Hudson Technologies, Inc. (HDSN, NASDAQ)
Industry: Specialty Chemicals
Annual report, fiscal year 2009


Morningstar \( ^{®} \)  Document Research \( ^{SM} \) 

FORM10-K

HUDSON TECHNOLOGIES INC /NY-HDSN

Filed: March 01, 2010 (period: December 31, 2009)

Annual report with a comprehensive overview of the company



# UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2009

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 1-13412

# Hudson Technologies, Inc.

(Exact name of registrant as specified in its charter)

New York
(State or Other Jurisdiction of Incorporation or Organization)
P.O. Box 1541
One Blue Hill Plaza
Pearl River, New York
(Address of Principal Executive Offices)
13-3641539
(I.R.S. Employer Identification No.)

Registrant's telephone number, including area code

(845) 735-6000

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

Title of each class Name of each Exchange on which Registered

Common stock, $.01 par value The NASDAQ Stock Market LLC (NASDAQ Capital Market)

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act [ ] Yes [x] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act [ ] Yes [x] No

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SECTION 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [x]

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

The aggregate market value of registrant's common stock held by non-affiliates at June 30, 2009 was approximately $15,667,044. As of February 26, 2010 there were 20,941,706 shares of the registrant's common stock outstanding.

Documents incorporated by reference: None



<table><tr><td colspan="3">Index</td></tr><tr><td>Part</td><td>Item</td><td>Page</td></tr><tr><td rowspan="7">Part I.</td><td>Item 1 -</td><td>3</td></tr><tr><td>Item 1A -</td><td>8</td></tr><tr><td>Item 1B -</td><td>11</td></tr><tr><td>Item 2 -</td><td>11</td></tr><tr><td>Item 3 -</td><td>11</td></tr><tr><td>Item 4 -</td><td>12</td></tr><tr><td>Part II.</td><td>Item 5 -</td><td>13</td></tr><tr><td></td><td>Item 6 -</td><td>13</td></tr><tr><td></td><td>Item 7 -</td><td>14</td></tr><tr><td></td><td>Item 7A -</td><td>18</td></tr><tr><td></td><td>Item 8 -</td><td>18</td></tr><tr><td></td><td>Item 9 -</td><td>18</td></tr><tr><td></td><td>Item 9A (T) -</td><td>19</td></tr><tr><td></td><td>Item 9B -</td><td>19</td></tr><tr><td rowspan="7">Part III.</td><td>Item 10 -</td><td>20</td></tr><tr><td>Item 11 -</td><td>22</td></tr><tr><td>Item 12 -</td><td>27</td></tr><tr><td>Item 13 -</td><td>29</td></tr><tr><td>Item 14 -</td><td>29</td></tr><tr><td>Part IV.</td><td>Item 15 -</td><td>30</td></tr><tr><td>Signatures</td><td>50</td></tr></table>

## Page 2

## Part I

## Item 1. Business

## General

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company's products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems, and include (i) refrigerant sales, (ii) refrigerant management services consisting primarily of reclamation of refrigerants and (iii) RefrigerantSide® Services performed at a customer's site, consisting of system decontamination to remove moisture, oils and other contaminants. In addition, RefrigerantSide® Services include predictive and diagnostic services for industrial and commercial refrigeration applications, which are designed to predict potential catastrophic problems and identify inefficiencies in an operating system. The Company's Chiller Chemistry®, Chill Smart®, Fluid Chemistry™ and Performance Optimization are predictive and diagnostic service offerings. The Company operates through its wholly-owned subsidiary, Hudson Technologies Company. Unless the context requires otherwise, references to the "Company", "Hudson", "we", "us", "our", or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

The Company’s executive offices are located at One Blue Hill Plaza, Pearl River, New York and its telephone number is (845) 735-6000.

## Industry background

The production and use, in the United States, of refrigerants containing hydrochlorofluorocarbons ("HCFC"), the most commonly used refrigerants, and chlorofluorocarbons ("CFC") are subject to extensive and changing regulation under the Clean Air Act, as amended (the "Act"). The Act, which



was amended during 1990 in response to evidence linking the use of CFC refrigerants and damage to the earth's ozone layer, prohibits any person in the course of maintaining, servicing, repairing and disposing of air conditioning or refrigeration equipment, to knowingly vent or otherwise release or dispose of ozone depleting substances used as refrigerants. That prohibition also applies to substitute, non-ozone depleting refrigerants. The Act also requires the recovery of refrigerants used in residential, commercial and industrial air conditioning and refrigeration systems, and, effective January 1, 1996, prohibited production of virgin CFC refrigerants and limited the production of virgin (new) HCFC refrigerants. Effective January 2004, the Act further limited the production of virgin HCFC refrigerants, and federal regulations were enacted which impose limitations on the importation of certain virgin HCFC refrigerants. Additionally, effective January 2010 the Act further limited the production of HCFC refrigerants and additional federal regulations were enacted which imposed further limitations on the use, production and importation of certain virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out by the year 2020, and production of all HCFC refrigerants is scheduled to be phased out by 2030. Under the Act, owners, operators and companies servicing cooling equipment are responsible for the integrity of the systems, regardless of the refrigerant being used, and for the responsible management of refrigerant.

Hydrofluorocarbon ("HFC") are used as substitutes for CFC and HCFC refrigerants in certain applications. As a result of the increasing restrictions and limitations on the production and use of CFC and HCFC refrigerants, various segments of the air conditioning and refrigeration industry have begun replacing or modifying equipment that utilize CFC and HCFC refrigerants and have been transitioning to equipment that utilizes HFC refrigerants. HFC refrigerants are not ozone depleting chemicals and are not currently regulated under the Act. However, HFC refrigerants are strong greenhouse gases that contribute to global warming and, as a result, are now subject to various state and federal regulations relating to the production, importation and emissions of HFC refrigerants. In addition, federal legislation has been proposed that, if enacted, would impose limitations on the production and importation of certain virgin HFC refrigerants.

The Act, and the federal regulations enacted under authority of the Act, have mandated and/or promoted responsible use practices in the air conditioning and refrigeration industry, which are intended to minimize the release of refrigerants into the atmosphere and encourage the recovery and re-use of refrigerants. In addition to prohibiting the venting of CFC and HCFC refrigerants, and prohibiting and/or phasing down the production of CFC and HCFC refrigerants, the Act mandates the recovery of these refrigerants and also promotes and encourages re-use and reclamation of CFC and HCFC refrigerants. Since January 1996, when virgin CFC production became prohibited, nearly the entire service demand for CFC refrigerants in existing equipment has been met through the recovery and the reclamation of used CFC refrigerants by the United States Environmental Protection Agency ("EPA") certified reclaimers. In addition, effective January 2010, EPA regulations reduced the total pounds of virgin HCFC refrigerants that can be produced and imported to levels which, based upon the EPA's estimates, will require as much as 20% of the service demand for existing equipment to be met by reclaimed or recycled HCFC refrigerants, with that percentage increasing in 2015.

## Page 3

## Products and Services

From its inception, the Company has sold refrigerants, and has provided refrigerant reclamation and management services that are designed to preserve refrigerants, thereby protecting the environment from ozone depletion. The reclamation process allows the refrigerant to be re-used thereby eliminating the need to destroy or manufacture additional refrigerant and eliminating the corresponding impact to the environment associated with the destruction and manufacturing. Today, these offerings represent most of the Company's revenues. For the past several years, the Company has created alternative solutions to reactive and preventative maintenance procedures that are performed on commercial and industrial refrigeration systems. These services, known as RefrigerantSide® Services, compliment the Company's refrigerant sales and refrigerant reclamation and management services. The Company has also developed Performance Optimization services that identify inefficiencies in the operation of air conditioning and refrigeration systems and assists companies to improve the efficiency of their systems and save energy. In addition, the Company is pursuing potential opportunities for the creation and monetization of verified emission reductions. See "Emission Reductions".

