UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
      DC 20549
 
 FORM
      10-Q
 
 x
              Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934.
 
 For
      the quarterly period ended June 30,
2009.
 
 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)1230
      Avenue of the Americas, Seventh Floor, New York, NY
                
                10020(Address of Principal Executive
      Offices)
                
                (Zip
      Code)
 
 (914)
      773-1100
 
 (Registrant’s
      Telephone Number Including Area
Code)
  Indicate
by check mark whether the registrant (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No
o
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes o No o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large Accelerated Filer o
              
              Accelerated Filer oNon-accelerated Filer o
              
              Smaller reporting company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x No o
  The
number of outstanding shares of the registrant’s Common Stock as of August 14,
2009 is 48,328,328.
  1
  OPTIONABLE, INC.
                INDEX
 
 PART I:
      FINANCIAL INFORMATIONITEM
    1:
                                                                  
                                                                  FINANCIAL STATEMENTS
      (Unaudited)
                                                                  3Consolidated Balance
      Sheets
                                                                  3Consolidated
      Statements of Operations
                                                                  4Consolidated Statements of Cash
      Flows
                                                                  5Notes to the
      Consolidated Financial Statements
                                                                  6ITEM
    2:
                                                                  
                                                                  MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                                                  22ITEM 3:
                                                                  
                                                                  QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
                                                                  25ITEM
    4:
                                                                  
                                                                  CONTROLS AND
      PROCEDURES
                                                                  25PART II: OTHER
      INFORMATIONITEM
    1
                                                                  
                                                                  LEGAL
      PROCEEDINGS
                                                                  26ITEM 1A:
                                                                  
                                                                  RISK
      FACTORS
                                                                  27ITEM
    2
                                                                  
                                                                  UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS
                                                                  27ITEM
    3
                                                                  
                                                                  DEFAULTS UPON SENIOR
      SECURITIES
                                                                  27ITEM
    4
                                                                  
                                                                  SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS
                                                                  27ITEM
    5
                                                                  
                                                                  OTHER
      INFORMATION
                                                                  27ITEM
    6:
                                                                  
                                                                  EXHIBITS
                                                                  27SIGNATURES
                                                                  
                                                                  
                                                                  28
 
 2
 OPTIONABLE,
      INC.CONSOLIDATED
      BALANCE SHEETSJune
      30, 2009
                                                      
                                                      
                                                      December
      31, 2008ASSETS
                                                      
                                                      (Unaudited)
                                                      
                                                      
                                                      (1)Current
      Assets:Cash
      and cash equivalents
                                                      
                                                      $
                                                      4,237,091
                                                      
                                                      
                                                      $
                                                      8,974,282Recoverable
      Income Taxes
                                                      
                                                      
                                                      908,988
                                                      
                                                      
                                                      
                                                      958,294Notes
      Receivable, net of allowance for doubtful accounts of $75,000 at June 30,
      2009
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Prepaid
      Expenses
                                                      
                                                      
                                                      1,185,740
                                                      
                                                      
                                                      
                                                      1,269,827Total
      current assets
                                                      
                                                      
                                                      6,331,819
                                                      
                                                      
                                                      
                                                      11,202,403Total
      assets
                                                      
                                                      $
                                                      6,331,819
                                                      
                                                      
                                                      $
                                                      11,202,403LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Accounts
      payable and accrued expenses
                                                      
                                                      $
                                                      534,493
                                                      
                                                      
                                                      $
                                                      420,590Due
      to stockholder
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      97,907Income
      Tax Payable
                                                      
                                                      
                                                      261,804
                                                      
                                                      
                                                      
                                                      83,555Total
      current liabilities
                                                      
                                                      
                                                      796,297
                                                      
                                                      
                                                      
                                                      602,052Due
      to stockholder, net of unamortized discount of $2,618,270 at December 31,
      2008
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      2,426,240Due
      to director, net of unamortized discount of $330,064 and
      $355,126at
      June 30, 2009 and December 31, 2008, respectively
                                                      
                                                      
                                                      178,633
                                                      
                                                      
                                                      
                                                      153,571Total
      liabilities
                                                      
                                                      
                                                      974,930
                                                      
                                                      
                                                      
                                                      3,181,863Stockholders'
      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  48,328,328 and 52,423,403 outstanding  at
      June 30, 2009
                                                      
                                                      
                                                      5,242
                                                      
                                                      
                                                      
                                                      5,242and
      December 31, 2008, respectivelyAdditional
      paid-in capital
                                                      
                                                      
                                                      162,779,028
                                                      
                                                      
                                                      
                                                      162,766,096Treasury
      stock at cost, 4,099,875 and 4,800 shares at June 30, 2009and
      December 31, 2008, respectively
                                                      
                                                      
                                                      (47,552
                                                      )
                                                      
                                                      
                                                      (2,506
                                                      )Accumulated
      deficit
                                                      
                                                      
                                                      (157,379,829
                                                      )
                                                      
                                                      
                                                      (154,748,292
                                                      )Total
      stockholders’ equity
                                                      
                                                      
                                                      5,356,889
                                                      
                                                      
                                                      
                                                      8,020,540Total
      liabilities and stockholders’ equity
                                                      
                                                      $
                                                      6,331,819
                                                      
                                                      
                                                      $
                                                      11,202,403(1)
      Derived from audited financial statements
 See Notes
to Unaudited Financial Statements.
 3
 
 OPTIONABLE,
      INC.CONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the three-month period ended
                                                                                      
                                                                                      
                                                                                      For
      the six-month period endedJune
      30,
                                                                                      
                                                                                      
                                                                                      June
      30,2009
                                                                                      
                                                                                      
                                                                                      2008
                                                                                      
                                                                                      
                                                                                      2009
                                                                                      
                                                                                      
                                                                                      2008(Unaudited)
                                                                                      
                                                                                      
                                                                                      (Unaudited)
                                                                                      
                                                                                      
                                                                                      (Unaudited)
                                                                                      
                                                                                      
                                                                                      (Unaudited)Operating
      expenses:Selling,
      general and administrative
                                                                                      
                                                                                      $
                                                                                      1,212,833
                                                                                      
                                                                                      
                                                                                      $
                                                                                      582,849
                                                                                      
                                                                                      
                                                                                      $
                                                                                      2,275,648
                                                                                      
                                                                                      
                                                                                      $
                                                                                      1,604,584Research
      and development
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      215,400
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      460,445Total
      operating expenses
                                                                                      
                                                                                      
                                                                                      1,212,833
                                                                                      
                                                                                      
                                                                                      
                                                                                      798,249
                                                                                      
                                                                                      
                                                                                      
