**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**







**FORM
      10-K**


**(Mark
      One)**


**x**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**




**For
                the fiscal year ended June 30, 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**
                (State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              **20-1938886**
                (I.R.S.
                  Employer
                Identification
                  No.)**640
                  Fifth Avenue, New York, NY, 10019**
                (Address
                  of principal executive offices)**,**(Zip
                  Code)Registrant's
                  telephone number, including area code: **(212)
                  303-7200**






**Securities
      registered pursuant to Section 12(b) of the Act:**




**Title of each
                  class**
              
              **Name
                  of each exchange on**
                **which
                  registered**Common
                  Stock, $0.01 Per Share Par Value
              
              NASDAQ
                  Capital Market




**Securities
      registered pursuant to Section 12(g) of the Act:
      None.**











Indicate
          by check mark if the registrant is a well-known seasoned issuer, as defined
          in
          Rule 405 of the Securities Act.  YesoNoý




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the
      Act.    YesoNoý




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 ý No o




Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S-K (§229.405
        of this
        chapter) is not contained herein, and will not be contained, to the best
        of
        registrant's knowledge, in definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-K or any
        amendment to this Form 10-K. ý




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




Large
                acceleratedfiler
                o
            
            Accelerated
                filer o
            
            Non-accelerated
                filerý




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




As
        of
        December 31, 2005, the registrant’s most recently completed second fiscal
        quarter; the aggregate market value of common equity held by nonaffiliates
        of
        the registrant was $44,707,521, computed by reference to the closing price
        of
        $5.90 on the NASDAQ Capital Market on December 31, 2005.




As
        of
        September 22, 2006, there were 19,671,932 shares of the registrant's common
        stock, $.01 par value per share, issued and outstanding.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Portions
      of the following documents are incorporated herein by reference into the
      Form 10-K as indicated:




**Document**
            
            **Part
                of Form 10-K into**
              **Which
                Incorporated**Company's
                Definitive Proxy Statement for the 2006 Annual Meeting of
                Shareholders
            
            Part III
















**Epoch
        Holding Corporation**
 ****Annual
        Report on Form 10-K****
 ******For
        the Fiscal Year Ended June 30,
        2006******
 ********Table
        of
        Contents********


**Form
                    10-K Item Number:**
                
                **Page**
                  **Number****PART
                    I**Item
                    1.
                Business
                
                1Item
                    1A.
                Risk
                    Factors
                
                9Item
                    2.
                Properties
                
                17Item
                    3.
                Legal
                    Proceedings
                
                17Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                
                17**PART
                    II**Item
                    5.
                Market
                    for Registrant's Common Equity, Related Stockholder Matters
                    andIssuer
                    Purchases of Equity Securities
                
                18Item
                    6.
                Selected
                    Financial Data
                
                19Item
                    7.
                Management's
                    Discussion and Analysis of Financial Condition and Resultsof
                    Operations
                
                21Item
                    7A.
                Quantitative
                    and Qualitative Disclosures About Market Risk
                
                36Item
                    8.
                Financial
                    Statements and Supplementary Data
                
                36Item
                    9.
                Changes
                    in and Disagreements With Accountants on Accounting andFinancial
                    Disclosure
                
                37Item
                    9A.
                Controls
                    and Procedures
                
                37Item
                    9B.
                Other
                    Information
                
                37**PART
                    III**Item
                    10.
                Directors
                    and Executive Officers of the Registrant
                
                38Item
                    11.
                Executive
                    Compensation
                
                38Item
                    12.
                Security
                    Ownership of Certain Beneficial Owners and Management andRelated
                    Stockholder Matters
                
                38Item
                    13.
                Certain
                    Relationships and Related Transactions
                
                38Item
                    14.
                Principal
                    Accountant Fees and Services
                
                38**PART
                    IV**Item
                    15.
                Exhibits
                    and Financial Statement Schedules
                
                39Signatures
                
                40Significant
                    subsidiaries of the RegistrantConsent
                    of Independent Registered Public Accounting FirmSection
                    302: Certification of Principal Executive OfficerSection
                    302: Certification of Principal Financial OfficerSection
                    906: Certification of Chief Executive Officer and Chief Financial
                    Officer









**PART
      I**




**ITEM
              1.**
            
            **BUSINESS**




**Forward-Looking
      Statements**





*Certain
        information included, or incorporated by reference in this Annual Report
        on Form
        10-K and other materials filed or to be filed by Epoch
        Holding Corporation ("Epoch" or the "Company") with the Securities and
        Exchange Comission ("SEC") contain statements that may be considered
        forward-looking within the meaning of the Private Securities Litigation Reform
        Act of 1995. 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. In particular, you should consider the numerous
        risks and uncertainties outlined in Item 1A.,"Risk
        Factors."*





*These
      risks and uncertainties are not exhaustive. Other sections of this Annual Report
      on Form 10-K 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 Annual
      Report on Form 10-K, nor to conform the Company's prior statements to actual
      results or revised expectations, and the Company does not intend to do
      so.*





*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,*





1


*.
      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.*




*Overview*





Epoch
        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 adviser under the Investment Advisers Act of 1940, as amended
        (the
        "Investment Advisers Act").





The
      Company uses a fiscal year which ends on June 30th. References to "FY 2006,"
“FY
      2005,” and "FY 2004" in this document refer to the fiscal years ended June 30,
      2006, June 30, 2005, and June 30, 2004, respectively. This Annual Report on
      Form
      10-K may also include "forward-looking statements" which refer to fiscal years
      subsequent to the historical financial positions and results of operations
      contained herein. References to future fiscal years also apply to the June
      30
      year end.





*Available
      Information*





The
        Company maintains a web site 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, we make available, free
        of charge, 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
        of
        1934, as amended (the “Exchange Act”) as soon as reasonably practicable after we
        electronically file such material with, or furnish it to, the
        SEC.





*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.





2


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.





Due
      to
      the reverse merger accounting treatment, the consolidated operations for FY
      2004
      reflect those of EIP from April 14, 2004 through June 30, 2004 and J Net from
      June 2, 2004 (the date of the business combination) through June 30, 2004.
      The
      FY 2006 and FY 2005 consolidated results reflect the first two complete years
      of
      operations for the Company.





*Recent
      Events and FY 2006 Highlights*





EIP
      became the primary operating business segment in June 2004 immediately following
      the aforementioned business combination. Initially, one sub-advisory contract
      with assets under management ("AUM") of $647 million was transferred to EIP
      by a
      former client of Mr. William W. Priest, the Chief Executive
      Officer of the Company.





The
      following highlights mark the notable accomplishments made by the Company during
      its second full year of operations:


1.
              AUM
                  increased to $3.25 billion at June 30, 2006, an increase of 132%
                  from the
                  prior year end.
  2.
                Revenues
                    increased to $10.2 million for the year ended June 30, 2006,
                    from $4.3
                    million for the year
                    ended June 30, 2005, an increase of
                    138%. 
 3.
                  The
                      Company commenced trading on the Nasdaq Capital Market on October
                      4,
                      2005. 
 4.
                    EIP
                        expanded its work force from 28 employees at June 30, 2005
                        to 38 employees
                        at June 30, 2006.  *Operations
              and Products*





EIP,
      the
      sole operating segment of the Company, is a registered investment adviser under
      the Investment Advisers Act that manages investment assets for retirement plans,
      mutual funds, endowments, foundations, and high net worth individuals. As of
      June 30, 2006, EIP offered eight separate


investment
      products to its clients:





1.
            *U.S.
                All Cap Value*-
                This portfolio is comprised of a broad range of U.S. companies with
                market
                capitalizations
                that resemble stocks in the "Russell 3000," a U.S. Equity index which
                measures theperformance
                of the 3,000 largest U.S. companies based upon total market
                capitalization.






3




2.
            *U.S.
                Value*-
                This portfolio reflects a selection of equities in U.S. companies
                with
                market capitalizations generally over $2 billion, generally considered
                to
                be comparable to the "Russell 1000,” a U.S. Equity index which measures
                the performance of the 1,000 largest companies in the Russell 3000
                index.





3.
            *U.S.
                Small Cap Value*-
                This portfolio comprises U.S. companies with capitalizations under
                $2
                billion, generally considered to be comparable to the "Russell 2000,"
                a
                U.S. Equity index which measures the performance of the 2,000 smallest
                companies in the “Russell 3000.”





4.**
            *Global
                Small Cap Value*-
                This product seeks to capitalize upon the continuing globalization
                of the
                world economy by investing in small cap companies in the U.S. and
                throughout the world.




5.
            *Global
                Absolute Return*-
                While this product uses the same security selection process of other
                products**offered
                by EIP, its holdings are generally limited to fewer than 30 positions.
                Individual positions can be as high as 15% and cash is used aggressively
                to control loss exposure. The objective of this product is absolute
                positive return.





6.
            *International
                Small Cap*-
                This product draws almost all of its holdings from small cap companies
                outside the U.S., with "small cap" defined as companies with market
                capitalization in the bottom 25%
                of the publicly traded companies in each country where the strategy
                is
                applied. This approachresults
                in an average portfolio market capitalization of less than $3 billion.
                Index comparisons forthis
                product include the S&P/Citigroup Extended Market Index (EMI) and the
                Europe Pacific AsiaComposite
                (EPAC), commonly referred to as the "EMI EPAC
                Index".




*7.*
            *Balanced
                Portfolios*-
                This product is available primarily to our high net worth investors.
                The
                mix of debt and equity securities is tailored to reflect (i) the
                client's
                tolerance for risk and (ii) the client's marginal tax rate or other
                preferences. As a result, the mix can vary among individual clients.
                The
                equity components of these portfolios typically reflect EIP's All-Cap
                equity structure and generally contain 40-60 positions, almost all
                of
                which are held in other EIP products. The debt component of the portfolio
                is largely comprised of high quality
                bonds.





*8.*
              *Global
                  Equity Shareholder Yield*-
                  This product seeks to invest in a diversified portfolio of global
                  equity
                  securities with a history of attractive dividend yields and positive
                  growth in free cash flow. The primary objective of this product
                  is to seek
                  a high level of income, with capital appreciation as a secondary
                  investment objective.




4
 The
        following chart shows the Company’s investment products as a percentage of AUM
        at June 30, 2006:




**Percentage
      of AUM**


**By
      Product**


**At
      June 30, 2006**




chart





EIP
        earns
        its revenues from managing client accounts under investment advisory and
        sub-advisory agreements. Such agreements provide for fees to EIP based on
        AUM.
        Generally, fees are computed quarterly and payable in arrears. Certain contracts
        contain provisions for the monthly payment of fees, or payment of quarterly
        fees in advance. The Company sponsors three mutual funds, the Epoch
        International Small Cap Fund (“EPIEX”), the Epoch Global Equity Shareholder
        Yield Fund (“EPSYX”), and the Epoch U.S. All-Cap Equity Fund (“EPACX”), for
        which fees are calculated based upon daily net assets and paid
        monthly.





5


EIP
      is
      the sub-adviser for a series of funds sponsored by CI Investments Inc. (“CI”).
      The fees earned are calculated based upon the daily net assets of each
      respective fund, and are payable in arrears on a quarterly basis. The CI
      contract contained a minimum two-year commitment to EIP, commencing June 2004,
      to provide such services.





The
      amount of AUM, by fiscal quarter, for the past two years is set forth in the
      graph below.





bar




6


*Growth
      Strategy*





As
      the
      Company enters its third full year of operations, its growth strategy will
      continue to be focused on the development of distribution channels to offer
      its
      various products to a broad array of clients. These efforts have included,
      and
      will continue to include, relationships with investment advisory consultants,
      initiation of managed accounts with third party institutions, and maintaining
      strong sub-advisory relationships.





The
      table
      below sets forth the amount of AUM by client category:




**Assets
                  Under Management By Distribution Channel*****(Dollars
                  in Millions)*****As
                  of June 30,****Distribution
                  Channel:**
              
              2006
              
              2005Sub-advisory
              
              $
              1,715
              
              $
              922Institutional
              
              
              1,245
              
              
              233High
                  net worth
              
              
              293
              
              
              247Total
                  AUM
              
              $
              3,253
              
              $
              1,402


The
        Company routinely evaluates its strategic position and maintains a disciplined
        acquisition and alliance effort which seeks complementary products or new
        products which could benefit clients. While the Company plans to actively
        seek
        such opportunities, there can be no assurance that acquisitions can be
        identified and closed on terms that are attractive. Management believes that
        opportunities are available, but will only act on opportunities that it believes
        are accretive to the Company's long-term business strategy.





Paramount
      to the ongoing success of the business, including growth in existing products
      and retention of clients, will be the Company's ability to attract and retain
      key employees. The Company offers competitive compensation to its employees,
      including share-based compensation, which the Company believes promotes a common
      objective with shareholders.





*Competition*





The
      investment management and investment advisory business is highly competitive.
      The Company continuously encounters competitors in the marketplace which offer
      similar products and services. Management expects that trend to continue due
      to
      the relatively low costs associated with entering the business.





The
      investment management and advisory business is also characterized by contracts
      with clients that are generally cancellable on relatively short notice. While
      the Company believes it will be successful in obtaining and retaining new
      clients, it may be necessary to expend additional resources to compete
      effectively.




7


*Significant
      Customers*





For
        the
        fiscal year ended June 30, 2006, two customers accounted for 42% of consolidated
        revenues. CI Investments Inc. (“CI”), a leading Canadian-owned investment
        management company for which EIP is a sub-adviser, accounted for
        approximately 22%. Genworth Financial Asset Management, Inc. (“Genworth”), 
a prominent investment adviser, through its investments in the Epoch
        International Small Cap Fund (“EPIEX”) and the Epoch Global Equity Shareholder
        Yield Fund (“EPSYX”), as well as separate account mandates, accounted for
        approximately 20%. For the quarter ended June 30, 2006, CI and Genworth
        accounted for 23% and 25% of consolidated revenues, respectively. The Company's
        services and relationships with these clients are important to the Company's
        ongoing growth strategy, and retention of these customers is significant
        to the
        ongoing results of operations and liquidity of the Company.





*Regulation*





The
        Company's business, as well as the financial services industry, is subject
        to
        extensive regulation throughout the world. As a matter of public policy,
        regulatory bodies are charged with safeguarding the integrity of the securities
        and other financial markets and with protecting the interests of customers
        participating in those markets. In the U.S., the SEC is the federal agency
        responsible for the administration of the federal securities laws. The stock
        exchanges, the National Association of Securities Dealers (“NASD”) and the
        National Futures Association are voluntary, self-regulatory bodies composed
        of
        members, such as EIP, that have agreed to abide by the respective bodies'
        rules
        and regulations. Each of these U.S. regulatory organizations may examine
        the
        activities of, and may expel, fine and otherwise discipline, member firms
        and
        their employees. The laws, rules and regulations comprising this framework
        of
        regulation and the interpretation and enforcement of existing laws, rules
        and
        regulations are constantly changing. The effect of any such change cannot
        be
        predicted and may impact the manner of operation and profitability of the
        Company.





Effective
        October 4, 2005, the Company's common stock began trading on the Nasdaq Capital
        Market under the symbol "EPHC”. Prior to this date, the Company’s stock was
        quoted on the NASDAQ Over-the-Counter Bulletin Board (“OTCBB”) under the same
        trading symbol.





EIP, the
        Company's primary operating subsidiary, is registered as an investment adviser
        with the SEC. As a registered investment adviser, EIP is subject to the
        requirements of the Investment Advisers Act and the SEC's regulations
        thereunder. Requirements relate to, among other things, principal transactions
        between an adviser and advisory clients, as well as general anti-fraud
        prohibitions. The Company is subject to the filing and reporting obligations
        of
        the Securities Act of 1933, as amended (the “Securities Act”) and the Exchange
        Act. Regulators are empowered to conduct administrative proceedings that
        can
        result in censure, fine, the issuance of cease-and-desist orders or the
        suspension or expulsion of an investment adviser or its directors, officers
        or
        employees.





The
      above
      descriptions of the regulatory and statutory provisions applicable to the
      Company and EIP are not complete and are qualified in its entirety by reference
      to the particular statutory or regulatory provision. Any change in applicable
      laws or regulations may have a material effect on the Company's business,
      prospects and opinions.





*Employees*




As
      of
      June 30, 2006, the Company employed 38 full-time employees. None of our
      employees are subject to any collective bargaining agreements.





8




**ITEM
                1A.**
              
              **RISK
                FACTORS**




In
      addition to factors mentioned elsewhere in this Form 10-K or previously
      disclosed in our SEC filings, including our reports on Form 10-Q and Form 8-K,
      the factors discussed below, among others, could cause actual results to differ
      materially from those contemplated by the forward-looking statements, and future
      results could differ materially from historical performance. Epoch undertakes
      no
      obligation to revise the forward-looking statements contained in this Form
      10-K
      to reflect events after the date of this Form 10-K.





**Risks
      Related to Our Business**





*The
      Company has limited operating history as an asset management business and,
      therefore, most of the historical financial information presented may not be
      indicative of our future performance.*





Business
      operations in the investment advisory and investment management line of business
      began on April 14, 2004, and revenues were not earned until June 2004. Prior
      to
      such date, the Company's business was focused on enterprise software and
      technology infrastructure. The enterprise software business was sold in
      September 2004 and the technology infrastructure investment activities were
      suspended. Investment advisory and investment management remains the sole line
      of business of the Company.





Although
      the Company is confident the management and employees of EIP have experience,
      good reputations and good prospects in the asset management business, and the
      Company is permitted under applicable rules promulgated by the SEC to report
      such experience and reputations to prospective clients, the acquisition of
      clients and generation of revenue cannot be assured. The Company could lose
      clients and suffer a decline in the Company's asset management and advisory
      revenue and earnings if the investments the Company chooses in the Company's
      asset management business perform poorly, regardless of overall trends in the
      prices of securities.





*Investment
      performance affects the Company's AUM relating to existing clients and is one
      of
      the most important factors in retaining clients and competing for new asset
      management business. Poor investment performance could impair the Company's
      revenue and growth because:*





.
      existing clients might withdraw funds from the Company's asset management
      business in favor of better
      performing products, which would result in lower investment advisory
      fees;





.
      third-party financial intermediaries, advisers or consultants may rate the
      Company's products poorly, which
      may
      result in client withdrawals and reduced asset flows from these third parties
      or their
      clients, or





.
      firms
      with which the Company has strategic alliances may terminate such relationships
      with the Company,
      and future strategic alliances may be unavailable.





*Some
      members of management are critical to the Company's success, and the inability
      to attract and retain key employees could compromise the Company's future
      success.*





If
      key
      employees were to leave, whether to join a competitor or otherwise, the Company
      may suffer a decline in revenue or earnings and suffer an adverse effect on
      the
      Company's financial position. Loss of key employees may occur due to perceived
      opportunity for promotion, increased compensation, work environment or other
      individual reasons, some of which may be beyond the Company's
      control.





