UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

|X|           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2006

                                       OR

|_|         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     For the transition period from __________________ to __________________

                         Commission file number: 0-9587

                           HUDSON HOLDING CORPORATION
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

              Delaware                                            20-3766053
   ---------------------------------                         -------------------
     (State or Other Jurisdiction                             (I.R.S. Employer
   of Incorporation or Organization)                         Identification No.)

   525 Washington Blvd., Suite 3600
        Jersey City, New Jersey                                     07310
----------------------------------------                     -------------------
(Address of Principal Executive Offices)                         (Zip Code)

         Issuer's telephone number, including area code: (201) 216-0100

Documents Incorporated By Reference:  None

Check  whether the issuer is not required to file reports  pursuant to Section B
or 15(d) of the Exchange Act |_|

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 |_|

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained  herein,  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. [XX]

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

State issuer's revenues for its most recent fiscal year: $20,227,649

The aggregate market value of the voting common equity held by non-affiliates of
the registrant was  approximately  $2,663,500 as of the last business day of the
registrant's most recently completed second fiscal quarter,  based upon the last
sale 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 16, 2006, the  Registrant had 27,149,860  shares of its Common Stock,
$0.001 par value, issued and outstanding.

          Transitional Small Business Disclosure Format Yes |_| No |X|

<PAGE>

                           HUDSON HOLDING CORPORATION
                                   FORM 10-KSB
                                TABLE OF CONTENTS

PART I ..................................................................      1
FORWARD-LOOKING STATEMENTS ..............................................      1
ITEM 1.DESCRIPTION OF BUSINESS ..........................................      1
ITEM 2.DESCRIPTION OF PROPERTIES ........................................     17
ITEM 3.LEGAL PROCEEDINGS ................................................     17
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............     17

PART II .................................................................     18
ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS .........     18
ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ........     19
ITEM 7.FINANCIAL STATEMENTS .............................................     24
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
       AND FINANCIAL DISCLOSURE .........................................     24
ITEM 8A.CONTROLS AND PROCEDURES .........................................     24
ITEM 8B OTHER INFORMATION ...............................................     25

PART III ................................................................     26
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT ...............     26
ITEM 10. EXECUTIVE COMPENSATION .........................................     29
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT, AND RELATED STOCKHOLDER MATTERS ....................     30
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................     31
ITEM 13. EXHIBITS .......................................................     32
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES .........................     33
SIGNATURES ..............................................................     34
FINANCIAL STATEMENTS ....................................................    F-1


<PAGE>

                                     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

Organization

Hudson Holding Corporation  ("Holding"),  is a holding company and is the parent
of its wholly owned subsidiary Hudson Securities, Inc. ("Hudson"), (collectively
the "Company"). Hudson (formerly Wien Securities Corp. ("Wien")) 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"). The Company has
offices in New Jersey and Florida.

In January 2003, the stockholders of Wien entered into an agreement whereby they
granted certain new employees (the "Trading  Group") an option to acquire 51% of
the  outstanding  shares of Wien's  common  stock  ("51%  Option")  from  Wien's
stockholders.  Upon the exercise of the 51% Option,  the Trading  Group would be
entitled to purchase the  remaining  outstanding  shares of Wien's  common stock
within six months, pending NASD approval of the transfer of Wien's common stock.

In May 2004 the Wien  stockholders  and the Trading Group amended the agreement,
which  changed the 51% Option to a 100% option.  Wien received NASD approval for
this transaction and on June 30, 2005 the Trading Group consummated the purchase
of all of the outstanding shares of Wien's common stock.  Subsequently,  on July
21, 2004 Wien formed a wholly owned  subsidiary  named Hudson  Capital  Markets,
Inc. ("HCMI"),  which was organized in the state of Delaware.  On July 31, 2004,
Wien was merged into HCMI,  with HCMI becoming the survivor  ("HCMI Merger") and
the name was changed to Hudson Securities, Inc.


                                       1
<PAGE>

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,  2006,  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
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 insured
by the  Securities  Investor  Protection  Corporation.  Hudson is a market maker
trading more than 7,000  securities  quoted on the NASDAQ stock market,  the OTC
Bulletin Board, and the National Quotation Bureau's Pink Sheets, and specializes
in providing  liquidity in less liquid,  difficult to trade  stocks.  Hudson has
been in business since 1984.

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 by purchasing or selling
the securities itself. In a sense, liquidity is the product that Hudson sells to
its customers.

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.


                                       2
<PAGE>

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
UMA, US and BRASS servers.  The facility is capable of executing  trades at peak
rates  of   approximately   triple  the  current   average  rate.  Its  complete
implementation  will also allow Sungard to be more responsive to Hudson's needs,
providing the ability to make changes to the system during trading hours, and it
will facilitate the addition of a dedicated FIX-protocol  communications server,
which will  simplify  the setup of new customer  connections.  The FIX server is
expected to be operational by the third quarter of 2006.

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 the firm's
existing  customers and by entering  into  strategic  partnerships  with related
businesses  that can  increase  its number of new  customers.  The firm hopes to
develop a niche in the investment banking business catering to small to mid-size
companies,  however,  there can be no assurance that we will be successful.  The
firm also intends to begin trading 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 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.


                                       3
<PAGE>

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. Schwab Capital
Markets'  purchase of Soundview and Goldman Sachs' recent  elimination of market
making  for  broker-dealer  flow  are  indicative  of the  industry's  focus  on
institutional  business.  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.  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.


                                       4
<PAGE>

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 will
soon have the  ability to begin  trading  NYSE and AMEX  stocks  that are dually
listed on NASDAQ.  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 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. The Company 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.


                                       5
<PAGE>

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 other SEC filings.

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.

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 the
Company must comply.  As of March 31, 2006, the Company had total net capital of
$5,454,995,  which is $4,454,995 in excess of the Company's  minimum net capital
requirement of $1,000,000.


                                       6
<PAGE>

Additionally, the Company is subject to periodic, routine finance and operations
reviews by the NASD  staff and state  securities  divisions.  It should be noted
that the  Company  has a  disciplinary  record with the NASD and fines have been
levied against the Company 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  the  Company  if we are cited for
additional violations. On May 5, 2006, the NASD levied a fine of $72,500 against
the Company related to examinations  and reviews  conducted  during the 2003 and
2004 calendar years.

Employees

As of June 16, 2006, we employed 78 individuals.  Of the 78 employees,  3 are in
management,  35 are in trading,  23 are in sales, 2 are in compliance,  7 are in
technology and 8 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 525  Washington  Boulevard,  46th Floor,
Jersey City, New Jersey 07310 (111 Pavonia Avenue,  15th Floor, Jersey City, New
Jersey 07310 after approximately  September 1, 2006) 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.


                                       7
<PAGE>

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 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 have  adversely
affected 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.

We are subject to market exposure.

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. 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
offerings, 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.


                                       8
<PAGE>

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:

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

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 will 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.

We are dependent on clearing brokers.

