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UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

  

FORM 10-K

(Mark One)

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   
  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2013

 

TRANSITION REPORT UNDER SECTION13 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 organization)

(I.R.S. Employer Identification No.)

 

 

635 Beach 19th Street, Far Rockaway, NY 11691

(Address of principal executive offices) (Zip Code)

 

Registrant’s Telephone Number Including Area Code: (516) 807-1981

 

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

 

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

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes   No 

 

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   No 

 

Indicate by checkmark whether the registrant 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  No 

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

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

 

The aggregate market value of the registrant’s common stock held by non-affiliates as of June 28, 2013, the registrant’s most recently completed second fiscal quarter, was approximately $0.8 million.

 

The number of shares of registrant’s common stock outstanding, as of March 24, 2014 was 83,133,128.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

 
 

 

 

TABLE OF CONTENTS

 

 

 

Page

PART I

Item 1.

Business

2

Item 1A. 

Risk Factors

4

Item 1B

Unresolved Staff Comments

7

Item 2.

Properties

8

Item 3. 

Legal Proceedings

8

Item 4.

Mine Safety Disclosures

9

 

 

 

PART II

Item 5. 

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

9

Item 6.  

Selected Financial Data

12

Item 7.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 7A.

Quantitative and Qualitative Disclosures about Market Risks

15

Item 8. 

Financial Statements and Supplementary Data

15

Item 9. 

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

15

Item 9A.

Controls and Procedures

15

Item 9B.

Other Information

16

 

 

 

PART III

Item 10. 

Directors, Executive Officers and Corporate Governance

      16

Item 11. 

Executive Compensation

18

Item 12. 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

21

Item 13. 

Certain Relationship and Related Transactions, and Director Independence

22

Item 14.

Principal Accountant Fees and Services

23

Item 15.

Exhibits, Financial Statement Schedules

23

 

 

 

SIGNATURES

28

  

 
 

 

  

Forward-Looking Statements

 

This Annual Report on Form 10-K (the “Report”), including ”Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and the future results of Accelerated Acquisitions IV, Inc. and its consolidated subsidiaries (the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in the “Risk Factors” section in Item 1A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.

 

PART I

 

ITEM 1.

 BUSINESS. 

 

Overview

 

Optionable, Inc. (the “Company”) is a corporation that 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.

 

The Company has not generated any revenues since the third quarter of 2007 as a result of the termination of the business relationship with its largest customer in 2007 together with the combined succession of events since then. The litigation matters listed below and discussed in Item 3 of Part I of this Report, "Legal Proceedings," have had a significantly adverse impact on its business, including current and, likely, future results of operations and financial condition.

 

The Company’s management is exploring and seeking possible business transactions and new business relationships in areas unrelated to brokerage services.  In addition, the Company’s management is exploring and seeking possible sources of additional capital to fund the Company’s litigation activities and other ongoing expenses.  There can be no assurance that the Company will be successful in securing new sources of capital or business transactions or relationships in areas unrelated to brokerage services.

 

The Company is a defendant to two significant legal proceedings, one brought by its largest stockholder, Chicago Mercantile Exchange/ New York Mercantile Exchange (“NYMEX”), and another brought by its former largest customer, Bank of Montreal (“BMO”) (which was settled during 2013).  Also named in such lawsuits, among others, are one of the Company’s current board members and former president; the Company’s former chief executive officer; and the Company’s former board chairman.  Additionally, one of the Company’s current board members and former president along with the Company’s former chief executive officer, are defendants in a claim made by the Securities and Exchange Commission.  

 

On August 15, 2011, a former chief executive officer of the Company plead guilty to conspiracy in violation of Title 18, United States Code, Section 371 before the United States District Court for the Southern District of New York.

 

On November 7, 2011, one of the Company’s current board members and former president and the Company consented to the entry of a Consent Order of Permanent Injunction, Civil Monetary Penalty and Ancillary Equitable Relief, which was entered by the United States District Court for the Southern District of New York in the matter Commodity Futures Trading Commission v. Kevin Cassidy, Edward O'Connor, Optionable, Inc., David Lee and Robert Moore (08-CIV-9962 (GBD)(JLC)).

  

 
2

 

 

Going Concern

 

Based on its cash and cash equivalents as of the date of this Annual Report on Form 10-K, the Company is unlikely to have sufficient funds to meet its obligations for the next twelve months if the Company is not able to secure new sources of capital or complete a strategic transaction.  Even if the Company raises additional capital or completes a strategic transaction, the combination of the anticipated legal costs to defend against current legal proceedings, the potential amounts the Company would have to pay if there are negative outcomes in one or more of such legal proceedings, the Company’s obligations under its indemnification obligations and additional legal and other ongoing expenses incurred by the Company could exceed the Company’s resources before the end of 2014. The legal proceedings also negatively impact the Company’s ability to raise additional capital or enter into strategic transactions with other companies.  The Company’s future depends on its ability to satisfactorily resolve the aforementioned issues and there is no assurance it will be able to do so. If the Company fails for any reason, it would not be able to continue as a going concern and could potentially be forced to seek relief through a bankruptcy or other dissolution proceeding. The Company's financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

HOW WE OPERATE

 

We have not had revenue-generating operations since the third quarter of 2007. Our management is responsible for seeking alternatives which would allow us to continue to operate by maximizing our resources, consisting primarily of our cash, while satisfying our financial obligations. To this end, our strategy is to vigorously defend our interests in the various pending legal actions while at the same time pursuing opportunities to secure additional capital to fund our activities and/or various potential merger or investment opportunities which would allow us to resume operating status.

 

CLIENT CONCENTRATION

 

Not applicable.

 

COMPETITION

 

Not applicable.

 

EMPLOYEES

 

We currently have two part-time employees---the Chief Executive Officer and the Chief Financial Officer. 

 

RESEARCH AND DEVELOPMENT

 

Not applicable.

  

 
3

 

 

ITEM 1A.         RISK FACTORS

 

This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below and the other information in this report. Each of the following risks may materially and adversely affect our ability to enter into business transactions and relationships, results of operations and financial condition. These risks may cause the market price of our common stock to decline, which may cause you to lose all or a part of the money you paid to buy our common stock. 

 

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

 

The Company may not be able to continue to operate as a going concern.

 

Based on its cash and cash equivalents as of the date of this Annual Report on Form 10-K, the Company is unlikely to have sufficient funds to meet its obligations for the next twelve months if the Company is not able to secure new sources of capital or complete a strategic transaction.  Even if the Company raises additional capital or completes a strategic transaction, the combination of the anticipated legal costs to defend against current legal proceedings, the potential amounts the Company would have to pay if there are negative outcomes in one or more of such legal proceedings, the Company’s obligations under its indemnification obligations and additional legal and other ongoing expenses incurred by the Company could exceed the Company’s resources before the end of 2014. The legal proceedings also negatively impact the Company’s ability to raise additional capital or enter into strategic transactions with other companies.  The Company’s future depends on its ability to satisfactorily resolve the aforementioned issues and there is no assurance it will be able to do so. If the Company fails for any reason, it would not be able to continue as a going concern and could potentially be forced to seek relief through a bankruptcy or other dissolution proceeding.

 

Unless we find and enter into new business or capital raising transactions, we have no revenues and no potential sources of future revenues or capital resources.

 

The Company has not had operations or revenue sources since the termination of the development of its OPEX technology in 2008.  Our attempts to restore business and generate revenues have been hindered by litigation brought against the Company. Our initial discussions with potential business partners have not progressed beyond an indication of interest in our cash due to pending litigation against the Company and pending litigation against some of the company’s former officers and directors and a current director. There can be no assurance that we can expeditiously resolve all pending litigations against the Company and after the resolution of the pending litigation that we will be able to generate interest that would materialize into an agreement upon terms that are satisfactory to our board of directors.  We are also in discussions with a potential source of new funds for the Company, but there can be no assurance that we will be able to secure additional funding in a timely manner.

 

Although the Company has had no revenues, we continue to incur expenses.

 

We have not generated revenues since the third quarter 2007. However, we continue to incur expenses, including salaries, auditing and legal expenses necessary to maintain our reporting status and legal fees in connection with our ongoing legal proceedings.  In 2013, we incurred expenses of $510,178 in legal fees, advances paid to certain former officers and a current director for their respective legal defenses and expenses associated with intellectual property.

 

Legal proceedings are pending against the Company and certain of our former directors and officers and a current director. The Company is unable to predict the outcome of these proceedings and can give no assurance that the outcome of these proceedings will not have a material adverse effect on it, or that other proceedings will not be initiated.

 

CMEG NYMEX Inc. v. Optionable, Inc. et. al., Civ. No. 09-03677 (S.D.N.Y.)

 

CMEG NYMEX (“NYMEX”) filed the operative complaint in this litigation on April 10, 2009.  The complaint alleges, among other things, that Optionable, certain of its former officers and directors, one current director, and other defendants defrauded NYMEX in connection with NYMEX’s purchase of $28.9 million of shares of Optionable common stock pursuant to a Stock and Warrant Purchase Agreement (“SWPA”).  NYMEX seeks damages in excess of $28.5 million based on the following causes of action against the Company:  violations of Section 10(b) of the Securities Exchange Act; breach of contract and warranty; aiding and abetting common law fraud; and negligent misrepresentation.  The Company has denied the allegations in the Complaint.  On September 6, 2011, the Company filed counterclaims against NYMEX alleging, among other things, that NYMEX breached its obligations under the SWPA.  The counterclaims seek unspecified damages based on the following causes of action:  breach of contract; breach of the covenant of good faith and fair dealing; and refusal to pay amounts due and owed of over $740,000.  NYMEX filed a motion for partial summary judgment in support of its claims, and the Company also filed a motion for summary judgment in support of its claims.