9


Future
        success will depend to a significant extent upon the services and efforts
        of the
        Company's executive officers, particularly William W. Priest, our Chief
        Executive Officer and Chief Investment Officer, Timothy T. Taussig, our
        President and Chief Operating Officer, and Executive Vice Presidents, J.
        Philip
        Clark and David N. Pearl. These executives are responsible for determining
        the
        strategic direction of our business, and are integral to our brand and our
        reputation. There are no employment agreements with any key employees, including
        Mr. Priest. However, pursuant to certain agreements pertinent to the business
        combination with EIP, shares of common stock held by Mr. Priest and Messrs.
        Taussig, Clark, and Pearl are subject to vesting and forfeiture provisions
        as
        well as transfer and sale restrictions. The loss of the services of one or
        more
        these key employees, or failure to attract, retain and motivate qualified
        personnel could negatively impact the business, financial condition, results
        of
        operations and future prospects. As with other asset management businesses,
        future performance depends to a significant degree upon the continued
        contributions of certain officers, portfolio managers and other key marketing,
        client service and management personnel. There is substantial competition
        for
        these types of skilled personnel.





*The
      Company is effectively controlled by William W. Priest, the Company's Chief
      Executive Officer.*





For
      at
      least three years following the June 2, 2004 business combination, William
      W.
      Priest has the right to set the number of directors on the Company's Board
      of
      Directors (the "Board") at seven, as done in August of 2006, and to designate
      four people for appointment to the Board, provided such designees meet the
      criteria established by our Nominating/Corporate Governance Committee. Moreover,
      Mr. Priest will have the right to remove and/or replace any of these directors
      at any time. As a result, Mr. Priest will control the Board and, therefore,
      its
      business policies and affairs, including determinations with respect to
      acquisitions, dispositions, borrowings, issuances of common stock or other
      securities of the Company, and the declaration and payment of dividends on
      the
      common stock.





*Negative
      performance of the securities markets could reduce revenues.*





The
      Company's investment management and investment advisory business also would
      be
      expected to generate lower revenues in a market or general economic downturn.
      Under the Company's asset management business arrangements, investment advisory
      fees the Company receives typically are


based
      on
      the market value of AUM. Accordingly, a decline in the prices of securities
      would be expected to cause the Company's revenue and income to decline
      by:





.
      causing
      the value of the Company's AUM to decrease, which would result in lower
      investment advisory
      fees, and/or





.
      causing
      some of the Company's clients to withdraw funds from the Company's asset
      management business
      in favor of investments they perceive as offering greater opportunity or lower
      risk, which also
      would result in lower investment advisory fees.





*If
      the Company's revenue declines without a commensurate reduction in the Company's
      expenses, the Company's net income will be reduced.*





In
      particular, a considerable portion of AUM is expected to be invested in equity
      securities of companies with market capitalizations between $200 million and
      $10
      billion, often characterized as small or mid-sized companies. As a consequence,
      the Company is susceptible to the volatility associated with changes in the
      market for stocks that fall within this capitalization range.





*The
      Company's investment style in the asset management business may underperform
      other investment approaches, which may result in significant client or asset
      departures or a reduction in AUM.*





10


Even
      when
      securities prices are rising, performance can be affected by investment style.
      Many of the equity investment strategies in the Company's asset management
      business share a common investment orientation towards fundamental security
      selection. The Company believes this style tends to outperform the market in
      some market environments and underperform it in others. In particular, a
      prolonged "growth" environment (i.e., a prolonged period whereby growth stocks
      outperform value stocks) may cause the Company's investment strategy to go
      out
      of favor with some clients, consultants or third-party intermediaries. In
      combination with poor performance relative to peers, any changes in personnel,
      extensive periods in particular market environments, or other difficulties,
      may
      result in significant client or asset departures or a reduction in
      AUM.





*The
      Company's business is dependent on investment advisory and sub-advisory
      agreements that are subject to termination or non-renewal; therefore, clients
      could be lost on very short notice.*





Substantially
      all anticipated revenues are to be derived pursuant to investment advisory
      and
      sub-advisory agreements with clients. In general, either party may terminate
      these agreements upon 30 days' notice. Any termination of, or failure to renew,
      these agreements could have a material adverse impact, particularly because
      many
      of the costs are relatively fixed.





*Because
      the Company's clients can remove the assets the Company manages on short notice,
      the Company may experience unexpected declines in revenue and
      profitability.*





The
        Company's investment advisory contracts are generally cancellable upon very
        short notice. Institutional and individual clients, and firms with which
        the
        Company has strategic alliances, can terminate their relationship with the
        Company, reduce the aggregate amount of AUM or shift their funds to
        other
        types of accounts with different rate structures for a number of reasons
        -
        including investment performance, changes in prevailing interest rates and
        financial market performance. Poor performance relative to other investment
        management firms may result in decreased inflows into the Company's investment
        products, increased withdrawals from the Company's investment products, and
        the
        loss of institutional or individual accounts or strategic alliances. In
        addition, the ability to terminate relationships may
        allow
        clients to renegotiate for lower fees paid for asset management
        services.





In
      addition, in the U.S., as required by the Investment Advisers Act, each of
      the
      Company's investment advisory contracts with the mutual funds the Company
      advises or sub-advises automatically terminates upon its "assignment", or
      transfer of the Company's responsibility for fund management. Each of the
      Company's other investment advisory contracts subject to the provisions of
      the
      Investment Advisers Act, as required by this act, provides that the contract
      may
      not be "assigned" without the consent of the customer. A sale of a sufficiently
      large block of shares of the Company's voting securities or other transactions
      could be deemed an "assignment" in certain circumstances. An assignment, actual
      or constructive,
      will trigger these termination provisions and could adversely affect the
      Company's ability to continue managing these client accounts.





To
      the
      extent that a technical "assignment" of investment advisory contracts arises,
      the Company will take the necessary steps to provide clients an opportunity
      to
      consent to the continuation of their advisory agreements. Such new agreements
      may need approval by the stockholders of the respective funds. In the event
      that
      any of these clients do not consent to a renewal of their agreement, the Company
      could lose AUM, which would result in a loss of revenue.





*There
      may not be a consistent pattern in the Company's financial results from period
      to period, which may make it difficult for the Company to achieve steady
      earnings growth on a quarterly basis and may cause the price of the Company's
      common stock and, similarly, the Company's equity security units, to
      decline.*





11




The
      Company may experience significant fluctuations in revenue and profits. The
      Company's revenue is particularly sensitive to fluctuations in the Company's
      AUM. Asset management fees are often based on AUM as of the end of a quarter
      or
      month. As a result, a reduction in assets at the end of a quarter or month
      (as a
      result of market depreciation, withdrawals or otherwise) will result in a
      decrease in management fees. As a result of quarterly fluctuations, it may
      be
      difficult for the Company to achieve steady
      earnings growth on a quarterly basis, which could lead to large adverse
      movements in the price of the Company's common stock or increased volatility
      in
      the Company's stock price and, in turn, cause the value of the Company's equity
      security units to decline.





*Access
      to clients through intermediaries is important to the Company's asset management
      business, and reductions in referrals from such intermediaries or poor reviews
      of the Company's products or the Company's organization by such intermediaries
      could materially reduce the Company's revenue and impair the Company's ability
      to attract new clients.*





The
      Company's ability to market its services relies, in part, on receiving mandates
      from the client base of national and regional securities firms, banks, insurance
      companies, defined contribution plan administrators, investment consultants
      and
      other intermediaries. To an increasing extent, the Company's business uses
      referrals from accountants, lawyers, financial planners and other professional
      advisers. The inability to have this access could materially adversely affect
      the Company's business. In addition, many of
      these
      intermediaries review and evaluate the Company's products and the Company's
      organization. Poor reviews or evaluations of either the particular products
      or
      of the Company may result in client withdrawals or an inability to attract
      new
      assets through such intermediaries.





*The
      Company derives a substantial percentage of its revenues from two significant
      clients.*





CI
      and
      Genworth accounted for approximately 22% and 20%, respectively, of revenues
      for
      FY 2006 and 23% and 25%, respectively, of revenues for the quarter ended June
      30, 2006. A loss of either one of these clients could negatively impact results
      of operations and liquidity of the Company.





*Employee
      misconduct could harm the Company by impairing the Company's ability to attract
      and retain clients and subjecting the Company to significant legal liability
      and
      reputational harm, and this type of* *misconduct
      is difficult to detect and deter.*





Recently,
      there have been a number of highly publicized cases involving fraud or other
      misconduct by employees in the financial services industry, and the Company
      runs
      the risk that employee misconduct could occur in the Company's business, as
      well. For example, misconduct by employees could involve the improper use or
      disclosure of confidential information, which could result in regulatory
      sanctions and serious reputational or financial harm. In the Company's business,
      the Company has discretion to trade client assets on the client's behalf and
      must do so acting in the best interest of the client. As a result, the Company
      is subject to a number of obligations and standards, and the violation of those
      obligations or standards may adversely affect the Company's clients and the
      Company. The Company has adopted and implemented a number of insider trading,
      code of ethics, and other related policies and procedures to address such
      obligations and standards. It is not always possible to deter employee
      misconduct, and the precautions the Company takes to detect and prevent this
      activity may not be effective in all cases.





12


*The
      Company may pursue acquisitions or joint ventures that could present unforeseen
      integration obstacles or costs and could dilute the stock ownership of the
      Company's stockholders and holders of the Company's equity
      securities.*





As
      part
      of the Company's long-term business strategy, the Company may pursue joint
      ventures and other transactions aimed at expanding the geography and scope
      of
      the Company's operations. The Company expects to explore partnership
      opportunities that the Company believes to be attractive. While the Company
      is
      not currently in negotiations with respect to material acquisitions or joint
      ventures, the Company routinely assesses its strategic position and may in
      the
      future seek acquisitions or other transactions to further enhance the Company's
      competitive position. If the Company is not correct when it assesses the value,
      strengths and weaknesses, liabilities and potential profitability of acquisition
      candidates or is not successful in integrating the operations of the acquired
      business, the success of the combined business could be
      compromised.





Acquisitions
      and joint ventures involve a number of risks and present financial, managerial
      and operational challenges, including potential disruption of the Company's
      ongoing business and distraction of management, difficulty with integrating
      personnel and financial and other systems, hiring additional management and
      other critical personnel and increasing the scope, geographic diversity and
      complexity of the Company's operations. The Company's clients may react
      unfavorably to the Company's acquisition and
      joint
      venture strategy, the Company may not realize any anticipated benefits from
      acquisitions, and the Company may be exposed to additional liabilities of any
      acquired business or joint venture, any of which could materially adversely
      affect the Company's revenue and results of operations. In addition, future
      acquisitions or joint ventures may involve the issuance of additional shares
      of
      the Company's common stock, which may dilute existing ownership of the
      Company.





*Other
      operational risks may disrupt the Company's business, result in regulatory
      action against the Company, or limit the Company's growth.*





The
      Company's business is dependent on communications and information systems,
      including those of the Company's vendors. Any failure or interruption of these
      systems, whether caused by fire, other natural disaster, power or
      telecommunications failure, act of terrorism or war or otherwise, could
      materially adversely affect the Company's operating results. Although the
      Company has back-up systems in place, the Company's back-up procedures and
      capabilities in the event of a failure or interruption may not be
      adequate.





The
      Company relies heavily on its financial, accounting, trading, compliance and
      other data processing systems. If any of these systems do not operate properly
      or are disabled, the Company could suffer financial loss, a disruption of the
      Company's business, liability to clients, regulatory intervention or
      reputational damage. The inability of the Company's systems to accommodate
      an
      increasing volume of transactions also could constrain the Company's ability
      to
      expand its businesses. The Company expects that it will need to continue to
      upgrade and expand these capabilities in the future to avoid disruption of,
      or
      constraints on, the Company's operations.





*Fluctuations
      in foreign currency exchange rates could lower the Company's net income or
      negatively impact the portfolios of the Company's clients and may affect the
      levels of the Company's AUM.*





Although
        most portfolios are in U.S. dollar base currency,  certain client
        portfolios are invested in securities denominated in foreign currencies.
        Foreign
        currency fluctuations can adversely impact investment performance for a client's
        portfolio. Accordingly, foreign currency fluctuations may affect the levels
        of
        the Company's AUM. As the Company's AUM includes assets that are denominated
        in
        currencies other than U.S. dollars, an increase in the value of the U.S.
        dollar
        relative to those non-U.S. currencies may result in a decrease in the dollar
        value of the Company's AUM, which, in turn, would result in lower U.S. dollar
        denominated revenue in the Company's business. Additionally, while this risk
        may
        be limited by foreign currency hedging, some risks cannot be hedged and there
        is
        no guarantee that the Company's hedging activity will be successful. Poor
        performance may result in decreased AUM, stemming from withdrawal of client
        assets or a decrease in new assets being raised in the relevant
        product.





13


*The
      Company may not be able to fund future capital requirements on favorable terms,
      if at all.*





The
      Company cannot be certain that financing to fund working capital or other cash
      requirements, if needed, will be available on favorable terms, if at all.
      Capital requirements will vary greatly from quarter to quarter depending on,
      among other things, capital expenditures, fluctuations in operating results
      and
      financing activities. We believe that current cash and cash equivalents and
      cash
      flows from operations will be sufficient to satisfy the Company's cash
      requirements for the foreseeable future. However, if future financing is
      necessary, the Company may or may not be able to obtain financing on favorable
      terms, if at all. Further, any future equity financings could dilute the
      relative percentage ownership of


the
      then
      existing holders of common stock, and any future debt financings could involve
      restrictive covenants that limit our ability to take certain
      actions.





**Risks
      Related to Our Industry**





*The
      Company faces strong competition from financial services firms, many of whom
      have the ability to offer clients a wider range of products and services than
      the Company can offer, which could lead to pricing pressures that could
      materially adversely affect the Company's revenue and
      profitability.*





The
      financial services industry is intensely competitive and the Company expects
      it
      to remain so. In addition to performance, the Company competes on the basis
      of a
      number of factors including the quality of the Company's employees, transaction
      execution, the Company's products and services, innovation, reputation and
      price. The Company believes that it will experience pricing pressures in the
      future as some of the Company's competitors seek to obtain increased market
      share by reducing fees.





*The
      Company faces increased competition due to a trend toward
      consolidation.*





In
      recent
      years, there has been substantial consolidation and convergence among companies
      in the financial services industry. In particular, a number of large commercial
      banks, insurance companies and other broad-based financial services firms have
      established or acquired broker-dealers or have merged with other financial
      institutions. Many of these firms have the ability to offer a wide range of
      products, from loans, deposit-taking and insurance to brokerage, asset
      management and investment banking services, which may enhance their competitive
      position. They also have the ability to support investment banking, including
      financial advisory services, with commercial banking, insurance and other
      financial services revenue in an effort to gain market share, which could result
      in pricing pressure in the Company's business.





*Any
      event that negatively affects the asset management industry could have a
      material adverse effect.*





Any
      event
      affecting the asset management industry that results in a general decrease
      in
      AUM or a significant general decline in the number of advisory clients or
      accounts could negatively impact revenues. Future growth and success depends,
      in
      part, upon the growth of the asset management industry.





14


*The
      financial services industry faces substantial litigation and regulatory risks,
      and the Company may face damage to the Company's professional reputation and
      legal liability if the Company's services are not regarded as satisfactory
      or
      for other reasons.*





As
      a
      financial services firm, the Company depends, to a large extent, on the
      Company's relationships with the Company's clients and the Company's reputation
      for integrity and high-caliber professional services to attract and retain
      clients. As a result, if a client is not satisfied with the Company's services,
      such dissatisfaction may be more damaging to the Company's business than to
      other types of businesses.





In
      recent
      years, the volume of claims and amount of damages claimed in litigation and
      regulatory proceedings against financial advisers has been increasing. In the
      Company's business, the Company makes investment decisions on behalf of the
      Company's clients which could result in substantial losses. This may subject
      the
      Company to the risk of legal liabilities or actions alleging negligent
      misconduct, breach of fiduciary duty or breach of contract. These risks often
      may be difficult to assess or quantify and their existence and magnitude often
      remain unknown for substantial periods of time. The Company's engagements
      typically include broad indemnities from the Company's clients and provisions
      designed to limit the Company's exposure to legal claims relating to the
      Company's services, but these provisions may not protect the Company or may
      not
      be adhered to in all cases. The Company also may be subject to claims arising
      from disputes with employees for alleged discrimination or harassment, among
      other things. These risks often may be difficult to assess or quantify, and
      their existence and magnitude often remain unknown for substantial periods
      of
      time. As a result, the Company may incur significant legal expenses in defending
      against litigation. Substantial legal liability or significant regulatory action
      against the Company could materially adversely affect the Company's business,
      financial condition or results of operations or cause significant reputational
      harm to the Company, which could seriously harm the Company's
      business.





Due
      to
      the extensive laws and regulations to which the Company is subject, management
      is required to devote substantial time and effort to legal and regulatory
      compliance issues. In addition, the regulatory environment in which the Company
      operates is subject to change. The Company may be adversely affected as a result
      of new or revised legislation or regulations or by changes in the interpretation
      or enforcement of existing laws and regulations.





*Extensive
      regulation of the Company's business limits the Company's activities and results
      in ongoing exposure to the potential for significant penalties, including fines
      or limitations on the Company's ability to conduct its
      business.*





The
      financial services industry is subject to extensive regulation. The Company
      is
      subject to regulation by governmental and self-regulatory organizations in
      the
      jurisdictions in which the Company operates around the world. Many of these
      regulators, including U.S. and non-U.S. government agencies and self-regulatory
      organizations, as well as state securities commissions in the U.S., are
      empowered to conduct administrative proceedings that can result in censure,
      fine, the issuance of cease-and-desist orders or the suspension or expulsion
      of
      an investment adviser. The requirements imposed by the Company's regulators
      are
      designed to ensure the integrity of the financial markets and to protect
      customers and other third parties who deal with the Company and are not designed
      to protect the Company's stockholders. Consequently, these regulations often
      serve to limit the Company's activities, including through net capital, customer
      protection and market conduct requirements.





15


The
      Company faces the risk of significant intervention by regulatory authorities,
      including extended investigation and surveillance activity, adoption of costly
      or restrictive new regulations and judicial or administrative
      proceedings that may result in substantial penalties. Among other things, the
      Company could be fined or be prohibited from engaging in some of the Company's
      business activities. In addition, the regulatory environment in which the
      Company operates is subject to modifications and further regulation. New laws
      or
      regulations or changes in the enforcement of existing laws or regulations
      applicable to the Company and the Company's clients also may adversely affect
      the Company's business, and the Company's ability to function in this
      environment will depend on the Company's ability to constantly monitor and
      react
      to these changes. In addition, the regulatory environment in which the Company's
      clients operate may impact the Company's business. For example, changes in
      antitrust laws or the enforcement of antitrust laws could affect the level
      of
      mergers and acquisitions activity and changes in state laws may limit investment
      activities of state pension plans.





In
      particular, for asset management businesses in general, there have been a number
      of highly publicized regulatory inquiries that focus on the mutual funds
      industry. These inquiries already have resulted in increased scrutiny in the
      industry and new rules and regulations for mutual funds and their investment
      managers. This regulatory scrutiny, along with rulemaking initiatives may result
      in an increase in operational and compliance costs or the assessment of
      significant fines or penalties against the Company and may otherwise limit
      the
      Company's ability to engage in certain activities.





