**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549




**FORM
      10-KSB**




(Mark
      One)




**x
      ANNUAL REPORT UNDER
      SECTION 13 OR 15 (D) OF THE**




**SECURITIES
      EXCHANGE ACT OF 1934**




**FOR
      THE FISCAL YEAR ENDED MARCH 31, 2007**




OR




**o
      TRANSITION REPORT UNDER
      SECTION 13 OR 15(D) OF THE**




**SECURITIES
      EXCHANGE ACT OF 1934**




For
      the
      transition period from __________________ to __________________




*Commission
      file number: 0-9587*





**HUDSON
      HOLDING CORPORATION**





(Name
      of
      Small Business Issuer in Its Charter)


Delaware
              
              20-3766053(State
                    or Other Jurisdiction
              
              (I.R.S.
                    Employerof
                  Incorporation or Organization)
              
              Identification
                  No.)111
                  Town Square Place; Suite 1500AJersey
                  City, New Jersey
              
              07310(Address
                  of Principal Executive Offices)
              
              (Zip
                  Code)




Issuer's
      telephone number: (201) 216-0100




Check
      whether the issuer is not required to file reports pursuant to Section
      13


or
      15(d)
      of the Exchange Act o




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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 o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B 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 to Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o




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




State
      issuer's revenues for its most recent fiscal year: $20,851,519




The
      aggregate market value of the voting common equity held by non-affiliates of
      the
      registrant was approximately $4,748,066 as of June 22, 2007, based upon the
      average of the closing bid and ask price on the OTC Bulletin Board reported
      for
      such date. Shares of common stock held by each officer and director and by
      each
      person who owns 5% or more of the outstanding Common Stock have been excluded
      in
      that such persons may be deemed to be affiliates. This determination of
      affiliate status is not necessarily a conclusive determination for other
      purposes.




As
      of
      June 22, 2007, the Registrant had 36,725,185 shares of its Common Stock, $0.001
      par value, issued and outstanding.




Documents
      Incorporated By Reference: None




Transitional
      Small Business Disclosure Format Yes o No x











**HUDSON
      HOLDING CORPORATION**


**FORM
      10-KSB**





**TABLE
      OF CONTENTS**




**PART
                  I**FORWARD-LOOKING
                  STATEMENTS
              
              
              1ITEM
                  1.DESCRIPTION OF BUSINESS
              
              
              1ITEM
                  2.DESCRIPTION OF PROPERTIES
              
              
              11ITEM
                  3.LEGAL PROCEEDINGS
              
              
              12ITEM
                  4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              
              12**PART
                  II**ITEM
                  5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERSAND
                  SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
              
              
              13ITEM
                  6.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              
              
              14ITEM
                  7.FINANCIAL STATEMENTS
              
              
              18ITEM
                  8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTINGAND
                  FINANCIAL DISCLOSURE
              
              
              18ITEM
                  8A.CONTROLS AND PROCEDURES
              
              
              18ITEM
                  8B. OTHER INFORMATION
              
              
              18**PART
                  III**ITEM
                  9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS;CORPORATE
                  GOVERNANCE, ANDCOMPLIANCE
                  WITH SECTION 16(A) OF THE EXCHANGE ACT
              
              
              19ITEM
                  10. EXECUTIVE COMPENSATION
              
              
              21ITEM
                  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT,
                  AND RELATED STOCKHOLDER MATTERS
              
              
              23ITEM
                  12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND
                  DIRECTOR INDEPENDENCE
              
              
              24ITEM
                  13. EXHIBITS
              
              
              25ITEM
                  14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
              
              
              26SIGNATURES
              
              
              27FINANCIAL
                  STATEMENTS
              
              
              F-1










**PART
      I**




**INTRODUCTORY
      NOTE**




**FORWARD-LOOKING
      STATEMENTS**




Information
      included or incorporated by reference in this Annual Report may contain
      forward-looking statements. This information may involve known and unknown
      risks, uncertainties and other factors which may cause our actual results,
      performance or achievements to be materially different from the future results,
      performance or achievements expressed or implied by any forward-looking
      statements. Forward-looking statements, which involve assumptions and describe
      our future plans, strategies and expectations, are generally identifiable by
      use
      of the words "may," "should," "expect," "anticipate," "estimate," "believe,"
      "intend" or "project" or the negative of these words or other variations on
      these words or comparable terminology.




This
      Form
      10-KSB Annual Report contains forward-looking statements, including statements
      regarding, among other things, (a) our projected revenues and profitability,
      (b)
      our growth strategies, (c) anticipated trends in our industry, (d) our future
      financing plans and (e) our anticipated needs for working capital. These
      statements may be found under "Management's Discussion and Analysis or Plan
      of
      Operations" and "Description of Business," as well as in other sections of
      this
      Annual Report generally. Actual events or results may differ materially from
      those discussed in forward-looking statements as a result of various factors,
      including, without limitation, the risks outlined under "Risk Factors" and
      matters described in this Annual Report generally. In light of these risks
      and
      uncertainties, there can be no assurance that the forward-looking statements
      contained in this Annual Report will in fact occur.




**Item
      1. Description of Business**





**Our
      Business**





**General**





Hudson
      Holding Corporation (“Holding”), was formed in 1987, is a holding company and is
      the parent of its wholly owned subsidiaries, Hudson Securities, Inc. (“Hudson”)
      and Hudson Technologies, Inc. (“Technologies”), (collectively the “Company”).
      Hudson was formed in 1984, is a registered broker-dealer under the Securities
      Exchange Act of 1934 and is a member of the National Association of Securities
      Dealers, Inc. (the "NASD"). Technologies was formed in 2006 for the purpose
      of
      providing software development and technology services for Hudson and for third
      parties. All three entities are incorporated in the State of Delaware. The
      Company has offices in New Jersey and Florida.





On
      June 30, 2004, Hudson’s current management team consummated the purchase of
      all of the outstanding shares of the predecessor broker-dealer’s common stock.
      Subsequently, on July 21, 2004, the predecessor broker-dealer formed a
      wholly owned subsidiary named Hudson Capital Markets, Inc. ("HCMI"), which
      was
      organized in the state of Delaware. On July 31, 2004, the predecessor
      broker-dealer was merged into HCMI, with HCMI becoming the survivor ("HCMI
      Merger") and the name was changed to Hudson Securities, Inc.





In
      December 2004, Hudson entered into an Agreement and Plan of Merger (the
      "Agreement") with Health Outcomes Management, Inc. ("HOM"), a non-operating
      public company. On May 3, 2005, under the terms of the Agreement, Hudson's
      stockholders exchanged all of their shares of common stock and warrants for
      shares of HOM common stock (the "Exchange"). The HOM shares that were issued
      to
      Hudson shareholders in the merger represented 94% of HOM's outstanding interest
      at the time of this exchange. In connection with the legal form of this
      transaction, Hudson became a wholly owned subsidiary of HOM. On September 6,
      2005, HOM changed its name to Hudson Holding Corporation and effectuated a
      one
      for eight reverse stock split for all stockholders of record as of the close
      of
      business on June 13, 2005. For financial reporting purposes, the Exchange
      represents a capital transaction of Hudson or a "reverse merger" rather than
      a
      business combination.





**Operations**




Hudson
      is
      a member of the National Association of Securities Dealers and is insured by
      the
      Securities Investor Protection Corporation. Hudson is a market maker trading
      more than 9,000 securities quoted on the NASDAQ stock market, the OTC Bulletin
      Board, and the National Quotation Bureau’s Pink Sheets, listed and foreign
      securities, and specializes in providing liquidity in less liquid,
      difficult to trade stocks.




As
      a
      market maker, Hudson provides its customers with order executions. When
      customers come to Hudson seeking to buy or sell securities, the firm works
      to
      satisfy the customers’ needs, either by finding counterparties willing to trade
      with the customers (obtaining liquidity) or, where appropriate, by taking the
      other side of the trades, thereby providing liquidity for its customers by
      purchasing or selling the securities itself. In a sense, liquidity is the
      product that Hudson sells to its customers.




1




Hudson’s
      customers are firms that require liquidity to complete stock trades, funds
      whose
      investment decisions call for shifts into or out of certain stocks, retail
      customers, professional traders who want to establish or liquidate their
      positions, and other retail brokerage firms whose individual investor clients
      wish to buy or sell securities. By trading with Hudson, its customers are able
      to obtain liquidity.





Providing
      trade executions generates two types of revenue for Hudson, commission revenue
      and trading revenue.





Commission
      revenue comes from the fees that Hudson charges its customers for executing
      their orders, generally a fixed price per share traded. Revenue may vary with
      the number and size of Hudson’s customers and with their level of trading
      activity. Commission revenue is free of market risk for Hudson since Hudson
      acts
      as an agent and does not take any proprietary security positions.





Trading
      revenue is derived from the profit and loss associated with purchases and sales
      of securities for Hudson’s trading account, for securities in which Hudson makes
      markets. In doing so, the firm itself is at risk to changes in stock prices.
      Trading profits are obtained by paying less to buy shares for its own account
      than the firm receives for selling those shares. Because the price for which
      the
      firm is willing to purchase shares (its “bid” price) is always less than the
      price at which it would then sell those shares (its “ask” price), trading with a
      customer presents a market maker with an opportunity to capture the difference
      between these prices (the “bid-ask spread”) provided it can find a contra-party
      with whom to trade in the same security before the stock price moves against
      the
      trader. Finding a counter party to take the other side of a trade can be
      challenging, and failure to find a counter party at the right price or time
      can
      lead to a loss.





**Competitive
      Advantages**





Hudson
      believes that it differentiates itself by the stocks it trades and by the
      customers it serves. While many of the firm’s competitors emphasize NASDAQ
      National Market stocks, Hudson focuses on providing liquidity in
      difficult-to-trade stocks, including shares quoted on the OTC Bulletin Board
      and
      Pink Sheets and second tier and Small-Cap NASDAQ stocks. At a time when much
      of
      the industry is shifting toward serving institutional customers, Hudson’s
      strategy is to maintain and grow existing relationships with retail firms while
      seeking to attract new customers from among other retailers that the firm’s
      competitors neglect.





**Technology**





Hudson
      maintains a multi-tier connectivity network to receive customers’ orders, to
      monitor the markets, and to communicate with trading partners. Hudson’s traders
      have the ability to trade all U.S. equities, using Sungard’s BRASS order
      management system to process incoming orders and its UMA market access system
      and the NASDAQ Level III system to enter orders. These systems interface with
      Goldman Sachs Execution & Clearing, L.P. (Hudson’s clearing broker) to
      ensure trades are processed. The firm’s Jersey City and Boca Raton offices are
      in constant communication and can serve as back-up for one another in case
      of
      system failures.





Hudson
      has migrated to Sungard’s “dedicated complex” on which Hudson can run its BRASS
      servers. The facility is capable of executing trades at peak rates of
      approximately triple the previous average capacity. Its complete implementation
      has allowed Sungard to be more responsive to Hudson’s needs, provided the
      ability to make changes to the system during trading hours, and facilitated
      the
      addition of a dedicated FIX-protocol communications server, which simplified
      the
      setup of new customer connections. The FIX server became operational during
      the
      second calendar quarter of 2007 and order flow is now being processed via this
      new connectivity.





Technologies
      is a hardware and software technology division of Holdings. Technologies creates
      and develops software to enhance the trading environment of Hudson and to meet
      customers needs for customized services. To date, Technologies has created
      applications that advance the base functionality of BRASS, a Sungard Order
      Management System. The profit and loss system developed by Technologies is
      a
      tool for equities sales traders of Hudson Securities which on a nightly basis
      calculates what they have earned based on their customer order flow. The system
      also creates a management report, as well as several other customer reports,
      to
      enhance the value of Hudson to its clients. To the extent that these programs
      may be useful for other brokerage firms, Technologies may sell or license these
      programs to others.





Technologies,
      through its value added vendor relationships, has created several modules using
      the BRASS OAPI, (an open OPI which allows Hudson to write code to the
      application) which will be able to provide added functionality for the traders
      of Hudson. Technologies also operates a carrier neutral co-location data center
      where customers can rent cabinets, paying Technologies a monthly fee.
      Technologies also generates revenues by providing co-location customers with
      remote hands support .





2





**Future
      Products and Services**





Hudson
      is
      actively seeking to expand into complementary businesses, both by developing
      new
      product/service offerings that will be valuable to Hudson’s existing customers
      and by entering into strategic partnerships with related businesses that can
      increase its number of new customers. During the most recently completed fiscal
      year, Hudson began trading listed securities and currently trades approximately
      500 listed securities. There can be no assurance that we will meet our goal.
      Strategic partnership candidates include boutique investment banking and money
      management firms. It may be necessary to acquire new businesses or hire
      experienced personnel to effectuate expansion plans in these areas, none of
      which have been identified to date.





**The
      Market**





Hudson
      focuses on attracting orders from retail brokerage firms and buy-side
      institutions, such as mutual funds, hedge funds and trusts.





Market
      makers’ main customers are retail brokers and institutions that require order
      executions for varieties of stocks, from widely traded issues, like those of
      S&P 500 and NASDAQ 100 companies, to less liquid securities such as NASDAQ
      Small-Cap, Bulletin Board, and Pink Sheet stocks.





While
      offering liquidity across a broad range of stocks to both institutional and
      retail brokerage customers, Hudson intends to focus its resources on increasing
      the firm’s market share as a liquidity provider to retail brokerage firms and on
      specializing in less liquid issues.





Management
      believes that retail order-entry firms are being neglected in the increasing
      competition among market makers for institutional customers, offering the firm
      an opportunity to increase its presence in that segment. Meanwhile, particularly
      as large competitors decrease their commitment to the market making business
      in
      light of recent “lean years,” lucrative retail brokerage customers may be
      interested in investigating alternative relationships, presenting Hudson with
      an
      opportunity to attract such customers. By establishing a large pool of retail
      orders, management believes that the firm will ultimately be better positioned
      to attract buy-side institutional firms in search of liquidity.





By
      focusing on less liquid stocks, the firm avoids some of the fiercest competition
      among market makers and other liquidity providers such as Electronic
      Crossing/Communication Networks (ECN’s). At the same time, Hudson provides a
      less available service, finding a firm willing to fill an order for little-known
      pink sheet stocks. However, trading less liquid issues exposes firms to greater
      price volatility and thus greater risk. There is less investor interest in
      trading such securities, but the wider spreads have greater profit potential.
      Hudson trades many of the most active NASDAQ National Market stocks, and by
      focusing on smaller issues management hopes to appeal to retail brokers in
      need
      of liquidity while maximizing the firm’s profit potential.





**Industry
      Analysis**





Historically,
      a handful of market makers have accounted for most of the shares traded on
      the
      NASDAQ, OTC Bulletin Board and Pink Sheets. Retail brokers and institutions
      prefer to have relationships with (and communication links to) more than one
      market-maker. This engenders competition among market makers, inducing them
      to
      offer fast executions, favorable prices, payment for order flow, liquidity,
      research, convenience, and trustworthiness.





**Industry
      Participants**





Over
      the
      last several years there has been a rapid consolidation in the market making
      industry, as global financial corporations that entered the business near the
      height of the market in the late 1990’s subsequently scaled back, as the market
      (and trading volumes and profits) retreated. While 200+ “market makers” are
      currently registered to trade bulletin board stocks*, we believe that many
      choose to register as market makers for technical reasons, and only a handful
      of
      these firms (including Hudson) actively compete to fill orders from retail
      brokers’ customers. Historically, two of the largest market makers, Knight
      Equity Markets and UBS Securities, dominate the market, accounting for a
      majority of NASDAQ, OTC Bulletin Board and Pink Sheet volume.





*according
      to
      http://www.otcbb.com/dynamic/tradingdata/MarketMakersPositions/MMakersdata.htm




**Competition**





Market
      making can be viewed by some as a commodity business, with participants all
      offering prompt executions of customer orders. But in an industry where everyone
      sells (or buys) identical shares of stock, there are criteria whereby market
      makers manage to distinguish themselves from their competition. Factors on
      which
      market makers compete include execution quality (speed and price), payment
      for
      orderflow, securities traded and available liquidity, research, service, ease
      of
      use and relationships.




3




Many
      of
      our competitors have greater financial, technical and personnel resources than
      Hudson. We compete with over 200 market makers, and specifically with Knight
      Trading Group and UBS Securities, two of the largest market makers. Our ability
      to continue to compete with other market makers will depend on our financial
      resources, trading ability, and our ability to provide other complementary
      services to our clients.





To
      help
      attract new customers, the firm is striving to increase the list of securities
      available for trading. Since the beginning of 2003, Hudson began making markets
      in 1,200 additional NASDAQ stocks. In addition, the firm recently began trading
      500 securities which are listed on certain US and foreign exchanges. Management
      is committed to expanding the list even more going forward, particularly with
      the future deployment of the firm’s automated trading system.





**Future
      Growth**





In
      addition to growing its market making business, the firm also intends to enter
      other (related) business lines, as discussed below. Management believes that
      entering other related businesses will help reduce earnings fluctuations. In
      addition, management hopes that the introduction of related business lines
      will
      help the firm to attract new customers to its market making business. The firm
      intends to pursue both organic growth and acquisitions to meet this goal,
      although there can be no assurance that management will meet these
      goals.





Furthermore,
      management is considering building a retail brokerage business driven by
      independent sales representatives. The firm would offer brokerage business
      necessities (office space, trading and clearing systems, statement generation)
      to retail brokers who prefer not to work in the traditional brokerage
      environment. Brokers would be allowed wide latitude in deciding how to best
      service their customers (subject to relevant industry rules). With such a
      division, in addition to adding a potentially profitable business, Hudson
      believes it would effectively create a new customer for its market making
      services.




