UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



|Washington, DC 20549
|--------------------



|FORM 10-Q
|---------

|ý  |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 
|-- |  | -----------------------------------------------------------------------------------------
|   |  | For the quarterly period ended March 31, 2008.                                           
|  
|or
|  
|o  |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|   |  | For the transition period from  ___________ to ________________                          

Commission File Number: 000-51837



|OPTIONABLE, INC.(Exact Name of Registrant as Specified in Its Charter)
|----------------------------------------------------------------------

|Delaware                                         |  | 52-2219407                       
|------------------------------------------------ |  | ---------------------------------
|(State or Other Jurisdiction of Incorporation or |  | (IRS Employer Identification No.)
|Organization)                                    |  |                                  
|                                                
|465 Columbus Avenue, Valhalla, New York          |  | 10595                            
|(Address of Principal Executive Offices)         |  | (Zip Code)                       



|(914) 773-1100
|--------------



|(Registrants Telephone Number Including Area Code)
|---------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesýNoo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

|Large Accelerated Filero |  | Accelerated Filero        
|------------------------ |  | --------------------------
|Non-accelerated Filero   |  | Smaller reporting companyý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNoý

The number of outstanding shares of the registrants Common Stock as of May 11, 2008 is 52,423,403.

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OPTIONABLE, INC.INDEXPART I: FINANCIAL INFORMATIONITEM 1:
     
     FINANCIAL STATEMENTS (Unaudited)Consolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Cash FlowsNotes to the Consolidated Financial StatementsITEM 2:
     
     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OFOPERATIONSITEM 3:
     
     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4:
     
     CONTROLS AND PROCEDURESPART II: OTHER INFORMATIONItem 1
     
     LEGAL PROCEEDINGSITEM 1A:
     
     RISK FACTORSITEM 2
     
     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 3
     
     DEFAULTS UPON SENIOR SECURITIESITEM 4
     
     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5
     
     OTHER INFORMATIONITEM 6:
     
     EXHIBITSSIGNATURES


2

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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3

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OPTIONABLE, INC.CONSOLIDATED BALANCE SHEETSMarch 31, 2008
     
     
     
     
     December 31, 2007 (1)(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
     
     $
     
     10,385,454
     
     
     $
     
     9,919,727Prepaid income taxes
     
     
     
     1,127,204
     
     
     
     
     2,281,432Deferred Tax Assets
     
     
     
     281,356
     
     
     
     
     281,356Other current assets
     
     
     
     437,096
     
     
     
     
     387,636Total current assets
     
     
     
     12,231,110
     
     
     
     
     12,870,151Property and equipment, net of accumulated depreciation of $593,801 and $569,712at March 31, 2008 and December 31, 2007, respectively
     
     
     
     162,142
     
     
     
     
     186,231Other assets
     
     
     
     19,900
     
     
     
     
     19,900Total assets
     
     $
     
     12,413,152
     
     
     $
     
     13,076,282LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts payable and accrued expenses
     
     $
     
     400,739
     
     
     $
     
     388,191Other liabilities
     
     
     
     4,207
     
     
     
     
     4,207Total current liabilities
     
     
     
     404,946
     
     
     
     
     392,398Other liabilities
     
     
     
     60,420
     
     
     
     
     59,367Due to stockholder, net of unamortized discount of $2,875,549 and $2,956,314at March 31, 2008 and December 31, 2007, respectively
     
     
     
     2,168,961
     
     
     
     
     2,088,196Due to executive officer, net of unamortized discount of $390,022 and $400,976at March 31, 2008 and December 31, 2007, respectively
     
     
     
     118,675
     
     
     
     
     107,721Total liabilities
     
     
     
     2,753,002
     
     
     
     
     2,647,682Stockholders' Equity:Preferred Stock; $.0001 par value, 5,000,000 shares authorized, none issuedand outstanding
     
     
     
     -
     
     
     
     
     -Common stock; $.0001 par value, 100,000,000 shares authorized,52,428,203 issued and 52,423,403 outstanding at March 31, 2008 and December 31, 2007, respectively
     
     
     
     5,242
     
     
     
     
     5,242Additional paid-in capital
     
     
     
     162,749,041
     
     
     
     
     162,743,356Treasury stock at cost, 4,800 shares
     
     
     
     (2,506
     )
     
     
     
     (2,506
     )Accumulated deficit
     
     
     
     (153,091,627
     )
     
     
     
     (152,317,492
     )Total stockholders equity
     
     
     
     9,660,150
     
     
     
     
     10,428,600Total liabilities and stockholders equity
     
     $
     
     12,413,152
     
     
     $
     
     13,076,282(1) Derived from audited financial statementsSee Notes to Unaudited Financial Statements.


4

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OPTIONABLE, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFor the three-month periods endedMarch 31,2008
     
     
     
     
     2007(Unaudited)
     
     
     
     
     (Unaudited)Revenues:Brokerage fees
     
     $
     
     -
     
     
     $
     
     5,936,717Brokerage fees-related parties
     
     
     
     -
     
     
     
     
     1,075,664Incentives-stockholder
     
     
     
     -
     
     
     
     
     2,086,967Net revenues
     
     
     
     -
     
     
     
     
     9,099,348Cost of revenues
     
     
     
     -
     
     
     
     
     2,974,609Cost of revenues-related parties
     
     
     
     -
     
     
     
     
     30,013-
     
     
     
     
     3,004,622Gross profit
     
     
     
     -
     
     
     
     
     6,094,726Operating expenses:Selling, general and administrative
     
     
     
     1,021,735
     
     
     
     
     756,851Research and development
     
     
     
     245,045
     
     
     
     
     224,005Total operating expenses
     
     
     
     1,266,780
     
     
     
     
     980,856Operating (loss) income
     
     
     
     (1,266,780
     )
     
     
     
     5,113,870Other income (expense):Interest income
     
     
     
     88,593
     
     
     
     
     98,461Other income
     
     
     
     -
     
     
     
     
     5,100Interest expense to related parties
     
     
     
     (91,719
     )
     
     
     
     (81,396
     )(3,126
     )
     
     
     
     22,165(Loss) Income before income tax
     
     
     
     (1,269,906
     )
     
     
     
     5,136,035Income tax benefit ( expense)
     
     
     
     495,771
     
     
     
     
     (2,032,974
     )Net (loss) income
     
     $
     
     (774,135
     )
     
     $
     
     3,103,061Basic earnings per common share
     
     $
     
     (0.01
     )
     
     $
     
     0.06Diluted earnings per common share
     
     $
     
     (0.01
     )
     
     $
     
     0.06Basic weighted average commonshares outstanding
     
     
     
     52,423,403
     
     
     
     
     52,023,047Diluted weighted average common shares outstanding
     
     
     
     52,423,403
     
     
     
     
     53,996,818See Notes to Unaudited Financial Statements.


5

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OPTIONABLE, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the three-month periods endedMarch 31,2008
     
     
     
     
     2007(Unaudited)
     
     
     
     
     (Unaudited)Cash flows from operating activities:Net (loss) income
     
     $
     
     (774,135
     )
     
     $
     
     3,103,061Adjustments to reconcile net income to net cash provided byoperating activities:Depreciation
     
     
     
     24,089
     
     
     
     
     30,253Amortization of debt discount
     
     
     
     91,719
     
     
     
     
     81,396Amortization of intangible asset
     
     
     
     -
     
     
     
     
     7,390Provision for doubtful accounts
     
     
     
     (625
     )
     
     
     
     (3,572
     )Fair value of warrants and options
     
     
     
     5,685
     
     
     
     
     536,423Fair value of shares issued to chief executive officer
     
     
     
     -
     
     
     
     
     181,987Changes in operating assets and liabilities:Accounts receivable
     
     
     
     625
     
     
     
     
     228,032Accounts receivable-related parties
     
     
     
     -
     
     
     
     
     77,507Due from related party
     
     
     
     -
     
     
     
     
     (105,210
     )Incentives receivable from stockholder
     
     
     
     -
     
     
     
     
     (496,128
     )Other current assets
     
     
     
     (49,460
     )
     
     
     
     25,663Accounts payable and accrued expenses
     
     
     
     13,600
     
     
     
     
     118,101Prepaid income taxes
     
     
     
     1,154,229
     
     
     
     
     -Inocme tax payable
     
     
     
     -
     
     
     
     
     382,974Accrued compensation
     
     
     
     -
     
     
     
     
     1,211,130Net cash provided by operating activities
     
     
     
     465,727
     
     
     
     
     5,379,007Cash flows used in investing activities:Acquisition of intangible asset
     
     
     