*In
      addition, financial services firms are subject to numerous conflicts of
      interests or perceived conflicts. The Company has adopted various policies,
      controls and procedures to address or limit actual or perceived conflicts and
      regularly seeks to review and update the Company's policies, controls and
      procedures. However, these policies and procedures may result in increased
      costs, additional operational personnel, and increased regulatory risk. Failure
      to adhere to these policies and procedures may result in regulatory sanctions
      or
      client litigation.*





Specific
      regulatory changes also may have a direct impact on the revenue of the Company's
      asset management business. In addition to regulatory scrutiny and potential
      fines and sanctions, regulators continue to examine different aspects of the
      asset management industry. Other proposed rules that are currently
      under consideration include potential limitations on investment activities
      in
      which an adviser may engage, such as hedge funds and mutual funds, increased
      disclosure of adviser and fund activities, and changes in compensation for
      mutual fund sales. These regulatory changes and other proposed or potential
      changes may result in a reduction of revenue associated with these
      activities.








16




**ITEM
                2.**
              
              **PROPERTIES**




The
      Company leases all office space. Our principal offices consist of the following
      properties:


ApproximateLocation
                  Lease
                      Expiration
                  Square
                      Feet640
                      Fifth Avenue, New York, NY(1)
                  September
                      2015
                  10,00015303
                      Ventura Boulevard, Sherman Oaks, CA
                  Annually
                  300







(1)
            Our
                principal executive office





The
      Company did not renew an office lease in Dallas, Texas, which expired in March
      of 2006. All accounting, administrative support and corporate affairs which
      were
      being conducted in this location were brought to our New York office in March
      2006.





The
      Company is also the primary party to a lease in New York, New York with
      approximately 8,500 square feet, which expires in December 2010. In January
      2002, a sublease agreement was executed with an unrelated third party. While
      the
      Company remains responsible under terms of the original lease, the subtenant
      has
      assumed those responsibilities and is performing its obligations under the
      sublease agreement. Proceeds from the sublease, net of profit sharing with
      the
      landlord, more than offset the Company's obligations under this
      lease.




The
      Company believes the facilities it presently occupies are adequate for the
      purposes for which they are currently used and are well maintained. We are
      evaluating our future space capacity in relation to our projected staffing
      levels, and anticipate obtaining additional space during the fiscal year
      2007.





Additional
      information about our occupancy costs, including commitments under
      non-cancellable leases, is in Note 12 of the "Notes to Consolidated Financial
      Statements” included in this Form 10-K under Item 8.




**ITEM
              3.**
            
            **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
              4.**
            
            **SUBMISSION
              OF MATTERS TO A VOTE OF SECURITY HOLDERS**




There
      were no matters submitted to a vote of any of the Company’s security holders,
      through the solicitation of proxies or otherwise, during the fourth quarter
      of
      our fiscal year ended June 30, 2006.




17





**PART
      II**




**ITEM
              5.**
            
            **MARKET
                FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER****MATTERS AND ISSUER PURHCASES OF EQUITY
                SECURITIES**




Effective
      October 4, 2005, the Company's common stock began trading on the NASDAQ Capital
      Market under the trading symbol “EPHC.” Prior to that date the Company’s common
      stock was quoted on the NASDAQ OTCBB under the same trading symbol. The
      following table sets forth the high and low closing prices during each fiscal
      quarter for the past two years as well as the closing price at the end of each
      fiscal quarter presented.





graph


**1Q
                  '05**
              
              **2Q
                  '05**
              
              **3Q
                  '05**
              
              **4Q
                  '05**
              
              **1Q
                  '06**
              
              **2Q
                  '06**
              
              **3Q
                  '06**
              
              **4Q
                  '06**High
                  closing price
              
              $
              3.10
              
              $
              4.90
              
              $
              5.00
              
              $
              4.74
              
              $
              5.35
              
              $
              6.75
              
              $
              5.80
              
              $
              5.08Low
                  closing price
              
              $
              2.15
              
              $
              2.50
              
              $
              4.25
              
              $
              4.10
              
              $
              4.12
              
              $
              4.80
              
              $
              4.69
              
              $
              3.68Quarter
                  closing price
              
              $
              2.65
              
              $
              4.90
              
              $
              4.75
              
              $
              4.30
              
              $
              5.00
              
              $
              6.00
              
              $
              4.80
              
              $
              5.08





18


As
        of
        September 22, 2006 there were 1,110 holders of record of the Company's common
        stock.




**Dividends**





No
      cash
      dividends were paid during the fiscal years ended June 30, 2006 and 2005,
      respectively. The declaration of dividends is within the discretion of the
      Company’s board of directors. Our board of directors will take into account such
      matters as general business conditions, the Company’s financial results, capital
      requirements, contractual, legal and regulatory restrictions. The Company does
      not anticipate declaring dividends in the immediate future.





Information
      relating to compensation plans under which equity securities of the Registrant
      are authorized for issuance is set forth in Part III, Item 12 of the Annual
      Report on Form 10-K.





**Issuer
      Purchases of Equity Securities**





None.




**ITEM
              6.**
            
            **SELECTED FINANCIAL
              DATA**




The
      following table presents selected financial data of the Company. This data
      was
      derived from the Company’s consolidated financial statements and reflects the
      operations and financial position of the Company at the dates and periods
      indicated. Due to the reverse merger accounting treatment for the EIP business
      combination, the June 30, 2004 results of operations reflect the April 14,
      2004
      (the date on which EIP began conducting business operations) through June 30,
      2004 operations for EIP and June 2, 2004 (the date of the business combination)
      through June 30, 2004 operations for J Net.





The
      following selected historical consolidated financial data should be read in
      conjunction with Part II, Item 7, ”Management's Discussion and Analysis of
      Financial Condition and Results of Operations," and Item 8, Financial Statements
      and Supplementary Data, of this Form 10-K.




19


**Selected
                    Financial Data***(dollars
                    in thousands)*
                
                
                
                Date
                    of inceptionApril
                    14, 2004through2006
                
                2005
                
                June
                    30, 2004**Consolidated
                    Statements of Operations Data:**Revenues
                
                $
                10,231
                
                $
                4,307
                
                $
                70Expenses:Employee
                    related costs (excluding share-based compensation)
                
                
                8,641
                
                
                5,777
                
                
                135Share-based
                    compensation
                
                
                4,670
                
                
                3,427
                
                
                771Other
                    expenses
                
                
                3,975
                
                
                3,378
                
                
                236Total
                    operating expenses
                
                
                17,286
                
                
                12,582
                
                
                1,142Operating
                    loss from continuing operations
                
                
                (7,055
                )
                
                (8,275
                )
                
                (1,072
                )Other
                    income
                
                
                1,106
                
                
                1,167
                
                
                59Provision 
                    for (benefit from) income taxes
                
                
                (227
                )
                
                -
                
                
                -Loss
                    from continuing operations, net of taxes
                
                
                (5,722
                )
                
                (7,108
                )
                
                (1,013
                )Income
                    from discontinued operations, net of $0 taxes
                
                
                -
                
                
                571
                
                
                21Net
                    loss
                
                $
                (5,722
                )
                $
                (6,537
                )
                $
                (992
                )**Consolidated
                    Statements of Financial Condition Data:**Cash
                    and cash equivalents
                
                $
                7,845
                
                $
                8,550
                
                $
                10,801Total
                    assets
                
                
                13,568
                
                
                13,031
                
                
                17,152Accounts
                    receivable
                
                
                2,486
                
                
                1,221
                
                
                70Long
                    term borrowings
                
                
                -
                
                
                -
                
                
                -Total
                    liabilities
                
                
                4,713
                
                
                3,454
                
                
                4,465Unearned
                    share-based compensation
                
                
                6,585
                
                
                7,480
                
                
                9,157Total
                    stockholders' equity
                
                
                8,855
                
                
                9,577
                
                
                12,687**Common
                    Share Data:**Basic
                    and diluted loss per share from continuing operations
                
                $
                (0.31
                )
                $
                (0.39
                )
                $
                (0.15
                )Basic
                    and diluted loss per share from discontinued operations
                
                $
                -
                
                $
                0.03
                
                $
                -Dividends
                    declared per share
                
                $
                -
                
                $
                -
                
                $
                -Weighted
                    average shares outstanding: basic and diluted*(a)*
                
                
                18,724
                
                
                18,025
                
                
                6,718Sales
                    price per share:High
                    closing price
                
                $
                6.75
                
                $
                5.00
                
                $
                3.00Low
                    closing price
                
                $
                3.68
                
                $
                2.15
                
                $
                0.75**Other
                    Financial Data:**Working
                    Capital
                
                $
                7,156
                
                $
                7,578
                
                $
                12,099Current
                    Ratio
                
                
                3.05
                
                
                4.35
                
                
                3.96Cash
                    used in operations
                
                
                (1,133
                )
                
                (5,909
                )
                
                (247
                )Assets
                    under management (AUM) by distribution channel:Sub-advisory
                
                $
                1,715
                
                $
                922
                
                $
                609Institutional
                
                
                1,245
                
                
                233
                
                
                28High
                    net worth
                
                
                293
                
                
                247
                
                
                211Total
                    AUM
                
                $
                3,253
                
                $
                1,402
                
                $
                848




*(a)* 2004
          weighted average shares outstanding are based on 1,000 shares from April
          14,
          2004 through June 1, 2004, representing issued and outstanding shares of
          Epoch
          up to the date of the merger. Beginning June 2, 2004, issued and outstanding
          shares were 17,834,737. Accordingly, the total weighted average shares
          outstanding from April 14, 2004 (date of inception) to June 30, 2004 was
          6,717,602.


20


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




**Overview**




The
        Company provides investment advisory and investment management services to
        its
        clients. Its operating subsidiary, EIP, is a registered investment adviser
        under
        the Investment Advisers Act. Its business operations are to manage investment
        assets for retirement plans, mutual funds, endowments, foundations, and high
        net
        worth individuals. Revenues are generally derived as a percentage of AUM.
        Therefore, among other factors, revenues are dependent on (i)
        performance of financial markets, (ii) the ability to maintain existing clients,
        and (iii) changes in the composition of AUM. The management team is led by
        William W. Priest. Mr. Priest has over 40 years of experience in the investment
        advisory business. The overall investment philosophy is focused on achieving
        a
        superior risk-adjusted return by investing in companies which are undervalued
        relative to the investment team's fair value determinations. Security selection
        and portfolio construction are designed to protect capital in declining markets
        while participating in rising markets.





The
      Company uses a fiscal year which ends on June 30. The June 2, 2004 business
      combination between J Net and EIP was treated as a reverse merger for accounting
      purposes. Due to the reverse merger accounting treatment, the June 30, 2004
      results of operations reflect the April 14, 2004 (the date on which EIP began
      conducting business operations) through June 30, 2004 operations for EIP and
      June 2, 2004 (the date of the business combination) through June 30, 2004
      operations for J Net.





Management’s
      Discussion and Analysis is primarily based upon fiscal years ended June 30,
      2006
      and 2005, the Company’s first two full years of operations. Fiscal year 2004 is
      included in the presentation, but is not meaningful for comparative purposes,
      as
      operations reflect a partial year.





**Financial
      Highlights**





The
      Company achieved positive operating leverage for fiscal year 2006, which is
      defined as the total revenue growth rate that exceeds the rate of growth of
      expenses. Total operating revenue increased by 138% from $4.3 million to $10.2
      million, while total operating expenses increased by 37%. The main driver of
      this positive trend was the significant increase in AUM. The Company finished
      fiscal year 2006 with AUM of $3.253 billion, an increase of 132% from $1.402
      billion at the fiscal year end 2005.





For
        fiscal year ended June 30, 2006, the Company recorded a net loss from continuing
        operations of $5.7 million, an improvement of $1.4 million, or 19%, from
        a net
        loss from continuing operations of $7.1 million for the same period a year
        ago.
        Basic and diluted loss per share from continuing operations was $.31 per
        share
        in fiscal year 2006, an improvement of 21% from $.39 in fiscal year
        2005.





21


**Results
      of Operations**





**General**





The
      fiscal years ended June 30, 2006 and 2005 represent the first two full years
      of
      operations of the Company. In FY 2004, results of operations represented the
      start-up period, which began on April 14, 2004 and ended on June 30, 2004.
      Since
      FY 2004 results of operations reflect only a partial year, comparisons to FY
      2004 are not meaningful. Accordingly, the discussion of results of operations
      will focus on the FY 2006 and FY 2005 comparison as well as significant
      accomplishments during the Company's first two full years of
      operations. The summarized results of operations for FY 2006, FY 2005, and
      FY 2004 are presented below ( *dollars
      in thousands* ):


Date
                    of inceptionApril
                    14, 2004through2006
                
                2005
                
                June
                    30, 2004**Consolidated
                    Statements of Operations Data:**Revenues
                
                $
                10,231
                
                $
                4,307
                
                $
                70Expenses:Employee
                    related costs (excluding share-based compensation)
                
                
                8,641
                
                
                5,777
                
                
                135Share-based
                    compensation
                
                
                4,670
                
                
                3,427
                
                
                771Other
                    expenses
                
                
                3,975
                
                
                3,378
                
                
                236Total
                    operating expenses
                
                
                17,286
                
                
                12,582
                
                
                1,142Operating
                    loss from continuing operations
                
                
                (7,055
                )
                
                (8,275
                )
                
                (1,072
                )Other
                    income (expense)
                
                
                1,106
                
                
                1,167
                
                
                59Provision
                    for (benefit from) income taxes
                
                
                (227
                )
                
                -
                
                
                -Loss
                    from continuing operations, net of taxes
                
                
                (5,722
                )
                
                (7,108
                )
                
                (1,013
                )Income
                    from discontinued operations, net of $0 taxes
                
                
                -
                
                
                571
                
                
                21Net
                    loss
                
                $
                (5,722
                )
                $
                (6,537
                )
                $
                (992
                )Basic
                    and diluted loss per share from continuing operations
                
                $
                (0.31
                )
                $
                (0.39
                )
                $
                (0.15
                )**Operating
                    Metrics:**Total
                    AUM
                
                $
                3,253
                
                $
                1,402
                
                $
                848






22


**Assets
        Under Management**





AUM
      as of
      June 30, 2006 were $3.253 billion compared with AUM of $1.402 billion and $848
      million at June 30, 2005 and 2004, respectively. A summary of AUM by
      distribution channel at each fiscal year end follows ( *dollars
      in millions* ):


**For
                    Fiscal Years Ended June 30,****2006**
                
                **2005**
                
                **2004****Percentage**
                
                
                
                **Percentage****Amount**
                
                **Change**
                
                **Amount**
                
                **Change**
                
                **Amount**Sub-advisory
                
                $
                1,715
                
                
                86
                %
                $
                922
                
                
                51
                %
                $
                609Institutional
                
                
                1,245
                
                
                434
                %
                
                233
                
                
                732
                %
                
                28High
                    net worth
                
                
                293
                
                
                19
                %
                
                247
                
                
                17
                %
                
                211$
                3,253
                
                
                132
                %
                $
                1,402
                
                
                65
                %
                $
                848


The
      charts presented on the following page depict the fiscal year end
      composition of AUM by distribution channel, as a percentage of total AUM for
      FY
      2006, FY 2005, and FY 2004, respectively:







23




pie1  pie2  pie3


24


**FY
      2006 versus FY 2005**





***Revenues***





Total
      revenues from investment advisory and management services for the fiscal year
      ended June 30, 2006 were $10.2 million, an increase of $5.9 million or 138%
      from
      $4.3 million for the fiscal year ended June 30, 2005. This increase was
      attributable to new business from existing and new customers, and higher equity
      market valuations.





A
      significant percentage of revenues in FY 2006 were derived from two clients,
      CI
      and Genworth. CI represented 22% of FY 2006 total revenues while Genworth,
      through its investments in the Epoch International Small Cap Fund (“EPIEX”) and
      the Epoch Global Equity Shareholder Yield Fund (“EPSYX”), as well as separate
      account mandates, represented approximately 20%.





Assets
        under management more than doubled by fiscal year end 2006, increasing 132%
        to
        $3.2 billion. Institutional business increased by more than five-fold, or
        $1.0
        billion during fiscal year 2006, making up more than half of the annual AUM
        increase. Several products experienced double digit increases, with the Epoch
        International Small Cap Fund (“EPIEX”) increasing by more than 37% over the past
        fiscal year. Investment advisory and  management revenues are expected to
        increase in the first quarter of fiscal year 2007 based upon the nearly $750
        million increase in AUM during the fourth quarter of fiscal year
        2006.





***Employee
      related costs (excluding share-based compensation)***





Employee
      related costs include salaries, benefits, payroll taxes, bonuses and commission
      expenses. For the fiscal year ended June 30, 2006, these expenses were $8.6
      million, an increase of $2.9 million or 50% from $5.8 million for the fiscal
      year ended June 30, 2005. Increased employee headcount to support the growth
      and
      expansion of the business was the primary reason for this increase. Employee
      headcount increased to 38 full-time employees at the end of FY 2006, from 28
      full-time employees at the end of FY 2005. These expenses for the fiscal year
      ended June 30, 2006 include $3.9 million of performance and guaranteed bonuses
      and sales commissions as compared to $2.0 million for the fiscal year ended
      June
      30, 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.





The
      Company has obligations to pay either bonuses or advances on future sales
      commissions in FY 2007 totaling approximately $1.2 million.





***Share-based
      compensation***





The
      Company believes that share-based compensation promotes unity in the workplace
      and a common objective with shareholders. Employee share-based compensation
      expense is recognized ratably over the three-year vesting period of those
      awards, in accordance with the underlying vesting provisions.





For
      the
      fiscal year ended June 30, 2006, share-based compensation was $4.7 million,
      an
      increase of $1.3 million or 36% from $3.4 million for the fiscal year ended
      June
      30, 2005. As noted above, increased employee headcount was the primary reason
      for this increase.





In
      the
      fiscal year ended June 30, 2006, 838,905 shares of restricted stock were issued
      to employees. A total of 105,294 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 26,533 shares were forfeited
      by terminated employees in the fiscal year ended June 30, 2006.





25


During
        the fiscal year ended June 30, 2006, no stock awards were granted to directors
        of the Company. However, approximately 128,316 shares were granted to directors
        of the Company during the fiscal year ended June 30, 2005 for FY 2005 services
        and in advance of FY 2006 services. These 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. The related share-based compensation expense
        is recognized ratably over the three-year vesting period of those awards,
        in
        accordance with the underlying vesting provisions.





Subsequent
      to June 30, 2006, 66,228 shares were issued to directors in advance of FY 2007
      services. These shares vest fully in one year and the related share-based
      compensation expense will be recognized ratably over the one-year period.
      Prospectively, all future director share grants will vest fully over one
      year.