**Government
      Regulation**




The
      securities industry in the United States is subject to extensive regulation
      under both federal and state laws. Hudson is registered as a broker-dealer
      with
      the SEC and certain state securities divisions. Much of the regulation of
      broker-dealers has been delegated to self-regulated organizations, principally
      the NASD, Nasdaq and national securities exchanges. These self-regulatory
      organizations adopt rules (subject to approval by the SEC) that govern the
      industry and conduct regular and periodic examinations of our operations.
      Securities firms are also subject to regulation by state securities
      administrators in those states in which they conduct business. The Company
      is
      also subject to oversight by the U.S. Department of Labor in connection with
      our
      benefit plans.





Significant
      legislation, rule-making and market structure changes have occurred over the
      last five years that have had an impact on the Company. First, decimalization
      was introduced in January 2001 in NYSE and AMEX listed securities, and in Nasdaq
      markets in April 2001. Decimalization, combined with the one-penny minimum
      price
      increment, has had a dramatic reduction in average spreads, which in turn has
      had a profound effect on our profitability. Second, in 2002 Nasdaq launched
      SuperMontage, a Nasdaq routing and execution system. SuperMontage transformed
      Nasdaq from a quote-driven market to a full-order-driven market as quotes and
      orders are treated the same. Under SuperMontage, market makers and ECNs are
      able
      to show trading interest at five different price levels, allowing investors
      to
      see individual and aggregated interest across all market participants at the
      National Best Bid or Offer (“NBBO”) and four additional layers above or below
      the NBBO. Third, the introduction of SuperMontage, which is not used by all
      market participants, and the increase in trading of Nasdaq-listed securities
      by
      other exchanges has created market fragmentation. This lack of linkage between
      market centers has resulted in an increase in locked and crossed markets,
      fragmented liquidity pools and different market centers using different sets
      of
      regulatory rules and regulations. Fourth, the U.S. Patriot Act of 2001, enacted
      in response to the terrorist attacks on September 11, 2001, contains anti-money
      laundering and financial transparency laws and mandates the implementation
      of
      various new regulations applicable to broker-dealers and other financial
      services companies, including standards for verifying client identification
      at
      account opening, and obligations to monitor client transactions and report
      suspicious activities. The increased obligations of financial institutions
      to
      identify their customers, watch for and report suspicious transactions, respond
      to requests for information by regulatory authorities and law enforcement
      agencies, and to share information with other financial institutions, requires
      the implementation and maintenance of internal practices, procedures and
      controls which will increase our costs and may subject us to regulatory
      inquiries, claims or penalties. Lastly, the Sarbanes-Oxley Act of 2002 has
      led
      to sweeping changes in corporate governance. This far reaching legislation
      has
      significantly affected public companies by enacting provisions covering
      corporate governance, board of directors and audit committee structure,
      management and control structure, new disclosure requirements, oversight of
      the
      accounting profession and auditor independence. The SEC also responded by,
      among
      other things, requiring chief executive officers and chief financial officers
      of
      public companies to certify the accuracy of certain financial reports and
      certain other SEC filings.





4





The
      regulatory environment in which we operate is subject to constant change. Our
      business, financial condition and operating results may be adversely affected
      as
      a result of new or revised legislation or regulations imposed by the U.S.
      Congress, the SEC, other U.S. and state governmental regulatory authorities,
      or
      the NASD. Our business, financial condition and operating results also may
      be
      adversely affected by changes in the interpretation or enforcement of existing
      laws and rules by these governmental authorities. Currently,
      new regulations are being discussed related to the over the counter market
      place, which, if adopted, could have negative implications for the profitability
      of making markets in OTC Bulletin Board  and Pink Sheet
      securities.





Additional
      regulation, changes in existing laws and rules, or changes in interpretations
      or
      enforcement of existing laws and rules often directly affect the method of
      operation and profitability of regulated broker-dealers.





**The
      NASD and Net Capital Requirements**





Regulatory
      bodies, including the NASD, are charged with safeguarding the integrity of
      the
      securities and with protecting the interests of investors participating in
      those
      markets. 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.





The
      SEC,
      NASD and various other regulatory agencies have rigid rules, including the
      maintenance of specific levels of net capital by securities brokers and dealers
      pursuant to the SEC’s Uniform Net Capital Rule 15c3-1 with which Hudson must
      comply. As of March 31, 2007, Hudson had total net capital of $8,393,065, which
      is $7,393,065 in excess of the Hudson’s minimum net capital requirement of
      $1,000,000.





Additionally,
      Hudson is subject to periodic, routine finance and operations reviews by the
      NASD staff and state securities divisions. It should be noted that Hudson has
      a
      disciplinary record with the NASD and fines have been levied against Hudson
      for
      violations that occurred during the tenure of the prior management. Given the
      NASD’s policy of progressive disciplinary actions, this prior record could
      adversely impact Hudson if we are cited for additional violations. On May 5,
      2006, the NASD levied a fine of $72,500 against Hudson related to examinations
      and reviews conducted during the 2003 and 2004 calendar years. **** To
      date,
      no additional fines have been assessed against Hudson.





**Employees**





As
      of
      June 22, 2007, we employed 95 individuals, of which 91 are full-time employees.
      Of the 95 employees, 4 are in management, 39 are in trading, 29 are in sales,
      3
      are in compliance, 7 are in technology and 13 are in administration. We believe
      that our relations with our employees are good. None of our employees are
      represented by a union or any collective bargaining agreement.




**Corporate
      Information**





Our
      principal offices are located at 111 Pavonia Avenue, Suite 1500A, Jersey City,
      New Jersey 07310 and our telephone number is (201) 216-0100. Our corporate
      website is http://www.hudsonholdingcorp.com. The information on our website
      is
      not incorporated by reference to this annual report.





We
      file
      reports and other information with the SEC. The SEC maintains an internet site
      that contains reports, proxy, information statements and other information
      at http://www.sec.gov .





**Risk
      Factors**





An
      investment in our securities is extremely risky. You should carefully consider
      the following risks, in addition to the other information presented in this
      annual report before deciding to purchase or to sell our securities. If any
      of
      the following risks actually materialize, our business and prospects could
      be
      seriously harmed, the price and value of our securities could decline and you
      could lose all or part of your investment. ****





**Risks
      Related to Our Business**





*Stock
      market volatility and other securities industry risks could adversely affect
      our
      business.*





Substantially
      all of our revenues are derived from securities market activities. As a result,
      we are directly affected by economic and political conditions, broad trends
      in
      business and finance and changes in volume and price levels of securities
      transactions. In recent years, the U.S. securities markets have been very
      volatile, which has reduced trading volume and net revenues. The tightening
      of
      credit, the terrorist attacks in the United States on September 11, 2001, the
      invasion of lraq in 2003 and other events have also resulted in substantial
      market volatility and accompanying reductions in trading volume and net
      revenues. In addition, any general economic downturn would adversely affect
      trading volumes and net revenues. Severe market fluctuations or weak economic
      conditions could reduce our trading volume and net revenues and adversely affect
      our profitability.





5





*We
      are subject to market exposure and could be adversely affected by a decrease
      in
      the price of securities which we hold in our trading accounts.*





We
      conduct our market-making activities predominantly as principal, which subjects
      our capital to significant risks. These activities involve the purchase, sale
      or
      short sale of securities for our own account and, accordingly, involve risks
      of
      price fluctuations and illiquidity, or rapid changes in the liquidity of markets
      that may limit or restrict our ability to either resell securities we purchase
      or to repurchase securities we sell in such transactions. From time to time,
      we
      may have large position concentrations in securities of a single issuer or
      issuers engaged in a specific industry, which might result in higher trading
      losses than would occur if our positions and activities were less concentrated.
      Further, we trade on margin, which permits us to borrow funds from our clearing
      broker in order to take positions for our own account that exceed the available
      funds that we have deposited with our clearing broker, which might result in
      higher trading losses than would occur if our positions and activities were
      restricted to our funds on deposit. The success of our market-making activities
      primarily depends upon our ability to attract order flow, the skill of our
      personnel, general market conditions, the amount of, and volatility in, our
      quantitative market-making and program trading portfolios, effective hedging
      strategies, the price volatility of specific securities and the availability
      of
      capital. To attract order flow, we must be competitive on price, size of
      securities positions traded, liquidity, order execution, technology, reputation
      and client relationships and service. In our role as a market maker, we attempt
      to derive a profit from the difference between the prices at which we buy and
      sell securities. However, competitive forces often require us to match the
      quotes other market makers display and to hold varying amounts of securities
      in
      inventory. By having to maintain inventory positions, we are subject to a high
      degree of risk. There can be no assurance that we will be able to manage such
      risk successfully or that we will not experience significant losses from such
      activities.





*There
      is a risk that our future operating results may fluctuate
      significantly.*





We
      may
      experience significant variation in our future results of operations. These
      fluctuations may result from, among other things:





•
            introductions
                of or enhancements to market-making services by us or our
                competitors;•
            the
                value of our securities positions and our ability to manage the risks
                attendant thereto;•
            the
                volume of our market-making activities;•
            the
                dollar value of securities traded;•
            volatility
                in the securities markets;•
            our
                market share with institutional clients;•
            our
                ability to manage personnel, overhead and other expenses, including
                our
                occupancy expenses under our office leases and legal fees relating
                to
                legal and regulatory proceedings;•
            the
                strength of our client relationships; the amount of, and volatility
                in,
                our quantitative market-making and program trading
                portfolios;•
            changes
                in payments for order flow and clearing costs;•
            the
                addition or loss of executive management and sales, trading and technology
                professionals;•
            legislative,
                legal and regulatory changes;•
            legal
                and regulatory matters;•
            geopolitical
                risk;•
            the
                amount and timing of capital expenditures and
                divestitures;•
            the
                incurrence of costs associated with acquisitions and
                dispositions;•
            investor
                sentiment;•
            technological
                changes and events;•
            seasonality;
                and•
            competition
                and market and economic conditions.




If
      demand
      for our services declines due to any of the above factors, and we are unable
      to
      timely adjust our cost structure, our operating results could be materially
      and
      adversely affected.





*Our
      traders may take larger risks than permitted which could result in large
      losses.*





Although
      we require our traders to adhere to certain position limits (generally no more
      than $500,000 in total positions for the most experienced traders), sometimes
      a
      trader takes a position beyond these limits and subjects our company to greater
      risks. We have established procedures to guard against this, including real-time
      position monitoring which should promptly alert management to any excessive
      risks. However, there can be no assurance that management will be able to guard
      against all risks taken by each employee.





6





*We
      are dependent on our clearing broker, which may go out of business or charge
      us
      for a default by a counter party to a trade.*





As
      a
      market maker, the majority of our securities transactions are conducted as
      principal with broker-dealer and institutional counterparties located in the
      United States. We clear our securities transactions through an unaffiliated
      clearing broker. Under the terms of the agreement between us and our clearing
      broker, the clearing broker has the right to charge us for losses that result
      from a counterparty's failure to fulfill its contractual obligations. No
      assurance can be given that any such counterparty will not default on its
      obligations, which default could have a material adverse effect on our business,
      financial condition and operating results. In addition, at any time, a
      substantial portion of our assets are held by our clearing broker and,
      accordingly, we are subject to credit risk with respect to such clearing broker.
      Consequently, we are reliant on the ability of our clearing broker to adequately
      discharge its obligations on a timely basis. We are also dependent on the
      solvency of such clearing broker. Any failure by the clearing broker to
      adequately discharge its obligations on a timely basis, or failure by the
      clearing broker to remain solvent, or any event adversely affecting the clearing
      broker, could have a material adverse effect on our business, financial
      condition and operating results. If our clearing broker was to go out of
      business or decide not to continue to act as our clearing broker, our operating
      results would be adversely effected until we could replace them.





*Reduced
      market volume, price and liquidity can impact our revenues.*





Our
      revenues may decrease in the event of a decline in market volume, prices or
      liquidity. Declines in the volume of securities transactions and in market
      liquidity generally result in lower revenues from market-making activities.
      Lower price levels of securities may also result in reduced revenue capture,
      and
      thereby reduced revenues from market-making transactions, as well as result
      in
      losses from declines in the market value of securities held in inventory. Sudden
      sharp declines in market values of securities can result in illiquid markets,
      declines in the market values of securities held in inventory, the failure
      of
      buyers and sellers of securities to fulfill their obligations and settle their
      trades, and increases in claims and litigation. Any decline in market volume,
      price or liquidity or any other of these factors could have a material adverse
      effect on our business, financial condition and operating results.





*We
      operate in a highly regulated industry and compliance failures could adversely
      affect our business.*





The
      securities industry is subject to extensive regulation covering all aspects
      of
      the securities business. The various governmental authorities and industry
      self-regulatory organizations that supervise and regulate us generally have
      broad enforcement powers to censure, fine, issue cease-and-desist orders or
      suspend or expel us or any of our officers or employees who violate applicable
      laws or regulations. We may also be subject to an enforcement action for failure
      to supervise if any of our employees or traders violate applicable laws or
      regulations. Our ability to comply with all applicable laws and rules is largely
      dependent on our establishment and maintenance of compliance and reporting
      systems, as well as our ability to attract and retain qualified compliance
      and
      other personnel. If we do not comply with the rules and regulations established,
      we could be subject to disciplinary or other regulatory or legal actions in
      the
      future. In addition, it is possible that any past noncompliance could subject
      us
      to future civil lawsuits, the outcome of which could have a material adverse
      effect on our financial condition and operating results.





We
      are
      required to keep accurate books and records. There is considerable fluctuation
      during any year and from year-to-year in the volume of transactions we must
      process. We record transactions and post our books daily. Operations personnel
      monitor operations to determine compliance with applicable laws, rules and
      regulations. Failure to keep current and accurate books and records can render
      us liable to disciplinary action by governmental and self-regulatory
      authorities, as well as to claims by our clients.





*We
      have a prior disciplinary record with the NASD, which could have an adverse
      effect on our ability to operate if we become subject to additional NASD
      disciplinary action.*





During
      the period from approximately 1990 through July 31, 2004, primarily while our
      operating subsidiary Hudson was owned by and supervised by the prior management
      of the prior owners and operating under a different name, we were cited by
      the
      NASD for violations of the NASD's Rules of Fair Practice and Marketplace Rules
      on at least 20 occasions and were fined amounts ranging from $250 to $82,500.
      The total amount of such fines was approximately $405,000. The existence of
      such
      prior violations could have an adverse effect on us should such violations
      recur
      under the supervision of current management. To date,
      no additional fines have been assessed.





7





*We
      face substantial competition that could reduce our market share and harm our
      financial performance.*





All
      aspects of our business are highly competitive. We compete directly with
      national and regional full service broker-dealers and, to a lesser extent,
      with
      discount brokers, investment advisors and certain commercial banks. The
      financial services industry has become considerably more concentrated as
      numerous securities firms have either ceased operations or have been acquired
      by
      or merged into other firms. These mergers and acquisitions have increased
      competition from these firms, many of which have significantly greater capital
      and financial and other resources than we have. With respect to retail brokerage
      activities, certain regional firms with which we compete have operated in
      certain markets longer than we have and have established long-standing client
      relationships. We also compete with others in the financial services industry
      in
      recruiting registered representatives and new employees as well as retaining
      current personnel, and we could be adversely affected in the event we were
      to
      lose registered representatives who either individually or in the aggregate
      accounted for a significant percentage of our revenues.





*If
      we
      lose senior management and key personnel or are unable to attract and retain
      skilled employees when needed, we may not be able to operate our business
      successfully.*





We
      are
      particularly dependent on the services of Mark Leventhal, Martin Cunningham
      and
      Keith Knox. The loss of any of these individuals would have a significant
      negative effect on our business. In addition, we believe that our success will
      depend in large part upon our continued ability to attract and retain skilled
      traders and other employees, which is difficult because the market for the
      services of such individuals is very competitive. On January 4, 2007, the
      Company entered into five year employment agreements, effective as of January
      1,
      2007, with Mr. Martin C. Cunningham and Mr. Keith R. Knox, whereby each will
      continue in their present positions, Chief Executive Officer and President,
      respectively.





*We
      need to comply with stringent capital requirements and therefore if we suffer
      significant losses we would be below our net capital
      requirement.*





Many
      of
      the regulatory agencies, securities exchanges and other industry self-regulatory
      organizations that regulate us have stringent rules with respect to the
      maintenance of specific levels of net capital by securities broker-dealers.
      Net
      capital is the net worth of a broker or dealer, less deductions for certain
      types of assets. Currently, we are required to maintain net capital of at least
      $1,000,000. As of March 31, 2007, we had net capital of $8,393,065   and
      excess net capital (that is, net capital less required net capital) of
      $7,393,065. We intend to maintain such funds as are necessary to operate our
      business and to maintain compliance with regulatory net capital requirements.
      Changes to our business may require us to maintain higher net capital levels
      than currently. If we fail to maintain the required net capital, we may be
      subject to suspension or revocation of our licenses. If such net capital rules
      are changed or expanded, or if there is an unusually large charge against our
      net capital, we might be required to limit or discontinue those portions of
      our
      business that require the intensive use of capital. A large operating loss
      or
      charge against net capital could adversely affect our ability to expand or
      even
      maintain our present levels of business.