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  unaffiliated
clearing brokers.  Under the terms of the agreements between us and our clearing
brokers, the clearing brokers have 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 at one or more clearing brokers and,
accordingly,  we are  subject  to credit  risk  with  respect  to such  clearing
brokers.  One firm clears the  majority of our trades and holds the  majority of
our assets. Consequently,  we are reliant on the ability of our clearing brokers
to  adequately  discharge  their  obligations  on a  timely  basis.  We are also
dependent on the solvency of such clearing brokers.  Any failure by the clearing
brokers to adequately  discharge their obligations on a timely basis, or failure
by a clearing  broker to remain solvent,  or any event  adversely  affecting the
clearing  brokers,  could  have a  material  adverse  effect  on  our  business,
financial  condition and operating results.  If any of our clearing brokers were
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.


                                       9
<PAGE>

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  Securities was owned by and supervised by the
prior  management  of the  prior  owners  and  operating  under  the  name  Wien
Securities, 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.


                                       10
<PAGE>

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.

Our current management has limited operational management experience.

Our  management  has limited  experience  in the  administration  and  financial
management  of a business  organization  and only  commenced  management  of our
operating  subsidiary  in June 2004.  Although our  president has had some prior
operational  experience,  our  management  has not  managed  our  company  for a
significant  period  of time  and has no  record  of  performance  that  you can
evaluate.

We need to comply with stringent capital requirements.

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, 2006, we had net capital of
$5,454,995  and excess net  capital  (that is, net  capital  less  required  net
capital) of  $4,454,995.  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.


                                       11
<PAGE>

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.  We hope to develop a niche investment  banking business  focusing on
small to medium-sized companies, although there can be no assurance that we will
be successful in our efforts. We also intend to begin trading 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.

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.

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.


                                       12
<PAGE>

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 lack of profits to date, 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.  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.


                                       13
<PAGE>

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

      o     quarterly variations in our revenues and operating expenses;

      o     fluctuations in interest rates;

      o     the operating and stock price  performance  of other  companies that
            investors may deem comparable to us; and

      o     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  63% of the voting  capital stock of our
company.

Our three executive officers, plus Steven Winkler, Co-Head of Nasdaq and Foreign
Trading  at  the  Company's  wholly-owned  broker-dealer  subsidiary,  each  own
approximately  15-16% 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 control the outcome of any
matters  submitted  to a vote  of our  stockholders  and  have  the  ability  to
determine all management policy and financing decisions.


                                       14
<PAGE>

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.

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.


                                       15
<PAGE>

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.

                           Forward Looking Statements

The following  discussion and analysis  should be read in  conjunction  with the
Consolidated  Financial  Statements and the Notes thereto included herein.  This
report  contains  forward-looking  statements  (as defined in Section 27A of the
Securities  Act and Section 21E of the  Securities  Exchange  Act of 1934 or the
"Exchange  Act". To the extent that any statements  made in this filing contains
information   that  is  not   historical,   these   statements  are  essentially
forward-looking.  Forward-looking  statements  can be  identified  by the use of
words such as "expects,"  "plans,"  "will,"  "may,"  "anticipates,"  "believes,"
"should," "intends,"  "estimates," and other words of similar meaning.  Although
we believe that the expectations  reflected in these forward-looking  statements
are reasonable and achievable,  these statements involve risks and uncertainties
and we cannot  assure you that  actual  results  will be  consistent  with these
forward-looking  statements.  Important  factors  that  could  cause our  actual
results,  performance  or  achievements  to differ  from  these  forward-looking
statements include the following:

      o     the maintenance of adequate funding,

      o     economic, competitive, demographic, business and other conditions in
            our markets,

      o     the value of our securities  positions and our ability to manage the
            associated risks,

      o     the volume of our market-making activities

      o     our ability to manage personnel, overhead and other expenses,

      o     actions taken or not taken by third-parties,  including our clients,
            as well as legislative,  regulatory, judicial and other governmental
            authorities,


                                       16
<PAGE>

      o     technological changes and events,

      o     changes in our business and growth strategy,

      o     other factors discussed under the section entitled "Risk Factors" or
            elsewhere in this Form 10-KSB.

All  forward-looking  statements  attributable to us are expressly  qualified by
these and other factors.  Information  regarding market and industry  statistics
contained in this filing is included based on  information  available to us that
we believe is accurate. Forecasts and other forward-looking information obtained
from these third-party  sources are subject to the same  qualifications  and the
additional  uncertainties  accompanying  any  estimates  of future  market size,
revenue and market acceptance of products and services.  We do not undertake any
obligation to publicly update any forward-looking  statements.  As a result, you
should not place undue reliance on these forward-looking statements.

Item 2. Properties

Our corporate headquarters are located at 525 Washington Blvd., Jersey City, New
Jersey  where we lease  11,737  square feet of office space at a monthly rent of
$34,484.  This lease  expires in November 30, 2007.  In addition,  we maintain a
trading and sales office in Boca Raton,  Florida. Our offices include a total of
80 trading stations: 60 at headquarters in New Jersey and 20 in Florida.

On April 4, 2006,  we entered into an operating  lease for our future  corporate
headquarters  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
with 140 trading stations that was abandoned by a competitor. This lease expires
in August 30, 2012 and our initial monthly 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.

Item 3. Legal Proceedings

The  Company has been named as a defendant  in various  actions  relating 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.


                                       17
<PAGE>

                                     PART II

Item 5. Market for our Common Equity and Related Stockholder Matters

Market for Common Equity

Our common stock is quoted on the OTC Bulletin Board and currently  trades under
the symbol HDHL.OB. We estimate that we have approximately 280 holders of record
of our common stock as of June 16, 2006.

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            Low
                          -----          -----
Fiscal Year 2005

First Quarter             $0.57          $0.32
Second Quarter             0.40           0.24
Third Quarter              2.88           0.40
Fourth Quarter             3.12           1.20

Fiscal Year 2006

First Quarter             $2.00          $0.96
Second Quarter             1.44           0.90
Third Quarter              1.09           0.51
Fourth Quarter             1.75           0.53


The high and low sales price as reported on the OTC  Bulletin  Board on June 16,
2006 was $1.65.

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.


                                       18
<PAGE>

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.

                                         Year Ended    Year Ended
Consolidated Statement of                 March 31,     March 31,
  Operations Data:                           2006          2005
                                         -----------   -----------

Revenues                                 $20,227,649   $21,162,383
                                         ===========   ===========

Net income                               $   783,825   $   447,914
                                         ===========   ===========

Earnings per share - basic and diluted   $      0.04   $      0.02
                                         ===========   ===========

Weighted average number of shares:
        - basic                           21,910,067    18,332,660
                                         ===========   ===========
        - diluted                         22,153,119    18,629,876
                                         ===========   ===========

Consolidated Balance Sheet Data:

Working capital                          $ 6,305,309
                                         ===========
Total assets                             $10,865,869
                                         ===========
Total liabilities                        $ 2,773,187
                                         ===========
Stockholders' equity                     $ 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, 2006, as
compared to the year ended March 31, 2005.

