U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              ____________________

                                   FORM 10-K/A

   FOR ANNUAL AND TRANSITIONAL REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: DECEMBER 31, 2003

                                       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: 1-31292

                              ____________________


                        EMPIRE FINANCIAL HOLDING COMPANY
                        --------------------------------
             (Exact name of registrant as specified in its charter)

                              ____________________


                   FLORIDA                             56-3627212
                   -------                             ----------
         (State or Other Jurisdiction                 (IRS Employer
              of Incorporation)                  Identification Number)


           2170 WEST STATE ROAD 434, SUITE 100
                    LONGWOOD, FLORIDA                     32779
                    -----------------                     -----
         (Address of principal executive offices)      (Zip Code)


       Registrant's telephone number, including area code: (407) 774-1300


          Securities Registered Pursuant to Section 12(b) of the Act:

       TITLE OF EACH CLASS         NAME OF EACH EXCHANGE ON WHICH REGISTERED
       -------------------         -----------------------------------------
   Common Stock, $.01 Par Value             American Stock Exchange


        Securities Registered Pursuant to Section 12(g) of the Act: None
<PAGE>

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]  No [ ]

Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-K contained in this form, and no disclosure
will 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. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ]  No [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 2004 computed by reference to the average bid and
asked prices of registrant's common stock reported on the American Stock
Exchange on such date was $1,506,890.

The number of shares outstanding of registrant's Common Stock, $.01 par value
per share, as of March 15, 2004 was 3,194,450.


                                EXPLANATORY NOTE

         This Amendment No. 1 to the Annual Report on Form 10-K/A ("Amendment
No. 1") of Empire Financial Holding Company for the year ended December 31,
2003, is being filed to amend and restate the items described below contained in
our Annual Report on Form 10-K originally filed with the Securities and
Exchange Commission on April 14, 2004.

         This Amendment No. 1 makes the following changes for the purposes
described:

         o  To amend Item 6. Selected Financial Data, to correct typographical
            errors and make other minor changes;

         o  To amend Item 7. Management's Discussion and Analysis of Financial
            Conditions and Results of Operations, to correct typographical
            errors and make other minor changes; and

         o  To amend Item 8. Financial Statements and Supplementary Data, to
            correct typographical errors, to make other minor changes and to
            more clearly describe certain transactions.

         In order to preserve the nature and character of the disclosures set
forth in such Items as originally filed, this Amendment No. 1 continues to speak
as of the date of the original filing of the Annual Report on Form 10-K on April
14, 2004 and we have not updated the disclosures in this report to speak as of a
later date. All information contained in this Amendment No. 1 is subject to
updating and supplementing as provided in our reports and any amendments filed
with the Securities and Exchange Commission for periods subsequent to the date
of the original filing of our Annual Report on Form 10-K.

<PAGE>
                                TABLE OF CONTENTS

                                                                            PAGE



PART I.........................................................................1

    Item 1.   Business.........................................................1

    Item 2.   Properties......................................................12

    Item 3.   Legal Proceedings...............................................12

    Item 4.   Submission Of Matters To A Vote Of Security Holders.............13


PART II.......................................................................13

    Item 5.   Market For Common Equity And Related Stockholder Matters........13

    Item 6.   Selected Financial Data.........................................15

    Item 7.   Management's Discussion And Analysis............................17

    Item 7A.  Quantitative and Qualitative Disclosures About Market Risk......30

    Item 8.   Financial Statements And Supplementary Data.....................31

    Item 9.   Changes In And Disagreements With Accountants On Accounting
               And Financial Disclosure.......................................31

    Item 9A.  Controls and Procedures.........................................31

PART III......................................................................31


PART IV.......................................................................32

    Item 15.  Exhibits And Reports On Form 8-K................................32


                                      (i)
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected consolidated financial data is qualified by
reference to, and should be read in conjunction with our consolidated financial
statements and the notes to those statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this report. Prior to our IPO in April 2002, we were taxed as an S
Corporation, and, accordingly, our taxable income was taxed directly to our
shareholders. Unaudited pro forma information assumes that we were subject to
federal income taxes and taxed as a C corporation at the statutory rates for the
periods presented.

<TABLE>
<CAPTION>
                                              2003            2002            2001            2000            1999
                                          ------------    ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>             <C>
STATEMENT OF INCOME DATA:
    Revenues:
      Commissions and fees ............   $ 16,140,329    $ 13,001,503    $ 10,138,894    $ 10,939,186    $  5,766,888
      Trading revenues, net ...........      1,064,478               -               -               -               -
      Interest ........................        180,371         164,817          53,070       1,024,300         149,949
      Other ...........................         14,863          38,798         200,954         602,588          52,955
                                          ------------    ------------    ------------    ------------    ------------
                                            17,400,041      13,205,118      10,392,918      12,566,074       5,969,792
                                          ------------    ------------    ------------    ------------    ------------

    Expenses:
      Commission and clearing costs ...     12,980,821       5,669,838       3,045,674       2,806,725         555,345
      Employees compensation
         and benefits .................      3,054,236       5,460,371       4,856,339       6,374,193       3,407,381
      General and administrative ......      2,759,250       2,269,729       1,474,400       1,691,613         380,472
      Communications and data
         processing ...................        175,298         247,524         188,810         258,120         299,020
      Orderflow payments ..............        119,313               -          (8,073)       (101,139)       (215,285)
      Advertising .....................         87,420          51,012         292,786         441,344         601,104
      Interest ........................         64,639             894          (2,108)       (108,474)        137,497
      Impairment loss .................         30,412       1,001,474               -
                                          ------------    ------------    ------------    ------------    ------------
                                            19,271,389      14,700,842       9,847,828      11,362,382       5,165,534
                                          ------------    ------------    ------------    ------------    ------------
    Income (loss) from
      continuing operations ...........     (1,871,348)     (1,495,724)        545,090       1,203,692         804,258
                                          ------------    ------------    ------------    ------------    ------------

    Income (loss) from
      discontinued operations .........     (1,212,661)       (981,344)        990,191       1,393,885       2,654,068
                                          ------------    ------------    ------------    ------------    ------------

    Net income (loss) .................     (3,084,009)     (2,477,068)      1,535,281       2,597,577       3,458,326
                                          ============    ============    ============    ============    ============

    Earnings per share -
     basic and diluted
      Continuing operations ...........   $      (0.41)   $      (0.33)   $       0.14    $       0.30    $       0.20
                                          ============    ============    ============    ============    ============

      Discontinued operations .........   $      (0.26)   $      (0.21)   $       0.24    $       0.35    $       0.66
                                          ============    ============    ============    ============    ============

      Net income (loss) per share .....   $      (0.67)   $      (0.54)   $       0.38    $       0.65    $       0.86
                                          ============    ============    ============    ============    ============
</TABLE>

                                       1
<PAGE>
<TABLE>
<CAPTION>
                                              2003            2002            2001            2000            1999
                                          ------------    ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>             <C>
    UNAUDITED PRO FORMA FINANCIAL
      INFORMATION :
         Total pro forma provision
           for income taxes ...........                                   $   (577,700)   $   (977,500)   $ (1,300,000)
                                                                          ============    ============    ============
      Pro forma income net of provision
       for income tax:
         Continuing operations ........                                        340,090         750,692         502,258
         Discontinued operations ......                                        617,491         869,385       1,656,068
                                                                          ------------    ------------    ------------
      Net income ......................                                   $    957,581    $  1,620,077    $  2,158,326
                                                                          ============    ============    ============

      Pro forma earnings (loss)
         per share - basic and diluted
           Continuing operations ......                                   $       0.09    $       0.19    $       0.13
                                                                          ============    ============    ============

           Discontinued operations ....                                   $       0.15    $       0.22    $       0.41
                                                                          ============    ============    ============

           Net income per share .......                                   $       0.24    $       0.41    $       0.54
                                                                          ============    ============    ============

      Weighted average shares
         outstanding - basic and
         diluted ......................      4,587,920       4,587,494       4,000,000       4,000,000       4,000,000
                                          ============    ============    ============    ============    ============

BALANCE SHEET DATA (AT PERIOD END):
    Total assets ......................   $  1,765,721    $ 13,494,633    $ 17,575,416    $ 18,551,857    $ 22,166,240
    Total liabilities .................      2,566,904       9,608,500      14,605,340      15,174,912      19,016,198
    Shareholder's equity (deficit) ....       (801,183)      3,886,133       2,970,076       3,376,945       3,150,042
</TABLE>

                                       2
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS

INTRODUCTION

         We were incorporated in Florida during February 2000. Our business is
conducted entirely through our wholly owned subsidiaries, Empire Financial
Group, Inc., and Empire Investment Advisors, Inc. Accordingly, the following
discussion and analysis of our financial condition and results of operations is
based on the combined results of these businesses.

         In November 2003, we sold all of the outstanding capital stock of
Advantage Trading Group, Inc. and we therefore no longer own Advantage.
Accordingly, the following discussion and analysis of our financial condition
and results of operations does not include Advantage. See Note 4 of our
Consolidated Financial Statements appearing elsewhere in this report.

         Empire Financial Group, Inc. is our financial brokerage services
subsidiary providing brokerage services directly to discount and full service
retail and institutional customers. We provide independent registered
representatives and advisors and back office compliance and administrative
services. Our retail customers can place their securities orders online through
our secure website located at www.empirenow.com, over the telephone at
1-800-569-3337 or through their designated registered representative. We provide
our retail customers access to useful financial products and services through
our website and by telephone. Our customers may, upon request, also receive
advice from our brokers regarding stock, bonds, mutual funds and insurance
products. We also provide securities execution and market making services,
providing execution services involving filling orders to purchase or sell
securities received from unaffiliated broker dealers on behalf of their retail
customers. We typically act as principal in these transactions and derive our
net trading revenues from the difference between the price paid when a security
is bought and the price received when that security is sold. We typically do not
receive a fee or commission for providing order execution services.

         Additionally through Empire Investment Advisors, Inc., we offer
fee-based investment advisory services to our customers, independent registered
investment advisors and unaffiliated broker dealers. These services are
web-based and are delivered through a platform that combines a variety of
independent third party providers. Services include access to separate account
money managers, managed mutual fund portfolios, asset allocation tools, separate
account manager and mutual fund research, due diligence and quarterly
performance review. We charge our customers an all-inclusive fee for these
services, which is based on assets under management. As of December 31, 2003 the
annual fee was equal to approximately 85 basis points times the assets under
management.

         As a result of our sale of Advantage, approximately $10,700,000 of our
consolidated assets and approximately $7,700,000 of our consolidated liabilities
as of December 31, 2002 have been eliminated from our balance sheet as of
December 31, 2003. In addition, our consolidated statement of operations for the
year ended December 31, 2003 reflects a loss from the discontinued operations of
Advantage in the amount of $1,212,661. As a result of the effects of the
disposition of Advantage, the losses incurred by Advantage prior to its
disposition and our loss from continuing operations during the year ended
December 31, 2003 in the amount of $1,871,348, our net stockholders' equity
declined from $3,886,133 as of December 31, 2002 to a net stockholders' deficit
of $801,183 as of December 31, 2003.

                                       3
<PAGE>

     GOING CONCERN

         The Consolidated Financial Statements appearing elsewhere in this
report have been prepared on a going concern basis, which reflects the
realization of assets and the satisfaction of liabilities in the normal course
of business. As shown in the accompanying Consolidated Financial Statements, we
incurred losses from continuing operations in the amount of $1,871,348 and
$1,495,724, during the years ended December 31, 2003 and 2002, respectively, and
had a stockholders' deficit of $801,183 as of December 31, 2003. In addition, we
currently have uncertainties in connection with regulatory investigations
described above. Depending on the result of these uncertainties, we may not
continue as a going concern. See Note 3 of our Notes to Consolidated Financial
Statements. The Consolidated Financial Statements do not include any adjustments
that might result from the outcome of this uncertainty.

     CRITICAL ACCOUNTING POLICIES

         Our discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements which have been
prepared in conformity with accounting principles generally accepted in the
United States of America. Because we operate in the financial services industry,
we follow certain accounting guidance used by the brokerage industry. Our
consolidated balance sheet is not separated into current and noncurrent assets
and liabilities. Certain financial assets, such as investment securities are
carried at fair market value on our consolidated statements of financial
condition while other assets are carried at historic values.