*We
      may not be able to grow as planned.*





As
      part
      of our long-term growth strategy, we intend to recruit individual registered
      representatives and to evaluate the acquisition of other firms or assets that
      would complement or expand our business in attractive service markets or that
      would broaden our customer relationships. We cannot assure you that we will
      be
      successful in our recruiting efforts or that we will be able to identify
      suitable acquisition candidates available for sale at reasonable prices or
      that
      we will be able to consummate any acquisition. Further, future acquisitions
      may
      further increase our leverage or, if we issue equity securities to pay for
      the
      acquisitions, our stockholders could suffer dilution of their
      interests.





We
      also
      plan to expand into complementary businesses, both by developing new
      product/service offerings that will be valuable to our existing customers and
      by
      entering into strategic partnerships with related businesses that can bring
      new
      customers. The firm recently began trading listed securities and currently
      trades approximately 500 listed securities. In addition, we plan to explore
      creating a retail brokerage division. There can be no assurance that any of
      the
      new products or services will be developed. If we are unable to raise adequate
      capital, we will not have the available funds to create new
      products.





*Our
      exposure to possible litigation could adversely affect our
      business.*





From
      time
      to time we are engaged in various legal and regulatory proceedings arising
      in
      the normal course of business. Many aspects of the securities brokerage business
      involve substantial risks of liability. In recent years, there has been an
      increasing incidence of litigation involving the securities brokerage industry,
      including class action and other suits that generally seek substantial damages,
      including in some cases punitive damages. While it is not possible to determine
      with certainty the outcome of these matters, we are of the opinion that the
      eventual resolution of such proceedings will not have a material adverse effect
      on our financial position or operating results. Any such litigation brought
      in
      the future could have a material adverse effect on our business, financial
      condition and operating results.




8




From
      time
      to time, we may also be engaged in various legal proceedings not related to
      securities. We currently maintain various types of insurance, including
      employment practices liability insurance, the proceeds of which may help to
      reduce the amount we may otherwise be required to pay with respect to certain
      types of claims. However, there can be no assurance that we will be able to
      obtain such insurance in the future. If it can be obtained, the price for such
      insurance may be unreasonable. Even if such insurance is in force, the amount
      of
      any award may exceed the maximum coverage provided by such insurance, in which
      case we will be required to pay any uncovered portion.





*Our
      business relies heavily on computers and other electronic systems and capacity
      constraints and failures of these systems could harm our
      business.*





Despite
      efforts to minimize the risk, system failures could negatively impact our
      ability to conduct our business. Furthermore, as our business expands, we face
      risks relating to the need to expand and upgrade our transaction processing
      systems, network infrastructure and other aspects of our technology. While
      many
      of our systems are designed to accommodate additional growth without redesign
      or
      replacement, we may nevertheless need to make significant investments in
      additional hardware and software to accommodate growth. We cannot assure you
      that we will be able to predict accurately the timing or rate of such growth,
      or
      expand and upgrade our systems and infrastructure on a timely
      basis.





**Risks
      Associated with our Securities**




*Our
      Common Stock is not actively traded, so you may be unable to sell at or near
      ask
      prices or at all if you need to sell your Shares to raise money or otherwise
      desire to liquidate your Shares.*




Our
      Common Stock has historically been sporadically traded on the OTC Bulletin
      Board, meaning that the number of persons interested in purchasing our Common
      Stock at or near ask prices at any given time has been, and may continue to
      be,
      relatively small or non-existent. This situation is attributable to a number
      of
      factors, including the fact that we are a small company which is relatively
      unknown to stock analysts, stock brokers, institutional investors and others
      in
      the investment community that generate or influence sales volume, and that
      even
      if we came to the attention of such persons, they tend to be risk-adverse and
      would be reluctant to purchase or recommend the purchase of our shares until
      such time as we became more seasoned and viable. As a consequence, there may
      be
      periods of several days or more when trading activity in our shares is minimal
      or non-existent, as compared to a seasoned issuer which has a large and steady
      volume of trading activity that will generally support continuous sales without
      an adverse effect on share price. We cannot assure you that a broader or more
      active public trading market for our Common Stock will develop or be sustained,
      or that current trading levels will be sustained or not diminish.




*The
      application of the "penny stock" rules to our Common Stock could limit the
      trading and liquidity of the Common Stock, adversely affect the market price
      of
      our Common Stock and increase your transaction costs to sell those
      shares.*




As
      long
      as the trading price of our Common Stock is below $5.00 per share, the
      open-market trading of our Common Stock will be subject to the "penny stock"
      rules. The "penny stock" rules impose additional sales practice requirements
      on
      broker-dealers who sell securities to persons other than established customers
      and accredited investors (generally those with assets in excess of $1,000,000
      or
      annual income exceeding $200,000 or $300,000 together with their spouse). These
      regulations require the delivery, prior to any transaction involving a penny
      stock, of a disclosure schedule explaining the penny stock market and the
      associated risks. Under these regulations, certain brokers who recommend such
      securities to persons other than established customers or certain accredited
      investors must make a special written suitability determination regarding such a
      purchaser and receive such purchaser's written agreement to a transaction prior
      to sale. These regulations have the effect of limiting the trading activity
      of
      the Common Stock, reducing the liquidity of an investment in the Common Stock
      and increasing the transaction costs for sales and purchases of our Common
      Stock
      as compared to other securities.




*The
      market price for our Common Stock is particularly volatile given our status
      as a
      relatively unknown company with a small and thinly traded public float, limited
      operating history and variable profitability which could lead to wide
      fluctuations in our share price. You may be unable to sell your Common Stock
      at
      or above your purchase price, which may result in substantial losses to
      you.*




The
      market for our Common Stock is characterized by significant price volatility
      when compared to seasoned issuers, and we expect that our share price will
      continue to be more volatile than a seasoned issuer for the indefinite future.
      The volatility in our share price is attributable to a number of factors. First,
      as noted above, our Common Stock is sporadically and thinly traded. As a
      consequence of this lack of liquidity, the trading of relatively small
      quantities of shares by our stockholders may disproportionately influence the
      price of those shares in either direction. The price for our Shares could,
      for
      example, decline precipitously in the event that a large number of shares of
      our
      Common Stock are sold on the market without commensurate demand, as compared
      to
      a seasoned issuer which could better absorb those sales without adverse impact
      on its share price. Secondly, we are a speculative or "risky" investment due
      to
      our limited operating history, and uncertainty of future market acceptance
      for
      our services. As a consequence of this enhanced risk, more risk adverse
      investors may, under the fear of losing all or most of their investment in
      the
      event of negative news or lack of progress, be more inclined to sell their
      shares on the market more quickly and at greater discounts than would be the
      case with the stock of a seasoned issuer.





9





Many
      of
      these factors are beyond our control and may decrease the market price of our
      Common Stock, regardless of our operating performance. We cannot make any
      predictions or projections as to what the prevailing market price for our Common
      Stock will be at any time, including as to whether our Common Stock will sustain
      its current market price, or as to what effect that the sale of shares or the
      availability of Common Stock for sale at any time will have on the prevailing
      market price.





In
      addition, the market price of the Common Stock could be subject to wide
      fluctuations in response to:




·
            quarterly
                variations in our revenues and operating expenses;·
            fluctuations
                in interest rates;·
            the
                operating and stock price performance of other companies that investors
                may deem comparable to us; and·
            news
                reports relating to trends in our markets or general economic
                conditions.





The
      stock
      market in general and the market prices for brokerage-related companies in
      particular, have experienced volatility that often has been unrelated to the
      operating performance of such companies. These broad market and industry
      fluctuations may adversely affect the price of our stock, regardless of our
      operating performance.





Stockholders
      should be aware that, according to SEC Release No. 34-29093, the market for
      penny stocks has suffered in recent years from patterns of fraud and abuse.
      Such
      patterns include (1) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (2)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (3) boiler room practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (4) excessive and undisclosed bid-ask differential and markups
      by
      selling broker-dealers; and (5) the wholesale dumping of the same securities
      by
      promoters and broker-dealers after prices have been manipulated to a desired
      level, along with the resulting inevitable collapse of those prices and with
      consequent investor losses. The occurrence of these patterns or practices could
      increase the volatility of our share price.





*We
      do
      not intend to pay dividends to our stockholders.*





We
      do not
      have any current plans to pay dividends to our stockholders. We currently intend
      to retain any future earnings for funding growth and, therefore, do not expect
      to pay any dividends in the foreseeable future.





*Four
      employees control approximately 46% of the voting capital stock of our
      company.*





Our
      three
      executive officers and Steven Winkler, our NASDAQ trading manager at the
      Company’s wholly-owned broker-dealer subsidiary, each own approximately 11-12%
      of our common stock. In the event that these individuals vote together on any
      or
      all issues, you will have no effective voice in our management. Accordingly,
      these four individuals could substantially influence the outcome of any matters
      submitted to a vote of our stockholders and have the ability to determine all
      management policy and financing decisions.




*Future
      sales of our Common Stock could put downward selling pressure on our shares,
      and
      adversely affect the stock price. There is a risk that this downward pressure
      may make it impossible for a stockholder to sell its shares at any reasonable
      price, if at all.*




Future
      sales of substantial amounts of our Common Stock in the public market, or the
      perception that such sales could occur, could put downward selling pressure
      on
      our shares, and adversely affect the market price of our Common
      Stock.




*The
      large number of newly issued shares and shares issuable upon exercise of
      warrants could have an adverse affect on our stock price.*




In
      a
      recent private placement, the Company issued 9,575,325 shares of Common Stock,
      4,787,664 investor warrants with an exercise price of $0.85 and 574,520
      placement agent warrants with an exercise price of $0.60. In addition, another
      1,760,590 warrants with an exercise price of $1.0494 remain outstanding.
      Subsequent to the private placement, 7,908,655 shares of Common Stock and
      3,954,329 shares of Common Stock issuable upon exercise of warrants with an
      exercise price of $0.85 were registered by the Company. Given the effectiveness
      of the Registration Statement, such investors now have the ability to sell
      such
      shares without any volume restrictions. Therefore, the price of our common
      stock
      could significantly decline if such investors elect to sell their shares in
      the
      market at times when there are not a corresponding number of investors willing
      to purchase such shares. In addition, the large number of outstanding warrants
      will likely cause an overhang on the market and prevent the market price of
      the
      Common Stock from rising above the warrant exercise price.




10





*There
      are limitations in connection with the availability of quotes and order
      information on the OTC Bulletin Board*




Trades
      and quotations on the Over the Counter Bulletin Board (the "OTCBB") involve
      a
      manual process, and the market information for such securities cannot be
      guaranteed. In addition, quote information, or even firm quotes, may not be
      available. The manual execution process may delay order processing and
      intervening price fluctuations may result in the failure of a limit order to
      execute or the execution of a market order at a significantly different price.
      Execution of trades, execution reporting and the delivery of legal trade
      confirmation may be delayed significantly. Consequently, one may not be able
      to
      sell shares of our Common Stock at the optimum trading prices.




*There
      are delays in order communication on the OTCBB.*





Electronic
      processing of orders is not available for securities traded on the OTCBB and
      high order volume and communication risks may prevent or delay the execution
      of
      one's OTCBB trading orders. This lack of automated order processing may affect
      the timeliness of order execution reporting and the availability of firm quotes
      for shares of our Common Stock. Heavy market volume may lead to a delay in
      the
      processing of OTCBB security orders for shares of our Common Stock, due to
      the
      manual nature of the market. Consequently, one may not able to sell shares
      of
      our Common Stock at the optimum trading prices.




*There
      is limited liquidity on the OTCBB.*





When
      fewer shares of a security are being traded on the OTCBB, volatility of prices
      may increase and price movement may outpace the ability to deliver accurate
      quote information. Due to lower trading volumes in shares of our Common Stock,
      there may be a lower likelihood of one's orders for shares of our Common Stock
      being executed, and current prices may differ significantly from the price
      one
      was quoted by the OTCBB at the time of one's order entry.





*There
      is a limitation in connection with the editing and canceling of orders on the
      OTCBB.*





Orders
      for OTCBB securities may be canceled or edited like orders for other securities.
      All requests to change or cancel an order must be submitted to, received and
      processed by the OTCBB. Due to the manual order processing involved in handling
      OTCBB trades, order processing and reporting may be delayed, and one may not
      be
      able to cancel or edit one's order. Consequently, one may not able to sell
      shares of our Common Stock at the optimum trading prices.





*Increased
      dealer compensation could adversely affect the stock price.*





The
      dealer's spread (the difference between the bid and ask prices) may be large
      and
      may result in substantial losses to the seller of shares of our Common Stock
      on
      the OTCBB if the stock must be sold immediately. Further, purchasers of shares
      of our Common Stock may incur an immediate "paper" loss due to the price spread.
      Moreover, dealers trading on the OTCBB may not have a bid price for shares
      of
      our Common Stock on the OTCBB. Due to the foregoing, demand for shares of our
      Common Stock on the OTCBB may be decreased or eliminated.




*Shares
      eligible for future sale may adversely affect the market.*





From
      time
      to time, certain of our stockholders may be eligible to sell all or some of
      their shares of Common Stock by means of ordinary brokerage transactions in
      the
      open market pursuant to Rule 144, promulgated under the Securities Act, subject
      to certain limitations. In general, pursuant to Rule 144, a stockholder (or
      stockholders whose shares are aggregated) who has satisfied a one-year holding
      period may, under certain circumstances, sell within any three-month period
      a
      number of securities which does not exceed the greater of 1% of the then
      outstanding shares of Common Stock or the average weekly trading volume of
      the
      class during the four calendar weeks prior to such sale. Rule 144 also permits,
      under certain circumstances, the sale of securities, without any limitation,
      by
      our stockholders that are non-affiliates that have satisfied a two-year holding
      period. Any substantial sale, or cumulative sales, of our Common Stock pursuant
      to Rule 144 or pursuant to any resale prospectus may have a material adverse
      effect on the market price of our securities.




**Item
      2. Description of Property**





Our
      corporate headquarters are located in 26,875 square feet of office space at
      111
      Pavonia Avenue in Jersey City, New Jersey, which incorporates a state-of-the-art
      trading floor that was abandoned by a competitor. This lease expires in August
      30, 2012 and our initial monthly base rent is $33,594. We believe that our
      new
      headquarters space is more than adequate to support our existing business,
      plus
      any intermediate term business expansion. We also lease space at 525 Washington
      Blvd., Jersey City, New Jersey (11,737 square feet of office space) at a monthly
      rent of $34,484. This lease expires in November 30, 2007 and we do not expect
      to
      continue using such space after that date. In addition, we maintain trading
      and sales offices in Tinton Falls, New Jersey and Boca Raton, Florida. Our
      offices include a total of 176 trading stations: 140 at headquarters in New
      Jersey, 16 in Tinton Falls and 20 in Florida.





11




**Item
      3. Legal Proceedings**




The
      Company has been named as a defendant in various routine actions that are
      incidental to its activities as a broker-dealer including civil actions and
      arbitration. From time to time, the Company is also involved in proceedings
      and
      investigations by self-regulatory organizations. Although the ultimate outcome
      of these matters involving the Company cannot be predicted with certainty,
      management believes it has meritorious defenses to all such actions and intends
      to defend each of these actions vigorously. Although there can be no assurances
      that such matters will not have a material adverse effect on the results of
      operations or financial condition of the Company in any future period, depending
      in part on the results for such period, in the opinion of the Company's
      management the ultimate resolution of such actions against the Company will
      have
      no material adverse effect on the Company's financial condition.




**Item
      4. Submission of Matters to a Vote of Security Holders**




None.




12





**PART
      II**




**Item
      5. Market for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities**




**Market
      for Common Equity**





Our
      common stock has been listed and quoted on the OTC Bulletin Board under the
      symbol “HDHL.OB” since September 5, 2005, and prior to that date, our common
      stock traded under the symbol “HOMI”. All prices reflected herein have been
      adjusted to reflect the 1-for-8 reverse split of our common stock that was
      effected on September 6, 2005.




We
      have
      296 holders of record of our common stock as of June 22, 2007.




The
      following table sets forth the high and low sales prices for our common stock
      for the periods indicated, as reported by the OTC Bulletin Board:




High
            
            LowFiscal
                Year 2006First
                Quarter
            
            $
            2.00
            
            $
            0.96Second
                Quarter
            
            
            1.44
            
            
            0.90Third
                Quarter
            
            
            1.09
            
            
            0.51Fourth
                Quarter
            
            
            1.75
            
            
            0.53Fiscal
                Year 2007First
                Quarter
            
            $
            2.00
            
            $
            1.46Second
                Quarter
            
            
            1.60
            
            
            0.93Third
                Quarter
            
            
            1.00
            
            
            0.70Fourth
                Quarter
            
            
            1.15
            
            
            0.70




The
      high
      and low sales prices as reported on the OTC Bulletin Board on June 22, 2007
      were
      $0.55 and $0.50, respectively.




We
      have
      not declared or paid any cash dividends on our common stock and do not
      anticipate declaring or paying any cash dividends in the foreseeable future.
      We
      currently expect to retain future earnings, if any, for the development of
      our
      business. Dividends may be paid on our common stock only if and when declared
      by
      our board of directors.




**Recent
      Sales of Unregistered Securities**




During
      the period covered by this report, we did not issue any securities that were
      not
      registered under the Securities Act of 1933, as amended, (the “Securities Act”)
      except as previously reported in a quarterly report on Form 10-QSB or on a
      current report on Form 8-K.