 

 
4

 

 

On August 24, 2012, the United States District Court for the Southern District of New York (the “Court”) issued a Memorandum Decision and Order (the “NYMEX Order”) concerning motions for summary judgment regarding certain of the parties’ claims and counterclaims.  In the NYMEX Order, the Court:  (i) denied NYMEX’s motion for summary judgment on its breach of warranty claim; (ii) denied NYMEX’s motion to dismiss the Company’s counterclaim for breach of the SWPA; (iii) granted NYMEX’s motion to dismiss the Company’s counterclaims for breach of the covenant of good faith and fair dealing, and refusal to pay amounts due and owed; and (iv) granted NYMEX’s motion to dismiss defendant Mark Nordlicht’s breach of contract counterclaim.  The Company is unable to predict the outcome of this litigation.

 

SEC Matter

 

On November 18, 2008, the Securities and Exchange Commission filed a complaint against the Company’s former Chief Executive Officer, Kevin Cassidy, its former President (and current Director), Edward O’Connor, and its former employee Scott Connor in the United States District Court for the Southern District of New York. The complaint claims that Cassidy and Mr. O’Connor are liable for violations of Rules 10b-5, 12b-20, 13a-1, 13a-14, 13a-16, 13b2-1, and 13b2-2 and Section 10(b), Section 13(a), Section 13(b)(2) and Section 13(b)(5) of the Exchange Act and Section 17(a) of the Securities Act. The complaint demands, among other things, that Mr. Cassidy and Mr. O’Connor disgorge their alleged ill-gotten gains, be permanently enjoined from certain activities, pay civil penalties, be prohibited from being an officer or director of any issuer that has registered securities or an issuer that is required to file reports pursuant to Section 15(d) of the Exchange Act.

 

On September 11, 2012, the SEC filed a First Amended Complaint in the action which added the Company as a defendant.  On December 4, 2012, without admitting or denying any of the allegations in the Amended Complaint, and without the payment of any amount, in full and final settlement of the action, the Company consented to entry of judgment enjoining the Company from violating, directly or indirectly, Sections 10(b), 13(a), 13(b)(2) or 13(b)(5) of the Securities Exchange Act or any of the rules promulgated thereunder.

 

While the Company intends to defend itself vigorously against the remaining claims from NYMEX, 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.

 

Our ability to operate in the future and our success in the future will depend upon our ability to attract and retain qualified officers and other personnel.

 

The Board of Directors hired Dov Rauchwerger as Chief Executive Officer in 2013 and Matthew L. Katzeff as Chief Financial Officer in 2010. Mr. Katzeff has an investment banking background.

 

The success of the Company in finding and engaging in new business opportunities may require hiring additional personnel. However, competition for highly qualified personnel is intense and may require financial resources that the Company does not have. We can make no assurances that we can retain or attract qualified personnel in the future. Our ability to retain and attract qualified personnel could have a material adverse effect on our financial condition and our ability to enter into business transactions.

  

 
5

 

 

Some stockholders, if they are able to form a majority, may be able to take stockholder actions without giving other stockholders prior notice and without giving such other stockholders a chance to vote on the matter at a stockholder meeting. You may, therefore, be unable to take preemptive measures that you believe are necessary to protect your investment in the Company.

  

Section 228 of the Delaware General Corporation Law and our Certificate of Incorporation permits our stockholders  to take any action which is otherwise required to be taken, or is permitted to be taken, at an annual or special meeting of the stockholders, without prior notice and without a vote of all the stockholders. Instead of a vote, stockholder actions can be authorized by the written consents to such actions, signed by the holders of the number of shares which would have been required to be voted in favor of such action at a duly called stockholders meeting. We would not be required to give prior notice to all stockholders of actions taken pursuant to the written consents of the stockholders who collectively form a majority.

 

If we fail to remain current in our reporting requirements, we could be removed from the OTCQB which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

 

Companies trading on the OTCQB, such as we are, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCQB. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTCQB, which may have an adverse material effect on our Company.

 

The Company may be unable to recoup advances made to former officers and directors.

 

In 2013, we paid approximately $52,000 in legal fees, net of insurance proceeds, to attorneys representing our current and former officers and directors in connection with their defense of lawsuits filed against them relating to their activities at our Company.  The Company cannot estimate its total legal fees for future periods.  In some but not all instances, the individual has a contractual right to receive such advancements, subject to an undertaking from such individual to repay all such amount to us if he is not entitled to be indemnified under the provisions of our Bylaws, the Delaware General Corporation Law or otherwise.  None of the amounts advanced have been collateralized.  If, upon the final disposition of these lawsuits, it is determined that one or more of these individuals is required to repay to us any portion of the advancements made to him, he may also be liable for monetary damages, fines and penalties to various third parties.  As a result, we may be unable to actually recoup monies advanced even if we are legally entitled to reimbursement.  Such amounts could constitute a material portion of our assets.

 

Future indemnification or advancement obligations could have a material adverse effect on our financial position.

 

As a result of their involvement in the ongoing legal matters described elsewhere in this Annual Report on Form 10-K, the Company may have indemnification or advancement obligations to certain of its former directors and officers and to a current board member and former president. These indemnification obligations may include, but are not limited to, amounts that would be payable to former directors or officers if they are ultimately successful in the legal matters or are otherwise found eligible for indemnification.  The amounts, if any, and timing of such indemnification obligations with respect to such individuals are indeterminable, and, therefore, are not reflected in our financial statements.  However, these amounts could be substantial.  In addition, our financial statements do not reflect approximately $202,000 of disputed legal fees that are claimed pursuant to an indemnification agreement by the law firm defending a former officer of the Company in various legal actions.  The ultimate amount for which the Company will be liable for these disputed amounts is not currently determinable.  If we are ultimately required to make any payments in connection with the foregoing indemnification or advancement obligations, it could have a material adverse effect on our financial position.

 

The Directors and Officers Liability insurance policy under which we have been reimbursed in connection with lawsuits currently pending against the Company, a current director and certain of our former officers or directors has been exhausted.

 

We paid $510,178 from our cash reserves in 2013 for legal fees because the insurance policy covering the currently pending litigations against the Company, its former officers and directors was exhausted in early 2010. The Company purchased additional Directors and Officers Liability insurance in 2012 and 2013, but this new insurance policy does not cover the currently pending litigation or any litigation arising out of alleged actions or causes of actions dating before 2010.  The Company anticipates that it will pay, without insurance reimbursement, substantial legal fees in 2014 and until the currently pending legal matters are fully resolved.  The Company will have to pay, without insurance reimbursement, legal fees if any new litigation against it arises with respect to any alleged cause of action dating before 2010.

  

 
6

 

 

Our common stock is subject to the “penny stock” rules of the SEC, and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

 

A “penny stock,” for the purposes relevant to us, is any equity security that has a market price of less than $5.00 per share of with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires, among other things:

 

 

that a broker or dealer approve a person's account for transactions in penny stocks; and

 

the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

 

In order to approve a person's account for transactions in penny stocks, the broker or dealer must: 

 

 

obtain financial information and investment experience objectives of the person; and

 

make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

 

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market, which, in highlight form:

 

  

sets forth the basis on which the broker or dealer made the suitability determination; and

  

that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

 

Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

 

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

 

ITEM 1B.         UNRESOLVED STAFF COMMENTS.

 

None.

 

 
7

 

 

ITEM 2.           PROPERTIES.

 

Our headquarters are located in New York, New York. The office consists of approximately 200 square feet.  Our headquarters are leased on a yearly basis with the option to renew for additional yearly periods.

 

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

 

ITEM 3.           LEGAL PROCEEDINGS.

 

CMEG NYMEX Inc. v. Optionable, Inc. et. al., Civ. No. 09-03677 (S.D.N.Y.)

 

NYMEX filed the operative complaint in this litigation on April 10, 2009.  The complaint alleges, among other things, that Optionable, certain of its former officers and directors, one current director, and other defendants defrauded NYMEX in connection with NYMEX’s purchase of $28.9 million of shares of Optionable common stock pursuant to a Stock and Warrant Purchase Agreement (“SWPA”).  NYMEX seeks damages in excess of $28.5 million based on the following causes of action against the Company: violations of Section 10(b) of the Securities Exchange Act; breach of contract and warranty; aiding and abetting common law fraud; and negligent misrepresentation.  The Company has denied the allegations in the Complaint.  On September 6, 2011, the Company filed counterclaims against NYMEX alleging, among other things, that NYMEX breached its obligations under the SWPA.  The counterclaims seek unspecified damages based on the following causes of action:  breach of contract; breach of the covenant of good faith and fair dealing; and refusal to pay amounts due and owed of over $740,000.  NYMEX filed a motion for partial summary judgment in support of its claims, and the Company also filed a motion for summary judgment in support of its claims.  

 

On August 24, 2012, the United States District Court for the Southern District of New York (the “Court”) issued a Memorandum Decision and Order (the “NYMEX Order”) concerning motions for summary judgment regarding certain of the parties’ claims and counterclaims.  In the NYMEX Order, the Court:  (i) denied NYMEX’s motion for summary judgment on its breach of warranty claim; (ii) denied NYMEX’s motion to dismiss the Company’s counterclaim for breach of the SWPA; (iii) granted NYMEX’s motion to dismiss the Company’s counterclaims for breach of the covenant of good faith and fair dealing, and refusal to pay amounts due and owed; and (iv) granted NYMEX’s motion to dismiss defendant Mark Nordlicht’s breach of contract counterclaim.  The Company is unable to predict the outcome of this litigation.

 

Bank of Montreal v. Optionable, Inc. et al., Civ. No. 09-07557 (S.D.N.Y.)

 

BMO filed the operative complaint in this litigation on August 28, 2009.  The complaint alleges, among other things, that the Company, certain of its former officers and directors, one current director and other defendants conspired to defraud BMO in connection with large monetary losses experienced by BMO as a result of natural gas option trades made by one of its former employees.  BMO seeks unspecified damages based on the following causes of action:  fraud; negligent misrepresentation; aiding and abetting fraud; aiding and abetting breach of fiduciary duty; and breach of contract.  The Company has denied the allegations in the Complaint. On September 6, 2011, the Company filed counterclaims against BMO alleging, among other things, that BMO launched an unlawful campaign to blame the Company for the losses BMO incurred due to its own fault.  