         We accrue for contingencies in accordance with Statement of Accounting
Standards ("SFAS") No. 5, " Accounting for Contingencies," when it is probable
that a liability or loss has been incurred and the amount can be reasonably
estimated. Contingencies by their nature relate to uncertainties that require
our exercise of judgment both in assessing whether or not a liability or loss
has been incurred and estimated the amount of probable loss.

     USE OF ESTIMATES

         Note 2 to Consolidated Financial Statements contains a summary of our
significant accounting policies, many of which require the use of estimates and
assumptions that affect the amounts reported in the consolidated financial
statements for the periods presented. We believe that of our significant
accounting policies, the valuation of customer lists (see also Note 6 to
Consolidated Financial Statements) is based on estimates and assumptions that
require complex, subjective judgments which can materially impact reported
results.

     MARKET-MAKING ACTIVITIES

         Securities owned and securities sold, not yet purchased, which
primarily consist of listed, over-the-counter, American Depository Receipts and
foreign ordinary stocks, are carried at market value and are recorded on a trade
date basis. Market value is estimated daily using market quotations available
from major securities exchanges and dealers.

                                       4
<PAGE>

SOURCES AND DESCRIPTION OF REVENUES

     COMMISSIONS AND FEES

         Approximately 93% of our 2003 revenues, approximately 98% of our 2002
revenues and approximately 91% of our 2001 revenues consist of commissions and
fees. Commissions and fees include revenues generated from transactional fees
charged to retail and institutional customers. Commissions and fees also include
mutual fund transaction commissions and trailer fees, which are periodic fees
paid by mutual funds as an incentive to keep assets invested with them over
time. Transactional fees charged to retail and institutional customers are
primarily affected by changes in transaction volumes and changes in the
commission or fee rates charged per transaction. The significant growth in our
daily average trading volumes in the U.S. and major global equities markets,
combined with our introduction of online trading services, has increased our
trading volume.

     EQUITIES MARKET-MAKING TRADING REVENUES, NET

         Approximately 6% of our 2003 revenues, and none of our 2002 or 2001
revenues consist of equities market-making trading revenues, net. Equities
market-making trading revenues are generated from the difference between the
price we pay to buy securities and the price we are paid when we sell
securities. Volatility of stock prices, which can result in significant price
fluctuations in short periods of time, may result in trading gains or losses.
Our equities market-making trading revenues are dependent on our ability to
evaluate and act rapidly on market trends and manage risk successfully. We
typically act as principal in these transactions and do not receive a fee or
commission for providing order execution services.

DESCRIPTION OF OPERATING EXPENSES

     EMPLOYEE COMPENSATION AND BENEFITS

         Employee compensation and benefits, which include salaries and wages,
incentive compensation and related employee benefits and taxes, are our largest
operating expenses, accounting for approximately 16% of our expenses during
2003, approximately 37% of our expenses during 2002 and approximately 49% of our
expenses for 2001. Our registered representatives, who make up approximately 80%
of our employees, are compensated primarily on a performance basis. Therefore, a
significant portion of compensation and benefits expense will fluctuate based on
our operating revenue.

     COMMISSIONS AND CLEARING COSTS

         Commissions and clearing costs include commissions paid to independent
brokers, fees paid to floor brokers and exchanges for trade execution costs,
fees paid to third-party vendors for data processing services and fees paid to
clearing entities for certain clearance and settlement services. Commissions and
clearing costs generally fluctuate based on transaction volume. Approximately
67% of our 2003 expenses, approximately 39% of our 2002 expenses and
approximately 31% of our 2001 expenses consist of commissions and clearing
costs.

     GENERAL AND ADMINISTRATIVE

         Our general and administrative expenses consist primarily of legal,
accounting and other professional fees, software consulting fees, travel and
entertainment expenses, insurance coverage, depreciation, occupancy expenses and
other similar operating expenses, and accounted for approximately 14% of our
expenses for 2003, approximately 15% of our expenses for 2002 and approximately
15% of our expenses for 2001.

                                       5
<PAGE>

RESULTS OF OPERATIONS

DECEMBER 31, 2003 COMPARED WITH DECEMBER 31, 2002

SOURCES AND DESCRIPTION OF REVENUES

         Total revenues for the year ended December 31, 2003 increased
$4,194,923 or 32%, to $17,400,041 from $13,205,118 reported for the year ended
December 31, 2002. Trading revenues from equities and market-making activities
accounted for $1,064,478, or 25% of the $4,194,923 increase in total revenues.
The increase in total revenues is primarily due to the reasons described herein
below.

COMMISSION AND FEES

         Commission and fees revenue increased $3,138,826 or 24% to $16,140,329
from $13,001,503 in 2002, primarily due to an increase in retail trading volume
and a change in revenue mix, which resulted from increased processing of
securities transactions by independent registered representatives already
affiliated with us, and the processing of securities transactions from
independent registered representatives who had not previously used our services.
Independent registered representatives increased to 170 in 2003 from 125 in
2002, an increase of 45, or 36%.

         Independent registered representatives accounted for $12,789,228 of the
commission and fees revenues in 2003 versus $5,961,778 in 2002, an increase of
$6,827,450, or 115%.

EQUITIES MARKET-MAKING ACTIVITIES

         During 2003, we established a market-making operation. Our
market-making operations accounted for $1,064,478 in equity market-making
trading revenue in 2003.

DESCRIPTION OF OPERATING EXPENSES

         Total operating expenses in 2003 increased $4,570,547, or 31%, to
$19,271,389 from $14,700,842 in 2002, primarily due to reasons described herein
below.

COMMISSIONS AND CLEARING COSTS

         Commissions and clearing costs in 2003 increased $7,310,983, or 129%,
to $12,980,821 from $5,669,838 in 2002. This increase is primarily due an
increase in retail trading volume and a change in revenue mix, which resulted
from increased processing of securities transactions by independent registered
representatives already affiliated with us, and the processing of securities
transactions from independent registered representatives who had not previously
used our services.

EMPLOYEE COMPENSATION AND BENEFITS

         Employee compensation and benefits in 2003 decreased $2,406,135, or
44%, to $3,054,236 from $5,460,371 in 2002. This decrease is primarily due to a
reliance on independent registered representatives in 2003 versus a reliance on
commissioned employees in 2002, and a reduction in executive compensation.

                                       6
<PAGE>

GENERAL AND ADMINISTRATIVE

         General and administrative expenses in 2003 increased $489,521 or 22%,
to $2,759,250 from $2,269,729 in 2002. This increase is primarily attributable
to an increase of approximately $953,000 in professional and legal fees
primarily incurred in connection with a dispute between the Company and one of
the majority shareholders, an increase of approximately $194,000 in other
professional fees and an increase of $51,831 in insurance costs, partially
offset by a $60,000 decrease in non-cash compensations resulting from stock
options, a $504,000 decrease in amortization expense and decreases in other
general and administrative costs.

OTHER

         We performed an impairment analysis of our intangible assets in 2003
and 2002. No adjustment was recorded for 2003 and an adjustment of approximately
$1,001,000 was charged to expense in 2002, increasing the operating loss for
that year.

         Our continuing operations lost $1,871,348 in 2003 and $1,495,724 in
2003. In 2002, we took an impairment charge of $1,001,474, leaving a loss after
the charge of $494,250. The increase of $1,377,098 was due to lower profit
margins and an increase in legal fees of $921,015.

DECEMBER 31, 2002 COMPARED WITH DECEMBER 31, 2001

         In July 2001, we acquired certain assets of Centennial Capital
Management, Inc., a securities broker dealer that provides a diversified range
of retail brokerage services through independent financial advisors located in
50 states. Approximately five months of the Centennial operations, $2,366,000
and $1,925,000 of revenues and expenses, respectively, are included in our
operating results for the year ended December 31, 2001.

SOURCES AND DESCRIPTION OF REVENUES

         Total revenues for the year ended December 31, 2002 increased
$2,812,200 or 27%, to $13,205,118 from $10,392,918 reported for the year ended
December 31, 2001. This increase is primarily due to the reasons described
herein below.

COMMISSION AND FEES

         Commission revenue increased $3,571,889, or 38% to $13,001,503 from
$9,429,614 in 2001, primarily due to an increase in revenues earned in
connection with our full service brokerage operations. In 2002, we processed
approximately 149,400 transactions for our retail customers, versus
approximately 134,000 in 2001, an increase of 12%. Furthermore, our retail
customer accounts totaled approximately 31,382 at December 31, 2002 compared to
approximately 27,935 at December 31, 2001, an increase of approximately 12%, or
a decrease of approximately 11% after reducing the December 31, 2002 total by
approximately 6,500 retail customer accounts added through acquisitions.

                                       7
<PAGE>

INTEREST

         Interest revenues in 2002 decreased $597,533, or approximately 78%, to
$164,817 in 2002 from $762,350 in 2001 a decrease primarily attributable to a
decrease in retail customers' margin account balances. The decrease was further
effected by lower interest rates being paid in 2002 than in 2001.

DESCRIPTION OF OPERATING EXPENSES

         Total operating expenses in 2002 increased $4,853,014, or 49%, to
$14,700,842 from $9,847,828 in 2001, primarily due to reasons described below:

COMMISSIONS AND CLEARING COSTS

         Commissions and clearing costs in 2002 increased $2,624,164, or 86%, to
$5,669,838 from $3,045,674 in 2001. This increase is primarily attributable to
commissions and related costs incurred in connection with acquisitions
consummated in 2002, partially offset by the overall decrease in volume and
clearing costs associated with our existing institutional and retail operations.
In 2002, we processed 149,400 transactions for our institutional and retail
customers versus 134,000 in 2001, an increase of 12%. When compared to related
revenues, commissions and clearing costs increased by a greater percentage
because of costs incurred in connection with the acquisitions consummated during
2002, partially offset by favorable clearing charges.

EMPLOYEE COMPENSATION AND BENEFITS

         Employee compensation and benefits in 2002 increased $604,032, or 12%,
to $5,460,371 from $4,856,339 in 2001. The increase is primarily due to an
increased number of employees necessary to handle our increased business
resulting from our acquisitions. At December 31, 2002 we employed 31 people as
compared to 35 people at December 31, 2001, a decrease of 11%.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses in 2002 increased $805,510, or 55%,
to $2,269,729 from $1,464,219 in 2001. This increase is primarily attributable
to the increase of approximately $675,000 for amortization of intangible assets
and various other lesser increases in stationery, printing and office supplies,
rental expense, professional fees and client entertainment and marketing.

OTHER

         We performed an impairment analysis of our intangible assets in 2002.
An adjustment of approximately $1,001,000 was charged to expense, increasing the
December 31, 2002 operating loss.

                                       8
<PAGE>

         As a result of the foregoing factors, the net loss in 2002 from
continuing operations was $1,495,724 compared to a net profit of $545,090 from
continuing operations in 2001.

LIQUIDITY AND CAPITAL RESOURCES

         We maintain a highly liquid balance sheet, with the majority of our
assets consisting of cash and cash equivalents and receivables from brokers,
dealers, and clearing brokers arising from customer-related securities
transactions.

         As of December 31, 2003, we had $1,765,721 in assets, 58% of which
consisted of cash or assets readily convertible into cash, principally
receivables from clearing brokers, which include interest bearing cash balances
held with clearing brokers. Historically, we have financed our business
primarily through cash generated by operations, as well as proceeds from our
initial public offering and follow-on private placements of stock and debt
offerings.

         Total stockholders' equity decreased to a deficit of $801,183 at
December 31, 2003, compared to $937,460 (excludes the net assets of discontinued
operations) at December 31, 2002, primarily due to a $1,071,845 decrease in
total assets, a $666,798 increase in total liabilities, and a decrease of
$1,738,643 in stockholders' equity.

         Net cash used in continuing operations during 2003 was $1,281,487, and
net cash provided from continuing operations for 2002 and 2001 was $1,589,430,
and $801,984 respectively.