We had overall  revenues  of $20.2  million for fiscal 2006 as compared to $21.2
million for fiscal 2005.  Net trading gains declined to $17.6 million from $19.4
million  during the prior fiscal year.  However,  the fourth quarter net trading
gains of $6.9 million represented the best quarterly results during the last two
fiscal years, an improvement  from the $6.4 million  generated  during the first
quarter of fiscal 2005 and the  $3.4-5.0  million  levels  generated  during the
intervening  quarterly periods. The nature of our business is that our quarterly
net trading gains can be subject to substantial volatility as a result of market
conditions  (prices and volume).  Commission  revenues increased to $2.5 million
from $1.6 million during the prior fiscal year. A hedge fund execution team that
was added  during the second  quarter of fiscal  2005 was  responsible  for $0.8
million of the commission revenue increase. However, this team exited during the
first quarter of fiscal 2007  following  the loss of a significant  client and a
recognition that primarily  low-margin  business  remained.  Consistent with our
business plan,  we're in the process of recruiting an established  institutional
sales group which would generate additional commission revenues,  although there
can be no assurance that we will be successful in attracting such a group.


                                       19
<PAGE>

Our cost structure  consists of both variable  costs,  such as  commissions  and
clearing  charges,  and fixed  costs,  such as salaries  and related  (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  salesperson  receive  revenue-based  commission
payments.

Despite the  decrease in overall  revenues,  pre-tax  income  increased  to $1.3
million from $0.7 million, as expenses decreased by $1.5 million, primarily as a
result of a $1.6 million  decrease in commissions and clearing  charges.  Trader
and  salesperson  commissions of $8.2 million (40.6% of revenues) in the current
fiscal year declined  compared to $9.5 million  (45.1% of revenues) in the prior
fiscal  year,  primarily  because  four  employee  shareholders  are  no  longer
compensated on a commissioned basis following the  change-in-control.  Clearance
charges of $1.1 million  (5.6% of revenues) in the current  fiscal year declined
compared to $1.4 million (6.6% of revenues) in the prior fiscal year,  primarily
due to ongoing negotiated rate reductions.  Communication  costs, which remained
relatively  steady at $4.6 million in the current fiscal year,  represent  order
management, stock quotation and news services, in addition to telecommunications
and networking costs.

Net income  increased to $783,825  from $447,914  during the prior year.  Income
taxes  increased to $469,000  from  $234,000,  partially  due to the increase in
pre-tax  income  and  partially  due  to  the  fact  that  Hudson  was  not  a C
corporation,  and  therefore  was not subject to federal and state income taxes,
for the first seven months of the 2005 fiscal year.

Liquidity and Capital Resources

Working Capital

During the past fiscal year, our working  capital  (current  assets less current
liabilities)  improved to $6.3 million from $3.9 million,  primarily as a result
of a $2  million  sale of  common  stock  plus the  retention  of  current  year
earnings.  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,  receivable from broker-dealer  (cash on deposit with our clearing
broker) and marketable securities. All liabilities are current liabilities.

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 J to the consolidated  financial  statements for additional details related
to  regulatory  net  capital  requirements.   While  our  operations  have  been
profitable  during each of the last three fiscal years, 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.


                                       20
<PAGE>

Our new headquarters  space was recently renovated by the previous occupants and
will  not   require   material   expenditures   on  our  part,   other   than  a
telecommunications  switch  which will be leased  over a three year  period with
aggregate payments totaling  approximately  $275,000.  Hudson  Technologies Inc.
("HTI") was formed as a Delaware  corporation  on May 22, 2006 and was initially
funded  with  $150,000  in order to  accommodate  an initial  expense  budget of
 $25,000  per month.  However,  HTI will  require  additional  funds  during its
development  stage.  The purpose of HTI is to perform  software  development and
technology services, both for the Company and for customers.

Our cash  position  increased by $0.2 million to $0.5 million  during the fiscal
year ended March 31, 2006,  after  decreasing by $0.3 million  during the fiscal
year  ended  March 31,  2005.  However,  it should be noted that the bulk of our
excess  funds are kept on deposit with our  clearing  broker,  rather than being
held as cash in a bank account.

Operating Activities

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  broker-dealer
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. Net cash provided by operating activities was $4.7 million
during fiscal 2005,  primarily due to a $6.2 million  decrease in the receivable
from  broker-dealer  and $0.6 million  generated from net income ($0.4 million),
after  adjusting for non-cash items ($0.2 million),  partially  offset by a $1.8
million increase in various payable and accrued liability balances.

Investing Activities

Net cash used in investing  activities  was $0.2 million and $0.1 million during
fiscal 2006 and 2005,  respectively.  During both periods, the usage of cash was
associated with the purchase of furniture, equipment and leasehold improvements.

Financing Activities

Net cash provided by financing activities was $2 million during fiscal 2006, due
to the sale of common  stock.  Net cash used by  financing  activities  was $4.9
million  during  fiscal 2005,  due to $6.2 million of  distributions  of cash to
stockholders,  partially  offset by $1.3 million from sales of common stock. The
private placements of common stock, which were offered without registration, are
subject to  restrictions  under the  Securities  Act of 1933,  as  amended  (the
"Securities Act"), and the securities laws of certain states, in reliance on the
private offering exemptions  contained in Section 4(2) of the Securities Act and
Regulation D  promulgated  thereunder,  and in reliance on the private  offering
exemptions under applicable state laws.


                                       21
<PAGE>

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:

<TABLE>
<CAPTION>
                                                                Payments due in
                                    -------------------------------------------------------------------------
For the years ended March 31,           2007         2008-2009      2010-2011      Thereafter        Total
---------------------------------   ------------   ------------   ------------   ------------   -------------
<S>                                 <C>            <C>            <C>            <C>            <C>
Leases in force at March 31, 2006        373,500        227,807              0              0         601,307
New  lease signed April 4, 2006          235,000        705,000        946,000        544,000       2,430,000
                                    ------------   ------------   ------------   ------------   -------------
                                         608,500        932,807        946,000        544,000       3,031,307
                                    ------------   ------------   ------------   ------------   -------------
</TABLE>

Off-Balance Sheet Arrangements

As of March 31, 2006, 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:

Basis of presentation

The Company's historical balances of common stock and additional paid-in capital
were  adjusted  retroactively  to give effect to the shares issued in connection
with the May 3, 2005 reverse merger,  while the historical  retained earnings is
being carried forward.

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.


                                       22
<PAGE>

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"). The goodwill in the Company's financial statements  represents the excess
of the June 30, 2004 purchase  price as compared to  management's  assessment of
the fair value of the net assets purchased.  Under SFAS No. 142, goodwill is not
subject  to  amortization,  but  rather an  assessment,  at least  annually,  of
impairment  is performed by applying a fair value based test. As a result of its
assessment,  the  Company has  determined  that no such  impairment  needs to be
recognized during the year ended March 31, 2006.

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
events that have been included 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,  2006,  the  Company  has a $72,000
valuation  allowance  related to certain state net operating loss  carryforwards
which expire in 2011.

Prior to November 1, 2005,  Hudson was taxed under the  provisions of Subchapter
"S" of the Internal  Revenue Service Code ("Code") and the appropriate  sections
of the New Jersey Corporate Business Tax Law. Under those provisions, Hudson did
not pay federal corporate income taxes on its taxable income and paid New Jersey
corporate  income  taxes at a reduced  rate.  The  stockholders  were liable for
individual  federal  and state  income  taxes on their  respective  share of the
Company's taxable income.