                                                                                      2,275,648
                                                                                      
                                                                                      
                                                                                      
                                                                                      2,065,029Operating
      loss
                                                                                      
                                                                                      
                                                                                      (1,212,833
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (798,249
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (2,275,648
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (2,065,029
                                                                                      )Other
      income (expense):Interest
      income
                                                                                      
                                                                                      
                                                                                      7,006
                                                                                      
                                                                                      
                                                                                      
                                                                                      68,095
                                                                                      
                                                                                      
                                                                                      
                                                                                      34,691
                                                                                      
                                                                                      
                                                                                      
                                                                                      156,688Interest
      expense to related parties
                                                                                      
                                                                                      
                                                                                      (12,718
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (94,500
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (128,776
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (186,219
                                                                                      )Total
      other expenses
                                                                                      
                                                                                      
                                                                                      (5,712
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (26,405
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (94,085
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (29,531
                                                                                      )Loss
      before income tax
                                                                                      
                                                                                      
                                                                                      (1,218,545
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (824,654
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (2,369,733
                                                                                      )
                                                                                      
                                                                                      
                                                                                      (2,094,560
                                                                                      )Income
      tax benefit ( expense)
                                                                                      
                                                                                      
                                                                                      216,818
                                                                                      
                                                                                      
                                                                                      
                                                                                      313,643
                                                                                      
                                                                                      
                                                                                      
                                                                                      (261,804
                                                                                      )
                                                                                      
                                                                                      
                                                                                      809,414Net
      loss
                                                                                      
                                                                                      $
                                                                                      (1,001,727
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (511,011
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (2,631,537
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (1,285,146
                                                                                      )Basic
      earnings per common share
                                                                                      
                                                                                      $
                                                                                      (0.02
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.01
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.05
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.02
                                                                                      )Diluted
      earnings per common share
                                                                                      
                                                                                      $
                                                                                      (0.02
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.01
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.05
                                                                                      )
                                                                                      
                                                                                      $
                                                                                      (0.02
                                                                                      )Basic
      and diluted weighted average commonshares
      outstanding
                                                                                      
                                                                                      
                                                                                      48,328,328
                                                                                      
                                                                                      
                                                                                      
                                                                                      52,023,047
                                                                                      
                                                                                      
                                                                                      
                                                                                      49,617,937
                                                                                      
                                                                                      
                                                                                      
                                                                                      52,023,047
  See
      Notes to Unaudited Financial
Statements.
 
 4
 OPTIONABLE,
      INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the six-month periods endedJune
      30,2009
                                                        
                                                        
                                                        2008(Unaudited)
                                                        
                                                        
                                                        (Unaudited)Cash
      flows from operating activities:Net
      loss
                                                        
                                                        $
                                                        (2,631,537
                                                        )
                                                        
                                                        $
                                                        (1,285,146
                                                        )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        48,177Amortization
      of debt discount
                                                        
                                                        
                                                        128,776
                                                        
                                                        
                                                        
                                                        186,219Provision
      for doubtful accounts
                                                        
                                                        
                                                        75,000
                                                        
                                                        
                                                        
                                                        (625
                                                        )Fair
      value of warrants and options
                                                        
                                                        
                                                        12,932
                                                        
                                                        
                                                        
                                                        11,370Changes
      in operating assets and liabilities:Accounts
      receivable
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        625Due
      to shareholder
                                                        
                                                        
                                                        (97,907
                                                        )
                                                        
                                                        
                                                        -Other
      current assets
                                                        
                                                        
                                                        84,087
                                                        
                                                        
                                                        
                                                        (12,267
                                                        )Accounts
      payable and accrued expenses
                                                        
                                                        
                                                        113,903
                                                        
                                                        
                                                        
                                                        (90,722
                                                        )Income
      tax payable
                                                        
                                                        
                                                        178,249
                                                        
                                                        
                                                        
                                                        -Recoverable
      income taxes
                                                        
                                                        
                                                        49,306
                                                        
                                                        
                                                        
                                                        840,586Net
      cash used in operating activities
                                                        
                                                        
                                                        (2,087,191
                                                        )
                                                        
                                                        
                                                        (301,783
                                                        )Cash
      flows used in investing activities:Purchases
      of notes receivable
                                                        
                                                        
                                                        (75,000
                                                        )
                                                        
                                                        
                                                        -Net
      cash used in investing activity
                                                        
                                                        
                                                        (75,000
                                                        )
                                                        
                                                        
                                                        -Cash
      flows from financing activities:Repurchase
      of shares of common stock
                                                        
                                                        
                                                        (45,046
                                                        )
                                                        
                                                        
                                                        -Principal
      repayment of due to stockholder
                                                        
                                                        
                                                        (2,529,954
                                                        )
                                                        
                                                        
                                                        -Net
      cash used in financing activities
                                                        
                                                        
                                                        (2,575,000
                                                        )
                                                        
                                                        
                                                        -Net
      decrease in cash
                                                        
                                                        
                                                        (4,737,191
                                                        )
                                                        
                                                        
                                                        (301,783
                                                        )Cash,
      beginning of period
                                                        
                                                        
                                                        8,974,282
                                                        
                                                        
                                                        
                                                        9,919,727Cash,
      end of period
                                                        
                                                        $
                                                        4,237,091
                                                        
                                                        
                                                        $
                                                        9,617,944Supplemental
      disclosures of cash flow information:Cash
      paid for taxes
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Cash
      paid for interest
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -
  See
      Notes to Unaudited Financial
Statements.
 
 5
 OPTIONABLE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
1-Organization, Description of Business and Going Concern
  Optionable, Inc. (“the “Company”) was formed in Delaware in
February 2000. Between April 2001 and July 2007, a substantial portion of the
Company’s revenues were generated from providing energy derivative brokerage
services to brokerage firms, financial institutions, energy traders, and hedge
funds worldwide.
  The
Company has not generated any revenues since the third quarter of 2007 as a
result of the suspension of the business relationship by its largest customer
and the succession of events since then. In addition, the matters discussed in
Note 7 and Item 1 of Part II of this Report "Legal Proceedings" have had a
significant adverse impact on its business and future results of operations and
financial condition. The Company’s management continues to seek out possible
business transactions and new business relationships.
 
 The
Company is considering merging with businesses outside of the financial service
industry.  The Company is also considering whether or not to satisfy
existing obligations with current creditors and distribute its remaining assets
to its stockholders.
 
 The
Company has suspended the development of its OPEX trading platform
technology.  However, the Company intends to maintain it and is
exploring its sale or license.
 
