February 25, 2005
Mail Stop 0409
Edward J. O`Connor
Optionable, Inc.
555 Pleasantville Road
South Building, Suite 110
Briarcliff Manor, New York 10510
Re: Optionable, Inc.
Amendment No. 1 to
Registration Statement on Form SB-2 Filed February 10, 2005
Registration No. 333-121543
Dear Mr. O`Connor:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note your response to comment 3 that OPEX will be qualified
to
operate as an exempt commercial market under the CEAct because you
will limit trading on OPEX to persons that are eligible commercial
entities at the time they enter a trade and because you will
permit
only exempt commodities to be traded on OPEX. Please tell us
whether
the CFTC has provided you with correspondence that agrees with
your
statement and please provide us a copy of any such correspondence.
Selling Stockholders, page 18
2. Please move the "Number of Shares Being Sold" column to after
the
"Before Offering" column.
3. When calculating the percentage of shares owned before the
offering for a particular selling stockholder, please include all
shares being sold by the selling stockholder in the total
outstanding. Please revise the paragraph preceding the table
accordingly.
4. Since the table includes shares that are not "beneficially
owned"
as determined under Regulation 13d-3, please remove references in
the
table and the preceding paragraph to beneficial ownership.
5. We note your response to comment 33. Please provide a
supplemental analysis with respect to any selling stockholder that
is
a broker-dealer or an affiliate thereof as to whether such person
is
an underwriter in this offering.
Management`s Discussion and Analysis of Plan of Operations, page
23
Overview, page 23
6. We note your statements that you intend to complete the
development and initial launch of the OPEX system in the first
half
of 2005, that you believe the costs will be at least $500,000 to
finalize the development of the first operating version of OPEX
and
$100,000 for marketing costs, and that these amounts will be
financed
by your cash flows from operations. In light of the fact that you
had negative cash flows from operations of approximately $600,000
for
the nine months ended September 30, 2004 and that the September
30,
2004 financial statements have been prepared on a going concern
basis, please tell us the basis for your belief that you will be
able
to finance these expenditure from cash flows from operations.
7. Please disclose what expected impact "a higher level of
participants...committing capital to energy trading" will have on
your business.
Results of Operations for the Nine-Month Period Ended September
30,
2004 and 2003, page 25
8. Please revise to explain what you mean by the statement that
12%
"is the rate used by management to discount such amounts due."
In
this connection, explain why a discount is used and the agreement
and
circumstances under which such discount is provided.
Liquidity and Capital Resources, page 27
9. We note your disclosure that "sophisticated investors"
participated in the September 2004 private placement and your
disclosure in Part II that accredited investors participated in
such
offering. Please revise the disclosure so that it is consistent.
If
the participants were sophisticated investors but not accredited
investors, please provide additional support in Part II for your
reliance on the exemption under Rule 506.
10. Please revise to disclose that you will pay up to 10.6% of any
amounts raised, up to $762,500, to CES.
11. We note your statement that you do not currently have any
material commitments for capital expenditures. Please revise to
reflect the commitment to pay CES minimum annual fixed fees of
$50,000 and $1,525,000 on April 1, 2014.
12. We note your response to comment 43. It is still unclear to
us
how issuance of common stock allowed you to fund an increase in
accounts and other receivables. In a supplemental response, please
specifically identify how the issuance of stock caused an increase
in
revenues and a corresponding increase in accounts and other
receivables. Also distinguish the amount of the proceeds advanced
to
the related party.
Business Alliances, page 30
13. We note your statement that by entering the Master Services
Agreement with CES you did not need to make "the large investment
of
purchasing seats on the NYMEX." Supplementally tell us the number
of
seats owned by CES and the market value of those seats.
Certain Relationships and Related Party Transactions, page 38
14. We note your response to comment 55. Please provide
additional
disclosure regarding the prepaid commission agreement with Mr.
Nordlicht. In particular, please discuss why a non-refundable
prepaid commission payment is consolidated with loans made by Mr.
Nordlicht. In addition, please disclose why the prepaid services
"never materialized."
Financial Statements
15. Please file an amended form SB-2 that includes audited
December
31, 2004 financial statements. Reference is made to Item 310(g)
of
Regulation S-B.
Notes to the Financial Statements - December 31, 2003 and 2002,
pages
F-7 - F-16
Note 3 - Summary of Significant Accounting Policies, pages F-7 -
F-12
Software Development Costs, page F-8 - F-9
16. We have reviewed your response to comment 63. The statement,
"After technological feasibility is established, any additional
costs
are capitalized in accordance with SFAS 86," does not appear to be
technically correct. Reference is made to SFAS 86, paragraph 6.
Please revise your disclosure or advise.
Notes to the Financial Statements - September 30, 2004 and 2003,
pages F-20 - F-33
Note 3 - Summary of Significant Accounting policies, pages F-21 -
F-
26
Revenue Recognition, page F-25
17. We note your response to comment 67. Please include a
discussion
similar to paragraph 2) in your response to comment 67 within the
notes to the financial statements.
Exhibits
18. With respect to the "validly issued" opinion, please direct
counsel to revise its opinion with respect to the shares already
issued and outstanding.
* * * *
As appropriate, please amend your registration statement
in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Matthew Maulbeck at (202) 942-1905 or Donna
DiSilvio, Senior Staff Accountant, at (202) 942-1852 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Michael McTiernan, Attorney-Advisor, at
(202) 824-5445 or the undersigned at (202) 942-1766 with any other
questions.
Sincerely,
Elaine Wolff
Branch Chief
cc: Kenneth S. Goodwin, Esq. (via facsimile)
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Optionable, Inc.
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