**Back
          to Table of Contents**







**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-Q**


**(Mark
      One)**


**x**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**  **For the quarterly period ended
              March 31, 2006**


**OR**




 ̈
            ****TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****  **For the transition period
              from to**




**Commission
      File Number 1-9728**







**Epoch
        Holding Corporation**
 (Exact
        name of Registrant as Specified in its Charter)
 **Delaware**
              
              **20-1938886**(State
                  or Other Jurisdiction
              
              (I.R.S.
                  Employerof
                  Incorporation or Organization)
              
              Identification
                  No.)**640
                  Fifth Avenue, New York, NY 10019**
                (Address
                  of Principal Executive Offices)
  **212-303-7200**
 (Registrant’s
        telephone number, including area code)
  
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
        during the preceding 12 months (or for such shorter period that the registrant
        was required to file such reports), and (2) has been subject to such filing
        requirements for the past 90 days. YES x NO  ̈
  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. (Check
        one):
  Large
                  accelerated filer ̈
              
              Accelerated
                  filer ̈
              
              Non-accelerated
                  filerx
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes  ̈ No x
  At
        May 5,
        2006, there were 18,889,210 shares of the Company's common stock, $.01 par
        value
        per share, issued and outstanding.
  
 
 
 **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **FORM
        10-Q**
 **TABLE
        OF CONTENTS**
  **Page
No.****Part
                    I.**
                **Financial
                    Information**Item
                    1.
                Financial
                    StatementsCondensed
                    Consolidated Balance Sheets -March
                    31, 2006 (unaudited) and June 30,
                    2005
                3Condensed
                    Consolidated Statements of Operations (Unaudited)
                    -Three
                    and Nine Months Ended March 31, 2006 and
                    2005
                4Condensed
                    Consolidated Statement of Stockholders'
                    Equity(Unaudited)
                    - Nine Months Ended March 31,
                    2006
                5Condensed
                    Consolidated Statements of Cash Flows(Unaudited)
                    - Nine Months Ended March 31, 2006 and
                    2005
                6Notes
                    to Unaudited Condensed Consolidated Financial
                    Statements
                7-14Item
                    2.
                Management's
                    Discussion and Analysis of Financial
                    Conditionand
                    Results of Operations
                15-23Item
                    3.
                Quantitative
                    and Qualitative Disclosures About Market
                    Risk
                24Item
                    4.
                Controls
                    and Procedures
                24**Part
                    II.**
                **Other
                    Information**Item
                    1.
                Legal
                    Proceedings
                25Item
                    1a.
                Risk
                    Factors
                25Item
                    6.
                Exhibits
                25Signatures
                25
 
 2
 **Back
              to Table of
              Contents**
  **PART
        I: FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements**
  **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 (Dollars
        in thousands)
 
 **March
                    31,**
                
                **June
                    30,****2006**
                
                **2005******(unaudited)**ASSETS****Current
                    assets:**Cash
                    and cash equivalents
                
                $
                6,408
                
                $
                8,550Accounts
                    receivable
                
                
                2,377
                
                
                1,221Income
                    taxes receivable
                
                
                230
                
                
                —Other
                    current assets
                
                
                172
                
                
                69Total
                    current assets
                
                
                9,187
                
                
                9,840Property
                    and equipment (net of accumulateddepreciation
                    of $461 and $211, respectively)
                
                
                2,063
                
                
                2,088Security
                    deposits
                
                
                744
                
                
                946Investments
                    in technology-related businesses
                
                
                157
                
                
                157Total
                    assets
                
                $
                12,151
                
                $
                13,031**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****Current
                    liabilities:**Accounts
                    payable and accrued liabilities
                
                $
                1,188
                
                $
                1,065Accrued
                    compensation and benefits
                
                
                1,200
                
                
                1,197Total
                    current liabilities
                
                
                2,388
                
                
                2,262Deferred
                    rent
                
                
                1,045
                
                
                981Sub-tenant
                    security deposit
                
                
                211
                
                
                211Total
                    liabilities
                
                
                3,644
                
                
                3,454**Commitments
                    and contingencies (Note 6)****Stockholders'
                    equity:**Preferred
                    stock - authorized 1,000,000shares
                    of $1 par value; none issued
                
                
                —
                
                
                —Common
                    stock - authorized 60,000,000 sharesof
                    $.01 par value; 18,889,210 and 18,257,749shares
                    issued, respectively
                
                
                189
                
                
                182Additional
                    paid-in capital
                
                
                27,477
                
                
                24,404Unearned
                    stock compensation
                
                
                (7,109
                )
                
                (7,480
                )Accumulated
                    deficit
                
                
                (12,050
                )
                
                (7,529
                )Total
                    stockholders' equity
                
                
                8,507
                
                
                9,577Total
                    liabilities and stockholders'
                    equity
                
                $
                12,151
                
                $
                13,031
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
  3
 **Back
            to Table of Contents**
 **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF
        OPERATIONS**
 (Dollars
        in thousands, except per share data)
 (Unaudited)
 **Three
                    Months
                    Ended**
                
                **Nine
                    Months
                    Ended****March
                    31,**
                
                **March
                    31,****2006**
                
                **2005**
                
                **2006**
                
                **2005****Revenues:**Investment
                    advisory andmanagement
                    fees
                
                $
                2,865
                
                $
                1,090
                
                $
                6,940
                
                $
                2,942**Operating
                    expenses:**Employee
                    related costs (excludingstock-based
                    compensation)
                
                
                2,177
                
                
                1,360
                
                
                6,230
                
                
                3,943Stock-based
                    compensation
                
                
                1,199
                
                
                993
                
                
                3,451
                
                
                2,547General
                    and administrative
                
                
                648
                
                
                624
                
                
                1,881
                
                
                1,714Professional
                    fees and services
                
                
                296
                
                
                232
                
                
                659
                
                
                700Depreciation
                    and amortization
                
                
                86
                
                
                53
                
                
                250
                
                
                113Total
                    operating expenses
                
                
                4,406
                
                
                3,262
                
                
                12,471
                
                
                9,017**Operating
                    loss from continuing****operations**
                
                
                (1,541
                )
                
                (2,172
                )
                
                (5,531
                )
                
                (6,075
                )**Other
                    income:**Interest
                    and other income
                
                
                249
                
                
                202
                
                
                684
                
                
                592Realized
                    gain on investments
                
                
                —
                
                
                —
                
                
                96
                
                
                —Total
                    other income
                
                
                249
                
                
                202
                
                
                780
                
                
                592**Loss
                    from continuing operations,****before
                    income taxes**
                
                
                (1,292
                )
                
                (1,970
                )
                
                (4,751
                )
                
                (5,483
                )Provision
                    (benefit) for income taxes
                
                
                (230
                )
                
                —
                
                
                (230
                )
                
                —**Loss
                    from continuing operations,****net
                    of taxes**
                
                
                (1,062
                )
                
                (1,970
                )
                
                (4,521
                )
                
                (5,483
                )Loss
                    from discontinued operations, netof
                    $0 taxes
                