 
 6
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Going
Concern
  The
Company believes it has sufficient funds to meet its obligations, based on its
internal projections, for at least the next twelve months. However, the Company
cannot guarantee that it will do so. If there are unforeseen expenses or
financial obligations which occur during that period, such as those that could
result from matters discussed in Note 7, the Company may not be able to meet
such obligations. Additionally, if the Company enters into a transaction with
another  company, this could hamper the Company's ability to continue
as a going concern and the Company may have to resort to financing, through
either debt or equity placements, for the funding of either such acquisitions or
unforeseen expenses or financial obligations. There can be no assurance that any
such financing would be available on acceptable terms, or at all, especially in
light of the pending litigations against the Company and certain of its former
and current directors and officers and the current economic
conditions.
  Principles
of consolidation
  The
accompanying consolidated financial statements include the results of operations
of Opex International, Inc. and Hydra Commodity Services, Inc. for the three and
six-month periods ended June 30, 2009 and 2008. All material intercompany
accounts and transactions between the Company and its subsidiaries have been
eliminated in consolidation.
  Basis
of Presentation
  The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and the
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
have been included. Operating results for the three and six-month periods ended
June 30, 2009 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2009.
   7
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
2- Summary of Significant Accounting Policies
  Cash
and Cash Equivalents
  The
Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
  Concentration
of Credit Risks
  The
Company is subject to concentrations of credit risk primarily from cash and cash
equivalents.
  The
Company's cash and cash equivalents accounts are held at financial institutions
and are insured by the Federal Deposit Insurance Corporation ("FDIC") up to
$100,000 between January 2007 and October 2008 and $250,000 for interest-bearing
accounts and an unlimited amount for noninterest-bearing accounts after October
2008. During the three and six-month periods ended June 30, 2009 and 2008, the
Company has reached bank balances exceeding the FDIC insurance limit. While the
Company periodically evaluates the credit quality of the financial institutions
in which it holds deposits, it cannot reasonably alleviate the risk associated
with the sudden failure of such financial institutions.  The Company’s
cash and cash equivalents held at financial institutions exceeding the FDIC
insurance limit amounted to $ 1.9 million and $7.3 million at June 30, 2009 and
December 31, 2008, respectively.
  Fair
Value of Financial Instruments
  Effective
January 1, 2008, the Company adopted SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”), for assets and liabilities measured at fair
value on a recurring basis. SFAS 157 establishes a common definition for
fair value to be applied to existing generally accepted accounting principles
that require the use of fair value measurements, establishes a framework for
measuring fair value and expands disclosure about such fair value measurements.
The adoption of SFAS 157 did not have an impact on the Company’s financial
position or operating results, but did expand certain
disclosures.
 
 8
 
 OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
2- Summary of Significant Accounting Policies-continued
  SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date. Additionally, SFAS 157 requires the use of valuation
techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs. These inputs are prioritized below:
  Level 1:
                Observable
      inputs such as quoted market prices in active markets for identical assets
      or liabilitiesLevel 2:
                Observable
      market-based inputs or unobservable inputs that are corroborated by market
      dataLevel 3:
                Unobservable
      inputs for which there is little or no market data, which require the use
      of the reporting entity’s own
assumptions.
  The
Company did not have any Level 2 or Level 3 assets or liabilities as of
June 30, 2009 and December 31, 2008, with the exception of its due to
shareholder and due to director.  The carrying amount of the due to
director at June 30, 2009 and December 31, 2008 and due to shareholder at
December 31, 2008, approximate their respective fair value based on the
Company’s incremental borrowing rate.
 
 Cash and
cash equivalents include money market securities that are considered to be
highly liquid and easily tradable as of June 30, 2009 and December 31, 2008,
respectively. These securities are valued using inputs observable in active
markets for identical securities and are therefore classified as Level 1
within our fair value hierarchy.
 
 In
addition, SFAS No. 159, “The Fair Value Option for Financial Assets
and Financial Liabilities,” was effective for January 1, 2008.
SFAS 159 expands opportunities to use fair value measurements in financial
reporting and permits entities to choose to measure many financial instruments
and certain other items at fair value. The Company did not elect the fair value
options for any of its qualifying financial instruments.
  
 9
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
2- Summary of Significant Accounting Policies-continued
  Income
Taxes
  Income
taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes". SFAS No. 109 requires the recognition of deferred tax
assets and liabilities to reflect the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
Measurement of the deferred items is based on enacted tax laws. In the event the
future consequences of differences between financial reporting bases and tax
bases of the Company's assets and liabilities result in a deferred tax asset,
SFAS No. 109 requires an evaluation of the probability of being able to realize
the future benefits indicated by such assets. A valuation allowance related to
a deferred tax asset is recorded when it is more likely than not that some
or all deferred tax assets will not be realized.  Penalties and
interest on underpayment of taxes are reflected in the Company’s effective tax
rate.
  Use
of Estimates
  The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by
management include, but are not limited to, the realization of receivables
and share-based payments. Actual results will differ from these
estimates.
  Basic
and Diluted Earnings per Share
  Basic
earnings per share are calculated by dividing income available
to stockholders by the weighted-average number of common shares outstanding
during each period. Diluted earnings per share are computed using the
weighted average number of common shares and dilutive common share
equivalents outstanding during the period. Dilutive common share
equivalents consist of shares issuable upon the exercise of stock options
and warrants (calculated using the modified-treasury stock method). The
outstanding options amounted to 1,233,000 and 983,000 at June 30, 2009 and
December 31, 2008, respectively. The outstanding warrants amounted to 100,000 at
June 30, 2009 and December 31, 2008. The options and warrants outstanding at
June 30, 2009 and 2008, respectively, have been excluded from the computation of
diluted earnings per share due to their antidilutive effect.
  10
 OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
2- Summary of Significant Accounting Policies-continued
  Share-Based
Payments
  In
December 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123(R), "Share-Based  Payment,"  which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No.
123(R), companies are required to measure
the costs  of  share-based  compensation  arrangements  based  on  the
grant-date  fair value and recognize the costs in the
financial  statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. In March 2005, the SEC
issued SAB 107. SAB 107 expresses views of the staff regarding the interaction
between SFAS No. 123(R) and certain SEC rules and regulations and provides the
staff's views regarding the valuation of share-based payment arrangements for
public companies. SFAS No. 123(R) permits public companies to adopt its
requirements using one of two methods. On April 14, 2005, the SEC adopted a new
rule amending the compliance dates for SFAS 123(R). Companies may elect to apply
this statement either prospectively, or on a modified version of retrospective
application under which financial statements for prior periods are adjusted on a
basis consistent with the pro forma disclosures required for those periods under
SFAS 123. Effective January 1, 2006, the Company has fully adopted the
provisions of SFAS No. 123(R) and related interpretations as provided by SAB 107
prospectively. As such, compensation cost is measured on the date of grant as
its fair value. Such compensation amounts, if any, are amortized over the
respective vesting periods of the option grant. The Company applies this
statement prospectively.
  Recent
Accounting Pronouncements
  In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”.  The new
standard is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date, but before the
issuance of financial statements. Specifically, the standard sets forth: 1) the
period after the balance sheet date during which management should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, 2) the circumstances that an entity should recognize
events or transactions that occur after the balance sheet date, and 3) the
disclosures that an entity should make about events or transactions that occur
after the balance sheet date.
  