Recent Accounting Pronouncements

In December 2004, the Financial  Accounting  Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 123 (revised 2004),  Share-Based
Payment,  ("SFAS 123(R)") which replaces SFAS 123 and supersedes APB Opinion No.
25. Under the  provisions of SFAS 123(R),  companies are required to measure the
cost  of  employee  services  received  in  exchange  for  an  award  of  equity
instruments  based on the  grant-date  fair  value of the  award  (with  limited
exceptions).  That cost  will be  recognized  over the  period  during  which an
employee is required to provide  service in exchange for the award,  usually the
vesting  period.  The  statement is  effective as of the  beginning of the first
annual  reporting period that begins after June 15, 2005 and accordingly will be
adopted by the  Company in the first  quarter of fiscal  year 2007.  SFAS 123(R)
requires that  compensation  expense be recognized for the unvested  portions of
existing options granted prior to its effective date of adoption and the cost of
options granted to employees after the effective date based on the fair value of
the stock options at grant date. The impact of adoption of SFAS 123(R) cannot be
predicted  at this time  because  it will  depend on the  levels of  share-based
payments granted in the future.


                                       23
<PAGE>

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections,  - a replacement  of APB Opinion No. 20 and FASB  Statement No. 3".
This Statement establishes,  unless impracticable,  retrospective application as
the  required  method for  reporting  a change in  accounting  principle  in the
absence  of  explicit  transition  requirements  specific  to the newly  adopted
accounting  principle.  The  provisions  of this  Statement  are  effective  for
accounting  changes and  corrections  of errors made in fiscal  years  beginning
after December 15, 2005. Early adoption is permitted for accounting  changes and
corrections  of  errors  made in  fiscal  years  beginning  after  the date this
Statement  is issued.  The Company  does not believe  that the  adoption of this
Statement in fiscal 2007 will have a material impact on the Company's  financial
position or results of operation.

Item 7. Financial Statements

Our  consolidated  financial  statements  and the related notes to the financial
statements  called  for  by  this  item  appear  under  the  caption  "Index  to
Consolidated Financial Statements" beginning on Page F-1 attached hereto of 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.


                                       24
<PAGE>

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, 2007. 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.


                                       25
<PAGE>

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; 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                  Position
--------------------   ---   ----------------------------------------
Martin C. Cunningham    46   Chairman of the Board of Directors and
                             Chief Executive Officer

Keith R. Knox           47   President, Secretary and Director

Mark Leventhal          50   Executive Vice President and Director

Peter J. Zugschwert     40   Director

Joanne V. Landau        51   Director

Carmine V. Chiusano     64   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  served as  President  of the Company  from  December  1997
through May 2005 and CEO of the Company from September  1997 to May 2005.  Prior
to joining the  Company,  he was the Senior Vice  President  of  Operations  for
Baratz Financial, Inc. since June 1995.

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.  From 1968 to 2004, Mr.
Chiusano  was  was  employed  by  Schwab  Capital  Markets   (formerly  Mayer  &
Schweitzer), most recently as Senior Vice President, Chief Operating Officer.

                                       26
<PAGE>

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.

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
attached as Exhibit 10.2,  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.


                                       27
<PAGE>

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  10.3.  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 attached as Exhibit 10.4. 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 attached as Exhibit 14.

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, 2006 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, 2006, it has been determined
that no  Reporting  Persons were  delinquent  with  respect  person's  reporting
obligations set forth in Section 16(a) of the Exchange Act.


                                       28
<PAGE>

Item 10. Executive Compensation

The following  Summary  Compensation  Table sets forth, for the years indicated,
all cash  compensation  paid,  distributed  or accrued for  services,  including
salary and bonus  amounts,  rendered in all  capacities  by our chief  executive
officer and all other executive  officers (the "Named  Executive  Officers") who
received or are entitled to receive  remuneration  in excess of $100,000  during
the stated periods.

Summary Compensation Table [1]

<TABLE>
<CAPTION>
                                                                   Long-Term
                                                                  Compensation
                                                             ---------------------
                                                               Awards      Payouts
                                                             ----------   --------
                                               Annual
                               Fiscal       Compensation     Securities
                                Year      ----------------   Underlying     LTIP       All Other
                               Ending     Salary    Bonus     Options/    Payouts    Compensation
Name and Principal Position   March 31,     ($)      ($)      SARs (#)      ($)           ($)
---------------------------   ---------   -------   ------   ----------   --------   -------------
<S>                           <C>         <C>       <C>      <C>          <C>        <C>

Martin C. Cunningham,
Chairman and                       2006   180,000       --           --         --              --
Chief Executive Officer            2005    60,000       --           --         --              --

Keith R. Knox,
President and Secretary            2006   180,000       --           --         --              --
                                   2005    60,000       --           --         --              --

Mark Leventhal,
Executive Vice President           2006   180,000       --           --         --              --
                                   2005    60,000       --           --         --              --
</TABLE>

------------
Note: Michael Picone, the Company's former Chief Financial  Officer,  joined and
      left the Company  during the fiscal year ended March 31, 2006,  earning an
      aggregate salary of $116,667 during his tenure.

[1]   The table above reflects  compensation for the current executive officers,
      during their term as executive officers, which is from June 30, 2004.


Director Compensation

Directors  were not  compensated  for their service during the fiscal year ended
March 31, 2006.  Compensation for the independent  directors for the fiscal year
ended  March  31,  2007 is under  discussion,  but the  specifics  have not been
finalized.


                                       29
<PAGE>

Employment   Contracts,   Termination   of  Employment  and  Change  in  Control
Arrangements

None  of the  Named  Executive  Officers  have  employment  contracts  or  other
agreements  which guarantee  minimum  compensation  amounts  relating to ongoing
employment, termination of employment or a change in control.

Equity Incentive 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.

On May 26,  2006,  an  aggregate  of 125,000  non-qualified  stock  options were
granted to four individuals  (none of which were Named Executive  Officers) with
an exercise  price of $1.46 and an expiration  date of November 30, 2009.  These
are the only grants to date.

Option, Stock Appreciation Right and Long-Term Incentive Plan Awards

No option,  stock  appreciation  right or long-term  incentive  plan awards were
granted or exercised to any of the Named  Executive  Officers  during the fiscal
year ended March 31, 2006 and no such awards are currently outstanding.

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

Securities Authorized for Issuance under Equity Compensation Plans

<TABLE>
<CAPTION>
                                                                                           Number of securities
                                                                                          remaining available for
                                Number of Securities to                                    future issuance under
                                be issued upon exercise    Weighted-average exercise     equity compensation plans
                                of outstanding options,       price of outstanding         (excluding securities
                                  warrants and rights     options, warrants and rights   reflected in column (a))
                                          (a)                         (b)                           (c)
<S>                             <C>                       <C>                            <C>

Equity compensation plans
approved by security holders                         --                             --                   2,000,000

Equity compensation plans not
approved by security holders                         --                             --                          --
                                -----------------------   ----------------------------   -------------------------
Total                                                --                             --                   2,000,000
                                =======================   ============================   =========================
</TABLE>


The table above reflects the status of the Company's equity  compensation  plans
as of March 31, 2006.


