to occur of: (i) March 22, 2014,  at which time we will pay
Mr.  Nordlicht  $5,621,753.18  or (ii) if through our first financing or sale of
our stock in a private placement excluding our private placement which closed in
the fourth quarter of 2004, we raise at least $1,000,000 (the "Capital  Raise");
in equity or debt;  then within 30 days after the closing of the Capital  Raise,
we will pay off the  principal of the note in an amount equal to at least 39.33%
of the  Capital  Raise,  provided  however,  that such  amount  will not  exceed
$2,810,877,  and any  remaining  unpaid  principal  balance will begin to accrue
interest at the rate of 12% annually;  and the outstanding  principal amount and
accrued interest will be due and payable on March 22, 2014.

On April 15, 2004, we entered into a revolving  Credit  Facility  Agreement (the
"Credit Facility") with Mr. Nordlicht, pursuant to which Mr. Nordlicht agreed to
lend up to $100,000 to us from time to time as required.  In connection with the
Credit Facility we issued a $50,000  promissory  note,  without  interest to Mr.
Nordlicht,  dated April 15,  2004.  The note,  which was  unsecured,  was due on
August 1, 2004, which was  subsequently  extended to December 31, 2004. The note
was repaid in December 2004.

                                       28

<PAGE>

We are  parties to a Master  Services  Agreement  with CES  pursuant to which we
provide brokerage services on the floor of the New York Mercantile Exchange (see
"Description of Business - Business  Alliances" for more information  about this
agreement).  Edward  J.  O'Connor,  our  president  and  a  director,  is a  50%
stockholder of CES. Kevin P. Cassidy our Chief Executive Officer until March 31,
2004, is the Managing Director of CES. Pursuant to this arrangement, we will pay
to CES a minimum  annual fixed fee of $50,000 and assume all  expenses  directly
incurred by CES's associated floor brokerage services. Additionally, we will pay
to CES $1,525,000 on April 1, 2014.  However,  upon a Capital Raise, we will pay
up to 10.67% of the amount raised during the Capital Raise,  up to $762,500,  to
CES, with the remaining  principal and accrued  interest of 12% from the date of
the Capital Raise payable on April 1, 2014.

During  April  2005,  CES  assigned  its rights to the  Company's  liability  of
$1,525,000  equally to Edward  O'Connor  and Kevin  Cassidy,  co-owners  of CES.
Subsequently,  during April 2005, the Company entered into  modifications of the
terms of the amounts due from it to Mark  Nordlicht,  Edward  O'Connor and Kevin
Cassidy.  The modified terms provide that, among other things, in the event of a
Capital Raise, the interest rate accrued after such event is reduced from 12% to
4.68%.  Additionally,  the Company may make  principal  repayments  towards such
liabilities  amounting to  approximately  25% of its  quarterly  cash flows from
operating activities less capital expenditures.

During April 2005,  we modified the terms of agreement  under which we initially
owed  $5,762,753,  $765,000 and $765,000 to Mark Nordlicht,  our Chairman of the
Board,  Kevin Cassidy,  our Chief Executive  Officer,  and Edward O'Connor,  our
President, respectively. The modified terms provide that, among other things, in
the event of a Capital Raise-defined as the Company raising more than $1,000,000
additional equity or debt financing,  the 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 Chairman of the Board,
the due to its Chief Executive  Officer,  and the due to related party amounting
to  approximately  25% of its cash flows from  operating cash flows less capital
expenditures.

During 2005, in connection with the modified  terms,  the Company made principal
repayments of $177,243 on the due to Mark Nordlicht, of which $69,638 was offset
against an accounts  receivable  of one of the Company's  clients,  which is not
affiliated  with  Mr.  Nordlicht.   Additionally,  the  Company  made  principal
repayment of $203,803 and $53,803 on the due to Kevin  Cassidy and due to Edward
O'Connor, respectively.

During  January 2006,  in connection  with the  aforementioned  agreements,  The
Company  paid  $600,000,  which is in excess of the 25% of  quarterly  cash flow
called  for by the  Agreements.  The  amounts  repaid  to each of the  executive
officers were as follows: Mr. Nordlicht,  $200,000; Mr. O'Connor,  $100,000; and
Mr. Cassidy, $300,000.

We are  parties to a Master  Services  Agreement  with CES  pursuant to which we
provide  brokerage  services  on the floor of the  NYMEX  (see  "Description  of
Business -  Business  Alliances"  for more  information  about this  agreement).
Edward  O'Connor  and Kevin  Cassidy  are  co-owners  of CES.  Pursuant  to this
arrangement,  our share of revenues and expenses of the floor brokerage services
amounted to approximately $2.0 million and $860,000, respectively,  during 2005,
and $1.0 million and $467,000, respectively, during 2004.. We have received $1.0
million and $250,000 from CES in connection with such floor  brokerage  services
during 2005 and 2004, and CES owes us approximately  $350,000 as of December 31,
2005.

The Company has recognized revenues from brokerage  commissions of approximately
$75,000,  $9,000 and  $21,000  during  2005 and $0,  $36,000  and  $29,000  from
Northern Lights Energy LLC,  Platinum  Partners,  L.P. and Fenmore Holdings LLC,
respectively, entities in which Mark Nordlicht is also the managing partner. The
aggregate amount owed to us from such entities amounted to approximately $41,000
as of December 31, 2005.

Pursuant  to  an  agreement   providing   for  the   reimbursement   of  certain
administrative  expenses for services provided to a coffee bean roaster,  Sleepy
Hollow Coffee Roasters,  Inc.  ("Sleepy  Hollow"),  a company owned by Edward J.
O'Connor and by Kevin P. Cassidy,  we charged an  administrative  fee of $17,000
and $5,700 to Sleepy Hollow during 2005 and 2004, respectively.  We provide such
services to Sleepy  Hollow to ensure that Edward  O'Connor and Kevin Cassidy can
focus as much time and efforts as possible on our operations.

                                       29

On April 1, 2004, we entered into a Consulting  Agreement  with Kevin P. Cassidy
whereby  Mr.  Cassidy  was  engaged  by us for a period of five  years as an OTC
broker, marketing manager, and management consultant for $215,000 per year total
compensation.  We also  reimburse  Mr.  Cassidy for his health  insurance  and a
$1,000,000  life insurance  policy during the term of the Consulting  Agreement.
Mr.  Cassidy is also a Managing  Director of CES. This  agreement was terminated
upon retaining Mr. Cassidy's  services as our Chief Executive Officer in October
2005.Furthermore,  we issued warrants to purchase 1,200,000 shares of our common
stock to Pierpont  Capital Corp., an entity owned by Mr.  Cassidy.  The warrants
are  exercisable  at a price of $0.20  per share and  expire in June  2007.  The
warrants are  exercisable in six traunches of up to 200,000  warrants if certain
trading milestones are met during three six-month periods following the issuance
of such  warrants,  and  were  intended  to  induce  Mr.  Cassidy  to  introduce
additional  customers to us. We did not receive any cash  consideration  for the
issuance of these warrants.

During April 2004,  Edward  O'Connor and Kevin P.  Cassidy  forfeited  aggregate
compensation of $375,000.