                
                —
                
                
                —
                
                
                —
                
                
                (1
                )Gain
                    from sale of discontinuedoperations,
                    net of $0 taxes
                
                
                —
                
                
                —
                
                
                —
                
                
                572**Net
                    loss**
                
                $
                (1,062
                )
                $
                (1,970
                )
                $
                (4,521
                )
                $
                (4,912
                )**Basic
                    and diluted earnings ( loss) per share:**Loss
                    from continuing operations
                
                $
                (.06
                )
                $
                (.11
                )
                $
                (.24
                )
                $
                (.31
                )Income
                    from discontinued operations
                
                
                —
                
                
                —
                
                
                —
                
                
                .03**Basic
                    and diluted loss per share**
                
                $
                (.06
                )
                $
                (.11
                )
                $
                (.24
                )
                $
                (.28
                )
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 
 4
 **Back
            to Table of Contents**
  **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF STOCKHOLDERS'
        EQUITY**
 **NINE
        MONTHS ENDED MARCH 31, 2006**
 (Dollars
        and shares in thousands)
 (Unaudited)
  **Additional**
                
                **Unearned****Common
                    Stock**
                
                **Paid-In**
                
                **Stock**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Capital**
                
                **Compensation**
                
                **Deficit**
                
                **Totals****Balance
                    at June 30, 2005**
                
                
                18,258
                
                $
                182
                
                $
                24,404
                
                $
                (7,480
                )
                $
                (7,529
                )
                $
                9,577Net
                    issuance of restricted stock
                
                
                631
                
                
                7
                
                
                3,073
                
                
                (2,680
                )
                
                
                
                
                400Amortization
                    of stock-based compensation
                
                
                
                
                
                
                
                
                
                
                
                3,051
                
                
                
                
                
                3,051Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,521
                )
                
                (4,521
                )**Balance
                    at March 31, 2006**
                
                
                18,889
                
                $
                189
                
                $
                27,477
                
                $
                (7,109
                )
                $
                (12,050
                )
                $
                8,507
  The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 
 5
 **Back
            to Table of Contents**
 .
 **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (Dollars
        in thousands)
 (Unaudited)
 **Nine
                    Months
                    Ended****March
                    31,****2006**
                
                **2005****Cash
                    flows from operating activities:**Net
                    loss
                
                $
                (4,521
                )
                $
                (4,912
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Gain
                    from sale of discontinued operations
                
                
                —
                
                
                (572
                )Loss
                    from discontinued operations
                
                
                —
                
                
                1Realized
                    gain on investments
                
                
                (96
                )
                
                —Stock-based
                    compensation
                
                
                3,451
                
                
                2,547Depreciation
                    and amortization
                
                
                250
                
                
                113Deferred
                    rent
                
                
                64
                
                
                673Increase
                    in operating assets:Accounts
                    receivable
                
                
                (1,156
                )
                
                (1,655
                )Income
                    taxes receivable
                
                
                (230
                )
                
                —Other
                    current assets
                
                
                (103
                )
                
                —Increase
                    (decrease) in operating liabilities:Accounts
                    payable and accrued liabilities
                
                
                123
                
                
                (446
                )Accrued
                    compensation and benefits
                
                
                3
                
                
                207Federal
                    income taxes payable
                
                
                —
                
                
                (1,373
                )Other,
                    net
                
                
                —
                
                
                (4
                )**Net
                    cash used in operating activities**
                
                
                (2,215
                )
                
                (5,421
                )**Cash
                    flows from investing activities:**Capital
                    expenditures
                
                
                (225
                )
                
                (1,901
                )Security
                    deposits
                
                
                202
                
                
                (503
                )Proceeds
                    from investment
                
                
                96
                
                
                —Redemption
                    of short-term investments
                
                
                —
                
                
                4,967**Net
                    cash provided by investing activities**
                
                
                73
                
                
                2,563**Net
                    decrease in cash and cash equivalents**
                
                
                (2,142
                )
                
                (2,858
                )Cash
                    and cash equivalents - Beginning of year
                
                
                8,550
                
                
                10,801**Cash
                    and cash equivalents - End of period**
                
                $
                6,408
                
                $
                7,943**Supplemental
                    disclosures of cash flow data:**Cash
                    paid for:Federal income taxes
                
                $
                —
                
                $
                1,373Interest
                
                $
                —
                
                $
                110Non-cash
                    investing and financing activities:Note
                  receivable for sale
                  of discontinued operations
                
                $
                —
                
                $
                200
  The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.
 6
 **Back
            to Table of Contents**
  **EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS**
 
 ***(Unaudited)***
   **NOTE
        1 - ORGANIZATION**
 Epoch
        Holding Corporation ("Epoch" or the "Company") is a holding company whose
        primary line of business is investment management and investment advisory
        services. The operations of the Company are conducted through its wholly-owned
        subsidiary, Epoch Investment Partners, Inc. ("EIP"). EIP is a registered
        investment advisor under the Investment Advisers Act of 1940, as amended
        (the
        "Investment Advisers Act"). EIP's primary operations are to provide investment
        advisory and investment management services to retirement plans, mutual funds,
        endowments, foundations and high net worth individuals. Headquartered in
        New
        York with an office in Sherman Oaks, CA, the Company’s current product offerings
        include U.S. Value; U.S. Small Cap Value, U.S. All Cap Value, U.S. Balanced,
        Global Small Cap Value, Global Absolute Return, Global Shareholder Yield,
        and
        International Small Cap Value.
 
 ***Company
        structure and discontinued operations***
 Operations
        commenced under the existing structure on June 2, 2004 when a subsidiary
        of J
        Net Enterprises, Inc. ("J Net"), the predecessor to Epoch, merged with EIP
        in a
        business combination which resulted in the former EIP stockholders owning
        51% of
        the issued and outstanding equity securities of J Net immediately following
        the
        transaction. As a result of the majority of ownership interest in the Company
        being held by the former EIP stockholders, the business combination was
        accounted for as a reverse merger. Under generally accepted accounting
        principles in the United States of America, the legally acquired company
        (in
        this case, EIP), became the surviving entity for financial reporting purposes.
        EIP was formed on April 14, 2004 and did not have a predecessor business.
 
 Prior
        to
        the June 2, 2004 business combination, J Net conducted operations in the
        Internet-based e-commerce industry. Immediately following the closing of
        the
        transaction with EIP, management initiated a formal plan to dispose of the
        Internet-based business and shift its business focus and capital resources
        to
        the operations of EIP. In September 2004, the Internet-based operations were
        sold to the management of that business segment. The results of operations
        for
        that business segment have been reported as discontinued
        operations.
 