                                       30
<PAGE>

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 16, 2006 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,  525 Washington Blvd., 36th Floor,  Jersey
City, New Jersey 07310.

<TABLE>
<CAPTION>
                                                              Number of Shares
                                                                Beneficially     Percentage of Shares
Name and Address of Beneficial Owner                              Owned(1)       Beneficially Owned(2)
-----------------------------------------------------------   ----------------   ---------------------
<S>                                                           <C>                <C>

Directors and Executive Officers:

Martin C. Cunningham                                                 4,178,565                    15.4%

Keith R. Knox                                                        4,178,565                    15.4%

Mark Leventhal                                                       4,348,565                    16.0%

Peter J. Zugschwert                                                    214,356                       *

Joanne V. Landau                                                            --                      --

Carmine V. Chiusano                                                         --                      --

All executive officers and directors as a group (6 persons)         12,920,051                    47.6%

Other 5% or Greater Stockholders:

Kenneth D. Pasternak(3)                                              6,581,784                    24.2%

Steven L. Winkler(4)                                                 4,348,565                    16.0%
</TABLE>

------------
      o     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. Includes only common shares, since none of
      the  individuals  named above are warrant  holders and the Company has not
      granted any options to directors or executive officers.

(2)   Based upon 27,149,860  shares of our common stock  outstanding on June 15,
      2006.

(3)   The address for Mr.  Pasternak is 111 E. Saddle River Road,  Saddle River,
      N.J. 07458.

(4)   Mr.  Winkler  is  employed  by Hudson  Securities,  Inc.,  a  wholly-owned
      subsidiary of Hudson Holding Corporation, as Co-Head of Nasdaq and Foreign
      Trading.

Item 12 Certain Relationships and Related Transactions

None.


                                       31
<PAGE>

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)

10.1          Subscription Agreement, dated January 10, 2006, between Kenneth
              Pasternak and Hudson Holding Corporation.(3)

10.2          Audit Committee Charter

10.3          Compensation Committee Charter

10.4          Nominating and Corporate Governance Committee Charter

10.5          Complaint Procedures for Accounting, Internal Accounting Control,
              and Auditing Matters

10.6          2005 Stock Option Plan.(1)

14            Code of Business Conduct and Ethics and Compliance Program

16            Letter from Mayer Hoffman McCann P.C.(4)

31.1          Certification of Chief Executive Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002.

31.2          Certification of Chief Financial Officer pursuant to Section 302
              of the Sarbanes-Oxley Act of 2002.

32.1          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, 2006

(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 January 19, 2006, as amended.

(4) Incorporated by reference to the exhibits included with our Current Report
on Form 8-K filed with the SEC on August 12, 2005.

                                       32
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate  fees billed for  professional  services  rendered was
$60,000, $50,000 and $40,000 for the audits of the Company's annual consolidated
financial  statements for the fiscal years ended March 31, 2006,  2005 and 2004,
respectively,  and  $11,000  for  the  reviews  of  the  consolidated  financial
statements  included in the  Company's  Forms 10-QSB during the year ended March
31, 2006. The audit of the Company's annual  consolidated  financial  statements
for the fiscal years ended March 31, 2005 and 2004 were  performed  concurrently
in connection with the Company's reverse merger transaction.

Audit-Related Fees. For the year ended March 31, 2006, the principal  accountant
billed $10,000 related to reviews of prior year financial statements.

Tax Fees. For the years ended March 31, 2006 and 2005, the principal  accountant
billed $6,000 and $12,000, respectively, for tax compliance.

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.


                                       33
<PAGE>

SIGNATURES

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

                                    HUDSON HOLDING CORPORATION

Dated: June 27, 2006                By: /s/ Martin Cunningham
                                       -----------------------------------------
                                    Martin Cunningham
                                    Chairman and Chief Executive Officer
                                    (Principal Executive Officer)

Dated: June 27, 2006                By: /s/ Keith Knox
                                        ----------------------------------------
                                    Keith Knox
                                    President, Secretary and Director
                                    (Principal Financial and Accounting Officer)

      Signatures                        Title                          Date
      ----------                        -----                          ----

/s/ Martin Cunningham     Chairman, Chief Executive Officer and    June 27, 2006
-----------------------   Director (principal executive officer)
Martin Cunningham

/s/ Keith Knox            President, Secretary and Director
-----------------------   (principal financial officer and
Keith Knox                principal accounting officer)            June 27, 2006

/s/ Mark Leventhal        Executive Vice President and Director    June 27, 2006
-----------------------
Mark Leventhal

/s/ Peter J. Zugschwert   Director                                 June 27, 2006
-----------------------
Peter J. Zugschwert

/s/ Joanne V. Landau      Director                                 June 27, 2006
-----------------------
Joanne V. Landau

/s/ Carmine V. Chiusano   Director                                 June 27, 2006
-----------------------
Carmine V. Chiusano


                                       34
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY

                    Table of Contents to Financial Statements

                                                                            Page
                                                                            ----

Financial Statements

   Report of independent registered public accounting firm                   F-2

   Consolidated statement of financial condition as of March 31, 2006        F-3

   Consolidated statements of operations for the
   years ended March 31, 2006 and 2005                                       F-4

   Consolidated statements of changes in stockholders' equity for the
   years ended March 31, 2006 and 2005                                       F-5

   Consolidated statements of cash flows for the
   years ended March 31, 2006 and 2005                                       F-6

   Notes to consolidated financial statements                                F-7


                                      F-1
<PAGE>

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 and subsidiary (the "Company") as of March 31, 2006 and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for the years  ended  March 31,  2006 and 2005.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of Hudson Holding
Corporation and subsidiary as of March 31, 2006, and the consolidated results of
their  operations and cash flows for the years ended March 31, 2006 and 2005, in
conformity with accounting principles generally accepted in the United States of
America.

Eisner LLP

New York, New York
June 22, 2006


                                      F-2
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                 MARCH 31, 2006

<TABLE>
<S>                                                                    <C>
ASSETS
   Cash                                                                $   476,549
   Receivable from broker-dealer                                         4,866,550
   Securities owned                                                      3,735,397
   Furniture, equipment and leasehold improvements, net                    175,564
   Deferred taxes                                                          123,000
   Other assets                                                            377,630
   Goodwill                                                              1,111,179
                                                                       -----------

                                                                       $10,865,869
                                                                       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
   Liabilities:
      Securities sold, but not yet purchased                           $   418,588
      Commissions payable                                                1,194,143
      Accrued expenses and other liabilities                               578,922
      Income taxes payable                                                 581,534
                                                                       -----------

         Total liabilities                                               2,773,187
                                                                       -----------

   Commitments and contingencies (Notes I and K)

   Stockholders' equity:

      Preferred stock, $.001 par value, 1,000,000 shares authorized,
         none issued                                                            --
      Common stock, $.001 par value, 100,000,000 shares authorized,
         27,149,860 shares issued and outstanding                           27,150
      Additional paid-in capital                                         6,672,761
      Retained earnings                                                  1,392,771
                                                                       -----------