                                       30

<PAGE>

ITEM 13. EXHIBITS

     The  following  exhibits  are  filed as part  of,  or are  incorporated  by
reference into, this report:

Exhibit No.                                Description
-----------                                -----------

3(i)(a)        Certificate  of  Incorporation  of  Optionable,  Inc.,  dated
               February 4, 2000 (incorporated by reference to Exhibit 3(i)(a) to
               the  Registrant's  Registration  Statement  on Form  SB-2,  filed
               December 22, 2004, file no. 333-121543 (the "SB-2").

3(i)(b)        Certificate of Amendment to the  Certificate of  Incorporation
               of  Optionable,  Inc.,  dated  March 30,  2000  (incorporated  by
               reference to Exhibit 3(i)(b) to the SB-2).

3(i)(c)        Certificate of Amendment to the  Certificate of  Incorporation
               of  Optionable,   Inc.,  dated  May  31,  2000  (incorporated  by
               reference to Exhibit 3(i)(c) to the SB-2).

3(i)(d)        Certificate of Amendment to the  Certificate of  Incorporation
               of  Optionable,  Inc.,  dated  July  21,  2000  (incorporated  by
               reference to Exhibit 3(i)(d) to the SB-2).

3(i)(e)        Corrected  Certificate  of Amendment  to the  Certificate  of
               Incorporation  of  Optionable,   Inc.,  dated  January  31,  2003
               (incorporated by reference to Exhibit 3(i)(e) to the SB-2).

3(i)(f)        Certificate of Amendment to the  Certificate of  Incorporation
               of  Optionable,   Inc.,  dated  June  9,  2004  (incorporated  by
               reference to Exhibit 3(i)(f) to the SB-2).

3(ii)          Amended and Restated By-laws of Optionable,  Inc.  (incorporated
               by reference to Exhibit 3(ii) to the SB-2)

10(i)          Lease  Agreement  between 24 South Third Avenue Corp. and 60 3rd
               Ave. Corp., as Lessor,  and  Optionable,  Inc., as Lessee,  dated
               October 3, 2001  (incorporated  by reference to Exhibit  10(i) to
               the SB-2).

10(ii)(a)      Master Services  Agreement with Capital Energy Services LLC,
               dated April 1, 2004 including the Consulting  Agreement as a part
               thereof and  Addendum,  dated  October 7, 2004  (incorporated  by
               reference to Exhibit 10(ii)(a) to the SB-2)

10(ii)(b)      Addendum  to Master  Services  Agreement  (incorporated  by
               reference to Exhibit 10(ii)(b) to the SB-2)

10(iii)(a)     Options  Order Flow Agreement,  dated July 1, 2004,  between
               the Company and Intercontinental  Exchange,Inc.  (incorporated by
               reference to Exhibit 10(iii)(a) to the SB-2)

10(iii)(b)     Superseding Option Order Flow Agreement,  dated as of March
               2, 2005  (incorporated by reference to Exhibit  10(iii)(b) to the
               SB-2)

10(iv)(a)      Employment  Agreement,  as amended,  between the Company and
               Edward  J.  O'Connor   (incorporated   by  reference  to  Exhibit
               10(iv)(a) to the SB-2)

10(iv)(b)      Employment  Agreement  between  the  Company  and  Kevin P.
               Cassidy  (incorporated  by reference to Exhibit  10(iv)(b) to the
               SB-2)

10(iv)(b)(I)   Termination of Employment  Agreement between the Company
               and  Kevin P.  Cassidy  (incorporated  by  reference  to  Exhibit
               10(iv)(b)(I) to the SB-2)

10(iv)(b)(II)  Employment  Agreement  between the Company and Kevin P.
               Cassidy  (incorporated by reference to the  Registrant's  Current
               Report on Form 8-K, dated as of October 30, 2005)

                                       31

<PAGE>

Exhibit No.                                Description
-----------                                -----------

10(v)(a)       Optionable,  Inc.  2004 Stock Option Plan  (incorporated  by
               reference  to  Exhibit  4.1  to  the  Registrant's   Registration
               Statement  on Form  S-8,  file  number  333-129853,  as  filed on
               November 21, 2005 (the "S-8")

10(v)(b)       Form of  Incentive  Stock  Option  Agreement(incorporated  by
               reference to Exhibit 4.2 to the S-8)

10(v)(C)       Nonstatutory Stock Option Agreement(incorporated by reference
               to Exhibit 4.3 to the S-8)

10(vi)         Prepaid Commission  Agreement,  dated February 3, 2003, between
               the Company and Mark  Nordlicht  (incorporated  by  reference  to
               Exhibit 10(vi) to the SB-2).

10(vii)(a)     Revolving  Credit Facility  Agreement,  dated June 5, 2003,
               between  the  Company  and  Platinum  Value   Arbitrage  Fund  LP
               (incorporated by reference to Exhibit 10(vii)(a) to the SB-2)

10(vii)(b)     $500,000  Revolving  Promissory  Note from the  Company to
               Platinum Value Arbitrage Fund LP dated June 5, 2003 (incorporated
               by reference to Exhibit 10(vii)(b) to the SB-2)

10(viii)       Prepaid  Commission  Agreement,  dated June 9, 2003, between
               the  Company  and  Platinum  Partners  Value  Arbitrage  Fund LLP
               (incorporated by reference to Exhibit 10(viii) to the SB-2)

10(ix)(a)      Loan Agreement, dated February 13, 2004, between the Company
               and  Mark  Nordlicht   (incorporated   by  reference  to  Exhibit
               10(ix)(a) to the SB-2)

10(ix)(b)      $250,000 Promissory Note, dated February 13, 2004, from the
               Company to Mark Nordlicht  (incorporated  by reference to Exhibit
               10(ix)(b) to the SB-2)

10(ix)(c)      $250,000   Promissory  Note  Extension   Agreement,   dated
               September 9, 2004 (incorporated by reference to Exhibit 10(ix)(c)
               to the SB-2)

10(x)(a)       Loan Agreement,  dated March 8, 2004, between the Company and
               Mark Nordlicht  (incorporated by reference to Exhibit 10(x)(a) to
               the SB-2)

10(x)(b)       $50,000  Promissory  Note,  dated  March 8,  2004,  from the
               Company to Mark Nordlicht  (incorporated  by reference to Exhibit
               10(x)(b) to the SB-2)

10(x)(c)       $50,000 Promissory Note Extension Agreement,  dated September
               9, 2004  (incorporated  by reference  to Exhibit  10(x)(c) to the
               SB-2)

10(xi)(a)      Loan  Agreement,  dated March 22, 2004,  between the Company
               and  Mark  Nordlicht   (incorporated   by  reference  to  Exhibit
               10(xi)(a) to the SB-2)

10(xi)(b)      $5,621,753.18  Promissory Note, dated March 22, 2004, from
               the  Company to Mark  Nordlicht  (incorporated  by  reference  to
               Exhibit 10(xi)(b) to the SB-2)

10(xi)(c)      Addendum   to  Loan   Agreement,   dated  March  22,  2004
               (incorporated by reference to Exhibit 10(xi)(c) to the SB-2)