         Net cash provided by financing activities was $588,167 in 2003, as
compared to $1,362,970 provided in 2002 and $850,000 used in financing
activities in 2001. Financing activities in 2003 include $400,000 of proceeds
from the issuance of convertible notes (10%) due December 31, 2006, $250,000 in
proceeds from the private placement of 200,000 shares of common stock, and
$112,000 received from the exercise of stock options. Also, in 2003, $20,833 was
used to pay down the principal balance of two long-term notes issued in
connection with the sale of Advantage. In 2002, cash provided from financing
activities was $1,362,970, compared to $850,000 used in financing activities in
2001. The increase was primarily attributed to the $5,042,616 net proceeds
received from the sale of common stock, offset by payments against contract
payables of $1,735,155 and purchases of treasury stock of $1,135,197.

         Based on currently proposed plans and assumptions relating to the
implementation of our business plan, we believe that our cash flow from
operations and cash on hand will enable us to fund our planned operations for at
least 12 months and thereafter. If not, or if our plans change, or our
assumptions change or prove to be inaccurate, or if our operating cash flow
otherwise proves to be insufficient to implement our business plans, we may
require additional financing and may seek to raise funds through subsequent
equity or debt financings. We cannot assure you that additional

                                       9
<PAGE>

funds will be available in adequate amounts or on acceptable terms. If funds are
needed but not available, our business would be harmed.

NET CAPITAL REQUIREMENTS

         Our broker dealer subsidiary, Empire Financial Group, Inc., is subject
to the requirements of the Uniform Net Capital Rule (Rule 15c3-1) under the
Securities Exchange Act of 1934. This rule requires that aggregate indebtedness,
as defined, not exceed 15 times net capital, as defined. Rule 15c3-1 also
provides for an "alternative net capital requirement" which, if elected,
requires that net capital be equal to the greater of $250,000 or 2% of aggregate
debit items computed in applying the formula for determination of reserve
requirements. Net capital positions of Empire Financial Group, Inc. are as
follows:

                                        DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                            2003          2002         2001
                                        ------------  ------------  ------------
Empire Financial Group, Inc.:
  Net capital........................... $ 313,522     $ 476,235     $ 330,491
  Required net capital..................   250,000       250,000       250,000
  Excess net capital.................... $  63,552     $ 226,235     $  80,491
  Ratio of aggregate indebtedness
   to net Capital....................... 2.80 to 1     4.01 to 1     4.90 to 1

NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"),
which establishes standards of accounting for asset retirement obligations
arising from the acquisition, construction, or development and/or the normal
operation of a long-lived asset. SFAS 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. We adopted SFAS 143 as of
January 1, 2003.

         In April 2002, Statement of Financial Accounting Standards No. 145
("SFAS 145") was issued, which rescinded SFAS Statements No. 4, 44, and 64,
amended No. 13 and contained technical corrections. As a result of SFAS 145,
gains and losses from extinguishments of debt will be classified as
extraordinary items only if they meet the criteria in APB Opinion No. 30, that
they are unusual and infrequent and not part of the entity's recurring
operations. We adopted SFAS 145 as of January 1, 2003.

         In July 2002, the FASB issued Statement of Financial Accounting
Standards No. 146 ("SFAS 146"), which addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with exit
and disposal activities, including restructuring activities that are currently
accounted for pursuant to guidance that the Emerging Issues Task Force has set
forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." SFAS 146 revises the accounting for certain
lease termination costs and employee termination benefits, which are generally
recognized in connection with restructuring charges. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December
31, 2002.

         In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantee, Including
Indirect Guarantees of Indebtedness of Others", which addresses the disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under guarantees. FIN 45 also requires the recognition of a
liability by a guarantor at the inception of certain guarantees that are entered
into or modified after December 31, 2002.

                                       10
<PAGE>

         In May 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not believe that there will be any impact on its consolidated
financial statements.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how companies classify and measure certain
financial instruments with characteristics of both liabilities and equity. It
requires companies to classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003. The
adoption of this standard did not impact the Company's consolidated financial
statements.

OFF-BALANCE SHEET ARRANGEMENTS

         We have no off-balance sheet arrangements.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

         Listed below is a tabular representation of our long-term debt
obligations, capital lease obligations, operating lease obligations, purchase
obligations and other long-term liabilities reflected on our balance sheet under
GAAP as of December 31, 2003.
<TABLE>
<CAPTION>
                                                                Payment due by period
                                    -------------------------------------------------------------------------
                                                     Less than                                      More than
   Contractual Obligations             Total           1 year         1-3 years       3-5 years      5 years
   -----------------------          ----------       ---------       ----------       ---------     ---------
<S>                                 <C>               <C>            <C>               <C>           <C>
Long-Term Debt Obligations ........ $1,304,166        $300,000       $1,004,166           --           --

Capital Lease Obligations .........     --               --              --               --           --

Operating Lease Obligations ....... $  797,907        $ 70,317       $  272,345        $284,158      $171,087

Purchase Obligations ..............     --               --              --               --           --

Other Long-Term Liabilities
Reflected on the Registrant's
Balance Sheet under GAAP ..........     --               --              --               --           --
</TABLE>

FACTORS AFFECTING OUR OPERATING, BUSINESS PROSPECTS AND MARKET PRICE OF STOCK

WE MAY NOT ACHIEVE PROFITABILITY OR CONTINUE AS A GOING CONCERN

         We have incurred significant operating losses during 2002 and 2003 and
experienced a significant decline in our net worth during 2003. Our operating
losses during 2002 were $1,495,724 (plus an additional loss in the amount of
$981,344 from our discontinued operations) and during 2003 were $1,871,348 (plus
an additional loss in the amount of $1,212,661 from our discontinued
operations). Our stockholders' equity decreased from $3,886,133 as of December
31, 2002 to a stockholders' deficit $801,183 as of December 31, 2003.

                                       11
<PAGE>

Also, we are subject to pending federal and state investigations relating to our
involvement in trading in mutual fund shares by our customers, the outcome of
which is uncertain. These factors raise substantial doubt about our ability to
continue as a going concern.

Our continued existence is dependent upon our ability to return to profitability
and to generate cash either from operations or from new financings. We have
implemented a plan, which we believe will return us to profitability. As part of
our plan, we have reduced general and administrative overhead and operating
expenses primarily by relocating and consolidating our offices and personnel, by
entering into a new clearing arrangement with a third party at lower rates and
by settling substantially all of our controversies with our former co-CEO. We
have also hired additional personnel to enhance our market making and order
execution capabilities. However, there is no assurance that we will achieve
profitability or be able to generate cash from either operations or from debt or
equity financings. Therefore, we may not be able to continue as a going concern,
which would substantially destroy our stockholders' investments in our business.

WE ARE SUBJECT TO SECURITIES REGULATION AND FAILURE TO COMPLY COULD SUBJECT US
TO PENALTIES OR SANCTIONS THAT COULD HARM OUR BUSINESS.

         Our business is subject to federal and state laws regulating the
securities industry. In addition, the Securities and Exchange Commission, or the
SEC, the National Association of Securities Dealers, Inc., or the NASD, and
other self-regulatory organizations, as well as the various stock exchanges and
state securities commissions, require strict compliance with their rules and
regulations. Broker dealers are subject to regulations covering all aspects of
the securities business, including sales methods, trade practices among broker
dealers, use and safekeeping of clients' funds and securities, capital
structure, record keeping and the conduct of directors, officers and employees.

         In particular, we are currently the subject of pending federal and
state investigations relating to our involvement in trading in mutual fund
shares by our customers. We cannot determine the nature or severity of any legal
or regulatory sanctions that may be imposed on us or on certain of our officers
and employees in connection with these investigations.

         Failure to comply, and disputes concerning compliance with, any of
these laws, rules or regulations could result in substantial expenses for us as
well as censure, fines, the issuance of cease and desist orders or suspension or
expulsion as a broker dealer.

WE MAY BE DELISTED FROM THE AMERICAN STOCK EXCHANGE WHICH WOULD REDUCE OUR
STOCKHOLDER LIQUIDITY

         The rules of the American Stock Exchange provide that the AMEX may
delist securities of a company which has stockholders' equity of less than
$2,000,000 if such company has sustained losses from continuing operations
and/or net losses in two of its three most recent fiscal years. We have incurred
significant operating losses during fiscal years 2002 and 2003. Additionally,
our stockholders' deficit as of December 31, 2003 was $801,183. As a result, the
AMEX may delist our securities. If our common stock is not listed on the AMEX it
may be more difficult for our stockholders to trade our stock.

OUR REVENUES COULD BE REDUCED SIGNIFICANTLY DUE TO MARKET PRICE FLUCTUATIONS.

         Our order execution services involve the purchase and sale of
securities predominantly as principal, instead of buying and selling securities
as an agent for our customers. As a result, we own securities or are required to
buy securities to complete customer transactions. During the period that we own
the securities, market prices could fluctuate significantly which could result
in lost revenues to us and adversely affect our profitability.

                                       12
<PAGE>

A REDUCTION IN OUR COMMISSION RATES COULD ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY.

         Intense competition from existing and new brokerage services may harm
our business. The market for online brokerage services is relatively new,
rapidly evolving, intensely competitive and has few barriers to entry. We expect
competition to continue and intensify in the future. Discount brokerage firms
may continue to reduce their commission rates in an effort to offer the lowest
transaction costs to investors. Because many of our competitors have
significantly greater financial, technical, marketing and other resources, offer
a wider range of products and services and have more extensive client bases than
we do, they may be able to respond more quickly to new or changing
opportunities, technologies and client requirements than us. They may also be
able to undertake more extensive promotional activities, offer more attractive
terms to clients and adopt more aggressive pricing policies than us. Moreover,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties or may consolidate to
enhance their services and products. Many of these firms have greater
transaction volume and offer a wider range of services than we do, which allows
them to compensate for lower commission rates. Our commission fees for online
trading start at $8.99 per trade.

OUR INDEPENDENT REGISTERED REPRESENTATIVES COULD LEAVE OR AFFILIATE WITH A
COMPETITOR.

         The independent registered representatives can terminate their
relationship with us on little or no notice and could associate with another
broker dealer. The independent registered representatives can transfer their
client accounts which could adversely affect our revenues.

SINCE KEVIN M. GAGNE OWNS MOST OF OUR COMMON STOCK AND CONTROLS US, MINORITY
SHAREHOLDERS WILL HAVE LITTLE SAY IN THE DIRECTION OF THE COMPANY.

         Kevin M. Gagne beneficially owns approximately 66% of our common stock.
Accordingly, Mr. Gagne controls us and has the power to, among other matters,
elect all directors, increase our authorized capital stock or cause us to
dissolve, merge or sell our assets.

POTENTIAL GOVERNMENTAL REGULATION OF THE INTERNET AND ONLINE COMMERCE COULD HARM
OUR BUSINESS.

         Our business could be harmed by future legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business or the application of existing laws and
regulations to the Internet and other online services. The adoption of any
additional laws or regulations may decrease the growth of the Internet or other
online services, which could, in turn, decrease the demand for our trading
systems and services and increase our cost of doing business.

FAILURE TO COMPLY WITH NET CAPITAL REQUIREMENTS COULD SUBJECT US TO SUSPENSION
OR REVOCATION OF OUR BROKER DEALER REGISTRATION BY THE SEC OR EXPULSION BY THE
NASD.

         We are subject to stringent rules promulgated by the SEC, the NASD and
various other regulatory agencies with respect to the maintenance of specific
levels of net capital by securities brokers. Failure to maintain the required
net capital may subject us to suspension or revocation of registration by the
SEC and suspension or expulsion by the NASD or other regulatory bodies and
ultimately could require our liquidation. In addition, a change in the net
capital rules, the imposition of new rules or any unusually large charge against
our net capital could limit our operations.

                                       13
<PAGE>

FAILURE TO QUALIFY AS A FOREIGN CORPORATION COULD RESULT IN THE IMPOSITION OF
TAXES AND PENALTIES THAT WOULD INCREASE OUR COSTS.

          Our subsidiary, Empire Financial Group, Inc., is currently registered
as a broker dealer in all 50 states as well as Puerto Rico, but is qualified to
do business as a foreign corporation in only a few states. Because our services
are available over the Internet and we have customers in many states, we and/or
any of our subsidiaries may be required to qualify as a foreign corporation. If
we fail to qualify as a foreign corporation in states that may require such
qualifications, we may be penalized.