**Recent
      Repurchases of Common Stock**




There
      were no repurchases of our common stock during the fourth quarter of the fiscal
      year covered by this report.





13





**Item
      6. Management's Discussion and Analysis or Plan of
      Operation**




**Summary
      Financial Information**




The
      summary financial data set forth below are derived from and should be read
      in
      conjunction with the consolidated financial statements, including the notes
      thereto, filed as part of this Form 10-KSB.





Consolidated
                Statement of
            
            Year
                Ended
            
            Year
                EndedOperations
                Data:
            
            March
                31, 2007
            
            March
                31, 2006Revenues
            
            $
            20,851,519
            
            $
            20,224,286Net
                income (loss)
            
            $
            (383,108
            )
            $
            783,825Earnings
                (loss) per share - basic and diluted
            
            $
            (0.01
            )
            $
            0.04Weighted
                average number of shares:-
                basic
            
            
            30,393,959
            
            
            21,910,067-diluted
            
            
            30,393,959
            
            
            22,153,119Consolidated
                Balance Sheet Data:Working
                capital
            
            $
            11,089,549
            
            $
            6,305,309Total
                assets
            
            $
            23,121,286
            
            $
            10,865,869Total
                liabilities
            
            $
            9,857,771
            
            $
            2,773,187Stockholders'
                equity
            
            $
            13,263,515
            
            $
            8,092,682




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




The
      following discussion of results of operations and financial condition is based
      upon, and should be read in conjunction with, our consolidated financial
      statements and accompanying notes thereto included elsewhere
      herein.




**Results
      of Operations**




The
      following discussion and financial information is presented to aid in
      understanding our consolidated financial position and results of operations.
      The
      emphasis of this discussion will be on the fiscal year ended March 31, 2007,
      as
      compared to the fiscal year ended March 31, 2006.





We
      had
      overall revenues of approximately $20.9 million for fiscal 2007, as compared
      to
      approximately $20.2 million for fiscal 2006. Net trading gains increased to
      approximately $17.9 million from approximately $17.6 million during the prior
      fiscal year. The increase in net trading gains is consistent with an increase
      in
      the number of trading personnel from 35 to 39. Commission revenues increased
      to
      $2.7 million from $2.5 million during the prior fiscal year. The increase in
      commission revenues is consistent with an increase in the number of sales
      personnel from 23 to 29. Other revenues increased to $0.3 million from $0.1
      million during fiscal 2006, primarily due to an increase in referral fees plus
      approximately $62,000 of revenues from Technologies.




Our
      cost
      structure consists of both variable costs, such as commissions and clearing
      charges, and fixed costs, such as salaries and related costs (including
      payroll taxes and benefits), communications (quote, trading, order management
      and telecommunication services), occupancy (rent, electricity, maintenance
      and
      real estate taxes) professional fees (attorneys and auditors), business
      development (travel, entertainment and advertising) and other operating costs.
      From a compensation perspective, roughly half of our employees are salaried,
      while most of our traders and salespersons receive revenue-based commission
      payments.




Despite
      the increase in overall revenues, we had a pre-tax loss of $0.5 million (which
      includes approximately $62,000 of pre-tax income from Technologies) as compared
      to a $1.3 million pre-tax profit during the prior year, as expenses increased
      by
      $2.4 million, primarily as a result of a $0.9 million increase in communications
      costs (order management, stock quotation, news services, telecommunications
      and
      networking costs) and a $0.7 million increase in occupancy costs, primarily
      attributable to efforts to increase the firm’s production capacity by occupying
      a new, larger and more technologically advanced trading floor, including a
      temporary duplication of rent expense for two locations in Jersey City, New
      Jersey from June 2006 until the lease for our former headquarters location
      expires in November 2007. Salaries and related costs increased by $0.5 million,
      primarily due to an increase in salaried technology, trading,
      marketing and sales personnel and salary increases. Trader and salesperson
      commissions of $8.6 million (41.4% of revenues) in the current fiscal year
      compare to $8.2 million (40.6% of revenues) in the prior fiscal year. Clearance
      charges of $0.8 million (3.6% of revenues) in the current fiscal year declined
      compared to $1.1 million (5.6% of revenues) in the prior fiscal year, primarily
      due to ongoing negotiation of rate reductions.




We
      had a
      net loss of $383,108 during fiscal 2007 (which includes approximately $20,000
      of
      net income from Technologies), as compared to net income of $783,825 during
      the
      prior year. Income taxes are a benefit of $89,430 during fiscal 2007, as
      compared to a provision of $469,000 during the prior year, primarily due to
      the
      decline in the pre-tax results.




14




**Liquidity
      and Capital Resources**




**Working
      Capital**




During
      the past fiscal year, our working capital (current assets less current
      liabilities) improved to $11.1 million from $6.3 million, primarily as a result
      of a sale of common stock with $5.5 million of net proceeds, partially offset
      by
      $0.7 million used for investment activities, including capital expenditures
      and the setting aside of restricted cash (a time deposit which is
      collateralizing a letter of credit. We have not declared and paid, nor do we
      expect to declare and pay in the intermediate future, any dividends on our
      common stock. Current assets include cash and cash equivalents, receivable
      from
      clearing broker (cash on deposit with our clearing broker) and marketable
      securities owned and income taxes receivable. Current liabilities include
      securities sold but not purchased, commissions payable and accrued
      expenses.




We
      currently do not have any outstanding bank borrowings or long-term debt. On
      April 20, 2006, we deposited a $225,000 letter of credit with the landlord
      associated with our new headquarters space, after depositing $225,000 of
      collateral with the issuing financial institution in the form of a
      fourteen-month time deposit.




Our
      requirement for funding is, and will be, driven by both working capital and
      regulatory net capital requirements associated with current operations, the
      enhancement of our technology, software development, and by potential future
      expansion into related activities and possible acquisition opportunities. See
      Note K to the consolidated financial statements for additional details related
      to regulatory net capital requirements. While we have recently issued stock
      and
      warrants, we still expect that any significant expansion or acquisition
      opportunities will require additional subordinated debt or common stock
      issuances in order to maintain the required levels of working capital or net
      capital. There can be no assurance that we will be successful in attracting
      such
      funding.




Our
      new
      headquarters space had been recently renovated by the previous occupants and
      did
      not require material expenditures on our part, other than a telecommunications
      switch which was leased over a three year period with aggregate payments
      totaling approximately $275,000. Technologies was formed as a Delaware
      corporation on May 22, 2006 and was funded with a total of $550,000 during
      the
      fiscal year ended March 31, 2007, in order to accommodate an initial expense
      budget of approximately $25,000 per month.  The purpose of Technologies is
      to perform software development and technology services, both for the Company
      and for customers. Our contractual commitments consist primarily of office
      and
      equipment leases, plus certain employment agreements (see the table on the
      next
      page).




Our
      cash
      position increased by $4.6 million to $5.1 million during the fiscal year ended
      March 31, 2007, after increasing by $0.2 million during the fiscal year ended
      March 31, 2006. However, it should be noted that our cash position is primarily
      a function of how much of our funds are invested in marketable securities or
      on
      deposit with our clearing broker.




**Operating
      Activities**




Net
      cash
      used in operating activities was $0.2 million during fiscal 2007, primarily
      due
      to a $2.6 million increase in net securities positions and a $1.2 million
      increase in the current income tax receivable, partially offset by a $3.9
      million decrease in the receivable from clearing broker balance and $0.1 million
      generated from our net loss ($0.4 million), after adjusting for non-cash items
      ($0.5 million). Net cash used in operating activities was $1.6 million during
      fiscal 2006, primarily due to a $2.1 million increase in the receivable from
      clearing broker balance and a $0.9 million increase in net securities positions,
      partially offset by $1.1 million generated from net income ($0.8 million),
      after
      adjusting for non-cash items ($0.3 million), plus a $0.6 million increase in
      the
      current income tax liability.




**Investing
      Activities**




Net
      cash
      used in investing activities was $0.7 million and $0.2 million during fiscal
      2007 and 2006, respectively. During both periods, the usage of cash included
      the
      purchase of $0.2 million of furniture, equipment, and leasehold improvements,
      plus for 2007 there was $0.2 million of capitalized software expenditures and
      another $0.2 million was set aside as restricted cash in order to collateralize
      the letter of credit issued in favor of the landlord of the new headquarters
      space.




**Financing
      Activities**




Net
      cash
      provided by financing activities was $5.5 million and $2.0 million during fiscal
      2007 and 2006, respectively, due to private placements of common stock (plus
      warrants in 2007). Most of the stock sold during fiscal 2007 was subject to
      registration rights and a registration statement went effective on April 5,
      2007
      related to 7,908,655 common shares plus 3,954,329 common shares underlying
      warrants.





15





**Contractual
      Obligations**





In
      connection with our operating activities, we enter into certain contractual
      obligations. Our future cash payments associated with our operating leases,
      are
      summarized below:





Payments
                due inFor
                the years ended March 31,
            
            2008
            
            2009-2010
            
            2011-2012
            
            Thereafter
            
            TotalOffice
                leases
            
            $
            702,000
            
            $
            1,048,000
            
            $
            1,117
                000
            
            $
            239,000
            
            $
            3,106,000Equipment
                leases
            
            
            104,000
            
            
            74,000
            
            
            -
            
            
            -
            
            
            178,000Employment
                agreements
            
            
            550,000
            
            
            900,000
            
            
            700,000
            
            
            -
            
            
            2,150,000$
            1,356,000
            
            $
            2,022,000
            
            $
            1,817,000
            
            $
            239,000
            
            $
            5,434,000




**Off-Balance
      Sheet Arrangements**




As
      of
      March 31, 2007, we did not have any off-balance sheet arrangements, as defined
      in Item 303(c)(2) of SEC Regulation S-B. On April 20, 2006, a financial
      institution issued a one-year, automatically renewable, irrevocable $225,000
      standby letter of credit, on our behalf, to the landlord associated with our
      new
      office space lease as a security deposit. The Company is obligated to maintain
      the letter of credit until sixty days after the August 30, 2012 expiration
      of
      the lease. The Company deposited $225,000 with the financial institution in
      the
      form of an automatically renewable fourteen-month time deposit, in order to
      collateralize the letter of credit.




**Critical
      Accounting Policies**




Hudson
      Holding Corporation's significant accounting policies, including the assumptions
      and judgments underlying them, are more fully described in our "Notes to
      Consolidated Financial Statements" included in this Form 10-KSB. Some of our
      accounting policies require the application of significant judgment by
      management in the preparation of the consolidated financial statements, and
      as a
      result, they are subject to a greater degree of uncertainty. In applying these
      policies, management uses its judgment to determine the appropriate assumptions
      to be used in calculating estimates that affect the reported amounts of assets,
      liabilities, revenues and expenses. Management bases its estimates and
      assumptions on historical experience and on various other factors that are
      believed to be reasonable under the circumstances. Hudson Holding Corporation
      has identified certain of its accounting policies as being most important to
      our
      consolidated financial condition and results of operations and which require
      management to make its most difficult and subjective judgments, often as a
      result of the need to make estimates of matters that are inherently uncertain.




Hudson
      Holding Corporation's critical accounting policies include the
      following:




**Securities
      transactions**




The
      Company records transactions in securities and the related revenue and expenses
      on a trade-date basis.





Securities
      owned and securities sold, but not yet purchased, are stated at market value
      with the resulting unrealized gains and losses reflected in trading gains,
      net.





Securities
      which do not have a readily ascertainable market value are valued at their
      estimated fair value as determined by management .




**Goodwill**




The
      Company accounts for its goodwill in accordance with Statement of Financial
      Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
      No.
      142"). Under SFAS No. 142, goodwill is not subject to amortization, but rather
      an assessment of impairment, by applying a fair value based test. The Company
      reviews goodwill for impairment annually, during the fourth quarter of each
      year, and also between annual tests upon the occurrence of trigger events.




The
      reviews are performed at the Hudson level, generally by using the market
      capitalization of the Company as an indicator of fair value, since Hudson
      currently represents the most significant component of the consolidated entity.
      Impairment is potentially indicated when the carrying value of Hudson, including
      goodwill, exceeds its fair value. If potential impairment were indicated, the
      fair value of Hudson would be measured against the fair value of its underlying
      assets and liabilities, excluding goodwill, to estimate an implied fair value
      of
      Hudson’s goodwill. If the fair value was less than the carrying value of
      goodwill, an impairment would be recorded. As a result of its assessment,
      the Company has determined no such potential impairment was indicated during
      the
      year ended March 31, 2007.




16




**Income
      taxes**




The
      Company accounts for income taxes in accordance with the provisions of Statement
      of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
      No. 109"). SFAS No. 109 requires that the Company recognize deferred tax
      liabilities and assets for the expected future tax consequences of items that
      have been included or excluded in the financial statements or tax returns.
      Under
      this method, deferred tax liabilities and assets are determined on the basis
      of
      the difference between the tax basis of liabilities and assets and their
      respective financial reporting amounts ("temporary differences") at enacted
      tax
      rates in effect for the years in which the temporary differences are expected
      to
      reverse. The Company records an estimated valuation allowance on its deferred
      income tax assets if it is not more than likely that these deferred income
      tax
      assets will be realized. As of March 31, 2007, the Company has a $71,500
      valuation allowance related to certain state net operating loss carryforwards
      which expire in 2011 and 2013.




**Stock-based
      compensation**




The
      Company accounts for stock option grants under the recognition and measurement
      principles of Statement of Financial Accounting Standards No. 123 (revised
      2004), Share-Based Payment, (“SFAS 123(R)”). Under the provisions of SFAS
      123(R), the Company is required to measure the cost of employee and director
      services received in exchange for an award of equity instruments based on the
      fair value of the award. The award is measured at the grant date for awards
      to
      employees and directors. That cost is then recognized over the period during
      which services are required to be provided in exchange for the award, usually
      the vesting period.





The
      Company has computed the fair value of options granted using the Black-Scholes
      option pricing model. Option valuation models require the input of highly
      subjective assumptions, including the expected term of the options and the
      expected volatility of the underlying common stock, which can materially affect
      the fair value estimate. Given that the Company’s shares have only been publicly
      traded since May 3, 2005, the Company developed an expected volatility figure
      based on a review of the historical volatilities, over a period of time,
      equivalent to the expected life of these options, of similarly positioned public
      companies within its industry, during the early stages of their life as a public
      company.





17




**Item
      7. Financial Statements**




Our
      consolidated financial statements and the related notes begin on Page F-1,
      which
      are included in this Annual Report on Form 10-KSB.




**Item
      8. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**




None.




**Item
      8A. Controls and Procedures**




**Evaluation
      of our Disclosure Controls and Internal Controls**




As
      of the
      end of the period covered by this annual report, we carried out an evaluation
      of
      the effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Exchange Act Rule 13a- -15(e) and 15d-15(e)). Based
      upon that evaluation, our Chief Executive Officer ("CEO") and Chief Financial
      Officer ("CFO") concluded that as of the end of the period covered by this
      annual report on Form 10-KSB our disclosure controls and procedures were
      adequate.




**Officers'
      Certifications**




Appearing
      as exhibits to this annual report are "Certifications" of the CEO and the CFO.
      The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (the "Section 302 Certifications"). This section of our annual
      report contains information concerning the Controls Evaluation referred to
      in
      the Section 302 Certifications and this information should be read in
      conjunction with the Section 302 Certifications for a more complete
      understanding of the topics presented.




**Disclosure
      Controls and Internal Controls**




Disclosure
      controls are procedures that are designed with the objective of ensuring that
      information required to be disclosed in our reports filed under the Securities
      Exchange Act of 1934, as amended (the "Exchange Act"), such as this annual
      report, is recorded, processed, summarized and reported within the time periods
      specified in the SEC's rules and forms. Disclosure controls are also designed
      with the objective of ensuring that such information is accumulated and
      communicated to our management, including the CEO and CFO, as appropriate to
      allow timely decisions regarding required disclosure. Internal controls are
      procedures which are designed with the objective of providing reasonable
      assurance that (1) our transactions are properly authorized, recorded and
      reported; and (2) our assets are safeguarded against unauthorized or improper
      use, to permit the preparation of our consolidated financial statements in
      conformity with United States generally accepted accounting
      principles.




We
      became
      a public company on May 3, 2005. We are not an accelerated filer (as defined
      in
      the Exchange Act) and are not required to deliver management's report on
      internal controls over our financial reporting until our year ending March
      31,
      2008. While our disclosure controls and procedures are currently adequate,
      they
      may not meet the higher standards of Section 404 of the Sarbanes Oxley Act
      of
      2002 ("Sarbanes Oxley") without some form of remediation.




We
      will
      be required to document and test our internal control procedures in order to
      satisfy the requirements of Sarbanes-Oxley, which requires annual management
      assessments of the effectiveness of our internal controls over financial
      reporting and a report by our independent registered public accounting firm
      addressing these assessments. During the course of our testing, we may identify
      deficiencies which we may not be able to remediate in time to meet the deadline
      imposed by Sarbanes-Oxley for compliance with the requirements of Section 404.
      In addition, if we fail to maintain the adequacy of our internal controls,
      as
      such standards are modified, supplemented or amended from time to time, we
      may
      not be able to ensure that we can conclude on an ongoing basis that we have
      effective internal controls over financial reporting in accordance with Section
      404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective
      internal control environment could also cause investors to lose confidence
      in
      our reported financial information, which could have a material adverse effect
      on our stock price.




There
      were no significant changes in our internal controls over financial reporting
      that occurred during the fourth fiscal quarter that have materially affected,
      or
      are reasonably likely to materially affect, our internal controls over financial
      reporting.