10(xi)(d)      Addendum  to  Promissory   Note,   dated  March  22,  2004
               (incorporated by reference to Exhibit 10(xi)(d) to the SB-2)

10(xii)(a)     Revolving Credit Facility Agreement,  dated April 15, 2004,
               between the Company and Mark Nordlicht (incorporated by reference
               to Exhibit 10(xii)(a) to the SB-2)

10(xii)(b)     $50,000  Promissory  Note,  dated April 15, 2004,  from the
               Company to Mark Nordlicht  (incorporated  by reference to Exhibit
               10(xii)(b) to the SB-2)

14             Code of Business Conduct and Ethics (filed herewith)

                                       32

<PAGE>

Exhibit No.                                Description
-----------                                -----------

23             Consent of Sherb & Co., LLP (filed herewith)

31.1           Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive
               Officer of Optionable, Inc. (filed herewith)

31.2           Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial
               Officer of Optionable, Inc. (filed herwith)

32.1           Section 1350 Certification of the Principal  Executive Officer of
               Optionable,  Inc The information  contained in this Exhibit shall
               not be deemed filed with the Securities  and Exchange  Commission
               nor incorporated by reference in any registration statement filed
               by the  registrant  under the Securities Act of 1933, as amended.
               (filed herewith)

32.2           Section 1350 Certification of the Principal  Financial Officer of
               Optionable,  Inc The information  contained in this Exhibit shall
               not be deemed filed with the Securities  and Exchange  Commission
               nor incorporated by reference in any registration statement filed
               by the  registrant  under the Securities Act of 1933, as amended.
               (filed herewith)


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The firm Sherb & Co.,  independent auditor, has audited our financial statements
for the years ended June 30, 2004 and 2005. The Board of Directors has appointed
Sherb & Co. to serve as our independent auditors for the 2004 year-end audit and
to review our quarterly  financial  reports for filing with the  Securities  and
Exchange Commission during fiscal year 2005.

The following table shows the fees paid or accrued by us for the audit and other
services provided by Sherb & Co. for fiscal year 2005 and 2004.

                                                     2005                   2004
                                      -------------------    -------------------
Audit Fees(1)                         $            66,500    $            38,000
Audit-Related Fees                                    --                      --
Tax Fees                                              --                      --
All Other Fees (2)                                    645                    590
                                      -------------------    -------------------
Total                                 $            67,145    $            38,590
                                      ===================    ===================
------------------
(1)  Audit fees represent fees for professional  services provided in connection
     with  the  audit of our  annual  financial  statements  and  review  of our
     quarterly  financial  statements and audit services  provided in connection
     with other statutory or regulatory filings.

(2)  All Other Fees  represent  edgarization  services  related  to the  certain
     statutory and regulatory filings.

         Pre-Approval of Non-Audit Services

The  Company  does not  currently  have an audit  committee  in place  and thus,
management must obtain the specific prior approval of the Board of Directors for
each  engagement of the  independent  auditor to perform any non-audit  services
that exceed any pre-approved amounts determined by the Board of Directors.

                                       34

<PAGE>

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) of the Exchange  Act,  the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on the 15th day of March, 2006.

                                                 OPTIONABLE, INC.

                                                 By: /s/   Kevin Cassidy
                                                 Name:  Kevin Cassidy
                                                 Title:  Chief Executive Officer


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

Signature                   Title                                 Date
---------                   -----                                 ----
/s/ Mark Nordlicht          Chairman of the Board                 March 15, 2006
------------------
Mark Nordlicht


/s/ Kevin Cassidy           Chief Executive Officer and Director  March 15, 2006
-----------------
Kevin Cassidy


/s/   Edward O'Connor       President and Director                March 15, 2006
---------------------
Edward O'Connor

/s/ Albert Helmig           Director                              March 15, 2006
-----------------
Albert Helmig

s/s Marc-Andre Boisseau     Chief Financial Officer               March 15, 2006
-----------------------
Marc-Andre Boisseau







                                       35
<PAGE>


                              OPTIONABLE, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of Independent Registered Public Accounting Firm.....................F-1

Balance Sheet...............................................................F-2

Statements of Operations....................................................F-3

Statement of Stockholders' Deficit..........................................F-4

Statements of Cash Flows....................................................F-5

Notes to Financial Statements...............................................F-6

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Optionable, Inc.
Briarcliff Manor, New York

We have  audited  the  accompanying  balance  sheet of  Optionable,  Inc.  as of
December 31, 2005 and the related statements of operations, stockholders' equity
and cash flows for the years ended December 31, 2005 and 2004.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Optionable, Inc. as of December
31, 2005 and the results of their  operations and their cash flows for the years
ended  December 31, 2005 and 2004,  in  conformity  with  accounting  principles
generally accepted in the United States of America.


                                                /s/ Sherb & Co., LLP
                                                    ----------------------------
                                                    Sherb & Co., LLP
                                                    Certified Public Accountants

New York, New York
February 16, 2006

                                       F-1

<PAGE>


                                OPTIONABLE, INC.
                                  BALANCE SHEET
                                December 31, 2005


                                     ASSETS
Current Assets:
Cash                                                          $       1,811,453
Accounts receivable, net of provision
 for doubtful accounts of $67,420                                       352,332
Due from related party                                                  303,572
Incentives receivable                                                   154,783
                                                              ------------------

     Total current assets                                             2,622,140

  Property and equipment, net of accumulated
  depreciation of $425,696                                               41,185
  Other receivable                                                      150,000
  Other assets                                                           49,089
                                                              ------------------

     Total assets                                             $       2,862,414
                                                              ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses                       $         104,985
  Accrued compensation                                                  360,555
                                                              ------------------

    Total current liabilities                                           465,540

Due to chairman of the board, net of unamortized
discount of $3,522,542                                                1,921,968
Due to executive officer, net of unamortized
discount of $477,796                                                    230,902
Due to chief executive officer, net of
unamortized discount of $477,796                                         80,901
                                                              ------------------

     Total liabilities                                                2,699,311

Stockholders' Equity:
  Preferred Stock; $.0001 par value, 5,000,000
  shares authorized, none issued
    and outstanding                                                           -
  Common stock; $.0001 par value, 100,000,000
  shares authorized,
    51,406,431 issued and outstanding                                     5,141
  Additional paid-in capital                                          7,946,471
  Accumulated deficit                                                (7,788,509)
                                                              ------------------


     Total stockholders' equity                                         163,103
                                                              ------------------


     Total liabilities and stockholders' equity               $       2,862,414
                                                              ==================




                       See Notes to Financial Statements.
                                      -F-2-

<PAGE>

                                OPTIONABLE, INC.
                            STATEMENTS OF OPERATIONS


                                                    For the Year Ended
                                                        December 31,
                                        ----------------------------------------
                                                2005                  2004
                                        -------------------   ------------------

Brokerage fees                          $        3,085,296    $       1,885,489
Brokerage fees-related party                     1,981,560            1,011,014
Incentives                                         738,558              597,734
                                        -------------------   ------------------

Net revenues                                     5,805,414            3,494,237

Cost of revenues                                 2,264,110            1,614,073
Cost of revenues-related party                     856,763              466,610
                                        -------------------   ------------------