     -
     
     
     
     
     (400,000
     )Acquisition of trading rights
     
     
     
     -
     
     
     
     
     (1,180,250
     )Purchases of property and equipment
     
     
     
     -
     
     
     
     
     (223,070
     )Net cash used in investing activities
     
     
     
     -
     
     
     
     
     (1,803,320
     )Cash flows from financing activities:Proceeds from exercise of options
     
     
     
     -
     
     
     
     
     22,600Proceeds from exercise of warrants
     
     
     
     -
     
     
     
     
     80,000Net cash provided by financing activities
     
     
     
     -
     
     
     
     
     102,600Net increase in cash
     
     
     
     465,727
     
     
     
     
     3,678,287Cash, beginning of period
     
     
     
     9,919,727
     
     
     
     
     7,913,393Cash, end of period
     
     $
     
     10,385,454
     
     
     $
     
     11,591,680Supplemental disclosures of cash flow information:Cash paid for taxes
     
     $
     
     -
     
     
     $
     
     1,650,000Cash paid for interest
     
     $
     
     -
     
     
     $
     
     -Noncash investing and financing activities:Fair value of warrants issued in conncetion with the acquisition of intangible asset
     
     $
     
     -
     
     
     $
     
     756,000See Notes to Unaudited Financial Statements.


6

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1-Organization, Description of Business and Going Concern

Optionable, Inc. (the "Company") was formed in Delaware in February 2000 and offers trading and brokerage services 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 offers its services through an automated electronic trading platform.

Recent Developments

Several recent developments, such as a statement made by the Company's most significant customer, such customer's suspension of its business relationship with the Company, the matters discussed in Note [10], together with the combined succession of events since then have had a significant adverse impact on our business, including current and, likely, future results of operations and financial condition and have impacted the Company's ability to continue to operate as a brokerage services provider through traditional voice-brokerage and on the floor of a US exchange. Consequently, the Company is formulating a revised strategy to:

|1) | emphasize the marketing of its automated electronic trading platform to end-users through indirect channels, such as through other third-party brokers and other exchanges;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | develop and enhance its automated trading platform to end-users other than those in the energy derivatives markets;                                                        
|3) | provide software development services to third-party brokers and other exchanges.                                                                                          

The Company is also considering whether it would be more advantageous to sell its intangible assets, including the technology it has developed.

The Company anticipates that revenue-generating agreements under its revised strategy may take the form of licensing, royalty-based agreements and/or software development and maintenance agreements.

7

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1-Organization, Description of Business and Going Concern-Continued

The Company has not generated revenues since the third quarter of 2007. The Company believes that revenues from its brokerage services will be minimal under its existing structure. While the Company is not discontinuing its brokerage services, it will most likely need to 1) acquire the operations of a brokerage firm, or several brokerage firms, and hire their personnel, to expand its current operations or 2) form a consortium of brokerage companies that would jointly use the electronic platform.

Going Concern

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

Principles of consolidation

The accompanying consolidated financial statements include the results of operations of Opex International, Inc. and Hydra Commodity Services, Inc. for the three-month period ended March 31, 2008 and 2007. All material inter-company accounts and transactions between the Company and its subsidiaries have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and the footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008.

Reclassification

Certain amounts in the prior year consolidated financial statements have been reclassified. Revenues from two related parties, as disclosed in footnote 6 of the Companys Form 10 QSB for the quarter ended March 31, 2007 were presented as Revenues: brokerage fees in the consolidated statement of operations for the three-month period ended March 31, 2007. The Company reclassified such revenues as Revenues: brokerage fees-related parties in the accompanying consolidated statement of operations for the three-month period ended March 31, 2007.

8

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|Note 2- Summary of Significant Accounting PoliciesCash and Cash Equivalents
|---------------------------------------------------------------------------

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

Concentration of Credit Risks

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

The Company's cash and cash equivalents accounts are held at financial institutions and are insured by the Federal Deposit Insurance Corporation("FDIC") up to $100,000. During three-month periods ended March 31, 2008 and 2007, 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.

Customer Concentration

One of the Company's customers accounted for approximately 30% of its revenues during the three-month period ended March 31, 2007. During May 2007, this customer announced that it was suspending its relationship with the Company and that customer has not used the Company's services in connection with any additional transactions since that time.

Product Concentration

All of the Company's revenues were derived from fees earned from energy derivatives transactions and related incentives provided by a United States exchange.

Allowance for Doubtful Accounts

The Company has established an allowance for doubtful accounts for its accounts and incentives receivable based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible.

9

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, incentive receivable from shareholder, prepaid income taxes, other receivable and other current assets and accounts payable and accrued expenses approximate their fair value due to their short-term maturities. The carrying amounts of due to former Chairman of the Board and due to an executive officer approximate their fair value based on the Company's incremental borrowing rate.

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.

Depreciation expense amounted to approximately $24,000 and $32,000 during the three-month period ended March 31, 2008 and 2007, respectively.

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 Financial Accounting 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 concurrently with the establishment of technological feasibility; accordingly, no software development costs have been capitalized at March 31, 2008 and December 31, 2007, 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 all deferred tax assets will not be realized. Penalties and interest on underpayment of taxes are reflected in the Companys effective tax rate.

10

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 shares and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the modified-treasury stock method). The outstanding options amounted to 1,363,000 at March 31, 2008 and December 31, 2007. The outstanding warrants amounted to 19,426,000 at March 31, 2008 and December 31, 2007. The outstanding warrants at March 31, 2008 and December 31, 2007 include 18,526,000 warrants issued to an investor but for which the Company has not received the agreed consideration. The options and warrants outstanding at March 31, 2008 have been excluded from the computation of diluted earnings per share due to their antidilutive effect.

11

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

|The following sets forth the computation of basic and diluted earnings per share
|--------------------------------------------------------------------------------
|for the three-month periods ended March 31:                                     
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Numerator:                                                                      
|Net (loss) income                                                               
|                                                                                
|Denominator:                                                                    
|Denominator for basicearnings per share-weightedaverage shares outstanding      
|                                                                                
|                                                                                
|                                                                                
|Effect of dilutive employeestock options                                        
|                                                                                
|                                                                                
|Effect of dilutive warrants                                                     
|                                                                                
|Denominator for dilutedearnings per share-weightedaverage shares outstanding    
|                                                                                
|                                                                                
|                                                                                
|Basic earnings (loss)per share                                                  
|                                                                                
|Diluted earnings (loss)per share                                                
|                                                                                

12

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

Revenue Recognition

Revenue is recognized when earned. The Company's revenue recognition policies are in compliance with the Securities and Exchange Commission's ("SEC") 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 a United States exchange 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 exchange. The Company estimates monthly such incentives based on the volumes of daily transactions submitted to the exchange using the day of trade-trade date basis, and the exchange's published revenues by type of transactions. The Company, pursuant to SAB 104, recognizes the incentive revenues realized or realizable when all of the following criteria are met:

1) persuasive evidence of an arrangement exists. The exchange has publicly published the terms of its incentive program in 2003 which is offered to all intermediaries in the select transactions;

2) delivery has occurred or services have been rendered. Under arrangements with the exchange, the incentives are earned on the day the Company submits transactions to the exchange based on the revenues generated from such transactions and are no longer subject to a minimum transaction volume. The Company accounts for all transactions submitted to the 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 exchange. The Company has no other obligations to the exchange to earn the incentives;

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

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

4) collectibility is reasonably assured. The exchange has paid the Company timely on incentives earned from 2004 through May 2007. The Company intends to enforce the payment of any incentives receivable under the incentive program.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. In such circumstances, the Company will estimate the future cash flows expected to result from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the Company will recognize an impairment loss to adjust to the fair value of the asset.

Share-Based Payments

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R), "Share-Based Payment," which replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R), companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In March 2005, the SEC issued SAB 107. SAB 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. SFAS No. 123(R) permits public companies to adopt its requirements using one of two methods.

14

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

On April 14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123(R). Companies may elect to apply this statement either prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted on a basis consistent with the pro forma disclosures required for those periods under SFAS 123. Effective January 1, 2006, the Company has fully adopted the provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107 prospectively. As such, compensation cost is measured on the date of grant as its fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

The Company accounts for share-based payments awarded to the Investor pursuant to FAS No. 123R and Emerging Issue Task Force Release No.96-16, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". Share-based payments awarded to NYMEX Holdings, Inc. (the "Investor"), including those awarded by another holder of an economic interest in the Company as compensation for services to the Company, are share-based payments transactions. The Company measures the fair value of the equity instruments to the Investor using the stock price and other measurement assumptions as of the earlier of either of the following: 1) the date at which a commitment for performance, as defined, by the counterparty to earn the equity instruments is reached, or 2) the date at which the counterparty's performance is complete. The fair value of the equity instruments amounts to the carrying value of the consideration receivable from the Investor and is recognized over the agreed-upon terms of the consideration, which is at most 10 years. The Company evaluates the carrying value of the consideration receivable from the Investor at each measurement date.