 

On August 24, 2012, the Court issued a Memorandum Decision and Order granting BMO’s motion to dismiss all of the Company’s counterclaims.  The Company is unable to predict the outcome of this litigation.

 

On November 25, 2013, Optionable, Inc. (the “Company”) entered into a Settlement Agreement (the “Agreement”) with Bank of Montreal (“BMO”), Edward J. O’Connor (“O’Connor”), Mark A. Nordlicht (“Nordlicht”), and Scott Connor (together with the Company, O’Connor, and Nordlicht, the “Optionable Parties,” and the Optionable Parties together with BMO, the “Parties,” and each, a “Party”) which sets for the agreement for the final terms of settlement and dismissal of the lawsuit entitled Bank of Montreal v. Optionable, Inc., No. 09-CV-7557 (S.D.N.Y.) (the “Litigation”). Pursuant to the Agreement, the Optionable Parties agree to pay $200,000 to BMO in full settlement of the Litigation, and within 10 business days of the date of payment, the Parties shall file for an order dismissing the Litigation with prejudice with respect to the Optionable Parties.  

 

 
8

 

 

SEC Matter

 

On November 18, 2008, the Securities and Exchange Commission filed a complaint against the Company’s former Chief Executive Officer, Kevin Cassidy, its former President (and current Director), Edward O’Connor, and its former employee Scott Connor in the United States District Court for the Southern District of New York. The complaint claims that Cassidy and Mr. O’Connor are liable for violations of Rules 10b-5, 12b-20, 13a-1, 13a-14, 13a-16, 13b2-1, and 13b2-2 and Section 10(b), Section 13(a), Section 13(b)(2) and Section 13(b)(5) of the Exchange Act and Section 17(a) of the Securities Act. The complaint demands, among other things, that Mr. Cassidy and Mr. O’Connor disgorge their alleged ill-gotten gains, be permanently enjoined from certain activities, pay civil penalties, be prohibited from being an officer or director of any issuer that has registered securities or an issuer that is required to file reports pursuant to Section 15(d) of the Exchange Act.

 

On September 11, 2012, the SEC filed a First Amended Complaint in the action which added the Company as a defendant.  On December 4, 2012, without admitting or denying any of the allegations in the Amended Complaint, and without the payment of any amount, in full and final settlement of the action, the Company consented to entry of judgment enjoining the Company from violating, directly or indirectly, Sections 10(b), 13(a), 13(b)(2) or 13(b)(5) of the Securities Exchange Act or any of the rules promulgated thereunder.

  

The actual costs that will be incurred in connection with these actions cannot be quantified at this time and will depend upon many unknown factors.  For 2012, the Company incurred approximately $668,630, net of insurance proceeds, in legal costs for these actions and other legal actions against Mr. Cassidy and Mr. O’Connor.  The Company’s management anticipates that its costs for these actions in 2013 could be comparable to 2012 or higher.

 

While the Company intends to defend itself vigorously against the remaining claims from NYMEX and BMO, there exists the possibility of adverse outcomes that the Company cannot determine.  These matters are subject to inherent uncertainties and management’s view of these matters may change in the future.

 

Other Matters

 

Since May 2007, the Company has received requests for documents and information from the CFTC, the SEC and the DOJ and the New York County’s District Attorney's Office. Since that time, the Company has complied with such requests and has not received any new requests on such matters since 2007.

 

ITEM 4.          Mine Safety Disclosures

 

 

Not applicable. 

 

PART II

 

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

 

Our common stock is quoted on the OTCQB. Our shares are listed under the symbol "OPBL."

 

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

 

   

Fiscal 2013

   

Fiscal 2012

 

Quarter Ended

 

High

   

Low

   

High

   

Low

 

March 31

  $ 0.02     $ 0.01     $ 0.03     $ 0.02  

June 30

  $ 0.03     $ 0.02     $ 0.03     $ 0.02  

September 30

  $ 0.05     $ 0.02     $ 0.02     $ 0.01  

December 31

  $ 0.06     $ 0.04     $ 0.02     $ 0.01  

 

At March 21, 2014, the closing price for our common stock was $0.03.

 

 
9

 

 

At March 24, 2014, there were 83,133,128 shares of our common stock outstanding.  There were approximately 22 stockholders of record at March 24, 2014.

 

The transfer agent of our common stock is Continental Stock Transfer & Trust Company, whose address is 17 Battery Place, New York, NY 10004.  The phone number of the transfer agent is (212) 509-4000.

 

DIVIDENDS

 

We have not declared any dividends to date. We have no present intention of paying any cash dividends on our common stock in the foreseeable future. The payment by us of dividends, if any, in the future, rests within the discretion of our Board of Directors and will depend, among other things, upon our financial condition, as well as other relevant factors. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.  However, we have no current earnings and profits and do not expect to generate earnings and profits in the near future.  Our ability to pay dividends may therefore be limited under applicable state corporate law, including the Delaware General Corporation Law.

 

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance at December 31, 2013:

 

Plan category

 

Number of

securities to

be issued

upon exercise

of outstanding

options,

warrants and

rights

   

Weighted

average

exercise price

of outstanding

options,

warrants and

rights

   

Number of

securities

remaining

available for

future

issuance

under equity

compensation

plans

(excluding

securities

reflected in

column (a))

 
   

(a)

   

(b)

   

(c)

 

Equity compensation plans approved by security holders

    2,883,000     $ 0.15       4,617,000  
                         

Equity compensation plans not approved by security holders

    -0-    

N/A

      -0-  
                         

Total

    2,883,000     $ 0.15       4,617,000  

  

 
10

 

 

2004 STOCK OPTION PLAN

 

We adopted our 2004 Stock Option Plan in November 2004, and amended it in March 2011. The plan provides for the grant of options intended to qualify as "incentive stock options" and options that are not intended to so qualify, or "nonstatutory stock options." The total number of shares of common stock reserved for issuance under the plan is 7,500,000, subject to adjustment in the event of a stock split, stock dividend, recapitalization or similar capital change.

  

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

 

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

 

The exercise price for incentive stock options granted under the plan may not be less than the fair market value of the common stock on the date the option is granted, except for options granted to 10% stockholders which must have an exercise price of not less than 110% of the fair market value of the common stock on the date the option is granted. The exercise price for nonstatutory stock options is determined by the board of directors. Incentive stock options granted under the plan have a maximum term of ten years, except for 10% stockholders who are subject to a maximum term of five years. The term of nonstatutory stock options is determined by the board of directors. With respect to the current directors and officers of the Company, their nonstatutory stock options do not expire until the second year anniversary of their resignation from the Company for Good Reason or termination without Cause ( as these terms are defined in the Plan), or upon the occurrence of certain other events. Options granted under the plan are not transferable, except by will and the laws of descent and distribution.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

The Company executed on June 29, 2010 a stock option agreement with its then new CEO. Mr. O’Sullivan was given options of 500,000 shares, with 50,000 vesting on June 29, 2010 and an exercise price of $0.015 per share (the closing price on the grant date). On March 1, 2011, the Company and Mr. O’Sullivan executed an amendment, which among other things increased the exercise price to $0.02 (the closing price on the day immediately prior to the amendment).

 

In October 2010, the Company granted Chief Financial Officer Matthew L. Katzeff 450,000 stock options, with 45,000 vesting immediately and an exercise price of $0.018 per share. On March 1, 2011, the Company and Mr. Katzeff executed an amendment, which among other things increased the exercise price to $0.02 (the closing price on the day immediately prior to the amendment).

 

The Company granted 500,000 options in March 2011, as follows: 100,000 options were granted to each of CEO Brad O'Sullivan, CFO Matthew Katzeff, Director Andrew Samaan, Director and former President Edward O’Connor and Comptroller Michael Templeton.  On August 3, 2011, the Company granted 100,000 options to Andrew Samaan, a non-employee Director.  

 

The Company granted 600,000 options in May 2012, as follows: 200,000 options were granted to each of CEO Brad O'Sullivan, and CFO Matthew Katzeff; and 100,000 options were granted to each of, Director Andrew Samaan, Director and former President Edward O’Connor.  There were no options granted during the twelve-month period ended December 31, 2013.

 

 

 
11

 

 

On April 10, 2013, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mark Nordlicht, a current stockholder of the Company (the “Subscriber”), pursuant to which the Company sold to the Subscriber an aggregate of 35,500,000 shares of the Company’s common stock, par value $.001 (the “Securities”), at a purchase price of $0.02 per share (the “Purchase Price”), for a total offering amount, before Offering related expenses, of $710,000 (the “Offering”). The Offering closed immediately following the execution and delivery of the Purchase Agreement by the Company and the Subscriber. After giving effect to the Offering, there are 83,833,128 shares of Common Stock outstanding and options to purchase an aggregate of 2,983,000 shares of Common Stock outstanding.

 

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

 

ITEM 6.            SELECTED FINANCIAL DATA.

 

Not applicable.

 

ITEM 7.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion should be read in conjunction with the consolidated financial statements and the related notes that appear in this annual report.

  

RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 2013 COMPARED TO YEAR ENDED DECEMBER 31, 2012

 

OPTIONABLE, INC.