**Item
      8B. Other Information**




None.


18




**PART
      III**




**Item
      9. Directors, Executive Officers, Promoters, Control Persons** **and
      Corporate Governance** **;**


**Compliance
      with Section 16(a) of the Exchange Act**




The
      following table sets forth information regarding the members of our board of
      directors and our executive officers.




Name
            
            Age
            
            PositionMartin
                C. Cunningham
            
            47
            
            Chairman
                of the Board of Directors and Chief Executive OfficerKeith
                R. Knox
            
            48
            
            President,
                Secretary and DirectorMark
                Leventhal
            
            51
            
            Executive
                Vice President and DirectorPeter
                J. Zugschwert
            
            41
            
            DirectorJoanne
                V. Landau
            
            52
            
            DirectorCarmine
                V. Chiusano
            
            65
            
            Director




The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our directors and officers are as follows:




Martin
      Cunningham has been a director of Hudson and has served as its Chief Executive
      Officer since 2004. From August 2003 until joining Hudson, Mr. Cunningham was
      an
      employee of Wien Securities, Inc. From February 2003 until August 2003, Mr.
      Cunningham was President of Wien Securities, Inc. From 1996 to December 2002,
      Mr. Cunningham was Senior Vice President and Head of Equity Trading at Schwab
      Capital Markets (formerly Mayer & Schweitzer).




Keith
      Knox has been a director of Hudson and has served as its President since 2004.
      From January 2003 until joining Hudson, Mr. Knox was a Vice President of Wien
      Securities, Inc. From 1984 to December 2002, Mr. Knox was a trader with Schwab
      Capital Markets (formerly Mayer & Schweitzer).




Mark
      Leventhal has been a director of Hudson and has served as its Executive Vice
      President since 2004. From January 2003 until joining Hudson, Mr. Leventhal
      was
      a Vice President of Wien Securities, Inc. From 1989 to December 2002, Mr.
      Leventhal was manager of NASDAQ Trading at Schwab Capital Markets (formerly
      Mayer & Schweitzer).




Peter
      J.
      Zugschwert has been a director of the Company since October 1997, served as
      President of the Company from December 1997 through May 2005 and served as
      CEO
      of the Company from September 1997 to May 2005. Mr. Zugschwert has been a
      Private Equity Consultant since 1997.




Joanne
      V.
      Landau has been a Director since May 2006. Ms. Landau has been the President
      of
      Kurtsam Realty Corp. since 2003. From 2000 to 2002, she was Senior Vice
      President, Head of Strategic Marketing and Communications with Zurich Scudder
      -
      Deutsche Asset Management/Investments and from 1990 to 1999, Ms. Landau was
      with
      The Citibank Private Bank/Investments, a subsidiary of Citigroup, of last as
      Vice President, Head of Global Marketing and Communications.




Carmine
      V. Chiusano has been a Director since May 2006. In 2004, Mr. Chiusano retired
      from Schwab Capital Markets (formerly Mayer & Schweitzer) where he was
      employed since 1968, most recently as Senior Vice President, Chief Operating
      Officer.




All
      directors hold office until the next annual meeting of stockholders and the
      election and qualification of their successors. Three of our six directors
      are
      considered "independent" under the SEC's new independence standards. Officers
      are elected annually by the board of directors and serve at the discretion
      of
      the board.




There
      are
      no family relationships among our directors and executive officers. No director
      or executive officer has been a director or executive officer of any business
      which has filed a bankruptcy petition or had a bankruptcy petition filed against
      it. No director or executive officer has been convicted of a criminal offense
      or
      is the subject of a pending criminal proceeding. No director or executive
      officer has been the subject of any order, judgment or decree of any court
      permanently or temporarily enjoining, barring, suspending or otherwise limiting
      his involvement in any type of business, securities or banking activities.
      No
      director or officer has been found by a court to have violated a federal or
      state securities or commodities law.




None
      of
      our directors or executive officers or their respective immediate family members
      or affiliates is indebted to us. As of the date of this filing, there is no
      material proceeding to which any of our directors, executive officers or
      affiliates is a party or has a material interest adverse to us.





19




**Board
      Committees**




Our
      board
      of directors has three standing committees to assist it with its
      responsibilities. These committees are described below.




The
      Audit
      Committee, which was established in May 2006, is comprised solely of directors
      who satisfy the SEC and American Stock Exchange audit committee membership
      requirements, is governed by a board-approved charter, which is incorporated
      by
      reference as Exhibit 10.7, that contains, among other things, the committee's
      membership requirements and responsibilities. The audit committee oversees
      our
      accounting, financial reporting process, internal controls and audits, and
      consults with management and the independent registered public accounting firm
      (the "independent auditors") on, among other items, matters related to the
      annual audit, the quarterly financial statements and the application of United
      States generally accepted accounting principles. As part of its duties, the
      audit committee appoints, evaluates and retains our independent auditors. It
      maintains direct responsibility for the compensation, termination and oversight
      of our independent auditors and evaluates the independent auditors'
      qualifications, performance and independence. The committee also monitors
      compliance with our policies on ethical business practices and reports on these
      items to the board. The audit committee has established policies and procedures
      for the pre-approval of all services provided by the independent auditors.
      Our
      audit committee is comprised of Ms. Landau and Messrs. Zugschwert and Chiusano,
      and Mr. Zugschwert is the chairman of the committee.




The
      board
      has determined that Mr. Zugschwert, who currently is a member of the board
      of
      directors and chairman of the audit committee, is the audit committee financial
      expert, as defined under the Securities Exchange Act of 1934, as amended (the
      "Exchange Act"). In addition, the board has determined that Mr. Zugschwert
      is an
      independent director as that term is defined in Item 7(d)(3)(iv) of Schedule
      14A
      under the Exchange Act. The board made a qualitative assessment of Mr.
      Zugschwert's level of knowledge and experience based on a number of factors,
      including his formal education, including an MBA in Finance, and experience
      as a
      Chief Financial Officer for more than ten years.




The
      Compensation Committee, which was established in May 2006, is comprised solely
      of independent directors, determines all compensation for our Chief Executive
      Officer; reviews and approves corporate goals relevant to the compensation
      of
      our Chief Executive Officer and evaluates our Chief Executive Officer's
      performance in light of those goals and objectives; reviews and approves
      objectives relevant to other executive officer compensation; reviews and
      approves the compensation of other executive officers in accordance with those
      objectives; advises our board regarding our stock option plans; approves
      severance arrangements and other applicable agreements for executive officers;
      and consults generally with management on matters concerning executive
      compensation and on pension, savings and welfare benefit plans where board
      or
      stockholder action is contemplated with respect to the adoption of or amendments
      to such plans. The compensation committee is governed by a Board-approved
      charter, which is attached as Exhibit 10.8. Our compensation committee is
      comprised of Ms. Landau and Messrs. Zugschwert and Chiusano, and Mr. Chiusano
      is
      the chairman of the committee.




The
      Nominating and Corporate Governance Committee, which was established in May
      2006, considers and makes recommendations on matters related to the practices,
      policies and procedures of the board and takes a leadership role in shaping
      our
      corporate governance. The committee is governed by a Board-approved charter,
      which is incorporated by reference as Exhibit 10.9. As part of its duties,
      the
      committee assesses the size, structure and composition of the board and board
      committees, coordinates evaluation of board performance and reviews board
      compensation. The committee also acts as a screening and nominating committee
      for candidates considered for election to the board. In this capacity it
      concerns itself with the composition of the board with respect to depth of
      experience, balance of professional interests, required expertise and other
      factors. The committee evaluates prospective nominees identified on its own
      initiative or referred to it by other board members, management, stockholders
      or
      external sources and all self-nominated candidates. The committee uses the
      same
      criteria for evaluating candidates nominated by stockholders and self-nominated
      candidates as it does for those proposed by other board members, management
      and
      search companies. Our nominating committee is comprised of Ms. Landau and
      Messrs. Zugschwert and Chiusano, and Ms. Landau is the chairman of the
      committee.




**Code
      of Business Conduct and Ethics**




We
      have
      adopted a Code of Business Conduct and Ethics applying to our directors,
      officers and employees. The Code is reasonably designed to deter wrongdoing
      and
      promote (i) honest and ethical conduct, including the ethical handling of actual
      or apparent conflicts of interest between personal and professional
      relationships, (ii) full, fair, accurate, timely and understandable disclosure
      in reports and documents filed with, or submitted to, the SEC and in other
      public communications made by us, (iii) compliance with applicable governmental
      laws, rules and regulations, (iv) the prompt internal reporting of violations
      of
      the code to appropriate persons identified in the code, and (v) accountability
      for adherence to the Code. The Code is incorporated by reference as Exhibit
      14.
      In addition, we undertake to provide copies of the Code to any person, at no
      charge, upon receipt of a written request addressed to Mr. Keith Knox,
      President, Hudson Holding Corporation, 111 Town Square Place, Suite 1500A,
      Jersey City, New Jersey 07310.





20





**Compliance
      with Section 16(a) of the Exchange Act**




Section
      16(a) of the Exchange Act requires the Company's officers and directors, and
      persons who own more than ten percent of a registered class of the Company's
      equity securities (collectively the "Reporting Persons") to file reports and
      changes in ownership of such securities with the SEC and the Company. Based
      solely upon a review of (i) Forms 3 and 4 and amendments thereto furnished
      to
      the Company pursuant to Rule 16a-3(e), promulgated under the Exchange Act,
      during the Company's fiscal year ended March 31, 2007 and (ii) Forms 5 and
      any
      amendments thereto and/or written representations furnished to the Company
      by
      any Reporting Persons, stating that such person was not required to file a
      Form
      5 during the Company's fiscal year ended March 31, 2007, it has been determined
      that no Reporting Persons were delinquent with respect to the person's reporting
      obligations set forth in Section 16(a) of the Exchange Act.





**Item
      10. Executive Compensation**





Summary
      Compensation Table








Name
                and Principal Position
            
            Fiscal
                Year Ended March 31,
            
            Salary
            
            Bonus
            
            Stock
              Awards
            
            Option
              Awards
            
            All
                Other
              Compensation
            
            TotalMartin
                C. Cunningham,
              Chairman
                and Chief Executive Officer
            
            
            2007
            
            $
            185,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            23,792
            (1)
            $
            208,792Keith
                R. Knox,
              President
                and Secretary
            
            
            2007
            
            $
            185,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            23,005
            (1)
            $
            208,005Mark
                Leventhal,
              Executive
                Vice President
            
            
            2007
            
            $
            180,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            32,538
            (1)
            $
            212,538





(1)
            Amounts
                represents health, dental, life and disability insurance benefits
                as well
                as vehicle allowances and parking fees, as
                applicable.





**Employment
      and Consulting Arrangements and Change in Control
      Arrangements**





The
      Compensation Committee of our board of directors have approved the terms of
      each
      of the employment agreements described below. As of January 1, 2007, we entered
      into the employment agreements described below with each of the following
      persons.





**Martin
      Cunningham** as
      our
      Chief Executive Officer. The agreement provides for an initial term of five
      years, an annual salary to Mr. Cunningham of $200,000 and an annual bonus based
      on a formula of 5% of the firm’s net profits before taxes, payable quarterly,
      provided that net profits in such fiscal quarter is equal to or exceeds
      $1,200,000. Our board of directors may increase the amount of the bonus. The
      agreement also provides for the executive’s ability to participate in our health
      insurance program and a car allowance of $1,000 per month. In the event that
      Mr.
      Cunningham’s employment is terminated by the Company, other than with good
      cause, he will receive any bonus payment due through his termination date,
      all
      remaining salary payments, plus certain health insurance benefits.





**Keith
      Knox** as our
      President. The agreement provides for an initial term of five years, an annual
      salary to Mr. Knox of $200,000 and an annual bonus, based on a formula of 4%
      of
      the firm’s net profits before taxes, payable quarterly, provided that net
      profits in such fiscal quarter is equal to or exceeds $1,200,000. Our board
      of
      directors may increase the amount of the bonus. The agreement also provides
      for
      the executive’s ability to participate in our health insurance program and a car
      allowance of $1,000 per month. In the event that Mr. Knox’s employment is
      terminated by the Company, other than with good cause, he will receive any
      bonus
      payment due through his termination date, all remaining salary payments, plus
      certain health insurance benefits.





**Outstanding
      Equity Awards at Fiscal Year End**




No
      option, stock appreciation right or long-term incentive plan awards were granted
      to or exercised by any of the Named Executive Officers during the fiscal year
      ended March 31, 2007 and no such awards are currently outstanding.


21




**2005
      Stock Option Plan**




We
      currently have one equity incentive plan, the 2005 Stock Option Plan (the
      "Plan"), which was approved by the stockholders on July 26, 2005, and is
      administered by the Board of Directors. The Plan is available for the issuance
      of awards of up to an aggregate of 2,000,000 shares of common stock to our
      employees, officers, directors and consultants, in the form of either
      non-qualified stock options or incentive stock options. The purpose of the
      Plan
      is to provide additional incentive to those persons who are responsible for
      the
      management and growth of the Company.





As  of
      March
      31, 2007, there were 1,355,000 options outstanding under the Plan and 645,000
      options remained available for issuance under the plan. On May 2, 2007, we
      granted an additional 250,000 options to a consultant.





**Director
      Compensation**





Directors
      were not compensated for their service during the fiscal year ended March 31,
      2006. On August 15, 2006, the board of directors resolved that compensation
      for
      each of the independent directors for the ensuing year would be $600 per month,
      plus immediately vested five -year options to purchase 10,000 shares of the
      Company’s common stock with an exercise price equal to the market price of the
      Company’s common stock on the August 15, 2006 grant date.





Director
      Compensation Table








Name
            
            Fees
                Earned or Paid in
              Cash
            
            (1)
              Stock
              Awards
            
            Option
              Awards
            
            Non-Equity
                Incentive Plan Compensation
            
            Non-Qualified
                Deferred Compensation Earnings
            
            (2)
              All
                Other
              Compensation
            
            TotalCarmine
                Chiusano
            
            $
            4,200
            
            $
            -
            
            $
            5,800
            
            $
            -
            
            $
            -
            
            $
            9,846
            
            $
            19,846Joanne
                Landau
            
            $
            4,200
            
            $
            -
            
            $
            5,800
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            10,000Peter
                Zugschwert
            
            $
            4,200
            
            $
            -
            
            $
            5,800
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            10,000





(1)
            Amounts
                represents the value of 10,000 stock options granted to each of the
                independent members of the Board of Directors during the fiscal year
                ended
                March 31, 2007. The options were valued using the Black-Sholes
                pricing model (For assumptions used in this calculation, See Note
                B[9] in
                the consolidated financial statements, included within this annual
                report). These are the only options granted to directors which are
                outstanding at March 31, 2007.




(2)
            Amount
                represents compensation paid, primarily during the period from April
                1,
                2006 to May 15, 2006.




22




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




**Securities
      Authorized for Issuance under Equity Compensation Plans**


Number
                  of securitiesNumber
                  of securities to
              
              
              
              remaining
                  available forbe
                  issued upon exercise
              
              Weighted-average
                  exercise
              
              future
                  issuance underof
                  outstanding options,
              
              price
                  of outstanding
              
              equity
                  compensation planswarrants
                  and rights
              
              options,
                  warrants and rights
              
              (excluding
                  securities(a)
              
              (b)
              
              reflected
                  in column (a))Equity
                  compensation plans approved by security holders
              
              
              1,355,000
              
              $
              1.00
              
              
              645,000Equity
                  compensation plans not approved by security holders
              
              
              -
              
              
              -
              
              
              -Total
              
              
              1,355,000
              
              $
              1.00
              
              
              645,000




The
      table
      above reflects the status of the Company's equity compensation plans as of
      March
      31, 2007.




**Security
      Ownership of Certain Beneficial Owners**




The
      following table sets forth information regarding the number of shares of our
      common stock beneficially owned on June 22, 2007 by:




o
      each
      person who is known by us to beneficially own 5% or more of our common
      stock;




o
      each of
      our directors and executive officers; and




o
      all of
      our directors and executive officers, as a group.




Except
      as
      otherwise set forth below, the address of each of the persons listed below
      is
      Hudson Holding Corporation, 111 Pavonia Avenue, Suite 1500A, Jersey City, New
      Jersey 07310.


**Number
                    of Shares****Beneficially**
                
                **Percentage
                    of Shares****Name
                    and Address of Beneficial Owner**
                
                **Owned
                    (1)**
                
                **Beneficially
                    Owned (2)**Directors
                    and Executive Officers:Martin
                    C. Cunningham
                
                
                4,178,565
                
                
                11.4
                %Keith
                    R. Knox
                
                
                4,178,565
                
                
                11.4
                %Mark
                    Leventhal
                
                
                4,348,565
                
                
                11.8
                %Peter
                    J. Zugschwert(3)
                
                
                224,356
                
                
                *Joanne
                    V. Landau(3)
                
                
                10,000
                
                
                *Carmine
                    V. Chiusano(3)
                
                
                10,000
                
                
                *All
                    executive officers and directors as a group (6 persons)
                
                
                12,950,051
                
                
                35.3
                %Other
                    5% or Greater Stockholders:Kenneth
                    D. Pasternak(4)
                
                
                9,081,789
                
                
                24.2
                %Steven
                    L. Winkler(5)
                
                
                4,348,565
                
                
                11.8
                %South
                    Ferry #2 LP(6)
                
                
                3,375,000
                
                
                8.9
                %
  23


*
      Less
      than 1% of outstanding shares




(1)
      Unless otherwise indicated, includes shares owned by a spouse, minor children
      and relatives sharing the same home, as well as entities owned or controlled
      by
      the named person.