 ***Business
        segments***
 The
        Company's primary line of business is the investment advisory and investment
        management business. There are no other operating or reportable
        segments.
  **NOTE
        2 - SIGNIFICANT ACCOUNTING POLICIES**
 
 ***Basis
        of presentation***
 The
        unaudited condensed consolidated financial statements of the Company included
        herein have been prepared in accordance with accounting principles generally
        accepted in the United States of America (“GAAP”), and in accordance with the
        instructions to Form 10-Q pursuant to the rules and regulations of the
        Securities and Exchange Commission (“SEC”). In the opinion of management, all
        adjustments, consisting of normal recurring adjustments, necessary for a
        fair
        presentation of the financial condition and interim results of operations
        have
        been made. The results for the interim periods ended March 31 are not
        necessarily indicative of the results to be obtained for a full fiscal year.
 
 7
 **Back
            to Table of Contents**
 **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 The
        Company’s unaudited condensed consolidated financial statements and the related
        notes should be read together with the consolidated financial statements
        and the
        related notes included in the Company’s Annual Report on Form 10-K for the year
        ended June 30, 2005 and the unaudited condensed consolidated financial
        statements and the related notes included in the Company’s Quarterly Reports on
        Form 10-Q for the periods ended September 30, 2005 and December 31, 2005.
 
 ***Principles
        of consolidation***
 The
        accompanying unaudited condensed consolidated financial statements include
        the
        accounts of the Company and its subsidiaries. All intercompany balances and
        transactions have been eliminated in consolidation.
 
 ***Use
        of estimates***
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        certain estimates and assumptions. These estimates and assumptions impact
        the
        reported amounts of assets and liabilities and disclosure of contingent assets
        and liabilities as of the dates of the unaudited condensed consolidated
        financial statements and the reported amounts of revenue and expenses during
        the
        reporting periods. Actual results could differ from those
        estimates.
 
 ***Cash
        equivalents***
 Cash
        equivalents are liquid investments comprised primarily of debt instruments
        and
        money market accounts with maturities of three months or less when acquired.
        Cash equivalents are stated at cost which approximates fair value due to
        their
        short maturity.
 
 ***Short-term
        investments***
 The
        Company owned short-term investments in Mariner Partners, L.P. ("Mariner"),
        a
        private investment fund. The Company classified those securities as short-term
        investments and recorded changes in the value of these investments in the
        item
        captioned “interest and other income” in the accompanying Condensed Consolidated
        Statement of Operations for the nine months ended March 31, 2005. In July
        2004,
        the Company began liquidating its short-term investments in Mariner. The
        account
        was fully liquidated by September 2004. The Company has not held a position
        with
        Mariner or any other short-term investments since that date.
 
 ***Fair
        value of financial instruments***
 The
        carrying value of the Company's cash and cash equivalents, accounts receivable,
        and accounts payable and accrued liabilities approximate fair value due to
        their
        short-term nature.
  8
 **Back
            to Table of Contents**
 **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 **** ***Financial
        instruments with concentration of credit risk***
 The
        financial instruments that potentially subject the Company to concentrations
        of
        credit risk consist principally of cash and cash equivalents. Epoch invests
        its
        cash and cash equivalents with financial institutions in amounts which, at
        times, may be in excess of the FDIC insurance limits. Cash is also invested
        in
        several high-grade securities which limits exposure to concentrations of
        credit
        risk.
 
 ***Revenue
        recognition***
 Investment
        advisory and management fees are generally recognized as services are provided
        pursuant to specific terms contained in advisory or sub-advisory contracts
        between EIP and its clients. Such contracts generally call for revenue to
        be
        determined as a percentage of assets under management ("AUM"). Generally,
        fees
        are billed on a quarterly basis, in arrears. Advance payments, if received,
        are
        deferred and recognized during the periods for which services are
        provided.
 
 The
        Company performs services for mutual funds under advisory and sub-advisory
        contracts. Fees for these contracts are calculated based upon the daily net
        assets of the respective fund. Generally, advisory payments from the mutual
        funds are received monthly, while sub-advisory payments are received
        quarterly.
 
 The
        Company also has certain contracts which contain "incentive clauses" which
        allow
        the Company to collect additional fees in the event that investment returns
        meet
        or exceed targeted amounts specified in the contracts. Revenues for these
        incentives are recognized only when such performance targets are met or exceeded
        at the end of the contracts' year, typically at the end of each calendar
        year.
        Due to the inability to forecast financial markets, no revenues are recognized
        until the contract year ends, even when investment returns are exceeding
        the
        contractual targets within such contract year.
 
 ***Investments
        in technology-related businesses***
 The
        Company holds minority investments in a few privately held, active
        technology-related companies. Ownership in these companies ranges from less
        than
        1% to 19.9%. As of March 31, 2006, the Company also held investments in several
        inactive technology-related companies. The Company uses the cost method to
        account for the above investments. Only one such investment, Tellme Networks,
        Inc., continues to have any value ascribed.
  It
        is the
        policy of the Company to evaluate its investments in technology-related
        businesses for possible impairment on an annual basis. Management uses a
        number
        of different criteria when evaluating an asset for possible impairment.
        Indicators such as significant decreases in book value of an investment,
        discounted cash flow analyses, adverse changes in the business climate, legal
        matters, losses of significant customers, new technologies which could
        accelerate obsolescence of business products, sustained operating losses,
        and
        cash flows which cannot be resolved or improved within a reasonable amount
        of
        time to justify continued business operations are used by management when
        making
        its evaluations.
 
 9
 **Back
            to Table of Contents**
 **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 The
        Company received $96 thousand from one of the inactive technology-related
        companies for the nine months ended March 31, 2006 and expects that investment
        to be fully liquidated by June 30, 2006 with an immaterial amount of proceeds
        still to be received. There are no plans to make additional investments in
        technology-related businesses.
 
 ***Share-based
        compensation***
 Effective
        July 1, 2005, the Company adopted Statement of Financial Accounting Standards
        No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”) which requires
        employee and qualifying director share-based payments to be accounted for
        using
        the fair value method. The fair value of the Company’s restricted stock awards
        is based on the closing price of the Company’s common stock at the grant date.
        Share-based compensation costs related to equity instruments are charged
        against
        income ratably over the fixed vesting period for the related equity instruments,
        with the initial charge generally recorded in the first full month following
        the
        grant. The accounting treatment of restricted stock awards under SFAS 123R
        is
        consistent with that of the Company’s previous policies under Accounting
        Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and
        the pro forma disclosures required in accordance with Statement of Financial
        Accounting Standards No. 123, “Accounting for Share-Based Compensation” (“SFAS
        123”).
 
 Under
        the
        modified prospective transition method chosen by the Company, compensation
        costs
        related to the non-vested portion of stock option awards outstanding at the
        adoption date are based on the grant-date fair value of those awards as
        calculated for pro forma disclosures under the original provisions of SFAS
        123.
        Outstanding stock options previously granted under the Company’s plan that
        expired on September 30, 2002 were fully vested prior to June 30, 2004;
        therefore, there are no deferred compensation costs resulting from stock
        options
        to be accounted for on a prospective basis.
 
 ***Accounts
        receivable***
 The
        Company's accounts receivable balances do not include an allowance for doubtful
        accounts and there have been no bad debt expenses recognized during the three
        and nine month periods ended March 31, 2006 and 2005. These receivables are
        advisory and sub-advisory fees, and management believes they are fully
        collectible.
 