                                                 3,120,873            2,080,683

Gross profit                                     2,684,541            1,413,554

Operating expenses:
  Selling, general and administrative              695,718              776,908
  Research and development                         450,488              116,520
                                        -------------------   ------------------

     Total operating expenses                    1,146,206              893,428
                                        -------------------   ------------------

     Operating income                            1,538,335              520,126
                                        -------------------   ------------------

Other income (expense):
Gain on extinguishment of debt                           -              238,282
Interest income                                     21,548                1,836
Interest expense to related parties               (300,319)            (276,471)
                                        -------------------   ------------------

                                                  (278,771)             (36,353)
                                        -------------------   ------------------


Net income                              $        1,259,564    $         483,773
                                        ===================   ==================


Basic earnings per common share         $             0.02    $            0.01
                                        ===================   ==================


Diluted earnings per common share       $             0.02    $            0.01
                                        ===================   ==================


Basic weighted average common
shares outstanding                              51,406,431           47,170,951
                                        ===================   ==================


Diluted weighted average common
shares outstanding                             51,524,732            47,170,951
                                       ===================   ===================

                       See Notes to Financial Statements.
                                      -F-3-

<PAGE>

                                OPTIONABLE, INC.
          STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) From
                      January 1, 2004 to December 31, 2005


<TABLE>
<CAPTION>

                                              Common Stock                   Additional         Accumulated
                                         Shares                $            Paid-in Capital         Losses              Total
                                     ----------------   ---------------    ----------------    ---------------    ----------------
<S>                      <C>              <C>           <C>                <C>                 <C>                <C>
Opening balance, January 1, 2004          45,096,430    $        4,510     $     2,698,938     $   (9,531,846)    $    (6,828,398)

Issuance of common stock pursuant
 to a private placement                    6,310,001               631           1,251,369                  -           1,252,000
Distribution                                       -                 -            (462,067)                 -            (462,067)
Fair value of unamortized discount
 on due to chairman of the board                   -                 -           3,918,391                  -           3,918,391
Fair value of warrants issued to
related party                                      -                 -               2,780                  -               2,780
Forfeiture of officers' compensation               -                 -             375,000                  -             375,000
Net income                                         -                 -                   -            483,773             483,773
                                     ----------------   ---------------    ----------------    ---------------    ----------------

Balance at December 31, 2004              51,406,431             5,141           7,784,411         (9,048,073)         (1,258,521)

Fair value of warrants issued to
related party                                      -                 -             162,060                  -             162,060
Net income                                         -                 -                   -          1,259,564           1,259,564
                                     ----------------   ---------------    ----------------    ---------------    ----------------

Ending balance, December 31, 2005         51,406,431    $        5,141     $     7,946,471     $   (7,788,509)    $       163,103
                                     ================   ===============    ================    ===============    ================

</TABLE>








                        See Notes to Financial Statements
                                      -F-4-

<PAGE>

                                OPTIONABLE, INC.
                            STATEMENTS OF CASH FLOWS

                                                       For the Year Ended
                                                           December 31,
                                               ---------------------------------
                                                     2005              2004
                                               ----------------  ---------------



Cash flows from operating activities:
Net income                                     $     1,259,564   $      483,773
Adjustments to reconcile net income to net
cash provided by
 operating activities:
  Depreciation                                          32,519           51,921
  Amortization of debt discount                        300,320          202,869
  Forfeiture of officers' compensation                       -          375,000
  Gain on extinguishment of debt                             -         (238,282)
  Provision for doubtful accounts                      (22,554)          35,251
  Fair value of warrants issued to consultant          162,060            2,780
Changes in operating assets and liabilities:
  Accounts receivable                                 (133,194)        (128,998)
  Due from related party                                (9,997)        (293,575)
  Incentives receivable                                (23,107)        (131,676)
  Other receivable                                    (150,000)               -
  Other assets                                         (36,133)         (11,349)
  Accounts payable and accrued expenses                (25,701)        (556,075)
  Accrued compensation                                  12,838          325,297
  Accrued interest on notes payable to related
  parties                                                    -            3,628

                                               ----------------  ---------------

Net cash provided by operating activities            1,366,615          120,564
                                               ----------------  ---------------

Cash flows used in investing activity:
Purchases of property and equipment                    (27,439)         (28,479)
                                               ----------------  ---------------

Net cash used in investing activity                    (27,439)         (28,479)
                                               ----------------  ---------------

Cash flows from financing activities:

  Proceeds from line of credit payable to
  chairman of the board                                      -           50,000
  Proceeds from issuance of shares of common
  stock                                                      -        1,252,000
  Principal repayments of due to chief
  executive officer                                   (203,803)        (500,000)
  Principal repayments of line of credit
  payable to chairman of the board                           -          (50,000)
  Principal repayments of due to executive
  officer                                              (53,803)               -
  Principal repayments of note payable to
  chairman of the board                                      -         (300,000)
  Principal repayment of due to chairman of
  the board                                           (177,243)               -
  Proceeds from issuance of notes payable to
  chairman of the board                                      -          300,000
                                               ----------------  ---------------

Net cash (used in) provided by financing
activities                                            (434,849)         752,000
                                               ----------------  ---------------


Net increase in cash                                   904,327          844,085

Cash, beginning of year                                907,126           63,041
                                               ----------------  ---------------


Cash, end of year                              $     1,811,453   $      907,126
                                               ================  ===============


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


     Cash paid for interest                    $             -   $       69,972
                                               ================  ===============


Supplemental disclosures for non-cash
financing activity:

Increase in due to related party and
corresponding increase in additional
paid-in capital                                $             -   $      462,067
                                               ================  ===============


Increase in discount on due to chairman
of the board and corresponding increase
in additional paid-in capital                  $             -   $    3,918,391
                                               ================  ===============



                       See Notes to Financial Statements.
                                      -F5-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 1-Organization and Description of Business

Optionable,  Inc. (the "Company") was formed in Delaware in February 2000 and is
a  trading  and  brokerage  services  provider  to  brokerage  firms,  financial
institutions,   energy  traders,  and  hedge  funds  nationwide.  The  Company's
operations are located in the New York metropolitan  area. The Company is in the
process of finalizing the development of an automated electronic trading system.

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,  accounts receivable,  incentives receivable, due from related
party and other receivable.

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.  During 2005,  the Company has reached  bank  balances
exceeding  the FDIC  insurance  limit.  To reduce its risk  associated  with the
failure of such financial  institutions,  the Company periodically evaluates the
credit quality of the financial institutions in which it holds deposits.

The Company's accounts  receivable are due from energy trading firms,  financial
institutions,   and  hedge  funds,  located  primarily  in  the  United  States.
Collateral is generally not required. Three of the Company's customers accounted
for 27%, 14%, and 12%, respectively,  of its accounts receivable at December 31,
2005. No other customers  accounted for more than 10% of its accounts receivable
at December 31, 2005.






                                       -F6-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 2- Summary of Significant Accounting Policies-Continued

The Company's  incentives  receivable  are due from two United States  exchanges
providing  the  Company  with  incentives  to  submit  customer  trades to their
respective platform. The incentives receivable are not collateralized.