(2)
      Based
      upon 36,725,185 shares of our common stock outstanding on June 22,
      2007.




(3)
      Includes 10,000 shares of Common Stock issuable upon exercise of Stock options
      to these directors




(4)
      Includes 833,335 shares of Common Stock issuable upon exercise of Warrants.
      The
      address for Mr. Pasternak is 111 E. Saddle River Road, Saddle River, N.J.
      07458.




(5)
      Mr.
      Winkler is employed by Hudson Securities, Inc., a wholly-owned subsidiary of
      Hudson Holding Corporation, as Nasdaq Trading Manager.





(6)  Includes
      1,125,000 shares of common stock issuable upon exercise of warrants. Aaron
      Wolfson and Abraham Wolfson are the General Partners of South Ferry #2 LP,
      however, all of the voting and dispositive power over South Ferry #2’s portfolio
      has been delegated to Morris Wolfson, its portfolio manager. Aaron Wolfson,
      Abraham Wolfson and Morris Wolfson each disclaim beneficial ownership over
      the
      shares owned by South Ferry #2 LP. The address for South Ferry #2 LP is One
      State Street Plaza, 29th Floor, New York, New York 10004.




**Item
      12. Certain Relationships and Related Transactions, and Director
      Independence**




Subsequent
      to our fiscal year end, the Board approved the establishment of trading accounts
      that would be subject to position limits and would be jointly or individually
      managed by key personnel, including Mr. Martin Cunningham (our Chairman and
      Chief Executive Officer), Mr. Keith Knox (our President, Secretary and
      Director), and Mr. Mark Leventhal (Executive Vice President and Director).
      In
      accordance with the arrangement, 48% of the net trading profit in these trading
      accounts will be paid out as compensation to the responsible
      individuals.




Three
      of
      our six directors are considered "independent" under the SEC's new independence
      standards.




24





**Item
      13. Exhibits**





**Exhibit
                No.**
            
            **Description**2.1
            
            Agreement
                and Plan of Merger, dated June 13, 2005, among Health Outcomes Management,
                Inc. and Hudson Holding Corporation (1)2.2
            
            Agreement
                and Plan of Merger, dated December 22, 2004, among Health Outcomes
                Management, Inc., Hudson Acquisition Inc. and Hudson Securities,
                Inc.
                (2)3.1
            
            Certificate
                of Incorporation of Hudson Holding Corporation (1)3.2
            
            Bylaws
                of Hudson Holding Corporation (1)4.1
            
            Rights
                of Dissenting Shareholders (1)4.2
            
            Form
                of Warrant (3)10.1
            
            Subscription
                Agreement, dated January 10, 2006, between Kenneth Pasternak
              and
                Hudson Holding Corporation (4)10.2
            
            2005
                Stock Option Plan (1)10.3
            
            Form
                of Securities Purchase Agreement (3)10.4
            
            Form
                of Registration Rights Agreement (3)10.5
            
            Employment
                Agreement, effective as of January 1, 2007, by and between Hudson
                Holding
                Corporation and Martin C. Cunningham (5)10.6
            
            Employment
                Agreement, effective as of January 1, 2007, by and between Hudson
                Holding
                Corporation and Keith R. Knox (5)10.7
            
            Audit
                Committee Charter (6)10.8
            
            Compensation
                Committee Charter (6)10.9
            
            Nominating
                and Corporate Governance Committee Charter (6)10.10
            
            Complaint
                Procedures for Accounting, Internal Accounting Control, and Auditing
                Matters (6)14
            
            Code
                of Business Conduct and Ethics and Compliance Program
                (6)21
            
            Subsidiaries
                of Hudson Holding Corporation31.1
            
            Certification
                of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley
                Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley
                Act of 200232.1
            
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                *32.2
            
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                *99.1
            
            Press
                Release Related to Hudson Holding Corporation's Earnings for the
                Year
                Ended March 31, 2007





*
      These
      Exhibits attached to this Form 10-KSB shall not be deemed "filed" for purposes
      of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or
      otherwise subject to liability under that section, nor shall it be deemed
      incorporated by reference in any filing under the Securities Act of 1933, as
      amended, or the Exchange Act, except as expressly set forth by specific
      reference in such filing.




25




(1)     
      Incorporated by reference to the exhibits included with our Definitive Proxy
      Statement on Schedule 14A, filed with the SEC on July 1, 2005.




(2)
         Incorporated by reference to the exhibits included with our Current
      Report on Form 8-K filed with the SEC on December 28, 2004.







(3)
         Incorporated by reference to the exhibits included with our Current
      Report on Form 8-K filed with the SEC on December 1, 2006, as
      amended.





(4)
         Incorporated by reference to the exhibits included with our Current
      Report on Form 8-K filed with the SEC on January 19, 2006, as
      amended.




(5)
         Incorporated by reference to the exhibits included with our Current
      Report on Form 8-K filed with the SEC on January 4, 2007, as
      amended.




(6)
         Incorporated by reference to the exhibits included with our Form
      10-KSB filed with the SEC on June 29, 2006.




**Item
      14. Principal Accountant Fees and Services**





*Audit
      Fees*





The
      aggregate fees billed for professional services rendered was $55,000 and $60,000
      for the audits of the Company's annual consolidated financial statements for
      the
      fiscal years ended March 31, 2007 and 2006, respectively, which services include
      the cost of the audits of the consolidated financial statements included in
      the
      Company’s annual Forms 10-KSB for each respective year and the reviews of
      the related quarterly Form 10-QSB’s..





*Audit-Related
      Fees*





The
      principal accountant billed $7,600 related to the review of a registration
      statement during the fiscal year ended March 31, 2007 and $10,000 related to
      reviews of prior year financial statements during the fiscal year ended March
      31, 2006.





*Tax
      Fees*





For
      the
      years ended March 31, 2007 and 2006, the principal accountant billed $54,500
      and
      $12,000, respectively, for tax compliance. The billing for the fiscal year
      ended
      March 31, 2007 included services related to tax returns for three
      periods.





*All
      Other Fees*





The
      principal accountant billed $28,728 related to several audits of anti-money
      laundering procedures during the fiscal year ended March 31, 2007.





*Audit
      Committee Policies and Procedures*





Effective
      with the formation of our Audit Committee, all auditing services and permitted
      non-audit services (including the fees and terms thereof) to be performed for
      the Company by its independent auditors will be pre-approved, subject to the
      de-minimus exceptions for non-audit services described in Section 10A(i)(1)(B)
      of the Securities Exchange Act of 1934, which should be nonetheless be approved
      by the Board of Directors prior to the completion of the audit. At the beginning
      of the fiscal year, the Audit Committee will evaluate other known potential
      engagements of the independent auditor, including the scope of work proposed
      to
      be performed and the proposed fees, and approve or reject each service, taking
      into account whether the services are permissible under applicable law and
      the
      possible impact of each non-audit service on the independent auditor's
      independence from management. At each such subsequent meeting, the auditor
      and
      management may present subsequent services for approval. Typically, these would
      be services such as due diligence for an acquisition, that would not have been
      known at the beginning of the year.





26





**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.








**HUDSON
      HOLDING CORPORATION**




Dated: June 28, 2007
            By:
                /s/ Martin C. Cunningham
              
              Martin
                C. Cunningham
              Chairman
                of the Board
              Chief
                Executive Officer and Director
              (Principal
                Executive Officer)Dated: June 28, 2007
            By:
              /s/ Keith R. Knox
              Keith R. Knox
              President,
                Secretary and Director
              (Principal
                Financial and Accounting Officer)




Signatures
              Title
              Date/s/
                  Martin C. Cunningham
                
                Martin
                  C. Cunningham
              Chairman
                  of the Board,
                  Chief
                    Executive Officer and Director
                  (principal
                      executive officer)
              June
                  28, 2007/s/
                  Keith R. Knox
                
                Keith
                  R. Knox
              President,
                  Secretary and Director
                (principal
                  financial and accounting officer)
              June
                  28, 2007/s/
                  Mark Leventhal
                Mark
                    Leventhal
              Executive
                  Vice President and Director
              June
                  28, 2007/s/
                  Peter J. Zugschwert
                
                Peter
                  J. Zugschwert
              Director
              June
                  28, 2007/s/
                  Joanne V. Landau
                Joanne
                    V. Landau
              Director
              June
                  28, 2007/s/
                  Carmine V. Chiusano
                
                Carmine
                  V. Chiusano
              Director
              June
                  28, 2007





27


**HUDSON
                  HOLDING CORPORATION AND SUBSIDIARIES****Table
                  of Contents to Consolidated Financial
                  Statements**
  **Page(s)**Report
                  of Independent Registered Public Accounting Firm
              
              
              F-1Consolidated
                  Balance Sheet as of March 31, 2007
              
              
              F-2Consolidated
                  Statements of Operationsfor
                  the Years Ended March 31, 2007 and 2006
              
              
              F-3Consolidated
                  Statements of Stockholders' Equityfor
                  the Years Ended March 31, 2007 and 2006
              
              
              F-4Consolidated
                  Statements of Cash Flows for the YearsEnded
                  March 31, 2007 and 2006
              
              
              F-5Notes
                  to Consolidated Financial Statements
              
              
              F-6









**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors
 Hudson
        Holding Corporation
 
 
 We
        have
        audited the consolidated statement of financial condition of Hudson Holding
        Corporation (the "Company") and subsidiaries as of March 31, 2007 and the
        related consolidated statements of operations, changes in stockholders' equity
        and cash flows for the years ended March 31, 2007 and 2006. These financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of Hudson Holding
        Corporation as of March 31, 2007, and the consolidated results of its
        operations and its cash flows for the years ended March 31, 2007 and 2006
        in conformity with U.S. generally accepted accounting principles.
 
 
 Eisner
        LLP
 
 
 New
        York,
        New York
 June
        20,
        2007




F-1




**HUDSON
                  HOLDING CORPORATION AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENT OF FINANCIAL CONDITION****MARCH
                  31, 2007**
  **ASSETS**Cash
                  and cash equivalents
              
              $
              5,112,275Cash-restricted
              
              
              235,837Receivable
                  from clearing broker
              
              
              945,031Securities
                  owned, at fair value
              
              
              14,188,748Income
                  taxes receivable
              
              
              613,266Furniture,
                  equipment, capitalized software and leasehold improvements,
                  net
              
              
              478,077Deferred
                  tax asset
              
              
              79,000Other
                  assets
              
              
              269,873Goodwill
              
              
              1,111,179$
              23,033,286**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Liabilities:Securities
                  sold, but not yet purchased, at fair value
              
              $
              8,266,395Commissions
                  payable
              
              
              628,088Accrued
                  expenses and other liabilities
              
              
              875,288Total
                  liabilities
              
              
              9,769,771Commitments
                  and contingencies (Note J)Stockholders'
                  equity:Preferred
                  stock, $0.001 par value,1,000,000
                  shares authorized, none issued
              
              
              -Common
                  stock, $0.001 par value; 100,000,000 shares authorized;36,725,185
                  shares issued and outstanding
              
              
              36,725Additional
                  paid-in capital
              
              
              12,217,127Retained
                  earnings
              
              
              1,009,663Total
                  stockholders' equity
              
              
              13,263,515$
              23,033,286




See
      notes to these consolidated financial
      statements




F-2




**HUDSON
                HOLDING CORPORATION AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS**




**Year
                Ended March 31,****2007**
            
            **2006****Revenues:**Trading
                gains, net
            
            $
            17,924,177
            
            $
            17,621,676Commissions
            
            
            2,665,437
            
            
            2,539,737Interest
                and other income, net
            
            
            261,905
            
            
            62,87320,851,519
            
            
            20,224,286**Expenses:**Salaries
                and related costs
            
            
            3,457,888
            
            
            2,948,861Commissions
                and clearing charges
            
            
            9,395,294
            
            
            9,327,598Communications
            
            
            5,517,066
            
            
            4,584,858Occupancy
            
            
            1,215,463
            
            
            522,774Professional
                fees
            
            
            549,792
            
            
            551,844Business
                development
            
            
            393,850
            
            
            390,383Other
            
            
            794,704
            
            
            645,14321,324,057
            
            
            18,971,461**(Loss)
                income before income taxes**
            
            
            (472,538
            )
            
            1,252,825Income
                tax (benefit) provision
            
            
            (89,430
            )
            
            469,000**Net
                (loss) income**
            
            $
            (383,108
            )
            $
            783,825(Loss)
                earnings per share - basic
            
            $
            (0.01
            )
            $
            0.04(Loss)
                earnings per share - diluted
            
            $
            (0.01
            )
            $
            0.04Weighted
                average number of shares outstanding - basic
            
            
            30,393,959
            
            
            21,910,067Weighted
                average number of shares outstanding - diluted
            
            
            30,393,959
            
            
            22,153,119




See
      notes to these consolidated financial
      statements


F-3
  **HUDSON
                    HOLDING CORPORATION AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CHANGES IN STOCKHOLDERS'
                    EQUITY**
  **Additional****Common
                    Stock**
                
                **Paid-in**
                
                **Retained****Shares**
                
                **Amount**
                
                **Capital**
                
                **Earnings**
                
                **Total**Balance,
                    March 31, 2005
                
                
                19,334,084
                
                $
                19,334
                
                $
                4,680,577
                
                $
                608,946
                
                $
                5,308,857Shares
                    deemed issued in connection with Health Outcomes Management,
                    Inc.
                    merger
                
                
                1,233,992
                
                
                1,234
                
                
                (1,234
                )
                
                -
                
                
                -Sale
                    of common stock
                
                
                6,581,784
                
                
                6,582
                
                
                1,993,418
                
                
                -
                
                
                2,000,000Net
                    income
                
                
                **-**
                
                
                **-**
                
                
                **-**
                
                
                783,825
                
                
                783,825Balance,
                    March 31, 2006
                
                
                27,149,860
                
                
                27,150
                
                
                6,672,761
                
                
                1,392,771
                
                
                8,092,682Sale
                    of common stock and warrants
                
                
                9,575,325
                
                
                9,575
                
                
                5,471,123
                
                
                -
                
                
                5,480,698Stock-based
                    compensation - employees
                
                
                -
                
                
                -
                
                
                55,843
                
                
                -
                
                
                55,843Stock-based
                    compensation - directors
                
                
                -
                
                
                -
                
                
                17,400
                
                
                -
                
                
                17,400Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                (383,108
                )
                
                (383,108
                )Balance,
                    March 31, 2007
                
                
                36,725,185
                
                $
                36,725
                
                $
                12,217,127
                
                $
                1,009,663
                
                $
                13,263,515
  See notes to
        these consolidated financial statements
  F-4
  **HUDSON
                    HOLDING CORPORATION AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS**
  **For
                    the Years Ended****March
                    31,****2007**
                
                **2006****Cash
                    flows from operating activities:**Net
                    (loss) income
                
                $
                (383,108
                )
                $
                783,825Adjustments
                    to reconcile net (loss) income to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                141,947
                
                
                145,214Stock-based
                    compensation
                
                
                73,243
                
                
                -Commissions
                    receivable reserve provision
                
                
                160,269
                
                
                112,521Bad
                    debt reserve provision
                
                
                -
                
                
                25,000Deferred
                    rent
                
                
                78,030
                
                
                (15,960
                )Changes
                    in:Receivable
                    from clearing broker
                
                
                3,921,519
                
                
                (2,143,146
                )Securities
                    owned
                
                
                (10,453,351
                )
                
                (679,704
                )Income
                    taxes receivable/payable
                
                
                (1,194,800
                )
                
                559,118Commissions
                    receivable
                
                
                (160,269
                )
                
                30,457Deferred
                    tax asset
                
                
                44,000
                
                
                (142,000
                )Other
                    assets
                
                
                107,757
                
                
                (238,911
                )Securities
                    sold, but not yet purchased
                
                
                7,847,807
                
                
                (225,744
                )Commissions
                    payable
                
                
                (566,055
                )
                
                286,968Accrued
                    expenses and other liabilities
                
                
                218,336
                
                
                (144,676
                )Net
                    cash used in operating activities
                
                
                (164,675
                )
                
                (1,647,038
                )**Cash
                    flows from investing activities:**Purchases
                    of furniture and equipment,capitalized
                    software and leasehold improvements
                
                
                (444,460
                )
                
                (171,515
                )Cash
                    subject to restrictions
                
                
                (235,837
                )
                
                -Net
                    cash used in investing activities
                
                
                (680,297
                )
                
                (171,515
                )**Cash
                    flows from financing activities:**Proceeds
                    from issuance of common stockand
                    warants, net of issuance costs
                
                
                5,480,698
                
                
                2,000,000Net
                    cash provided by financing activities
                
                
                5,480,698
                
                
                2,000,000**Net
                    increase in cash**
                
                
                4,635,726
                
                
                181,447Cash
                    and cash equivalents - beginning of year
                
                
                476,549
                
                
                295,102**Cash
                    and cash equivalents - end of year**
                
                $
                5,112,275
                
                $
                476,549**Supplemental
                    disclosures of cash flow information:**Cash
                    paid during the year for:Income
                    taxes
                
                $
                1,114,060
                
                $
                57,057Non-cash
                    operating activities:Commissions
                    and note receivablewritten-off
                    against reserve
                
                $
                137,521
                
                $
                -
  See
        notes to these consolidated financial
        statements
  F-5
  **HUDSON
        HOLDING CORPORATION AND SUBSIDIARIES**
  **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **NOTE
        A - ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION**
  The
        consolidated financial statements include the accounts of Hudson Holding
        Corporation ("Holding") and its wholly-owned subsidiaries Hudson Securities,
        Inc. ("Hudson") and Hudson Technologies, Inc. (“Technologies”) (collectively the
        "Company"). Holding was formed in 1987, is currently incorporated in the
        State
        of Delaware, and is a holding company. Hudson was formed in 1984, is a
        registered broker-dealer under the Securities Exchange Act of 1934 and is
        a
        member of the National Association of Securities Dealers, Inc. (the "NASD").
        Hudson is a market maker specializing in providing liquidity in less liquid,
        difficult to trade stocks. Hudson is an introducing broker and clears all
        transactions through a clearing organization on a fully disclosed basis.
        Accordingly, Hudson is exempt from rule 15c3-3 of the Securities Exchange
        Act of
        1934. On May 22, 2006, Technologies was formed as a Delaware corporation
        for the
        purpose of providing software development and technology services for Hudson
        and
        for third parties. As of March 31, 2007, Technologies had total assets of
        $752,186 and for the period from May 22, 2006 (date of inception) through
        March
        31, 2007, Technologies had revenues and net income of $62,281 and $19,950,
        respectively. All significant intercompany transactions among the companies
        have
        been eliminated. The Company has offices in New Jersey and Florida.
  On
        July
        21, 2004 a predecessor broker-dealer formed a wholly-owned subsidiary named
        Hudson Capital Markets, Inc. ("HCMI"), which was organized in the state of
        Delaware. HCMI was authorized to issue 30,000,000 shares of common stock
        with a
        par value of $.001 per share. On July 31, 2004, the predecessor broker-dealer
        was merged into HCMI, with HCMI becoming the survivor ("HCMI Merger") and
        the
        name was changed to Hudson Securities, Inc. In connection with this merger,
        the
        stockholders of the predecessor broker-dealer received 83,333.33 shares of
        Hudson for each share of the predecessor broker-dealer shares owned. The
        historical capital accounts were retroactively adjusted to reflect the
        equivalent number of shares issued by HCMI in the HCMI Merger, while the
        predecessor broker-dealer historical retained earnings was carried forward.
 