## Refrigerant Sales

The Company sells reclaimed and virgin (new) refrigerants to a variety of customers in various segments of the air conditioning and refrigeration industry. Virgin, non-CFC refrigerants, including HCFC and HFC refrigerants, are purchased by the Company from several suppliers and resold by the Company, typically at wholesale. The Company continues to sell reclaimed CFC based refrigerants, which are no longer manufactured. The Company regularly purchases used or contaminated refrigerants, some of which are CFC based, from many different sources, which refrigerants are then reclaimed using the Company's high volume proprietary reclamation equipment, the Zugibeast \( ^{\circledR} \)  system, and resold by the Company.

## Refrigerant Management Services

The Company provides a complete offering of refrigerant management services, which primarily include reclamation of refrigerants, laboratory testing through the Company's laboratory, which has been certified by the Air Conditioning, Heating and Refrigeration Institute, formerly the Air Conditioning and Refrigeration Institute ("ARI"), and banking (storage) services tailored to individual customer requirements. Hudson also separates "crossed" (i.e. commingled) refrigerants and provides re-usable cylinder repair and hydrostatic testing services.

## RefrigerantSide® Services

The Company provides decontamination and recovery services that are performed at a customer's site through the use of portable, high volume, high-speed proprietary equipment, including its patented Zugibeast \( ^{\circledR} \) . Certain of these RefrigerantSide \( ^{\circledR} \)  Services, which encompass system decontamination, and refrigerant recovery and reclamation are also proprietary and are covered by process patents.

In addition to the decontamination and recovery services previously described, the Company also provides predictive and diagnostic services for its customers. The Company offers diagnostic services that are intended to predict potential problems in air conditioning and refrigeration systems before they occur. The Company's Chiller Chemistry \( ^{\circledR} \)  offering integrates several fluid tests of an operating system and the corresponding laboratory results into an engineering report providing its customers with an understanding of the current condition of the fluids, the cause for any abnormal findings and the potential consequences if the abnormal findings are not remediated. Fluid Chemistry \( ^{™} \) , an abbreviated version of, the Company's Chiller Chemistry \( ^{\circledR} \)  offering, is designed to quickly identify systems that require further examination. ChillSmart \( ^{\circledR} \)  combines the diagnostic information of Chiller Chemistry \( ^{\circledR} \)  with a detailed performance evaluation for an operating refrigeration system and recommendations for



eliminating any inefficiencies that may have been discovered.

The Company has been awarded four United States patents for its Performance Optimization System, which is a system for measuring, modifying and improving the efficiency of energy systems, including air conditioning and refrigeration systems, in industrial and commercial applications. Hudson's Performance Optimization Services are able to identify specific inefficiencies in the operation of refrigeration systems and, when used with Hudson's RefrigerantSide \( ^{\circledR} \)  Services, can increase the efficiency of the operating systems thereby reducing energy usage and costs. These inefficiencies require power generating companies to produce more energy and, in many instances increase carbon dioxide ("CO \( _{2} \) ") emissions to produce the excess energy. Consequently, not only is Hudson's reclamation system beneficial to the environment, but Hudson's Performance Optimization Services recommendations are also designed to achieve an overall reduction in CO \( _{2} \)  emissions. The Company's Performance Optimization Services have allowed the Company to become an Energy Star \( ^{\circledR} \)  Service and Product Provider Partner. The Company's Performance Optimization System can be customized to a particular customer's refrigeration system, such as at an industrial facility that utilizes refrigeration in its manufacturing processes, or offered as a stand alone product that can be used with air conditioning and packaged refrigeration systems, such as a comfort cooling application in large office buildings. When the Company combines it Performance Optimization System with its Chiller Chemistry \( ^{\circledR} \)  the Company calls this combined offering ChillSmart \( ^{\circledR} \) .

## Page 4

## Emission Reductions

CFC refrigerants are ozone depleting substances and are also strong greenhouse gases that contribute to global warming. The destruction of CFC refrigerants may be eligible for verified emission reductions that can be converted and monetized into carbon offset credits that may be traded in the emerging carbon offset markets. The Company is pursuing opportunities to acquire CFC refrigerants and is developing relationships within the emerging environmental markets in order to develop opportunities for the creation and monetization of verified emission reductions from the destruction of CFC refrigerants.

## Hudson's Network

Hudson operates from a network of facilities located in:

Auburn, Washington –RefrigerantSide® Service depot

Baton Rouge, Louisiana –RefrigerantSide® Service depot

Champaign, Illinois –Reclamation and separation of refrigerants and cylinder refurbishment center;

RefrigerantSide® Service depot

Charlotte, North Carolina –RefrigerantSide® Service depot

Orangeburg, New York –RefrigerantSide® Service depot

Pearl River, New York –Company headquarters and administrative offices

Pottsboro, Texas –Telemarketing office

Raymond, New Hampshire –Telemarketing office

## Strategic Alliances

The Company believes that the international market for refrigerant reclamation, sales and services is equal in size to the United States market for those sales and services. In furtherance of the Company's efforts to expand its presence outside the United States, in June 2003, the Company entered into an exclusive global technology and marketing agreement with The Linde Group ("Linde"), formerly the BOC Group, a worldwide industrial gases, vacuum technologies and distribution services company that serves two million customers in more than 50 countries. Under the agreement, the Company has licensed its RefrigerantSide \( ^{\circledR} \)  Services technology to Linde, and the Company has agreed to enter into separate supplemental agreements with certain Linde affiliate companies, pursuant to which the Company will license its RefrigerantSide \( ^{\circledR} \)  Services technology and the use of its related proprietary equipment to each Linde affiliate in return for (i) a license fee payable to the Company by the Linde affiliate in annual installments during the course of such supplemental agreement and (ii) royalty payments to the Company based on revenues derived by the Linde affiliate from the performance of RefrigerantSide \( ^{\circledR} \)  Services and other sales licensed from the Company. The arrangement was specifically aimed at marketing and developing the Company's RefrigerantsSide \( ^{\circledR} \)  and other performance optimization services in over 20 countries outside the United States. The agreement with Linde will expire on September 30, 2010. Currently, the Company has executed two separate supplemental agreements with Linde affiliates covering the United Kingdom and the Republic of South Africa. Each of the existing supplemental agreements is, and any future supplemental agreement with a Linde affiliate will be, for an initial term of seven years and may be further extended for an initial period of three years and thereafter on an open-ended basis unless earlier terminated.

In January 2010, the Company entered into a strategic alliance agreement with EOS Climate, Inc. ("EOS"), which is a provider of technology and services related to the destruction or mitigation of ozone-depleting substances in order to generate verified emissions reductions for sale in emerging environmental markets. Under the agreement, the Company and EOS have established an exclusive relationship pursuant to which the Company will supply certain CFC refrigerants to EOS, and EOS will utilize the Company to perform reclamation and recovery services for emissions reduction projects, and the parties will share any revenues generated from the monetization of verified emissions reductions. The agreement is worldwide in scope and provides for the granting of licenses by the Company to EOS to utilize the Company's equipment and technology in other countries in connection with emissions reductions projects.

## Suppliers

The Company's financial performance and its ability to sell refrigerants is in part dependent on its ability to obtain sufficient quantities of virgin, non-CFC based refrigerants, and of reclaimable CFC and non-CFC based, refrigerants from manufacturers, wholesalers, distributors, bulk gas brokers and from other sources within the air conditioning, refrigeration and automotive aftermarket industries, and on corresponding demand for refrigerants. The Company's refrigerant sales include CFC based refrigerants, which are no longer manufactured. Additionally, the Company's refrigerant sales include non-CFC based refrigerants, including HCFC and HFC refrigerants, which are the most widely used refrigerants. Effective January 1, 1996, the Act limits the production of virgin HCFC refrigerants, which production was further limited in January 2004. Federal regulations enacted in January 2004 also imposed limitations on the importation of certain virgin HCFC refrigerants. In addition, effective January 2010, the Act further limited the production of virgin HCFC refrigerants and additional federal regulations were enacted which imposed further



limitations on the use, production and importation of virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out by the year 2020 and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030. The

## Page 5

limitations imposed by and under the Act may limit supplies of virgin refrigerants for the foreseeable future or cause a significant increase in the price of virgin HCFC refrigerants. To the extent the Company is unable to source sufficient quantities of virgin or reclaimable refrigerants in the future, or resell refrigerants at a profit, the Company's financial condition and results of operations would be materially adversely affected.