STATEMENTS OF OPERATIONS

 

 

   

For the years ended

December 31,

                 
   

2013

   

2012

   

$ Change

   

% Change

 
                                 
                                 

Operating expenses:

                               

Selling, general and administrative

  $ 869,148     $ 1,152,031       (282,883 )     -25 %
                                 

Total operating expenses

    869,148       1,152,031       (282,883 )     -25 %
                                 

Operating loss

    (869,148 )     (1,152,031 )     282,883       -25 %
                                 

Other income (expense):

                               

Interest income

    672       2,855       (2,183 )     -76 %

Interest expense to related parties

    (55,810 )     (49,529 )     (6,281 )     13 %
      (55,138 )     (46,674 )                
                                 

Loss before income tax benefit

    (924,286 )     (1,198,705 )     274,419       -23 %
                                 

Income tax benefit

    -       -                  
                                 

Net loss

  $ (924,286 )   $ (1,198,705 )                

 

 
12

 

 

General and administrative expenses

 

General and administrative expenses consist primarily of legal fees, incurred in connection with the Company’s attention to the legal proceedings described in Part 1, Item 3, expenses incurred in connection with the handling of certain matters which occur during the course of our operations and compensation of personnel supporting our operations.  Legal fees incurred during the twelve-month periods ending December 31, 2013 and 2012 amounted to $510,178 and $668,630, respectively.

 

The decrease of $363,238 in general and administrative expenses during the twelve-month period ended December 31, 2013, in comparison to the comparable period in 2012, is due to decreases in expenses associated with accounting services, insurance, telecommunications, investor relations and other third party services, as well as the effect of Management’s implementation of a general cost reduction policy, as well as a significant reduction in spending on legal fees due to the settlement of certain legal matters in 2012 and 2013, the realization of the Company’s end of its obligation to continue to either indemnify or advance payments to certain indemnities (partially offset by an increase in legal fees resulting from the Company’s negotiation and entering into a Securities Purchase Agreement with one of the current shareholders of the Company), as well as an overall process implemented by Management to manage overall legal and other expense spending in the most effective and efficient manner possible.

 

On April 10, 2013, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mark Nordlicht, a current stockholder of the Company (the “Subscriber”), pursuant to which the Company sold to the Subscriber an aggregate of 35,500,000 shares of the Company’s common stock, par value $.001 (the “Securities”), at a purchase price of $0.02 per share (the “Purchase Price”), for a total offering amount, before Offering related expenses, of $710,000 (the “Offering”). The Offering closed immediately following the execution and delivery of the Purchase Agreement by the Company and the Subscriber. After giving effect to the Offering, there are 83,833,128 shares of Common Stock outstanding and options to purchase an aggregate of 2,983,000 shares of Common Stock outstanding.

 

Research and development

 

We did not incur any research and development expenses in 2012 or 2013.

 

Interest income

 

Interest income consists primarily of interest earned on interest-bearing cash and cash equivalents. The decrease in interest income during 2013 when compared to 2012, is primarily due to the reduction of the Company’s cash and cash equivalents held in interest bearing-accounts.

 

Interest expense to related parties

 

Interest expense to related parties consists of interest charges associated with amounts due to related parties. As of December 31, 2013, the only remaining related party note payable is due to Edward O’Connor, a Director and former President.  The decrease in interest expense to related parties during the twelve-month period ended December 31, 2013 in comparison to the comparable period in 2012 is due to the amortization of the discount.  See Note 4 to Financial Statements.

 

Income tax

 

Income tax benefit/expense consists of federal and state current and deferred income tax or benefit based on our net income. During 2011, the Internal Revenue Service informed the Company that the carry back to the earlier years is barred by statute, and that the Company will need to carry forward this net operating loss to be applied against taxable income of future years.  However, since the Company cannot be assured at this time that there will be a future taxable income available to which this loss may be offset, the Company has reserved the full amount of the tax benefit attributable to this loss carry forward.  See Note 2 to Financial Statements.

 

 
13

 

 

Going Concern

 

Based on its cash and equivalents as of the date of this Annual Report on Form 10-K, the Company is unlikely to have sufficient funds to meet its obligations for the next twelve months if the Company is not able to secure new sources of capital or complete a strategic transaction.  Even if the Company raises additional capital or completes a strategic transaction, the combination of the anticipated legal costs to defend against current legal proceedings, the potential amounts the Company would have to pay if there are negative outcomes in one or more of such legal proceedings, the Company’s obligations under its indemnification obligations and additional legal and other ongoing expenses incurred by the Company could exceed the Company’s resources before the end of 2014. The legal proceedings also negatively impact the Company’s ability to raise additional capital or enter into strategic transactions with other companies.  The Company’s future depends on its ability to satisfactorily resolve the aforementioned issues and there is no assurance it will be able to do so. If the Company fails for any reason, it would not be able to continue as a going concern and could potentially be forced to seek relief through a bankruptcy or other dissolution proceeding. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Our cash balance as of December 31, 2013 amounts to approximately $163,234.

 

During 2013, we used cash for operating activities of approximately $662,264, resulting from the net loss incurred by the Company of approximately $924,286, adjusted for:

 

 

the amortization of debt discount of approximately $55,810 and share-based compensation expense of approximately $7,353;

 

 

An increase in prepaid expenses of approximately $5,411; and

 

 

An increase in accounts payable and accrued expenses of approximately $72,085.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

A summary of significant accounting policies is included in Note 2 of the audited financial statements included in this Annual Report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“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:

 

Contingencies

 

The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. FASB ASC 450-20-25-2 “Contingencies-Loss Contingencies-Recognition,” 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 the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. While the Company believes that it will continue to incur losses from such legal proceedings, it is unable 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.

 

 
14

 

 

ITEM 7A.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

 

Not applicable.

 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference.

 

ITEM 9.              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

 

None

 

ITEM 9A.           CONTROLS AND PROCEDURES.

 

 

Evaluation of Disclosure Controls and Procedures

 

Based upon an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our Chief Executive Officer and our Principal Financial Officer concluded that, as of December 31, 2013, 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 our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

  

Management's Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a - 15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework - Guidance for Smaller Public Companies (the COSO criteria). Based on our assessment we believe that, as of December 31, 2013, our internal controls over financial reporting is effective based on those criteria.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Our management's report was not subject to attestation by our registered public accounting.

 

 
15

 

 

Changes in Internal Controls Over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

 

ITEM 9B.              OTHER INFORMATION.

 

 

None.

 

PART III

 

ITEM 10.               DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

 

The following table sets forth information about our executive officers and directors during the fiscal year ended December 31, 2013.  Ages are as of March 31, 2014.

 

Name

Age

Position

Date of Election Or Appointment as a Director

Dov Rauchwerger

36

Chief Executive Officer and Director

April 2013

Matthew Katzeff

43

Chief Financial Officer

July 2010

Neil Osrof

46

Director

April 2013

  

Dov Rauchwerger continues to serve as the Managing Partner of, NLE Group LLC , a full service consumer merchandise wholesaler, distributor and reseller. From 2007-2012, he was Managing Partner of Northern Lights Electronics LLC. Mr. Rauchwerger graduated magna cum laude with a Bachelor of Arts degree from Queens College in May 1998.  

 

Matthew L. Katzeff was appointed by the Board of Directors to the position of Chief Financial Officer on July 27, 2010. Since beginning his investment banking career at The Blackstone Group, Mr. Katzeff has developed a successful 18 year career predominantly focused upon Mergers & Acquisitions advisory, Private Equity sourcing and execution, as well as the development and execution of debt and equity capital transactions, all across a wide array of industry sectors as well as corporate sizes and situations. Since his tenure at Blackstone, Mr. Katzeff was a member of the M&A teams at SBC Warburg Dillon Read (currently UBS), Credit Suisse First Boston and Peter J. Solomon Company. Mr. Katzeff then became a Vice President with North Atlantic Trading Company, focusing on the sourcing and execution of both stand-alone and “bolt-on” private equity investments, primarily within the consumer products sector. He was also responsible for the financing and refinancing of a number of the company’s investments and acquisitions, including the arrangement of senior debt facilities and high-yield offerings.

 

Immediately prior to joining Ashir Group, Mr. Katzeff was a Managing Director with J Giordano Securities Group, an investment banking boutique in which he focused  upon the development, strategy and execution of debt and equity capital transactions as well as M&A across a number of industry sectors. Mr. Katzeff’s experience at both bulge-bracket institutions as well as boutique investment firms have given him a unique and very well rounded perspective enabling him to be truly value-added with respect to corporate strategy, development and value, while maintaining a very strong sense of creativity.

 

 
16

 

 

Neil Osrof, founded For Sons Properties LLC, a full service residential real estate development company, where he has worked since 2012. He worked for Osrof Enterprises, Inc. from 2005-2011 as a Vice President. He has been involved in the real estate business since 1984. 

 

DIRECTOR INDEPENDENCE, COMMITTEES OF THE BOARD OF DIRECTORS

 

One of our members of our Board of Directors, Neil Osrof, is "independent" within the meaning of Nasdaq Marketplace Rule 4200. We have not established any committees, including an Audit Committee, a Compensation Committee, a Nominating Committee, or any committee performing a similar function. The functions of those committees are being undertaken by the entire board as a whole. Due to the size of the Board and the Company’s limited resources, our Board of Directors believes that the establishment of such committees of the Board is unnecessary and could be considered more form than substance. The Board of Directors has determined that it has no audit committee financial expert serving on the Board which acts as a whole as an audit committee.

 

FAMILY RELATIONSHIPS

 

There are no family relationships among our executive officers and directors.

 

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

 

To our knowledge, based solely on review of these filings and written representations from certain of the reporting persons, we believe that during the fiscal year ended December 31, 2013, all of our officers, directors and significant stockholders have timely filed all required forms under Section 16(a) of the Exchange Act.

 

Code of Business Conduct and Ethics

 

We have adopted a Code of Business Conduct and Ethics to provide guiding principles to all of our employees. Our Code of Business Conduct and Ethics does not cover every issue that may arise, but it sets out basic principles to guide our employees and provides that all of our employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. Any employee who violates our Code of Business Conduct and Ethics will be subject to disciplinary action, up to and including termination of his or her employment. Generally, our Code of Business Conduct and Ethics provides guidelines regarding: 

 

compliance with laws, rules and regulations,

conflicts of interest,

insider trading,

corporate opportunities,

competition and fair dealing,

discrimination and harassment,

health and safety,

record keeping,

confidentiality,

protection and proper use of company assets,

payments to government personnel,

waivers of the Code of Business Conduct and Ethics,

reporting any illegal or unethical behavior, and

compliance procedures.