The due from related party is due from an affiliate owned by the Company's chief
executive  officer  and by an  executive  officer of the  Company,  who are both
stockholders of the Company. The due from related party is not collateralized.

The other receivable is due from an employee of a related party, a company owned
by the Company's chief executive officer and by an executive officer. It is used
as a $100,000 deposit with a United States exchange and a $50,000 deposit with a
clearinghouse. It is secured by cash accounts.

Customer Concentration

One of the Company's  customers accounted for 18% and 10% of its revenues during
2005 and 2004,  respectively.  The Company minimizes its customer  concentration
risks by diversifying its existing customer base.

Product Concentration

All of  the  Company's  revenues  are  derived  from  fees  earned  from  energy
derivatives transaction fees and related incentives provided by exchanges.

Fair Value of Financial Instruments

The  carrying  value  of  cash  and  cash  equivalents,   accounts  receivables,
incentives  receivable,  due from  related  party,  other  receivable,  accounts
payable and accrued expenses,  and accrued  compensation  approximate their fair
value due to their short-term maturities. The carrying amount of due to Chairman
of the  board,  due to  chief  executive  officer,  and  due  to  related  party
approximate their fair value based on the Company's incremental borrowing rate.

Provision for Doubtful Accounts

The Company establishes a provision for estimated doubtful accounts concurrently
with the  recognition  of  revenues.  The  provision is  established  based upon
consideration of various factors,  including recent and historical payment rates
for  each of the  Company's  clients  and in  aggregate  and the  impact  of new
financial and economic conditions on its client base.

Reclassifications

Certain reclassifications of items in the prior years' financial statements have
been made to conform to the current year's presentation.






                                       -F7-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 2- Summary of Significant Accounting Policies-Continued

Software Development Costs

Costs incurred in the research and development of software products are expensed
as  incurred  until  technological  feasibility  has  been  established.   After
technological  feasibility is established,  any additional costs are capitalized
in accordance with Statement of Accounting  Financial Standards ("SFAS") No. 86,
Accounting  for the Costs of Computer  Software to Be Sold,  Leased or Otherwise
Marketed.  Costs of maintenance and customer  support will be charged to expense
when related  revenue is recognized or when those costs are incurred,  whichever
occurs  first.  The Company  believes  that the current  process for  developing
software is  essentially  completed  simultaneously  with the  establishment  of
technological feasibility;  accordingly, no software development costs have been
capitalized at December 31, 2005.


The Company has  outsourced  the  research  and  development  of its software to
outside consultants under agreements which can be terminated under short notices
and provide for fees based on the Company's use of the  consultants'  resources.
The Company has incurred expenses of approximately $350,000 and $115,000, during
2005 and 2004, respectively, pursuant to such agreements.

Property and Equipment

Property  and  equipment  are  recorded  at  cost  and  are   depreciated  on  a
straight-line  basis over their  estimated  useful lives of three to five years.
Maintenance and repairs are charged to expense as incurred. Significant renewals
and betterments are capitalized.

Property and equipment consist of the following as of December 31, 2005:

Computer equipment and software                                        $418,461
Office furniture and equipment                                           48,420
                                                                       --------
                                                                        466,881
Accumulated depreciation                                                425,696
                                                                       --------
                                                                       $ 41,185
                                                                       ========

Depreciation  expense amounted to approximately  $33,000 and $52,000 during 2005
and 2004, respectively.

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 the
entire deferred tax asset will not be realized.









                                       -F8-
<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 2- Summary of Significant Accounting Policies-Continued

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.  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 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 791,000  and 780,250 at
December 31, 2005 and 2004,  respectively.  The outstanding warrants amounted to
1,000,000  and  550,000  at  December  31,  2005  and  2004,  respectively.  The
outstanding options and warrants at December 31, 2004 are excluded from the loss
per share  computation  for the  respective  periods  due to their  antidilutive
effect.

The  following  sets forth the  computation  of basic and diluted  earnings  per
share:

                                                           2005             2004
                                                           ----             ----
Numerator:
Net income                                           $1,259,564         $483,773
                                                     ==========         ========
Denominator:
Denominator for basic earnings per share-
Weighted average shares outstanding                  51,406,431       47,170,591
Effect of dilutive employee stock options                71,525                0
Effect of dilutive warrants                              46,776                0
                                                     ----------       ----------
Denominator for diluted earnings per share-
Weighted average shares outstanding                  51,524,732       47,170,591
                                                     ==========       ==========
Basic earnings per share                                  $0.01            $0.02
                                                          =====            =====
Diluted earnings per share                                $0.01            $0.02
                                                          =====            =====
Anti-dilutive weighted-average shares                         0          100,000
                                                          =====          =======

The share amounts included in the financial statements,  including the basic and
diluted  loss per share have been  retroactively  restated  to reflect the stock
splits discussed below.






                                       -F9-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 2- Summary of Significant Accounting Policies-Continued

Stock Splits

The Company's  board of directors  declared the following split of the Company's
common stock:

        June 10, 2004                    1.27 for 1

The basic and diluted  earnings per share have been  adjusted  retroactively  to
give effect to this stock spilt.

Revenue Recognition

Revenue is recognized when earned.  The Company's revenue  recognition  policies
are in compliance with the Securities and Exchange Commission's Staff Accounting
Bulletin ("SAB") No. 104 "Revenue Recognition".

The Company generally invoices its customers monthly, for all transactions which
have been  executed  during such month.  Revenues are  recognized  on the day of
trade-trade   date  basis.   The  Company's   revenues  derive  from  a  certain
predetermined  fixed  fee of the  transactions  it  executes  on  behalf  of its
customers.  The fee is based on the volume of financial  instruments traded. The
Company  bases its fees on oral and written  contracts  and confirms the fees in
writing upon the execution of each transaction.

The Company also receives incentives from United States exchanges for the volume
of transactions  conducted by the Company using their  platform.  The incentives
are  based on a  percentage  of the  total  revenues  received  by the  exchange
attributable to the Company's volume of transactions submitted to the respective
exchanges.  The Company estimates monthly such incentives based on the volume of
daily  transactions  submitted  to the  respective  exchanges  using  the day of
trade-trade  date  basis,  and  the  exchanges'  published  revenues  by type of
transactions.  The Company, pursuant to SAB 104, realizes the incentive revenues
realized or realizable when the all of the following criteria are met:

     1) Persuasive  evidence of an arrangement exists. The Company has a written
separate  agreement with one of the  exchanges.  The other exchange has publicly
published  the terms of its  incentive  program in 2003,  which were modified in
2005 and are offered to all intermediaries in the select transactions;

     2) Delivery has occurred or services have been rendered. Under arrangements
with both  exchanges,  the incentives are earned on the day the Company  submits
transactions to the respective  exchanges  based on the revenues  generated from
such transactions and are no longer subject to minimum volume of transactions to
the respective exchanges. The Company accounts for all transactions submitted to
each  exchange on a daily basis.  Accordingly,  the Company is able to determine
when the incentives are earned based on the date it submits  transactions to the
exchanges.  The Company has no other  obligations  to the  exchanges to earn the
incentives;

     3)  "Seller's"  price to the buyer is fixed or  determinable.  Based on the
incentive program terms of each exchange, their published prices for the type of
transactions  the  Company  submits  to  them,  and the  Company's  transactions
records,  the Company is able to estimate the revenues  each  exchange  earns in
connection with the transactions it submits, and accordingly, the amount, if any
of the incentives the Company earns in connection with such transactions; and

     4) Collectibility is reasonably assured. Historically,  both exchanges have
paid the Company timely on incentives  earned. The Company has no knowledge that
they  do  not  intend  to pay  these  incentives,  if  earned,  in  the  future.
Furthermore,  the  Company  intends to  enforce  the  payment of any  incentives
receivable under the incentive programs.