## Customers

The Company provides its services to commercial, industrial and governmental customers, as well as to refrigerant wholesalers, distributors, contractors and to refrigeration equipment manufacturers. Agreements with larger customers generally provide for standardized pricing for specified services.

For the years ended December 31, 2009 and 2008, no one customer accounted for more than 10% of the Company's revenues.

## Marketing

Marketing programs are conducted through the efforts of the Company's executive officers, Company sales personnel, and third parties. Hudson employs various marketing methods, including direct mailings, technical bulletins, in-person solicitation, print advertising, response to quotation requests and the internet through the Company's website (www.hudsontech.com). Information in the Company's website is not part of this report.

The Company’s sales personnel are compensated on a combination of a base salary and commission. The Company’s executive officers devote significant time and effort to customer relationships.

## Competition

The Company competes primarily on the basis of the performance of its proprietary high volume, high-speed equipment used in its operations, the breadth of services offered by the Company, including proprietary RefrigerantSide \( ^{\circledR} \)  Services and other on-site services, and price, particularly with respect to refrigerant sales.

The Company competes with numerous regional and national companies that market reclaimed and virgin refrigerants and provide refrigerant reclamation services. Certain of these competitors possess greater financial, marketing, distribution and other resources for the sale and distribution of refrigerants than the Company and, in some instances, serve a more extensive geographic area than the Company.

Hudson's RefrigerantSide \( ^{\circledR} \)  Services provide new and innovative solutions to certain problems within the refrigeration industry and, as such, the demand and market acceptance for these services are subject to uncertainty. Competition for these services primarily consists of traditional methods of solving the industry's problems. The Company's marketing strategy is to educate the marketplace that its alternative solutions are available and that RefrigerantSide \( ^{\circledR} \)  Services are superior to traditional methods. The market acceptance for these services is subject to uncertainty.

## Insurance

The Company carries insurance coverage that it considers sufficient to protect the Company's assets and operations. The Company currently maintains general commercial liability insurance and excess liability coverage for claims up to $7,000,000 per occurrence and $8,000,000 in the aggregate. The Company attempts to operate in a professional and prudent manner and to reduce potential liability risks through specific risk management efforts, including ongoing employee training.

The refrigerant industry involves potentially significant risks of statutory and common law liability for environmental damage and personal injury. The Company, and in certain instances, its officers, directors and employees, may be subject to claims arising from the Company's on-site or off-site services, including the improper release, spillage, misuse or mishandling of refrigerants classified as hazardous or non-hazardous substances or materials. The Company may be held strictly liable for damages, which could be substantial, regardless of whether it exercised due care and complied with all relevant laws and regulations.

Hudson maintains environmental impairment insurance of $7,000,000 per occurrence, and $8,000,000 annual aggregate, for events occurring subsequent to November 1996.

## Government Regulation

The business of refrigerant sales, reclamation and management is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the United States Occupational Safety and Health Administration and the United States Department of Transportation.

## Page 6

Among other things, these regulatory authorities impose requirements which regulate the handling, packaging, labeling, transportation and disposal of hazardous and non-hazardous materials and the health and safety of workers, and require the Company and, in certain instances, its employees, to obtain and maintain licenses in connection with its operations. This extensive regulatory framework imposes significant compliance burdens and risks on the Company.

Hudson and its customers are subject to the requirements of the Act, and the regulations promulgated thereunder by the EPA, which make it unlawful for any person in the course of maintaining, servicing, repairing, and disposing of air conditioning or refrigeration equipment, to knowingly vent or otherwise release or dispose of ozone depleting substances, and non-ozone depleting substitutes, used as refrigerants.

Pursuant to the Act, reclaimed refrigerant must satisfy the same purity standards as newly manufactured, virgin, refrigerants in accordance with standards established by ARl prior to resale to a person other than the owner of the equipment from which it was recovered. The EPA administers a certification program pursuant to which applicants certify to reclaim refrigerants in compliance with ARl standards. The Company is one of only



three certified refrigerant testing laboratories under ARI's laboratory certification program, which is a voluntary program that certifies the ability of a laboratory to test refrigerant in accordance with the ARI 700 standard.

In addition, the EPA has established a mandatory certification program for air conditioning and refrigeration technicians. Hudson's technicians have applied for or obtained such certification.

The Company may also be subject to regulations adopted by the EPA which impose certain reporting requirements arising out of the production, use and/or emissions of certain greenhouse gases, including HFC's.

The Company is also subject to regulations adopted by the United States Department of Transportation which classify most refrigerants handled by the Company as hazardous materials or substances and imposes requirements for handling, packaging, labeling and transporting refrigerants and which regulate the use and operation of the Company's commercial motor vehicles used in the Company's business.

The Resource Conservation and Recovery Act of 1976, as amended ("RCRA") requires facilities that treat, store or dispose of hazardous wastes to comply with certain operating standards. Before transportation and disposal of hazardous wastes off-site, generators of such waste must package and label their shipments consistent with detailed regulations and prepare a manifest identifying the material and stating its destination. The transporter must deliver the hazardous waste in accordance with the manifest to a facility with an appropriate RCRA permit. Under RCRA, impurities removed from refrigerants consisting of oils mixed with water and other contaminants are not presumed to be hazardous waste.

The Emergency Planning and Community Right-to-Know Act of 1986, as amended requires the annual reporting by the Company of Emergency and Hazardous Chemical Inventories (Tier II reports) to the various states in which the Company operates and requires the Company to file annual Toxic Chemical Release Inventory Forms with the EPA.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), establishes liability for clean-up costs and environmental damages to current and former facility owners and operators, as well as persons who transport or arrange for transportation of hazardous substances. Almost all states have similar statutes regulating the handling and storage of hazardous substances, hazardous wastes and non-hazardous wastes. Many such statutes impose requirements that are more stringent than their federal counterparts. The Company could be subject to substantial liability under these statutes to private parties and government entities, in some instances without any fault, for fines, remediation costs and environmental damage, as a result of the mishandling, release, or existence of any hazardous substances at any of its facilities.

The Occupational Safety and Health Act of 1970, as amended mandates requirements for a safe work place for employees and special procedures and measures for the handling of certain hazardous and toxic substances. State laws, in certain circumstances, mandate additional measures for facilities handling specified materials.

The Company believes that it is in compliance with all material regulations relating to its material business operations.

## Quality Assurance & Environmental Compliance

The Company utilizes in-house quality and regulatory compliance control procedures. Hudson maintains its own analytical testing laboratory, which is ARI certified, to assure that reclaimed refrigerants comply with ARI purity standards and employs portable testing equipment when performing on-site services to verify certain quality specifications. The Company employs four persons engaged full-time in quality control and to monitor the Company's operations for regulatory compliance.

## Page 7

## Employees

The Company has 72 full and 3 part time employees including air conditioning and refrigeration technicians, chemists, engineers, sales and administrative personnel.

None of the Company's employees are represented by a union. The Company believes that its employee relations are good.

## Patents and Proprietary Information

The Company holds a United States patent and eight foreign patents covering seventeen foreign countries and has patent applications pending in two other foreign countries all relating to the high-speed equipment, components and process to reclaim refrigerants. The Company also holds a registered trademark for its Zugibeast \( ^{®} \) . The United States patent expires in January 2012 and the foreign patents will expire between May 2014 and December 2014. The Company also holds several U.S. and foreign patents related to certain RefrigerantSide \( ^{®} \)  Services developed by the Company as well as for certain processes to measure and improve the efficiency of refrigeration systems. These patents will expire between February 2017 and December 2020.