 11
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
   Note
2- Summary of Significant Accounting Policies-continued
  In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles- a replacement of FASB Statement No. 162”.  The new
standard sets forth that the FASB Accounting Standards
Codification(Codification) will become the source of authoritative U.S.
generally accepted accounting principles (GAAP) recognized by the FASB to be
applied to nongovernmental entities.  Rules and interpretive releases
of the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also source for authoritative GAAP for SEC registrants. When
the statement is effective, the Codification will supersede all then-existing
non-SEC accounting and reporting standards. All other nongrandfathered non-SEC
accounting literature not included in the Codification will become
nonauthoritative.
  Note
3- Prepaid expenses
  Prepaid
expenses primarily consists of retainers paid to certain law firms which
represent the Company and certain former and current directors and officers in
connection with legal proceedings which are described in Note 7- Litigation and
contingencies.
  
  
 12
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
4- Notes receivable
  The
Company purchased four notes receivable aggregating $75,000 from its former
chief technical officer and an affiliate.  The notes can be either
redeemed in cash or in kind for services performed, at the Company’s
option.  The notes can be redeemed in cash within six-month of
issuance or within a year from issuance if redeemed in-kind.
  The
Company has not received payment on of the first note and believes that it is
unlikely that it will collect on the remaining notes and has provided for an
allowance for doubtful accounts on all the notes at June 30, 2009.
  Note
5-Due to Related Parties
  The terms
and amounts of due to related parties at June 30, 2009 and December 31, 2008 are
as follows:
  Due to
Stockholder and former  Chairman  of the
Board,  non-interest  bearing, unsecured,  payable
by March 12, 2014, if the Company obtains  additional equity or
debt financing of at least $1,000,000  following the
private  placement which closed in September  2004
("Capital  Raise"),  the Company will repay its
former Chairman of the Board up to 39.33% of the Capital Raise, up to
$2,810,877,  with the remaining balance and accrued interest of
4.68% from the date of the Capital Raise due on March 12,
2014:
 June
      30,
                                        
                                        
                                        December
      31,2009
                                        
                                        
                                        2008$
                                        -
                                        
                                        
                                        $
                                        5,044,510Discount,
      using initial implied rate of 12%
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (2,618,270
                                        )$
                                        -
                                        
                                        
                                        $
                                        2,426,240
 
  13
 OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
5-Due to Related Parties-continued
  Due to
Director and former President, non-interest bearing, unsecured, payable by March
12, 2014, if the
Company  obtains  additional  equity or
debt  financing of at
least $1,000,000  following  a
Capital  Raise,  the Company  will repay
its  Director up to 5.3% of the
Capital  Raise,  up to  $381,250,  with
the  remaining balance and accrued interest of 4.68% from the date of
the Capital Raise due on March 12, 2014:
  June
      30,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008$
                                          508,697
                                          
                                          
                                          $
                                          508,697Discount,
      using initial implied rate of 12%
                                          
                                          
                                          (330,064
                                          )
                                          
                                          
                                          (355,126
                                          )$
                                          178,633
                                          
                                          
                                          $
                                          153,571
 
  During
April 2005, the Company modified the terms of its due to related
parties. The modified terms provide that, in the event of a Capital Raise,
among other things, the annual interest rate accrued after such event is reduced
from 12% to 4.68%.  Additionally, the modified terms provide that the
Company may make principal repayments towards the due to a stockholder and
former Chairman of the Board and the due to Director amounting to approximately
25% of its cash flows from operating cash flows less capital
expenditures.  During April 2006, the Company modified the terms of
its due to related parties to allow the Company to make principal
repayments at its discretion.
  The
amortization of the discount on the due to related parties amounted to
approximately $129,000 and $118,000 during the six-month period ended June 30,
2009 and 2008, respectively.
  During
the six-month period ended June 30, 2009, the Company satisfied its obligations
under the due to Stockholder and former Chairman of the Board by paying him
$2,575,000, including the repurchase of 4,095,075 shares of the Company’s common
stock, valued at approximately $45,000 based on the closing price of the
Company’s stock on the date of repurchase.
  
 14
  OPTIONABLE, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
5-Due to Related Parties-continued
  At
December 31, 2008, the Company owed approximately $98,000 to a Stockholder for
certain legal fees incurred and paid by such Stockholder for matters discussed
in Note 7 of the financial statements.  As of June 30, 2009, the
Company satisfied its obligation to the Stockholder.
  Note
6- Stockholders' Equity
  Stock
Compensation Plan
  During
November 2004, the Company adopted the 2004 Stock Option Plan
("2004 Plan"). The 2004 Plan allows for the grant of both incentive stock
options and nonstatutory stock options. The 2004 Plan may be administered,
interpreted and constructed by the Board of Directors or a compensation
committee. The maximum number of shares of common stock which may be issued
pursuant to options granted under the 2004 Plan may not exceed 7,500,000 shares.
The options outstanding vest over periods of up to twenty-four
months.
  The
amortization of share-based payment was recorded in selling, general, and
administrative expenses during such periods.
  The
Company granted 500,000 options during the six-month period ended June 30,
2009.
  The fair
value of the options granted during the six-month period ended June 30, 2009 is
based on the Black Scholes Model using the following
assumptions:
  Exercise
      price :
                      $0.016-0.025Market
      price at date of grant :
                      $0.016-0.025Volatility
      :
                      104.5%Expected
      dividend rate:
                      0%Expected
      terms:
                      3.3
      yearsRisk-free
      interest
      rate:
                      1.22-1.44%
  
 15
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
6- Stockholders' Equity-continued
  The
following activity occurred under our plan:
  Six-month
      periods endedJune 30,2009
                                
                                
                                2008Weighted-average
      grant-date fair value of options granted
                                
                                
                                $0.015
                                
                                
                                
                                N/AFair
      value of options recognized as expense:
                                
                                
                                $12,932
                                
                                
                                