15

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2- Summary of Significant Accounting Policies-Continued

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 statement of operations.

Recent Pronouncements

The FASB issued FASB Statement No. 141 (revised 2007),Business Combinations,and No. 160,Noncontrolling Interests in Consolidated Financial Statements.Statement 141(R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. FASB No.141 R is effective for fiscal years beginning after December 15, 2008. The Company does not believe that FAS No. 141 R will have any impact on its financial statements.

The FASB issued FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial StatementsStatement No.160 requires all entities to report noncontrolling (minority) interests in subsidiaries in the same wayas equity in the consolidated financial statements. Moreover, Statement 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. FASB No.160 is effective for fiscal years beginning after December 15, 2008. The Company does not believe that FAS No. 160 will have any impact on its financial statements.

In March 2008, the FASB issued FASB No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company beginning January 1, 2009. Management believes that, for the foreseeable future, this Statement will have no impact on the financial statements of the Company once adopted.

16

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3-Due from Related Party

In April 2004, under the Master Services Agreement, as amended on April 12, 2005, with a related party, Capital Energy Services, Inc., the Company agreed to pay certain fixed and variable fees and support services to such related party entity, partly owned by its former 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 Company has agreed to pay a fixed fee in the amount of $50,000 per year. This agreement was terminated on January 31, 2007.

The Company's share of revenues of the floor brokerage services amounted to approximately $901,000 during the three-month period ended March 31, 2007. The Company's share of expenses of the floor brokerage services amounted to approximately $15,000 during the three-month period ended March 31, 2007. The Company has received approximately $105,000 from the related party in connection with such floor brokerage services during the three-month period ended March 31, 2007.

The Company recognized 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.

The father of the Company's former Chairman of the Board leases to the Company a seat on the exchange through which Capital Energy maintains its floor operations. The Company assumed the cost of the lease in April 2006 and renewed it in December 2006 through June 2007. The Company terminated this agreement effective April 1, 2007. The lease provided for monthly payments of $5,000 through June 30, 2007. The amount paid pursuant to the lease amounted to $15,000 during the three-month period ended March 31, 2007.

Note 4-Trading rights

During March 2007, the Company acquired two trading rights for an aggregate amount of approximately $1,180,250, allowing it to operate on the floor of a United States exchange.

17

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OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 5-Agreement with NYMEX Holding, Inc.

On April 10, 2007, the Company and its former Chairman of the Board, its former Vice Chairman and Chief Executive Officer, and its President, (the "Founding Stockholders") and NYMEX Holdings, Inc. (the "Investor") entered into a definitive stock and warrant purchase agreement (the "Stock and Warrant Purchase Agreement") and consummated the transactions contemplated thereby.

Pursuant to the terms of the Stock and Warrant Purchase Agreement, the Investor purchased 10,758,886 shares of the Company's common stock ("Common Stock") from the Founding Stockholders (the "Purchased Shares") representing 19% of the then outstanding shares of common stock on a fully diluted basis (without giving effect to the Warrant, as defined and discussed below). Additionally, pursuant to the Stock and Warrant Purchase Agreement, the Company issued to the Investor a Warrant, as defined and described below, in consideration of the Investor's agreement (the "Consideration"):

1.
     to develop a marketing plan, which plan was to detail proposed expenditures by the Investor and joint activities;2.
     subject to regulatory requirements, to provide space for up to twenty of the Company's brokers on the Investor's trading floor;3.
     to host the Company's OPEX electronic trade matching and brokerage system ("OPEX") in the Investor's data center and provide the Company with computer and networking hardware, software, bandwidth and ancillary infrastructure and services reasonably necessary to interconnect OPEX with the Investor's ClearPort market gateway to trading and clearing services; and4.
     Additionally, the Company agreed to exclusively clear all over-thecounter ("OTC") products through the Investor's NYMEXClearPort clearing system for a period of ten years (provided that the Investor continues to offer clearance for a particular product through the NYMEX ClearPort clearing system) in consideration for additional fees to be paid by the Investor to the Company.


18

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5-Agreement with NYMEX Holding, Inc.

The terms of the warrant issued by the Company (the "Warrant"), as contemplated in the Stock and Warrant Purchase Agreement, permit the Investor to purchase a number of shares of Common Stock sufficient to increase the Investor's ownership of the Company's Common Stock to an amount not to exceed 40% of the Company's then outstanding Common Stock on a fully diluted basis, based on the assumption that the Investor has retained ownership of the Purchased Shares and any shares of Common Stock previously issued to the Investor upon a partial exercise of the Warrant. The Warrant could be exercisable at any time and from time to time prior to October 10, 2008 at an exercise price per share equal to $4.30 (the "Exercise Price"). The Warrant does not contain a cashless exercise feature. The Exercise Price is subject to certain customary adjustments to protect against dilution.

Following the occurrence of the events which are the subject of the matters discussed in Note 10 "Litigation," the Company and the Investor have not agreed upon the aforementioned joint marketing and technology initiatives. Additionally, the Investor indicated in a Schedule 13D it filed with the SEC on July 6, 2007, with respect to its holdings of equity securities of the Company, that it was now re-considering its potential joint marketing and technology initiatives with the Company. As a result, the Investor and the Company have not developed the contemplated joint marketing and technology initiatives.

The Company is considering the effect of the failure of the Investor to provide the Consideration for the Warrant upon the Company's obligations under the Warrant.

The Company has provided for an allowance for doubtful accounts for the incentives receivable from the Investor of approximately $640,000 at March 31, 2008 and December 31, 2007.

19

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6- Intangible Asset

During March 2007, the Company acquired the customer list of HQ Trading, an energy derivatives brokerage firm, and assumed its continued operations. The Company acquired such assets to expand its customer base and provide a critical mass entry in the crude oil options market. The terms of the agreement provided, among other things, the following:

|o | $400,000 payable to the owners of HQ Trading upon execution of final agreement;                                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | $400,000 payable to the owners of HQ Trading in September 2008;                                                                                                                                                                                                                                                        
|o | $400,000 payable to the owners of HQ Trading in March 2010;                                                                                                                                                                                                                                                            
|o | 900,000 warrants with an exercise price of $5 per share and expiring in March 2012, of which 300,000 are exercisable immediately and 600,000 become exercisable in March 2008 if the continued operations of HQ Trading generate revenues exceeding $1.2 million for the 12-month period following the final agreement.

20

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6- Intangible Asset-Continued

The aggregate value assigned to the consideration amounted to $1,156,000 and is as follows:

|o | The cash consideration amounts to $400,000.                                                                                                                                                                                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|o | The fair value of the 300,000 warrants exercisable at the date of the agreement amounts to $756,000, based on the Black Scholes Model, using the following assumptions: exercise price of $5, market value of $5, risk-free interest rate of 4.54%, expected volatility of 52%, expected dividend rate: 0%, term: 5 years

The expected volatility was based on the average historical volatility of comparable publicly-traded companies considering the Company's period of observable historical data is shorter than the terms of the warrants.

The fair value of the consideration was assigned to customer relationships and was amortized over a period of three years. The Company recognized approximately $7,000 during the three-month period ended March 31, 2007 and is included as selling, general and administrative expenses in the accompanying consolidated statement of income.

During May 2007, following the occurrence of the events which are the subject of the matters discussed in Note 10, "Litigation", the former owners of HQ Trading agreed to unwind the acquisition. As part of the unwinding, the former owners of HQ Trading released the Company from its obligations related to the two payments of $400,000 payable in September 2008 and March 2010 and agreed to the cancellation of the 900,000 warrants. The former owners of HQ Trading retained the $400,000 which was paid upon execution of the final agreement. Both parties retained the right to use the HQ Trading customer list. Accordingly, the Company did not be recognizing the fair value of the remaining 600,000 warrants and the two payments of aggregating $800,000.