The Company believes that patent protection is important to its business. There can be no assurance as to the breadth or degree of protection that patents may afford the Company, that any patent applications will result in issued patents or that patents will not be circumvented or invalidated. Technological development in the refrigerant industry may result in extensive patent filings and a rapid rate of issuance of new patents. Although the Company believes that its existing patents and the Company's equipment do not and will not infringe upon existing patents or violate proprietary rights of others, it is possible that the Company's existing patent rights may not be valid or that infringement of existing or future patents or violations of proprietary rights of others may occur. In the event the Company's equipment or processes infringe, or are alleged to infringe, patents or other proprietary rights of others, the Company may be required to modify the design of its equipment or processes, obtain a license or defend a possible patent infringement action. There can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action or that the Company will not become liable for damages.

The Company also relies on trade secrets and proprietary know-how, and employs various methods to protect its technology. However, such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company's know-how, concepts, ideas and documentation. Failure to protect its trade secrets could have a material adverse effect on the Company.



## Item 1A. Risk Factors

There are many important factors that have affected, and in the future could affect Hudson's business including, but not limited to, the factors discussed below, which should be reviewed carefully together with the other information contained in this report. Some of the factors are beyond Hudson's control and future trends are difficult to predict.

## Our existing and future debt obligations could impair our liquidity and financial condition.

Our existing credit facility, which currently expires in June 2011, is secured by substantially all of our assets and contains formulas that limit the amount of our borrowings under the facility. Moreover, the terms of our credit facility also include negative covenants that, among other things, may limit our ability to incur additional indebtedness. If we violate any of these loan covenants our indebtedness under the credit facility would become immediately due and payable, and the bank could foreclose on its security, which could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

## We may need additional financing to satisfy our future capital requirements, which may not be readily available to us.

Our capital requirements have been and may be significant in the future. In the future, we may incur additional expenses in the development and implementation of our operations. Due to fluctuations in the price, demand and availability of new refrigerants, our existing credit facility that expires in June 2011 may not in the future be sufficient to provide all of the capital that we need to acquire and manage our inventories of new refrigerant. As a result, we may be required to seek additional equity or debt financing in order to develop our RefrigerantSide \( ^{\circledR} \)  Services business our refrigerant sales business and our other businesses. We have no current arrangements with respect to, or sources of, additional financing other than our existing credit facility. There can be no assurance that we will be able to renew this credit facility or obtain any additional financing on terms acceptable to us or at all. Our inability to obtain financing, if and when needed, could materially adversely affect our business and future financial condition and could require us to curtail or otherwise cease our existing operations.

## Page 8

## The current economic downturn could cause a severe disruption in our operations.

Our business could be negatively impacted by the current economic downturn. If this downturn is prolonged or worsens, there could be several severely negative implications to our business that may exacerbate many of the risk factors we identified in this report but not limited, to the following:

## Liquidity

The economic downturn and the associated credit crisis could continue or worsen and reduce liquidity and this could have a negative impact on financial institutions and the global financial system, which could, in turn, have a negative impact on us.

We may not be able to borrow additional funds under any existing credit facility or may not be able to expand our borrowings under any existing facility if participating lenders become insolvent or their liquidity is limited or impaired. In addition, we may not be able to renew our existing credit facility at the conclusion of its current term.

## Demand

The economic downturn has resulted in severe job losses and lower business to business and consumer confidence, which could cause a decrease in demand and/or price for our product and services.

## The nature of our business exposes us to potential liability.

The refrigerant recovery and reclamation industry involves potentially significant risks of statutory and common law liability for environmental damage and personal injury. We, and in certain instances, our officers, directors and employees, may be subject to claims arising from our on-site or off-site services, including the improper release, spillage, misuse or mishandling of refrigerants classified as hazardous or non-hazardous substances or materials. We may be strictly liable for damages, which could be substantial, regardless of whether we exercised due care and complied with all relevant laws and regulations. Our current insurance coverage may not be sufficient to cover potential claims, and adequate levels of insurance coverage may not be available in the future at a reasonable cost. A partially or completely uninsured claim against us, if successful and of sufficient magnitude would have a material adverse effect on our business and financial condition.

## Our business and financial condition is substantially dependent on the sale and continued environmental regulation of refrigerants.

Our business and prospects are largely dependent upon continued regulation of the use and disposition of refrigerants. Changes in government regulations relating to the emission of refrigerants into the atmosphere could have a material adverse effect on us. Failure by government authorities to otherwise continue to enforce existing regulations or significant relaxation of regulatory requirements could also adversely affect demand for our services and products.

## Our business is subject to significant regulatory compliance burdens.

The refrigerant reclamation and management business is subject to extensive, stringent and frequently changing federal, state and local laws and substantial regulation under these laws by governmental agencies, including the EPA, the United States Occupational Safety and Health Administration and the United States Department of Transportation. Although we believe that we are in substantial compliance with all material regulations relating to our material business operations, amendments to existing statutes and regulations or adoption of new statutes and regulations which affect the marketing and sale of refrigerant could require us to continually alter our methods of operation and/or discontinue the sale of certain of our products resulting in costs to us that could be substantial. We may not be able, for financial or other reasons, to comply with applicable laws, regulations and permit requirements, particularly as we seek to enter into new geographic markets. Our failure to comply with applicable laws, rules or regulations or permit requirements could subject us to civil remedies, including substantial fines, penalties and



injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition.

## As a result of competition, and the strength of some of our competitors in the market, we may not be able to compete effectively.

The markets for our services and products are highly competitive. We compete with numerous regional and national companies which provide refrigerant recovery and reclamation services, as well as companies which market and deal in new and reclaimed alternative refrigerants, including certain of our suppliers, some of which possess greater financial, marketing, personnel and other resources than us. We also compete with numerous manufacturers of refrigerant recovery and reclamation equipment. Certain of these competitors have established reputations for success in the service of air conditioning and refrigeration systems. We may not be able to compete successfully, particularly as we seek to enter into new markets.

## Page 9

A number of factors could negatively impact the price and/or availability of refrigerants, which would, in turn, adversely affect our business and financial condition.

Refrigerant sales continue to represent a significant portion of our revenues. Therefore, our business is substantially dependent on the availability of both new and used refrigerants in large quantities, which may be affected by several factors including commercial production and consumption limitations imposed by the Act and legislative limitations and ban on HCFC refrigerants; the ban on production of CFC based refrigerants under the Act; the proposed legislation which, if enacted, could impose limitations on production and consumption of HFC refrigerants; introduction of new refrigerants and air conditioning and refrigeration equipment; price competition resulting from additional market entrants; and changes in government regulation on the use and production of refrigerants. We do not maintain firm agreements with any of our suppliers of refrigerants. Sufficient amounts of new and/or used refrigerants may not be available to us in the future, or may not be available on commercially reasonable terms. Additionally, we may be subject to price fluctuations, periodic delays or shortages of new and/or used refrigerants. Our failure to obtain and resell sufficient quantities of virgin refrigerants, or to obtain, reclaim and resell sufficient quantities of used refrigerants would have a material adverse effect on our operating margins and results of operations.

## Adverse weather conditions could adversely impact our financial results.

Weather is a significant factor in determining market demand for the refrigerants sold by us, and to a lesser extent, our RefrigerantSide \( ^{®} \)  Services. Unusually cooler temperatures in the spring and summer in the markets served by us, tends to depress demand for, and price of, refrigerants we sell. Protracted periods of cooler than normal spring and summer weather could result in a substantial reduction in our sales which could adversely affect our financial position as well as our results of operations.

## Issues relating to potential climate change could have an impact on our business.

Refrigerants are considered to be strong greenhouse gases that are believed to contribute to global warming and are now subject to various state and federal regulations relating to the production, importation and emissions of refrigerants. In addition, federal legislation has been proposed that, if enacted, would impose limitations on the production and importation of certain virgin HFC refrigerants and current and future climate change or related legislation and/or regulations, may impose additional compliance burdens on us and on our customers and suppliers which could potentially result in increase administrative costs, decreased demand in the marketplace for our products, and/or increased costs for our supplies and products.