EMPLOYEE MISCONDUCT COULD RESULT IN REGULATORY SANCTIONS AND UNANTICIPATED
COSTS.

         Because our business involves handling cash and marketable securities
on behalf of our customers, employee misconduct could result in unknown and
unmanaged risks or losses. Misconduct by employees could also include binding us
to transactions that exceed authorized limits or present unacceptable risks or
hiding from us unauthorized or unsuccessful activities.

IF OUR RETAIL CUSTOMERS DO NOT REPAY US FOR CREDIT WE EXTEND TO THEM, OUR
FINANCIAL CONDITION COULD BE NEGATIVELY IMPACTED.

         Periods of volatile markets increase the risks inherent in extending
credit to the extent that we permit our retail customers to purchase securities
on a margin basis. Under such circumstances the value of the collateral held by
us could fall below the amount borrowed by the customer. We may then be required
to sell or buy securities at prevailing market prices and incur losses to
satisfy customer obligations.

IF WE ARE UNABLE TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGES IN A COST-EFFECTIVE
MANNER, WE MAY LOSE BUSINESS.

         Our future success will depend, in part, on our ability to develop and
use new technologies, respond to technological advances, enhance our existing
services and products, and develop new services and products in a timely and
cost-effective manner. The market for brokerage services and, particularly,
electronic brokerage services over the Internet, is characterized by rapid
technological change, changing client requirements, frequent service and product
enhancements and introductions, and emerging industry standards. The
introduction of services or products embodying new technologies and the
emergence of new industry standards can render existing services or products
obsolete and unmarketable.

INTERRUPTION OR LOSS OF CONTENT PROVIDED BY THIRD PARTIES COULD CAUSE US TO LOSE
CUSTOMERS, HARMING OUR BUSINESS.

         We rely on third-party content providers for much of the financial
information we offer through our website and are therefore dependent on the
ability of third-party content providers to deliver content in a timely and
consistent manner. Interruption or termination of our existing third-party
content supply would require us to seek content from other third parties. Delays
in obtaining replacement content could cause us to lose customers.

DISRUPTION OF OUR COMPUTER SYSTEMS AND/OR THOSE OF OUR VENDORS AND SYSTEMS
FAILURES COULD CAUSE OUR REVENUES TO DECLINE AND OUR BUSINESS REPUTATION TO
SUFFER.

                                       14
<PAGE>

         We rely heavily on various electronic media. We receive trade orders
using the Internet and telephone. In addition, we process trade orders through
our own systems and those of Sungard Trading System's Broker Routing Access
System Service, Penson Financial Services, Inc., Nexa Technologies, Inc., and
ABN Amro Incorporated. These methods of trading are heavily dependent on the
integrity of the electronic systems supporting them.

         Heavy system traffic during peak trading times could cause our systems
to operate at unacceptably low speeds or fail altogether. Any significant
degradation or failure of our computer systems, those of our vendors, or any
other systems in the trading process (e.g., online service providers, record
keeping and data processing functions performed by third parties and third-party
software such as Internet browsers) could cause clients to suffer delays in
trading. These delays could cause substantial losses for our clients and could
subject us to claims from clients for losses, including litigation claiming
fraud or negligence. Our computer systems are also vulnerable to damage or
interruption from human error, natural disasters, power loss, sabotage or
computer viruses.

IF OUR SYSTEMS SECURITY IS COMPROMISED, OUR REPUTATION MAY SUFFER AND WE MAY
LOSE BUSINESS.

         Any compromise of our systems' security could harm our business. The
secure transmission of confidential information over public networks is a
critical element of our operations. We and our vendors rely on encryption and
authentication technology to provide the security and authentication necessary
to effect secure transmission of confidential information over the Internet.
However, advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments may result in a compromise of our
systems' security.

CLAIMS OF INFRINGEMENT MAY INCREASE OUR COSTS AND DISRUPT OUR BUSINESS.

         Other parties may claim that we infringe on their intellectual property
rights. Regardless of whether any such claims are valid, claims of infringement
could be time-consuming and expensive to defend, could divert our resources and
our management's attention. If we are forced to stop using any software, systems
or processes that are important to run our operations, our business may be
disrupted and our costs significantly increased.

IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL WHEN WE NEED IT, WE MAY NOT BE
ABLE TO EFFECTIVELY COMPETE IN THE MARKETPLACE.

         We anticipate that our available cash resources will be sufficient to
meet our presently anticipated working capital and capital expenditure
requirements for at least the next 12 months. In the future, however, we may
need to raise additional funds in order to support further expansion, develop
new or enhanced services and products, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements. We cannot assure you that additional financing will be available
when needed on terms favorable to us or on terms that will not result in
dilution to our existing shareholders.

WE RELY ON RELATIVELY FEW KEY PERSONNEL TO PROVIDE CRITICAL MANAGEMENT
FUNCTIONS.

         If one or more of such individuals leave the Company, our ability to
manage our operations may be impeded and our business could be adversely
impacted.


                                       15
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Consolidated Financial Statements of Empire Financial Holding
Company the accompanying notes thereto and the independent accountants' reports
are included as part of this Amendment No.1 to the Annual Report on Form 10-K/A
and immediately follow the signature page of this Amendment No.1 to the Annual
Report on Form 10-K/A.




                                       16
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to the
report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                    EMPIRE FINANCIAL HOLDING COMPANY

Dated April 15, 2004                By: /s/ Kevin M. Gagne
                                        ------------------
                                        Kevin M. Gagne Chief Executive Officer
                                        (Principal Executive Officer)


Dated April 15, 2004                By: /s/ Patrick Rodgers
                                        -------------------
                                        Patrick Rodgers, Chief Financial Officer
                                        (Principal Financial Officer and
                                        Principal Accounting Officer)


                                       17
<PAGE>
                                 EXHIBIT INDEX


EXHIBIT                           DESCRIPTION

31.1           Certification by Principal Executive Officer pursuant to Rule
               13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
               the Sarbanes-Oxley Act of 2002 (filed herewith)

31.2           Certification by Principal Financial Officer pursuant to Rule
               13-a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of
               the Sarbanes-Oxley Act of 2002(filed herewith)

32.1           Principal Executive Officer Certification Pursuant to 18 U.S.C.
               Section 1350, as Adopted Pursuant to Section 906 of The
               Sarbanes-Oxley Act of 2002 (filed herewith)

32.2           Principal Financial Officer Certification Pursuant to 18 U.S.C.
               Section 1350, as Adopted Pursuant to Section 906 of The
               Sarbanes-Oxley Act of 2002 (filed herewith)

                                       18
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                                TABLE OF CONTENTS


Report of Independent Certified Public Accountants ..........................F-2

Consolidated Statements of Financial Condition
  December 31, 2003 and 2002 ................................................F-3

Consolidated Statements of Operations
  Years Ended December 31, 2003, 2002 and 2001 ..............................F-5

Consolidated Statements of Changes in Stockholders' Deficit
  Years Ended December 31, 2003, 2002 and 2001 ..............................F-6

Consolidated Statements of Cash Flows
  Years Ended December 31, 2003, 2002 and 2001 ..............................F-7

Notes to Consolidated Financial Statements ..................................F-9

Schedule II - Valuation and Qualifying Accounts and Reserves ...............F-29



                                      F-1
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders of
Empire Financial Holding Company and subsidiaries

We have audited the accompanying consolidated statements of financial condition
of Empire Financial Holding Company and subsidiaries as of December 31, 2003,
and 2002, and the related consolidated statements of operations and
shareholders' equity and cash flows for the years ended December 31, 2003, 2002
and 2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Empire Financial
Holding Company and subsidiaries at December 31, 2003 and 2002, and the results
of its operations and its cash flows for the years ended December 31, 2003, 2002
and 2001 in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has had losses from continuing
operations during 2003 and 2002 and had a stockholder's deficit of $801,183 as
of December 31, 2003. Also, the Company is subject to pending federal and state
investigations relating to the Company's involvement in trading in mutual fund
shares by its customers, the outcome of which is uncertain. These matters raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Table of
Contents to the Consolidated Financial Statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.


                                        Sweeney, Gates & Co.

Ft. Lauderdale, Florida
March 26, 2004
except for Note 8
which is as of April 8, 2004
                                      F-2
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                           DECEMBER 31, 2003 AND 2002


                                                        2003           2002
                                                    ------------   ------------

ASSETS

Cash and cash equivalents ........................  $    393,283   $  1,144,778
Receivables from broker dealers and clearing
   organizations .................................       637,279        565,756
Deposits at clearing organizations ...............       304,468        121,687
Income taxes receivable ..........................             -        351,000
Property and equipment, net of accumulated
   depreciation of $116,297 and
   $95,113, respectively .........................        15,678         29,810
Customer lists, net ..............................       145,393        331,390
Prepaid expenses and other assets ................       269,620        293,145
Assets of discontinued operations ................             -     10,657,069
                                                    ------------   ------------

           Total assets ..........................  $  1,765,721   $ 13,494,635
                                                    ============   ============

Continued

              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                       F-3
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                           DECEMBER 31, 2003 AND 2002


                                                        2003           2002
                                                    ------------   ------------

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Liabilities:
   Notes payable .................................  $    790,741   $          -
   Notes payable - related party .................       488,426              -
   Accounts payable and accrued expenses .........     1,208,893      1,319,516
   Payable to brokers and dealers and clearing
      organizations ..............................        78,844              -
   Deferred revenue ..............................             -        519,237
   Payable to S corporation stockholders .........             -         61,353
   Liabilities of discontinued operations ........             -      7,708,396
                                                    ------------   ------------

        Total liabilities ........................     2,566,904      9,608,502
                                                    ------------   ------------


Stockholders' (deficit) equity:
   Series A Preferred stock, $.01 par value,
      1,000,000 shares authorized;
      10,000 issued and outstanding in 2003
      and none issued and outstanding in 2002 ....           100              -
   Common stock, $.01 par value, 100,000,000
      shares authorized; 3,194,450 issued and
      outstanding in 2003 and 5,000,000 shares
      issued and outstanding in 2002 .............        31,945         50,000
   Additional paid-in capital ....................     5,763,374      8,350,095
   Accumulated deficit ...........................    (6,462,774)    (3,378,765)
   Deferred compensation .........................      (133,828)             -
   Treasury stock, at cost, 212,200 shares at
      December 31, 2002 ..........................             -     (1,135,197)
                                                    ------------   ------------

        Total stockholders' (deficit) equity: ....      (801,183)     3,886,133
                                                    ------------   ------------

                                                    $  1,765,721   $ 13,494,635
                                                    ============   ============

              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                       F-4
<PAGE>
<TABLE>
                                    EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                  FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
<CAPTION>

                                                                         2003                2002               2001
                                                                     ------------        ------------        -----------
<S>                                                                  <C>                 <C>                 <C>
Revenues:

     Commissions and fees ....................................       $ 16,140,329        $ 13,001,503        $ 9,429,614
     Trading revenues, net ...................................          1,064,478                   -                  -
     Interest ................................................            180,371             164,817            762,350
     Other ...................................................             14,863              38,798            200,954
                                                                     ------------        ------------        -----------

                                                                       17,400,041          13,205,118         10,392,918
                                                                     ------------        ------------        -----------

Expenses:

     Commissions and clearing costs ..........................         12,980,821           5,669,838          3,045,674
     Employee compensation and benefits ......................          3,054,236           5,460,371          4,856,339
     General and administrative ..............................          2,759,250           2,269,729          1,464,219
     Communications and data processing ......................            175,298             247,524            188,810
     Order flow payments .....................................            119,313                   -                  -
     Advertising .............................................             87,420              51,012            292,786
     Interest ................................................             64,639                 894                  -
     Impairment loss .........................................             30,412           1,001,474                  -
                                                                     ------------        ------------        -----------

                                                                       19,271,389          14,700,842          9,847,828
                                                                     ------------        ------------        -----------

Net income (loss) from continuing operations .................         (1,871,348)         (1,495,724)           545,090

Income (loss) from discontinued operations ...................         (1,212,661)           (981,344)           990,191
                                                                     ------------        ------------        -----------