 In
        December 2004, Hudson entered into an Agreement and Plan of Merger (the
        "Agreement") with Health Outcomes Management, Inc. ("HOM"), a non-operating
        public company. On May 3, 2005, under the terms of the Agreement, Hudson's
        stockholders exchanged all 10,967,000 shares of their common stock for
        19,334,084 post reverse-split shares of HOM common stock, and Hudson's warrant
        holders exchanged 998,667 of their Hudson warrants with an exercise price
        of
        $1.85 for 1,760,590 post reverse-split warrants to purchase HOM common stock
        at
        $1.0494 per share (the "Exchange"). The HOM shares that were issued represented
        94% of HOM's outstanding interest at the time of this exchange. In connection
        with the legal form of this transaction, Hudson became a wholly owned subsidiary
        of HOM. On September 6, 2005, HOM changed its name to Hudson Holding Corporation
        and effectuated a one for eight reverse stock split for all stockholders
        of
        record as of the close of business on June 13, 2005. For financial reporting
        purposes, the Exchange represents a capital transaction of Hudson or a "reverse
        merger" rather than a business combination. Accordingly, the number of shares
        issued and outstanding and additional paid-in capital of Holding has been
        retroactively adjusted to reflect the equivalent number of shares issued
        by HOM,
        on a post reverse-split basis, in the Exchange while Hudson's historical
        retained earnings is being carried forward. All costs attributable to the
        reverse merger were expensed. Further, all per share amounts and number of
        common stock shares, including those obtainable on the exercise of warrants,
        in
        these consolidated financial statements and notes thereto have been reflected
        on
        a post reverse-split basis.
 
 **NOTE
        B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **[1]
        Securities transactions:**
  Hudson
        records transactions in securities and the related revenue and expenses on
        a
        trade-date basis. Securities owned and securities sold, but not yet purchased,
        are stated at fair value with any resulting unrealized gains and losses
        reflected in trading gains, net. Securities which do not have a readily
        ascertainable market value are valued at their estimated fair value as
        determined by management. Because of the inherent uncertainty of valuation
        estimates, the management determined values may differ significantly from
        values
        that would have been used had a ready market for these securities existed
        and
        the differences could be material.
  **[2]
        Income taxes:**
  The
        Company accounts for income taxes in accordance with the provisions of Statement
        of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
        ("SFAS
        No. 109"). SFAS No. 109 requires that the Company recognize deferred tax
        liabilities and assets for the expected future tax consequences of items
        that
        have been included or excluded in the financial statements or tax returns.
        Under
        this method, deferred tax liabilities and assets are determined on the basis
        of
        the difference between the tax basis of liabilities and assets and their
        respective financial reporting amounts ("temporary differences") at enacted
        tax
        rates in effect for the years in which the temporary differences are expected
        to
        reverse. The Company records an estimated valuation allowance on its deferred
        income tax assets if it is not more than likely that these deferred income
        tax
        assets will be realized.
  F-6
  **NOTE
        B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** **,** **continued**
  **[3]
        Furniture, equipment, leasehold improvements, capitalized software and
        depreciation and amortization** :
  Furniture,
        equipment and leasehold improvements are recorded at cost. Depreciation and
        amortization is computed using the straight-line method over the estimated
        useful life of the related asset or, in the case of leasehold improvements,
        over
        the shorter of its estimated useful life or the lease term.
 
 During
        April 2006, the Company began capitalizing certain costs incurred in connection
        with developing or obtaining internal use software pursuant to Statement
        of
        Position 98-1, Accounting for the Costs of Computer Software Developed or
        Obtained for Internal Use. Unamortized capitalized software development costs
        of
        $218,000 are included in furniture, equipment, capitalized software and
        leasehold improvements in the Consolidated Statement of Financial Condition
        as
        of March 31, 2007. The entire amount represents software that is still in
        development and is not being amortized as of March 31, 2007.
  **[4]
        Use of estimates** :
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amount of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reported amount of revenues and expenses
        during
        the reporting period. The most significant assumptions concern determining
        the
        fair value of certain securities and the evaluation of goodwill for impairment.
        Actual results could differ from those estimates.
  **[5]
        Cash and cash equivalents** :
  For
        purposes of the statements of cash flows, the Company considers all highly
        liquid investments purchased with an original maturity of three months or
        less
        to be a cash equivalent.
  Restricted
        cash represents an automatically renewable, fourteen month time deposit which
        collateralizes a letter of credit (see Note I [3]).
  **[6]
        Concentrations of credit risk:**
  Hudson
        is
        engaged in trading on a principal and/or agency basis with and for primarily
        other securities broker-dealers and institutional investors such as mutual
        funds, hedge funds, banks and similar businesses. Counterparties to Hudson's
        business activities include broker-dealers and clearing organizations, and
        can
        include banks and other financial institutions. Hudson uses one clearing
        broker
        to process transactions and maintain customer accounts. The clearing broker
        extends credit to Hudson's clientele which is secured by cash and securities
        in
        the clients' account. Hudson's exposure to credit risk associated with the
        non-performance by its customers and counterparties in fulfilling their
        contractual obligations can be directly impacted by volatile or illiquid
        trading
        markets, which may impair the ability of customers and counterparties to
        satisfy
        their obligations to Hudson. Additionally, Hudson has agreed to indemnify
        the
        clearing broker for losses it incurs while extending credit to Hudson's clients.
        Amounts due from customers that are considered uncollectible are charged
        back to
        Hudson by the clearing broker when such amounts become
        determinable.
 
 In
        the
        normal course of business, Hudson enters into transactions in various derivative
        instruments for trading purposes. These transactions include securities sold
        short, but not yet purchased, and option and warrant contracts.
 
 Securities
        sold short, but not yet purchased, represent obligations of Hudson to deliver
        the underlying securities sold; and option and warrant contracts written
        represent obligations of Hudson to purchase or deliver the specified security
        at
        the contracted price. Hudson's ultimate obligation on such instruments may
        exceed the amount recognized in the statement of financial condition. Hudson
        monitors its positions continuously to reduce the risk of the potential loss
        due
        to changes in market value or failure of counterparties to perform.
 
 Substantially
        all of Hudson's cash and security positions are deposited with its clearing
        broker for safekeeping purposes. Hudson maintains cash in bank accounts,
        which,
        at times, may exceed federally insured limits. Hudson has not experienced
        any
        losses in such accounts and believes it is not exposed to any significant
        credit
        risk on cash .
  **[7]
        Goodwill:**
  On
        June
        30, 2004, an investor group purchased all of the outstanding common stock
        of the
        broker-dealer which was the predecessor to Hudson for a purchase price of
        approximately $7,136,000. As a result, the predecessor broker-dealer changed
        its
        name to Hudson and recorded goodwill of approximately $1,111,000, which
        represented the excess of the purchase price over the estimated fair value
        of
        the assets acquired and liabilities assumed.
  F-7
  **NOTE
        B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
  **[7]
        Goodwill, continued**
  The
        Company accounts for its goodwill in accordance with Statement of Financial
        Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
        No.
        142"). Under SFAS No. 142, goodwill is not subject to amortization, but rather
        an assessment of impairment, by applying a fair value based test. The Company
        reviews goodwill for impairment annually, during the fourth quarter of each
        year, and also between annual tests upon the occurrence of trigger events.
        The
        reviews are performed at the Hudson level, generally by using the market
        capitalization of the Company as an indicator of fair value, since Hudson
        currently represents the most significant component of the consolidated entity.
        Impairment is potentially indicated when the carrying value of Hudson, including
        goodwill, exceeds its fair value. If a potential impairment is indicated,
        the
        fair value of Hudson would be measured against the fair value of its underlying
        assets and liabilities, excluding goodwill, to estimate an implied fair value
        of
        Hudson’s goodwill. If that fair value was less than the carrying value of
        goodwill, impairment would be recorded. As a result of its assessment, the
        Company has determined that no such potential impairment was indicated during
        the year ended March 31, 2007.
  **[8]
        Commissions receivable reserve** :
  Commissions
        receivable represent cumulative draws and benefits provided to traders and
        salespersons in excess of cumulative commissions earned. The Company will
        collect these receivables if future earned commissions exceed future draws
        and
        benefits. The Company establishes reserves as an offset to the receivable
        balance on the basis of historical collections and estimates of future
        collections. As of March 31, 2007, the Company had $160,269 of commissions
        receivable offset by a reserve of the same amount.
 
 **[9]
        Stock based compensation:**
 
 Commencing
        with the first issuance of stock options on May 26, 2006, the Company accounts
        for stock options issued under the recognition and measurement principles
        of
        Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
        Payment, (“SFAS 123(R)”). Under the provisions of SFAS 123(R), the Company is
        required to measure the cost of services received in exchange for an award
        of
        equity instruments based on the fair value of the award. The award is measured
        on the grant date for awards to employees and directors. That cost is then
        recognized over the period during which services are required to be provided
        in
        exchange for the award, usually the vesting period.
 
 **[10]
        (Loss) earnings per share:**
 
 Basic
        (loss) earnings per share ("EPS") has been calculated by dividing net (loss)
        income by the weighted average shares of common stock outstanding during
        the
        year. Diluted EPS reflects the change in EPS, using the treasury stock method
        to
        reflect the impact of common share equivalents as if dilutive securities
        such as
        stock options or warrants were exercised or converted into common
        stock.
 
 The
        following is a reconciliation of the numerators and denominators of the basic
        and diluted (loss) earnings per share computations for the years ended March
        31,
        2007 and 2006:
 Year
                    EndedMarch
                    31, 2007
                
                March
                    31, 2006Numerator/
                  Net
                    Income
                
                Denominator/
                  Shares
                
                Numerator/
                  Net
                    Income
                
                Denominator/
                  SharesNet
                    (loss) income and shares used in basic calculation
                
                $
                (383,108
                )
                
                30,393,959
                
                $
                783,825
                
                
                21,910,067Effect
                    of dilutive securities - warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                243,052Net
                    (loss) income and shares used in diluted calculation
                
                $
                (383,108
                )
                
                30,393,959
                
                $
                783,825
                
                
                22,153,119(Loss)
                    earnings per share - basic
                
                $
                (0.01
                )
                
                
                
                $
                0.04(Loss)
                    earnings per share - diluted
                
                $
                (0.01
                )
                
                
                
                $
                0.04
   At
            March
            31, 2007, outstanding stock options to purchase 1,355,000 shares of common
            stock
            and warrants to purchase 7,122,774 shares of common stock were excluded
            from the
            calculation of diluted earnings per share because their impact would
            have been
            anti-dilutive.
 F-8
  **NOTE
        B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued**
  **[11]
        Reclassifications** :
 
 Certain
        fiscal 2006 amounts have been reclassified to conform with the fiscal 2007
        presentation.
 
 **[12]
        Recently issued accounting standards** :
 
 In
        July
        2006,  the FASB  issued  FASB  Interpretation  No.
        48,  "Accounting  for Uncertainty in Income Taxes - an 
interpretation  of FASB Statement No. 109" ("FIN 48"),  which 
clarifies the accounting  for  uncertainty  in tax
        positions.  This Interpretation  requires  that the Company
        recognize  in its financial  statements,  the impact of a
        tax position,  if that  position  is more  likely than
        not of being sustained  on  examination,  based  on 
the  technical  merits  of the  position.  The
        provisions of FIN 48 are effective as of the beginning of the
        Company's 2008 fiscal year, with the cumulative effect of the change in
        accounting principle recorded as an adjustment to opening retained
        earnings.  Adoption of FIN 48 is not expected to have a material
        impact on the Company's consolidated financial position, results of operations
        or cash flows.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standard
        157,
“Fair Value Measurements”, which defines fair value, establishes a framework for
        measuring fair value in generally accepted accounting principles, and expands
        disclosures about fair value measurements.  Adoption is required for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal
        years.  Early adoption of SFAS 157 is encouraged.  Adoption of SFAS
        157 is not expected to have a material impact on the Company's consolidated
        financial position, results of operations or cash flows.
  In
        September 2006, the staff of the SEC issued Staff Accounting Bulletin No.
        108
        (“SAB 108”) which provides interpretive guidance on how the effects of the
        carryover or reversal of prior year misstatements should be considered in
        quantifying a current year misstatement. SAB 108 becomes effective for fiscal
        years ending after November 15, 2006. Adoption of SAB 108 did not have a
        material impact on the Company’s consolidated financial position, results of
        operations or cash flows.
 
 In
        December 2006, the FASB issued FASB Staff Position (“FSP”) EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”) which
        specifies that the contingent obligation to make future payments or otherwise
        transfer consideration under a registration payment arrangement should be
        separately recognized and measured in accordance with SFAS No. 5,
“Accounting for Contingencies.”    Adoption of FSP EITF 00-19-02
        is required for fiscal years beginning after December 15, 2006. Adoption of
        FSP EITF 00-19-2 is not expected to have a material impact on the Company's
        consolidated financial position, results of operations or cash
        flows.
 
 **NOTE
        C - RECEIVABLE FROM CLEARING BROKER**
  At
        March
        31, 2007, the receivable from clearing broker amount in the statement of
        financial condition represents the Company's cash balance with its clearing
        broker.
  **NOTE
        D - SECURITIES OWNED AND SECURITIES SOLD, BUT NOT YET
        PURCHASED**
  Securities
        owned and securities sold, but not yet purchased, at March 31, 2007 consisted
        entirely of marketable equity securities.
  **NOTE
        E - FURNITURE, EQUIPMENT, CAPITALIZED SOFTWARE AND LEASEHOLD
        IMPROVEMENTS**
  Furniture,
        equipment, capitalized software and leasehold improvements, net, are summarized
        as follows:
 March
                    31, 2007Furniture
                    and equipment
                
                $
                2,126,367Capitalized
                    software
                
                
                218,000Leasehold
                    improvements
                
                
                113,005Gross
                
                
                2,457,372Accumulated
                    depreciation and amortization
                
                
                1,979,295Net
                
                $
                478,077
  Depreciation
        and amortization expense totaled $141,947 and $145,214 for the years ended
        March
        31, 2007 and 2006, respectively.
  F-9
  **NOTE
        F - STOCKHOLDERS' EQUITY**
  **[1]
        Private placements** :
 
 **(a)
        January 2006 private placement**
 
 On
        January 10, 2006, the Company sold 6,581,784 shares of its common stock for
        $2,000,000. There were no underwriting discounts or commissions paid in
        connection with the sale of the common stock.
 
 **(b)
        November 2006 private placement**
 
 On
        November 28, 2006, the Company sold securities at a purchase price of $.60
        per
        unit. The units consisted of common stock and warrants to purchase shares
        of
        common stock (the "Warrants"). The Company sold an aggregate of 9,575,325
        shares
        of common stock and delivered Warrants to purchase an aggregate of 4,787,664
        shares of our common stock, in exchange for gross proceeds of $5,745,190,
        pursuant to a private placement agreement (“Agency Agreement”) dated October 24,
        2006. The Warrants entitle the holders to purchase shares of the Company’s
        common stock for a period of five years from the date of issuance at an exercise
        price of $.85 per share. The Warrants are redeemable by us on terms specified
        in
        the warrant agreement.
 