## The loss of key management personnel would adversely impact our business.

Our success is largely dependent upon the efforts of our Chief Executive Officer and Chairman. The loss of his services would have a material adverse effect on our business and prospects.

We have the ability to designate and issue preferred stock, which may have rights, preferences and privileges greater than Hudson's common stock and which could impede a subsequent change in control of us.

Our Certificate of Incorporation authorizes our Board of Directors to issue up to 5,000,000 shares of "blank check" preferred stock and to fix the rights, preferences, privileges and restrictions, including voting rights, of these shares, without further shareholder approval. The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of holders of any additional preferred stock that may be issued by us in the future. Our ability to issue preferred stock without shareholder approval could have the effect of making it more difficult for a third party to acquire a majority of its voting stock, thereby delaying, deferring or preventing a change in control of us.

If our common stock were delisted from NASDAQ it would be subject to "penny stock" rules which could negatively impact its liquidity and our shareholders' ability to sell their shares.

Our common stock is currently listed on the NASDAQ Capital Market. We must comply with numerous NASDAQ MarketPlace rules in order to continue the listing of our common stock on NASDAQ. There can be no assurance that we can continue to meet the rules required to maintain the NASDAQ listing of our common stock. If we are unable to maintain our listing on NASDAQ, the market liquidity of our common stock may be severely limited.

## Our management effectively control our affairs.

Currently, our officers and directors collectively own approximately 36% of our outstanding common stock. Accordingly, our officers and directors are in a position to significantly effect, and potentially fully control us and the election of our directors. There is no provision for cumulative voting for our directors.



## Item 1B. Unresolved Staff Comments

## Not Applicable

## Item 2. Properties

The Company’s Auburn, Washington depot facility is located in a 3,000 square foot building leased from an unaffiliated third party at an annual rental of $25,000 pursuant to month to month rental agreement.

The Company’s Baton Rouge, Louisiana depot facility is located in a 3,600 square foot building leased from an unaffiliated third party at an annual rental of $27,000 pursuant in an agreement expiring in October 2010.

The Company’s Champaign, Illinois facility is located in a 48,000 square foot building, which was purchased by the Company in May 2005 for $999,999. The Company has financed the purchase with a 15 year amortizing loan in the amount of $945,000 with a balloon payment due on June 1, 2012. As of December 31, 2009, the Company has outstanding $759,000 under its mortgage and the annual real estate taxes on this facility are approximately $35,000.

The Company has established a second facility in Champaign, Illinois, which is located in a 60,000 square foot building. The building is leased from an unaffiliated third party at an annual rental of $241,000, pursuant to an arrangement expiring in December 2011.

The Company’s Charlotte, North Carolina depot facility is located in an 8,500 square foot building leased from an unaffiliated third party at an annual rental of $58,000 pursuant to an agreement expiring in January 2013.

The Company’s Orangeburg, New York depot facility is located in an 18,000 square foot building leased from an unaffiliated third party at an annual rental of $179,000 pursuant to an agreement expiring in June 2011.

The Company’s headquarters are located in a 4,400 square foot building in Pearl River, New York. The building is leased from an unaffiliated third party at an annual rental of $107,000 pursuant to an agreement expiring in March 2013.

The Company’s Pottsboro, Texas telemarketing facility is located in a 1,350 square foot building leased from an unaffiliated third party at an annual rental of $18,000 pursuant to an agreement expiring in August 2011.

The Company’s Hampstead, New Hampshire telemarketing facility is located in a 1,600 square foot building leased from an unaffiliated third party at an annual rental of $21,000 pursuant to an agreement expiring in August 2010.

In addition to the above leases, the Company from time to time utilizes public warehouse space on a month to month basis. The Company typically enters into short-term leases for its facilities and whenever possible extends the expiration date of such leases. The Company believes that its insurance policies are adequate to protect the Company's property.

## Item 3. Legal Proceedings

On April 1, 1999, the Company reported a release of approximately 7,800 lbs. of R-11 refrigerant (the "1999 Release"), at its former leased facility in Hillburn, NY (the "Hillburn Facility"), which the Company vacated in June 2006. A failed hose connection to one of the Company's outdoor storage tanks allowed liquid R-11 refrigerant ("R-11") to discharge from the tank into the concrete secondary containment area in which the subject tank was located.

Between April 1999 and May 1999, with the approval of the New York State Department of Environmental Conservation ("DEC"), the Company constructed and put into operation a remediation system to remove R-11 levels in the groundwater under and around the Hillburn Facility.

In September 2000, the Company signed an Order on Consent with the DEC, which was amended in May 2001, whereby the Company agreed to operate the remediation system and perform monthly testing at the Hillburn Facility until remaining groundwater contamination has been effectively abated. In July 2005, the DEC approved a modification of the Order on Consent to reduce the frequency of testing from monthly to quarterly. The Company is continuing to operate the remediation system pursuant to the approved modifications to that Order on Consent and, as of December 31, 2009, the Company has accrued, as an expense in its consolidated financial statements, the costs that the Company believes it will incur in connection with its compliance with the Order on Consent through December 31, 2011. There can be no assurance that additional testing will not be required or that the Company will not incur additional costs, and such costs in excess of the Company's estimate may have a material adverse effect on the Company financial condition or results of operations.

In May 2000, the Hillburn Facility, as a result of the 1999 Release, was nominated by the EPA for listing on the National Priorities List ("NPL") pursuant to CERCLA. The Company submitted opposition to the listing within the sixty-day comment period. In

## Page 11

September 2003, the EPA advised the Company that it has no current plans to finalize the process for listing of the Hillburn Facility on the NPL and that the EPA will not withdraw the proposal for listing on the NPL.

In October 2001, the Company learned that trace levels of R-11 were detected in one of the wells operated by United Water of New York, Inc. ("United") that is in the closest proximity to the Village of Suffern's ("Village") well system. No contamination of R-11 has ever been detected in any of the Village's wells and, since October 2002, the level of R-11 in the United well closest to the Village has been below 1 ppb. In September 2004, the Village advised that it intends to continue performing additional sampling of its wells at a cost of approximately $5,000 per year and the Company has reimbursed the Village for sampling costs through September 2005.

The Company has exhausted all insurance proceeds available for the 1999 Release under all applicable policies.

During the years ended December 31, 2009 and 2008, the Company incurred $76,000 and $34,000, respectively, in additional remediation costs in connection with the matters above. There can be no assurance that the 1999 Release will not impact the Village wells, or that the ultimate outcome of the 1999 Release will not have a material adverse effect on the Company's financial condition and results of operations. There can be no assurance that the EPA will not change its current plans and seek to finalize the process of listing the Hillburn Facility on the NPL, or that the



ultimate outcome of such a listing will not have a material adverse effect on the Company's financial condition and results of operations.

Item 4. [Reserved]

## Page 12

## Part II

## Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company's common stock trades on the NASDAQ Capital Market under the symbol "HDSN". The following table sets forth, for the periods indicated, the range of the high and low sale prices for the Common stock as reported by NASDAQ.

<table><tr><td></td><td>High</td><td>Low</td></tr><tr><td>2008</td><td></td><td></td></tr><tr><td>First Quarter</td><td>$ 1.61</td><td>$ 0.87</td></tr><tr><td>Second Quarter</td><td>$ 3.66</td><td>$ 1.32</td></tr><tr><td>Third Quarter</td><td>$ 3.33</td><td>$ 1.32</td></tr><tr><td>Fourth Quarter</td><td>$ 1.54</td><td>$ 0.75</td></tr><tr><td></td><td></td><td></td></tr><tr><td>2009</td><td></td><td></td></tr><tr><td>First Quarter</td><td>$ 1.75</td><td>$ 1.16</td></tr><tr><td>Second Quarter</td><td>$ 1.96</td><td>$ 1.21</td></tr><tr><td>Third Quarter</td><td>$ 1.43</td><td>$ 0.94</td></tr><tr><td>Fourth Quarter</td><td>$ 1.60</td><td>$ 1.01</td></tr></table>

The number of record holders of the Company's common stock was approximately 175 as of February 26, 2010. The Company believes that there are in excess of 2,500 beneficial owners of its common stock.