Net income (loss) ............................................       $ (3,084,009)       $ (2,477,068)       $ 1,535,281
                                                                     ============        ============        ===========

Basic and diluted earnings (loss) per share:

     Continuing operations ...................................       $      (0.41)       $      (0.33)       $      0.14
                                                                     ============        ============        ===========
     Discontinued operations .................................       $      (0.26)       $      (0.21)       $      0.24
                                                                     ============        ============        ===========
     Net income (loss) per share .............................       $      (0.67)       $      (0.54)       $      0.38
                                                                     ============        ============        ===========

Unaudited pro forma income, net of provision for income taxes:

     Continuing operations ...................................                                               $   339,982

     Discontinued operations .................................                                                   617,599
                                                                                                             -----------

     Net income ..............................................                                               $   957,581
                                                                                                             ===========

Basic and diluted pro forma earnings per share:

     Continuing operations ...................................                                               $      0.09
                                                                                                             ===========
     Discontinued operations .................................                                               $      0.15
                                                                                                             ===========
     Net income per share ....................................                                               $      0.24
                                                                                                             ===========
Weighted average shares outstanding ..........................          4,587,920           4,587,494          4,000,000
                                                                     ============        ============        ===========

                                  The accompanying notes are an integral part of these
                                           consolidated financial statements.
                                                           F-5
</TABLE>
<PAGE>
<TABLE>

                                    EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                  FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<CAPTION>
                                                    Series A
                                                 preferred stock                Common stock              Additional
                                              ----------------------      -------------------------         paid-in
                                               Shares        Amount         Shares          Amount          capital
                                              ---------      -------      ----------       --------       -----------
<S>                                           <C>            <C>          <C>              <C>            <C>
Balance at January 1, 2001 .............              -      $     -       4,000,000       $ 40,000       $   500,691

Net income .............................              -            -               -              -                 -
Stockholders' distribution .............              -            -               -              -                 -
                                              ---------      -------      ----------       --------       -----------

Balance at December 31, 2001 ...........              -            -       4,000,000         40,000           500,691

Contribution to capital of undistributed
  retained earnings from S corporation
  termination on April 9, 2002 .........              -            -               -              -         3,331,082
Stockholders' distribution .............              -            -               -              -          (865,941)
Distribution payable to
  S Corporation stockholders ...........              -            -               -              -           (61,353)
Issuance of common stock ...............              -            -       1,000,000         10,000         5,032,616
Issuance of stock options for services .              -            -               -              -           413,000
Purchase of treasury stock .............              -            -               -              -                 -
Net loss ...............................              -            -               -              -                 -
                                              ---------      -------      ----------       --------       -----------

Balance at December 31, 2002 ...........              -            -       5,000,000         50,000         8,350,095

Reversal of distribution payable
  to S corporation stockholders ........              -            -               -              -            61,353
Non-cash stock compensation ............              -            -               -              -           262,360
Issuance of restricted stock ...........              -            -         100,000          1,000           130,000
Exercise of stock options ..............              -            -         100,000          1,000           111,000
Conversion of stock options to
  common stock .........................              -            -          94,650            947           104,973
Capital contributed by stockholder .....              -            -               -              -            67,000
Settlement agreement:
     Purchase of treasury stock ........              -            -               -              -                 -
     Issuance of preferred stock .......         10,000          100               -              -           299,900
Sale of common stock ...................              -            -         200,000          2,000           248,000
Retirement of treasury stock ...........              -            -      (2,300,200)       (23,002)       (3,871,307)
Net loss ...............................              -            -               -              -                 -
                                              ---------      -------      ----------       --------       -----------

Balance at December 31, 2003 ...........         10,000      $   100       3,194,450       $ 31,945       $ 5,763,374
                                              =========      =======      ==========       ========       ===========

Continued

                                  The accompanying notes are an integral part of these
                                           consolidated financial statements.
                                                           F-6A
</TABLE>
<PAGE>
<TABLE>

                              EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                            FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001

<CAPTION>
                                                                                      Treasury stock
                                              Accumulated        Deferred       ----------------------------
                                                deficit        compensation       Shares            Amount
                                              -----------      ------------     ----------       -----------
<S>                                           <C>               <C>             <C>              <C>
Balance at January 1, 2001 .............      $ 2,836,254       $       -                -       $         -

Net income .............................        1,535,281               -                -                 -
Stockholders' distribution .............       (1,942,150)              -                -                 -
                                              -----------       ---------       ----------       -----------

Balance at December 31, 2001 ...........        2,429,385               -                -                 -

Contribution to capital of undistributed
  retained earnings from S corporation
  termination on April 9, 2002 .........       (3,331,082)              -                -                 -
Stockholders' distribution .............                -               -                -                 -
Distribution payable to
  S Corporation stockholders ...........                -               -                -                 -
Issuance of common stock ...............                -               -
Issuance of stock options for services .                -               -                -                 -
Purchase of treasury stock .............                -               -         (212,200)       (1,135,197)
Net loss ...............................       (2,477,068)              -                -                 -
                                              -----------       ---------       ----------       -----------

Balance at December 31, 2002 ...........       (3,378,765)              -         (212,200)       (1,135,197)

Reversal of distribution payable
  to S corporation stockholders ........                -               -                -                 -
Non-cash stock compensation ............                -               -                -                 -
Issuance of restricted stock ...........                -        (107,348)               -                 -
Exercise of stock options ..............                -               -                -                 -
Conversion of stock options to
  common stock .........................                -         (26,480)               -                 -
Capital contributed by stockholder .....                -               -                -                 -
Settlement agreement:
     Purchase of treasury stock ........                -               -       (2,088,000)       (2,759,112)
     Issuance of preferred stock .......                -               -                -                 -
Sale of common stock ...................                -               -                -                 -
Retirement of treasury stock ...........                -               -        2,300,200         3,894,309
Net loss ...............................       (3,084,009)              -                -                 -
                                              -----------       ---------       ----------       -----------

Balance at December 31, 2003 ...........      $(6,462,774)      $(133,828)               -       $         -
                                              ===========       =========       ==========       ===========



                             The accompanying notes are an integral part of these
                                      consolidated financial statements.
                                                     F-6B
</TABLE>
<PAGE>
<TABLE>
                                    EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<CAPTION>
                                                                              2003            2002             2001
                                                                          -----------      -----------      -----------
<S>                                                                       <C>              <C>              <C>
Operating activities:
  Net income (loss) .................................................     $(3,084,009)     $(2,477,068)     $ 1,535,281
     Less:  (Income) loss from discontinued operations ..............       1,212,661          981,344         (990,191)
                                                                          -----------      -----------      -----------

Income (loss) from continuing operations: ...........................      (1,871,348)      (1,495,724)         545,090
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation ....................................................          21,964           33,420           56,455
    Amortization of customer lists ..................................         185,997          690,403          266,438
    Impairments .....................................................          30,412        1,001,474                -
    Non-cash charge for options issued ..............................         262,360          413,000                -
    Change in assets and liabilities:
      Receivable from brokers and dealers and
        clearing organizations ......................................         (71,523)        (179,963)         938,632
      Deposits at clearing organizations ............................        (182,781)           3,550           71,908
      Income taxes receivable .......................................         351,000         (351,000)               -
      Prepaid expenses and other assets .............................          23,525         (149,137)        (109,150)
      Accounts payable and accrued expenses .........................        (110,623)         454,990         (335,918)
      Payable to broker dealers and clearing organizations ..........          78,844                -                -
      Deferred revenue ..............................................        (519,237)          19,237          500,000
                                                                          -----------      -----------      -----------

      Net cash provided by (used in) operating activities ...........      (1,801,410)         440,250        1,933,455
                                                                          -----------      -----------      -----------

Investing activities:
  Purchase of property and equipment ................................         (38,244)          (2,300)               -
  Sale of property and equipment ....................................               -                -           61,589
  Purchase of customer lists ........................................               -         (211,490)        (343,060)
                                                                          -----------      -----------      -----------

      Net cash used in investing activities .........................     $   (38,244)     $  (213,790)     $  (281,471)
                                                                          -----------      -----------      -----------

Continued

                                  The accompanying notes are an integral part of these
                                           consolidated financial statements.
                                                           F-7
</TABLE>
<PAGE>
<TABLE>
                                    EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<CAPTION>
                                                                              2003            2002             2001
                                                                          -----------      -----------      -----------
<S>                                                                       <C>              <C>              <C>
Financing activities:
  Proceeds from note payable ........................................     $   400,000      $         -      $         -
  Payments on note payable ..........................................         (20,833)               -                -
  Proceeds from stock options exercised .............................         112,000                -                -
  Proceeds from sale of common stock ................................         250,000        5,042,616                -
  Capital contributed by stockholder ................................          67,000                -                -
  Payments of contracts payable .....................................               -       (1,735,155)               -
  Purchase of treasury stock ........................................        (250,000)      (1,135,197)               -
  Stockholder distributions .........................................               -         (809,294)        (850,000)
                                                                          -----------      -----------      -----------

      Net cash provided by (used in) financing activities ...........         558,167        1,362,970         (850,000)
                                                                          -----------      -----------      -----------

Discontinued operations:

      Net cash (used) provided by discontinued operations ...........         529,992       (1,525,744)         (54,896)
                                                                          -----------      -----------      -----------

Net increase (decrease) in cash and cash equivalents ................        (751,495)          63,686          747,088

Cash and cash equivalents at beginning of year ......................       1,144,778        1,081,092          334,004
                                                                          -----------      -----------      -----------

Cash and cash equivalents at end of year ............................     $   393,283      $ 1,144,778      $ 1,081,092
                                                                          ===========      ===========      ===========

Supplemental disclosure of cash flow information:

  Cash paid during the year for:

    Interest ........................................................     $    60,243      $       894      $         -
                                                                          ===========      ===========      ===========

    Income taxes ....................................................     $         -      $   351,000      $         -
                                                                          ===========      ===========      ===========

Supplemental disclosure of non-cash investing and
 financing activities:
  Notes payable assumed in connection with purchase of
       treasury stock ...............................................     $   900,000
  Preferred stock issued in connection with purchase of
       treasury stock ...............................................     $   300,000
  Reversal of payable to S corporation stockholders .................     $    61,353
  Issuance of restricted stock ......................................     $   131,000
  Conversion of stock options to common stock .......................     $   105,920



                                  The accompanying notes are an integral part of these
                                           consolidated financial statements.
                                                           F-8
</TABLE>
<PAGE>
               EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


1. NATURE OF BUSINESS

ORGANIZATION AND OPERATIONS - Empire Financial Holding Company (the "Company"),
a Florida corporation, was formed on February 16, 2000 to acquire Empire
Financial Group, Inc. ("Empire Group"), Empire Investment Advisors, Inc.
("Advisors") and Advantage Trading Group, Inc. ("Advantage"). All subsidiaries
are, or were, wholly owned and all intercompany transactions and accounts have
been eliminated in consolidation.

Empire Group, incorporated in Florida on August 20, 1990, is an introducing
securities broker dealer, which provides discount brokerage and advisory
services to retail and institutional customers and a trading platform, order
execution and market making services to its network of independent registered
representatives. During the year, Empire Group amended its broker dealer
registration to allow for its market making activities.

Advisors, incorporated in Florida on September 10, 1999, is a fee-based
investment advisory service, which offers its services to retail customers.

Advantage was incorporated in Florida on July 18, 1995 and is a securities
broker dealer, which acts as principal in providing order execution services for
independent broker dealers and also acts as a clearing broker. On November 6,
2003, the Company sold Advantage. Advantage was the order execution segment of
the Company prior to its sale. The results of Advantage, which was sold to the
Company's former co-CEO, who was a major stockholder of the Company, have been
reported as discontinued operations for all periods presented.

Since the sale of Advantage, the Company has operated in the retail
brokerage services segment and does not have any other operating segments.

The Company's executive offices are located in Longwood, Florida.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with an initial maturity of three months or less to be cash equivalents.

RECEIVABLES FROM BROKER DEALERS AND CLEARING ORGANIZATIONS - Receivables from
broker dealers and clearing organizations represent monies due the Company from
its clearing agents for transactions processed.