                                $11,370
  The total
compensation cost related to nonvested options not yet recognized amounted to
approximately $10,000 at June 30, 2009 and the Company expects that it will
be recognized over the following weighted-average period of
8 months.
  If any
options granted under the 2004 Plan expire or terminate without having been
exercised or cease to be exercisable, such options will be available
again under the 2004 Plan. All employees of the Company and its
subsidiaries, if any, are eligible to receive incentive stock options and
nonstatutory stock options. Non-employee directors and outside consultants
who provided bona-fide services not in connection with the offer or sale of
securities in a capital raising transaction are eligible to receive
nonstatutory stock options. Incentive stock options may not be granted
below the fair market value of the Company's common stock at the time of
grant or, if to an individual who beneficially owns more than 10% of the
total combined voting power of all stock classes of the Company or a
subsidiary, the option price may not be less than 110% of the fair value
of the common stock at the time of grant. The expiration date of an
incentive stock option may not be longer than ten years from the date of
grant. Option holders, or their representatives, may exercise their vested
options up to three months after their employment termination or one year
after their death or permanent and total disability. The 2004 Plan provides
for adjustments upon changes in capitalization.
  The
Company's policy is to issue shares pursuant to the exercise of
stock options from its available authorized but unissued shares of common
stock. It does not issue shares pursuant to the exercise of stock options
from its treasury shares.
  
  16
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
7- Litigation and Contingencies
  Regulatory
Matters
  On
November 18, 2008, a complaint was filed in the United States District Court for
the Southern District of New York by the Commodity Futures Trading Commission
(the “CFTC”) against the Company, current and former employees of the Company,
including its former Chief Executive Officer and its former President and a
Director, Edward O’Connor, David Lee, a former Bank of Montreal (“BMO”) trader
(“Lee”), and Robert Moore, a former executive managing director of BMO’s
Commodity Derivatives Group.
  The
complaint alleges, among other things, that Lee, through the assistance of
Moore, and employees of the Company, engaged in a scheme to mis-mark Lee’s
natural gas options positions between at least May 2003 to May 2007, and
mis-value other natural gas option positions from October 2006 until May 2007.
The complaint further alleges that based upon the scheme, in April 2007, BMO
announced anticipated losses of approximately C$350 million and C$450
million.
  The CFTC
alleges, among other things, violations of, Section 4c(b) of the Commodity
Exchange Act, as amended (the “Act”) and Commission Regulations 33.10(a),(b) and
(c). The CFTC seeks an order of permanent injunction restraining and enjoining,
among others, the Company from directly or indirectly violating Section 6c(b) of
the Act and Commission Regulations 33.10(a), (b) and (c). The CFTC further seeks
an order directing, among others, the Company to pay civil monetary penalties in
an amount not to exceed $120,000 or triple the monetary gain for each violation
of the Act during the time period between October 23, 2000 and October 22, 2004
and $130,000 or triple the monetary gain for each violation of the Act on or
after October 23, 2004.
  On March
20, 2009, the Company and certain other of the defendants filed motions to
dismiss the CFTC complaint.  On April 3, 2009, the CFTC filed briefs
in opposition to the motions to dismiss.  On April 15, 2009, the
Company and certain other of the defendants filed reply briefs.
  
 17
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
7- Litigation and Contingencies-continued
  The
Company also understands that on November 18, 2008, a complaint was filed in the
United States District Court for the Southern District of New York by the
Securities and Exchange Commission (“SEC”) against Lee, Scott Connor, the
Company’s former President and a Director, Edward O’Connor and its former Chief
Executive Officer. The Company was not named in the SEC complaint. Like the
action brought by the CFTC, the complaint is based upon allegations that the
defendants engaged in a scheme to overvalue Lee’s commodity derivates trading
portfolio at BMO.
  The SEC
alleges causes of action against the Company’s former President and a Director,
Edward O’Connor, for violations of Sections 10(b), 13(a), 13(b)(2), 13(b)(5),
Rules 13b2-2 and 13a-14 of the Securities and Exchange Act of 1934 (the
“Exchange Act”), and Section 17(a) the Securities Act of 1933 (the “Securities
Act”). The complaint seeks a permanent injunction against, among others, Mr.
O’Connor and an order to pay civil penalties and disgorgement. The complaint
also seeks an order prohibiting, among others, Mr. O’Connor from acting as an
officer or director of a public company.
  CMEG
NYMEX Inc. v. Optionable, Inc. et. al
  On April
10, 2009, CMEG NYMEX Inc. filed suit against the Company, several past and
present officers and directors, and other defendants in the United States
District Court for the Southern District of New York (09-3677).  The
complaint alleges that defendants committed securities and common law fraud, and
breach warranties, in connection with an April 2007 transaction in which the
officers and directors sold $28.9 million of their Optionable stock to NYMEX,
and the Company issued warrants to NYMEX for the  purchase of
additional stock.  The plaintiff seeks rescission and restitution
and/or damages.
  The
Company filed a motion to dismiss in June 2009.
  
 18
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
7- Litigation and Contingencies-continued
  Claim
from the Company’s former Chief Executive Officer
  On
October 15, 2007, and as subsequently reiterated, the Company received a letter
from the Company's former Chief Executive Officer in which he states, among
other things, that the Company is in breach of certain obligations pursuant
to an Amended and Restated Employment Agreement, dated April 10, 2007, and
the Company should:
  1)   continue
to pay him his base  salary,  amounting  to
$25,000 per month for fiscal 2007, $325,000 for fiscal 2008, and $350,000
for fiscal 2009;
  2)   continue
to pay  him
a  cash  consideration  equal  to 5% of
the Company's revenues and a stock consideration equal to 2% of the
Company's revenues. The aggregate value of the unpaid consideration based on the
Company's revenues amounted to approximately $289,000 at September 30,
2007;
  3)   Continue
to provide to him health, welfare, and pension plan benefits as well as the
payment of an annual premium for his life insurance through October
2009.
  