         Total stockholders' equity                                      8,092,682
                                                                       -----------

                                                                       $10,865,869
                                                                       ===========
</TABLE>

See notes to consolidated financial statements


                                      F-3
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Year Ended March 31,
                                                            ---------------------------
                                                                2006            2005
                                                            -----------     -----------
<S>                                                         <C>             <C>
Revenues:
   Trading gains, net                                       $17,621,676     $19,412,005
   Commissions                                                2,539,737       1,646,689
   Interest and other income                                     66,236         103,689
                                                            -----------     -----------

                                                             20,227,649      21,162,383
                                                            -----------     -----------

Expenses:
   Salaries and related costs                                 2,746,988       2,805,676
   Commissions and clearing charges                           9,327,598      10,939,868
   Communications                                             4,584,858       4,423,794
   Occupancy                                                    522,774         563,084
   Professional fees                                            551,844         569,232
    Business development                                        390,383         383,848
   Other                                                        850,379         794,967
                                                            -----------     -----------

                                                             18,974,824      20,480,469
                                                            -----------     -----------

Income before income taxes                                    1,252,825         681,914
Provision for income taxes                                      469,000         234,000
                                                            -----------     -----------

Net income                                                  $   783,825     $   447,914
                                                            ===========     ===========

Earnings per share - basic                                  $      0.04     $      0.02
                                                            ===========     ===========
Earnings per share - diluted                                $      0.04     $      0.02
                                                            ===========     ===========

Weighted average number of shares outstanding - basic        21,910,067      18,332,660
                                                            ===========     ===========
Weighted average number of shares outstanding - diluted      22,153,119      18,629,876
                                                            ===========     ===========

Supplemental pro forma data (Note B[10]) (unaudited):

   Income before income taxes as reported above                             $   681,914
   Pro forma provision for income taxes                                         383,000
                                                                            -----------

   Pro forma net income                                                     $   298,914
                                                                            ===========

   Pro forma earnings per share - basic                                     $      0.02
                                                                            ===========
   Pro forma earnings per share - diluted                                   $      0.02
                                                                            ===========
</TABLE>

See notes to consolidated financial statements


                                      F-4
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 Common Stock            Additional
                                          --------------------------      Paid-in         Retained
                                            Shares         Amount         Capital         Earnings         Total
                                          -----------    -----------    -----------     -----------     -----------
<S>                                        <C>           <C>            <C>             <C>             <C>
Balance - March 31, 2004                   17,629,335    $    17,629    $ 2,256,814     $ 6,389,867     $ 8,664,310
100% change in ownership interest
   pushed down                                     --             --      1,111,179              --       1,111,179

Sale of common stock                        1,704,749          1,705      1,303,745              --       1,305,450

Warrants issued to consultants at fair
   value                                           --             --          8,839              --           8,839

Distributions to stockholders                      --             --             --      (6,228,835)     (6,228,835)

Net income                                         --             --             --         447,914         447,914
                                          -----------    -----------    -----------     -----------     -----------

Balance - March 31, 2005                   19,334,084         19,334      4,680,577         608,946       5,308,857

Shares 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              --       2,000,000

Net income                                         --             --             --         783,825         783,825
                                          -----------    -----------    -----------     -----------     -----------

Balance - March 31, 2006                   27,149,860    $    27,150    $ 6,672,761     $ 1,392,771     $ 8,092,682
                                          ===========    ===========    ===========     ===========     ===========
</TABLE>

See notes to consolidated financial statements


                                      F-5
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                         Year Ended March 31,
                                                                     ---------------------------
                                                                         2006            2005
                                                                     -----------     -----------
<S>                                                                  <C>             <C>
Cash flows from operating activities:
   Net income                                                        $   783,825     $   447,914
   Adjustments to reconcile net income to net cash
      (used in) provided by operating activities:
        Depreciation and amortization                                    145,214          98,347
        Warrants used to compensate consultants                               --           8,839
        Commission receivable reserve provision                          112,521              --
        Bad debt reserve provision                                        25,000              --
        Deferred rent                                                    (15,960)         46,372
        Changes in:
           Receivable from broker-dealer                              (2,143,146)      6,210,272
           Securities owned                                             (679,704)        649,805
           Commission receivable                                          30,457        (142,978)
           Other assets                                                 (238,911)          8,282
           Securities sold, but not yet purchased                       (225,744)       (810,104)
           Commissions payable                                           286,968      (1,519,546)
           Accrued expenses and other liabilities                       (144,676)       (311,549)
           Income taxes payable                                          559,118          (5,584)
           Deferred taxes                                               (142,000)         19,000
                                                                     -----------     -----------

              Net cash (used in) provided by operating activities     (1,647,038)      4,699,070
                                                                     -----------     -----------

Cash flows from investing activities:
   Purchase of furniture, equipment and leasehold improvements          (171,515)        (58,452)
                                                                     -----------     -----------

Cash flows from financing activities:
   Proceeds from the sale of common stock                              2,000,000       1,305,450
   Distributions to stockholders                                              --      (6,228,835)
                                                                     -----------     -----------

              Net cash provided by (used in) financing activities      2,000,000      (4,923,385)
                                                                     -----------     -----------

Net increase (decrease) in cash                                          181,447        (282,767)
Cash - beginning of year                                                 295,102         577,869
                                                                     -----------     -----------

Cash - end of year                                                   $   476,549     $   295,102
                                                                     ===========     ===========

Supplemental disclosures of cash flow information:
   Cash paid during the year for:
      Income taxes                                                   $    57,057     $   206,800
                                                                     ===========     ===========
   Non-cash investing and financing activities:
      100% change in ownership interest pushed down                  $        --     $ 1,111,179
                                                                     ===========     ===========
</TABLE>

See notes to consolidated financial statements


                                      F-6
<PAGE>

                    HUDSON HOLDING CORPORATION AND SUBSIDIARY
                   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"),  a holding  company,  and its wholly owned  subsidiary
Hudson  Securities,  Inc.  ("Hudson"),   (collectively  the  "Company").  Hudson
(formerly Wien Securities Corp.  ("Wien")) 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. The Company has offices in New Jersey and
Florida.

In January 2003, the stockholders of Wien entered into an agreement whereby they
granted certain new employees (the "Trading  Group") an option to acquire 51% of
the  outstanding  shares of Wien's  common  stock  ("51%  Option")  from  Wien's
stockholders.  Upon the exercise of the 51% Option,  the Trading  Group would be
entitled to purchase the  remaining  outstanding  shares of Wien's  common stock
within six months, pending NASD approval of the transfer of Wien's common stock.
The agreement  included  employment  terms for four of Wien's  stockholders  for
periods ranging from 1 to 2.5 years.