 ***Property
        and equipment***
 Leasehold
        improvements are recorded at cost and are depreciated on a straight-line basis
        over the shorter of their estimated useful lives or remaining lease term,
        as
        applicable. All other capital assets are recorded at cost and are depreciated
        on
        a straight-line basis over their estimated useful lives. Generally, the useful
        lives are 3 to 10 years for leasehold improvements and 3 to 7 years for
        equipment, and exclude option periods, if any. Property sold or retired is
        eliminated from the accounts in the period of disposition. Software used
        to
        conduct the investment advisory and investment management services is amortized
        using a three-year estimated useful life.
 
 10
 **Back
            to Table of Contents**
 **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 ***Income
        taxes***
 The
        Company accounts for income taxes in accordance with Statement of Financial
        Accounting Standard No. 109, "Accounting for Income Taxes" ("SFAS 109").
        SFAS
        109 requires that deferred tax assets and liabilities arising from temporary
        differences between book and tax basis be recognized using enacted rates
        at the
        time such temporary differences reverse. In the case of deferred tax assets,
        SFAS 109 requires a reduction in deferred tax assets if it is more likely
        than
        not that some portion or all of the deferred tax assets will not be
        realized.
 
 ***Reclassifications***
 Certain
        reclassifications have been made to prior period condensed consolidated
        financial statements to conform to the current period presentation.
 
 **NOTE
        3 - EARNINGS (LOSS) PER SHARE**
 Basic
        earnings (loss) per share is computed by dividing net earnings (loss) by
        the
        weighted average number of common shares outstanding during each period.
        Diluted
        earnings (loss) per share is computed by dividing net earnings (loss) by
        the
        weighted average number of common and common equivalent shares outstanding
        during the period. The calculation of earnings (loss) per share excluded
        1,267,500 and 1,377,500 issued and outstanding stock options at March 31,
        2006
        and 2005, respectively, as their effect was antidilutive. While there were
        137,500 options deemed to be "in the money" at March 31, 2006, the effect
        of
        their exercise would still be considered antidilutive as the Company was
        in a
        net loss position.
 
 The
        following is the amount of loss and number of shares used in the basic and
        diluted earnings (loss) per share computations for the three and nine months
        ended March 31, 2006 and 2005 (dollars and shares in thousands, except per
        share
        data):
 
 Three
                    Months Ended
                
                
                Nine
                    Months EndedMarch
                    31,
                
                
                March
                    31,2006
                
                
                2005
                
                
                2006
                
                
                2005Loss
                    from continuing operations
                
                $
                (1,062
                )
                $
                (1,970
                )
                $
                (4,521
                )
                $
                (5,483
                )Income
                    from discontinued operations
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                571Shares:Weighted
                    average number ofcommon
                    shares outstanding
                
                
                18,825
                
                
                18,175
                
                
                18,635
                
                
                17,968Basic
                    and diluted loss per share fromcontinuing
                    operations
                
                $
                (.06
                )
                $
                (.11
                )
                $
                (.24
                )
                $
                (.31
                )Basic
                    and diluted earnings per sharefrom
                    discontinued operations
                
                $
                —
                
                $
                —
                
                $
                —
                
                $
                .03
  11
 **Back
            to Table of Contents**
  **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 
 **NOTE
        4 - RELATED PARTY TRANSACTIONS**
 There
        have been no related party transactions for the three and nine months ended
        March 31, 2006. For the three and nine months ended March 31, 2005, the Company
        incurred rent and other related occupancy expenses payable to Berenson &
Company of approximately $34 thousand and $187 thousand, respectively. The
        Chief
        Executive Officer of Berenson & Company is a Director and stockholder of the
        Company. Epoch entered into a long-term lease on September 15, 2004 with
        an
        unrelated party and relocated its offices on February 14, 2005. There have
        been
        no related party transactions with Berenson & Company since such
        date.
 
 **NOTE
        5 - FEDERAL INCOME TAX**
 The
        Company completed a reverse merger business combination with EIP on June
        2,
        2004. As a result, the ability to utilize certain net operating loss
        carryfowards ("NOL's") became limited as a result of a greater than 50% change
        in ownership. These limitations are covered by Section 382 of the Internal
        Revenue Code ("IRC"). Section 382 limits the annual utilization of NOL's
        accumulated prior to the ownership change to a percentage of the acquired
        entity's fair value at the time of the change in ownership. As a result,
        the
        Company's ability to utilize accumulated NOL's to their full extent prior
        to
        their expiration cannot be reasonably assured. Until profitability can be
        achieved, and utilization of NOL's can be more definitive, the Company has
        provided a full valuation allowance on its accumulated NOL's and temporary
        differences.
 
 The
        Company recently underwent an audit by the Internal Revenue Service (the
        "IRS")
        with respect to its fiscal years ended June 30, 2001 and June 30, 2002 (the
        “audit period”). In July 2004, the Company paid $1.5 million for tax items
        associated with the IRS audit.
 
 In
        January 2005, the Company received an additional inquiry from the IRS related
        to
        calculations of alternative minimum taxes for the audit period. In May 2005,
        the
        Company met with the IRS and presented pertinent data and other factual
        information which demonstrated that no additional taxes were due. In August
        2005, the Company received notice indicating the IRS submitted a special
        report
        to the congressional Joint Committee on Taxation (the "Joint Committee"),
        outlining the findings of the audit, and concurring with the Company's position.
        In September 2005, the Company received notice from the IRS that the Joint
        Committee had completed its consideration of the IRS' report, and had taken
        no
        exception to the conclusions reached by the IRS. In April 2006, the Company
        received a refund of $227 thousand with respect to the above, and management
        now
        considers this matter to be closed.
 
 **NOTE
        6 - COMMITTMENTS AND CONTINGENCIES**
 
 ***Employment
        agreements***  There
        are
        no employment contracts with any officers of the Company. There are written
        agreements with certain employees, which provide for sales commissions or
        bonuses, subject to the attainment of certain performance criteria or
        continuation of employment. Such obligations under the various agreements
        total
        approximately $1.5 million at March 31, 2006 and are accrued for over the
        applicable service period. Of this amount, approximately $0.5 million represents
        restricted stock awards still to be issued during the fiscal year ended June
        30,
        2006.
 
 12
 **Back
            to Table of Contents**
  **EPOCH
            HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 The
        Company is obligated to enter into an employment agreement with its Chief
        Executive Officer prior to June 2, 2007, the third anniversary of the business
        combination with EIP. Terms of the contract are to be customary for Chief
        Executive Officers of peer group companies.
 
 ***Legal
        proceedings***
 From
        time
        to time, the Company or its subsidiaries may become parties to claims, legal
        actions and complaints arising in the ordinary course of business. Management
        is
        not aware of any claims which would have a material adverse effect on its
        consolidated financial position.
 