  

 
17

 

  

 In addition, we have also adopted a Code of Ethics for our Chief Executive Officer and Senior Financial Officer. In addition to our Code of Business Conduct and Ethics, our CEO and CFO are also subject to specific policies regarding:

 

  

disclosures made in our filings with the SEC,

  

deficiencies in internal controls or fraud involving management or other employees who have a significant role in our financial reporting, disclosure or internal controls,

  

conflicts of interests, and

  

knowledge of material violations of securities or other laws, rules or regulations to which we are subject.

 

A copy of the Code of Ethics was filed as an exhibit to our annual report for the fiscal year ended December 31, 2005 as Exhibit 14.1. The Code of Ethics is also posted on our website under Governance Documents under the investor relations section of our website: www.optionable.com.

 

ITEM 11.  EXECUTIVE COMPENSATION.

 

The following table summarizes all compensation (but excludes compensation for services on the Board of Directors) recorded by us in each of the last two completed fiscal years for our principal executive officer, our principal financial officer, our only two executive officers who were serving as such at December 31, 2013.  The value attributable to any option awards is computed in accordance with ASC 718.

 

 

Name and Principal Position

Year

 

Salary

($)

   

Bonus

($)

   

Stock

Awards

   

Option

Awards

($)

   

Non-Equity Incentive Plan Compensation

($)

   

Change in pension value and Non-Qualified Deferred Compensation

   

All Other Compensation

($)

   

Total

($)

 

Dov Rauchwerger

2013

    0       0       0       0       0       0       0       0  

Chief Executive Officer,

                                                                 

and Director

                                                                 
                                                                   

Matthew Katzeff,

2013

    33,935       0       0       0       0       0       0       33,935  

Chief Financial Officer,

2012

    25,000       0       0       3,667       0       0       0       28,667  

and Director

                                                               
                                                                   

Brad O’Sullivan

2012

    25,000       0       0       3,667       0       0       0       28,667  

Chief Executive Officer and Director (resigned April 2013)

 

                                                               

 

EMPLOYMENT AGREEMENTS

  

On July 27, 2010, Optionable, Inc. appointed Matthew L. Katzeff, age 40, to the position of Chief Financial Officer. Per his employment letter, Mr. Katzeff shall receive an annual salary of $20,000, pro rated for the year 2010. Also, the Company’s Board of Directors granted Mr. Katzeff 450,000 stock options, with an exercise price of $0.02 per share. In May of 2013, Mr. Katzeff’s annual salary was increased to $36,000.

 

 
18

 

 

   OUTSTANDING EQUITY AWARDS AT 2013 FISCAL YEAR-END TABLE

 

The following table sets forth information with respect to grants of options to purchase our common stock to the named executive officers at December 31, 2013.

 

Option Awards

   

Stock Awards

 

Name

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

 

Number of

Securities

Underlying

Unexercised

Options (#) Unexercisable

 

Equity

Incentive

Plan

Awards:

Number of

Securities Underlying

Unexercised

Unearned

Options (#)

   

Option

Exercise

Price ($)

   

Option

Expiration

Date

   

Number

of

Shares

or Units

of

Stock

That

Have

Not

Vested

(#)

   

Market

Value

of

Shares

or Units

of Stock

That

Have

Not

Vested

(#)

   

Equity

Incentive

Plan

Awards: Number of

Unearned

Shares,

Units or

Other Rights

That Have

Not

Vested

(#)

   

Equity Incentive

Plan Awards:

Market or Payout

Value of

Unearned Shares, Units or Other

Rights

That Have

Not

Vested

($)

 

Brad O’Sullivan

    500,000         -         0     $ 0.02       (1)(2)       -       -       -       -  
      100,000         -         0     $ 0.02       (1)(2)       -       -       -       -  
      80,000         -         120,000     $ 0.022       (1)(2)(3)       -       -       -       -  
                                                                             

Matthew Katzeff

    450,000         -         0     $ 0.02       (1)(2)       -       -       -       -  
      100,000         -         0     $ 0.02       (1)(2)       -       -       -       -  
      200,000         -         0     $ 0.022       (1)(2)       -       -       -       -  

 

 

(1) Notwithstanding any other vesting provision, the options shall vest immediately (i) upon a Change of Control of the Company, (ii) on the effective date of optionee's resignation or termination of optionee’s services to the Company if he resigns for Good Reason or is terminated without Cause, or (iii) if optionee is not nominated for re-election to the Board of Directors without Cause.  “Cause” and “Good Reason” have the meanings ascribed thereto in the 2004 Stock Option Plan, as amended.  “Change of Control” has the meaning ascribed thereto in the Stock Option Agreement pursuant to which this option was granted.

 

(2) The options shall terminate (even if vested) upon the earliest to occur of (i) the effective date of optionee's resignation without Good Cause, (ii) the effective date of termination of services to the Company if such services were terminated for Cause, (iii) the second anniversary of the effective date of optionee’s resignation for Good Reason, (iv) the second anniversary of the effective date of the termination of optionee’s services without Cause, (v) the second anniversary of the termination of optionee’s services as a director after the Board fails without Cause to nominate optionee for re-election to the Board, (vi) the first anniversary of the termination of optionee’s services due to disability, and (vii) the first anniversary of optionee’s death if such death occurred while still he was employed with or serving the Company.  “Cause” and “Good Reason” have the meanings ascribed thereto in the 2004 Stock Option Plan, as amended.

 

(3) Had Mr. O’Sullivan been asked to remain with the Company, the remaining options would have vested as follows: 40,000 on May 2, 2013, 40,000 on November 2, 2013 and an additional 40,000 on May 2, 2012, however this was not the case as he was not asked to remain with the Company.

  

 
19

 

 

Director Compensation

 

The following table sets forth with respect to the named directors, compensation information inclusive of equity awards and payments made for the fiscal year ended December 31, 2013.

 

Name (a)

 

Fees Earned

or Paid in

Cash ($) (b)

   

Stock Awards

($) (c)

   

Option Awards

($) (d)

   

Non-Equity

Incentive Plan Compensation

($) (e)

   

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings (f)

   

All Other Compensation ($) (g)

   

Total ($) (h)

 
                                                         

Matthew Katzeff

    6,935       -       -       -       -       -       6,935  

Edward O’Connor

    0       -       -       -       -       -       0  

Brad O’Sullivan

    6,935       -       -       -       -       -       6,935  

Andrew Samaan

    13,870       -       -       -       -       -       13,870  

Dov Rauchwerger

    0       -       -       -       -       -       0  

Neil Osrof

    9,000       -       -       -       -       -       9,000  

 

Director Compensation

 

The Company agreed to pay Andrew Samaan $25,000 in annual compensation when he joined the Board of Directors in February 2009. Starting on March 31, 2009, his annual compensation was raised to $50,000.

 

In February 2009, the Board also approved a grant of 250,000 options to Mr. Samaan. Those options have all vested as of March 29, 2011.  On March 1, 2011, the Company granted Mr. Samaan 100,000 options.  On August 3, 2011, the Company granted Mr. Samaan 100,000 more options. On May 2, 2012, the Company granted Mr. Samaan 100,000 more options. Mr. Samaan resigned as a Director of the Company in April 2013.

 

The Company agreed to give Brad O’Sullivan $25,000 in annual compensation starting in May 2010 for his services on the Board of Directors. Mr. O’Sullivan also receives $25,000 in annual compensation and 500,000 stock options for his services as Chief Executive Officer, as described in the Executive Compensation section above.  On March 1, 2011, the Company granted Mr. O’Sullivan 100,000 options.  On May 2, 2012, the Company granted Mr. O’Sullivan 200,000 more options. Mr. O’Sullivan resigned as a Director of the Company in April 2013.

 

Matthew Katzeff was appointed to the Board of Directors in December 2010. He is paid $25,000 in annual compensation for such services. As Chief Executive Officer of the Company, Mr. Katzeff is paid $25,000 in annual compensation as an officer and received 450,000 stock options, as described in the Executive Compensation section above.  On March 1, 2011, the Company granted Mr. Katzeff 100,000 options.  On May 2, 2012, the Company granted Mr. Katzeff 200,000 more options. Mr. Katzeff resigned as a Director of the Company in April 2013.

 

Edward J. O'Connor has served as a director since March 2001. Mr. O'Connor previously served as our CEO between March 2004 and October 2005 and as our President between March 2001 and January 2009.  On March 1, 2011, the Company granted Mr. O’Connor 100,000 options.  On May 2, 2012, the Company granted Mr. O’Connor 100,000 more options. Mr. O’Connor resigned as a Director of the Company in April 2013.

 

Dov Rauchwerger was appointed to the Board of Directors in April 2013.

 

Neil Osrof was appointed to the Board of Directors in April 2013. He is paid an annual salary of $12,000.

 

 

All of our directors are reimbursed for their reasonable expenses for attending board and board committee meetings.

 

 
20

 

   

Item 12.              SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth, as of December 31, 2013, the number of and percent of our common stock beneficially owned by:

 

 

all directors and nominees, naming them,

 

 

our executive officers,

 

 

our directors and executive officers as a group, without naming them, and

 

 

persons or groups known by us to own beneficially 5% or more of our common stock:

 

We believe that all persons named in the table have sole voting and investment power (or shares such powers with his or her spouse) with respect to all shares of common stock beneficially owned by them.

 

A person is deemed to be the beneficial owner of securities if that person has the power to vote or dispose of such securities or if that person can acquire such securities within 60 days from March 24, 2014 upon the exercise of options, warrants, convertible securities or other rights. Each beneficial owner's percentage ownership is determined by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of March 24, 2014 have been exercised and converted.