In May 2004 the Wien  stockholders  and the Trading Group amended the agreement,
which  changed  the 51% Option to a 100%  option.  The  agreement,  as  amended,
provided that upon the exercise of the 100% option,  the exercise  price and the
remaining purchase price of the shares of common stock of Wien to be paid by the
Trading  Group  would be  calculated  based on a  formula  of book  value.  Wien
received  NASD  approval for this  transaction  and on June 30, 2005 the Trading
Group consummated the purchase of all of the outstanding shares of Wien's common
stock for a purchase price of approximately $7,136,000. In conjunction with this
100%  change  in  ownership  the  former  stockholders  took a  distribution  of
approximately $1,580,000 and received all of the proceeds of the purchase price.
The transaction was treated for accounting  purposes as a purchase of Wien. As a
result, Wien recorded goodwill of approximately $1,111,000, which represents the
excess  of the  purchase  price  over the  estimated  fair  value of the  assets
acquired and liabilities assumed.  Subsequently,  on July 21, 2004 Wien 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,
Wien 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 Wien received  83,333.33 shares of Hudson for each share of
Wien owned.  Wien's historical capital accounts were  retroactively  adjusted to
reflect the equivalent  number of shares issued by HCMI in the HCMI Merger while
Wien's historical  retained  earnings was carried forward.  Prior to November 1,
2004, Hudson elected treatment as a Subchapter S corporation for federal and New
Jersey income tax  purposes.  Effective  November 1, 2004,  the Company is being
treated as a C corporation.

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
warrantholders 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.


                                      F-7
<PAGE>

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  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.  Because of the inherent
      uncertainty  of valuation,  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 events that have been included 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.

      Prior to  November  1, 2004,  Hudson  was taxed  under the  provisions  of
      Subchapter  "S" of the  Internal  Revenue  Service  Code  ("Code") and the
      appropriate  sections of the New Jersey Corporate  Business Tax Law. Under
      those provisions, Hudson did not pay federal corporate income taxes on its
      taxable  income and paid New Jersey  corporate  income  taxes at a reduced
      rate. The stockholders were liable for individual federal and state income
      taxes on their respective share of Hudson's taxable income.

[3]   Furniture, equipment and depreciation:

      Furniture  and equipment  are recorded at cost.  Depreciation  is computed
      using the  straight-line  method  over the  estimated  useful  life of the
      related asset.

[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 assets and
      the  valuation  of  goodwill.  Actual  results  could  differ  from  those
      estimates.

[5]   Cash:

      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.

[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.


                                      F-8
<PAGE>

      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:

      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,  at least annually,
      by applying a fair value based test.  As a result of its  assessment,  the
      Company has determined no such  impairment  needs to be recognized  during
      the year ended March 31, 2006.

[8]   Commissions receivable reserve:

      Commissions receivable represent cumulative draws and benefits provided to
      traders and salespersons in excess of cumulative  commissions  earned. The
      Company   expected  to  collect  these   receivables  from  future  earned
      commissions.  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,  2006,  the Company had  $112,521 of
      commissions receivable offset by a reserve of the same amount.

[9]   Supplemental pro forma data:

      The objective of the pro forma results of operations  data is to show what
      the significant effects on the historical financial information would have
      been had Hudson not been an S corporation for income tax purposes. For the
      year ended March 31,  2005,  the pro forma amount  reflects an  additional
      provision for income taxes  computed as if the Company had been subject to
      federal and state taxes during the period  April 1, 2004  through  October
      31, 2004.


                                      F-9
<PAGE>

[10]  Earnings per share:

      Basic  earnings  per share  ("EPS") has been  calculated  by dividing  net
      income by the weighted average shares of common stock  outstanding  during
      the year.  Diluted EPS reflects the potential  reduction in EPS, using the
      treasury stock method to reflect the impact of common share equivalents 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 earnings per share  computations for the years ended
      March 31, 2006 and 2005:

<TABLE>
<CAPTION>
                                                      Years Ended
                                --------------------------------------------------------
                                      March 31, 2006               March 31, 2005
                                --------------------------    --------------------------
                                Numerator/    Denominator/    Numerator/    Denominator/
                                Net Income       Shares       Net Income       Shares
                                -----------   ------------    -----------   ------------
<S>                             <C>             <C>           <C>             <C>
Net income and shares
used in basic calculation       $   783,825     21,910,067    $   447,914     18,332,660
                                ===========                   ===========
Effect of dilutive
securities  - warrants                             243,051                       297,215
                                                ----------                    ----------
Net income and shares
used in diluted calculation                     22,153,119                    18,629,876
                                                ==========                    ==========

Earnings per share - basic      $      0.04                   $      0.02
                                ===========                   ===========
Earnings per share - diluted    $      0.04                   $      0.02
                                ===========                   ===========
</TABLE>

[11]  Reclassifications:

      Certain  fiscal 2005  amounts have been  reclassified  to conform with the
      fiscal 2006 presentation.

[12]  Future impact of recently issued accounting standards:

      In December 2004, the Financial  Accounting  Standards  Board (the "FASB")
      issued Statement of Financial Accounting Standards No. 123 (revised 2004),
      Share-Based   Payment,   ("SFAS  123(R)")  which  replaces  SFAS  123  and
      supersedes  APB  Opinion  No. 25.  Under the  provisions  of SFAS  123(R),
      companies are required to measure the cost of employee  services  received
      in exchange  for an award of equity  instruments  based on the  grant-date
      fair  value of the  award  (with  limited  exceptions).  That cost will be
      recognized over the period during which an employee is required to provide
      service in  exchange  for the  award,  usually  the  vesting  period.  The
      statement is effective as of the  beginning of the first annual  reporting
      period that begins after June 15, 2005 and accordingly  will be adopted by
      the Company in the first quarter of fiscal year 2007. SFAS 123(R) requires
      that  compensation  expense be  recognized  for the  unvested  portions of
      existing  options  granted prior to its effective date of adoption and the
      cost of options granted to employees after the effective date based on the
      fair value of the stock  options at grant date.  The impact of adoption of
      SFAS 123(R) cannot be predicted at this time because it will depend on the
      levels of share-based payments granted in the future.

      In May 2005, the FASB issued SFAS No. 154,  "Accounting  Changes and Error
      Corrections,  - a replacement of APB Opinion No. 20 and FASB Statement No.
      3".  This  Statement  establishes,  unless  impracticable,   retrospective
      application  as the required  method for  reporting a change in accounting
      principle in the absence of explicit transition  requirements  specific to
      the newly adopted accounting  principle.  The provisions of this Statement
      are effective for  accounting  changes and  corrections  of errors made in
      fiscal  years  beginning  after  December  15,  2005.  Early  adoption  is
      permitted for accounting  changes and corrections of errors made in fiscal
      years beginning after the date this Statement is issued.  The Company does
      not believe that the adoption of this Statement on April 1, 2006 will have
      a  material  impact on the  Company's  financial  position  or  results of
      operation.


                                      F-10
<PAGE>

NOTE C - RECEIVABLE FROM CLEARING BROKER

At March 31, 2006, 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, 2006
consisted entirely of marketable equity securities.

NOTE E - FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Furniture, equipment and leasehold improvements are summarized as follows:

                                                               March 31,
                                                                 2006
                                                              -----------

      Furniture and equipment                                 $ 1,967,374

      Leasehold improvements                                       45,538
                                                              -----------

           Gross                                                2,012,912

      Accumulated depreciation and amortization                (1,837,348)
                                                              -----------

            Net                                               $   175,564
                                                              ===========

Depreciation and amortization  expense totaled $145,214 and 98,347 for the years
ended March 31, 2006 and 2005, respectively.