 ***Significant
        customers and contracts***
 For
        the
        three months ended March 31, 2006, CI Mutual Funds Inc. of Canada ("CI")
        accounted for approximately 21% of revenues while the Epoch International
        Small
        Cap Fund ("EPIEX"), a publicly traded mutual fund for which the Company acts
        as
        the advisor, accounted for approximately 13%. For the three months ended
        March
        31, 2005, CI and EPIEX accounted for approximately 38% and 11% of consolidated
        revenues, respectively.
 
 For
        the
        nine months ended March 31, 2006, CI and EPIEX accounted for 33% and 19%
        of
        consolidated revenues, respectively. For the nine months ended March 31,
        2005,
        CI and EPIEX accounted for 37% and 4% of consolidated revenues,
        respectively.
 
 The
        Company's services and relationship with these clients is important to its
        ongoing growth strategy, and retention of these customers is significant
        to the
        ongoing results of operations and liquidity of the Company.
 
 **NOTE
        7 - DISCONTINUED OPERATIONS**
 In
        September 2004, the Company completed the sale of its e-commerce software
        operations to the former management of that segment. Consideration to the
        Company came in the form of a 19.9% membership interest in the buyer's entity,
        the assumption by the buyer of liabilities of $466 thousand, and the issuance
        of
        a $534 thousand secured promissory note (the "Note") to the Company. The
        Note
        was due five years from the date of issuance, bore interest at 6.5% per annum
        and was secured by all of the assets that were purchased in the transaction.
        Payments of principal on the Note were to be made at a rate of 50% of the
        annual
        cash flows from operations, as defined in the agreement, in excess of $300
        thousand. The Company recorded the Note at its estimated fair value of
        approximately $200 thousand. Factors affecting the estimate were the
        non-marketable status of the Note and certain risks in reaching cash flow
        targets for payment. On May 16, 2005 the Company collected the full $534
        thousand. The receipt fully discharged the Note and required the Company
        to
        record a gain of $334 thousand in the fourth quarter of fiscal year
        2005.
 
 13
 **Back
            to Table of Contents**
 **EPOCH
              HOLDING CORPORATION AND SUBSIDIARIES**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 ***(Unaudited)***
 ***Selected
        financial data - discontinued operations***
 Following
        are the final summary operating results of the discontinued operations, which
        represent the fiscal 2005 period of July 1, 2004 through the date of sale,
        September 9, 2004 (dollars in thousands):
  July
                    1, 2004 - September 9,
                    2004Revenues
                
                $
                293Costs
                    and expenses
                
                
                (294
                )Loss
                    from discontinued operationsbefore
                    taxes
                
                
                (1
                )Provision
                    for income taxes
                
                
                —
                (a)Gain
                    from sale of discontinued operations
                
                
                572Income
                    from discontinued operations
                
                $
                571
 
 (a)  There
        were no income taxes due to utilization of available net operating loss
        carryforwards.
 
 14
 **Back
            to Table of Contents**
  **Item
        2.****Management's
        Discussion and Analysis of Financial Condition and Results of
        Operations**
 
 Set
        forth
        on the following pages is management’s discussion and analysis of our financial
        condition and results of operations for the three and nine months ended March
        31, 2006 and March 31, 2005. Such information should be read in conjunction
        with
        our unaudited condensed consolidated financial statements together with the
        notes to the unaudited condensed consolidated financial statements. When
        we use
        the terms the “Company”, “management”, “we”, “us”, and “our”, we mean Epoch
        Holding Corporation, a Delaware corporation, and its consolidated
        subsidiaries.
  **Forward-Looking
        Statements**
 
 *Certain
        information included in this Quarterly Report on Form 10-Q and other materials
        filed or to be filed by the Company with the Securities and Exchange Commission
        ("SEC") contain statements that may be considered forward-looking. In some
        cases, you can identify these statements by forward-looking words such as
        "may,"
        "might," "will," "should," "expect," "plan," "anticipate," "believe,"
        "estimate," "predict," "potential" or "continue," and the negative of these
        terms and other comparable terminology. These forward-looking statements,
        which
        are subject to known and unknown risks, uncertainties and assumptions about
        the
        Company, may include projections of the Company's future financial performance
        based on the Company's growth strategies and anticipated trends in the Company's
        business. These statements are only predictions based on the Company's current
        expectations and projections about future events. There are important factors
        that could cause the Company's actual results, level of activity, performance
        or
        achievements to differ materially from the results, level of activity,
        performance or achievements expressed or implied by the forward-looking
        statements. See "Factors Which May Affect Future Results".*
 
 *These
        risks and uncertainties are not exhaustive. Other sections of this Quarterly
        Report on Form 10-Q may include additional factors which could adversely
        impact
        the Company's business and financial performance. Moreover, the Company operates
        in a very competitive and rapidly changing environment. New risks and
        uncertainties emerge from time to time, and it is not possible for the Company's
        management to predict all risks and uncertainties, nor can the Company assess
        the impact of all factors on the Company's business or the extent to which
        any
        factor, or combination of factors, may cause actual results to differ materially
        from those contained in any forward-looking statements.*
 
 *Although
        the Company believes the expectations reflected in the forward-looking
        statements are reasonable, the Company cannot guarantee future results, level
        of
        activity, performance or achievements. Moreover, neither the Company nor
        any
        other person assumes responsibility for the accuracy or completeness of any
        of
        these forward-looking statements. You should not rely upon forward-looking
        statements as predictions of future events. The Company is under no duty
        to
        update any of these forward-looking statements after the date of this Quarterly
        Report on Form 10-Q, nor to conform the Company's prior statements to actual
        results or revised expectations, and the Company does not intend to do
        so.*
 
 15
 **Back
            to Table of Contents**
 *Forward-looking
        statements include, but are not limited to, statements about:*
 
 *•*
              *the
                  Company's business strategies and investment
                  policies,*
 
 *•*
              *the
                  Company's possible or assumed future results of operations and
                  operating
                  cash flows,*
 
 *•*
              *the
                  Company's financing plans and the availability of short-term
                  borrowing,*
 
 *•*
              *the
                  Company's competitive
                  position,*
 
 *•*
              *potential
                  growth opportunities available to the
                  Company,*
 
 *•*
              *the
                  recruitment and retention of the Company's managing directors and
                  employees,*
 
 *•*
              *the
                  Company's expected levels of
                  compensation,*
 
 *•*
              *the
                  Company's potential operating performance, achievements, productivity
                  improvements, efficiency and cost reduction
                  efforts,*
 
 *•*
              *the
                  likelihood of success and impact of
                  litigation,*
 
 *•*
              *the
                  Company's expected tax rates,*
 
 *•*
              *the
                  Company's expectations with respect to the economy, securities
                  markets,
                  the market for mergers and acquisitions activity, the market for
                  asset
                  management activity and other industry
                  trends,*
 
 *•*
              *the
                  benefits to the Company resulting from the effects of separation
                  and
                  recapitalization transactions and additional financing
                  transactions,*
 
 *•*
              *the
                  effects of competition on the Company,
                  and*
 
 *•*
              *the
                  impact of future legislation and regulation on the
                  Company.*
 
 **Available
        Information**
 
 The
        Company maintains a website which contains current information on operations
        and
        other corporate governance matters. The website address is www.eipny.com.
        Through the Investor Relations section of our website, and “Link to SEC Website”
therein, we make available our Annual Report on Form 10-K, quarterly reports
        on
        Form 10-Q, current reports on Form 8-K, and any amendments to those reports
        filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
        Act as soon as reasonably practicable after we electronically file such material
        with, or furnish it to, the SEC.
 