21

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7-Due to Related Parties

The terms and amounts of due to related parties at March 31, 2008 and December 31, 2007 are as follows:

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

As ofMarch 31,
     
     
     
     
     December 31,2008
     
     
     
     
     2007$
     
     5,044,510
     
     
     $
     
     5,044,510Discount, using initial implied rate of 12%:
     
     
     
     (2,875,549
     )
     
     
     
     (2,956,314
     )$
     
     2,168,961
     
     
     $
     
     2,088,196


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 12, 2014:

As ofMarch 31,
     
     
     
     
     December 31,2008
     
     
     
     
     2007$
     
     508,697
     
     
     $
     
     508,697Discount, using initial implied rate of 12%:
     
     
     
     (390,022
     )
     
     
     
     (400,976
     )$
     
     118,675
     
     
     $
     
     107,721


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

22

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7-Due to Related Parties-Continued

As a condition to the Investor's obligation to consummate the transactions contemplated by the Stock and Warrant Purchase Agreement, the Company's former Chairman of the Board executed an agreement, dated April 10, 2007 (the "Waiver"), waiving any obligation on the part of the Company to make any prepayment of principal, or to begin paying interest upon amounts due to the Company's former Chairman of the Board, under the Loan Agreement between him and the Company, dated March 22, 2004, as a result of any exercise by the Investor of the Warrant.

The amortization of the discount on the due to related parties amounted to approximately $92,000 and $82,000 during the three-month period ended March 31, 2008 and 2007, respectively.

Note 8- Other Related Party Transactions

The Company provided administrative services to a related party, an entity owned by the Company's former Chief Executive Officer and an Executive Officer. TheCompany charged approximately $4,000 during the three-month ended March 31, 2007. This agreement was terminated by both parties effective June 30, 2007.

The Company has recognized revenues of approximately $173,000 during the three-month period ended March 31, 2007 from two related parties, entities in which one of its stockholders and former Chairman of the Board is also the managing director.

23

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9- Stockholders' Equity

During the three-month period ended March 31, 2007 the Company issued 30,689 shares of common stock, respectively, to its former Chief Executive Officer. The fair value of such shares issued amounted to approximately $182,000, based on the quoted price of the Company's common stock at the date of issuance. The shares were issued pursuant to the employment agreement between the Company and its former Chief Executive Officer.

Stock Compensation Plan

During November 2004, the Company adopted the 2004 Stock Option Plan ("2004 Plan"). The 2004 Plan allows for the grant of both incentive stock options and nonstatutory stock options. The 2004 Plan may be administered, interpreted and constructed by the Board of Directors or a compensation committee. The maximum number of shares of common stock which may be issued pursuant to options granted under the 2004 Plan may not exceed 7,500,000 shares. There are 1,363,000 options outstanding at March 31, 2008 and December 31, 2007. The Company granted 2,393,000 options during the three-month period ended March 31, 2008. The Company did not grant any options during the three-month period ended March 31, 2008. The options outstanding vest over periods of up to three years.

During March 31, 2008 and 2007, the Company recorded share-based payment expenses amounting to approximately $5,000 and $30,000, respectively, in connection with all options outstanding at the respective measurement dates. The amortization of share-based payment were recorded in cost of revenues during the three-month period ended March 31, 2007 and in selling, general, and administrative expenses during the three-month period ended March 31, 2008.

24

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9- Stockholders' Equity-continued

The share-based payment is based on the fair value of the outstanding options amortized over the requisite period of service for optionholders, which is generally the vesting period of the options.

The fair value of the options is based on the Black Scholes Model using the following assumptions :

|                                |  |   |  | 2007       |  
|------------------------------- |  | - |  | ---------- | -
|Exercise price :                |  | $ |  | 4.63-$7.17 |  
|Market price at date of grant : |  | $ |  | 4.63-$7.17 |  
|Volatility :                    |  |   |  | 52         | %
|Expected dividend rate :        |  |   |  | 0          | %
|Expected terms:                 |  |   |  | 3 years    |  
|Risk-free interest rate :       |  |   |  | 4.54       | %

The expected volatility was based on the average historical volatility of comparable publicly-traded companies considering the Company's period of observable historical data is shorter than the terms of the options.

25

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9- Stockholders' Equity-continued

The total compensation cost related to nonvested options not yet recognized amounted to approximately $38,000 at March 31, 2008 and the Company expects that it will be recognized over the following weighted-average period of 18 months.

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

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

26

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|Note 9- Stockholders' Equity-continuedOther warrants
|----------------------------------------------------

During March 2007, the Company issued warrants to the owners of HQ Trading, in connection with the Company's purchase of the HQ Trading customer relationships. The terms of the warrants are as follows:

- 900,000 warrants with an exercise price of $5 per share and expiring in March2012, of which 300,000 are exercisable immediately and 600,000 warrants become exercisable in March 2008 ifthe continued operations of HQ Trading generate revenues exceeding $1.2 million for the 12-month periodfollowing the final agreement.

All of these warrants were cancelled in May 2007 in connection with the unwinding of the HQ Trading transaction.

During 2007, the Company issued warrants to a US exchange ( See Note 5-Agreement with NYMEX Holding, Inc)The terms of the warrant issued by the Company (the "Warrant"), as contemplated in the Stock and Warrant Purchase Agreement, permit the Investor to purchase a number of shares of Common Stock sufficient to increase the Investor's ownership of the Company's Common Stock to an amount not to exceed 40% of the Company's then outstanding Common Stock on a fully diluted basis, based on the assumption that the Investor has retained ownership of the Purchased Shares and any shares of Common Stock previously issued to the Investor upon a partial exercise of the Warrant. The Warrant could be exercisable at any time and from time to time prior to October 10, 2008 at an exercise price per share equal to $4.30 (the "Exercise Price"). The Warrant does not contain a cashless exercise feature. The Exercise Price is subject to certain customary adjustments to protect against dilution. The warrants are exercisable into 18,526,000 shares of the Companys common stock at December 31, 2007.

27

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9- Stockholders' Equity-continued

Investor Rights and Registration Agreements

In connection with the consummation of the transactions contemplated by the Stock and Warrant Purchase Agreement, the Company, the Investor and the Founding Stockholders also entered into an Investor Rights Agreement, also dated April 10, 2007 (the "Investor Rights Agreement"), pursuant to which, for so long as the Investor owns at least 5,379,443 shares of Common Stock:

(a) the Investor is entitled to designate one person (reasonably acceptable to the Company) that the Company is required to nominate as a member of the Company's board of directors (the "Investor Director");

(b) each of the Founding Stockholders are required to vote their shares in favor of the election of the Investor's designee as a director of the Company;

(c) the Investor is required to vote its shares in favor of each individual nominated for election as a member of the Company's board of directors by the nominating committee of the Company;

(d) subject to certain permitted threshold amounts, the consent of the Investor Director (which may not be unreasonably withheld) is required before the Company may take certain actions, including (1) issuances of shares of a class of stock ranking senior to the Common Stock, (2) acquisitions of businesses or assets, (3) entry into related party transactions, (4) the declaration or payment of dividends or distributions on or with respect to, or the optional redemption of, capital stock or the issuance of debt and (5) entry into any business which is not similar, ancillary or related to any of the businesses in which the Company is currently engaged;

(e) each of the Founding Stockholders and the Investor have certain rights of first refusal to purchase or subscribe for their pro rata percentage of shares in certain subsequent sales by the Company of Common Stock and/or certain other securities convertible into or exchangeable for Common Stock;

(f) each of the Founding Stockholders and the Investor have certain rights of first refusal with respect to proposed sales of Common Stock by the others; and

28

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9- Stockholders' Equity-continued

(g) before they may accept any offer by an independent third party to acquire fifty percent (50%) or more of the total voting power of the Common Stock or voting stock of the Company, the Founding Stockholders and the Company are required to provide notice of such offer to the Investor and permit the Investor a period of 10 days to make its own offer.

The Investor Rights Agreement additionally requires the Investor to refrain from purchasing any additional shares of the Company's Common Stock, with certain limited exceptions, until April 10, 2008.

The Company and the Investor also entered into a registration rights agreement, dated April 10, 2007 (the "Registration Rights Agreement"), pursuant to which, among other things, the Company has provided the Investor, subject to standard exceptions, with (a) unlimited "piggyback" rights subject to standard underwriter lock-up and cutback provisions and (b) the right to two demand registrations for underwritten offerings or take downs off of a shelf registration statement, provided that (i) a minimum of $5,000,000 of Common Stock is offered in such demand registration or take down and (ii) the Company will not be obligated to effectuate more than one underwritten offering pursuant to a demand registration by the Investor in any six-month period. In addition, if the Company is eligible to register its securities on Form S-3 (or any successor form then in effect), the Investor will be entitled to unlimited registrations on Form S-3 (or any successor form then in effect), including shelf registrations, provided that (a) a minimum of $5,000,000 of Common Stock is offered in the S-3 registration and (b) the Company will not be obligated to effect more than two S-3 registrations in any twelve month period. An S-3 registration will not count as a demand registration, unless such registration is for an underwritten offering or an underwritten take down off of an existing, effective shelf registration statement.