NOTE F - STOCKHOLDERS' EQUITY

[1]   Private placement:

      In October and November 2004, the Company  raised  $1,305,450  through the
      sale of 483.5 units in a private placement.  Each unit was sold for $2,700
      and  consisted of 3,526 shares of common stock and a five-year  redeemable
      warrant,  which expires in 2009, to purchase 3,526 shares of the Company's
      common stock at an exercise price of $1.0494 per share.

[2]   Warrants:

      In  December of 2004,  the  Company  issued  55,826  five-year  redeemable
      warrants to  consultants  for services in  connection  with the  Company's
      corporate  structure.  The consulting warrants are exercisable into common
      stock at a price of $1.0494  per share and expire in 2009.  The  warrants,
      which vested immediately, resulted in a charge of $8,839 based on the fair
      value of the warrants ($.16 per warrant). The fair value of these warrants
      was  estimated  using the  Black-Scholes  pricing model with the following
      assumptions:  interest  rate of 3.27%,  dividend  yield of 0%,  volatility
      factor of .70 and an average expected life of three years.

      The warrants sold in the private placement and the consulting 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.


                                      F-11
<PAGE>

      A summary of the Company's warrants and related  information for the years
      ended March 31, 2006 and 2005 is as follows:

                                                               Weighted Average
                                                                Exercise Price
                                                               ----------------

      Outstanding at April 1, 2004                         --             --

      Granted                                       1,760,590      $  1.0494
      Exercised                                            --             --
                                                    ---------      ---------

      Outstanding at March 31, 2005                 1,760,590      $  1.0494

      Granted                                              --             --
      Exercised                                            --             --
                                                    ---------      ---------

      Outstanding at March 31, 2006                 1,760,590      $  1.0494
                                                    =========      =========

      Weighted average remaining months
         of contractual life at March 31, 2006             44
                                                    =========

[3]   Stock option plan

      On July 26, 2005, the stockholders approved 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  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.  No
      options were granted during the year ended March 31, 2006.

[4]   Sale of stock

      On January 10, 2006, the Company sold 6,581,784 shares of its common stock
      (the "Securities") for $2,000,000. There were no underwriting discounts or
      commissions paid in connection with the sale of the Securities.

NOTE G - INCOME TAXES

The Company files a federal  income tax return,  which will be on a consolidated
basis with its  wholly-owned  subsidiary  for the year ended March 31, 2006,  as
well as state income tax returns in certain  jurisdictions.  Commencing November
1, 2004,  Hudson  elected  to be taxed as a C  corporation.  Therefore,  the tax
provision  for the year ended  March 31, 2005  excluded  taxes on income for the
period April 1, 2005 through October 31, 2004.


                                      F-12
<PAGE>

The provision (benefit) for taxes consists of the following:

                                            Actual               Pro Forma
                                  -------------------------      ---------
                                     2006            2005           2005
                                  ---------       ---------      ---------
                                                                (unaudited)
      Federal:
         Current                  $ 558,500       $ 184,000      $ 312,000
         Deferred                  (121,500)         16,000         52,000

      State and local:
         Current                     52,500          31,000         16,000
         Deferred                   (20,500)          3,000          3,000
                                  ---------       ---------      ---------

                                    469,000       $ 234,000      $ 383,000
                                  =========       =========      =========

For the years ended March 31, 2006 and 2005,  the expected tax expense  based on
the statutory rate is reconciled with actual tax expense as follows:

                                                   Actual          Pro Forma
                                              ----------------     ---------
                                               2006       2005        2005
                                              -----      -----       -----
                                                                  (unaudited)

      Expected tax expense                    34.00%     34.00%      34.00%
      Non-taxable S corporation income                   (11.05)%
      State income tax net of federal          2.55%      4.57%       7.67%
      income tax effect
      Non-deductible items                     4.59%      4.61%      14.30%
      Other                                   (3.71)%     2.18%       0.20%
                                              -----      -----       -----

      Actual tax expense                      37.44%     34.31%      56.17%
                                              =====      =====       =====

The principal  components of the net deferred tax asset at March 31, 2006 are as
follows:

                                                                      March 31,
                                                                         2006
                                                                      ---------

Deferred tax assets

      State net operating loss carryforward                           $  46,000

      Reserve for commissions receivable and bad debt                    55,000

      Deferred rent                                                      12,000

      Excess of tax over book basis of fixed assets                      56,000
                                                                      ---------

      Total gross deferred tax assets                                   169,000

      Valuation allowance                                               (46,000)
                                                                      ---------

      Net deferred tax asset                                          $ 123,000
                                                                      ---------

As of March 31, 2006, the Company has a state net operating loss carryforward of
approximately  $848,000,  which  expires  in  2011.  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.


                                      F-13
<PAGE>

NOTE H - 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, 2006 and 2005,  the Company
made no matching contributions.

NOTE I - COMMITMENTS AND CONTINGENCIES

[1]   Lease:

      The Company  leases  office space at its main office in Jersey  City,  New
      Jersey  and one  satellite  location.  As of March  31,  2006 the  Company
      recorded a deferred lease liability of $30,412 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.   Future  minimum  lease
      commitments as of March 31, 2006 are as follows:

                Years Ended
                 March 31,
                -----------

                   2007                    $ 373,500
                   2008                      227,807
                                           ---------

                                           $ 601,307
                                           =========

      Rent  expense,  net of sublease  income,  was  approximately  $523,000 and
      $563,000 for the years ended March 31, 2006 and 2005, respectively.

      See Note K for discussion of an additional lease commitment.

[2]   Contingencies:

      The Company has been named as a defendant in various  actions  relating 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 J - 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, 2006, Hudson had net capital of $5,454,995, which was $4,454,995 in
excess of its required net capital of $1,000,000.


                                      F-14
<PAGE>

NOTE K - SUBSEQUENT EVENTS

[1]   New office lease:

      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 the Company. The lease will commence
      when the landlord's work is  substantially  complete and expires on August
      30, 2012. Future minimum lease commitments are as follows:

         Years Ended
          March 31,
         -----------

            2007                                          $  235,000
            2008                                             302,000
            2009                                             403,000
            2010                                             463.000
            2011                                             483,000
            Thereafter                                       544,000
                                                          ----------

                                                          $2,430,000
                                                          ==========

[2]   Letter of credit:

      In  connection  with the new  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.

[3]   New subsidiary:

      On May 22, 2006,  Hudson  Technologies Inc. ("HTI") was formed as Delaware
      corporation  for  the  purpose  of  providing  software   development  and
      technology  services for Hudson and for third  parties.  On June 13, 2006,
      the  Company  funded  HTI as a  wholly-owned  subsidiary  with a  $150,000
      initial investment.

[4]   Option grants:

      In May 2006,  the  Company  granted  non-qualified  stock  options to four
      employees  pursuant to the 2005 Stock Option Plan.  The grants  enable the
      employees  to purchase a total of 125,000  shares at an exercise  price of
      $1.46 per  share,  which was the  market  value on the date of the  grant.
      Vesting occurs over three years and the options expire in November 2009.


                                      F-15