 Under
        the
        terms of the Agency Agreement, the placement agent received, among other
        compensation, a cash commission fee of four percent (4%; or approximately
        $229,808) of the gross proceeds to the Company of the securities sold. In
        addition, pursuant to the terms of the Agency Agreement, the Company agreed
        to
        issue to the placement agent warrants to purchase common stock during a period
        of five years in an amount equal to six percent (6%) of the Shares sold in
        the
        private placement (the "Placement Agent Warrants"). The 574,520 Placement
        Agent
        Warrants are exercisable at $.60 per share.
 
 The
        Company’s net proceeds from the private placement were $5,480,697, after
        deducting the placement agent cash commission plus $32,185 of legal fees
        and
        $2,500 of transfer agent fees associated with the private
        placement.
  **[2]
        Warrants:**
 
 The
        Company has 1,760,590 warrants outstanding, in addition to the Warrants issued
        in connection with the private placement described above, which are
        exercisable for common stock at an exercise price of $1.0494 per share and
        expire in 2009. The warrants may be redeemed by the Company at $.01 per
        redeemable warrant, upon not less than thirty days written notice, if the
        average of the closing sale price of the common stock is at least $2.10 for
        a
        period of 20 consecutive days ending on the third day prior to the date of
        the
        notice of redemption. Any right to exercise the warrant expires on the business
        day immediately preceding the date of redemption.
 
 A
        summary
        of the Company's warrants and related information for the years ended March
        31,
        2007 and 2006 is as follows:
 
 Number
                    of
                
                Weighted
                    AverageWarrants
                
                Exercise
                    PriceOutstanding
                    at March 31, 2005
                
                
                1,760,590
                
                $
                1.0494Granted
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -Outstanding
                    at March 31, 2006
                
                
                1,760,590
                
                $
                1.0494Granted
                
                
                5,362,184
                
                
                0.8232Exercised
                
                
                -
                
                
                -Outstanding
                    at March 31, 2007
                
                
                7,122,774
                
                $
                0.8791Weighted
                    average remaining monthsof
                    contractual life at March 31, 2007
                
                
                50
  F-10
 
 **NOTE
        G - STOCK OPTIONS**
 
 The
        Company has established a stock option plan (the "2005 Plan"), which provides
        for the granting of options to purchase up to an aggregate of 2,000,000 shares
        of the Company’s common stock, pursuant to which employees, consultants,
        independent contractors, officers and directors are eligible to receive
        incentive and/or nonqualified stock options. Options granted under the 2005
        Plan
        are exercisable for a period of up to 10 years from the date of grant at
        an
        exercise price which is not less than the fair value on the date of grant,
        except that the exercise price of options granted to a stockholder owning
        more
        than 10% of the outstanding capital stock shall in no event be less than
        110% of
        the fair market value of the stock covered by the option at the time the
        option
        is granted and shall not be exercisable more than five years after date of
        grant. Options issued under the 2005 Plan will typically vest over either
        a
        three or four year period from the anniversary date of the grant. Exercises
        of
        options granted under the 2005 Plan will typically result in the issuance
        of new
        common shares.
 
 The
        Company recognized $55,843 of compensation expense related to employee stock
        option grants and $17,400 of professional fees expense related to director
        stock
        option grants during the year ended March 31, 2007. As of March 31, 2007,
        there
        was $431,656 of unrecognized stock-based compensation expense that will be
        amortized over a weighted average period of 2.67 years.
 
 The
        Company has computed the fair value of options granted using the Black-Scholes
        option pricing model. Under SFAS 123(R) forfeitures are estimated at the
        time of
        valuation and reduce expense ratably over the vesting period. G
        iven
        that the Company granted options for the first time during the fiscal year
        ended
        March 31, 2007, the initial forfeiture rate has been set at 0%.This estimate will be adjusted periodically based on the extent
        to which actual forfeitures differ, or are expected to differ, from the previous
        estimate.  The expected term of options granted represents the estimated
        period of time that options granted are expected to be outstanding. Given
        that
        the Company’s shares have only been publicly traded since May 3, 2005, the
        Company developed an expected volatility figure based on a review of the
        historical volatilities, over a period of time, equivalent to the expected
        life
        of these options, of similarly positioned public companies within its industry,
        during the early stages of their life as a public company. The risk-free
        interest rate was determined from the implied yields from U.S. Treasury
        zero-coupon bonds with a remaining term consistent with the expected term
        of the
        options. Hudson has not paid any dividends in the past and does not expect
        to
        pay any in the near future. In applying the Black-Scholes option pricing
        model,
        the Company used the following weighted average assumptions:
 
 For
                  the year ended
                March
                  31, 2007Risk
                  free interest rate
              4.82%Expected
                  term (years)
              2.47Expected
                  volatility
              65%Expected
                  dividends
              ---Forfeiture
                  rate
              ---
 
 The
        weighted average estimated fair value of the stock options granted during
        the
        year ended March 31, 2007 was $0.38 per share.
 
 As
        of
        March 31, 2006, the Company had not issued any options under the 2005 Plan.
        A
        summary of the status of the options issued under the 2005 Plan during the
        year
        ended March 31, 2007, is presented in the table below:
 
 WeightedWeighted
                
                AverageAverage
                
                RemainingNumber
                    of
                
                Exercise
                
                Contractual
                
                IntrinsicOptions
                
                Price
                
                Term
                
                ValueBalance,
                    March 31, 2006
                
                
                -
                
                $
                -Granted
                
                
                1,540,000
                
                
                1.00Exercised
                
                
                -
                
                
                -Forfeited
                
                
                (185,000
                
                
                1.01Balance,
                    March 31, 2007
                
                
                1,355,000
                
                $
                1.00
                
                
                3.2
                
                $
                -Exercisable,
                    March 31, 2007
                
                
                30,000
                
                $
                1.15
                
                
                4.4
                
                $
                -
 
 There
        is
        no intrinsic value as of March 31, 2007, since the closing price of the
        Company’s stock was less than the exercise price of any of the outstanding stock
        options.
  F-11


**NOTE
        G - STOCK OPTIONS, continued**
 
 A
        summary
        of non-vested options for the year ended March 31, 2007 is presented in the
        table below:
  WeightedAverage
                
                TotalGrant
                    Date
                
                Grant
                    DateOptions
                
                Fair
                    Value
                
                Fair
                    ValueNon-vested,
                    March 31, 2006
                
                
                -
                
                $
                -
                
                $
                -Granted
                
                
                1,540,000
                
                
                0.38
                
                
                577,600Vested
                
                
                (30,000
                )
                
                0.58
                
                
                (17,400
                )Forfeited
                
                
                (185,000
                )
                
                0.39
                
                
                (72,700
                )Non-vested,
                    March 31, 2007
                
                
                1,325,000
                
                $
                0.37
                
                $
                487,500
 
 The
        following table presents information related to stock options at March 31,
        2006:
 
 Options
                    Outstanding
                
                Options
                    ExercisableWeightedAverageExercise
                
                
                
                Remaining
                    LifePrice
                
                Shares
                
                In
                    Years
                
                Shares$
                0.90
                
                
                500,000
                
                
                -
                
                
                -1.00
                
                
                725,000
                
                
                -
                
                
                -1.15
                
                
                30,000
                
                
                4.4
                
                
                30,0001.46
                
                
                100,000
                
                
                -
                
                
                -1,355,000
                
                
                
                
                
                30,000
   **NOTE
        H - INCOME TAXES**
 
 The
        Company files a federal income tax return on a consolidated basis with its
        wholly-owned subsidiaries, as well as state income tax returns in certain
        jurisdictions. The
        Company is subject to minimum taxes at the state and local level which are
        based
        on measures other than income. If these minimum taxes exceed the amounts
        based
        on income, such amounts have been included below.
 
 The
        income tax (benefit) provision consists of the following:
  Year
                    Ended March 31,2007
                
                2006Federal:Current
                
                $
                (162,790
                )
                $
                558,500Deferred
                
                
                37,000
                
                
                (121,500
                )State
                    and local:Current
                
                
                29,360
                
                
                52,500Deferred
                
                
                7,000
                
                
                (20,500
                )$
                (89,430
                )
                $
                469,000
 
 The
        Company intends to carry back the current year federal taxable loss against
        federal taxable income from the two prior years.
  F-12
  **NOTE
        H - INCOME TAXES, continued**
  For
        the
        years ended March 31, 2007 and 2006, the expected tax expense based on the
        statutory rate is reconciled with actual tax expense as follows:
  Year
                    Ended March 31,2007
                
                2006Expected
                    tax expense
                
                
                34.0
                %
                
                34.0
                %State
                    income tax,net
                    of federal income tax effect
                
                
                (1.3
                )
                
                2.6Non-deductible
                    items
                
                
                (7.3
                )
                
                4.6Other
                
                
                (6.5
                )
                
                (3.7
                )Actual
                    tax expense
                
                
                18.9
                %
                
                37.4
                %
  The
        principal components of the net deferred tax asset at March 31, 2007 are
        as
        follows:
 
 March
                  31,2007Deferred
                  taxes:State
                  net operating loss carryforwards
              
              $
              71,500Reserve
                  for commissions receivable and bad debts
              
              
              63,000Deferred
                  rent
              
              
              43,000Stock-based
                  compensation
              
              
              29,000Excess
                  of tax over book basis of fixed assets
              
              
              32,000Total
                  gross deferred tax assets
              
              $
              238,500Excess
                  of book over tax basis
                of
                  capitalized software
              
              
              (88,000
              )Net
                  deferred taxes before valuation allowance
              
              
              150,500Valuation
                  allowance
              
              
              (71,500
              )Net
                  deferred tax asset
              
              $
              79,000
 
 As
        of
        March 31, 2007, the Company has state net operating loss carryforwards of
        approximately $1,212,000, which expire in 2011 and 2013. Prior to the Exchange,
        as discussed in Note A, the Company had federal net operating loss carryforwards
        which, due to the merger with Hudson, are no longer available to be utilized
        pursuant to the provisions of the tax law. A valuation allowance has been
        established to offset a portion of the deferred tax asset to the extent the
        Company has not determined that it is more likely than not that the future
        tax
        benefits will be realized. During the year ended March 31, 2007, the valuation
        allowance increased by $25,500.
 
 **NOTE
        I - SALARY REDUCTION RETIREMENT PLAN**
  The
        Company sponsors a 401(k) Savings Plan (the "Savings Plan") which covers
        all
        eligible employees. Participants may contribute no less than 1% and up to
        the
        maximum allowable per the Internal Revenue Service regulations. In addition,
        the
        Company may make discretionary contributions to the Savings Plan, subject
        to
        certain limitations. For the years ended March 31, 2007 and 2006, the Company
        made no matching contributions.
 
 F-13
  **NOTE
        J - COMMITMENTS AND CONTINGENCIES :**
  **[1]
        Leases**
 
 On
        April
        4, 2006, Hudson entered into an agreement to sublease an additional 26,875
        rentable square feet of office space in Jersey City, New Jersey. The sublease
        is
        guaranteed by Holding. The lease commenced on June 21, 2006 and expires on
        August 30, 2012.
 
 On
        February 1, 2007, the Company entered into an agreement to sublease an
        additional 2,744 rentable square feet of office space in Tinton Falls, New
        Jersey. The lease commenced on March 1, 2007 and expires on March 31,
        2010.
 
 The
        Company now leases office space at two Jersey City, New Jersey locations
        and two
        satellite locations. The Company occupied the new Jersey City location during
        September 2006. It is the Company’s intention to maintain the original Jersey
        City office space as a back-up site until November 2007, when the lease
        expires.
 
 As
        of
        March 31, 2007, the Company had a deferred lease liability of $108,443 which
        represents the excess of rent expense recognized on a straight-line basis
        over
        the term of the leases as compared to cash rental payments and is included
        in
        accrued expenses and other liabilities on the Statement of Financial Condition.
  Future
        minimum commitments related to non-cancelable operating leases as of March
        31,
        2007 are as follows :
  **Years
                      Ended**
                  
                  **Office**
                  
                  **Equipment****March
                      31,**
                  
                  **Leases**
                  
                  **Leases**
                  
                  **Total**2008
                  
                  $
                  702,000
                  
                  $
                  104,000
                  
                  $
                  806,0002009
                  
                  
                  489,000
                  
                  
                  70,000
                  
                  
                  559,0002010
                  
                  
                  559,000
                  
                  
                  4,000
                  
                  
                  563,0002011
                  
                  
                  524,000
                  
                  
                  -
                  
                  
                  524,0002012
                  
                  
                  593,000
                  
                  
                  -
                  
                  
                  593,000Thereafter
                  
                  
                  239,000
                  
                  
                  -
                  
                  
                  239,000$
                  3,106,000
                  
                  $
                  178,000
                  
                  $
                  3,284,000
 Rent
        expense, net of sublease income, was approximately $1,215,000 and $523,000
        for
        the years ended March 31, 2007 and 2006, respectively.
 
 **[2]
        Employment agreements:**
 
 On
        January 4, 2007, Hudson entered into five year employment agreements, effective
        as of January 1, 2007, with Mr. Martin C. Cunningham and Mr. Keith R. Knox,
        whereby each will continue in their present positions, Chief Executive Officer
        and President, respectively. Mr. Cunningham and Mr. Knox are key employees
        of
        the Company and these employment agreements are deemed to be commitments
        of the
        Company. The agreements provide that each shall receive a salary of $200,000
        per
        year, plus a formula-based annual bonus. In addition, the Company entered
        into a
        two year employment agreement with another key employee, effective as of
        December 1, 2006, which provides that the employee shall receive a salary
        of
        $150,000 per year.
 
 Future
        minimum salary commitments pursuant to these employment agreements are as
        follows:
  **Years
                    Ended****March
                    31,**2008
                
                $
                550,0002009
                
                
                500,0002010
                
                
                400,0002011
                
                
                400,0002012
                
                
                300,000Thereafter
                
                
                -$
                2,150,000
  F-14
  **NOTE
        J - COMMITMENTS AND CONTINGENCIES, continued**
 
 **[3]
        Letter of credit:**
  In
        connection with the new Jersey City office lease, on April 20, 2006 Hudson
        deposited a one-year $225,000 irrevocable standby letter of credit with the
        landlord as security, which automatically renews for additional one-year
        terms,
        unless sixty days written notice is provided. Pursuant to the lease agreement,
        Hudson is required to maintain the letter of credit until sixty days following
        the expiration of the lease. On April 5, 2006, Hudson deposited $225,000
        with
        the issuing financial institution in the form of an automatically renewable,
        fourteen-month time deposit, in order to collateralize the letter of credit.
        The
        time deposit, plus accrued interest, is included in cash-restricted on the
        accompanying statement of financial condition.
  **[4]
        Contingencies:**
 
 The
        Company has been named as a defendant in various routine actions that are
        incidental to its activities as a broker-dealer including civil actions and
        arbitration. From time to time, the Company is also involved in proceedings
        and
        investigations by self-regulatory organizations. Although the ultimate outcome
        of these matters involving the Company cannot be predicted with certainty,
        management believes it has meritorious defenses to all such actions and intends
        to defend each of these actions vigorously. Although there can be no assurances
        that such matters will not have a material adverse effect on the results
        of
        operations or financial condition of the Company in any future period, depending
        in part on the results for such period, in the opinion of the Company’s
        management, the ultimate resolution of such actions against the Company will
        have no material adverse effect on the Company's financial
        condition.
 
 **NOTE
        K - NET CAPITAL REQUIREMENT**
 
 Hudson
        is
        subject to various regulatory requirements, including the SEC's Uniform Net
        Capital Rule (SEC rule 15c3-1), which is intended to ensure the general
        financial soundness and liquidity of broker-dealers by requiring the maintenance
        of minimum levels of net capital. These regulations place limitations on
        certain
        transactions, such as repaying subordinated borrowings, paying cash dividends,
        and making loans to its parent, affiliates or employees. Broker-dealers are
        prohibited from such transactions which would result in a reduction of its
        total
        net capital to less than 120% of its required minimum net capital. Moreover,
        broker-dealers are required to notify the SEC before entering into such
        transactions which, if executed, would result in a reduction of 30% or more
        of
        its excess net capital (net capital less the minimum requirement). The SEC
        has
        the ability to prohibit or restrict such transactions if the result is
        detrimental to the financial integrity of the broker-dealer.
 
 At
        March
        31, 2007, Hudson had net capital of $8,393,065 under the alternative method,
        which was $7,393,065 in excess of its required net capital of
        $1,000,000.
 
 **NOTE
        L - SUBSEQUENT EVENTS**
  **[1]**  **Stock
        option grant:**
 
 In
        May
        2007, Hudson granted non-qualified stock options to a consultant pursuant
        to the
        2005 Stock Option Plan. The grant enables the consultant to purchase 250,000
        shares of common stock at an exercise price of $0.80 per share, which was
        the
        market value on the date of the grant. Vesting occurs over three years and
        the
        options expire in November 2010. This option was initially valued at $85,000
        or
        $0.34 per share utilizing the Black-Scholes option pricing model and will
        be
        amortized to stock-based compensation over the three year vesting period
        in
        accordance with Emerging Issues Task Force pronouncement No. 96-18 - “Accounting
        for Equity Instruments That are Issued to Other than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services” (“EITF 96-18”). On a quarterly
        basis, Hudson will recalculate the current fair value of the unvested options
        on
        a mark-to-market basis, and an adjustment will be recorded to current period
        amortization in order to properly reflect the cumulative amortization of
        the
        current fair value of the unvested options over the elapsed
        vesting period. Final adjustments to fair value will be made at each vesting
        date.
 
 F-15