 

Title of Class

Name and address of

Beneficial Owner

 

Number of Shares

Beneficially Owned

   

Percent of Total*

 

 

Matthew Katzeff 

               
  c/o Optionable, Inc., 635 Beach 19th Street,                
Common Stock  Far Rockaway, NY 11691     750,000 (1)     0.9 %
                   
                   

 

Mark Nordlicht 

               
  152 West 57th Street, 4th Floor, New York,                
Common Stock  NY 10019     41,681,761 (3)     49.7 %
                   
 

Nymex Holdings, Inc.

               
  One, North End Avenue                
  World Financial Center                
Common Stock  New York, NY 10282     10,758,886       12.8 %
                   
 

All Executive Officers and Directors as a

               
Common Stock  Group (4 persons )     750,000       0.9 %

 

* Based upon 83,833,128 shares outstanding as of March 24, 2014.

 

(1) Includes shares issuable pursuant to the exercise of stock options exercisable within 60 days.

(2) Includes 2,682,201 shares owned by Ridgecrest Capital Corp., Inc., a corporation wholly owned by Mr. O'Connor, 901,929 shares owned by Mr. O'Connor's daughter Kathleen O'Connor and 901,929 shares owned by Mr. O'Connor's daughter Erin O'Connor.  Mr. O’Connor disclaims beneficial ownership of his daughters’ shares.

(3) Based solely on a Schedule 13-D/A filed on August 2, 2011 as well as the Stock Purchase Agreement between Mark Nordlicht and the Company executed in April 2013.

 

 
21

 

  

ITEM 13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

The terms and amounts of due to related parties at September 30, 2013 and December 31, 2012, respectively, are as follows:

 

One of the Company’s former board members and former president is entitled to a payment of $508,697 (the “Principal Amount”), plus interest, if applicable, upon the following terms. In the event that the Company secures financing of at least $1,000,000 (the “Capital Raise”), this person will be entitled to a payment equal to the lesser of (i) 12.5% of the Capital Raise, (ii) $381,250, and (iii) any unpaid Principal Amount. In the event that upon a Capital Raise, the entire Principal Amount has not been repaid, this person shall be issued a promissory note (the “Capital Raise Note”) in the principal amount of any then unpaid Principal Amount remaining after the payments described in the preceding sentence. The Capital Raise Note shall be due and payable on April 1, 2014 and shall bear interest at a rate of 4.68% annually. In the event that no Capital Raise shall have occurred prior to April 1, 2014, then the unpaid Principal Amount shall be due and payable as of such date. This liability is recorded on the Company’s balance sheets as follows:

 

   

December 31,

2013

   

December 31,

2012

 
    $ 508,697     $ 508,697  

Discount, using initial implied rate of 12%

    (12,828 )     (68,638 )
    $ 495,869     $ 440,059  

  

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 $55,810 and $49,529 during the years ending December 31, 2013 and 2012, respectively.

 

On April 10, 2013, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mark Nordlicht, a current stockholder of the Company (the “Subscriber”), pursuant to which the Company sold to the Subscriber an aggregate of 35,500,000 shares of the Company’s common stock, par value $.001 (the “Securities”), at a purchase price of $0.02 per share (the “Purchase Price”), for a total offering amount, before Offering related expenses, of $710,000 (the “Offering”). The Offering closed immediately following the execution and delivery of the Purchase Agreement by the Company and the Subscriber. After giving effect to the Offering, there are 83,833,128 shares of Common Stock outstanding and options to purchase an aggregate of 2,983,000 shares of Common Stock outstanding.

 

Effective upon the closing of the Offering, Brad O’Sullivan, Matthew Katzeff, Ed O’Connor and Andrew Samaan resigned as directors of the Company, the number of directors constituting the Company’s full Board of Directors was reduced to two and Dov Rauchwerger and Neil Osrof were elected to fill the vacancies created by such resignations.  Mr. Rauchwerger was also elected as the Chief Executive Officer and Chief Financial Officer of the Company. Subsequently, Matthew Katzeff was reappointed Chief Financial Officer.

 

 

One of our members of our Board of Directors, Neil Osrof is "independent" within the meaning of Nasdaq Marketplace Rule 4200. The other current member of the Board of Director, Dov Rauchwerger, is not “independent.” We have not established any committees, including an Audit Committee, a Compensation Committee, a Nominating Committee, or any committee performing a similar function. The functions of those committees are being undertaken by the entire board as a whole. Due to the size of the Board and the Company’s limited resources, our Board of Directors believes that the establishment of such committees of the Board is unnecessary and could be considered more form than substance.

  

 
22

 

   

ITEM 14.              PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

RBSM, LLP audited our financial statements for the years ended December 31, 2013 and 2012. The following table shows the fees paid or accrued by us for the audit and other services provided by our accounting firms for fiscal years 2013 and 2012.

 

   

2013

   

2012

 
                 

Audit Fees (1)

  $ 40,000     $ 46,000  

Audit-Related Fees

  $ -     $ -  

Tax Fees

  $ -     $ -  

All Other Fees

  $ 8,348     $ 16,703  
                 

Total

  $ 48,348     $ 62,703  

 

 (1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings.

 

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

 

The Board of Directors acts as the audit committee, and consults with respect to audit policy, choice of auditors, and approval of out of the ordinary financial transactions. The Board approved all of the services provided by RBSM, LLP, as described above.

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

 

Exhibit No. 

 

Description

 

 

Exhibit

No. 

 

Description

 

 

 

3.1

 

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

 

 

 

3.2

 

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

 

 

 

3.3

 

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

 

 

 

3.4

 

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

 

 

 

3.5

 

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

 

3.6

 

Certificate of Amendment to the Certificate of Incorporation of Optionable, Inc., dated June 9, 2004 (incorporated by reference to Exhibit 3.1(i)(f) to the SB-2).

 

 

 

3.7

 

Amended and Restated By-laws of Optionable, Inc. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of June 25, 2010 and filed on June 28, 2010)

 

10.1

 

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

 

 

 

10.2

 

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

  

 
23

 

 

10.3

 

Amendment to Master Services Agreement (incorporated reference to the registrant's Current Report on Form 8-K, dated as of April 10, 2006)

 

 

 

10.4

 

Termination Agreement (of Master Service Agreement; incorporated by reference to the registrant's Current Report on Form 8-K, dated as of January 31, 2007)

 

 

 

10.5

 

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

 

 

 

10.6

 

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

 

 

 

10.7

 

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

 

 

 

10.8

 

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

 

 

 

10.9

 

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

 

 

 

10.10

 

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

 

 

 

10.11

 

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

 

 

 

10.12

 

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

 

 

 

10.13

 

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

 

 

 

10.14

 

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

 

 

 

10.15

 

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

 

 

 

10.16

 

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

   

10.17

 

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

 

 

 

10.18

 

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

  

10.19

 

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

 

 

 

10.20

 

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

 

 

 

10.21

 

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

 

 

 

10.22

 

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

 

 

 

10.23

 

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

 

 

 

10.24

 

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

 

 

 

10.25

 

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

 

 

 

10.26

 

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

 

 

 

10.27

 

Warrant Agreement for the Purchase of Common Stock (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006)

  

 
24

 

 

10.28

 

Service and Repurchase Agreement (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of January 31, 2007)

 

 

 

10.29

 

Code of Business Conduct and Ethics (Incorporated by reference to the registrant’s Form 10-KSB for the fiscal year ended December 31, 2007)

 

 

 

10.30

 

Acquisition Agreement, dated March 23, 2007, between the Company, Peter Holmquist, Douglas Towne, and Joseph McHugh (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of March 23, 2007.

 

 

 

10.31

 

Release, Rescission and Termination Agreement, dated May 18, 2007, by and among Optionable, Inc., Peter Holmquist, Douglas Towne, Joseph McHugh and Nicole Troiani (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of May 18, 2007.

 

 

 

10.32

 

Separation and Release Agreement, dated July 25, 2007, by and among Optionable, Inc., Opex International, Inc., Kevin DeAndrea, Noah Rothblatt, Kevin Brennan and Nicole Troiani. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of July 25, 2007).

 

 

 

10.33

 

Warrant, dated April 10, 2007, issued pursuant to that certain Stock and Warrant Purchase Agreement, dated April 10, 2007, by and among Optionable, Inc., NYMEX Holdings, Inc., Mark Nordlicht, Kevin Cassidy through Pierpont Capital, Inc. and Edward O'Connor through Ridgecrest Capital, Inc. (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

    

10.34

 

Stock and Warrant Purchase Agreement, dated April 10, 2007, by and among Optionable, Inc., NYMEX Holdings, Inc., Mark Nordlicht, Kevin Cassidy through Pierpont Capital, Inc. and Edward O'Connor through Ridgecrest Capital, Inc.(portions of this exhibit are subject to a confidential treatment request) (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

 

 

10.35

 

Investor Rights Agreement, dated April 10, 2007, by and among Optionable, Inc., NYMEX Holdings, Inc., Mark Nordlicht, Kevin Cassidy and Edward O'Connor. (incorporated by reference to  the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

 

 

10.36

 

Waiver, dated April 10, 2007, by and between Optionable, Inc. and Mark Nordlicht, to that certain Loan Agreement, dated March 22, 2004, by and between Optionable, Inc. and Mark Nordlicht. (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

 

 

10.37

 

Amended and Restated Employment Agreement, dated April 10, 2007, by and between Optionable, Inc. and Kevin Cassidy. (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

 

 

10.38

 

Registration Rights Agreement, dated April 10, 2007, by and between Optionable, Inc. and NYMEX Holdings, Inc. (incorporated by reference to the registrant's Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2007)

 

 

 

10.39

 

Separation and Release Letter, dated November 6, 2007, by and between Optionable, Inc. and Albert Helmig (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of November 6, 2007).

 

 

 

10.40

 

Letter Agreement, dated as of November 26, 2007, by and between Optionable, Inc. and Thomas Burchill. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of November 26, 2007).