The
      amortization of the cost of the former EIP stockholders' restricted stock was
      $3.1 million in FY 2006. Assuming the remaining shares vest as contemplated,
      additional stock compensation of $3.1 million will occur in the fiscal year
      ended June 30, 2007. Due to its magnitude, the ability to achieve profitability
      is diminished until the amortization and vesting period on these shares expires
      at June 30, 2007.





***General,
      administrative and occupancy***





General,
      administrative and occupancy expenses consist primarily of office rentals,
      travel and entertainment, marketing, information technology expenses, utilities,
      insurance, and other office related expenses. For the fiscal year ended June
      30,
      2006, general, administrative and occupancy expenses were $2.6 million, up
      $.3
      million or 11% from $2.3 million for the fiscal year ended June 30, 2005.
      Increased travel related expenses to support marketing and distribution efforts
      accounted for a significant portion of this increase. Occupancy costs also
      contributed to this increase as FY 2006 was the first full year in the Company’s
      new corporate headquarters.





***Professional
      fees and services***





Professional
        fees and services consist primarily of outside legal fees for SEC compliance
        and
        general corporate legal affairs, independent accountants' fees, and other
        professional services. For the fiscal year ended June 30, 2006, such fees
        were
        $1.0 million, an increase of $0.2 million or 24% from $0.8 million for the
        fiscal year ended June 30, 2005. Employee placement fees contributed to this
        increase for the fiscal year ended June 30, 2006, as several new staff positions
        were added. Legal fees partially offset this increase, decreasing by
        approximately $150 thousand. The prior year comparable period included
        incremental legal fees in conjunction with the Company’s first full year of
        operations. The Company expects to reduce its reliance on outside professionals
        as more full time staff positions are added. Nevertheless, certain third
        party
        costs in advertising and compliance with public company and investment advisory
        regulations will continue to be incurred. In addition, the Company expects
        to
        see an increase in professional fees in the upcoming fiscal year as it continues
        to implement the compliance requirements of Sarbanes-Oxley Section
        404.





***Depreciation
      and amortization***





Depreciation
      and amortization increased to $0.3 million in the fiscal year ended June 30,
      2006, an increase of $139 thousand or 69%, from $0.2 million in the fiscal
      year
      ended June 30, 2005. The increase in depreciation and amortization expense
      is
      primarily due to the impact of amortization of the costs of new leasehold
      improvements in connection with the Company’s move to its new headquarters in
      February 2005. Additionally, office re-configuration expenditures incurred
      during FY 2006 to accommodate new staffing levels will cause this expense to
      increase slightly in FY 2007.





26


***Other
      income***





For
        the
        fiscal year ended June 30, 2006, other income was $1.1 million, decreasing
        $61 thousand from FY 2005.





During
        FY
        2005, “Other Income” included a $334 thousand gain from the collection of a
        previously, fully-reserved note receivable. Specifically, in FY 2005, the
        Company sold its Internet-based, e-commerce business and accepted a note
        with a
        face value of $534 thousand as part of the purchase price. 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 fourth quarter gain of $334
        thousand.





During
        FY
        2006, “Other Income” included gains of approximately $169 thousand from
        investments to which the Company had previously ascribed no value. Interest
        income during FY 2006 was higher than FY 2005 by approximately $100
        thousand as a result of higher cash balances during the year.





***Benefit
      from income taxes***





The
      $227
      thousand benefit from income taxes related to an Internal Revenue Service
      (“IRS”) refund received in April 2006 for an audit of the June 30, 2001 and June
      30, 2002 periods. No refund or assessable interest amounts had been accrued
      at
      June 30, 2005 because the Company had not received a final accounting from
      the
      IRS. Management now considers this matter to be closed.





**FY
      2005 versus FY 2004**





***General***





The
      fiscal year ended June 30, 2005 represents the first full year of operations
      of
      the Company. In FY 2004, results of operations represented the start-up period,
      which began on April 14, 2004 and ended on June 30, 2004. Since FY 2004 results
      of operations reflect only a partial year, comparisons of FY 2005 to FY 2004
      are
      not meaningful. Accordingly, the discussion of results of operations will focus
      on significant accomplishments during FY 2005, the Company's first full year
      of
      operations.





***Revenues***





Revenues
      from investment advisory and investment management services were $4.3 million
      in
      FY 2005. As noted above, FY 2004 revenues, which were $70 thousand, are not
      comparable due to FY 2004 representing only a partial year. In fact, no revenues
      were earned in FY 2004 until June 18, 2004. As a result, FY 2004 revenues
      represented only twelve days of earnings.





A
        significant percentage of revenues in FY 2005 were derived from two clients,
        CI
        and Genworth. CI represented 36% of FY 2005 total revenues while Genworth
        represented approximately 8%.





27


***Employee
      related costs (excluding share-based compensation)***





For
      the
      fiscal year ended June 30, 2005, these expenses totaled $5.8 million. Total
      full-time employees increased to 28 at June 30, 2005 from 17 at June 30, 2004.
      These expenses for the fiscal year ended June 30, 2005 include $2.0 million
      of
      performance and guaranteed bonuses, and advances on sales commissions which
      were
      non-refundable but could be applied against future sales.





***Share-based
      compensation***





Share-based
      compensation was $3.4 million for the year ended June 30, 2005. During that
      year, 294,796 shares of restricted stock were issued to employees. A total
      of
      36,850 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. There were no forfeitures in the fiscal year ended June 30,
      2005. ****





Approximately
      128,316 shares were granted to directors of the Company during the fiscal year
      ended June 30, 2005 for FY 2005 services and in advance of FY 2006 services.
      These 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.
      The related share-based compensation expense is recognized ratably over the
      three-year vesting period of those awards, in accordance with the underlying
      vesting provisions.





***General,
      administrative and occupancy expenses***





The
      most
      significant component of these expenses, which totaled $2.3 million in FY 2005,
      included office rent of $1.0 million, insurance costs of $.1 million, travel
      and
      entertainment costs of $.5 million, computer applications and software-related
      maintenance costs of $.2 million, and office supplies and marketing materials
      of
      $.2 million.





***Professional
      fees and services***





For
        the
        fiscal year ended June 30, 2005, such fees were $.8 million. Significant
        components included in these expenses were legal and accounting fees of $.4
        million, public relations costs of $.2 million, and $.2 million to various
        other
        service providers.





***Depreciation
      and amortization***





Depreciation
      and amortization expense was $.2 million for the fiscal year ended June 30,
      2005
      and consisted primarily of amortization of leasehold improvement costs and
      depreciation on purchased software.





***Other
      income***





Other
      income was $1.2 million in FY 2005. This included interest earned on cash and
      cash equivalents of $.2 million. The Company invests its excess cash in money
      market and other interest-bearing instruments which earn interest over a short
      period of time, typically 7 to 35 days. Management does not seek higher returns
      from investments in riskier, low-grade securities.





One
      of
      the Company's properties in New York, New York is subleased to an unrelated
      party. In FY 2005, rental receipts from the subtenant were $.6 million. The
      rental receipts more than offset base lease costs on the property.





28


**Selected
      financial data - discontinued operations**





The
      following is a summary of operating results of the discontinued operations
      ( *dollars
      in thousands* ):


Revenue
                
                $
                293Cost
                    and expenses
                
                
                (294
                )Loss
                    from discontinued operations, net of $0 income taxes
                
                $
                (1
                )Gain
                    on sale of discontinued operations, net of $0 income
                    taxes
                
                $
                572Income
                  from discontinued operations, net of income taxes
                
                $
                571


**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 5 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 fourth quarter gain of $334 thousand. Such gain is included
      in “Gain from collection of notes and other settlements” in the “Other Income”
section in the Statement of Operations. This
      accounting treatment is consistent with the SEC's Staff Accounting Bulletin
      No.
      93 which states the gains and losses associated with assets received in
      consideration for discontinued operations should be reported within continuing
      operations.





29






**Capital
      Resources and Liquidity**





A
      summary
      of cash flow data for the fiscal years ended June 30, is as follows *(in
      thousands):*


**April
                  14, 2004****to****2006**
              
              **2005**
              
              **June
                  30, 2004**Cash
                  flows (used in) provided by:Operating
                  activities
              
              $
              (1,133
              )
              $
              (5,909
              )
              $
              (247
              )Investing
                  activities
              
              
              98
              
              
              3,658
              
              
              10,948Financing
                  activities
              
              
              330
              
              
              -
              
              
              100Net
                  (decrease) increase in cash and cash equivalents
              
              
              (705
              )
              
              (2,251
              )
              
              10,801Cash
                  and cash equivalents at beginning of year
              
              
              8,550
              
              
              10,801
              
              
              -Cash
                  and cash equivalents at end of year
              
              $
              7,845
              
              $
              8,550
              
              $
              10,801


For
      the
      fiscal years shown above, the use of cash flows from operations is primarily
      due
      to the process of establishing and expanding the business during the Company’s
      first two years of operations.




***2006
      Cash Flows:***





For
      the
      fiscal year ended June 30, 2006, net cash used in operating activities was
      $1.1
      million, a decrease of $4.8 million. The decrease in cash utilization stems
      from
      improved operating results coupled with the fact that the fiscal year ended
      June
      30, 2005 included expenditures of $1.4 million related to payment of income
      taxes and interest for earlier year tax audits of J Net.





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 meets its operating needs for the foreseeable
        future as well as to implement its growth objectives. The Company, from time
        to
        time, may also consider pursuing opportunities to raise additional capital
        to expand its market base and support its
        growth objectives.





The
      Company’s business does not require it to maintain significant capital balances.
      The Company’s current financial condition is highly liquid, with cash and cash
      equivalents comprising approximately 58% of its assets.





Sources
      of funds for the Company's operations are primarily derived from investment
      advisory and investment management fees and interest on the Company's cash
      and
      cash equivalents. As of June 30, 2006, the Company had $7.8 million of cash
      and
      cash equivalents and $2.5 million of accounts receivable to fund its business
      growth strategy.




30


***2005
      Cash Flows:***





Cash
      used
      in operations during FY 2005 was $5.9 million. The total amount included
      nonrecurring payments of $0.8 million in conjunction with the June 2004 business
      combination with EIP and a $1.4 million payment to the Internal Revenue Service
      to settle earlier year tax audits of J Net. Excluding these non-recurring
      payments, cash used in operations was $3.7 million.





Property
      and equipment expenditures in FY 2005 of approximately $2.0 million consisted
      primarily of leasehold improvements for the build-out of the Company’s
      new corporate office in New York.




***Working
      Capital:***





The
      Company’s working capital for the past two years is set forth in the table
      below:





June
                    30,
                
                Increase
                
                Percent2006
                
                2005
                
                (decrease)
                
                Change*(dollars
                    in thousands)*Current
                    Assets
                
                $
                10,647
                
                $
                9,840
                
                $
                807
                
                
                8.2
                %Current
                    Liabilities
                
                
                3,491
                
                
                2,262
                
                
                1,229
                
                
                54.3
                %Working
                    Capital
                
                $
                7,156
                
                $
                7,578
                
                $
                (422
                )
                
                (5.6
                %)Current
                    Ratio
                
                
                3.05
                
                
                4.35
                
                
                (1.30
                )
                
                (29.9
                %)


Current
      assets at June 30, 2006 increased $807 thousand, primarily as a result of
      an increase in accounts receivable, corresponding with increases in revenue
      during the year.





Current
      liabilities at June 30, 2006 increased $1.2 million, primarily as a result
      of an
      increase in accrued compensation, due to higher staffing levels in FY 2006.
      Increases in accounts payable and accrued liabilities from employee placement
      fees, travel related expenses, and consultant fees were additional reasons
      for
      the increase in current liabilities.




**Contractual
      Obligations**





The
        Company's primary headquarters and operations are located in New York, New
        York.
        Business is conducted at a location with approximately 10,000 square feet
        under
        a long-term lease that expires in September 2015.





The
      Company is also the primary party to another lease in New York, New York which
      expires in December 2010. This property is subleased to an unrelated third
      party. While the Company remains responsible for obligations under the lease,
      the sublease income, net of profit sharing with the landlord, more than offsets
      the Company's obligations under this lease. The subtenant has performed its
      obligations under the sublease agreement and the Company is not aware of any
      credit issues with the subtenant.
      As of June 30, 2006, the remaining future minimum payments under this lease
      total $2.1 million. Future minimum receipts from the subtenant, net of profit
      sharing with the landlord, total $2.5 million as of June 30, 2006.





31


The
      Company also has an office lease in Sherman Oaks, California with an annual
      option to renew. The obligations under this lease are minimal. The Company
      also
      had leased space in Dallas, Texas until March 31, 2006. All accounting,
      administrative support and corporate affairs which were being conducted at
      that
      location were relocated to our New York office in March 2006.





There
      are
      no employment contracts with any officers or employees of the Company. 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 and must be reviewed and approved
      by
      the Company's Compensation Committee.





**Summary
      of Contractual Obligations**





The
      following table summarizes all contractual obligations, including the
      aforementioned office leases (dollars in thousands).


**Payments
                    Due In****Fiscal
                    Years Ended June 30,****2008
                    -**
                
                **2010
                    -**
                
                **2012
                    and****2007**
                
                **2009**
                
                **2011**
                
                **thereafter**
                
                **Total**Primary
                    New York operations
                
                $
                665
                
                $
                1,333
                
                $
                1,369
                
                $
                3,047
                
                $
                6,414Subleased
                    New York lease
                
                
                481
                
                
                961
                
                
                641
                
                
                -
                
                
                2,083Other
                    office locations
                
                
                32
                
                
                -
                
                
                -
                
                
                -
                
                
                32Other
                    operating leases
                
                
                31
                
                
                30
                
                
                11
                
                
                -
                
                
                72Total
                    obligations
                
                
                1,209
                
                
                2,324
                
                
                2,021
                
                
                3,047
                
                
                8,601Sub-lease
                    income
                
                
                (560
                )
                
                (1,148
                )
                
                (765
                )
                
                -
                
                
                (2,473
                )Net
                    obligations
                
                $
                649
                
                $
                1,176
                
                $
                1,256
                
                $
                3,047
                
                $
                6,128







32


**Off-Balance
      Sheet Arrangements**





As
      of
      June 30, 2006, the Company had no off-balance sheet arrangements.





**Subsequent
      Event**





During
        FY
        2000, J Net, the predecessor company to Epoch, made a $4 million investment
        in
        eStara, Inc. ("eStara"), a technology-related company which provides
        conversion and tracking solutions to enhance on-line sales. This investment
        comprised 373,376 shares of Series C-1 and 553,893 shares of Series C-2,
        respectively, 8% cumulative convertible redeemable preferred stock. As there
        was
        no readily available market and the investment represented less than a 20%
        interest in eStara, the securities were valued at the Company’s initial cost.
        During FY 2001 and FY 2002, the carrying value of this investment was deemed
        to
        be impaired by J Net’s management and written down. During FY 2003, J Net’s
        management concluded its ability to recover its investment was remote and
        wrote
        off the remaining carrying value. Accordingly, this investment had no carrying
        value at June 30, 2006. Additionally, no dividends had been paid through
        June
        30, 2006.





On
      September 19, 2006, eStara and Art Technology Group, Inc. (NASDAQ ticker symbol
      “ARTG”) announced the signing of a definitive agreement for ARTG to acquire
      eStara in a stock and cash merger transaction. The closing of the transaction
      is
      subject to customary closing conditions, including the approval of eStara’s
      stockholders, and is expected to occur during the second quarter of Epoch’s FY
      2007.





Under
      the
      terms of the agreement, ARTG will acquire all of the outstanding common stock,
      preferred stock, and vested and unvested stock options of eStara for
      approximately 15.3 million shares of ARTG common stock, $2.0 million in cash,
      and up to an additional $6.0 million in earn-out potential.





As
        a
        result of the above-mentioned merger, the Company, as holder of the preferred
        stock of eStara, will be entitled to an amount per share equal to the original
        issue price, plus the amount of any unpaid cumulative dividends, along with
        its
        approximately 5% proportionate share of remaining merger consideration.
        Accordingly, the Company will receive approximately 2,458,000 common shares
        of
        ARTG as well as $321 thousand in cash. Additional lesser amounts, up to $150
        thousand, may also be realized subsequently, pursuant to the earn-out provisions
        of the merger. These shares are subject to a lock up period. None of these
        shares can be sold during the first three months after the closing of the
        transaction. After this period, up to 1/12 of the shares are available for
        sale
        each month for the subsequent twelve months.





The
        above
        merger transaction, if approved by eStara’s stockholders, will have
        a material impact on the Company's financial position,  shareholders'
        equity, and results of operations during FY 2007.





**Critical
      Accounting Policies**





***General***


The
      policies outlined below are critical to the Company's operations and the
      understanding of the results of operations. The impact of these policies on
      operations is discussed throughout Management's Discussion and Analysis of
      Financial Condition and Results of Operations where such policies affect the
      reported and expected financial results. For a detailed discussion on the
      application of these and other accounting policies, refer to Note 2 in the
      Notes
      to the Consolidated Financial Statements contained in this Annual Report on
      Form
      10-K. Note that preparation of this Annual Report on Form 10-K requires the
      Company to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities, disclosure of contingent assets and liabilities, and
      the
      reported amounts of revenue and expenses during the reporting period. Actual
      results may differ from those estimates.





33


***Consolidation***


The
      accompanying consolidated financial statements include the accounts of the
      Company and its wholly-owned subsidiaries. All material intercompany accounts
      and transactions have been eliminated in consolidation.





The
      June
      2, 2004 business combination with EIP, pursuant to generally accepted accounting
      principles in the United States of America, was treated as a reverse
      acquisition. In a reverse acquisition, the "legally acquired" company (EIP)
      becomes the surviving reporting entity. EIP began conducting business operations
      in April 2004. Due to the fact that FY 2006 and 2005 represent the first two
      full years of operations, comparisons to FY 2004 are not meaningful since FY
      2004 reflects only the start-up period for EIP of April 2004 through June
      2004.





***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, based on the account’s net asset value
      at the end of a quarter. 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
      asset values 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 contract 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 June 30, 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., had any value ascribed to it at June 30, 2006.





It
      is the
      policy of the Company to evaluate its investments in technology- related
      businesses for possible impairment on an annual basis, or earlier if an
      indicator of impairment arises. Management uses a number of different criteria
      when evaluating an asset for possible impairment. Indicators such as significant
      decreases in the investee’s book value, cash flows which cannot be resolved or
      improved within a reasonable amount of time, sustained operating losses, adverse
      changes in the business climate, legal matters, losses of significant customers,
      and new technologies which could accelerate obsolescence of business products
      are used by management when making its evaluations.





34


There
        are
        no plans to make additional investments in technology-related businesses.
        Furthermore, the Company intends to divest its existing investments in
        technology-related companies in the foreseeable future. The Company may realize
        proceeds from divestitures of investments whose carrying value had previously
        been written down to zero. The amount of proceeds is not readily determinable
        and may be material to the Company’s financial position, results of operations,
        and cash flows. See previous “Subsequent Event”
discussion.