On May 14, 2007, the Investor Director resigned and the Investor has stated that it has no current plans to fill the vacancy created by the Investor Director's resignation.

29

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10- Litigation and Contingencies

On May 11, 2007, two lawsuits, captioned Alexander Fleiss v. Optionable Inc., Mark Nordlicht, Kevin Cassidy, Edward J. O'Connor, Albert Helmig and Marc-Andre Boisseau, 07 CV 3753 (LAK) ("Fleiss") and Robert Rastocky v. Optionable, Inc., Kevin Cassidy and Edward O'Connor, 07 CV 3755 (CLB), were filed in the United States District Court for the Southern District of New York. Subsequently, five additional lawsuits were filed in the United States District Court for the Southern District of New York as follows: one on May 16, 2007, Jagdish Patel v. Optionable Inc., Kevin Cassidy, and Edward J. O'Connor, 07 CV 3845 (LAK) ("Patel"); two on May 17, 2007, Peters v. Optionable, Inc., Mark Nordlicht, Kevin P. Cassidy, Edward J. O'Connor, Albert Helmig, and Marc-Andre Boisseau, 07 CV 3877 (LAK) ("Peters"); and Manowitz v. Optionable Inc., Kevin Cassidy, Edward J. O'Conner, and Mark Nordlicht, 07 CV 3884 (UA) ("Manowitz"); one on May 24, 2007, Glaubach v. Optionable Inc., Kevin Cassidy, Mark Nordlicht, Edward J. O'Connor, Albert Helmig, and Marc-Andre Boisseau; 07 CV 4085 (LAK) ("Glaubach"); and one on June 22, 2007, Bock v. Optionable Inc., Kevin Cassidy, Mark Nordlicht, Edward J. O'Connor, Albert Helmig, and Marc-Andre Boisseau, 07 CV 5948 (LAK) ("Bock"). Each of the lawsuits names the Company as a defendant and some of the lawsuits name as defendants all or certain of the directors and officers of the Company during the time period referenced. The directors and officers of the Company named as defendants include Mark Nordlicht, the former Chairman of the Board of Directors of the Company; Kevin Cassidy, the former Chief Executive Officer and Vice-Chairman of the Board of Directors of the Company; Edward J. O'Connor, the President of the Company and member of the Board of Directors; Albert Helmig, a member of the Board of Directors during the relevant time period; and Marc-Andre Boisseau, the Chief Financial Officer of the Company. By Order dated May 24, 2007, Rastocky was voluntarily dismissed.

By Orders dated June 20, 2007 and July 3, 2007, Fleiss, Patel, Peters, Manowitz and Glaubach were consolidated under In re Optionable Securities Litigation, 07 CV 3753 (LAK). . By Order November 20, 2007, Judge Kaplan granted the motion of KLD Investment Management, LLC to serve as Lead Plaintiff and approved its choice of counsel, Kahn Gauthier Swick, LLC.

On January 17, 2008, Lead Plaintiff filed a Consolidated Amended Class Action Complaint (Complaint.) The Complaint seeks unspecified damages arising from alleged violations of the federal securities laws, including the Securities Exchange Act of 1934, 15 U.S.C. ss. 78a et seq., (the "Exchange Act"), and Rule 10b-5 under the Exchange Act, 17 C.F.R. ss. 240.10b -5. The Complaint alleges, among other things, that during the class period of January 22, 2007 to May 14, 2007, defendants failed to disclose certain information in public filings and statements, made materially false and misleading statements and

30

---

OPTIONABLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|Note 10- Litigation and Contingencies-continued
|-----------------------------------------------

misrepresentations in public filings and statements, sold artificially inflated stock and engaged in improper deals, had an improper relationship with and schemed with its customer Bank of Montreal ("BMO"), and understated the Company's reliance on its relationship with BMO. The Complaint alleges that while the Company's stock was trading at artificially inflated prices, certain defendants sold shares of common stock of the Company.

On February 15, 19, and 20, 2008, the Company and individual defendants Nordlicht, Cassidy, Helmig, OConnor and Boisseau filed motions to dismiss the Complaint. On April 1 and 4, 2008, Plaintiffs filed their oppositions to the Defendants' motions. On April 3, 2008, Judge Kaplan ordered the individual defendants to file only a single joint reply memorandum in response to Plaintiffs' oppositions. On April 22, 2008, the Company filed its reply memorandum of law in support of its motion to dismiss the Complaint, and the individual defendants filed their joint reply memorandum of the same. All parties also advised the Court of their availability for oral argument on the motions, and await a response.

The actual costs that will be incurred in connection with these actions cannot be quantified at this time and will depend upon many unknown factors.

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

|1) | continue to pay him his base salary, amounting to $25,000 per month for fiscal 2007, $325,000 for fiscal 2008, and $350,000 for fiscal 2009;                                                                                                                                             
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | continue to pay him a cash consideration equal to 5% of the Company's revenues and a stock consideration equal to 2% of the Company's revenues. The aggregate value of the unpaid consideration based on the Company's revenues amounted to approximately $289,000 at September 30, 2007;
|3) | Continue to provide to him health, welfare, and pension plan benefits as well as the payment of an annual premium for his life insurance through October 2009.                                                                                                                           

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

31

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

OVERVIEW OF RECENT DEVELOPMENTS SINCE APRIL 2007

Stock and Warrant Purchase Agreement with NYMEX Holdings, Inc.

On April 10, 2007, we, Mark Nordlicht, our former Chairman of the Board, Kevin Cassidy, our former Vice Chairman and Chief Executive Officer, Edward OConnor, our President,
(together with Mr. Nordlicht and Mr. Cassidy, the Founding Stockholders), and NYMEX Holdings, Inc. (the Investor) entered into a definitive stock and warrant purchase agreement (the Stock and Warrant Purchase
Agreement).

Pursuant to the terms of the Stock and Warrant Purchase Agreement, Mr. Nordlicht, Mr. Cassidy and Mr. OConnor sold to the Investor, 7,000,000, 1,905,000 and 1,853,886 shares,
respectively, of common stock of the Company. This aggregate of 10,758,886 shares of common stock (the Purchased Shares) represented 19% of the then outstanding shares of common stock on a fully diluted basis (without giving effect to
the Warrant, as defined and discussed below). The purchase price paid by the Investor for the Purchased Shares was $2.69 per share. Additionally, pursuant to the Stock and Warrant Purchase Agreement, we physically issued to the Investor the
Warrant, as defined and described below, in consideration of the Investors agreement (i) to develop with us a marketing plan, which plan will detail proposed expenditures by the Investor and joint activities; (ii) subject to regulatory
requirements, to provide space for up to twenty of the our brokers on the Investors trading floor; and (iii) to host our electronic trading platform, OPEX, in the Investors data center and provide us with computer and networking
hardware, software, bandwidth and ancillary infrastructure and services reasonably necessary to interconnect OPEX with the Investors clearing system market gateway to trading and clearing services. Additionally, we agreed to exclusively clear
all OTC products through the Investors clearing system for a period of ten years (provided that the Investor continues to offer clearance for a particular product through its clearing system) in consideration for additional fees to be paid by
the Investor to us.

The warrant issued by us (the Warrant) permits the Investor to purchase a number of shares of common stock sufficient to increase the Investors ownership of the
Companys common stock to an amount not to exceed 40% of the Companys then outstanding common stock on a fully diluted basis, based on the assumption that the Investor has retained ownership of the Purchased Shares and any shares of
common stock previously issued to the Investor upon a partial exercise of the Warrant. The Warrant is exercisable at any time and from time to time prior to October 10, 2008 at an exercise price per share equal to $4.30 (the Exercise
Price). The Warrant does not contain a cashless exercise feature. The Exercise Price is subject to certain customary adjustments to protect against dilution.