 

 

 

10.41

 

Letter Agreement, dated as of November 26, 2007, by and between Optionable, Inc. and Dov Rauchwerger. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of November 26, 2007).

 

 

 

10.42

 

Stock Option Agreement, dated as of November 26, 2007, by and between Optionable, Inc. and Thomas Burchill. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of November 26, 2007).

 

 

 

10.43

 

Stock Option Agreement, dated as of November 26, 2007, by and between Optionable, Inc. and Dov Rauchwerger. (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of November 26, 2007).

 

 

 

10.44

 

Separation Agreement between Optionable, Inc. and Edward J. O’Connor dated as of January 28, 2009. (incorporated by reference to the registrant’s Current Report on Form 8-K dated as of February 2, 2009)

  

 
25

 

 

10.45

 

Employment Agreement between Optionable, Inc. and Thomas Burchill dated as of January 28, 2009(incorporated by reference to the registrant’s Current Report on Form 8-K dated as of February 2, 2009)

 

 

 

10.46

 

Letter Agreement dated as of January 15, 2009 with respect to compensation to Andrew Samaan (incorporated by reference to the registrant’s Current Report on Form 8-K dated as of February 2, 2009)

  

10.47

 

Settlement and Voting Agreement between Optionable, Inc. and Mark Nordlicht dated as of  February 26, 2009 (incorporated by reference to the registrant’s Current Report on Form 8-K dated as of February 27, 2009)

 

 

 

10.48

 

Employment Letter dated May 17, 2010 with respect to compensation to  Brad P. O’Sullivan (incorporated by reference to the registrant’s Current Report on Form 8-K dated as of July 2, 2010)

 

 

 

10.49

 

Stock Option Agreement dated as of November 26, 2007, by and between Optionable, Inc. and Brad P. O’Sullivan (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of July 2, 1010).

 

 

 

10.50

 

Indemnification Agreement, by and between Optionable, Inc. and Brad P. O’Sullivan (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of July 2, 1010).

 

 

 

10.51

 

Indemnification Agreement, by and between Optionable, Inc. and Andrew Samaan (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of July 2, 1010).

 

 

 

10.52

 

First Amendment to 2004 Stock Option Plan (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of March 4, 2011).

 

 

 

10.53

 

Amendment to Stock Option Agreement between Optionable, Inc. and Matthew Katzeff  (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of March 4, 2011).

 

 

 

10.54

 

Amendment to Stock Option Agreement between Optionable, Inc. Brad O’Sullivan  (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of March 4, 2011).

 

 

 

10.55

 

Amendment to Stock Option Agreement between Optionable, Inc. and Andrew Samaan  (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of March 4, 2011).

 

 

 

10.56

 

Stock Option Agreement dated as of May 2, 2012, by and between Optionable, Inc. and Brad P. O’Sullivan (incorporated by reference to the registrant's Quarterly Report on Form 10-Q, dated as of May 14, 2012).

 

 

 

10.57

 

Stock Option Agreement dated as of May 2, 2012, by and between Optionable, Inc. and Matthew Katzeff (incorporated by reference to the registrant's Quarterly Report on Form 10-Q, dated as of May 14, 2012).

 

 

 

10.58

 

Stock Option Agreement dated as of May 2, 2012, by and between Optionable, Inc. and Edward O’Connor (incorporated by reference to the registrant's Quarterly Report on Form 10-Q, dated as of May 14, 2012).

 

 

 

10.59

 

Stock Option Agreement dated as of May 2, 2012, by and between Optionable, Inc. and Andrew Samaan (incorporated by reference to the registrant's Quarterly Report on Form 10-Q, dated as of May 14, 2012).

 

 

 

10.60

 

Stock Option Agreement dated as of May 3, 2011, by and between Optionable, Inc. and Andrew Samaan (incorporated by reference to the registrant's Quarterly Report on Form 10-Q, dated as of November __, 2012).

 

 

 

10.61

 

Memorandum Decision and Order.  CMEG NYMEX Inc. v. Optionable, Inc., et al., Civ. No. 09-03677 (S.D.N.Y.) (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of August 30, 2012).

 

 10.62

 

Memorandum Decision and Order.  Bank of Montreal v. Optionable, Inc., et al., Civ. No. 09-07557 (S.D.N.Y.) (incorporated by reference to the registrant's Current Report on Form 8-K, dated as of August 30, 2012).

  

 
26

 

 

10.63

 

Securities Purchase Agreement (incorporated by reference to the registrant’s Current Report on Form 8-K, dated as of April 10, 2013)

 

 

 

31.1*

 

Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

 

 

 

31.2*

 

Certification by Principal Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act

 

 

 

32.1*

 

Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

 

 

 

32.2*

 

Certification by Principal Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code

 

 

 

101.INS**

 

XBRL INSTANCE

 

 

 

101.SCH**

 

XBRL TAXONOMY EXTENSION SCHEMA

 

 

 

101.CAL**

 

XBRL TAXONOMY EXTENSION CALCULATION

 

 

 

101.DEF**

 

XBRL TAXONOMY EXTENSION DEFINITION

 

 

 

101.LAB**

 

XBRL TAXONOMY EXTENSION LABELS

 

 

 

101.PRE**

 

XBRL TAXONOMY EXTENSION PRESENTATION

  

 

Filed herewith

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections

  

 
27

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

Optionable, Inc.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Dov Rauchwerger

 

 

 

 

 

 

 

Dov Rauchwerger

 

   

Chief Executive Officer

 
    (Principal Executive Officer)  

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Matthew Katzeff

 

 

 

 

 

 

 

Matthew Katzeff

 

   

Chief Financial Officer

 
    (Principal Financial Officer)  

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Signature

 

 

 

Title

 

 

 

Date

 

 

 

 

 

 

 /s/ Dov Rauchwerger

 

Chief Executive Officer and

 

March 24, 2014

Dov Rauchwerger

 

Director

 

 

 

 

 

 

 

/s/ Matthew Katzeff

 

Chief Financial Officer

 

March 24, 2014

Matthew Katzeff

 

 

 

 

 

 

 

 

 

/s/ Neil Osrof

 

Director

 

March 24, 2014

Neil Osrof

 

 

 

 

 

 

 

 

 

  

 
28

 

  

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders, Optionable, Inc.

 

We have audited the accompanying balance sheet of Optionable, Inc. (the "Company") as of December 31, 2013 and 2012, and the related statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Optionable, Inc. at December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note 1 to the financial statements, the Company’s recurring losses from operations and uncertainty regarding pending legal matters raise substantial doubt about its ability to continue as a going concern. Management’s plans as to these matters also are described in Note 1. The December 31, 2013 and 2012 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ RBSM LLP

 

New York, New York

March 24, 2014

  

 

 

   

OPTIONABLE, INC.

BALANCE SHEETS

 

 

   

December 31,

2013

   

December 31,

2012

 
                 

ASSETS

               

Current Assets:

               

Cash and cash equivalents

  $ 163,234     $ 247,684  

Prepaid expenses

    20,000       14,589  

Total current assets

    183,234       262,273  
                 
                 

Total assets

  $ 183,234     $ 262,273  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               
                 

Current Liabilities:

               

Accounts payable and accrued expenses

  $ 248,938     $ 176,853  
      248,938       176,853  
                 

Due to director, net of unamortized discount of $12,828 and $68,638 at December 31, 2013 and December 31, 2012, respectively

    495,869       440,059  

Total liabilities

    744,807       616,912  
                 

Stockholders' Deficit:

               

Preferred Stock; $.0001 par value, 5,000,000 shares authorized, none issued and outstanding at December 31, 2013 and December 31, 2012

    -       -  

Common stock; $.0001 par value, 100,000,000 shares authorized, 87,928,203 shares issued and 52,423,403 shares outstanding at December 31, 2013 and December 31, 2012

    8,792       5,242  

Additional paid-in capital

    163,533,686       162,819,884  

Treasury stock at cost, 4,095,075 shares at December 31, 2013 and December 31, 2012

    (47,552 )     (47,552 )

Accumulated deficit

    (164,056,499 )     (163,132,213 )
                 

Total stockholders’ deficit

    (561,573 )     (354,639 )
                 

Total liabilities and stockholders’ deficit

  $ 183,234     $ 262,273  

 

See Notes to Financial Statements.

 

 
F-1

 

 

OPTIONABLE, INC.

STATEMENTS OF OPERATIONS

 

 

   

For the years ended

December 31,

 
   

2013

   

2012

 
                 
                 

Operating expenses:

               

Selling, general and administrative

  $ 869,148     $ 1,152,031  
                 

Total operating expenses

    869,148       1,152,031  
                 

Operating loss

    (869,148 )     (1,152,031 )
                 

Other income (expense):

               

Interest income

    672       2,855  

Interest expense to related parties

    (55,810 )     (49,529 )
      (55,138 )     (46,674 )
                 

Loss before income tax benefit

    (924,286 )     (1,198,705 )
                 

Income tax benefit

    -       -  
                 

Net loss

  $ (924,286 )   $ (1,198,705 )
                 

Basic loss per common share

  $ (0.01 )   $ (0.02 )
                 

Diluted loss per common share

  $ (0.01 )   $ (0.02 )
                 

Basic and Diluted weighted average common shares outstanding

    78,298,134       48,333,128  

 

See Notes to Financial Statements.

 

 
F-2

 

 

OPTIONABLE, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

From January 1, 2012 to December 31, 2013

 

                           

Treasury

                 
   

Common Stock

   

Additional

   

Stock,

   

Accumulated

         
   

Shares

           

Paid-in Capital

   

at Cost

   

Deficit

   

Total

 
                                                 

Balance at January 1, 2012

    52,428,203     $ 5,242     $ 162,805,110     $ (47,552 )   $ (161,933,508 )   $ 829,292  
                                                 

Fair value of options

    -       -       14,774       -       -       14,774  

Repurchase of shares

    -       -       -               -       -  

Net loss

    -       -       -       -       (1,198,705 )     (1,198,705 )

Ending balance, December 31, 2012

    52,428,203       5,242       162,819,884       (47,552 )     (163,132,213 )     (354,639 )
                                                 

Fair value of options

    -       -       7,353       -       -       7,353  

Issuance of Common Stock, net of issuance costs

    35,500,000       3,550       706,450       -       -       710,000  

Net loss

    -       -       -       -       (924,286 )     (924,286 )

Ending balance, December 31, 2013\

    87,928,203     $ 8,792     $ 163,533,687     $ (47,552 )   $ (164,056,499 )   $ (561,572 )

 

See Notes to Financial Statements

  

 
F-3

 

 

OPTIONABLE, INC.