***Share-based
      compensation***


Effective
        July 1, 2005, the Company adopted Statement of Financial Accounting Standards
        No. 123 (Revised 2004), *Share-Based
        Compensation* (“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 Company’s accounting treatment of
        restricted stock awards under SFAS 123R is consistent with that of the Company’s
        previous policies under Accounting Principles Board (“APB”)  Opinion No.
        25, *Accounting
        for Stock Issued to Employees* and the
        pro forma disclosures required in accordance with SFAS 123, *Accounting
        for Stock-Based Compensation* .
        The
        adoption of this standard did not have a material effect on the Company’s
        financial statements.





Under
      the
      modified prospective method transition of SFAS 123R, compensation costs related
      to any non-vested portion of stock option awards outstanding at the adoption
      date are based on the grant date fair value of those awards. Since all stock
      options previously granted under the Company’s plan that expired on September
      30, 2002 were fully vested prior to June 30, 2004, there are no deferred
      compensation costs resulting from stock options to be accounted for on a
      prospective basis. There were no further stock options issued for all years
      presented.





***Provision
      for (benefit from) income taxes***


Management’s
      judgment is required in developing the Company’s provision for (benefit from)
      income taxes, including the determination of deferred tax assets and liabilities
      and any valuation allowances that might be required against net deferred tax
      assets. The Company's ability to utilize accumulated net operating losses
      (“NOLs”) to their full extent prior to their expiration cannot be reasonably
      assured. Until profitability can be achieved, and utilization of NOLs can be
      more definitive, the Company has provided a full valuation allowance on its
      accumulated NOLs and temporary differences for all years presented. The $227
      thousand tax benefit in the Statement of Operations for FY 2006 represents
      an
      IRS refund. See Note 11 in the consolidated financial statements for further
      details.





***Discontinued
      Operations***


Prior
      to
      the business combination with EIP, the Company conducted operations in the
      Internet-based, e-commerce
      industry. Upon consummation of the business combination, the Company formalized
      a plan to divest this line of business, which was conducted through IW Holdings,
      Inc. ("IWH"), a wholly owned subsidiary of the Company. As a result, the IWH
      financial information is being reported as discontinued operations. Management
      completed the sale of the assets of IWH in September 2004.




35


***Recently
      issued accounting standards***


On
      June 7, 2005, the Financial Accounting Standards Board issued SFAS
      No. 154, *Accounting
      Changes and Error Corrections* ("SFAS
      No. 154"), replacing APB Opinion No. 20, *Accounting
      Changes* ,
      and
      SFAS No. 3, *Reporting
      Accounting Changes in Interim Financial Statements.* SFAS
      No. 154 alters the requirements for the accounting for and reporting of a
      change in accounting principle. Previously, most voluntary changes in accounting
      principles required recognition via a cumulative effect adjustment within net
      income of the period of the change. SFAS No. 154 requires retrospective
      application to prior periods' financial statements, unless it is impracticable
      to determine either the period-specific effects or the cumulative effect of
      the
      change. SFAS No. 154 is effective for accounting changes made in fiscal
      years beginning after December 15, 2005; however, SFAS No. 154 does
      not change the transition provisions of any existing accounting pronouncements.
      The Company does not believe the adoption of SFAS No. 154 will have a
      material effect on its consolidated financial position, results of operations
      or
      cash flows as it is not contemplating any voluntary accounting
      changes.




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




***Investment
      advisory and management fees***




The
      Company’s exposure to market risk is directly related to its role as an
      investment adviser for the mutual funds and separate accounts the Company
      manages. The revenues earned under these agreements are typically based on
      the
      market value of AUM. AUM can be affected by changes in interest rates,
      fluctuations in financial markets, and fluctuations in foreign currency.
      Accordingly, a decline in the prices of securities may cause the Company’s
      revenue to decline by:





-
            causing
                the value of AUM to decrease, which would result in lower investment
                advisory and management fees.





-
            causing
                the Company’s clients to withdraw funds in favor of investments that they
                perceive as offering greater reward or lower risk, which would also
                result
                in lower investment advisory and management
                fees.




***Cash
      and cash equivalents***





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. 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.





Presently,
      the Company neither participates in hedging activities nor does it have any
      derivative financial instruments.




**ITEM
              8****.**
            
            **FINANCIAL STATEMENTS
              AND SUPPLEMENTARY DATA**





The
        financial statements and supplementary financial information required by
        this
        Item, included in this Report in Item 15 (a) (1) (2), beginning on page
        F-1 ,
        are
        listed in the Index to Financial Statements appearing on page F-1 and
        are
        incorporated herein by reference.





36








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




None.




**ITEM
              9A.**
            
            **CONTROLS AND
              PROCEDURES**




Within
      the 90-day period prior to the filing of this Annual Report on Form 10-K, an
      evaluation was carried out under the supervision and with the participation
      of
      the Company's management, including the Chief Executive Officer (the "CEO"),
      the
      Chief Operating Officer ("COO") and the Chief Financial Officer ("CFO"), of
      the
      effectiveness and design of disclosure controls and procedures, pursuant to
      Exchange Act Rule 13a-15(b), used to prepare consolidated financial statements.
      Based on that evaluation, the CEO, COO and CFO have concluded the disclosure
      controls and procedures designed to ensure that information required to be
      disclosed by the Company in reports filed or to be filed with the SEC are
      adequate and are operating in an effective manner.





There
      have been no significant changes in our internal controls or in other factors
      that could significantly affect these controls subsequent to the date of the
      most recent evaluation.





The
      Company is not currently an accelerated filer and is not currently subject
      to
      the Internal Control reporting requirements under Section 404 of the
      Sarbanes-Oxley Act until the fiscal year ending June 30, 2008.  The
      Company expects to be in full compliance with Section 404, as
      required.




**ITEM
              9B.**
            
            **OTHER
              INFORMATION**




Not
      applicable.


37


**PART
      III**




**ITEM
              10.**
            
            **DIRECTORS AND
              EXECUTIVE
              OFFICERS OF THE REGISTRANT****ITEM 11.**
            
            **EXECUTIVE
              COMPENSATION****ITEM
              12.**
            
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND****MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS****ITEM 13.**
            
            **CERTAIN
              RELATIONSHIPS AND RELATED TRANSACTIONS****ITEM
              14.**
            
            **PRINCIPAL ACCOUNTANT
              FEES AND SERVICES**




The
      information required by items 10, 11, 12, 13 and 14 are incorporated by
      reference from the 2006 Proxy Statement to be filed with the SEC within 120
      days
      of the end of the fiscal year covered by this report.




38


**PART
      IV**




**ITEM 15.**
            
            **EXHIBITS AND FINANCIAL STATEMENT
              SCHEDULES**




(a)
      (1)
      and (2) Consolidated Financial Statements and Schedules





For
        a
        list of the consolidated financial statements and consolidated financial
        statement schedules filed as a part of this Annual Report on Form 10-K, see
        "Index to Financial Statements, Supplementary Data and Financial Statement
        Schedules" on F-1.





(a)
      (3)
      The exhibits filed and incorporated by reference are listed in the Index of
      Exhibits required by Item 601 of Regulation S-K at Item c below.





(b)
      Reports on Form 8-K




Date
                  of Report
              
              Item(s)
              
              DescriptionJuly
                  6, 2006
              
              8.01
              
              Disclosure
                  of June 30, 2006 selection as adviser for significant institutional
                  mandateJuly
                  11, 2006
              
              8.01
              
              Disclosure
                  and press release of Assets Under Management as of June 30,
                  2006August
                  9, 2006
              
              5.02
              
              Election
                  of Enrique R. Arzac to Board of
                  Directors









(c)
      Exhibits





2.1
                Agreement
                    and Plan of Reorganization dated June 2, 2004. (A)3.1
                Articles
                    of Incorporation of the Registrant, as amended. (B)3.2
                By-laws
                    of the Registrant, as amended. (B)4.1
                Stockholder
                    Rights Agreement dated as of July 11, 1994 between the Registrant
                    and
                    Continental Stock Transfer & Trust Company, as Rights Agent.
                    (C)10.2
                1992
                    Incentive and Non-qualified Stock Option Plan. (E)10.40
                Indemnification
                  Agreement. (D)10.40
                Stockholders
                    Agreement dated as of June 2, 2004 among J Net Enterprises, Inc.
                    and
                    certain of its stockholders. (A)10.41
                Registration
                    Rights Agreement dated as of June 2, 2004 among J Net Enterprises,
                    Inc.
                    and certain of its stockholders. (A)10.42
                Audited
                    Financial Statements of J Net as of June 1, 2004. (F)10.43
                Asset
                    Purchase Agreement by and between InterWorld Holdings, LLC as
                    buyer and IW
                    Holdings, Inc. as seller dated September 9, 2004. (G)10.44
                2004
                    Omnibus Long-Term Incentive Compensation Plan. (H)10.45
                Office
                    lease between Vornado 640 Fifth Avenue LLC (Landlord) and Epoch
                    Investment
                    Partners, Inc. (Tenant). (I)10.46
                Form
                    of Restricted Stock Award. (J)10.47
                Office
                    lease between 680 Fifth Avenue Associates, L.P. (Landlord) and
                    JNet
                    Enterprises (Tenant). (J)10.48
                Office
                  sub-lease between JNet Enterprises (Tenant) and The Game Show Network
                  (sub-tenant). (J)21.1
                List
                    of Registrant's significant subsidiaries. (J)23.1
                Consent
                    of CF & Co., L.L.P. (J)31.1
                Principal
                    Executive Officer Certification. (J)31.2
                Principal
                    Financial Officer Certification. (J)32
                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.
                    (J)




(A)
                Incorporated
                    by reference to Registrant's Form 8-K dated June 3,
                    2004.(B)
                Incorporated
                    by reference to Registrant's Form 8-K dated December 7,
                    2004.(C)
                Incorporated
                    by reference to Registrant's Form 8-K dated July 12,
                    1994.(D)
                Incorporated
                      by reference to Registrant's Quaterly Report on Form 10-Q for
                      the fiscal
                      quarter ended March 31, 2003.(E)
                Incorporated
                  by reference to Registrant's 1992 Proxy Statement.(F)
                Incorporated
                  by reference to Registrant's Annual Report on Form 10-K for the
                  fiscal
                  year ended June 30, 2004.(G)
                Incorporated
                  by reference to Registrant's Form 8-K dated September 14,
                  2004.(H)
                Incorporated
                  by reference to Registrant's Form 8-K dated November 19,
                  2004.(I)
                Incorporated
                  by reference to Registrant's Annual Report on Form 10-K for the
                  fiscal
                  year ended June 30, 2005.(J)
                Included
                  herein.




39





SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange
      Act of 1934, the Registrant has duly caused this report to be signed
      on
      its behalf by the undersigned, thereunto duly authorized.






Dated:
              September 28, 2006
            EPOCH
              HOLDING
              CORPORATION(Registrant)By:
            /s/ William
              W. PriestWilliam
                W. Priest
              Chief
                Executive Officer


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




Signature
              
              Title
              Date/s/
                  Allan R. Tessler
              
              Chairman
                  of the Board
              September
                  28, 2006Allan
                  R. Tessler/s/
                  William W. Priest
              
              Chief
                  Executive Officer
              September
                  28, 2006William
                  W. Priest
              
              (Principal
                  Executive Officer)/s/
                  Adam Borak
              
              Chief
                  Financial Officer
              September
                  28, 2006Adam
                  Borak
              
              (Principal
                  Financial Officer)/s/
                  Enrique R. Arzac
              
              Director
              September
                  28, 2006Enrique
                  R. Arzac/s/
                  Jeffrey L. Berenson
              
              Director
              September
                  28, 2006Jeffrey
                  L. Berenson/s/
                  Peter A. Flaherty
              
              Director
              September
                  28, 2006Peter
                  A. Flaherty/s/
                  Eugene M. Freedman
              
              Director
              September
                  28, 2006Eugene
                  M. Freedman/s/
                  David R. Markin
              
              Director
              September
                  28, 2006David
                  R. Markin




40


**EPOCH
      HOLDING CORPORATION AND SUBSIDIARIES**


**INDEX
      TO FINANCIAL STATEMENTS, SUPPLEMENTARY DATA**


**AND
      FINANCIAL STATEMENT SCHEDULES**


**[ITEMS
      8 AND 15(a)]**





**(1)
      FINANCIAL STATEMENTS:**




Report
                  of Independent Registered Public Accounting FirmConsolidated
                  Balance Sheets At June 30, 2006 and 2005Consolidated
                  Statements of OperationsFor
                  the years ended June 30, 2006 and 2005 and the period from April
                  14, 2004
                  (date of inception) to June 30, 2004Consolidated
                  Statements of Changes in Stockholders' EquityFor
                  the years ended June 30, 2006 and 2005 and the period from April
                  14, 2004
                  (date of inception) to June 30, 2004Consolidated
                  Statements of Cash FlowsFor
                  the years ended June 30, 2006 and 2005 and the period from April
                  14, 2004
                  (date of inception) to June 30, 2004Notes
                  to Consolidated Financial Statements**(2)
                  SUPPLEMENTARY DATA:**Quarterly
                  Financial Information (Unaudited)For
                  the years ended June 30, 2006 and 2005.


Certain
      financial statement schedules are omitted because the required information
      is
      provided in the Consolidated Financial Statements or the notes
      thereto.





All
      other
      schedules for which provision is made in the applicable accounting regulation
      of
      the Securities and Exchange Commission are not required under the related
      instructions or are inapplicable and therefore have been omitted.







F-1





Report
      of
      Independent Registered Public Accounting Firm





We
      have
      audited the accompanying consolidated balance sheets of Epoch Holding
      Corporation and Subsidiaries as of June 30, 2006 and 2005 and the related
      consolidated statements of operations, changes in stockholders' equity, and
      cash
      flows for the years ended June 30, 2006 and 2005, and for the period from April
      14, 2004 (date of inception) to June 30, 2004. These financial statements are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management,
      as well as evaluating the overall financial statement presentation. We believe
      that our audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the consolidated financial position of Epoch Holding
      Corporation and Subsidiaries as of June 30, 2006 and 2005, and the consolidated
      results of their operations and their cash flows for the years ended June 30,
      2006 and 2005, and for the period from April 14, 2004 (date of inception) to
      June 30, 2004, in conformity with U.S. generally accepted accounting
      principles.





/s/ CF
& Co., L.L.P.





CF &
Co., L.L.P.




Dallas,
      Texas


September
        28, 2006




F-2









**EPOCH
        HOLDING CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEETS** ***(Dollars
          in thousands, except share data)***





**June
                    30,****2006**
                
                **2005****ASSETS****Current
                    assets:**Cash
                    and cash equivalents
                
                $
                7,845
                
                $
                8,550Accounts
                    receivable
                
                
                2,486
                
                
                1,221Prepaid
                    and other current assets
                
                
                316
                
                
                69Total
                    current assets
                
                
                10,647
                
                
                9,840Property
                    and equipment (net of accumulateddepreciation
                    of $552 and $211, respectively)
                
                
                2,015
                
                
                2,088Security
                    deposits
                
                
                749
                
                
                946Investments
                    in technology-related businesses
                
                
                157
                
                
                157Total
                    assets
                
                $
                13,568
                
                $
                13,031**LIABILITIES
                    AND STOCKHOLDERS' EQUITY****Current
                    liabilities:**Accounts
                    payable and accrued liabilities
                
                $
                1,423
                
                $
                1,066Accrued
                    compensation and benefits
                
                
                2,068
                
                
                1,196Total
                    current liabilities
                
                
                3,491
                
                
                2,262Deferred
                    rent
                
                
                1,011
                
                
                981Sub-tenant
                    security deposit
                
                
                211
                
                
                211Total
                    liabilities
                
                
                4,713
                
                
                3,454**Commitments
                    and contingencies (Note 12)****Stockholders'
                    equity:**Preferred
                    stock, $1 par value; authorized 1,000,000 sharesnone
                    issued
                
                
                -
                
                
                -Common
                    stock, $.01 par value; authorized 60,000,000 shares
                
                
                191
                
                
                18219,153,996
                    and 18,257,749shares
                    issued and outstanding, respectivelyAdditional
                    paid-in capital
                
                
                28,500
                
                
                24,404Accumulated
                    deficit
                
                
                (13,251
                )
                
                (7,529
                )Unearned
                    share-based compensation
                
                
                (6,585
                )
                
                (7,480
                )Total
                    stockholders' equity
                
                
                8,855
                
                
                9,577Total
                    liabilities and stockholders' equity
                
                $
                13,568
                
                $
                13,031




The
      accompanying notes are an integral part of these
      consolidated financial statements




F-3




**EPOCH
          HOLDING CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF OPERATIONS**
 **FOR
          THE YEARS ENDED JUNE 30, 2006 AND 2005 AND** **FOR
            THE PERIOD FROM APRIL 14, 2004 (DATE OF INCEPTION) TO JUNE 30, 2004** ***(Dollars
              in thousands, except per share
              data)***




**April
                14, 2004****to****2006**
            
            **2005**
            
            **June
                30, 2004****Revenues:**Investment
                advisory and management fees
            
            $
            10,231
            
            $
            4,307
            
            $
            70**Operating
                expenses:**Employee
                related costs (excluding share-based
                compensation)
            
            
            8,641
            
            
            5,777
            
            
            135Share-based
                compensation
            
            
            4,670
            
            
            3,427
            
            
            771General,
                administrative and occupancy
            
            
            2,584
            
            
            2,328
            
            
            142Professional
                fees and services
            
            
            1,050
            
            
            848
            
            
            85Depreciation
                and amortization
            
            
            341
            
            
            202
            
            
            9Total
                operating expenses
            
            
            17,286
            
            
            12,582
            
            
            1,142**Operating
                loss from continuing operations**
            
            
            (7,055
            )
            
            (8,275
            )
            
            (1,072
            )**Other
                income (expense):**Interest
                and other income
            
            
            937
            
            
            808
            
            
            59Realized
                gain on investments
            
            
            169
            
            
            -
            
            
            -Gain
                from collection of notes and other settlements
            
            
            -
            
            
            359
            
            
            -Total
                other income
            
            
            1,106
            
            
            1,167
            
            
            59**Loss
                from continuing operations, before income taxes**
            
            
            (5,949
            )
            
            (7,108
            )
            
            (1,013
            )Provision
                for (benefit from) income taxes
            
            
            (227
            )
            
            -
            
            
            -**Loss
                from continuing operations, net of taxes**
            
            
            (5,722
            )
            
            (7,108
            )
            
            (1,013
            )Income
                from discontinued operations (including gain on disposal
                in2005
                of $572, net of $0 taxes)
            
            
            -
            
            
            571
            
            
            21**Net
                loss**
            
            $
            (5,722
            )
            $
            (6,537
            )
            $
            (992
            )**Basic
                and diluted earnings (loss) per share:**Loss
                from continuing operations
            
            $
            (0.31
            )
            $
            (0.39
            )
            $
            (0.15
            )Income
                from discontinued operations
            
            
            -
            
            
            0.03
            
            
            -**Basic
                and diluted loss per share**
            
            $
            (0.31
            )
            $
            (0.36
            )
            $
            (0.15
            )**Weighted
                average shares outstanding:**Basic
            