DEPOSITS AT CLEARING ORGANIZATIONS - The Company is required, by its clearing
agreements, to maintain deposits with its clearing agents.

                                       F-9
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Repair and
maintenance costs are charged to operations as incurred. When assets are retired
or disposed of, the cost and accumulated depreciation thereon is removed from
the accounts, and any gains or losses are included in operations. Leasehold
improvements are depreciated using the straight-line method over the lease term.
Depreciation on furniture and equipment is provided utilizing the straight-line
method over the estimated useful lives of the related assets, which range from
five to seven years. The Company recorded a loss on the disposal of property and
equipment of $45,846 for the year ended December 31, 2001, which has been
recorded in general and administrative expenses in the consolidated statements
of operations.

CUSTOMER LISTS - Purchased customer lists are amortized over the estimated
useful lives of the customers. A significant portion of the customer lists is
amortized over thirty-nine months.

IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
its property and equipment and other assets in accordance with Statement of
Financial Accounting Standards Board No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the estimated future undiscounted cash flows attributable to such assets
or the business to which such assets relate. When an asset exceeds its expected
cash flows, it is considered to be impaired and is written down to fair value,
which is determined based on either discounted future cash flows or appraised
values. The Company recorded an impairment of long-lived assets of $30,412 and
$1,001,474 for the years ended December 31, 2003 and 2002, respectively.

DEFERRED REVENUE - The Company defers commission revenue on annuity contracts
when the issuer has a right to charge back commissions should the annuity owner
surrender the contract. Commission revenue is recorded when charge back
provisions expire.

COMMISSIONS AND FEES - Commissions and fees include revenues generated from
transactional fees charged to retail and institutional customers. Commissions
and fees also include mutual fund transaction sales commissions and trailer
fees, which are periodic fees paid by mutual funds as an incentive to keep
assets invested with them over time.

SECURITIES TRANSACTIONS - Securities transactions and the related revenues and
expenses are recorded on the trade date.

TRADING REVENUES, NET - Trading revenues are generated from the difference
between the price paid to buy securities and the amount received from the sale
of securities. Volatility of stock prices, which can result in significant price
fluctuations in short periods of time, may result in trading gains or losses.
The Company typically acts as principal in these transactions and does not
receive a fee or commission for providing order execution services.

ADVERTISING - Advertising costs are expensed as incurred.

                                      F-10
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK BASED COMPENSATION - The Company accounts for its employee stock option
plans under the intrinsic value method, in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No, 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES, and related interpretations. Compensation expense related to the
granting of employee stock options is recorded over the vesting period only if,
on the date of grant, the fair value of the underlying stock exceeds the
option's exercise price. The Company has adopted the disclosure-only
requirements of SFAS No. 123 ACCOUNTING FOR STOCK-BASED COMPENSATION, which
allows entities to continue to apply the provisions of APB No. 25 for
transactions with employees and provide pro forma net loss and pro forma loss
per share disclosures for employee stock grants made as if the fair value based
method of accounting in SFAS No. 123 had been applied to these transactions.

In December 2002, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 148 "Accounting for
Stock-Based Compensation-Transition and Disclosure" which amends SFAS No. 123
"Accounting for Stock-Based Compensation."

Had the Company determined compensation expense of employee stock options based
on the estimated fair value of the stock options at the grant date, consistent
with the guidelines of SFAS 123, its net loss would have been increased to the
pro forma amount indicated below:

                                                       Year ended December 31,
                                                      -------------------------
                                                         2003           2002
                                                      -----------   -----------
Net loss:
    As reported ....................................  $(3,084,009)  $(2,477,068)
Add Stock-based employee compensation
    expense related to stock options determined
    under fair value method ........................     (439,943)   (2,738,505)
Deduct amounts charged to expense ..................      262,360             -
                                                      -----------   -----------

    Pro forma according to SFAS 123 ................  $(3,261,592)  $(5,215,573)
                                                      ===========   ===========
Net loss per share:
   As reported .....................................  $      (.67)  $      (.54)
                                                      ===========   ===========
   Pro forma according to SFAS 123 .................  $      (.71)  $     (1.14)
                                                      ===========   ===========

                                      F-11
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The per share weighted average fair value of options granted for the years ended
December 31, 2003 and 2002 was $4.72, and $6.00, respectively, on the grant date
with the following weighted average assumptions:

                                                 Year ended December 31,
                                              ----------------------------
                                                 2003               2002
                                              ----------          --------

Expected dividend yield ..................       None               None
Risk-free interest rate ..................      3.66%               5.22%
Expected life ............................    9.50 years          10 years
Volatility ...............................        90%                92%

The pro forma impact of options on the net loss for the years ended December 31,
2003 and 2002 is not representative of the effects on net income (loss) for
future years, as future years will include the effects of additional years of
stock option grants.

INCOME TAXES - The Company with the consent of its stockholders, elected to be
an "S" Corporation under the Internal Revenue Code until April 9, 2002, at which
time the Company completed its public offering and terminated its S election.
Until that date, all taxable income or loss flowed through to the stockholders.
Accordingly, no income tax expense or liability is recorded in the accompanying
financial statements prior to April 9, 2002. The pro forma adjustments shown in
the consolidated statements of operations reflect provisions for income taxes
computed based upon statutory tax rates as if the Company had been subject to
federal and state taxation during 2001.

After April 9, 2002, the Company accounts for income taxes on an asset and
liability approach to financial accounting and reporting. Deferred income tax
assets and liabilities are computed annually for differences between the
financial and tax basis of assets and liabilities that will result in taxable or
deductible amounts in the future, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. A
valuation allowance is recognized if, based on the weight of available evidence,
it is more likely than not that some portion or all of the deferred asset will
not be realized. Income tax expense is the tax payable or refundable for the
period, plus or minus the change during the period in deferred tax assets and
liabilities.

MANAGEMENT ESTIMATES AND ASSUMPTIONS - The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The financial instruments of the Company
are reported in the accompanying consolidated statement of financial condition
at their carrying values, which approximate their fair values due to their
short-term nature.

                                      F-12
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per share is computed by
dividing income (loss) available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings (loss) per
share considers the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or resulted in the issuance of
common stock. Options, convertible notes and convertible preferred stock were
not included in the computation of net loss per share because the effect of
inclusion would be anti-dilutive.

RECENT ACCOUNTING PRONOUNCEMENTS - In April 2002, the FASB issued SFAS No. 145,
"Rescission of FASB Statements No. 4, No.44 and No. 64 and Amendment of SFAS No.
13." As a result of SFAS 145, gains and losses from extinguishment of debt
should be classified as extraordinary items only if they meet the criteria in
APB Opinion No. 30, that they are unusual and infrequent and not part of an
entity's recurring operations. The Company adopted SFAS 145 for the year
beginning January 1, 2003.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF 94-3. SAFS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. This differs from the guidance in EITF 94-3, which requires that a
liability for costs associated with an exit plan or disposal activity be
recognized at the date of an entity's commitment to an exit plan. SFAS No. 146
also requires all charges related to an exit activity, including accretion of
interest related to the discounting of future liability related to that
activity, to be classified in the same line item on the statement of operations.
The Company adopted the statement for the fiscal year beginning January 1, 2003.

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees Including
Guarantees of Indebtedness of Others", which requires entities to establish
liabilities for certain types of guarantees and expands financial statement
disclosures for others. The accounting requirements of FIN No. 45 are effective
for guarantees issued or modified after December 31, 2002, and the disclosure
requirements are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of FIN No. 45 did not have any
impact on the Company's financial position or results of operations.

In May 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not believe that there will be any impact on its consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how companies classify and measure certain financial
instruments with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003. The adoption
of this standard did not impact the Company's consolidated financial statements.

                                      F-13
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


3. GOING CONCERN AND MANAGEMENT PLANS

The Company's continued existence is dependent upon its ability to return to
profitability and to generate cash either from operations or from new
financings. The Company has losses from continuing operations during 2003 and
2002 and had a stockholders' deficit of $801,183 as of December 31, 2003. Also,
the Company is subject to pending federal and state investigations relating to
the Company's involvement in trading in mutual fund shares by its customers, the
outcome of which is uncertain. These factors raise substantial doubt about the
Company's ability to continue as a going concern.

Management has implemented a plan, which it believes will return the Company to
profitability. As part of the plan, the Company has reduced general and
administrative overhead and operating expenses primarily by relocating and
consolidating its offices and personnel, by entering into a new clearing
arrangement with a third party at lower rates and by settling substantially all
of its controversies with its former co-CEO. The Company has also hired
additional personnel to enhance its market making and order execution
capabilities. As a result of the foregoing and the sale of Advantage, the
Company has focused its efforts on its core business.

There is no assurance that the Company will achieve profitability or be able to
generate cash from either operations or from debt or equity financings. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.


4. SETTLEMENT OF LITIGATION, PURCHASE OF TREASURY STOCK AND DISCONTINUED
   OPERATIONS

SETTLEMENT AGREEMENT:

On November 6, 2003, the Company, its directors, and the former co-CEO entered
into a Stock Purchase and Settlement Agreement, which settled certain
controversies between the parties thereto.

Pursuant to the Settlement Agreement, the Company purchased from the former
co-CEO his 2,088,000 shares of common stock, which were subsequently retired.

As consideration for the purchase of the shares, the former co-CEO received from
the Company all of the issued and outstanding stock of Advantage, a three year
unsecured promissory note for $400,000, and the Company assumed the former
co-CEO's obligation to pay the current CEO all of the assumed G&G purchase price
(See below).

                                      F-14
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


4. SETTLEMENT OF LITIGATION, PURCHASE OF TREASURY STOCK AND DISCONTINUED
   OPERATIONS (CONTINUED)

The Company, the former co-CEO and the current CEO also executed a stock
purchase agreement, dated as of November 6, 2003, wherein the former co-CEO
purchased from the current CEO 50% of the outstanding capital stock of G&G
Holdings, Inc. ("G&G"), a corporation jointly owned by the former and current
CEO, which owned the premises then leased by the Company. The following explains
the transaction in which the Company assumed the liability of the former co-CEO
to pay the current CEO for his G&G stock:


Cash ........................................................ $  250,000

Obligation to pay for his share of the G&G purchase:
    Note payable (see Note 9) ...............................    500,000
    10,000 shares of Series A convertible preferred
       stock at $.01 par value ..............................    300,000
                                                              ----------

                                                              $1,050,000
                                                              ==========

As part of the Settlement Agreement, the Company and G&G entered into an
amendment of the lease between the parties.

The Series A preferred convertible stock ("Series A") ranks prior to the
Company's common stock in liquidation and is convertible into shares of common
stock as determined by dividing the Series A issue price of $30. a share (the
"Series A Issue Price") by the Series A conversion price. The holder of Series A
is entitled to receive cumulative dividends at nine percent. Upon liquidation of
the Company, the holder of shares of Series A will be paid $30. a share plus a
cash amount equal to all unpaid dividends. Subject to earlier conversion, on
November 1, 2008, shares of the Series A may be redeemed by the Company, at the
Company's option.

Subsequent to the Settlement Agreement, the Company elected to forgive the
receivable from the former co-CEO for funds advanced to pay his estimated income
taxes while the Company was an S corporation.

                                      F-15
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


4. SETTLEMENT OF LITIGATION, PURCHASE OF TREASURY STOCK AND DISCONTINUED
   OPERATIONS (CONTINUED)

TREASURY STOCK:

The transaction has been accounted for as a purchase of treasury stock as
follows:

ASSETS OF ADVANTAGE

Cash and cash equivalents ....................................        $2,417,608
Customer receivables .........................................         3,262,613
Other assets .................................................           410,251
                                                                      ----------
                                                                       6,090,472
                                                                      ----------

LIABILITIES OF ADVANTAGE:

Customer payables ............................................         2,746,502
Other current liabilities ....................................         2,343,970
                                                                      ----------
                                                                       5,090,472
                                                                      ----------

         Net assets transferred ..............................         1,000,000

OTHER CONSIDERATION:

Assumption by the Company of former co-CEO's
    obligation to pay for shares of
    G & G stock ..............................................         1,050,000
Note payable issued to former co-CEO .........................           400,000
Expenses of transaction ......................................           199,923
Forgiveness of former co-CEO income
    tax payments .............................................            66,647
Transfer of fixed assets .....................................            42,542
                                                                      ----------

Cost of treasury stock acquired ..............................        $2,759,112
                                                                      ----------


DISCONTINUED OPERATIONS:

Summarized financial information for discontinued operations as of December 31,
was as follows:

                                       2003             2002             2001
                                   -----------      ------------      ----------

Total revenues ...............     $ 5,493,588      $ 10,746,583      $8,240,996
                                   ===========      ============      ==========

Net income (loss) ............     $(1,212,661)     $   (981,344)     $  990,191
                                   ===========      ============      ==========

                                      F-16
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


5. CUSTOMER LISTS AND IMPAIRMENT

On July 23, 2001, the Company acquired certain assets and assumed certain
liabilities of Centennial Capital Management, Inc. ("Centennial"). Centennial
was a securities broker dealer that provided a diversified range of retail
brokerage services through independent registered representatives.