  
 19
  OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
7- Litigation and Contingencies-continued
  While the
Company intends to vigorously defend these matters, there exists
the possibility of adverse outcomes that the Company cannot determine.
These matters are subject to inherent uncertainties and management's view
of these matters may change in the future.
  Note
8-Income Taxes
  The
components of the benefit (provision) for income taxes are as
follows:
  June
      30, 2009
                                                                            
                                                                            
                                                                            June
      30, 2008Current
      and deferred:Federal
                                                                            
                                                                            $
                                                                            (261,804
                                                                            )
                                                                            
                                                                            $
                                                                            809,414Total
      benefit (provision) for income taxes
                                                                            
                                                                            $
                                                                            (261,804
                                                                            )
                                                                            
                                                                            $
                                                                            809,414
  A
reconciliation of the Company’s effective tax rate to the statutory federal rate
is as follows:
  Six-month period ended June
    30,2009
                        
                        
                        2008Federal
      statutory taxes
                        
                        
                        (35.0
                        %)
                        
                        
                        (35.0
                        )%State
      income taxes, net of federal tax benefit
                        
                        
                        (5.7
                        )
                        
                        
                        (5.7
                        )Utilization
      of state net operating loss
                        
                        
                        5.7
                        
                        
                        
                        -Permanent
      differences (taxable gain on extinguishment of due to Stockholder in
      2009)
                        
                        
                        46.0
                        
                        
                        
                        1.711.0
                        %
                        
                        
                        (38.6
                        )
      %
 
  20
 OPTIONABLE,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note
8-Income Taxes-continued
  The
recoverable income tax amounting to approximately $900,000 is recoverable from
applications for carryback refund from the Company’s 2006 federal tax
returns.
  The
Company has net operating losses of approximately $1.2 million for both federal
and state tax purposes.
   21
 ITEM 2: MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Overview
  Optionable,
Inc. (“the “Company”) was formed in Delaware in February 2000. Between April
2001 and July 2007, a substantial portion of our revenues were generated from
providing energy derivative brokerage services to brokerage firms, financial
institutions, energy traders, and hedge funds worldwide. A substantial portion
of all energy derivatives we brokered in the past were natural gas
derivatives.
  We
launched our electronic trading system, OPEX, in 2006 and we enhanced its
features and functionalities during 2007 and 2008. Users of OPEX can execute on
the platform mostly energy-related derivative trades. A significant portion of
the contracts executed on OPEX were those offered by NYMEX, a US exchange.
However, we believe that OPEX features and functionalities can be ported to
other derivatives as well, such as credit default swaps, interest-related
derivatives, metals and other commodities. Additionally, we believe that OPEX,
with appropriate enhancements, may be able to execute transactions offered by
other exchanges as well. Effective November 4, 2008, the Company has suspended
the development of OPEX. However, we intend to maintain OPEX and explore its
possible sale or licensing.
  A
significant portion of our revenues through the third quarter of 2007 was
derived from our business relationship with BMO Financial Group ("BMO"). We have
not generated any revenues since the third quarter of 2007 as a result of the
suspension of the business relationship with us by BMO together with the
combined succession of events since then. In addition, the matters discussed in
Item 1 of Part II of this Report "Legal Proceedings" have had a significant
adverse impact on our business, including current and, likely, future results of
operations and financial condition. Our management continues to seek out
possible business transactions and new business relationships.
  The
Company is considering merging with businesses outside of the financial service
industry.  The Company is also considering whether or not to satisfy
existing obligations with current creditors and distribute its remaining assets
to its stockholders.
 
 GOING
CONCERN
  The
Company believes it has sufficient funds to meet its obligations, based on its
internal projections, for at least the next twelve months. However, the Company
cannot guarantee that it will do so. If there are unforeseen expenses or
financial obligations which occur during that period such as those related to
matters disclosed in Part II, Item 1- Legal Proceedings, the Company may not be
able to meet such obligations. Additionally, if the Company acquires another
company , this could hamper the Company's ability to continue as a going
concern, and the Company would have to resort to financing, through either debt
or equity placements, for the funding of either such acquisitions or unforeseen
expenses or financial obligations. There can be no assurance that any such
financing would be available on acceptable terms, or at all, especially in light
of the pending litigation against the Company and recent economic
conditions.
  Three
and Six-Month Periods Ended June 30, 2009 and 2008
  Results
      of Operations(Unaudited)
  Increase/
                                            
                                            
                                            Increase/
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            Increase/
                                            
                                            
                                            Increase/For
      the three-month
                                            
                                            
                                            (Decrease)
                                            
                                            
                                            (Decrease)
                                            
                                            
                                            For
      the six-month
                                            
                                            
                                            (Decrease)
                                            
                                            
                                            (Decrease)period
      ended June 30,
                                            
                                            
                                            in
      $ 2009
                                            
                                            
                                            in
      % 2009
                                            
                                            
                                            periods
      ended June 30,
                                            
                                            
                                            in
      $ 2009
                                            
                                            
                                            in
      % 20092009
                                            
                                            
                                            2008
                                            
                                            
                                            vs
      2008
                                            
                                            
                                            vs
      2008
                                            
                                            
                                            2009
                                            
                                            
                                            2008
                                            
                                            
                                            vs
      2008
                                            
                                            
                                            vs
      2008Operating
      expenses:Selling,
      general and administrative
                                            
                                            
                                            1,212,833
                                            
                                            
                                            
                                            582,849
                                            
                                            
                                            
                                            629,984
                                            
                                            
                                            
                                            108.1
                                            %
                                            
                                            
                                            2,275,648
                                            
                                            
                                            
                                            1,604,584
                                            
                                            
                                            
                                            671,064
                                            
                                            
                                            
                                            41.8
                                            %Research
      and development
                                            
                                            
                                            -
                                            
                                            
                                            
                                            215,400
                                            
                                            
                                            
                                            (215,400
                                            )
                                            
                                            
                                            -100.0
                                            %
                                            
                                            
                                            -
                                            
                                            
                                            
                                            460,445
                                            
                                            
                                            
                                            (460,445
                                            )
                                            
                                            
                                            -100.0
                                            %Total
      operating expenses
                                            
                                            
                                            1,212,833
                                            
                                            
                                            
                                            798,249
                                            
                                            
                                            
                                            414,584
                                            
                                            
                                            
                                            51.9
                                            %
                                            
                                            
                                            2,275,648
                                            
                                            
                                            
                                            2,065,029
                                            
                                            
                                            
                                            210,619
                                            
                                            
                                            
                                            10.2
                                            %Operating
      loss
                                            
                                            
                                            (1,212,833
                                            )
                                            
                                            
                                            (798,249
                                            )
                                            
                                            
                                            (414,584
                                            )
                                            
                                            51.9
                                            %
                                            
                                            
                                            (2,275,648
                                            )
                                            
                                            
                                            (2,065,029
                                            )
                                            
                                            
                                            210,619
                                            
                                            
                                            
                                            10.2
                                            %Other
      income (expense):Interest
      income
                                            
                                            
                                            7,006
                                            
                                            
                                            
                                            68,095
                                            
                                            
                                            
                                            (61,089
                                            )
                                            
                                            
                                            -89.7
                                            %
                                            
                                            
                                            34,691
                                            
                                            
                                            
                                            156,688
                                            
                                            
                                            
                                            (121,997
                                            )
                                            