            
            18,724
            
            
            18,025
            
            
            6,718Diluted
            
            
            18,724
            
            
            18,025
            
            
            6,718




The
      accompanying notes are an integral part of these
      consolidated financial statements


F-4




**EPOCH
      HOLDING CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
          STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY** **FOR
            THE YEARS ENDED JUNE 30, 2006 AND 2005 AND**
 **FOR
          THE PERIOD FROM APRIL 14, 2004 (DATE OF INCEPTION) TO JUNE 30, 2004** ***(Dollars
            and shares in thousands)***


**Additional**
              
              
              
              **Unearned****Common
                  Stock**
              
              **Paid-in**
              
              **Accumulated**
              
              **Share-Based**
              
              **Treasury
                  Stock****Shares**
              
              **Amount**
              
              **Capital**
              
              **Deficit**
              
              **Compensation**
              
              **Shares**
              
              **Amount**
              
              **Totals**Issuance
                  of common shares atformation
                  of EIP on April 14, 2004
              
              
              1
              
              $
              -
              
              $
              100
              
              $
              -
              
              $
              -
              
              
              -
              
              $
              -
              
              $
              100Exchange
                  of outstanding EIPcommon
                  shares for 9,096 commonshares
                  of J Net
              
              
              9,095
              
              
              91
              
              
              (91
              )
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              **-**
              
              
              -Recapitalization
                  to reflect reverse merger
              
              
              10,233
              
              
              102
              
              
              28,761
              
              
              -
              
              
              -
              
              
              (1,694
              )
              
              (16,055
              )
              
              12,808Share-based
                  compensation
              
              
              -
              
              
              -
              
              
              9,628
              
              
              -
              
              
              (9,628
              )
              
              -
              
              
              -
              
              
              -Net
                  issuance of restricted common stock
              
              
              200
              
              
              2
              
              
              298
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              300Amortization
                  of unearned share-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              471
              
              
              -
              
              
              -
              
              
              471Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (992
              )
              
              -
              
              
              -
              
              
              -
              
              
              (992
              )**Balances
                  at June 30, 2004**
              
              
              19,529
              
              
              195
              
              
              38,696
              
              
              (992
              )
              
              (9,157
              )
              
              (1,694
              )
              
              (16,055
              )
              
              12,687Net
                  issuance of restricted common stock
              
              
              423
              
              
              4
              
              
              1,746
              
              
              -
              
              
              (1,587
              )
              
              -
              
              
              -
              
              
              163Amortization
                  of unearned share-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,264
              
              
              -
              
              
              -
              
              
              3,264Recapitalization
                  to State of Delaware fromNevada:Retirement
                  of treasury stock
              
              
              (1,694
              )
              
              (17
              )
              
              (16,038
              )
              
              -
              
              
              -
              
              
              1,694
              
              
              16,055
              
              
              -Retirement
                  of outstanding J Net stock
              
              
              (17,905
              )
              
              (179
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (179
              )Reissuance
                  of Epoch HoldingCorporation
                  shares
              
              
              17,905
              
              
              179
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              179Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,537
              )
              
              -
              
              
              -
              
              
              -
              
              
              (6,537
              )**Balances
                  at June 30, 2005**
              
              
              18,258
              
              
              182
              
              
              24,404
              
              
              (7,529
              )
              
              (7,480
              )
              
              -
              
              
              -
              
              
              9,577Net
                  issuance of restricted common stock
              
              
              812
              
              
              8
              
              
              3,767
              
              
              -
              
              
              (3,285
              )
              
              -
              
              
              -
              
              
              490Amortization
                  of unearned share-basedcompensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,180
              
              
              -
              
              
              -
              
              
              4,180Issuance
                  of common stockupon
                  exercise of stock options
              
              
              84
              
              
              1
              
              
              329
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              330Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,722
              )
              
              -
              
              
              -
              
              
              -
              
              
              (5,722
              )**Balances
                  at June 30, 2006**
              
              
              19,154
              
              $
              191
              
              $
              28,500
              
              
              ($13,251
              )
              
              ($6,585
              )
              
              -
              
              $
              -
              
              $
              8,855
  The
        accompanying notes are an integral part of these
        consolidated financial statements
 F-5
  **EPOCH
          HOLDING CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS** **FOR
            THE YEARS ENDED JUNE 30** ***(Dollars
              in thousands)***
  **April
                  14, 2004****2006**
              
              **2005**
              
              **to
                  June 30, 2004****Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (5,722
              )
              $
              (6,537
              )
              $
              (992
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Share-based
                  compensation
              
              
              4,670
              
              
              3,427
              
              
              771Depreciation
                  and amortization
              
              
              341
              
              
              202
              
              
              9Realized
                  gain on investments
              
              
              (169
              )
              
              -
              
              
              -Income from
                  sale of discontinued operations
              
              
              -
              
              
              (571
              )
              
              (21
              )Gain
                  from collection of notes
              
              
              -
              
              
              (334
              )
              
              -(Increase)
                  decrease in operating assets:Accounts
                  receivable
              
              
              (1,265
              )
              
              (1,154
              )
              
              (70
              )Short-term
                  investments
              
              
              -
              
              
              -
              
              
              (13
              )Prepaid
                  and other current assets
              
              
              (247
              )
              
              10
              
              
              (74
              )Other
                  non-current assets
              
              
              -
              
              
              -
              
              
              (5
              )Increase
                  (decrease) in operating liabilities:Accounts
                  payable and accrued liabilities
              
              
              357
              
              
              6
              
              
              109Accrued
                  compensation and benefits
              
              
              872
              
              
              205
              
              
              54Federal
                  income taxes payable
              
              
              -
              
              
              (1,373
              )
              
              -Deferred
                  rent
              
              
              30
              
              
              194
              
              
              (2
              )Other,
                  net
              
              
              -
              
              
              (4
              )
              
              -Net
                  cash used in continuing operations
              
              
              (1,133
              )
              
              (5,929
              )
              
              (234
              )Net
                  cash provided by (used in) discontinued operations
              
              
              -
              
              
              20
              
              
              (13
              )**Net
                  cash used in operating activities**
              
              
              (1,133
              )
              
              (5,909
              )
              
              (247
              )**Cash
                  flows from investing activities:**Capital
                  expenditures
              
              
              (270
              )
              
              (1,961
              )
              
              (338
              )Proceeds
                  from sale of property and equipment
              
              
              2
              
              
              -
              
              
              -Security
                  deposits
              
              
              197
              
              
              (497
              )
              
              -Proceeds
                  from investments
              
              
              169
              
              
              -
              
              
              -Redemption
                  of short-term investments
              
              
              -
              
              
              4,967
              
              
              -Landlord
                  contributions to leasehold improvements
              
              
              -
              
              
              615
              
              
              -Collection
                  of notes receivable
              
              
              -
              
              
              534
              
              
              -Acquisition
                  of J Net
              
              
              -
              
              
              -
              
              
              11,291Net
                  cash provided by investing activities-continuing
                  operations
              
              
              98
              
              
              3,658
              
              
              10,953Net
                  cash used in discontinued operations
              
              
              -
              
              
              -
              
              
              (5
              )**Net
                  cash provided by investing activities**
              
              
              98
              
              
              3,658
              
              
              10,948**Cash
                  flows from financing activities:**Proceeds
                  from stock option exercise
              
              
              330
              
              
              -
              
              
              -Issuance
                  of common stock
              
              
              -
              
              
              -
              
              
              100Proceeds
                  from note to related party
              
              
              -
              
              
              -
              
              
              100Repayment
                  of note to related party
              
              
              -
              
              
              -
              
              
              (100
              )**Net
                  cash provided by financing activities**
              
              
              330
              
              
              -
              
              
              100**Net
                  (decrease) increase in cash and cash****equivalents
                  during year**
              
              
              (705
              )
              
              (2,251
              )
              
              10,801Cash
                  and cash equivalents at beginning of year
              
              
              8,550
              
              
              10,801
              
              
              -Cash
                  and cash equivalents at end of year
              
              $
              7,845
              
              $
              8,550
              
              $
              10,801
 The accompanying notes are an integral part of these
        consolidated financial statements
 F-6




**EPOCH
      HOLDING CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1 - Organization**





***Business*** **:**


Epoch
      Holding Corporation ("Epoch" or the "Company"), a Delaware corporation, 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 ("EIP"). EIP
      is a
      registered investment adviser under the Investment Advisers Act of 1940 (the
      "Investment Advisers Act"). EIP provides investment advisory and investment
      management services to retirement plans, mutual funds, endowments, foundations
      and high net worth individuals. Headquartered in New York City with an office
      in
      Sherman Oaks, CA, the Company’s current product offerings include U.S. All Cap
      Value, U.S. Value, U.S. Small Cap Value, Global Small Cap Value, Global Absolute
      Return, International Small Cap, Balanced Portfolios, and Global Equity
      Shareholder Yield.





Unless
      specifically stated otherwise, references to FY 2006 and FY 2005 refer to the
      fiscal years ended June 30, 2006 and June 30, 2005, respectively. All references
      to FY 2004 refer to the period from April 14, 2004 (date of inception) through
      June 30, 2004.





***Company
      Structure and Discontinued Operations:***


Operations
      commenced under the existing structure on June 2, 2004 when 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. Due to the reverse merger
      accounting treatment, the consolidated operations for FY 2004 reflect those
      of
      EIP from April 14, 2004 through June 30, 2004 and J Net from June 2, 2004 (the
      date of the reverse merger) through June 30, 2004. The FY 2006 and FY 2005
      consolidated operations represent the first two complete years of operations
      for
      the Company.





Prior
      to
      the June 2, 2004 business combination, J Net conducted its 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 line of business is the investment advisory and investment management
        business. There
        are
        no other operating or reportable segments.




F-7





**Note
      2 - Summary of Significant Accounting Policies**





***Principles
      of consolidation and basis of presentation*** **:**


The
      accompanying consolidated financial statements include the accounts of the
      Company and its subsidiaries. All material intercompany accounts and
      transactions have been eliminated in consolidation. The Company's fiscal year
      ends on June 30. Certain reclassifications have been made to prior period
      financial statements to conform with the current period presentation.





***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 these consolidated financial statements
      and
      the reported amounts of revenue and expenses during the reporting periods.
      Actual results could differ from those estimates.





***Fair
      value of financial instruments*** **:**


The
      carrying value of the Company's cash and cash equivalents, accounts receivable,
      accounts payable and accrued expenses approximates fair value due to their
      short-term nature.





***Cash
      equivalents*** **:**


Cash
        equivalents are liquid investments primarily comprising debt and money market
        instruments with maturities of three months or less when acquired. Cash
        equivalents are stated at cost, which approximates fair value, due, to their
        short maturity.





***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 high-grade, short-term liquid investments, limiting exposure
      to concentrations of credit risk.





***Property
      and equipment*** **:**


Leasehold
      improvements are capitalized at cost and such costs are amortized on a
      straight-line basis over the shorter of their estimated useful lives or lease
      term, as applicable. All other capital assets are recorded at cost and such
      costs are depreciated on a straight-line basis over their estimated useful
      lives. Generally, the useful lives are approximately 3 to 7 years for equipment
      and 10 years for leasehold improvements and exclude option periods, if any.
      Repairs and maintenance are charged to expense as incurred. Property sold or
      retired is eliminated from the accounts in the period of disposition. The cost
      of purchased software used to conduct the investment advisory and investment
      management services is amortized using a three-year estimated useful life.





***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 June 30, 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., had any value ascribed to it at June 30, 2006.




F-8


It
        is the
        policy of the Company to evaluate its investments in technology-related
        businesses for possible impairment on an annual basis, or earlier if an
        indicator of impairment arises. Management uses a number of different criteria
        when evaluating an asset for possible impairment. Indicators such as significant
        decreases in the investee’s book value, cash flows which cannot be resolved or
        improved within a reasonable amount of time, sustained operating losses,
        adverse
        changes in the business climate, legal matters, losses of significant customers,
        and new technologies which could accelerate obsolescence of business products
        are used by management when making its evaluations.





As
      described in Note 3 - Business Combination, the Company's technology-related
      investment in Tellme Networks, Inc. ("Tellme") was decreased from $2 million
      to
      $157 thousand at June 1, 2004. This reduction was due solely to the purchase
      accounting in the J Net acquisition which required a write down of non-current
      assets stemming from negative goodwill.





The
        Company recorded gains of $169 thousand from two of the inactive
        technology-related companies during the year ended June 30, 2006. There are
        no
        plans to make additional investments in technology-related businesses.
        Furthermore, the Company intends to divest its existing investments in
        technology-related companies in the foreseeable future. The Company may realize
        proceeds from divestitures of investments whose carrying value had previously
        been written down to zero. The amount of proceeds is not readily determinable
        and may be material to the Company’s financial position, results of operations,
        and cash flows. See Note 15, "Subsequent Event", for further
        discussion.





***Revenue
      recognition*** **:**


Investment
      management and advisory 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 AUM. Generally, fees are billed on a quarterly
      basis, in arrears, based on the account’s net asset value at the end of a
      quarter. 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
      asset values 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 contract’s 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 the contract year





***Share-based
      compensation:***


Effective
        July 1, 2005, the Company adopted Statement of Financial Accounting Standards
        No. 123 (Revised 2004), *Share-Based
        Compensation* (“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 Company’s accounting treatment of
        restricted stock awards under SFAS 123R is consistent with that of the Company’s
        previous policies under Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
        for Stock Issued to Employees* and the
        pro forma disclosures required in accordance with SFAS 123, *Accounting
        for Stock-Based Compensation* .
        The
        adoption of this standard did not have a material effect on the Company’s
        financial statements.




Under
      the
      modified prospective method transition of SFAS 123R, compensation costs related
      to any non-vested portion of stock option awards outstanding at the adoption
      date are based on the grant date fair value of those awards. Since all stock
      options previously granted under the Company’s plan that expired on September
      30, 2002 were fully vested prior to June 30, 2004, there are no deferred
      compensation costs resulting from stock options to be accounted for on a
      prospective basis. There were no further stock options issued for all years
      presented.




F-9




***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 the
        enacted
        statutory tax rates and laws that will be in effect when such differences
        are
        expected to 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 asset will not be realized.





***Earnings
      (loss) per common share:***


Basic
      earnings per share (“EPS”) is calculated by dividing net earnings applicable to
      common shareholders by the weighted average number of common shares outstanding.
      Diluted EPS includes the determinants of basic EPS and, in addition, reflects
      the dilutive effect, if any, of the common stock deliverable pursuant to stock
      options.





***Recently
      issued accounting standards*** **:**


On
        June 7, 2005, the Financial Accounting Standards Board issued SFAS
        No. 154, *Accounting
        Changes and Error Corrections* ("SFAS
        No. 154"), replacing APB Opinion No. 20, *Accounting
        Changes* ,
        and
        SFAS No. 3, *Reporting
        Accounting Changes in Interim Financial Statements.* SFAS
        No. 154 alters the requirements for the accounting for and reporting of a
        change in accounting principle. Previously, most voluntary changes in accounting
        principles required recognition via a cumulative effect adjustment within
        net
        income of the period of the change. SFAS No. 154 requires retrospective
        application to prior periods' financial statements, unless it is impracticable
        to determine either the period-specific effects or the cumulative effect
        of the
        change. SFAS No. 154 is effective for accounting changes made in fiscal
        years beginning after December 15, 2005; however, SFAS No. 154 does
        not change the transition provisions of any existing accounting pronouncements.
        The Company does not believe the adoption of SFAS No. 154 will have a
        material effect on its consolidated financial position, results of operations,
        or cash flows, as it is not contemplating any voluntary accounting
        changes.





**Note
      3 - Business Combination**





On
      June
      2, 2004, pursuant to an Agreement and Plan of Merger (the "Merger Agreement"),
      J
      Net issued 9,095,716 shares of its common stock to acquire EIP. After issuance
      of the shares, the former EIP stockholders owned 51% of the issued and
      outstanding stock of the Company. The common shares issued
      consisted of 6,426,153 shares of initial stock consideration (the "Initial
      Shares") and 2,669,563 shares of escrow stock consideration (the "Escrow
      Consideration"). The Initial Shares were issued to reflect value of a
      sub-advisory contract assigned to EIP with AUM of $647 million on the date
      of
      the business combination. The Escrow Consideration was contingent on EIP
      increasing the AUM from $647 million to $779 million within 120 days from the
      date of the Merger Agreement. On June 18, 2004, AUM surpassed this threshold
      and
      the Escrow Consideration was deemed to have been earned.






F-10




Separately,
      the Merger Agreement called for additional shares to be issued to the former
      EIP
      stockholders in the future (the "Contingent Shares") if J Net were to incur
      obligations in excess of $2 million relating to taxes prior to the merger.
      As of
      June 30, 2006, there were no contingent shares issued, or contemplated to be
      issued.




The
        Company, EIP shareholders and certain trusts formed by them ("Family
        Affiliates"), an independent director, the Chairman of the Board of Directors
        and former Chief Executive Officer of the Company, entered into a Stockholders
        Agreement (the "Stockholders Agreement"). The Stockholders Agreement governs
        vesting, transfers and voting of the shares of the Company's common stock
        received by the EIP stockholders and Family Affiliates. Complete details
        of the
        Merger Agreement and other documents are incorporated by reference to the
        June
        3, 2004 Current Report on Form 8-K filed by the Company, as
        amended.





Vesting
      terms contained within the Stockholders Agreement apply to EIP stockholders
      who
      became employees ("Employee Owners"). Employee Owners were 12.5% immediately
      vested at the time the shares were issued. A total of 50% and 25% of the
      shares are vested as of June 30, 2006 and 2005, respectively, and the full
      100% will be vested in June 2007. If an Employee Owner is terminated within
      this
      three-year period, the unvested shares are subject to purchase by the Company
      at
      a price of $.01 per share. The voting provisions contained within the
      Stockholders Agreement call for:





(1)
      The
      Board of Directors to have seven members.





(2)
        Four
        of the directors to be designated by the Chief Executive
        Officer of the Company.





(3)
      Three
      directors of the prior J Net Board to continue their services as members of
      the
      Board.





(4)
      Amendment to the By-Laws of the Company to provide that decisions of the Board
      of Directors must
      be
      made by a two-third majority for (i) compensation of the Chief Executive
      Officer, (ii) issuance
      of additional shares to Employee Owners, and (iii) any amendments to the
      Stockholders Agreement.





The
      issuance of the restricted shares to the Employee Owners created non-cash
      compensation for a portion of the Initial Shares and Escrow Consideration
      issued. A total of 5,763,251 of the 9,095,716 shares issued for the EIP
      acquisition were compensatory shares issued to the Employee Owners.
      Additionally, 5,531,332 of the compensatory shares are subject to a three-year
      vesting period, which requires continued employment with the Company. In June
      2005 and 2006, a total of 790,190 and 1,580,381, respectively, of those shares
      vested pursuant to terms contained in the Merger Agreement. Assuming the
      Employee Owners remain employees of the Company, the remaining 3,160,761 shares
      will vest in June 2007.