In December 2002, as a result of lower revenues than anticipated and lower
expected future cash flows, the Company determined that a partial impairment of
the customer lists was required. Therefore, an impairment charge of $1,001,474
was recorded.

Customer lists consisted of:

                                 Adjusted          Accumulated
                                   cost            amortization            Net
                                ----------         ------------         --------

December 31, 2003 ....          $1,355,257          $1,209,864          $145,393
December 31, 2002 ....          $1,355,257          $1,023,867          $331,390


Amortization for the years ending December 31, 2003 and 2002 was $185,997 and
$690,403, respectively. Amortization for the year ended 2004 is expected to be
$145,393.


6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

At December 31, accounts payable and accrued expenses consisted of the
following:

                                                 2003           2002
                                              ----------     ----------

         Accounts payable ...............     $  376,750     $  463,965
         Commissions payable ............        340,390              -
         Other accrued expenses .........        259,363        358,328
         Accrued payroll ................        206,160        421,996
         Accrued rent ...................         26,230         75,227
                                              ----------     ----------

                                              $1,208,893     $1,319,516
                                              ==========     ==========

                                      F-17
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


7. NOTES PAYABLE

Notes payable at December 31, 2003, consisted of the following:


Convertible notes payable to investors, interest payable
semi-annually on June 30 and December 31 at ten percent.
Notes convertible into common stock at $2.00 per share
subject to certain adjustments. Payable in full on December
31, 2006, if not converted. .........................................  $400,000

Unsecured note payable to the former co-CEO. The note
requires monthly installments of $11,111, plus interest at
six percent until December 31, 2004 and nine percent
thereafter. The note matures on October 1, 2006. ....................   390,741
                                                                       --------

                                                                       $790,741
                                                                       ========

The annual maturities of principal payable on the notes payable are as follows:

                              Year ending December 31,
                           -----------------------------

                           2004 .............. $ 133,333
                           2005 ..............   133,333
                           2006 ..............   524,075
                                               ---------

                           Total ............. $ 790,741
                                               =========

The note payable to the former co-CEO contains provisions relating to the sale
of the Company, wherein the note would be paid off from the proceeds of the
sale. Additionally, in the event the Company receives any proceeds from the
issuance of any equity security (other than in connection with the exercise of
stock options), or in connection with the incurrence of any indebtedness for
money borrowed (excluding indebtedness incurred by the Company in connection
with margin loans to customers), the Company is required to make principal
payments in an aggregate amount equal to 50% of the net proceeds in an amount
proportional to the outstanding principal balance of the former co-CEO's notes
to the former co-CEO and current CEO.

Subsequent to December 31, 2003, the Company paid the March 1, 2004 installment
on this note to the former co-CEO by offsetting the March installment against
amounts owed to the Company by the former co-CEO. The former co-CEO filed a
claim against the Company alleging breach of the terms and conditions of the
note. In addition, the former co-CEO alleges the Company failed to provide him
with his required proportionate share of the net proceeds raised from the
issuance of equity securities and indebtedness in December 2003 and January
2004. As of March 26, 2004, there has been no determination as to the outcome of
this controversy.

                                      F-18
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


8. NOTE PAYABLE - RELATED PARTY

Note payable - related party at December 31, 2003, consisted of the following:

Unsecured note payable to the current CEO. The note requires monthly
installments of $13,889, plus interest at six percent until December 31, 2004
and nine percent thereafter. The note matures on October 1, 2006.

The note contains provisions relating to the sale of the Company, wherein the
notes would be paid off from the proceeds of the sale. Additionally, in the
event that the Company receives any proceeds from the issuance of any equity
security (other than in connection with the exercise of stock options), or in
connection with the incurrence of any indebtedness for money borrowed (excluding
indebtedness incurred by the Company in connection with margin loans to
customers), the Company is required to make principal payments in an aggregate
amount equal to 50% of the net proceeds to the current CEO in an amount
proportional to the then outstanding principal amount of the notes to the former
co-CEO and the current CEO.

The annual maturities of principal payable on the notes are as follows:

                              Year ending December 31,
                           -----------------------------

                           2004 .............. $ 166,667
                           2005 ..............   166,667
                           2006 ..............   155,092

                                              ----------

                           Total ............. $ 488,426
                                              ==========

In December 2003 and January 2004, the Company issued equity securities and
indebtedness utilizing convertible notes payable. Pursuant to the note issued to
the current CEO, the Company is required to make principal payments in an
aggregate amount equal to 50% of the net proceeds in an amount proportional to
the outstanding principal balance of the current CEO's note and the former
co-CEO's note. The current CEO has elected to waive all principal note
reductions with regards to the equity and debt securities issued by the Company,
as described above, through April 8, 2004.

                                      F-19
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


9. EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2003 -

During 2003, after the completion of the tax return for 2002, the Company
determined that no tax payments were due the S corporation stockholders.
Consequently, the Company reversed the $61,353 accrual from 2002 and one of the
stockholders reimbursed the Company for his tax advance of $67,000.

On May 28, 2003, the board of directors authorized the Company to make an
exchange offer to all holders of outstanding options (with an exercise price of
$6.00 per share), to allow holders to exchange their options into shares of
common stock of the Company on a ratio of five options for each share of common
stock. Effective September 12, 2003, these holders exchanged 473,250 options for
94,650 shares of common stock. Half of the shares vest in 90 days from the date
of issuance, and the balance vest one year from date of issuance. In connection
with the exchange, compensation expense of $79,440 was recorded and $26,480 was
recorded as deferred compensation.

On June 19, 2003, 100,000 restricted shares of stock were granted to the
president of the Company. This stock, according to the president's employment
agreement, vests over three years. Therefore, the Company recorded $23,652 as
expense and $107,348 as deferred compensation. Also, on that same date, 200,000
stock options, previously granted to the president were cancelled and reissued.
The options were accounted for as variable according to FASB Interpretation No.
44, "Accounting for Certain Transactions Involving Stock Compensation," and
accordingly, a charge of $198,500 was recorded. Additionally, the Company issued
certain options to officers, directors and employees at exercise prices below
market. The Company recorded a charge for the difference of $63,860.

In September 2003, 100,000 stock options were exercised and $112,000 was
received by the Company.

On November 6, 2003, the Company issued 10,000 shares of Series A preferred
stock to the current CEO as part of the Settlement Agreement. On that same date,
the Company repurchased 2,088,000 shares of common stock owned by the former
co-CEO. As of December 31, 2003, the Company retired all outstanding treasury
shares.

On December 28, 2003, the Company sold 200,000 shares of common stock for
$250,000.

FOR THE YEAR ENDED DECEMBER 31, 2002 -

On April 9, 2002, the Company sold 1,000,000 shares of common stock for
$6,000,000, less expenses of $957,384, including underwriting commissions. The
net amount to the Company after deducting the total expenses incurred in the
offering was $5,042,616. The stockholders contributed all the retained earnings
through April 9, 2002 totaling $3,331,082 to additional paid-in capital. The
Company distributed $865,941 to the stockholders for the payment of individual
income taxes while the Company was an S corporation. The Company accrued
estimated payments to the stockholders for income taxes for 2002 in the amount
of approximately $60,000.

During April and November of 2002, the Company repurchased 212,200 shares of its
common stock. The total cost of the stock repurchased was $1,135,197.

                                      F-20
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


9. EQUITY (CONTINUED)

STOCK OPTIONS -

During March 2000, the Company adopted the 2000 Incentive Compensation Plan (the
"Plan"). The Plan is designed to serve as an incentive for retaining directors,
employees, consultants and advisors. Stock options, stock appreciation rights
and restricted stock options may be granted to certain persons in proportion to
their contribution to the overall success of the Company as determined by the
board of directors or a committee thereof. Effective April 9, 2002, the Company
granted 677,950 options for common stock, including 87,500 granted to
consultants, which were valued at $413,000, using the Black-Scholes option
pricing model. All options, except for 200,000, vest over five years and expire
in ten years from the date of grant. The 200,000 options vest immediately but
only 100,000 can be sold within the first year.

The following table summarizes stock options at December 31, 2003:
<TABLE>
<CAPTION>
                          Outstanding Stock Options                    Exercisable Stock Options
                    --------------------------------------        ------------------------------------
                                  Weighted                                     Weighted
                                   Average        Weighted                      Average      Weighted-
                                  Remaining       Average                      Remaining      average
    Exercise                     Contractual      Exercise                    Contractual    exercise
  Price range        Shares         Life           Price          Shares         Life          price
  -----------        ------         ----           -----          ------         ----          -----
<S>                 <C>             <C>            <C>            <C>            <C>           <C>
 $1.12 - $1.14      380,000         9.50           $1.13          380,000        9.50          $1.13
 $1.45 - $2.00      225,000         9.58           $1.76                -           -          $   -
     $6.00              500         8.25           $6.00              100        8.25          $6.00
</TABLE>

The following table summarizes stock option activity for the years ended
December 31:
<TABLE>
<CAPTION>
                                                    2003                           2002
                                                    ----                           ----

                                                          Weighted                       Weighted
                                                          Average                        Average
                                                          Exercise                       Exercise
                                           Shares          Price          Shares           Price
                                         ----------       --------       ---------       --------
<S>                                        <C>            <C>            <C>              <C>
Outstanding at beginning of year .......    648,100       $  6.00               -         $    -
Granted ................................    705,000          1.33         677,950           6.00
Exercised ..............................   (100,000)         1.12               -              -
Converted ..............................   (473,250)         6.00               -              -
Cancelled ..............................   (174,350)         6.00         (29,850)          6.00
                                         ----------                      ---------

Outstanding at end of year .............    605,500       $  1.36         648,100         $ 6.00
                                         ==========                      =========

Exercisable at end of year .............    380,100                       100,000
                                         ==========                      =========

Weighted average fair value of
   options granted during the year ..... $     1.21                      $   6.00
                                         ==========                      =========
</TABLE>
                                      F-21
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


10.  INCOME TAXES

Deferred income tax assets as of December 31, were as follows:

                                             2003                2002
                                          -----------         ---------

Net operating losses .................... $   900,000         $ 200,000
Customer lists ..........................     420,000           575,000
Deferred revenue ........................           -           195,000
                                          -----------         ---------
                                            1,320,000           970,000
Less valuation allowance ................  (1,320,000)         (970,000)
                                          -----------         ---------

Net deferred tax asset ..................    $      -          $      -
                                          ===========         =========

A valuation allowance has been recorded due to the uncertainty of realizing the
net deferred tax asset.

The Company had available at December 31, 2003, a net operating loss
carryforward for federal and state tax purposes of approximately $2,500,000 that
could be applied against taxable income in subsequent years through December 31,
2023.

Reconciliation of the differences between income tax benefit computed at the
federal and state statutory tax rates and the provision for income tax benefit
for the years ended December 31, 2003 and 2002 was as follows:


Income tax loss at federal statutory rate ...................   (34.00)%
State taxes, net of federal benefit .........................    (3.63)
Valuation allowance .........................................    37.63
                                                                --------

Provision for income taxes ..................................      -   %
                                                                ========

                                      F-22
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


11. COMMITMENTS AND CONTINGENCIES

RELATED PARTY COMMITMENTS

In November 1999, the Company entered into a lease agreement for operating
facilities with G&G. The lease contained escalating rental payments and expired
in May 2009. Rental expense was reflected on a straight-line basis over the term
of the lease. During the year ended December 31, 2002, the Company overpaid the
rent in the amount of $25,668. For the years ended December 31, 2003, 2002 and
2001, the Company recorded rent expense of $138,531, $139,286 and $136,156,
respectively. According to the Settlement Agreement, the Company is responsible
for paying rent totaling $26,230 in 2004.