                                            
                                            -77.9
                                            %Interest
      expense-related parties
                                            
                                            
                                            (12,718
                                            )
                                            
                                            
                                            (94,500
                                            )
                                            
                                            
                                            (81,782
                                            )
                                            
                                            
                                            -86.5
                                            %
                                            
                                            
                                            (128,776
                                            )
                                            
                                            
                                            (186,219
                                            )
                                            
                                            
                                            (57,443
                                            )
                                            
                                            
                                            -30.8
                                            %(5,712
                                            )
                                            
                                            
                                            (26,405
                                            )
                                            
                                            
                                            (20,693
                                            )
                                            
                                            78.4
                                            %
                                            
                                            
                                            (94,085
                                            )
                                            
                                            
                                            (29,531
                                            )
                                            
                                            
                                            64,554
                                            
                                            
                                            
                                            218.6
                                            %Net
      loss before income tax
                                            
                                            
                                            (1,218,545
                                            )
                                            
                                            
                                            (824,654
                                            )
                                            
                                            
                                            (393,891
                                            )
                                            
                                            47.8
                                            %
                                            
                                            
                                            (2,369,733
                                            )
                                            
                                            
                                            (2,094,560
                                            )
                                            
                                            
                                            (275,173
                                            )
                                            
                                            
                                            13.1
                                            %Income
      tax benefit ( expense)
                                            
                                            
                                            216,818
                                            
                                            
                                            
                                            313,643
                                            
                                            
                                            
                                            96,825
                                            
                                            
                                            30.9
                                            %
                                            
                                            
                                            (261,804
                                            )
                                            
                                            
                                            809,414
                                            
                                            
                                            
                                            (1,071,218
                                            )
                                            
                                            NMNet
      loss
                                            
                                            $
                                            (1,001,727
                                            )
                                            
                                            $
                                            (511,011
                                            )
                                            
                                            $
                                            (490,716
                                            )
                                            
                                            96.0
                                            %
                                            
                                            $
                                            (2,631,537
                                            )
                                            
                                            $
                                            (1,285,146
                                            )
                                            
                                            $
                                            (1,346,391
                                            )
                                            
                                            
                                            104.8
                                            %NM:  Not
      meaningful
  22
  Selling,
general, and administrative expenses
  Selling,
general, and administrative expenses consists primarily of legal fees, incurred
in connection with the Company’s attention to matters described in Part II, Item
1- Legal Proceedings or to handle certain matters which occur during the course
of our operations, and compensation of personnel supporting our
operations.
  The increase in selling, general, and administrative expenses
during the three-month and six-month periods ended June 30, 2009, when compared
to the prior year period is primarily due to the following:
  ·
              Higher
      legal fees incurred in connection with an increased number of litigations
      handled during 2009 as well as legal fees incurred in connection with our
      annual meeting of stockholders in March 2009 and the satisfaction of our
      obligations to Mark Nordlicht, a stockholder and our former Chairman of
      the Board, which occurred in February
2009.
  As a
result of the matters discussed above and in Item 1 of Part II of this Report,
we believe that our legal fees for 2009 will continue to constitute a large
share of our selling, general, and administrative expenses.
  Research
and development
  Research
and development expenses consist primarily of compensation of personnel and
consultants associated with the development and testing of our automated
electronic trading system. The decrease in research and development expenses
during the three-month and six-month periods ended June 30, 2009 when compared
to the prior year periods is primarily due to the following:
  ·
              We
      suspended our OPEX development efforts in November
  2008.
  Interest income
  Interest
income consists primarily of interest earned on interest-bearing cash and cash
equivalents. The decrease in interest income during the three-month and
six-month periods ended June 30, 2009 when compared to the prior year period is
primarily due to a decrease in interest rate we earned as well as a lower
weighted average interest-bearing cash balance.
  Interest
expense to related parties
  Interest
expense to related parties consists of interest charges associated with amounts
due to related parties, including Mark Nordlicht, our former Chairman of the
Board and Edward O’Connor, our former President and current Director. The
increase in interest expense to related parties during the three-month and
six-month periods ended June 30, 2009 is primarily due to a loss on
extinguishment of debt to Mark Nordlicht of approximately $35,000 which was
recognized as interest expense during February 2009.  No such loss
occurred during the comparable prior year period.
  Income
tax
  Income
tax benefit/expense consists of federal and state current and deferred income
tax or benefit based on our net income. The increase in income tax provision
during the three and six- month periods ended June 30, 2009 when compared to the
income tax benefits expense we incurred during the comparable prior year periods
is primarily due to a tax gain of $2.5 million we incurred on the satisfaction
of the due to Mark Nordlicht, offset by taxable losses resulting from our
expenses.
  23
  LIQUIDITY
AND CAPITAL RESOURCES
  Our cash
balance as of June 30, 2009 amounts to approximately $4.2 million.
  During
the six-month period ended June 30, 2009, we used cash from operating activities
of approximately $2.1 million, primarily resulting from:
  ·
              net
      loss of approximately $2.6 million, adjusted for the amortization of debt
      discount of approximately $129,000 and an increase in allowance for bad
      debt of $75,000; and
  ·
              a
      increase in income tax payable of approximately $178,000 resulting from
      the taxable gain of $2.5 million resulting from the satisfaction of our
      obligations to Mark Nordlicht, a stockholder and our former Chairman of
      the Board, offset by the current pre-tax
loss.
  During
the six-month period ended June 30, 2009, we used cash in investing activities,
resulting from purchases of four notes receivable aggregating
$75,000;
  During
the six-month period ended June 30, 2009, we satisfied our obligations of
approximately $5.0 million to Mark Nordlicht, and repurchased 4,095,075 shares
of our common stock hold for a consideration aggregating
$2,575,000.
  During
the six-month period ended June 30, 2009, we used cash in our operating
activities of approximately $302,000, primarily resulting from:
  ·
              net
      loss of approximately $1.3 million, adjusted for the amortization of debt
      discount of approximately $186,000;
and
 ·
              a
      decrease  in recoverable income taxes resulting from the
      reimbursement during the six-month period ended June 30, 2008 of the 2007
      federal  estimated tax payments /income tax payable of $1.6
      million resulting from the payment of estimated income taxes, offset by
      benefits resulting from the pre-tax
loss.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
  A summary
of significant accounting policies is included in Note 2 of unaudited financial
statements included in this Quarterly Report. Management believes that the
application of these policies on a consistent basis enables us to provide useful
and reliable financial information about our operating results and financial
condition. Our financial statements and accompanying notes are prepared in
accordance with U.S. GAAP. Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. Critical accounting policies
for us include the following:
  Share-based
payment
  We
account for share-based payments in accordance with SFAS No. 123(R), Share-Based Payment. Under
the fair value recognition provisions of this statement, share-based
compensation cost is measured at the grant date based on the value of the award
and is recognized as expense over the vesting period. Determining the fair value
of share-based awards at the grant date requires judgment, including estimating
expected volatility. In addition, judgment is also required in estimating the
amount of share-based awards that are expected to be forfeited. If actual
results differ significantly from these estimates, stock-based compensation
expense and our results of operations could be materially impacted.
  24
  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.
  Recent
Accounting Pronouncements
  In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”.  The new
standard is intended to establish general standards of accounting for and
disclosure of events that occur after the balance sheet date, but before the
issuance of financial statements. Specifically, the standard sets forth: 1) the
period after the balance sheet date during which management should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, 2) the circumstances that an entity should recognize
events or transactions that occur after the balance sheet date, and 3) the
disclosures that an entity should make about events or transactions that occur
after the balance sheet date.
  In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles- a replacement of FASB Statement No. 162”.  The new
standard sets forth that the FASB Accounting Standards
Codification(Codification) will become the source of authoritative U.S.
generally accepted accounting principles (GAAP) recognized by the FASB to be
applied to nongovernmental entities.  Rules and interpretive releases
of the Securities and Exchange Commission (SEC) under authority of federal
securities laws are also source for authoritative GAAP for SEC registrants. When
the statement is effective, the Codification will supersede all then-existing
non-SEC accounting and reporting standards. All other nongrandfathered non-SEC
accounting literature not included in the Codification will become
nonauthoritative.
  ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  n/a
  ITEM
4. CONTROLS AND PROCEDURES
  Evaluation of Disclosure Controls and Procedures
  As of
June 30, 2009, our Chief Executive Officer and 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 Chief
Executive Officer and President and our Chief Financial Officer concluded that,
as of June 30, 2009, our disclosure controls and procedures were effective in
ensuring that material information required to be disclosed in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, including ensuring that such material information
is accumulated and communicated to our Chief Executive Officer and President and
our Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.
  25
  Changes
in Internal Control Over Financial Reporting
  During
the quarter ended June 30, 2009, there were no changes in our internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial
reporting.
  PART
2 OTHER INFORMATION
  ITEM 1. Legal Proceedings
  Shareholder
Class Action Lawsuit
  On May
11, 2007, two class action lawsuits were filed against the Company and certain
past and present officers and directors in the United States District Court for
the Southern District of New York and were consolidated under In re Optionable
Securities Litigation.
  The suit
sought unspecified damages arising from alleged violations of the federal
securities laws, including the Securities Exchange Act of 1934, 15 U.S.C. ss.
78a et seq., (the “Exchange Act”), and Rule 10b-5 under the Exchange Act, 17
C.F.R. ss. 240.10b-5. The complaint alleged, among other things, that during
the  period  January 22, 2007 to May 14, 2007, the
defendants made materially false and misleading statements concerning the
Company’s relationship with its customer Bank of Montreal (“BMO”), and concealed
a “scheme” to assist a former trader at BMO in concealing trading losses from
his employer.  As a result, according to the plaintiffs, the Company’s
stock sold at “inflated” prices.
  On
September 15, 2008, the Court granted the defendants’ motions to dismiss the
complaint.  The plaintiffs subsequently filed a motion to take
discovery they claimed would permit them to file an amended
complaint.  On October 20, 2008, the Court denied the plaintiffs’
motion, and a final judgment of dismissal was entered on October 23,
2008.
  On
January 13, 2009, the plaintiffs filed a motion pursuant to Rule 60(b) for
relief from the October 23, 2008 judgment and seeking to file an amended
complaint on the basis of newly discovered evidence.  On February 12,
2009, the defendants filed an opposition to the motion.  The
plaintiffs filed a reply on March 3, 2009.   The plaintiffs’
motion was dismissed in June 2009.
  Commodity
Futures Trading Commission v. Cassidy et al.
 