To date, the Company has not declared or paid any cash dividends on its common stock. The payment of dividends, if any, in the future is within the discretion of the Board of Directors and will depend upon the Company's earnings, its capital requirements and financial condition, borrowing covenants, and other relevant factors. The Company presently intends to retain all earnings, if any, to finance the Company's operations and development of its business and does not expect to declare or pay any cash dividends on its Common stock in the foreseeable future. In addition, the Company has a credit facility with Keltic Financial Partners, LLP ("Keltic") that, among other things, restricts the Company's ability to declare or pay any cash dividends on its capital stock.

See Item 12 for certain information with respect to the Company's equity compensation plans as of December 31, 2009.

## Item 6. Selected Financial Data

Not applicable

## Page 13

## Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

## Safe Harbor Statement Under The Private Securities Litigation Reform Act of 1995

Certain statements contained in this section and elsewhere in this Form 10-K constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, changes in the demand and price for refrigerants (including unfavorable market conditions adversely affecting the demand for, and the price of refrigerants), the Company's ability to source CFC and non-CFC based refrigerants, regulatory and economic factors, seasonality, competition, litigation, the nature of supplier or customer arrangements that become available to the Company in the future, adverse weather conditions, possible technological obsolescence of existing products and services, possible reduction in the carrying value of long-lived assets, estimates of the useful life of its assets, potential environmental liability, customer concentration, the ability to obtain financing, and other risks detailed in this report and in the Company's other periodic reports filed with the Securities and Exchange Commission ("SEC"). The words "believe", "expect", "anticipate", "may", "plan", "should" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

## Critical Accounting Policies

The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Several of the Company's accounting policies involve significant judgments, uncertainties and estimations. The Company bases its estimates on historical experience and on various other assumptions that are believed to



be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, valuation allowance for the deferred tax assets relating to its net operating loss carryforwards ("NOL's") and commitments and contingencies. With respect to accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company's valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future. The Company utilizes both internal and external sources to evaluate potential current and future liabilities for various commitments and contingencies. In the event that the assumptions or conditions change in the future, the estimates could differ from the original estimates.

## Overview

Sales of refrigerants continue to represent a significant portion of the Company's revenues. The Company's refrigerant sales are primarily HCFC and HFC based refrigerants and to a lesser extent CFC base refrigerants that are no longer manufactured. Under the Act, in 2010, future production of certain virgin HCFC refrigerants are scheduled to be phased out by the year 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030. To the extent that the Company is unable to source refrigerants on commercially reasonable terms or at all, or the demand for refrigerants decreases, the Company's financial condition and results of operations could be materially adversely affected.

The Company has created and developed a service offering known as RefrigerantSide \( ^{\circledR} \)  Services. RefrigerantSide \( ^{\circledR} \)  Services are sold to contractors and end-users whose refrigeration systems are used in commercial air conditioning and industrial processing. These services are offered in addition to refrigerant sales and the Company's traditional refrigerant management services, which consist primarily of reclamation of refrigerants. The Company has created a network of service depots that provide a full range of the Company's RefrigerantSide \( ^{\circledR} \)  Services to facilitate the growth and development of its service offerings.

The Company focuses its sales and marketing efforts for its RefrigerantSide \( ^{\circledR} \)  Services on customers who the Company believes most readily appreciate and understand the value that is provided by its RefrigerantSide \( ^{\circledR} \)  Services offering. In pursuing its sales and marketing strategy, the Company offers its RefrigerantSide \( ^{\circledR} \)  Services to customers in the following industries; petrochemical, pharmaceutical, industrial power, manufacturing, commercial facility and property management and maritime. In addition, the Company has expanded its service offering outside of the United States through a strategic alliance with The Linde Group. The Company may incur additional expenses as it develops its RefrigerantSide \( ^{\circledR} \)  Services offering.

## Page 14

## Results of Operations

Year ended December 31, 2009 as compared to the year ended December 31, 2008

Revenues for the fiscal year ended December 31, 2009 were $24,167,000, a decrease of $9,000,000 or 27% from the $33,167,000 reported during the comparable 2008 period. The decrease in revenues was primarily attributable to a decrease in refrigerant revenues of $8,503,000 and a decrease in RefrigerantSide \( ^{\circledR} \)  Services revenues of $497,000. The decrease in refrigerant revenues is primarily related to a decrease in the number of pounds of certain refrigerants sold. The decrease in RefrigerantSide \( ^{\circledR} \)  Services was attributable to a decrease in the numbers of jobs completed when compared to the same period of 2008. The Company believes that the decrease in 2009 volumes of refrigerants sold and the number of RefrigerantSide \( ^{\circledR} \)  Service jobs performed were attributed to the overall poor economy and unseasonably cool weather in the 2009 year.

Cost of sales for fiscal year ended December 31, 2009 was $20,356,000, a decrease of $1,501,000 or 7% from the $21,857,000 reported during the comparable 2008 period. The decrease in cost of sales was primarily due to the decrease in the number of pounds of refrigerant sold. As a percentage of sales, cost of sales was 84% of revenues for 2009, an increase from the 66% reported for the comparable 2008 period. The increase in cost of sales as a percentage of revenues was primarily attributable to an increase in the Company's cost of and reserves established for refrigerants it sold.

Operating expenses for the fiscal year ended December 31, 2009 were $5,025,000 a decrease of $869,000 or 15% from the $5,894,000 reported during the comparable 2008 period. The decrease in operating expenses was primarily related to decreased payroll expenses, which was due to certain reductions in officer and other employee compensation, elimination of positions and to a lesser extent a reduction in professional fees.

Other income (expense) for fiscal year ended December 31, 2009 was $(1,400,000), compared to the ($1,167,000) reported during the comparable 2008 period. Other income (expense) includes interest expense of $1,401,000 and $1,170,000 for the comparable 2009 and 2008 periods, respectively. The increase in interest expense is primarily attributed to an increase in outstanding indebtedness.

Income tax benefit for the fiscal ended December 31, 2009 and 2008 was $119,000 and $2,420,000, respectively. The tax benefits associated with the Company's NOL's are recognized to the extent that the Company is expected to recognize taxable income in future periods. The Company's NOL's are subject to annual limitations and the Company expects to incur certain state and/or federal alternative minimum taxes for the foreseeable future.

Net loss for the fiscal year ended December 31, 2009 was $(2,495,000) compared to net income of $6,669,000 reported during the comparable 2008 period. The net loss in the 2009 period was primarily due to a decrease in gross profit from refrigerant revenues and an increase in interest expense, partially offset by a decrease in payroll expense and professional fees and, in 2008, the Company recognized a $2,420,000 income tax benefit.

## Liquidity and Capital Resources

At December 31, 2009, the Company had working capital, which represents current assets less current liabilities, of $9,369,000 a decrease of $1,730,000 from the working capital of $11,099,000 at December 31, 2008. The decrease in working capital is primarily attributable to the net loss during the 2009 period as well as a reduction in long-term debt and an increase in property, plant and equipment.



Inventory and trade receivables are principal components of current assets. At December 31, 2009, the Company had inventories of $16,410,000 a decrease of $7,203,000 from the $23,613,000 at December 31, 2008. The decrease in the inventory balance is due to the timing and availability of inventory purchases and the sale of refrigerants. The Company's ability to sell and replace its inventory on a timely basis and the prices at which it can be sold are subject, among other things, to current market conditions and the nature of supplier or customer arrangements and the Company's ability to source CFC based refrigerants, which are no longer being manufactured, or non-CFC based refrigerants. At December 31, 2009, the Company had trade receivables, net of allowance for doubtful accounts of $1,594,000 a decrease of $137,000 from the $1,731,000 at December 31, 2008. The Company's trade receivables are concentrated with various wholesalers, brokers, contractors and end-users within the refrigeration industry that are primarily located in the continental United States.