A
      total
      of 1,623,428 of the 5,531,332 shares subject to the aforementioned vesting
      were
      attributable to an escrow provision as defined in the Merger Agreement. These
      shares were not deemed to be earned until June 18, 2004, the date on which
      AUM
      surpassed the targets established in the Merger Agreement. As a result, the
      value of these shares is based on a share price of $2.03, the closing price
      of
      the Company's common stock on June 18, 2004. The other 3,907,904 shares were
      valued on June 2, 2004 at $1.50 per share,
      the effective date of the business combination. Total share-based compensation
      expense, as it relates to the Employee Owners was $3.1 million, $3.1 million,
      and $0.5 million for the fiscal years ended June 30, 2006, 2005, and 2004,
      respectively. Assuming the remaining shares vest as contemplated, additional
      share-based compensation of $3.1 million will be expensed in the fiscal year
      ended June 30, 2007.






F-11


Due
      to
      the majority ownership of the issued and outstanding common stock and the
      majority board representation, the transaction for the J Net and EIP business
      combination was accounted for as a reverse merger. Therefore, EIP was treated
      as
      the acquiring company for financial reporting purposes. Because J Net was
      treated as the company being acquired, adjustments to the fair value of J Net's
      assets and liabilities were required.




A
        condensed balance sheet of J Net as of June 1, 2004, immediately prior to
        the acquisition,
        follows (*dollars in thousands*):


**Assets**Cash
                  and short-term investments
              
              $
              16,518Other
                  current assets
              
              
              454Total
                  current assets
              
              
              16,972Investments
                  in technology-related businesses
              
              
              2,000Property,
                  equipment and other non-current assets
              
              
              745Total
                  assets
              
              $
              19,717**Liabilities
                  and stockholders' equity**Current
                  liabilities
              
              $
              5,217Non-current
                  liabilities
              
              
              386Total
                  liabilities
              
              
              5,603Stockholders'
                  equity
              
              
              14,114Total
                  liabilities and stockholders' equity
              
              $
              19,717




F-12


A
        schedule of the purchase costs and fair value adjustments to the June 1,
        2004
        balance sheet of J Net were as follows *(dollars
        and shares in thousands):*




Fair
                  market value of J Net on June 2, 2004(8,539
                  shares at $1.50 per share)
              
              $
              12,808Cost
                  of acquisition
              
              
              917Total
                  purchase cost
              
              
              13,725Net
                  tangible assets as of June 1, 2004
              
              
              (14,114
              )Negative
                  goodwill
              
              
              (389
              )Fair
                  value adjustments:Liabilities
                  of InterWorld Corporationnet
                  of estimated disposal costs ofdiscontinued
                  operations
              
              
              (1,724
              )
              (a)Negative
                  goodwill to be pushed down tonon-current
                  assets
              
              $
              (2,113
              )Non-current
                  assets written down:Furniture,
                  fixtures, and equipment
              
              $
              61Deferred
                  non-current assets
              
              
              209Cost
                  method investments intechnology-related
                  businesses
              
              
              1,843Negative
                  goodwill to be pushed down tonon-current
                  assets
              
              $
              2,113




(a)
      InterWorld Corporation, a 95% owned, inactive subsidiary of J Net, filed for
      Chapter 7 Bankruptcy in May 2004. On September 14, 2004, a "no asset" report
      for
      InterWorld was filed on the Company's behalf. Due to the bankruptcy filing,
      the
      liabilities of InterWorld, which were ultimately fully discharged on August
      7, 2005 in the bankruptcy process, were eliminated.





*Pro
      forma information (unaudited)*


Set
      forth
      in the following table is certain unaudited pro forma financial information
      for
      the twelve months ended June 30, 2004. This information has been prepared
      assuming that J Net's reverse acquisition with EIP occurred on July 1, 2003.
      Due
      to EIP's limited operating history, the twelve-month Statement of Operations
      for
      June 2004 includes the separate historical statements of operations of J Net
      for
      the twelve months ended June 30, 2004 and the April 14, 2004 to June 30, 2004
      operations of EIP. Basic and diluted earnings per share calculations are based
      on issued and outstanding shares of 17,834,737 shares. The calculation of
      diluted earnings per share excluded 1,405,000 issued and outstanding options,
      as
      their effect was antidilutive. There were no dilutive options. Results for
      the
      fiscal year ended June 30, 2005 contain twelve months of actual results. Thus,
      they are not presented in any pro forma sections of this annual
      report.




F-13







Twelve
                  months ended June 30, 2004*(dollars
                  in thousands, except per share
                  data)*Revenues,
                  net
              
              $
              70Operating
                  expenses
              
              
              (2,115
              )Share-based
                  compensation
              
              
              (771
              )Loss
                  from operations
              
              
              (2,816
              )Other
                  income
              
              
              1,135Loss
                  from operations beforeincome
                  taxes
              
              
              (1,681
              )Income
                  tax benefit
              
              
              5,537Net
                  income
              
              $
              3,856Basic
                  and diluted earnings per share
              
              $
              0.22




**Note
      4 - 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 fiscal
      years ended June 30, 2006, 2005 and 2004, respectively. These receivables are
      advisory and sub-advisory service fees, and management believes they are fully
      collectible.





***Significant
      customers and contracts*** **:**


For
        the
        fiscal year ended June 30, 2006, two customers accounted for 42% of consolidated
        revenues. CI Investments Inc. (“CI”), a Canadian-owned investment
        management company, accounted for approximately 22%, while Genworth
        Financial Asset Management, Inc. (“Genworth”), an investment
        adviser, through its investments in the Epoch International Small Cap Fund
        (“EPIEX”) and the Epoch Global Equity Shareholder Yield Fund (“EPSYX”), publicly
        traded mutual funds, as well as separate account mandates, accounted for
        approximately 20%. For the quarter ended June 30, 2006, CI and Genworth
        accounted for 23% and 25% of consolidated revenues, respectively. The Company's
        services and relationships with these clients are important to the Company's
        ongoing growth strategy, and retention of these customers is significant
        to the
        ongoing results of operations and liquidity of the Company.




During
          FY
          2005, two customers accounted for 43% of consolidated revenues. CI accounted
          for
          approximately 36% of FY 2005 revenues while Genworth, through its investments
          in
          EPIEX, accounted for approximately 7%.


F-14




**Note
      5 - Property and Equipment**





As
        of
        June 30, 2006 and 2005, property and equipment consisted of the following
        *(dollars in thousands):*


**June
                  30,**
              
              **June
                  30,****2006**
              
              **2005**Leasehold
                  improvements
              
              $
              1,656
              
              $
              1,579Office
                  furniture
              
              
              683
              
              
              522Purchased
                  software
              
              
              228
              
              
              198Total
                  property and equipment
              
              
              2,567
              
              
              2,299Less:
                  accumulated depreciation and amortization
              
              
              552
              
              
              211Total
                  property and equipment, net
              
              $
              2,015
              
              $
              2,088




**Note
      6 - Accounts Payable and Accrued Liabilities**





Accounts
        payable and accrued liabilities consisted of the following *(dollars in
        thousands):*




**June
                  30, 2006**
              
              **June
                  30, 2005**Trade
                  accounts payable
              
              $
              1,123
              
              $
              980Accrued
                  professional fees
              
              
              86
              
              
              21Accrued
                  expenses and other
              
              
              214
              
              
              65Total
                  accounts payable and accrued liabilities
              
              $
              1,423
              
              $
              1,066





F-15




**Note
      7 - 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 1,130,000, 1,267,500 and 1,405,000 issued and outstanding stock
      options, at June 30, 2006, 2005 and 2004 respectively, as their effect was
      antidilutive.





The
        following table presents the computation of basic and diluted earnings (loss)
        per share for the years ended June 30 *(
        in
        thousands, except per share data):*


**2006**
              
              **2005**
              
              **2004**Loss
                  from continuing operations
              
              $
              (5,722
              )
              $
              (7,108
              )
              $
              (1,013
              )Income
                  from discontinued operations
              
              $
              -
              
              $
              571
              
              $
              21Shares:Weighted
                  average number of common sharesoutstanding
              
              
              18,724
              
              
              18,025
              
              
              6,718Basic
                  and diluted loss per share fromcontinuing
                  operations
              
              $
              (0.31
              )
              $
              (0.39
              )
              $
              (0.15
              )Basic
                  and diluting earnings per share fromdiscontinued
                  operations
              
              $
              -
              
              $
              0.03
              
              $
              -








**Note
      8 - Long-Term Incentive Compensation**





***2004
      Omnibus Long-Term Incentive Compensation Plan:***


At
        the
        annual meeting of shareholders on November 18, 2004, stockholders approved
        the
        2004 Omnibus Long-Term Incentive Compensation Plan (the "2004 Plan"). The
        2004
        Plan allows the Company to issue 3,000,000 shares of common stock subject
        to
        stock options, restricted stock awards or other share-based compensation.
        Restricted stock awards issued to employees under the 2004 Plan vest at the
        rate
        of 12.5% immediately and remaining amounts vest at the rate of 12.5%, 25%,
        and
        50% upon the completion of the first, second, and third years of
        service. During fiscal years ended June 30, 2006 and 2005, 838,905 and
        294,796 shares, respectively, of restricted stock were issued to employees
        of
        the Company under the Company's 2004 Plan at a weighted average price of
        $4.64
        and $4.41 per share, respectively. Subsequent to June 30, 2006, the Company
        granted 526,886 shares of restricted stock to employees at a weighted average
        price of $4.46 per share.


F-16


In
      addition, non-employee directors of the Company receive common stock equal
      to
      $50,000 per year for their services. No such awards were made in FY 2006. Two
      such awards were made to directors in FY 2005, one for FY 2005 services and
      one
      in advance of FY 2006 services. Total shares issued to directors for the two
      years of services were 128,316 at a weighted average price of $3.51 per share.
      These shares vest one-third per year over a three year period from the date
      of
      issuance. Subsequent to June 30, 2006, 66,228 shares were issued to directors
      in
      advance of FY 2007 services. These shares vest fully in one year. Prospectively,
      all directors share grants will vest fully over one year.


A
            summary
            of the status of the Company's nonvested shares under the 2004 Plan and
            Merger
            Agreement in Note 3, as of June 30, 2006, 2005, and 2004 respectively,
            as well
            as changes during the years ended June 30, 2006, and 2005 and the one
            month
            period ended June 30, 2004 is presented below *(shares in
            thousands):*
 **2006**
                  
                  **2005**
                  
                  **2004**Shares
                  
                  Weighted
                      Average Grant-Date Fair Value
                  
                  Shares
                  
                  Weighted
                      Average Grant-Date Fair Value
                  
                  Shares
                  
                  Weighted
                      Average Grant-Date Fair ValueNonvested
                      at beginningof
                      the period
                  
                  
                  5,127
                  
                  $
                  1.84
                  
                  
                  5,531
                  
                  $
                  1.66
                  
                  
                  -
                  
                  $
                  -Issued
                      to Employee Owners underMerger
                      Agreement
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  5,763
                  
                  
                  1.67Granted
                      under the 2004 Plan
                  
                  
                  839
                  
                  
                  4.64
                  
                  
                  423
                  
                  
                  4.14
                  
                  
                  -
                  
                  
                  -Shares
                      vested under:Merger
                      Agreement
                  
                  
                  (1,580
                  )
                  
                  1.66
                  
                  
                  (790
                  )
                  
                  1.66
                  
                  
                  (232
                  )
                  
                  2.032004
                      Plan
                  
                  
                  (183
                  )
                  
                  4.33
                  
                  
                  (37
                  )
                  
                  4.41
                  
                  
                  -
                  
                  
                  -Forfeited
                  
                  
                  (27
                  )
                  
                  4.49
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Nonvested
                      at end of the period
                  
                  
                  4,176
                  
                  $
                  2.35
                  
                  
                  5,127
                  
                  $
                  1.84
                  
                  
                  5,531
                  
                  $
                  1.66
  As
            of
            June 30, 2006, there was $6.6 million of total unrecognized compensation
            cost
            related to nonvested share-based compensation arrangements granted under
            the
            Plan.  That cost is expected to be recognized over a weighted-average
            period of 1.69 years.  The total fair value of shares vested during
            the years ended June 30, 2006, 2005, and 2004, was $4.7 million, $3.4
            million,
            and $0.8 million, respectively.


***Rights
      plan*** **:**


In
      June
      1994, the Board of Directors approved a Stockholder Rights Plan. On July 11,
      1994, J Net declared a dividend distribution of one Preferred Stock purchase
      right (the "Rights") payable on each outstanding share of the Company's common
      stock, as of July 15, 1994. The Rights became exercisable only in the event,
      with certain exceptions, an acquiring party accumulated 15% or more of the
      Company's voting stock, or if a party announced an offer to acquire 30% or
      more
      of the Company's voting stock. Each Right entitled the holder to purchase
      one-hundredth of a share of a Series A Junior Preferred Stock at a price of
      $30.
      In addition, upon the occurrence of certain events, holders of the Rights were
      entitled to purchase
      either Preferred Stock or shares in an "acquiring entity" at half of market
      value. The June 2, 2004 business combination with EIP did not create an event
      contemplated by the Rights Plan. The Rights expired, according to their terms,
      on July 15, 2004.





***Expired
      stock option plans*** **:**


On
      January 12, 1993, J Net's stockholders approved the 1992 Incentive and
      Non-qualified Stock Option Plan (the "1992 Plan"). On August 17, 1994, the
      Board
      adopted certain amendments (the "Amendments") to the 1992 Plan which were
      approved by J Net's stockholders on January 10, 1995. The Amendments increased
      the number of shares of J Net's common stock authorized for issuance pursuant
      to
      the 1992 Plan from 1,045,000 to 2,545,000. The 1992 Plan terminated in
      accordance with its terms on September 30, 2002. Options outstanding at the
      termination date totaled 877,500 and will remain outstanding until they are
      exercised or expire. As of June 30, 2006 and 2005, options outstanding under
      the
      1992 Plan were 520,000 and 657,500, respectively.





Although
      the 1992 Plan has expired, the issued and outstanding options remain in force
      until they are exercised, canceled or expire. Options outstanding under the
      1992
      stock option plan are summarized as follows*(shares in
      thousands)*:





F-17


**Fiscal
                    Year Ended**
                
                **Fiscal
                    Year Ended**
                
                **Fiscal
                    Year Ended****June
                    30, 2006**
                
                **June
                    30, 2005**
                
                **June
                    30, 2004**Weighted
                
                
                
                Weighted
                
                
                
                WeightedAverage
                
                
                
                Average
                
                
                
                AverageExercise
                
                
                
                Exercise
                
                
                
                ExerciseShares
                
                Price
                
                Shares
                
                Price
                
                Shares
                
                PriceFixed
                    options:Outstanding
                    atbeginning
                    of period
                
                
                658
                
                $
                8.91
                
                
                795
                
                $
                9.05
                
                
                878
                
                $
                9.02Granted
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Exercised
                
                
                (110
                )
                
                4.00
                
                
                -
                
                
                -
                
                
                -
                
                
                -Cancelled
                
                
                (28
                )
                
                4.00
                
                
                (137
                )
                
                9.73
                
                
                (83
                )
                
                8.75Outstanding
                    at end ofyear
                
                
                520
                
                $
                10.20
                
                
                658
                
                $
                8.91
                
                
                795
                
                $
                9.05Options
                    exercisable atend
                    of year
                
                
                520
                
                $
                10.20
                
                
                658
                
                $
                8.91
                
                
                795
                
                $
                9.05







The
        following table summarizes information about the 1992 Plan stock options
        outstanding at June 30, 2006 *(shares in thousands):*


Options
                  Outstanding
              
              Options
                  ExercisableWeighted
              
              
              
              WeightedRange
                  of
              
              
              
              Remaining
              
              Average
              
              
              
              AverageExercise
              
              Number
              
              Contractual
              
              Exercise
              
              Number
              
              ExercisePrices
              
              Outstanding
              
              Life
              
              Price
              
              Exercisable
              
              Price$               
                  9.50
              
              
              10
              
              
              4.25
                  years
              
              $
              9.50
              
              
              10
              
              $
              9.50$10.13
                  - $10.25
              
              
              490
              
              
              3.64
                  years
              
              $
              10.14
              
              
              490
              
              $
              10.14$
                  12.00- $12.44
              
              
              20
              
              
              4.00
                  years
              
              $
              12.22
              
              
              20
              
              $
              12.22
  ***Other
      nonqualified stock options*** **:**


On
      September 14, 1999, nonqualified stock options to purchase an aggregate of
      140,000 shares of common stock were granted to the J Net Board of Directors
      and
      a non-employee then serving as the Secretary at an exercise price of $9.00
      per
      share, the fair market value on the date of grant.
      The options vested 50% on each of the first and second anniversaries of the
      date
      of grant and expire ten years from the date of grant. On October 31, 2001,
      30,000 options were cancelled as a result of a director's
      resignation.





F-18


On
      June
      21, 2000, nonqualified stock options to purchase an aggregate of 500,000 shares
      of common stock were granted to the former President and Chief Operating Officer
      and the former Executive Vice President and Chief Financial Officer at an
      exercise price of $13.13 per share, the fair market value on the date of the
      grant. The options vested in thirds on each of the first, second and third
      anniversaries of the date of grant and expire ten years from the date of the
      grant. As of June 30, 2003, all the options were exercisable. On June 21, 2003,
      the former President and Chief Operating Officer and the former Executive Vice
      President and Chief Financial Officer's employment contracts expired and were
      not renewed.
      The expiration of those contracts did not affect the expiration of the options,
      which will occur on June 21, 2010.





There
      were no nonqualified options granted during the fiscal years ended June 30,
      2006, 2005 and 2004, respectively.





Changes
      in nonqualified options outstanding are summarized below ( *shares
      in thousands* ):


**Fiscal
                  Year Ended**
              
              **Fiscal
                  Year Ended**
              
              **Fiscal
                  Year Ended****June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **June
                  30, 2004**Weighted
              
              
              
              Weighted
              
              
              
              WeightedAverage
              
              
              
              Average
              
              
              
              AverageExercise
              
              
              
              Exercise
              
              
              
              ExerciseShares
              
              Price
              
              Shares
              
              Price
              
              Shares
              
              PriceFixed
                  options:Outstanding
                  atbeginning
                  ofperiod
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38Granted
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Cancelled
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Outstanding
                  atend
                  of year
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38Options
                  exercisableat
                  end of year
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38
              
              
              610
              
              $
              12.38







F-19





The
      following table summarizes information about the nonqualified stock options
      outstanding at June 30, 2006 ( *shares
      in thousands* ):


Options
                    Outstanding
                
                Options
                    ExercisableWeighted
                
                
                
                WeightedRange
                    of
                
                
                
                Remaining
                
                Average
                
                
                
                AverageExercise
                
                Number
                
                Contractual
                
                Exercise
                
                Number
                
                ExercisePrices
                
                Outstanding
                
                Life
                
                Price
                
                Exercisable
                
                Price$
                9.00
                
                
                110
                
                
                3.21
                    years
                
                $
                9.00
                
                
                110
                
                $
                9.00$
                13.13
                
                
                500
                
                
                3.98
                    years
                
                $
                13.13
                
                
                500
                
                $
                13.13







**Note
      9 - Defined Contribution Plan**





The
      Company sponsors a defined contribution plan (the “Plan”) for all its employees.
      The Plan qualifies as a deferred salary arrangement under Section 401(k) of
      the
      Internal Revenue Code. Under the Plan, participating employees may defer up
      to
      60% of their pre-tax gross wages, subject to annual Internal Revenue Code
      contribution limits. Employees vest immediately in their contributions. The
      Plan
      allows ** the
      Company to make discretionary contributions. The Company has not contributed
      separately to the plan or matched employee contributions for any of the fiscal
      years presented. The Company intends to contribute to the Plan
      prospectively.