Stock-Based Compensation

The Company  accounts for stock options  issued to employees in accordance  with
the  provisions  of  Accounting   Principles   Board  ("APB")  Opinion  No.  25,
"Accounting  for Stock Issued to  Employees,"  and related  interpretations.  As
such,  compensation  cost is  measured on the date of grant as the excess of the
current market price of the underlying

                                       -F10-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 2- Summary of Significant Accounting Policies-Continued

stock over the exercise price. Such compensation  amounts, if any, are amortized
over the respective vesting periods of the option grant. The Company adopted the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation"
and  SFAS  148,  "Accounting  for  Stock-Based   Compensation   -Transition  and
Disclosure",  which  permits  entities  to provide  pro forma net income and pro
forma earnings per share  disclosures for employee stock option grants as if the
fair-valued  based method defined in SFAS No. 123 had been applied.  The Company
accounts  for stock  options  and stock  issued  to  non-employees  for goods or
services in accordance with the fair value method of SFAS 123.

Accounts Payable and Accrued Expenses


Accounts payable and accrued expenses at December 31, 2005 consist  primarily of
accrued trade payables.

Segment reporting

The Company  operates in one segment,  brokerage  services.  The Company's chief
operating  decision-maker  evaluates the  performance  of the Company based upon
revenues  and  expenses  by  functional  areas  as  disclosed  in the  Company's
statements of operations.

Recent Pronouncements

In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
This  Statement   requires  that  the  cost   resulting  from  all   share-based
transactions be recorded in the financial statements.  The Statement establishes
fair value as the measurement  objective in accounting for  share-based  payment
arrangements and requires all entities to apply a  fair-value-based  measurement
in accounting for share-based payment transactions with employees. The Statement
also  establishes  fair value as the measurement  objective for  transactions in
which an entity  acquires  goods or services from  non-employees  in share-based
payment   transactions.   The  Statement   replaces  SFAS  123  "Accounting  for
Stock-Based  Compensation"  and supersedes  APB Opinion No. 25  "Accounting  for
Stock Issued to  Employees".  The provisions of this Statement will be effective
for the Company beginning in the first quarter of 2006. The Company is currently
evaluating  the impact this new Standard  will have on its  financial  position,
results of operations or cash flows.

Note 3-Due from Related Party

In April 2004,  under the Master Services  Agreement,  the Company agreed to pay
certain fixed and variable  fees and support  services to a related party entity
partly  owned by its Chief  Executive  Officer  and by an  Executive  Officer in
exchange for a share of revenues of the floor brokerage  services of the related
party. The fixed fees the Company has agreed to pay amount to $50,000 per year.

The  Company's  share of revenues and expenses of the floor  brokerage  services
amounted  to  approximately  $2.0  million and  $850,000,  during 2005 and 2004,
respectively.  The Company has  received  approximately  $1.0  million  from the
related party in connection with such floor  brokerage  services during 2005 and
the related party owed approximately $300,000 at December 31, 2005.



                                       -F11-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004


Note 3-Due from Related Party-continued

The Company  recognizes  its share of revenues of the floor  brokerage  services
based on the  commissions  earned for such services  which are recognized on the
day of the trade-trade date basis.


Note 4-Other Receivable

The Company's other receivable consists of amounts due from a broker employed by
a related  party,  an  entity  owned by our Chief  Executive  Officer  and by an
Executive  Officer.  This other receivable  funded security deposits of $100,000
held at a US exchange  and $50,000 held at a  clearinghouse,  which are required
for the Company's floor operations.

Note 5-Due to Related Parties

The terms and  amounts of due to related  parties at  December  31,  2005 are as
follows:

Due  to  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 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 22,
2014:                                                                $5,444,510
Discount, using initial implied rate of 12%:                         (3,522,542)
                                                                     -----------
                                                                     $1,921,968
                                                                     ===========

Due to Executive Officer,  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 Executive  Officer
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 22, 2014:                       $708,698
Discount, using initial implied rate of 12%:                           (477,796)
                                                                       ---------
                                                                       $230,902
                                                                       =========




                                       -F12-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004


Note 5-Due to Related Parties-continued

Due  to  Chief  Executive  Officer,   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 Chief
Executive  Officer 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 22,
2014:                                                                  $558,697
Discount, using initial implied rate of 12%:                           (477,796)
                                                                       ---------
                                                                       $ 80,901
                                                                       =========


During March 2004,  the Company  entered into a loan agreement with its Chairman
of the Board pursuant to which we consolidated various amounts due to him into a
single loan of  $5,621,753.  The due to Chairman of the Board does not currently
bear  interest  and  will  only  bear  interest  if the  Capital  Raise  occurs.
Accordingly,  in March  2004,  the  Company  recorded a  discount  on the due to
Chairman of the Board of approximately $3.9 million and a corresponding increase
in additional  paid-in capital.  The due to Chairman of the board was discounted
using the initial implied rate of 12% over ten years.

During March 2004, the Company entered into a Master Services Agreement pursuant
to which the Company  will pay to a related  party owned by its Chief  Executive
Officer and Executive Officer $1,525,000. The Company has recorded a discount on
this due to  related  party of  approximately  $1.0  million in April 2004 and a
corresponding decrease in additional paid-in capital. The payable to the related
party was discounted using the implied rate of 12% over ten years

During April 2005, the Company  modified the terms of its due to related parties
comprising  of amounts  owed to the  Chairman  of the Board and  pursuant to the
Master  Services  Agreement.  The modified terms provide that, in the event of a
Capital Raise, among other things, the 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 Chairman of the Board,
the due to its Chief Executive  Officer,  and the due to related party amounting
to  approximately  25% of its cash flows from  operating cash flows less capital
expenditures.

In June 2003, the Company issued a $500,000 note payable to a related party,  an
entity in which its  Chairman of the Board is also the  managing  director.  The
note payable bore  interest at 20% and was payable by September  30, 2004.  Such
note payable was unsecured. The Company repaid the principal and related accrued
interest amounting to approximately $70,000 during 2004.

In February and March 2004,  the  Company's  Chairman of the Board  advanced the
Company  $250,000 and $50,000,  respectively,  to finance the settlement  amount
related to obligations with a former  contractor and with the payment of certain
legal fees incurred in connection with the retention of their corporate counsel.
Such advances were  non-interest  bearing and were due on or before December 31,
2004.  The Company  repaid the  advances of $250,000 and $50,000 in October 2004
and December 2004, respectively.