The Company has historically financed its working capital requirements through cash flows from operations, the issuance of debt and equity securities, and bank borrowings.

Net cash provided by operating activities for the fiscal year ended December 31, 2009, was $3,360,000 compared with net cash used by operating activities of $4,389,000 for the comparable 2008 period. Net cash provided by operating activities for the 2009 period was primarily attributable to a decrease in inventory, offset by a decrease in accounts payable and accrued expenses and the net loss.

## Page 15

Net cash used by investing activities for fiscal year ended December 31, 2009, was $430,000 compared with net cash used by investing activities of $593,000 for the comparable 2008 period. The net cash used by investing activities for the 2009 period was primarily related to investment in general purpose equipment for the Company's Champaign, Illinois facility.

Net cash used by financing activities for the fiscal year ended December 31, 2009, was $2,845,000 compared with net cash provided by financing activities of $4,913,000 for the comparable 2008 period. The net cash used by financing activities for the 2009 period was due to repayments under the Company's revolving line of credit and repayments of long term debt, offset by proceeds from the issuance of common stock.

At December 31, 2009, the Company had cash and cash equivalents of $299,000. The Company continues to assess its capital expenditure needs. The Company may, to the extent necessary, continue to utilize its cash balances to purchase equipment primarily for its operations. The Company estimates that the total capital expenditures for 2010 will be approximately $600,000.

The following is a summary of the Company's significant contractual cash obligations for the periods indicated that existed as of December 31, 2009 (in 000's):

<table><tr><td colspan="8">Twelve Month Period ended December 31.</td></tr><tr><td></td><td>2010</td><td>2011</td><td>2012</td><td>2013</td><td>2014</td><td>Total</td><td></td></tr><tr><td>Long and short term debt and capital lease obligations (1) &amp; (2)</td><td>$6,132</td><td>$4,013</td><td>$965</td><td>$20</td><td>$6</td><td>$11,136</td><td></td></tr><tr><td>Operating leases</td><td>643</td><td>487</td><td>159</td><td>40</td><td>-</td><td>1,329</td><td></td></tr><tr><td>Total contractual cash obligations</td><td>$6,775</td><td>$4,500</td><td>$1,124</td><td>$60</td><td>$6</td><td>$12,465</td><td></td></tr><tr><td></td><td>====</td><td>====</td><td>====</td><td>====</td><td>===</td><td>====</td><td></td></tr></table>

(1) The contractual cash obligations included in the table includes both principal and estimated interest payments. The estimated interest payments on revolving debt are based primarily on the interest rates in effect and the outstanding revolving debt obligation as of December 31, 2009.

(2) Long and short term debt and capital lease obligations include payment of obligations of outstanding principal amounts of debt as of December 31, 2009 and estimated future interest payments on the outstanding principal amounts under the Company's credit facility which expires on June 20, 2011.

On June 26, 2007, Hudson entered into a credit facility (the "Facility") with Keltic and on April 17, 2008, the Facility was amended to secure the participation of Bridge Healthcare Financial, LLC ("Bridge") and to provide for borrowings of up to $15,000,000. On August 12, 2009, the loan agreement evidencing the Facility was amended to, among other things, restate certain of the Company's financial covenants. On September 23, 2009, Keltic advised the Company that it had acquired all of Bridge's rights under the Facility. The Facility consists of a revolving line of credit and two term loans, which expires on June 20, 2011. Advances under the revolving line of credit are limited to (i) 85% of eligible trade accounts receivable and (ii) 55% of eligible inventory. Advances available to Hudson under the A and B term loans may not exceed $2,500,000 and $4,500,000, respectively. At December 31, 2009, the Facility bore interest at 6.5%. Substantially all of Hudson's assets are pledged as collateral for its obligations under the Facility. In addition, among other things, the loan agreement restricts Hudson's ability to declare or pay any cash dividends on its capital stock. As of December 31, 2009, Hudson had $3,300,000 of borrowings outstanding and $3,000,000 available for borrowing under the revolving line of credit. In addition, as of December 31, 2009, Hudson had $4,500,000 of borrowings outstanding under the A and B term loans.

In connection with the April 2008 amendment to the Facility, the Company issued an aggregate of 100,000 five-year common stock purchase warrants exercisable at $1.88 per share. The fair value of the warrants was $74,000 and such amount is amortized over the life of the Facility.

On July 15, 2009, Hudson, obtained a waiver from Keltic with respect to the Facility which, among other things, waived Hudson's violation of the minimum EBITDA covenant as required under the Facility.

On March 20, 2009, the Company borrowed $1,000,000 from a non-affiliate for a period of six months at an interest rate of 10% per annum. The borrowing is subordinated to the Facility. On September 30, 2009, the due date of the loan was extended to June 30, 2010.



On July 31, 2009, Hudson entered into a Placement Agent Agreement with Roth Capital Partners, ("Roth"), engaging Roth to act as placement agent for a registered direct offering under the Company's shelf registration statement to sell, on a best efforts basis, 3,870,000 shares of the Company's common stock at a sale price of $1.15 per share (the "Offering").

## Page 16

A closing of the Offering was held on August 5, 2009, at which time, Hudson sold 1,470,000 shares of its common stock at $1.15 per share and received net proceeds of approximately $1,400,000 and no other closings were completed. As placement agent for the Offering, Roth received $101,000 and a warrant to purchase 73,500 shares of common stock at an exercise price of $1.4375 per share, plus reimbursement of its expenses of $56,000. The estimated fair value of the warrant was approximately $48,000 and such warrant was charged to additional paid in capital as compensation expense to Roth. As of October 1, 2009, the Company discontinued, and ceased pursuing future sales under, the Offering.

In September, 2009, the Company issued an aggregate of 32,173 shares of its common stock to certain vendors and the Company expensed approximately $44,000 as professional fees for these services.

In May 2005, the Company purchased its Champaign, Illinois facility for a total purchase price of $999,999. The Company financed the purchase with a 15 year amortizing loan in the amount of $945,000 with a balloon payment due on June 1, 2012. The note bears interest at 7% for the first five years and then adjusts annually based on prime plus 2%.

In April 2008, the Company purchased approximately five acres of vacant land adjacent to its Champaign, Illinois facility for $300,000. The Company financed the purchase with a 15 year amortizing loan in the amount of $300,000 with a balloon payment due on June 1, 2012. The note bears interest at the fixed rate of 6.7% over the entire term of the note.

The Company believes that it will be able to satisfy its working capital requirements for the foreseeable future from anticipated cash flows from operations and available funds under the Facility. Any unanticipated expenses, including, but not limited to, an increase in the cost of refrigerants purchased by the Company, an increase in operating expenses or failure to achieve expected revenues from the Company's RefrigerantSide \( ^{\circledR} \)  Services and/or refrigerant sales or additional expansion or acquisition costs that may arise in the future or to the extent that the Company does not renew or replace the Facility when it expires would adversely affect the Company's future capital needs. There can be no assurances that the Company's proposed or future plans will be successful, and as such, the Company may require additional capital sooner than anticipated, which capital may not be available.

## Inflation

Inflation has not historically had a material impact on the Company's operations.