In connection with the consummation of the transactions contemplated by the Stock and Warrant Purchase Agreement , the Company, the Investor and the Founding Stockholders also entered
into an Investor Rights Agreement, also dated April 10, 2007 (the Investor Rights Agreement), pursuant to which, for so long as the Investor owns at least 5,379,443 shares of common stock:

(a) the Investor is entitled to designate one person (reasonably acceptable to the Company) that we are required to nominate as a member of the our board of directors (the
Investor Director);

(b) each of the Founding Stockholders are required to vote their shares in favor of the election of the Investors designee as one our directors;

(c) the Investor is required to vote its shares in favor of each individual nominated for election as a member of our board of directors by our nominating committee;

(d) subject to certain permitted threshold amounts, the consent of the Investor Director (which may not be unreasonably withheld) is required before we may take certain actions,
including (1) issuances of shares of a class of stock ranking senior to the common stock, (2) acquisitions of businesses or assets, (3) entry into related party transactions, (4) the declaration or payment of dividends or distributions on or with
respect to, or the optionable redemption of, capital stock or the issuance of debt and (5) entry into any business which is not similar, ancillary or related to any of the businesses in which we are currently engaged;

(e) each of the Founding Stockholders and the Investor have certain rights of first refusal to purchase or subscribe for their pro rata percentage of shares in certain subsequent
sales by us of common stock and/or certain other securities convertible into or exchangeable for common stock;

32

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(f) each of the Founding Stockholders and the Investor have certain rights of first refusal with respect to proposed sales of our common stock by the others; and

(g) before they may accept any offer by an independent third party to acquire fifty percent (50%) or more of the total voting power of our common stock, the Founding Stockholders and
we are required to provide notice of such offer to the Investor and permit the Investor a period of 10 days to make its own offer.

The Investor Rights Agreement additionally requires the Investor to refrain from purchasing any additional shares of our common stock, with certain limited exceptions, until April 10,
2008.

The Company and the Investor also entered into a registration rights agreement, dated April 10, 2007 (the Registration Rights Agreement), pursuant to which, among other
things, we have provided the Investor, subject to standard exceptions, with (a) unlimited piggyback rights subject to standard underwriter lock-up and cutback provisions and (b) the right to two demand registrations for underwritten
offerings or take downs off of a shelf registration statement, provided that (i) a minimum of $5,000,000 of our common stock is offered in such demand registration or take down and (ii) we will not be obligated to effectuate more than one
underwritten offering pursuant to a demand registration by the Investor in any six-month period. In addition, if we are eligible to register our securities on Form S-3 (or any successor form then in effect), the Investor will be entitled to
unlimited registrations on Form S-3 (or any successor form then in effect), including shelf registrations, provided that (a) a minimum of $5,000,000 of common stock is offered in the S-3 registration and (b) we will not be obligated to effect
more than two S-3 registrations in any twelve month period. An S-3 registration will not count as a demand registration, unless such registration is for an underwritten offering or an underwritten take down off of an existing, effective shelf
registration statement.

To date, we have not received any demands from the Investor pursuant to such registration rights nor have we included their shares in a registration statement.

As a condition to the Investors obligation to consummate the transactions contemplated by the Stock and Warrant Purchase Agreement, Mr. Nordlicht executed an agreement, dated
April 10, 2007 (the Waiver), waiving any obligation on the part of the Company to make any prepayment of principal, or to begin paying interest upon amounts due to Mr. Nordlicht, under the Loan Agreement between him and the Company,
dated March 2004, as a result of any exercise by the Investor of the Warrant. Also as a condition to the Investors obligation to consummate the transactions contemplated by the Stock and Warrant Purchase Agreement, Mr. Cassidy and the Company
entered into an Amended and Restated Employment Agreement and Mr. OConnor entered into a Non-Competition Agreement, dated April 10, 2007, with the Company, pursuant to which Mr. OConnor agreed not to disclose or use the Companys
confidential information and, for a period of nine months following the termination of Mr. OConnors employment, not to compete with the Company or solicit certain customers of the Company.

Pursuant to our final agreements with the Investor in April 2007, we physically issued to the Investor warrants which will permit the Investor to purchase a number of shares of common
stock sufficient to increase its ownership to an amount not to exceed 40% of our then outstanding common stock on a fully diluted basis, based on the assumption that the Investor has retained ownership of the Purchased Shares and any shares of
common stock previously issued to the Investor upon a partial exercise of the Warrant. The Warrant will be exercisable from time to time for a period of 18 months from the closing date of the final agreement at an exercise price per share equal to
$4.30 (the "Exercise Price"). The Exercise Price will be subject to certain customary adjustments to protect against dilution.

The number of warrants issued to NYMEX may increase or decrease from time to time until October 2008, depending on whether we issue additional shares, options, and warrants,
repurchase treasury shares, or certain outstanding options and warrants expire or become unexercisable. Because the number of shares will vary from time to time, the fair value of the warrants issued pursuant to our agreement and the related
amortization may also vary from time to time, until October 2008.

Following the occurrence of the events which are subject of the matters discussed in Item 1 of Part II of this Report Legal Proceedings, we have not agreed with the
Investor on the joint marketing and technology initiatives discussed, above. Additionally, the Investor indicated in a Schedule 13D it filed with the SEC on July 6, 2007, with respect to its holdings of equity securities of the Company, that it was
now re-considering its potential joint marketing and technology initiatives with the Company. As a result, the Investor and the Company have not developed the contemplated joint marketing and technology initiatives.

33

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The Company is considering the effect of the failure of the Investor to provide the consideration for the Warrant upon the Companys obligations under the Warrant.

Resignations and Suspension of Business Relationship with the Company by BMO Financial Group

On May 1, 2007, Mark Nordlicht resigned as a member of the Companys Board and Albert Helmig was designated as Chairman of the Board.

On May 8, 2007, BMO Financial Group (BMO) issued a statement indicating that BMO was suspending its business relationships with us, as well as all derivatives trading
through us, pending the results of an ongoing external review of certain commodity trading losses incurred by BMO. BMO has accounted for a significant portion of the Companys revenues. Since that time, BMO has not explained its action to the
Company and has not resumed its business relationships with us.

On May 11, 2007, Albert Helmig was designated as our Executive Chairman of the Board.

On May 12, 2007, Mr. Kevin Cassidy resigned as our Chief Executive Officer and as a director.

On May 14, 2007, Benjamin Chesir, the Investor Director resigned as one of our directors. The Investor has issued a statement that they do not have current plans to fill the vacancy
created by Mr. Chesirs resignation.

The statement issued by BMO, the related suspension of their business relationship with us, the matters discussed in [Item 1 of Part 2 of this Report Legal Proceedings]
together with the combined succession of events since then have had a significant adverse impact on our business, including current and, likely, future results of operations and financial condition. Consequently, we formulated a revised business
strategy.



|REVISED STRATEGY
|----------------

We launched our electronic trading system, OPEX, in 2006 and we have continued to enhance its features and functionalities during 2007. Users of OPEX can now execute on the platform
mostly energy-related derivative trades. A significant portion of the contracts executable on OPEX are those offered by NYMEX, a US exchange. However, we believe that OPEX features and functionalities can be ported to other derivatives as well, such
as credit default swaps, interest-related derivatives, metals and other commodities. Additionally, we believe that OPEX, with appropriate enhancements, may be able to execute transactions offered by other exchanges as well.

The Company is revising its strategy to:

|1) | emphasize the marketing of its automated electronic trading platform to end-users through indirect channels, such as through other third-party brokers and other
exchanges, operating in either the energy or other commodities markets;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2) | develop and enhance its automated trading platform to end-users other than those in the energy derivatives markets;                                                                                                                     
|3) | provide software development services to third-party brokers and other exchanges.                                                                                                                                                       
|4) | Considering whether it would be more advantageous to sell its intangible assets, including the technology it has developed.                                                                                                             

The Company anticipates that revenue-generating agreements under some elements of its revised strategy would take the form of licensing, royalty-based agreements and/or software
development and maintenance agreements. We could also enter in an arrangement in which we buy a stake in a brokerage firm, trading firm, or technology company in exchange for our intangible assets. Depending on the terms of such arrangements, we may
have to consolidate the operations of such firm or company, even if we hold a minority stake in it. We have not entered into such arrangements to date.

The Company believes that revenues from its traditional brokerage services will be minimal under its existing structure. We have not generated any revenues under our existing
structure since the third quarter of 2007. While the Company is not discontinuing its brokerage services, it may need to 1) acquire a stake in the operations of a brokerage firm, or several brokerage firms, and hire their personnel, to expand its
current operations, or 2) form a consortium of brokerage companies that would jointly use the electronic platform.