In April 2004, the Company  secured a $100,000 credit facility with its Chairman
of the Board.  The Company has drawn  $50,000  under such credit  facility.  The
credit facility was  non-interest  bearing and was due on or before December 31,
2004. The Company repaid the credit facility of $50,000 in December 2004.

The  amortization  of the  discount  on the due to related  parties  amounted to
approximately $300,000 and $200,000 during 2005 and 2004, respectively,  and has
been  recorded  as  interest  expense  to related  parties  in the  accompanying
statements of operations.

Interest  expense,  other than the amortization of discount,  in connection with
the various  amounts due to Chairman of the Board and note  payable to a related
party,  an  entity  in which  the  Company's  Chairman  of the Board is also the
managing director amounted to approximately $0 and $74,000 during 2005 and 2004,
respectively.

                                       -F13-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 5-Due to Related Parties-continued

During 2005, in connection with the modified  terms,  the Company made principal
repayments of $177,243 on the due to its Chairman of the Board, of which $69,638
was offset against an accounts receivable of one of the Company's clients, which
is an unrelated  party.  Additionally,  the Company made principal  repayment of
$203,803 and $53,803 on the due to Chief Executive  Officer and due to Executive
Officer, respectively.

During January 2006, the Company made principal repayments amounting to $600,000
towards its due to related parties.

Note 6- Other Related Party Transactions

The Company has recognized revenues of approximately $106,000 and $65,000 during
2005 and 2004, respectively,  from three related parties,  entities in which its
Chairman of the Board is also the managing  director.  Such related  parties owe
the Company approximately $41,000 at December 31, 2005.

The Company provides administrative services to a related party, an entity owned
by the Company's Chief Executive Officer and an Executive  Officer.  The Company
charged approximately $17,000 and $6,000 during 2005 and 2004, respectively, for
such  services.  The  related  party owes the  Company  approximately  $7,000 at
December 31, 2005. Furthermore, the Company has purchased goods of approximately
$1,000 from this related party during 2005.

Note 7-Other Transactions

The Company has recognized  revenues of approximately  $150,000 during 2004 from
two unrelated customers. These customers used the services of the Company at the
request of its Chairman of the Board,  who is also  unrelated to the  customers.
Such customers do not owe money to the Company as of December 31, 2005.

Note 8- Stockholders' Equity

Stock Compensation Plan

During  November  2004,  the Company  adopted its 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
construed  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.

If any options  granted under the 2004 Plan expire or terminate  without  having
been exercised or ceased to be exercisable, such options will be available again
under the 2004 Plan.  All  employees  of the  Company and its  subsidiaries  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  their fair market  value 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 following pro forma information regarding stock-based  compensation has been
determined as if the Company had accounted for its employee  stock options under
the fair  value  method  pursuant  to SFAS 123.  For  purposes  of the  proforma
calculations,  the  fair  value  of each  option  granted  in 2005  and 2004 was
estimated at the date of grant using the Black-Scholes  model with the following
assumptions  used:  risk-free  interest  rate:  4.04% and  2.78%,  respectively;
dividend yield: none; volatility:  none (at the date of grant) ; expected lives:
3 years.

                                       -F14-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 8- Stockholders' Equity-continued

No stock-based  employee  compensation  cost is reflected in net income,  as all
options  granted  under the  Company's  plans had an exercise  price equal to or
above market  value of the  underlying  common  stock on the date of grant.  Had
compensation  cost  for  the  Company's  stock-based   compensation  plans  been
determined  based on the fair value at the grant  dates for grants  under  those
plans consistent with the method of SFAS No. 123, the Company's cash flows would
have  remained  unchanged;  however net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                     2005              2004
                                                                  --------           -------
<S>                                                              <C>                <C>
Net income as reported:                                          $1,259,564         $ 483,773
Deduct: Total stock-base employee compensation expense
           determined under fair value based method for all
           awards, net of related tax effects                   (     4,338)       (        -)
                                                                ------------       -----------
Net income pro forma                                             $1,255,226         $ 483,773
                                                                ============       ===========
Earnings per share:
Basic                                                                 $0.02             $0.01
                                                                      =====             =====
Diluted                                                               $0.02             $0.01
                                                                      =====             =====
</TABLE>

The fair value per option  attributed  to options  issued  during  2005 and 2004
amounted to $0.02 and $0, respectively.

A summary of the  activity  during 2005 and 2004 of the  Company's  stock option
plan is presented below:

                                                                    Weighted
                                                                     Average
                                                Options           Exercise Price
                                                -------           --------------
Outstanding at January 1, 2004                 1,104,900              $0.09

Granted                                          780,250               0.20
Exercised                                              -                  -
Expired   or cancelled                       ( 1,104,900)              0.09
                                             ------------             -----
Outstanding at December 31, 2004                 780,250               0.20

Granted                                          150,000               0.30
Exercised                                              -                  -
Expired   or cancelled                       (   139,250)              0.24
                                             ------------             -----
Outstanding at December 31, 2005                 791,000              $0.21
                                             ============             =====

Exercisable at December 31, 2004                 261,833              $0.20
                                                 ========             =====
Exercisable at December 31, 2005                 432,667              $0.20
                                                 ========             =====

The weighted  average  remaining  contractual life and weighted average exercise
price of options  outstanding at December 31, 2005, for selected  exercise price
ranges, is as follows:

Options outstanding:
<TABLE>
<CAPTION>

 Range of exercise prices        Number of options          Weighted average           Weighted average
                                                          remaining contractual         exercise price
                                                                  life
---------------------------- -------------------------- -------------------------- --------------------------
<S>        <C>                        <C>                                                   <C>
           $0.20                      691,000                  indefinite                   $ 0.20
---------------------------- -------------------------- -------------------------- --------------------------
            0.30                      100,000                  indefinite                     0.30
---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>

                                       -F15-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 8- Stockholders' Equity-continued

Warrants

In June and July 2004, the Company issued  warrants to one of its  shareholders.
The warrants are  exercisable  for up to 1,200,000  shares of common stock at an
exercise  price of $0.20 per share and expire in June  2007.  The  warrants  are
exercisable  in six  traunches  of up to 200,000  warrants  if  certain  trading
milestones are met during three six-month periods following the issuance of such
warrants. There are 450,000 warrants exercisable as of December 31, 2005.

In June 2004,  the Company  cancelled  the grant of 1,104,900  options made to a
former  employee  and  replaced it with the  issuance of 100,000  warrants.  The
warrants  are  convertible  into  100,000  shares of common stock at an exercise
price of $0.20 per share and expire in July 2010.

The value  attributed to such warrants  amounted to  approximately  $162,000 and
$3,000 during 2005 and 2004, respectively,  and is included in selling, general,
and  administrative  expenses.  The fair value of such warrants at the date they
became  exercisable  was  determined  using  the  Black-Scholes  model  with the
following  assumptions used:  risk-free interest rate: 2.78% to 4.37%;  dividend
yield: none; volatility: none to 57%; expected lives: 3 years.