 On
November 18, 2008, the U.S. Commodity Futures Trading Commission (“CFTC”) filed
a Complaint in the United States District Court for the Southern District of New
York against the Company, two past and present officers and directors, and two
Bank of Montreal employees.. The complaint seeks injunctive relief restraining
defendants from future violations of CFTC regulations, disgorgement, and civil
monetary penalties under the Commodity Exchange Act.
 
 The
complaint alleges that that the defendants violated Section 4c(b) of the CEA, 7
U.S.C. § 6c(b), and Rule 33.10 thereunder, 17 C.F.R. § 33.10.  On
March 20, 2009, the Company and certain other of the defendants filed motions to
dismiss the CFTC complaint.  On April 3, 2009, the CFTC filed briefs
in opposition to the motions to dismiss.  On April 15, 2009, the
Company and certain other of the defendants filed reply briefs.
  CMEG
NYMEX Inc. v. Optionable, Inc. et. al
  On April
10, 2009,  CMEG NYMEX Inc. filed suit against the Company, the
Company’s former Chief Executive Officer, former Chairman of the Board, and
former President and current board member, and other defendants in the United
States District Court for the Southern District of New York.  The
complaint alleges that defendants committed securities and common law fraud, and
breach warranties, in connection with an April 2007 transaction in which the
officers and directors sold $28.9 million of their Optionable stock to NYMEX,
and the Company issued warrants to NYMEX for the  purchase of
additional stock.  The plaintiff seeks rescission and restitution
and/or damages.
  The
Company and the other defendants have responded to the complaint in June
2009.
  26
  ITEM
1A. RISK FACTORS
  N/A
  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
5.  OTHER INFORMATION
  The
Company’s by-laws were amended after the Board adopted in April 2009 certain
procedures for stockholders to propose nominees to the Board.  The
amended and restated by-laws were filed as an exhibit to Form 8-K in April
2009.
  ITEM 6. EXHIBITS
  31.1
              Certification
      of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934*31.2
              Certification
      of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
      Securities Exchange Act of 1934*32.1
              Certification
      of Principal Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) of the
      Securities Exchange Act of 1934 and 18 U.S.C. Section
  1350*32.2
              Certification
      of Principal Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the
      Securities Exchange Act of 1934 and 18 U.S.C. Section
  1350*
  *Filed herewith
 
 27
  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.
  August
14, 2009
  Optionable,
      Inc.By:
                          /s/ Thomas
      BurchillThomas
      Burchill
                            Chief
      Executive Officer and President
                            (Principal
      Executive Officer)By:
                          /s/
      Marc Andre-BoisseauMarc
      Andre-Boisseau
                            Chief
      Financial Officer
                            (Principal
      Financial Officer)
 
  28