34

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GOING CONCERN

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

35

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RESULTS OF OPERATIONS - Three month period ended March 31, 2008 compare to 2007Results of Operations(Unaudited)Increase/
     
     
     Increase/For the three-month period ended
     
     
     
     
     (Decrease)
     
     
     (Decrease)March 31,
     
     
     
     
     in $ 2008
     
     
     in $ 20082008
     
     
     
     2007
     
     
     
     
     vs 2007
     
     
     vs 2007Brokerage fees
     
     $
     
     -
     
     $
     
     5,936,717
     
     
     $
     
     (5,936,717
     )
     
     NMBrokerage fees-related parties
     
     
     
     -
     
     
     
     1,075,664
     
     
     
     
     (1,075,664
     )
     
     NMIncentives
     
     
     
     -
     
     
     
     2,086,967
     
     
     
     
     (2,086,967
     )
     
     NMNet revenues
     
     
     
     -
     
     
     
     9,099,348
     
     
     
     
     (9,099,348
     )
     
     NMCost of revenues
     
     
     
     -
     
     
     
     2,974,609
     
     
     
     
     (2,974,609
     )
     
     NMCost of revenues-related parties
     
     
     
     -
     
     
     
     30,013
     
     
     
     
     (30,013
     )
     
     NM-
     
     
     
     3,004,622
     
     
     
     
     (3,004,622
     )
     
     NMGross profit
     
     
     
     -
     
     
     
     6,094,726
     
     
     
     
     (6,094,726
     )
     
     NMOperating expenses:Selling, general and administrative
     
     
     
     1,021,735
     
     
     
     756,851
     
     
     
     
     264,884
     
     
     35.0
     %Research and development
     
     
     
     245,045
     
     
     
     224,005
     
     
     
     
     21,040
     
     
     9.4
     %Total operating expenses
     
     
     
     1,266,780
     
     
     
     980,856
     
     
     
     
     285,924
     
     
     29.2
     %Operating (loss) income
     
     
     
     (1,266,780
     )
     
     
     5,113,870
     
     
     
     
     (6,380,650
     )
     
     NMOther income (expense):Interest income
     
     
     
     88,593
     
     
     
     98,461
     
     
     
     
     (9,868
     )
     
     -11.1
     %Interest expense-related parties
     
     
     
     (91,719
     )
     
     
     (81,396
     )
     
     
     
     10,323
     
     
     12.7
     %(3,126
     )
     
     
     17,065
     
     
     
     
     20,191
     
     
     NMNet (loss) income before income tax
     
     
     
     (1,269,906
     )
     
     
     5,130,935
     
     
     
     
     (6,400,841
     )
     
     NMIncome tax benefit ( expense)
     
     
     
     495,771
     
     
     
     (2,032,974
     )
     
     
     
     (2,528,745
     )
     
     NMNet (loss) income
     
     $
     
     (774,135
     )
     $
     
     3,097,961
     
     
     $
     
     (3,872,096
     )
     
     NMNM: Not meaningful


36

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Revenues consist primarily of fees earned from natural gas derivatives transactions and related incentive arrangements.

The decrease in brokerage fees during the three-month period ended March 31, 2008 when compared to the prior year period is primarily due to an decrease in the brokerage fees
resulting from increased volume of transactions of natural gas derivatives traded on the OTC market on behalf of existing clients. We have not generated any meaningful brokerage fees since the second quarter of 2007.

The decrease in brokerage fees-related party during the three-month period ended March 31, 2008 when compared to the prior year period is primarily due to the fact that our agreement
with Capital Energy Services, Inc., a related party, was effective during one month (i.e. January 2007). This agreement was terminated January 31, 2007.

The decrease in incentives earned during the three-month period ended March 31, 2008 when compared to the prior year period, pursuant to an agreement with a US exchange, the Investor,
was due to a higher volume of cleared OTC transactions handled by us on such exchange during the prior year period. We have not generated any meaningful incentive revenues since the second quarter of 2007.

The Company anticipates that revenue-generating agreements, if any, under its revised strategy would take the form of licensing, royalty-based agreements and/or software development
and maintenance agreements.

As a result of the factors discussed above, we believe that our revenues for the remainder of 2008 will decrease when compared to 2007. We believe that revenues we traditionally
generated from OPEX, voice-brokerage and our floor operations will be minimal for the remainder of 2008 unless we are able to implement our revised strategy.

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 decrease in cost of revenues during the three-month period ended March 31, 2008 when compared to the prior year period is primarily attributable to the termination of employment of substantially
all our brokers during 2007, which reduced our compensation expenses ( including salary, commissions, and share-based payment) associated with the employment of such brokers.

We expect that our cost of revenues for the remainder of 2008 will decrease, commensurate with an expected decrease in revenues, unless we implement our revised strategy which could
change our business model.

Selling, general, and administrative expenses

Selling, general, and administrative expenses consists primarily of legal fees, incurred in connection with the Companys attention to certain allegations made recently and to
our responses to and compliance with requests for documents and information received from the United States Commodity Futures Trading Commission (the CFTC), the United States Securities and Exchange Commission (the SEC), the
United States Department of Justice (the DOJ) and a grand jury subpoena received from the New York County District Attorneys office (the District Attorneys Office), or to handle certain matters which occur during
the course of our operations, and compensation of personnel supporting our operations. The increase in selling, general, and administrative expenses during the three-month period ended March 31, 2008, when compared to the prior period is primarily
due to the following:

- increased legal fees of approximately $480,000, primarily incurred in connection with our attention to certain legal proceedings commenced in May 2007 and, our responses to, and compliance with the governmental requests described above,
offset by a decrease in legal fees we incurred during the three-month period ended March 31, 2007 in connection with the NYMEX transaction which closed in April
2007;
- decreased investor relation fees in connection with decreased efforts to position our company before the investors community;
- decreased marketing expenses incurred in connection with the decreased marketing efforts to position our company before the traders community.

37

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As a result of the matters discussed above and in Item 1 of Part II of this Report, we believe that our legal fees for 2008 will continue to constitute of a large share of our selling, general, and administrative expenses. We are unable to predict whether they will remain at comparable level to 2007.

Research and development

Research and development expenses consist primarily of compensation of personnel and consultants associated with the development and testing of our automated electronic trading system. The increase in research and development expenses during the three-month period ended March 31, 2008 when compared to the prior year period is primarily due to the following:

- increased compensation rate for existing software engineers and quality and assurance personnel working on electronic platform, OPEX.

We expect that our research and development expenses to enhance features and functionalities of OPEX may exceed $1 million during 2008.

Interest income

Interest income consists primarily of interest earned on interest-bearing cash and cash equivalents. The decrease in interest income during the three-month period ended March 31, 2008 when compared to the prior year period is primarily due to an decrease in interest rate we earned on our cash and cash equivalents interest bearing balances.

Interest expense to related parties

Interest expense to related parties consists of interest charges associated with amounts due to related parties, Mark Nordlicht, our former Chairman, and Edward OConnor, our President. The increase in interest expense to related parties during the three-month period ended March 31, 2008 is primarily due to the increase in basis on which the interest is imputed, using the effective interest method.

Income tax

Income tax benefit/expense consists of federal and state current and deferred income tax or benefit based on our net income. The increase in income tax benefit during the three-month ended March 31, 2008 when compared to the income tax expense we incurred during the comparable prior year period is primarily due to losses we incurred during the three-month period ended March 31, 2008 compared to profits we earned during the three-month period ended March 31, 2007.

LIQUIDITY AND CAPITAL RESOURCES

Our cash balance as of March 31, 2008 amounts to approximately $10.4 million.

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

- net loss of approximately $770,000, adjusted for the amortization of debt discount of approximately $92,000; and
- a decrease in prepaid income taxes assets resulting from the reimbursement during the three-month period ended March 31, 2008 of the 2007 federal estimated tax payments /income tax payable of 3.6 million resulting from the payment of estimated income taxes.

During the three-month period ended March 31, 2007, we generated cash from operating activities of approximately $5.4 million, primarily resulting from:

- net income of approximately $3.1 million, adjusted for the fair value of warrants, options and shares issued during the period aggregating approximately $718,000; and
- a decrease in accounts receivable and accounts receivable-related party of approximately $305,000, and an increase in incentive receivable, due from related party, income tax payable, and accrued compensation of approximately $496,000, $105,000, $383,000 and $1.2 million, respectively.

38

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We used our cash generated from operating activities to acquire the customer relationship of HQ Trading, a crude oil broker, for $400,000, acquired trading rights on the NYMEX floor for $1.2 million, and incurred capital expenditures aggregating approximately $223,000

We generated gross proceeds from the exercise of certain warrants options aggregating approximately $103,000.