A summary of the  activity  during  2005 and 2004 of the  Company's  warrants is
presented below:

                                                                     Weighted
                                                                      Average
                                                Warrants          Exercise Price

Outstanding at January 1, 2004                         -              $   -

Granted                                        1,300,000               0.20
Exercised                                              -                  -
Expired   or cancelled                          (300,000)              0.20
                                               ---------              -----
Outstanding at December 31, 2004               1,000,000               0.20

Granted                                                -               0.20
Exercised                                              -                  -
Expired   or cancelled                          (450,000)              0.20
                                               ---------              -----
Outstanding at December 31, 2005                 550,000              $0.20
                                               =========              =====
Exercisable at December 31, 2004                 200,000              $0.20
                                               =========              =====
Exercisable at December 31, 2005                 550,000              $0.20
                                               =========              =====

The weighted  average  remaining  contractual life and weighted average exercise
price of warrants  outstanding at December 31, 2005, for selected exercise price
ranges, is as follows:

Warrants:
<TABLE>
<CAPTION>

---------------------------- -------------------------- -------------------------- --------------------------
 Range of exercise prices       Number of warrants          Weighted average           Weighted average
                                                          remaining contractual         exercise price
                                                                  life
---------------------------- -------------------------- -------------------------- --------------------------
<S>        <C>                        <C>                      <C>                          <C>
           $0.20                      550,000                  2.06 years                   $ 0.20
---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>

                                       -F16-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 9- Commitments

During October 2005, the Company named a new Chief  Executive  Officer,  elected
him a  director,  and  entered  into  an  employment  agreement  with  him  (the
"Agreement").  The initial term of the  Agreement  is for 51 months,  subject to
renewal or earlier termination.

The Company's Chief Executive Officer's salary will be as follows:  $20,833 upon
entering into the Agreement, $46,875 from October 30, 2005 to December 31, 2005,
$275,000  from January 1 to December 31, 2006,  $300,000 from January 1, 2007 to
December 31, 2007,  $325,000 from January 1 to December 31, 2008,  $350,000 from
January 1, 2009 to December 31, 2009 ("Fixed Compensation" ) .

In addition,  beginning  with the first month of the quarter in which the amount
payable  to the Chief  Executive  Officer  is fully  paid,  the Chief  Executive
Officer  will be paid (i) cash  compensation  amounting  to five percent (5%) of
Gross  Revenues of the  Company,  and (ii) stock  compensation  amounting to two
percent (2%) of the Gross Revenues of the Company, as defined.  Gross Revenue is
defined  as the  total  gross  revenue  related  to any and all  aspects  of the
brokerage  business,  including  incentive  received  from  exchanges,  based on
generally  accepted  accounting  principles.  The shares of Company common stock
will be granted at fair value at the date of grant.

The Company will issue  options to its Chief  Executive  Officer equal to 20% of
the  number of shares of common  stock  issuable  under  warrants  which  become
exercisable pursuant to any Order Flow Agreements (Order Flow Agreements are the
agreements  for the  Company to issue  warrants to a firm based on the volume of
orders the firm placed with the  Company).  Those  options  will be fully vested
Non-Statutory  Stock Options granted under the Company's 2004 Plan at fair value
at the date of grant.  Also,  the  Company  will  issue to its  Chief  Executive
Officer  5,000  options each time a firm  registers  with and executes its first
10,000 lots on the  Company's  OPEX  platform.  The total number of such options
will be limited to  2,500,000.  Such options will be fully vested  Non-Statutory
Options granted under the Plan at fair value at the date of grant.

Upon the sale or merger or other business combination of the Company and another
company or companies,  the Company's Chief Executive Officer will be entitled to
a lump sum payment of 50% of the unpaid Fixed Compensation  should he desire not
to be employed with the new or successor entity.

The Company  leases its  executive  offices under a 5-year  leasing  arrangement
providing for a monthly base rent of $5,568.  The minimum annual  payments under
such commitment for the next five years are as follows:



Year                                           Minimum Annual Payments
----                                           -----------------------
2006                                                  $66,816
2007 and thereafter                                        --



The  Company's  rental  expense  amounted to  approximately  $80,000 and $60,000
during 2005 and 2004, respectively.



                                       -F17-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 10-Income Taxes

Deferred  income  taxes  reflect  the net tax  effect of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the net deferred taxes, as of December 31, 2005, are as follows:




         Deferred tax assets:
         Net operating loss carryforward                            $ 3,720,000
          Less valuation allowance                                   (3,720,000)
                                                                    ------------
          Total net deferred tax assets:                            $          -
                                                                    ============


As of December 31, 2005,  the Company has a net  operating  losses  amounting to
approximately $9.1 million which expire at various times through 2023.

SFAS No. 109  requires a valuation  allowance  to reduce the deferred tax assets
reported,  if any,  based on the weight of the evidence,  it is more likely than
not that some  portion or all of the  deferred  tax assets will not be realized.
Management has determined  that a valuation  allowance of $3,720,000 at December
31, 2005 is  necessary to reduce the deferred tax assets to the amount that will
more likely than not be realized.  The change in the valuation  allowance during
2005 and  2004 was a  decrease  of  approximately  $1.1  million  and  $449,000,
respectively.

The federal  statutory tax rate reconciled to the effective tax rate during 2005
and 2004, respectively, is as follows:

                                                     2005               2004
                                                   --------           --------
     Tax at U.S Statutory Rate:                      35.0%             35.0%
     State tax rate, net of federal benefits          5.7               5.7
     Change in valuation allowance                  (40.7)            (40.7)
                                                   --------           --------
           Effective tax rate                         0.0%              0.0%
                                                   ========           ========





Note 11-Legal Proceedings


During 2004, the Company settled claims from a vendor for $250,000.  The Company
has also agreed to indemnify  such vendor up to  approximately  $460,000 plus 9%
interest  from March 1, 2004 in the event the Company  breaches  its warranty or
representation of financial information provided to such vendor. The Company had
provided  for this  settlement  by  recording  $250,000 in accounts  payable and
accrued  expenses as of December  31,  2003.  Amounts due under the  settlement,
which amounted to $250,000,  were paid in February 2004. The Company believes it
has not breached its warranty or representations  of its financial  information.
Accordingly,  the Company does not provide for additional  provision  related to
this matter.


In May 2004, the Company settled outstanding  professional fees of approximately
$663,000 due to its former counsel, of which approximately $62,000 were incurred
in 2004.  The Company has agreed to pay $425,000 in  settlement  of such claims,
which was paid in September 2004.  Additionally,  as part of the  settlement,  a
partner of the Company's former legal counsel's firm has acquired 375,000 shares
of the Company's  common stock for $75,000 in September  2004.  This  settlement
generated a gain on settlement of obligations of approximately $238,000 which is
included in other income for 2004.

                                       -F18-

<PAGE>

                                OPTIONABLE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2005 and 2004

Note 12- Subsequent Event

During January 2006, the Company amended its agreements with its Chairman of the
Board, its Chief Executive Officer, and its Executive Officer to allow principal
repayments higher than required by such agreements to retain their services. The
Company  made  principal  repayments  amounting  to $600,000  towards its due to
related parties.




















                                       -F19-