STATEMENTS OF CASH FLOWS

 

   

For the years ended

December 31,

 
   

2013

   

2012

 
                 
                 

Cash flows from operating activities:

               

Net loss

  $ (924,286 )   $ (1,198,705 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Amortization of debt discount

    55,810       49,529  

Non cash expenses paid by shareholder

    132,185       -  

Share-based compensation expense

    7,353       14,774  

Changes in operating assets and liabilities:

               

Prepaid and other assets

    (5,411 )     25,411  

Accounts payable and accrued expenses

    72,085       66,393  
                 

Net cash used in operating activities

    (662,264 )     (1,042,598 )
                 

Net cash used in investing activities

    -       -  
                 

Net cash used in financing activities

    577,815       -  
                 

Net decrease in cash

    (84,449 )     (1,042,598 )
                 

Cash, beginning of period

    247,684       1,290,282  
                 

Cash, end of period

  $ 163,235     $ 247,684  
                 

Supplemental disclosures of cash flow information:

               

Cash paid for income taxes

  $ -     $ -  
                 

Cash paid for interest

  $ -     $ -  

 

See Notes to Financial Statements.

 

 
F-4

 

 

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

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 termination of the business relationship by its largest customer and the succession of events since then. The litigation matters listed below and discussed in Note 6 have had a significant adverse impact on its business and future results of operations and financial condition.

 

The Company’s management is seeking out possible business transactions and new relationships in areas unrelated to brokerage services.

 

The Company is a defendant to several legal proceedings, one from its largest shareholder, Chicago Mercantile Exchange/ New York Mercantile Exchange (“NYMEX”), and a second one from its former largest customer, Bank of Montreal (“BMO”) (which was settled in 2013). Also named in such lawsuits, among others, are: one of the Company’s current board members and former president, as well as the Company’s former chief executive officer and former chairman. Additionally, the Company’s former chief executive officer and former president are defendants in a claim made by the Securities and Exchange Commission.

 

Going Concern

 

Based on its cash and equivalents as of the date of this Annual Report on Form 10-K, the Company is unlikely to have sufficient funds to meet its obligations for the next twelve months if the Company is not able to secure new sources of capital or complete a strategic transaction.  Even if the Company raises additional capital or completes a strategic transaction, the combination of the anticipated legal costs to defend against current legal proceedings, the potential amounts the Company would have to pay if there are negative outcomes in one or more of such legal proceedings, the Company’s obligations under its indemnification obligations and additional legal and other ongoing expenses incurred by the Company could exceed the Company’s resources before the end of 2014. The legal proceedings also negatively impact the Company’s ability to raise additional capital or enter into strategic transactions with other companies.  The Company’s future depends on its ability to satisfactorily resolve the aforementioned issues and there is no assurance it will be able to do so. If the Company fails for any reason, it would not be able to continue as a going concern and could potentially be forced to seek relief through a bankruptcy or other dissolution proceeding. The Company's December 31, 2013 financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 
F-5

 

  

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

 

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. The Federal Deposit Insurance Corporation ("FDIC") insured up to $100,000 between January 2007 and October 2008. After October 2008, it insured up to $250,000 for interest-bearing accounts and an unlimited amount for noninterest-bearing accounts after October 2008. 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. 

 

Fair Value of Financial Instruments

 

Effective January 1, 2008, the Company adopted Financial Accounting Statement Board (“FASB”) Accounting Standard Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” , for assets and liabilities measured at fair value on a recurring basis. ASC 820 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.

 

ASC 820 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, ASC 820 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 liabilities

 

 

 

 

Level 2:    

Observable market-based inputs or unobservable inputs that are corroborated by market data

 

 

 

 

Level 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 December 31, 2013 and 2012, with the exception of its due to director.  The Company deems that the carrying value of the due to director approximates the fair value as of December 31, 2013.

 

 
F-6

 

 

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

 

Note 2- Summary of Significant Accounting Policies-Continued

 

Cash and cash equivalents include money market securities that are considered to be highly liquid and easily tradable as of December 31, 2013 and 2012, 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, ASC 825-10-25, “Fair Value Option,” was effective January 1, 2008. ASC 825-10-25 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.

 

Income Taxes

 

Income taxes are accounted for in accordance with "Accounting for Income Taxes", which 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, ASC 740 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 2,883,000 and 2,283,000 at December 31, 2013 and 2012, respectively. There were no outstanding warrants at December 31, 2013 and 2012, respectively. The options and warrants outstanding at December 31, 2013 and 2012, respectively, have been excluded from the computation of diluted earnings per share due to their antidilutive effect.

  

 
F-7

 

 

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

Note 2- Summary of Significant Accounting Policies-Continued

 

Stock Compensation

 

Under ASC 718-  Compensation-Stock Compensation, 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 ASC 718 and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. 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.

 

Contingencies

 

The outcomes of legal proceedings and claims brought against the Company are subject to significant uncertainty. FASB ASC 450-20-25-2 “Contingencies- Loss Contingencies-Recognition”, 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 the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. While the Company believes that it will continue to incur losses from such legal proceedings, it is unable to make a reasonable estimate of the amount of loss.

 

Recent Accounting Pronouncements

 

A variety of accounting standards have been issued or proposed by FASB that do not require adoption until a future date.  The Company does not expect the adoption of any of these standards to have a material impact once adopted.

  

 

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 in connection with legal proceedings which are described in Note 6-Litigation and Contingencies.

  

 
F-8

 

 

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

Note 4-Due to Related Parties

 

The terms and amounts of due to related parties at December 31, 2013 and 2012, respectively, are as follows:

 

One of the Company’s current board members and former president is entitled to a payment of $508,697 (the “Principal Amount”), plus interest, if applicable, upon the following terms. In the event that the Company secures financing of at least $1,000,000 (the “Capital Raise”), this person will be entitled to a payment equal to the lesser of (i) 12.5% of the Capital Raise, (ii) $381,250, and (iii) any unpaid Principal Amount. In the event that upon a Capital Raise, the entire Principal Amount has not been repaid, then this person shall be issued a promissory note (the “Capital Raise Note”) in the principal amount of any then unpaid Principal Amount remaining after the payments described in the preceding sentence. The Capital Raise Note shall be due and payable on April 1, 2014 and shall bear interest at a rate of 4.68% annually. In the event that no Capital Raise shall have occurred prior to April 1, 2014, then the unpaid Principal Amount shall be due and payable as of such date. This liability is recorded on the Company’s balance sheets as follows: 

 

   

December

31,

2013

   

December

31,

2012

 
                 
                 
    $ 508,697     $ 508,697  

Discount, using initial implied rate of 12%

    (12,828

)

    (68,638

)

    $ 495,869     $ 440,059  

 

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 $55,810 and $49,529 during 2013 and 2012, respectively.

 

 

 Note 5- Stockholders' Equity

 

Stock Compensation Plan

 

During November 2004, the Company adopted the 2004 Stock Option Plan ("2004 Plan"), and amended it in March 2011. 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. The 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.

  

 
F-9

 

 

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

  Note 5- Stockholders' Equity-continued

 

During 2013 and 2012, the Company recorded share-based payment expenses amounting to approximately $7,353 and $14,774, respectively, in connection with all options outstanding at the respective measurement dates. The amortization of share-based payment was recorded in general and administrative expenses during 2013 and 2012.

 

The Company granted 500,000 options in March 2011, as follows: 100,000 options were granted to each of CEO Brad O’Sullivan, CFO Matthew Katzeff, Director Andrew Samaan, Director and former President Edward O’Connor and Comptroller Michael Templeton. The Company granted 100,000 options to Director Andrew Samaan in August 2011. 

 

The Company granted 600,000 options in May 2012, as follows: 200,000 options were granted to each of CEO Brad O'Sullivan and CFO Matthew Katzeff and 100,000 options were granted to each of Director Andrew Samaan and Director and former President Edward O’Connor. These were the only options granted during the year ended December 31, 2012.

 

No options granted during the year ended December 31, 2013.

 

The fair value of the options granted during the years ended December 31, 2012 are based on the Black Scholes Model using the following assumptions:

 

   

600,000

Options

Issued

On May 2,

2012

                 
                         

Exercise price:

  $ 0.022                  
                         

Market price at date of grant:

  $ 0.022                  
                         

Volatility:

    123

%

               
                         

Expected dividend rate:

    0

%

               
                         

Expected terms (years):

    5                  
                         

Risk-free interest rate:

    0.82

%

               

  

 
F-10

 

  

OPTIONABLE, INC.

 

NOTES TO FINANCIAL STATEMENTS

 

 

 Note 5- Stockholders' Equity-continued

 

 

  A summary of the activity during 2013 and 2012 of the Company’s stock option plan is presented below:

 

   

Options

   

Weighted

Average

Exercise Price

   

Aggregate

Intrinsic

Value

 
                         

Outstanding at January 1, 2012

    2,283,000     $ 0.15          
                         

Granted

    600,000     $ .022          

Exercised

    -       -          

Expired or cancelled

    -       -          

Outstanding at December 31, 2012

    2,883,000     $ 0.015     $ .035  
                         

Granted

    -       -          

Exercised

    -       -          

Expired or cancelled

    120,000     $ 0.22          

Outstanding at December 31, 2013

    2,763,000     $ 0.16     $