On May 30, 2006, our Board of Directors authorized us to repurchase such number of shares of our common stock that have an aggregate purchase price not in excess of $200,000 at the rate of up to $50,000 worth of common stock each quarter. The Company repurchased 4,800 shares at a cost aggregating $2,506 since the commencement of the share repurchase program. We did not repurchase any shares during the three-month period ended March 31, 2008.

GOING CONCERN

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Revenue recognition

Revenue is recognized when earned. Our revenue recognition policies are in compliance with the SEC'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.

We also receive incentives from the New York Mercantile Exchange 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 an exchange which has publicly published the initial terms of its incentive program in 2003 which it modified in 2005 and is which is offered to all intermediaries in the select transactions;

2) Delivery has occurred or services have been rendered. Under arrangements with the exchange, the incentives are earned on the day we submit transactions to the respective exchanges based on the

39

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revenues generated from such transactions and are no longer subject to minimum volume of transactions to the exchange. 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 exchange. We have no other obligations to the exchange 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. The exchange has paid us timely on incentives earned from 2004 through May 2007. The Company intends to enforce the payment of any incentives receivable

Accounts and incentive receivable and related allowance for doubtful accounts.

Accounts receivable and incentive receivable are reported at net realizable value. We have established an allowance for doubtful accounts based upon factors pertaining to the credit risk of specific customers, historical trends, and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible.

Share-based payment

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

Impairment of intangible assets

SFAS No. 142,Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of an intangible asset below its carrying value. These events or circumstances could include a significant change in the relationship with the contracting party, business climate, legal factors, operating performance indicators, or competition. Application of the intangible asset impairment test requires judgment, including the determination of the fair value of each intangible asset. The fair value of each intangible asset is estimated based on the consideration given by us to acquire the intangible asset(s). This requires significant judgment including the estimation of expected volatility if the Company issued common share equivalent as consideration. Changes in our estimates of undiscounted cash flows related to each intangible asset could materially affect the determination of the impairment for each intangible asset.

Contingencies

The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. SFAS No. 5,Accounting for Contingencies,requires that an estimated loss from a loss contingency such as a legal proceeding or claim should be accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Disclosure of a contingency is required if there is at least a reasonable possibility that a loss has been incurred. In determining whether a loss should be accrued we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our financial position or our results of operations.



40

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RECENT PRONOUNCEMENTS

The FASB issued FASB Statement No. 141 (revised 2007),Business Combinations,and No. 160,Noncontrolling Interests in Consolidated Financial Statements.Statement 141(R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. FASB No.141 R is effective for fiscal years beginning after December 15, 2008. The Company does not believe that FAS No. 141 R will have any impact on its financial statements.

The FASB issued FASB Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements

Statement No.160 requires all entities to report noncontrolling (minority) interests in subsidiaries in the same wayas equity in the consolidated financial statements. Moreover, Statement 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. FASB No.160 is effective for fiscal years beginning after December 15, 2008. The Company does not believe that FAS No. 160 will have any impact on its financial statements.

In March 2008, the FASB FASB No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company beginning January 1, 2009. Management believes that, for the foreseeable future, this Statement will have no impact on the financial statements of the Company once adopted.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



|n/aITEM 4T. CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and Procedures
|-----------------------------------------------------------------------------------

As of March 31, 2008, our management our President and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our President and our Chief Financial Officer concluded that, as of March 31, 2008, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, including ensuring that such material information is accumulated and communicated to our President and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2008, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

41

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|PART II: OTHER INFORMATION
|--------------------------



|ITEM 1. LEGAL PROCEEDINGS
|-------------------------

On May 11, 2007, two lawsuits, captioned Alexander Fleiss v. Optionable Inc., Mark Nordlicht, Kevin Cassidy, Edward J. O'Connor, Albert Helmig and Marc-Andre Boisseau, 07 CV 3753
(LAK) ("Fleiss") and Robert Rastocky v. Optionable, Inc., Kevin Cassidy and Edward O'Connor, 07 CV 3755 (CLB), were filed in the United States District Court for the Southern District of New York. Subsequently, five additional lawsuits were filed in
the United States District Court for the Southern District of New York as follows: one on May 16, 2007, Jagdish Patel v.

Optionable Inc., Kevin Cassidy, and Edward J. O'Connor, 07 CV 3845 (LAK) ("Patel"); two on May 17, 2007, Peters v. Optionable, Inc., Mark Nordlicht, Kevin P. Cassidy, Edward J.
O'Connor, Albert Helmig, and Marc-Andre Boisseau, 07 CV 3877 (LAK) ("Peters"); and Manowitz v. Optionable Inc., Kevin Cassidy, Edward J. O'Conner, and Mark Nordlicht, 07 CV 3884 (UA) ("Manowitz"); one on May 24, 2007, Glaubach v. Optionable Inc.,
Kevin Cassidy, Mark Nordlicht, Edward J. O'Connor, Albert Helmig, and Marc-Andre Boisseau; 07 CV 4085 (LAK) ("Glaubach"); and one on June 22, 2007, Bock v. Optionable Inc., Kevin Cassidy, Mark Nordlicht, Edward J. O'Connor, Albert Helmig, and
Marc-Andre Boisseau, 07 CV 5948 (LAK) ("Bock"). Each of the lawsuits names the Company as a defendant and some of the lawsuits name as defendants all or certain of the directors and officers of the Company during the time period referenced. The
directors and officers of the Company named as defendants include Mark Nordlicht, the former Chairman of the Board of Directors of the Company; Kevin Cassidy, the former Chief Executive Officer and Vice-Chairman of the Board of Directors of the
Company; Edward J. O'Connor, the President of the Company and member of the Board of Directors; Albert Helmig, a member of the Board of Directors during the relevant time period; and Marc-Andre Boisseau, the Chief Financial Officer of the Company.
By Order dated May 24, 2007, Rastocky was voluntarily dismissed.

By Orders dated June 20, 2007 and July 3, 2007, Fleiss, Patel, Peters, Manowitz and Glaubach were consolidated under In re Optionable Securities
Litigation, 07 CV 3753 (LAK). . By Order November 20, 2007, Judge Kaplan granted the motion of KLD Investment Management, LLC to serve as Lead Plaintiff and approved its choice of counsel, Kahn Gauthier Swick, LLC.

On January 17, 2008, Lead Plaintiff filed a Consolidated Amended Class Action Complaint ("Complaint.") The Complaint seeks unspecified damages arising
from alleged violations of the federal securities laws, including the Securities Exchange Act of 1934, 15 U.S.C. ss. 78a et seq., (the "Exchange Act"), and Rule 10b-5 under the Exchange Act, 17 C.F.R. ss. 240.10b -5. The Complaint alleges, among
other things, that during the class period of January 22, 2007 to May 14, 2007, defendants failed to disclose certain information in public filings and statements, made materially false and misleading statements and misrepresentations in public
filings and statements, sold artificially inflated stock and engaged in improper deals, had an improper relationship with and "schemed" with its customer Bank of Montreal ("BMO"), and understated the Company's reliance on its relationship with BMO.
The Complaint alleges that while the Company's stock was trading at artificially inflated prices, certain defendants sold shares of common stock of the Company.

On February 15, 19, and 20, 2008, the Company and individual defendants Nordlicht, Cassidy, Helmig, O'Connor and Boisseau filed motions to dismiss the
Complaint. On April 1 and 4, 2008, Plaintiffs filed their oppositions to the Defendants' motions. On April 3, Judge Kaplan ordered the individual defendants to file only a single joint reply memorandum in response to Plaintiffs' oppositions. On
April 22, 2008, the Company filed its reply memorandum of law in support of its motion to dismiss the Complaint, and the individuals defendants filed their joint reply memorandum of the same. All parties also advised the Court of their availability
for oral argument on the motions, and await a response.

The actual costs that will be incurred in connection with these actions cannot be quantified at this time and will depend upon many unknown
factors.

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

Other Matters

Since May 2007, the Company has received requests for documents and information from the CFTC, the SEC and the DOJ and the District Attorney's Office. Since that time, the Company has
complied, and continues to comply, with these several requests for documents and information.

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ITEM 1A. RISK FACTORS

There are no material changes from the risk factors previously disclosed in the Registrants Form 10-K filed on March 31, 2008.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 6. EXHIBITS

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



|*Filed herewith
|---------------

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|SIGNATURES
|----------

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 12, 2008

Optionable, Inc.By: /s/ Edward OConnorEdward OConnorPresident and Director(Principal Executive Officer)By: /s/ Marc-Andre BoisseauMarc Andre-BoisseauChief Financial Officer(Principal Financial Officer)


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