 16
 **Back
            to Table of Contents**
 **Overview**
 
 Epoch
        Holding Corporation ("Epoch" or the "Company") is a holding company whose
        primary line of business is investment management and investment advisory
        services. The operations of the Company are conducted through its wholly-owned
        subsidiary, Epoch Investment Partners, Inc. ("EIP"). EIP is a registered
        investment advisor under the Investment Advisers Act of 1940 (the "Investment
        Advisers Act").
 
 **Critical
        Accounting Policies**
 
 Our
        significant accounting policies are described in Note 1 of the Notes to the
        Consolidated Financial Statements included in our Annual Report on Form 10-K
        for
        the year ended June 30, 2005. A discussion of critical accounting policies
        is
        included in Management’s Discussion and Analysis of Financial Condition and
        Results of Operations in our Annual Report on Form 10-K for the year ended
        June
        30, 2005. There were no significant changes in our critical accounting policies
        during the nine months ended March 31, 2006.
  **Company
        Structure and Discontinued Operations**
 
 On
        June
        2, 2004, a subsidiary of J Net Enterprises, Inc. ("J Net"), the predecessor
        to
        Epoch, merged with EIP in a business combination which resulted in the former
        EIP stockholders owning 51% of the issued and outstanding equity securities
        of J
        Net immediately following the transaction. As a result of the majority of
        ownership interest in the Company being held by the former EIP stockholders,
        the
        business combination was accounted for as a reverse merger. Under generally
        accepted accounting principles in the United States of America, the legally
        acquired company (in this case, EIP), became the surviving entity for financial
        reporting purposes. EIP was formed on April 14, 2004 and did not have a
        predecessor business.
 
 Prior
        to
        the June 2, 2004 business combination, J Net conducted operations in the
        Internet-based e-commerce industry. Immediately following the closing of
        the
        transaction with EIP, management initiated a formal plan to dispose of the
        Internet-based business and shift its business focus and capital resources
        to
        the operations of EIP. In September 2004, the Internet-based operations were
        sold to the management of that business segment. The results of operations
        for
        that business segment have been reported as discontinued
        operations.
  **Results
        of operations - three months ended March 31, 2006 and 2005**
 
 ***Assets
        Under Management***
 
 Assets
        under management increased to $2.51 billion at March 31, 2006, or 101%, from
        $1.25 billion at March 31, 2005. This increase was primarily attributable
        to the
        ongoing expansion of the Company’s client base.
 
 17
 **Back
            to Table of Contents**
 The
        percentage of assets under management from CI Mutual Funds, Inc. of Canada
        ("CI"), a significant customer, declined to approximately 50% at March 31,
        2006
        from approximately 71% at March 31, 2005.
 
 ***Revenues***
 
 Total
        revenues from investment advisory and management services for the three months
        ended March 31, 2006 were $2.9 million, an increase of $1.8 million or 163%
        over
        the comparable period of the prior year. This increase was attributable to
        the
        increase in assets under management.
 
 The
        sub
        advisory contract with CI accounted for approximately 21% of revenues for
        the
        three months ended March 31, 2006. For the three months ended March 31, 2005,
        CI
        accounted for approximately 38% of revenues.
  ***Employee
        related costs (excluding stock-based compensation)***
 
 Expenses
        in this category include salaries, benefits, incentive compensation, signing
        bonuses and commission expenses. For the three months ended March 31, 2006,
        these expenses were $2.2 million, an increase of $0.8 million or 60% from
        $1. 4
        million
        for the three months ended March 31, 2005 .
        Increased employee headcount to support the growth and expansion of the business
        was the primary reason for this increase. The total expenses for the three
        months ended March 31, 2006 include $0.9 million of performance and guaranteed
        bonuses, or advances on sales commissions which are non-refundable but can
        be
        applied against future sales, as compared to $0.3 million for the three months
        ended March 31, 2005. We expect the level of overall employee related costs
        to
        increase in future periods due to changes in staffing levels to support the
        growth and expansion of our business.
 
 ***Stock-based
        compensation***
 
 Stock-based
        compensation for the three months ended March 31, 2006 was $1.2 million,
        up $0.2
        million or 21% from $1.0 million for the three months ended March 31, 2005.
        Stock-based compensation includes 5.5 million shares of restricted stock
        that
        was issued to employee owners associated with the acquisition of EIP, as
        well as
        restricted stock issued to employees during fiscal year 2005 and the nine
        months
        ended March 31, 2006. An increase in employees is primarily attributable
        to this
        increase.
 
 Stock-based
        compensation expense is recognized ratably over the three-year vesting period
        of
        those awards, in accordance with their underlying vesting provisions. In
        the
        three months ended March 31, 2006 and 2005, 179,648 and 279,510 shares of
        restricted stock, respectively, were issued to employees. A total of 22,886
        and
        34,939 shares of the awards, or approximately 12.5% of the shares issued
        in the
        three months ended March 31, 2006 and 2005, respectively, were immediately
        vested. The remaining 87.5% of the shares vest ratably over the subsequent
        three
        years. Approximately 11,617 shares were forfeited by terminated employees
        in the
        three months ended March 31, 2006. There were no forfeitures in the three
        months
        ended March 31, 2005. ****
 
 18
 **Back
            to Table of Contents**
 During
        the three months ended March 31, 2006 and March 31, 2005 **,** no
        stock
        awards were granted to Directors of the Company. The currently outstanding
        Directors' shares are subject to a three-year vesting period and vest one-third
        each year, or immediately in the event of death or disability. Stock-based
        compensation expense is recognized ratably over the three-year vesting period
        of
        those awards, in accordance with their underlying vesting provisions.
 
 ***General
        and administrative expenses***
 
 These
        expenses consist primarily of office rentals, travel and entertainment,
        advertising and marketing, information technology expenses, utilities,
        insurance, and other office related expenses. For the three months ended
        March
        31, 2006 and March 31, 2005, these fees were virtually unchanged, amounting
        to
        $0.6 million for each period.
 
 ***Professional
        fees and services***
 
 These
        expenses consist primarily of outside legal fees for Securities and Exchange
        Commission compliance and general corporate legal affairs, independent
        accountants' fees, and other professional services. For the three months
        ended
        March 31, 2006 such fees were $0.3 million, an increase of $0.1 million,
        or 28%
        from the comparable period a year ago. The prior year comparable period included
        incremental legal fees in conjunction with the Company’s first year of
        operations.
 