During
        the fiscal year ended June 30, 2005, the Company eliminated a 401(k)
        contribution plan that was in place prior to the business combination explained
        in Note 3. All participants in that former plan have been transitioned to
        the
        surviving plan.





**Note
      10 - Related Party Transactions**





Epoch
      incurred rent and other related occupancy expenses with a company whose Chief
      Executive Officer is also a director and stockholder of Epoch. Rental and other
      related occupancy expenses incurred with this company totaled approximately
      $187
      thousand for the period beginning July 1, 2004 through February 15, 2005. 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 the above company since such date.





On
      May
      24, 2004, Epoch’s Chief Executive Officer loaned $100 thousand to EIP in the
      form of a promissory note. Terms of the promissory note called for interest
      of
      4%, compounded quarterly. On June 16, 2004, the promissory note, together with
      accrued interest, was paid in full.





F-20


**Note
      11 - Income Taxes**





The
      Company files a consolidated U.S. federal income tax return reflecting the
      income (loss) of Epoch Holding Corporation and its subsidiaries. The components
      of the provision for (benefit from) income tax are as follows ( *dollars
      in thousands* ):


**For
                  the Fiscal**
              
              **For
                  the Fiscal**
              
              **For
                  the Period****Year
                  Ended**
              
              **Year
                  Ended**
              
              **of
                  April 14, 2004****June
                  30, 2006**
              
              **June
                  30, 2005**
              
              **to
                  June 30, 2004**Current
                  income tax (benefit) expense:U.S.
                  federal
              
              $
              (1,166
              )
              $
              (292
              )
              $
              (173
              )State
                  and local
              
              
              (353
              )
              
              (88
              )
              
              (52
              )Cash
                  settlement resulting from IRS audit
              
              
              (227
              )
              
              -
              
              
              -Adjustments
                  resulting from IRS audit
              
              
              -
              
              
              6,998
              
              
              -Total
                  current income tax (benefit) expense
              
              
              (1,746
              )
              
              6,618
              
              
              (225
              )Deferred
                  income tax expense (benefit):U.S.
                  federal
              
              
              1,166
              
              
              292
              
              
              173State
                  and local
              
              
              353
              
              
              88
              
              
              52Benefit
                  of NOLs offsetting IRS auditadjustment
              
              
              -
              
              
              (4,438
              )
              
              -Benefit
                  of capital losses offseting IRSaudit
                  adjustment
              
              
              -
              
              
              (2,560
              )
              
              -Total
                  deferred income tax expense (benefit)
              
              
              1,519
              
              
              (6,618
              )
              
              225Total
                  income tax provision (benefit)
              
              $
              (227
              )
              $
              -
              
              $
              -




The
          Company recently underwent an audit by 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. No refund or assessable
            interest amounts had been accrued at June 30, 2005 because the Company
            had not
            received a final accounting from 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. This amount has been included in “benefit from income
            taxes” on the Statement of Operations.


F-21


(dollars in
                thousands)





**For
                the Fiscal**
            
            **For
                the Fiscal****Year
                Ended**
            
            **Year
                Ended****June
                30, 2006**
            
            **June
                30, 2005**Deferred
                tax assets:Net
                operating losses
            
            $
            7,192
            
            $
            5,204Equity
                method losses and impairments
            
            
            2,276
            
            
            11,132Accrued
                bonuses
            
            
            910
            
            
            485Share-based
                compensation
            
            
            495
            
            
            94Leasehold
                improvement impairments
            
            
            276
            
            
            414Accruals
                and other
            
            
            101
            
            
            14Depreciation
                and amortization
            
            
            51
            
            
            24Deferred
                rent
            
            
            -
            
            
            434Total
                deferred tax assets
            
            
            11,301
            
            
            17,801Total
                deferred tax liability
            
            
            -
            
            
            -Deferred
                tax assets, net of deferred tax liability
            
            
            11,301
            
            
            17,801Less:
                valuation allowance
            
            
            (11,301
            )
            
            (17,801
            )Net
                deferred tax assets
            
            $
            -
            
            $
            -





The
        Company's net operating losses (“NOLs”) can be carried forward pursuant to
        Federal tax regulations. The Company has $16.2 million of NOLs which expire
        between 2022 and 2026.





The
        Company completed a reverse merger business combination with EIP on June
        2,
        2004. As a result, the ability to utilize certain NOLs 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"). IRC Section 382 limits
        the
        annual utilization of NOLs accumulated prior to the ownership change to a
        percentage of the acquired entity's fair value at the time of the change
        in
        ownership. Approximately $13.1 million of such NOLs can be utilized against
        taxable income only at a rate of approximately $600 thousand per year due
        to
        limitations imposed by Section 382 of the IRC.





The
      Company's ability to utilize accumulated NOLs to their full extent prior to
      their expiration cannot be reasonably assured. Until profitability can be
      achieved, and utilization of NOLs can be more definitive, the Company has
      provided a full valuation allowance on its accumulated NOLs and temporary
      differences.





F-22


As
          referred to in Note 3, InterWorld Corporation, an inactive subsidiary,
          completed
          bankruptcy proceedings in August of 2005. This investment had been written
          down
          to zero in prior years for financial reporting purposes. For tax
          purposes, this built-in loss is recognized at the time of bankruptcy completion
          in FY 2006. A significant portion of the built-in loss resulting from this
          bankruptcy is disallowed under section 382 of the IRC.
  A
          reconciliation of the U.S federal statutory income tax rate to the effective
          income tax rate based on loss from continuing operations before income
          tax, for
          fiscal years ended June 30, 2006, 2005, and 2004, respectively,
          follows:
 **For
                      the Fiscal**
                  
                  **For
                      the Fiscal**
                  
                  **For
                      the Period****Year
                      Ended**
                  
                  **Year
                      Ended**
                  
                  **of
                      April 14, 2004****June
                      30, 2006**
                  
                  **June
                      30, 2005**
                  
                  **to
                      June 30, 2004**U.S.
                      federal statutory income tax rate
                  
                  
                  (34
                  %)
                  
                  (34
                  %)
                  
                  (34
                  %)(Decrease)
                      increase in tax resultingfrom:State
                      and local taxes, net of federal benefit
                  
                  
                  (10.3
                  %)
                  
                  (10.3
                  %)
                  
                  (10.3
                  %)Valuation
                      allowance
                  
                  
                  (109.2
                  %)
                  
                  (126.3
                  %)
                  
                  21.4
                  %Share-based
                      compensation
                  
                  
                  22.7
                  %
                  
                  20.7
                  %
                  
                  21.1
                  %IRS
                      audit adjustments
                  
                  
                  (3.8
                  %)
                  
                  145.3
                  %
                  
                  0.0
                  %Built-in
                      losses disallowed (in excess of Section 382 limits)
                  
                  
                  130.70
                  %
                  
                  0.0
                  %
                  
                  0.0
                  %Other
                  
                  
                  0.1
                  %
                  
                  4.6
                  %
                  
                  1.8
                  %Effective
                      income tax rate
                  
                  
                  (3.8
                  %)
                  
                  0.0
                  %
                  
                  0.0
                  %
  **Note
        12 - Commitments 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 commitments under the various agreements
        totaled approximately $1.2 million at June 30, 2006 and are accrued over
        the
        applicable service period. Of this amount, approximately $0.1 million represents
        restricted stock awards to be issued during the fiscal year ending June 30,
        2007.


F-23




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 and must be reviewed and approved
      by
      the Company's Compensation Committee.





***Legal
      matters*** **:**


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.





***Leases*** **:**


The
      Company's headquarters and primary business operations are located in New York,
      New York. The Company leases approximately 10,000 square feet of office space
      under a long-term lease that expires in September 2015. In addition, EIP
      maintains a small office in Sherman Oaks, CA on an annual lease. Certain
      administrative support and corporate affairs were conducted in an office in
      Dallas, Texas on a six-month lease which expired in March 2006. The Company
      did
      not renew this lease. All accounting, administrative support and corporate
      affairs which were being conducted in this location were brought to our
      corporate headquarters in New York in March 2006.





The
      Company is also the primary party to a lease in New York, New York with
      approximately 8,500 square feet, which expires in December 2010. In January
      2002, a sublease agreement was executed with an unrelated third party. While
      the
      Company remains responsible under terms of the original lease, the subtenant
      has
      assumed those responsibilities and is performing its obligations under the
      sublease agreement. Proceeds from the sublease, net of profit sharing with
      the
      landlord, more than offset the Company's obligations under this
      lease.





Total
      rent expenses for the Company's continuing operations were $1.1 million, $975
      thousand and $50 thousand for the fiscal years ended June 30, 2006, 2005 and
      2004, respectively. Rent receipts under the sublease, net of profit sharing
      expenses with the primary landlord were $570 thousand, $560 thousand and $45
      thousand for the fiscal years ended June 30, 2006, 2005, and 2004, respectively.
      Rental expenses for the discontinued operations in FY 2005 were $26
      thousand.





The
      following table outlines the office and equipment lease obligations of the
      Company and related sub-rental receipts ( *dollars
      in thousands* ):







F-24


Fiscal
                  Years Ended June 30,Sublease
              
              NetYear
              
              Gross
              
              Receipts
              
              Expense2007
              
              $
              1,209
              
              $
              (560
              )
              $
              6492008
              
              
              1,163
              
              
              (574
              )
              
              5892009
              
              
              1,161
              
              
              (574
              )
              
              5872010
              
              
              1,157
              
              
              (574
              )
              
              5832011
              
              
              864
              
              
              (191
              )
              
              6732012
                  and thereafter
              
              
              3,047
              
              
              -
              
              
              3,047Total
                  minimum lease payments(receipts)
              
              $
              8,601
              
              $
              (2,473
              )
              $
              6,128





***Investment
      management contracts:***


Most
      of
      the Company’s revenues are derived pursuant to written investment management and
      advisory agreements. These agreements may be terminated by either party with
      notice or terminated in the event of an “assignment” (as defined in the
      Investment Company Act of 1940 as amended (the “1940 Act”)). Generally, any
      change in control of the Company would constitute an “assignment” under the 1940
      Act. Additionally,
      mutual fund agreements generally must be approved and renewed annually.








F-25





**Note
      13 - Supplemental Disclosure of Cash Flow Information**





Supplemental
        disclosures of cash flow information for the fiscal years ended June 30,
        2006,
        2005, and 2004, respectively, are as follows *(dollars
        in thousands):*





June
                  30,2006
              
              2005
              
              2004Cash
                  paid for:Interest
                  paid
              
              $
              1
              
              $
              110
              
              $
              -Federal
                  income taxes
              
              $
              -
              
              $
              1,373
              
              $
              -Cash
                  received for:Federal
                  income tax refund
              
              $
              227
              
              $
              -
              
              $
              -Non-cash
                  investing and financing activities:Issuance
                  of common stock to Epoch InvestmentPartners,
                  Inc. stockholders for non-cashassets
              
              $
              -
              
              $
              -
              
              $
              1,517Accrued
                  acquisition, formation anddiscontinued
                  operations costs
              
              $
              -
              
              $
              -
              
              $
              539





F-26




**Note
      14 - Discontinued Operations**




*Selected
      financial data - discontinued operations*


Following
        are the summary operating results of the discontinued operations for FY 2005
        and
        FY 2004, which represent the fiscal 2005 period of July 1, 2004 through the
        date
        of sale, September 9, 2004, and the fiscal 2004 period of June 2, 2004 through
        June 30, 2004 as a result of the reverse merger
        transaction with Epoch *(dollars
        in thousands):*


**FY
                    2005**
                
                **FY
                    2004****(July
                    1, 2004 -**
                
                **(June
                    2, 2004 -****September
                    9, 2004)**
                
                **June
                    30, 2004)**Revenues
                
                $
                293
                
                $
                198Costs
                    and expenses
                
                
                (294
                )
                
                (177
                )Income
                    (loss) from discontinuedoperations
                    before income taxes
                
                
                (1
                )
                
                21Provision
                    for income taxes
                
                
                -
                (a)
                
                -
                (a)Loss
                  from discontinued operations, net income taxes
                
                
                (1
                )
                
                21Gain
                    on sale of discontinuedoperations
                
                
                572
                
                
                -Income
                    from discontinued operations, net of income taxes
                
                $
                571
                
                $
                21




(a)
      There
      are no income taxes due to utilization of available net operating loss
      carryforwards.








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 5 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 fourth quarter gain of $334 thousand. Such gain is included
      in “Gain from collection of notes and other settlements” in the “Other Income”
section in the Statement of Operations.








F-27




**Note
      15 - Subsequent Event**





During
        FY
        2000, J Net, the predecessor company to Epoch, made a $4 million investment
        in
        eStara, Inc. ("eStara"), a technology-related company which provides
        conversion and tracking solutions to enhance on-line sales. This investment
        comprised 373,376 shares of Series C-1 and 553,893 shares of Series C-2,
        respectively, 8% cumulative convertible redeemable preferred stock. As there
        was
        no readily available market and the investment represented less than a 20%
        interest in eStara, the securities were valued at the Company’s initial cost.
        During FY 2001 and FY 2002, the carrying value of this investment was deemed
        to
        be impaired by J Net’s management and written down. During FY 2003, J Net’s
        management concluded its ability to recover its investment was remote and
        wrote
        off the remaining carrying value. Accordingly, this investment had no carrying
        value at June 30, 2006. Additionally, no dividends had been paid through
        June
        30, 2006.





On
      September 19, 2006, eStara and Art Technology Group, Inc. (NASDAQ ticker symbol
      “ARTG”) announced the signing of a definitive agreement for ARTG to acquire
      eStara in a stock and cash merger transaction. The closing of the transaction
      is
      subject to customary closing conditions, including the approval of eStara’s
      stockholders, and is expected to occur during the second quarter of Epoch’s FY
      2007.





Under
      the
      terms of the agreement, ARTG will acquire all of the outstanding common stock,
      preferred stock, and vested and unvested stock options of eStara for
      approximately 15.3 million shares of ARTG common stock, $2.0 million in cash,
      and up to an additional $6.0 million in earn-out potential.





As
        a
        result of the above-mentioned merger, the Company, as holder of the preferred
        stock of eStara, will be entitled to an amount per share equal to the original
        issue price, plus the amount of any unpaid cumulative dividends, along with
        its
        approximately 5% proportionate share of remaining merger consideration.
        Accordingly, the Company will receive approximately 2,458,000 common shares
        of
        ARTG as well as $321 thousand in cash. Additional lesser amounts, up to $150
        thousand, may also be realized subsequently, pursuant to the earn-out provisions
        of the merger. These shares are subject to a lock up period. None of these
        shares can be sold during the first three months after the closing of the
        transaction. After this period, up to 1/12 of the shares are available for
        sale
        each month for the subsequent twelve months.





The
        above
        merger transaction, if approved by eStara’s stockholders, will have
        a material impact on the Company's financial position, shareholders'
        equity, and results of operations during FY 2007.







F-28





**Note
      16 - Quarterly Financial Data (unaudited)**





The
      table
      which follows presents selected quarterly financial data for fiscal years ended
      June 30, 2006 and 2005, respectively. The data presented should be read in
      conjunction with the consolidated financial statements and “Management’s
      Discussion and Analysis of Financial Results of Operations” included
      herein.





**June
                    30, 2006****First**
                
                **Second**
                
                **Third**
                
                **Fourth****Quarter**
                
                **Quarter**
                
                **Quarter**
                
                **Quarter**
                
                **Total*****(in
                    thousands, except per share and AUM data)***Revenues
                
                $
                1,780
                
                $
                2,295
                
                $
                2,865
                
                $
                3,291
                
                $
                10,231Operating
                    expenses
                
                
                3,756
                
                
                4,309
                
                
                4,406
                
                
                4,815
                
                
                17,286Loss
                    from continuing operations before taxes
                
                
                (1,712
                )
                
                (1,747
                )
                
                (1,292
                )
                
                (1,198
                )
                
                (5,949
                )Income
                    from discontinued operations
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Net
                    loss
                
                
                (1,712
                )
                
                (1,747
                )
                
                (1,062
                )
                
                (1,201
                )
                
                (5,722
                )Basic
                    and diluted earnings (loss) per share:From
                    continuing operations
                
                $
                (0.09
                )
                $
                (0.09
                )
                $
                (0.06
                )
                $
                (0.07
                )
                $
                (0.31
                )From
                    discontiuned operations
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                -Weighted-average
                    shares outstanding:Basic
                    and diluted
                
                
                18,349
                
                
                18,730
                
                
                18,825
                
                
                18,999
                
                
                18,724Assets
                    under management
                
                
                1,770
                
                
                2,230
                
                
                2,510
                
                
                3,253
                
                
                3,253(in
                    millions)**June
                    30, 2005****First**
                
                
                **Second**
                
                
                **Third**
                
                
                **Fourth****Quarter**
                
                
                **Quarter**
                
                
                **Quarter**
                
                
                **Quarter**
                
                
                **Total**Revenues
                
                $
                787
                
                $
                1,065
                
                $
                1,090
                
                $
                1,365
                
                $
                4,307Operating
                    expenses
                
                
                3,053
                
                
                2,702
                
                
                3,262
                
                
                3,565
                
                
                12,582Loss
                    from continuing operations before taxes
                
                
                (2,071
                )
                
                (1,442
                )
                
                (1,970
                )
                
                (1,625
                )
                
                (7,108
                )Income
                    from discontinued operations
                
                
                571
                
                
                -
                
                
                -
                
                
                -
                
                
                571Net
                    loss
                
                
                (1,500
                )
                
                (1,442
                )
                
                (1,970
                )
                
                (1,625
                )
                
                (6,537
                )Basic
                    and diluted earnings (loss) per share:From
                    continuing operations
                
                $
                (0.12
                )
                $
                (0.08
                )
                $
                (0.11
                )
                $
                (0.08
                )
                $
                (0.39
                )From
                    discontiuned operations
                
                $
                0.03
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                0.03Weighted-average
                    shares outstanding:Basic
                    and diluted
                
                
                17,835
                
                
                17,895
                
                
                18,175
                
                
                18,195
                
                
                18,025Assets
                    under management
                
                
                908
                
                
                1,009
                
                
                1,245
                
                
                1,402
                
                
                1,402(in
                    millions)






F-29