OFFICE LEASE COMMITMENTS

On December 31, 2003, the Company executed a lease for new corporate offices
commencing March 1, 2004 and ending February 28, 2010. The Company is not
required to make lease payments through August 2004.

With the exception of the Company's Atlanta office, the Company does not have
lease agreements for its branch offices. The rent for the branch offices is paid
by the independent registered representatives located in those offices. The rent
for the Company's Atlanta office is $1,334 monthly. The lease expires on August
31, 2004.

At December 31, 2003, approximate future minimum annual lease payments for the
next five years were as follows:

                          2004 ..............  $  81,000
                          2005 ..............    136,000
                          2006 ..............    137,000
                          2007 ..............    140,000
                          2008 ..............    143,000
                       Thereafter ...........    171,000
                                               ---------

                                               $ 808,000
                                               =========

REGULATORY AND LEGAL MATTERS

The securities industry is subject to extensive regulation under Federal, state
and applicable international laws. As a result, the Company is required to
comply with many complex laws and rules and its ability to so comply is
dependent in large part upon the establishment and maintenance of a qualified
compliance system. From time to time, the Company has been threatened with, or
named as a defendant in, lawsuits, arbitration and administrative claims
involving securities and other matters. The Company is also subject to periodic
regulatory audits and inspections. Compliance and trading problems are reported
to regulators, such as the SEC, the NYSE, the NASD or the OTS by dissatisfied
customers or others are investigated by such regulators, and may, if pursued,
result in formal claims being filed against the Company by customers and/or
disciplinary action being taken against the Company by regulators. Any such
claims or disciplinary actions that are decided against the Company could harm
the Company's business.

                                      F-23
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

On October 17, 2003, the Company received the first of a series of subpoenas
issued by the United States Securities and Exchange Commission in an
investigation regarding mutual fund trading practices. The investigation seeks
information regarding whether certain persons and entities engaged in, or aided
and abetted others to engage in, certain practices, in connection with the
trading of mutual funds shares in violation of the federal securities laws. The
New York Attorney General is also conducting a similar investigation. At this
time, management cannot determine the financial impact, if any, on the Company,
or the results of these investigations.

The Company is a defendant or co-defendant in various lawsuits incidental to its
retail brokerage services business. The Company is contesting the allegations of
the complaints in these cases. In view of the number and diversity of claims
against the Company, the number of jurisdictions in which litigation is pending
and the inherent difficulty of predicting the outcome of litigation and other
claims, management cannot state with certainty the eventual outcome of pending
litigation or other claims. In the opinion of management, based on discussions
with legal counsel, the outcome of the matters will not result in a material
adverse effect on the financial position or results of operations of the
Company.

On January 16, 2004, the Company filed suit against the former co-CEO and G&G
alleging that the former co-CEO breached the Settlement Agreement and the lease
agreement covering the Company's former executive offices. On February 12, 2004,
the former co-CEO, G & G and Advantage filed a countersuit alleging breach of
the Settlement Agreement and breach of the lease among other claims. The Company
believes the countersuit is without merit and intends to vigorously prosecute
its claim against the former co-CEO.


12. NET CAPITAL AND RESERVE REQUIREMENTS

The Empire Group is subject to SEC Uniform Net Capital Rule 15c3-1, which
requires the maintenance of minimum net capital equal to $250,000 and requires
that the ratio of aggregate indebtedness to net capital, both as defined, shall
not exceed 15 to 1. Net capital and the related ratio of aggregate indebtedness
to net capital, as defined, may fluctuate on a daily basis. At December 31,
2003, the Empire Group had net capital of $313,552, which was $63,552 in excess
of its required net capital of $250,000. The Empire Group's ratio of aggregate
indebtedness to net capital was 2.80 to 1. The Empire Group claims exemption
from Rule 15c3-3 under Paragraph (k)(2)(ii) of the Rule as all customer
transactions are cleared through other broker-dealers on a fully-disclosed
basis.

                                      F-24
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


13. OFF-BALANCE SHEET RISK

In the normal course of business, the Company purchases and sells securities as
principal for its own account and on behalf of its customers. If either the
customer or a broker dealer fails to perform, the Company could be required to
discharge the obligations of the non-performing party. In these circumstances,
the Company could sustain a loss of the market value if the security contract is
different from the contract value of the transaction.

Retail customer transactions are cleared through the clearing brokers on a fully
disclosed basis. In the event that customers default in payments of funds or
delivery of securities, the clearing brokers may charge the Company for any loss
incurred in satisfying the customer obligations. Additional credit risk occurs
if the clearing brokers of affiliates do not fulfill their obligations. The
Company regularly monitors the activity in its customer accounts for compliance
with margin requirements.

                                      F-25
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


14. SELECTED QUARTERLY DATA

2003
<TABLE>
<CAPTION>
                                                     First            Second            Third           Fourth
                                                    Quarter           Quarter          Quarter          Quarter
                                                  -----------      ------------      -----------      -----------
<S>                                               <C>              <C>               <C>              <C>
Revenues ...................................      $ 3,121,299      $  4,205,183      $ 5,067,141      $ 5,164,513
                                                  ===========      ============      ===========      ===========

Net loss from
   continuing operations ...................          (16,776)       (1,256,880)        (186,689)        (411,003)

Income (loss) from discontinued
   operations ..............................         (382,501)           19,486         (419,593)        (430,053)
                                                  -----------      ------------      -----------      -----------

Net loss ...................................      $  (399,277)     $ (1,237,394)     $  (606,282)     $  (841,056)
                                                  ===========      ============      ===========      ===========

Basic and diluted earnings (loss) per share:
   Continuing operations ...................      $      0.00      $      (0.26)     $     (0.04)     $     (0.11)
                                                  ===========      ============      ===========      ===========
   Discontinued operations .................      $     (0.08)     $       0.01      $     (0.08)     $     (0.11)
                                                  ===========      ============      ===========      ===========
   Net income (loss) per share .............      $     (0.08)     $      (0.25)     $     (0.12)     $     (0.22)
                                                  ===========      ============      ===========      ===========

Weighted average shares
   outstanding .............................        4,787,800         4,804,284        4,927,958        3,838,337
                                                  ===========      ============      ===========      ===========
</TABLE>
                                      F-26
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


14. SELECTED QUARTERLY DATA (CONTINUED)

2002
<TABLE>
<CAPTION>
                                                     First            Second            Third           Fourth
                                                    Quarter           Quarter          Quarter          Quarter
                                                  -----------      ------------      -----------      -----------
<S>                                               <C>              <C>               <C>              <C>
Revenues ...................................      $ 4,222,689      $  2,990,566      $ 2,084,938      $ 3,906,925
                                                  ===========      ============      ===========      ===========

Net income (loss) from
   continuing operations ...................          804,171          (644,736)        (168,655)      (1,486,504)

Income (loss) from discontinued
   operations ..............................           97,527           238,998         (286,388)      (1,031,481)
                                                  -----------      ------------      -----------      -----------

Net income (loss) ..........................      $   901,698      $   (405,738)     $  (455,043)     $(2,517,985)
                                                  ===========      ============      ===========      ===========

Basic and diluted earnings (loss) per share:
   Continuing operations ...................      $      0.20      $      (0.14)     $     (0.03)     $     (0.36)
                                                  ===========      ============      ===========      ===========
   Discontinued operations .................      $      0.03      $       0.05      $     (0.06)     $     (0.23)
                                                  ===========      ============      ===========      ===========
   Net income (loss) per share .............      $      0.23      $      (0.09)     $     (0.09)     $     (0.59)
                                                  ===========      ============      ===========      ===========

Unaudited pro forma income, net of provision
  for income taxes:
      Continuing operations ................      $   501,171      $   (401,736)
      Discontinued operations ..............           60,527           148,998
                                                  -----------      ------------

   Net income (loss) .......................      $   561,698      $   (252,738)
                                                  ===========      ============

Basis and diluted pro forma earnings (loss)
  per share:
   Continuing operations ...................      $      0.13      $      (0.08)
                                                  ===========      ============
   Discontinued operations .................      $      0.01      $       0.03
                                                  ===========      ============
   Net income (loss) per share .............      $      0.14      $      (0.05)
                                                  ===========      ============

Weighted average shares
   outstanding .............................        4,000,000         4,740,112        4,802,800        4,795,952
                                                  ===========      ============      ===========      ===========
</TABLE>
                                      F-27
<PAGE>
                EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


14. SELECTED QUARTERLY DATA (CONTINUED)

2001
<TABLE>
<CAPTION>
                                                     First            Second            Third           Fourth
                                                    Quarter           Quarter          Quarter          Quarter
                                                  -----------      ------------      -----------      -----------
<S>                                               <C>              <C>               <C>              <C>
Revenues ...................................      $ 3,387,782      $  1,987,707      $ 2,251,695      $ 2,765,734
                                                  ===========      ============      ===========      ===========

Net income (loss) from
   continuing operations ...................           90,011             8,628           31,134          415,317

Income (loss) from discontinued
   operations ..............................          814,904           (37,358)         265,391          (52,746)
                                                  -----------      ------------      -----------      -----------

Net income .................................      $   904,915      $    (28,730)     $   296,525      $   362,571
                                                  ===========      ============      ===========      ===========

Basic and diluted earnings (loss) per share:
   Continuing operations ...................      $      0.02      $       0.01      $      0.01      $      0.10
                                                  ===========      ============      ===========      ===========
   Discontinued operations .................      $      0.21      $      (0.01)     $      0.06      $     (0.02)
                                                  ===========      ============      ===========      ===========
   Net income (loss) per share .............      $      0.23      $          -      $      0.07      $      0.08
                                                  ===========      ============      ===========      ===========

Unaudited pro forma income, net of provision
  for income taxes:
      Continuing operations ................      $    56,011      $      5,628      $    19,428      $   258,915
      Discontinued operations ..............          507,904           (23,358)         165,482          (32,429)
                                                  -----------      ------------      -----------      -----------

   Net income (loss) .......................      $   563,915      $    (17,730)     $   184,910      $   226,486
                                                  ===========      ============      ===========      ===========

Basic and diluted pro forma earning (loss)
 per share:
   Continuing operations ...................      $      0.01      $          -      $      0.01      $      0.07
                                                  ===========      ============      ===========      ===========
   Discontinued operations .................      $      0.13      $          -      $      0.04      $     (0.02)
                                                  ===========      ============      ===========      ===========
   Net income (loss) per share .............      $      0.14      $          -      $      0.05      $      0.05
                                                  ===========      ============      ===========      ===========

Weighted average shares
   outstanding .............................        4,000,000         4,000,000        4,000,000        4,000,000
                                                  ===========      ============      ===========      ===========
</TABLE>
                                      F-28
<PAGE>
<TABLE>
                          EMPIRE FINANCIAL HOLDING COMPANY AND SUBSIDIARIES
                               SCHEDULE II - VALUATION AND QUALIFYING
                                        ACCOUNTS AND RESERVES
                               YEARS ENDED DECEMBER 31, 2003 AND 2002
<CAPTION>
                                                         Additions
                                               ---------------------------------
                                Balance at     Charged to    Charged to                  Balance at
                               beginning of    costs and        other                     end of
                                   year         expenses      accounts     Deductions       year
                               ------------    ----------    ----------    ----------    ----------
<S>                             <C>            <C>             <C>           <C>         <C>
Year ended December 31, 2003:

 Allowance for impairment of
      intangible assets ......  $1,001,474     $        -      $    -        $    -      $1,001,474
                                ===========    ==========      ======        ======      ==========

Year ended December 31, 2002:

 Allowance for impairment of
      intangible assets ......  $        -     $1,001,474      $    -        $    -      $1,001,474
                                ===========    ==========      ======        ======      ==========

                                                F-29
</TABLE>