 ***Depreciation
        and amortization***
 
 Depreciation
        and amortization increased to $86 thousand in the three months ended March
        31,
        2006, an increase of $33 thousand or 62%, from $53 thousand in the three
        months
        ended March 31, 2005. The increase in depreciation and amortization expense
        is
        primarily due to the impact of amortization of new leasehold improvements
        in
        connection with the Company’s move to its new headquarters in February 2005.
 
 ***Other
        income***
 
 Other
        income includes interest earnings from cash and cash equivalents and rental
        income from subleased office space in New York. For the three months ended
        March
        31, 2006, other income increased to $249 thousand, an increase of $47 thousand
        or 23%, from $202 thousand for the three months ended March 31, 2005. Increased
        interest income was the primary reason for the increase from the comparable
        period of the prior year.
 
 19
 **Back
            to Table of Contents**
  **Results
        of operations - nine months ended March 31, 2006 and 2005**
 
 ***Assets
        Under Management***
 
 Assets
        under management increased to $2.51 billion at March 31, 2006, or 101%, from
        $1.25 billion at March 31, 2005. This increase was primarily attributable
        to the
        ongoing expansion of the Company’s client base.
 
 The
        percentage of assets under management from CI Mutual Funds, Inc. of Canada
        ("CI"), a significant customer, declined to approximately 50% at March 31,
        2006
        from approximately 71% at March 31, 2005.
 
 ***Revenues***
 
 Total
        revenues from investment advisory and management services for the nine months
        ended March 31, 2006 were $6.9 million, an increase of $4.0 million or 136%
        over
        the comparable period of the prior year. This increase was attributable to
        the
        increase in assets under management.
 
 The
        sub
        advisory contract with CI accounted for approximately 22% of revenues for
        the
        nine months ended March 31, 2006. For the nine months ended March 31, 2005,
        CI
        accounted for approximately 37% of revenues.
 ***Employee
        related costs (excluding stock-based compensation)***
 
 Expenses
        in this category include salaries, benefits, incentive compensation, signing
        bonuses and commission expenses. For the nine months ended March 31, 2006,
        these
        expenses were $6.2 million, an increase of $2.3 million or 58% from $3.9
        million
        for the nine months ended March 31, 2005. Increased employee headcount to
        support the growth and expansion of the business was the primary reason for
        this
        increase. The total expenses for the nine months ended March 31, 2006 include
        $2.8 million of performance and guaranteed bonuses, or advances on sales
        commissions which are non-refundable but can be applied against future sales,
        as
        compared to $1.1 million for the nine months ended March 31, 2005. We expect
        the
        level of overall employee related costs will increase in future periods due
        to
        changes in staffing levels to support the growth and expansion of our business.
 
 ***Stock-based
        compensation***
 
 Stock-based
        compensation for the nine months ended March 31, 2006 was $3.5 million, up
        $1.0
        million or 35% from $2.5 million for the nine months ended March 31, 2005.
        Stock-based compensation includes 5.5 million shares of restricted stock
        that
        was issued to employee owners associated with the acquisition of EIP, as
        well as
        restricted stock issued to employees during fiscal year 2005 and the nine
        months
        ended March 31, 2006. An increase in employees is primarily attributable
        to this
        increase.
 
 20
 **Back
            to Table of Contents**
 Stock-based
        compensation expense is recognized ratably over the three-year vesting period
        of
        those awards, in accordance with their underlying vesting provisions. In
        the
        nine months ended March 31, 2006, 656,648 shares of restricted stock were
        issued
        to employees. A total of 82,511 shares of the awards, or approximately 12.5%
        of
        the shares issued, were immediately vested. The remaining 87.5% of the shares
        vest over the subsequent three years. Approximately 25,190 shares were forfeited
        by terminated employees in the nine months ended March 31, 2006. There were
        no
        forfeitures in the nine months ended March 31, 2005. ****
 
 During
        the nine months ended March 31, 2006 no stock awards were granted to Directors
        of the Company. Approximately 70,176 shares were granted to Directors of
        the
        Company during the nine months ended March 31, 2005. The currently outstanding
        128,316 Directors' shares are subject to a three-year vesting period and
        vest
        one-third each year, or immediately in the event of death or disability.
        Stock-based compensation expense is recognized ratably over the three-year
        vesting period of those awards, in accordance with their underlying vesting
        provisions.
 
 ***General
        and administrative expenses***
 
 These
        expenses consist primarily of office rentals, travel and entertainment,
        advertising and marketing, information technology expenses, utilities,
        insurance, and other office related Expenses. For the nine months ended March
        31, 2006, general and administrative expenses were $1.9 million, up $0.2
        or 10%
        from $1.7 million for the nine months ended March 31, 2005. Increased travel
        related expenses to support marketing and distribution efforts accounted
        for
        most of this increase.
 
 ***Professional
        fees and services***
 
 These
        expenses consist primarily of outside legal fees for Securities and Exchange
        Commission compliance and general corporate legal affairs, independent
        accountants' fees, and other professional services. For the nine months ended
        March 31, 2006, such fees were $0.6 million, a decrease of $0.1 million or
        6%
        from $0.7 million for the nine months ended March 31, 2005. The
        prior
        year comparable period included incremental legal fees in conjunction with
        the
        Company’s first year of operations.
 
 ***Depreciation
        and amortization***
 
 Depreciation
        and amortization increased to $0.3 million in the nine months ended March
        31,
        2006, an increase of $0.2 million or 121%, from $0.1 million in the nine
        months
        ended March 31, 2005. The increase in depreciation and amortization expense
        is
        primarily due to the impact of amortization of new leasehold improvements
        in
        connection with the Company’s move to its new headquarters in February 2005.
 
 ***Other
        income***
 
 Other
        income includes interest earnings from cash and cash equivalents and rental
        income from subleased office space in New York. Also included in other income
        is
        a gain of approximately $96 thousand from an investment to which the Company
        ascribed no value. For the nine months ended March 31, 2006, other income
        increased to $0.8 million, an increase of $0.2 million or 32%, from $0.6
        million
        for the nine months ended March 31, 2005. Increased interest income and realized
        gain on investments were the primary reasons for the increase from the
        comparable period of the prior year.
 
 21
 **Back
            to Table of Contents**
 
 **Liquidity
        and Capital Resources**
 
 Sources
        of funds for the Company's operations are derived from investment advisory
        and
        investment management fees and interest on the Company's cash and cash
        equivalent investments. As of March 31, 2006, the Company had $6.4 million
        of
        cash and cash equivalents and $2.4 million of accounts receivable to fund
        its
        business growth strategy. Accounts payable and accrued liabilities, which
        consist of professional fees, trade payables and other liabilities were $1.2
        million. Accrued compensation and benefits, which consist primarily of accrued
        employee bonuses and sales commissions, was $1.2 million. There was no debt
        and
        management does not foresee any reason to incur debt unless a significant
        business opportunity warrants such action.
 
 For
        the
        nine months ended March 31, 2006, net cash used in operating activities was
        $2.2
        million, primarily attributable to cash-based operating expenses, as compared
        to
        $5.4 million in the nine months ended March 31, 2005. The nine month period
        ended March 31, 2005 included expenditures of $1.5 million related to payment
        of
        income taxes and interest for fiscal year 2001 and 2002 for audits, start-up
        and
        signing bonus costs of $0.4 million, and $0.5 million to secure a letter
        of
        credit for the Company's lease deposit at 640 Fifth Avenue, New York, New
        York.
 
 The
        Company expects to continue to increase staff to support the growth and
        expansion of its business and the related distribution efforts for its products.
        Despite the occurrence of operating losses in the fiscal year ended June
        30,
        2006, management believes the existing cash and cash equivalents are adequate
        to
        provide the necessary resources to implement its growth objectives.
 
 **Contractual
        obligations**
 
 ***Leases***
 
 The
        Company has a long-term office space lease in New York City, where its primary
        business operations are conducted.
 
 Future
        minimum lease payments under this lease total $6.6 million and are presented
        on
        the table which follows (fiscal years ending June 30, dollars in thousands).
  Fiscal
                    Years Ended June
                    30,2007-
                
                2010-
                
                2012
                    and2006
                
                2009
                
                2011
                
                thereafter
                
                TotalFuture
                    minimum payments
                
                $
                166
                
                $
                1,997
                
                $
                1,370
                
                $
                3,048
                
                $
                6,581
  22
 **Back
              to Table of Contents**
 The
        Company also has another office lease commitment in New York, and one in
        California, as well as operating leases for office equipment. The other office
        lease in New York is subleased to an unrelated third party. While the Company
        remains the primary responsible party under that lease, the tenant is performing
        its obligations under the sublease in a timely fashion. A schedule of these
        other lease commitments and the related sublease income as of March 31, 2006
        follows (fiscal years ending June 30, dollars in thousands):
  Fiscal
                    Years Ended June 30,2007 -
                
                
                2010
                    -
                
                
                2012
                    and2006
                
                
                2009
                
                
                2011
                
                
                thereafter
                
                
                TotalLease
                    payments
                
                $
                131
                
                $
                1,496
                
                $
                652
                
                $
                —
                
                $
                2,279Sublease
                    income
                
                
                (137
                )
                
                (1,708
                )
                
                (765
                )
                
                —
                
                
                (2,610
                )Net
                    (income) commitment
                
                $
                (6
                )
                $
                (212
                )
                $
                (113
                )
                $
                —
                
                $
                (331
                )
 **Off-Balance
        Sheet Arrangements**
 
 We
        do not
        invest in any off-balance sheet vehicles that provide liquidity, capital
        resources, market or credit risk support, or engage in any leasing activities
        that expose us to any liability that is not reflected in our unaudited condensed
        consolidated financial statements.
 
 **Factors
        Which May Affect Future Results**
 
 There
        are
        numerous risks which may affect the results of operations of the Company.
        Factors which could affect the Company's success include, but are not limited
        to, the Company's limited operating history in the investment management
        and
        investment advisory business, the ability to attract and retain clients,
        performance of the financial markets and invested assets managed by the Company,
        retention of key employees, misappropriation of assets and information by
        employees, system failures, significant changes in regulations, the costs
        of
        compliance associated with existing regulations and the penalties associated
        with non-compliance, and the risks associated with loss of key members of
        the
        management team.
 
 In
        addition, the Company's ability to expand or alter its product offerings,
        whether through acquisitions or internal development is critical to its
        long-term success and has inherent risks. This success is dependent on the
        ability to identify and fund those products or acquisitions on terms which
        are
        favorable to the Company. There can be no assurance that any of these operating
        factors or acquisitions can be achieved or, if undertaken, they will be
        successful.
 
 These
        and
        other risks related to our Company are discussed in greater detail in the
        Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
        2005.
 
 23
 **Back
            to Table of Contents**
  **Item
        3.****Quantitative and Qualitative Disclosures About Market
        Risk**
 
 The
        Company invests its free cash in various financial instruments and money
        market
        instruments, which entail certain risks. Presently, the Company does not
        participate in hedging activities nor does it have any derivative financial
        instruments.
 
 Cash
        and
        cash equivalents, including instruments which earn interest over short periods
        of time (7-35 days), are exposed to market risk due to changes in interest
        rates, which impacts interest income. Cash balances also exceed amounts which
        are guaranteed by the Federal Deposit Insurance Corporation. The Company
        maintains its cash in institutions which have superior credit ratings and
        it
        consistently monitors the quality of the institution where its cash is
        deposited.
 
 The
        value
        of AUM can be affected by changes in interest rates and fluctuations in
        financial markets. The Company's revenue is derived from the value of AUM.
        Therefore, revenues and results of operations can be negatively affected
        by
        adverse changes in the prices of securities or interest rates.
 
 The
        Company has had no significant changes in its exposure to market risks from
        that
        previously reported in the Company’s Annual Report on Form 10-K for the fiscal
        year ended June 30, 2005.
  **Item
        4. Controls and Procedures**
 
 ***Evaluation
        of Disclosure Controls and Procedures*** . 
        Our management, with the participation of the Company's principal executive
        officer and principal financial officer, has evaluated the effectiveness
        of our
        disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
        under the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
        as
        of the end of the period covered by this Quarterly Report on Form 10-Q. Based
        on
        such evaluation, the Company's principal executive officer and principal
        financial officer have concluded that as of such date, the Company's disclosure
        controls and procedures were designed to ensure that information required
        to be
        disclosed by us in reports that we file or submit under the Exchange Act
        is
        recorded, processed, summarized and reported within the time periods specified
        in applicable SEC rules and forms and were effective.
 
 ***Changes
        in Internal Control Over Financial Reporting*** .
        There
        was no change in our internal control over financial reporting (as defined
        in
        Rules 13a-5(f) and 15d-15(f) under the Exchange Act) that occurred during
        the
        period covered by this Quarterly Report on Form 10-Q that has materially
        affected, or is reasonably likely to materially affect, our internal control
        over financial reporting.
  24
 **Back
            to Table of Contents**
 **PART
        II. OTHER INFORMATION**
 
 **Item
        1.****Legal
        Proceedings**
 
 From
        time
        to time, the Company or its subsidiaries may become parties to claims, legal
        actions and complaints arising in the ordinary course of business. Management
        is
        not aware of any claims which would have a material adverse effect on its
        consolidated financial position.
 
 **Item
        1a. Risk Factors**
 
 There
        were no material changes from the risk factors set forth under Part I, Item
        1
“Cautionary Statements” in our Annual Report on Form 10-K for the fiscal year
        ended June 30, 2005.
  **Item
        6.****Exhibits**
 
 (a)
        Exhibits:
 
 Exhibit No.
              Description  31.1
              Principal
                  Executive Officer Certification
 31.2
              Principal
                  Financial Officer Certification
 32.1
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.
 
 
  Signature
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  EPOCH
                HOLDING
                CORPORATION(Registrant)By:
              /s/ Adam
                BorakAdam
                BorakChief
                Financial OfficerDate: May 15, 2006
 25