## Reliance on Suppliers and Customers

The Company's financial performance and its ability to sell refrigerants is in part dependent on its ability to obtain sufficient quantities of virgin, non-CFC based refrigerants, and of reclaimable CFC and non-CFC based, refrigerants from manufacturers, wholesalers, distributors, bulk gas brokers and from other sources within the air conditioning, refrigeration and automotive aftermarket industries, and on corresponding demand for refrigerants. The Company's refrigerant sales include CFC based refrigerants, which are no longer manufactured. Additionally, the Company's refrigerant sales include non-CFC based refrigerants, including HCFC and HFC refrigerants, which are the most widely used refrigerants. Effective January 1, 1996, the Act limits the production of virgin HCFC refrigerants, which production was further limited in January 2004. Federal regulations enacted in January 2004 also imposed limitations on the importation of certain virgin HCFC refrigerants. In addition, effective January 2010, the Act further limited the production of virgin HCFC refrigerants and additional federal regulations were enacted which imposed further limitations on the use, production and importation of certain virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out by the year 2020 and production of all virgin HCFC refrigerants is scheduled to be phased out by the year 2030. The limitations imposed by and under the Act may limit supplies of virgin refrigerants for the foreseeable future or cause a significant increase in the price of virgin HCFC refrigerants. To the extent the Company is unable to source sufficient quantities of virgin or reclaimable refrigerants in the future, or resell refrigerants at a profit, the Company's financial condition and results of operations would be materially adversely affected.

For the years ended December 31, 2009 and 2008, no one customer accounted for more than 10% of the Company's revenues.

The loss of a principal customer or a decline in the economic prospects of and/or a reduction in purchases of the Company's products or services by any such customer could have a material adverse effect on the Company's financial position and results of operations.

## Seasonality and Weather Conditions and Fluctuations in Operating Results

The Company's operating results vary from period to period as a result of weather conditions, requirements of potential customers, non-recurring refrigerant and service sales, availability and price of refrigerant products (virgin or reclaimable), changes in reclamation technology and regulations, timing in introduction and/or retrofit or replacement of CFC and non CFC based refrigeration equipment, the rate of expansion of the Company's operations, and by other factors. The Company's business is seasonal in nature with peak sales of refrigerants occurring in the first half of each year. During past years, the seasonal decrease in sales of refrigerants has resulted in losses particularly in the fourth quarter of the year. In addition, during 2009, the Company experienced decreases in

## Page 17

sales due, in part, to unseasonably cool weather throughout the spring and summer months, which adversely impacted demand for refrigerants. Delays or inability in securing adequate supplies of refrigerants at peak demand periods, lack of refrigerant demand, increased expenses, declining refrigerant prices and a loss of a principal customer could result in significant losses. There can be no assurance that the foregoing factors will not occur and result in a material adverse effect on the Company's financial position and significant losses. The Company believes that there is a similar seasonal element to RefrigerantSide \( ^{\circledR} \)  Service revenues as refrigerant sales. The Company is continuing to assess its RefrigerantSide \( ^{\circledR} \)  Service revenues seasonal trend.

## Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 168, "The FASB



Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" (SFAS No. 168) (ASC 105-10). SFAS No. 168 replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" and establishes the FASB Accounting Standards Codification ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with generally accepted accounting principles ("GAAP"). Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification has become the exclusive authoritative reference effective September 30, 2009. This Form 10-K includes a dual presentation of the Codification and the former reference.

In September 2006, the FASB issued FASB statement No. 157 ("SFAS No. 157"), (ASC 820-10) "Fair Value Measurements," which establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The FASB agreed to defer the effective date of Statement 157 for one year for non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The adoption of SFAS No. 157 did not have a material impact on the Company's results of operations or its financial position.

In December 2007, the FASB issued Statement No. 141 (revised 2007), "Business Combinations" ("FAS 141r") (ASC 805-10). FAS No. 141r requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies. FAS 141r (ASC 805-10) applies prospectively to business combinations and is effective for fiscal years beginning on or after December 15, 2008. The adoption of FAS 141r did not have a material impact on the Company's results of operations or its financial position.

In June 2008, the Emerging Issues Task Force of the FASB published EITF Issue 07-5 "Determining Whether an Instrument is Indexed to an Entity's Own Stock" ("EITF 07-5") (ASC 815-40) to address concerns regarding the meaning of "indexed to an entity's own stock" contained in FASB Statement 133 (ASC 815-10) "Accounting for Derivative Instruments and Hedging Activities". This related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt. If an instrument is classified as debt, it is valued at fair value, and this value is remeasured on an ongoing basis, with changes recorded in earnings in each reporting period. EITF 07-5 was effective for years beginning after December 15, 2008. Adoption of EITF 07-5 did not have a financial statement impact on the Company.

## Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

## Item 8. Financial Statements and Supplementary Data

The financial statements appear in a separate section of this report following Part IV.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

## Page 18

## Item 9A (T). Controls and Procedures

## Disclosure Controls and Procedures

The Company, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Furthermore, the Company's controls and procedures can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control, and misstatements due to error or fraud may occur and not be detected on a timely basis.

## Management's Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements and the reliability of financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.



Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on our assessment, we believe that, as of December 31, 2009, the Company's internal control over financial reporting is effective based on those criteria.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report on Form 10-K.

## Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting, (as defined in Rule 13a-15(f) of the Exchange Act) in the quarter ended December 31, 2009 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

## Item 9B. Other Information

None

## Page 19

## Part III

## Item 10. Directors, Executive Officers and Corporate Governance

The information presented below provides information each director has given us about his age, all positions he holds, his principal occupation and his business experience for at least the past five years. In addition to the information presented below regarding each nominee's specific experience, qualifications, attributes and skills that led our Board to the conclusion that he should serve as a director, we also believe that all of our directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment to service to the Company and our Board.

The following table sets forth information with respect to the directors and executive officers of the Company:

<table><tr><td>Name</td><td>Age</td><td>Position</td></tr><tr><td>Kevin J. Zugibe</td><td>46</td><td>Chairman of the Board and Chief Executive Officer</td></tr><tr><td>Brian F. Coleman</td><td>48</td><td>President and Chief Operating Officer, Director</td></tr><tr><td>James R. Buscemi</td><td>56</td><td>Chief Financial Officer</td></tr><tr><td>Charles F. Harkins, Jr.</td><td>48</td><td>Vice President Sales</td></tr><tr><td>Stephen P. Mandracchia</td><td>50</td><td>Vice President Legal and Regulatory and Secretary</td></tr><tr><td>Vincent P. Abbatecola</td><td>63</td><td>Director</td></tr><tr><td>Dominic J. Monetta</td><td>68</td><td>Director</td></tr><tr><td>Otto C. Morch</td><td>76</td><td>Director</td></tr></table>

Kevin J. Zugibe, P.E., a founder of the Company, has been Chairman of the Board and Chief Executive Officer of the Company since its inception in 1991. From May 1987 to May 1994, Mr. Zugibe was employed as a power engineer with Orange and Rockland Utilities, Inc., a major public utility, where he was responsible for all HVAC applications. Mr. Zugibe is a licensed professional engineer, and from December 1990 to May 1994, he was a member of Kevin J. Zugibe & Associates, a professional engineering firm. We believe Mr. Zugibe's qualifications to sit on our Board of Directors include his 25 years of experience in the air conditioning and refrigeration industry including as our founder, our Chairman and Chief Executive Officer for 19 years. Mr. Zugibe is the brother-in-law of Stephen P. Mandracchia.

Brian F. Coleman has been a Director of the Company since December 2007, and President and Chief Operating Officer of the Company since August 21, 2001 and served as Chief Financial Officer of the Company from May 1997 until December 2002. From June 1987 to May 1997, Mr. Coleman was employed by, and since July 1995, was a partner with BDO Seidman, LLP, the Company's independent registered public accounting firm. We believe Mr. Coleman's qualifications to sit on our Board of Directors include his prior financial and accounting experience obtained as a partner with BDO Seidman, LLP, his 15 years of experience in the air conditioning and refrigeration industry including as our President and Chief Operating Officer for the past 9 years.

James R. Buscemi has been Chief Financial Officer of the Company since December 2002 and served as Corporate Controller from June 1998 until December 2002. Prior to joining the Company, Mr. Buscemi held various financial positions within Avnet, Inc, including Chief Financial Officer of Avnet's electric motors and component part subsidiary, Brownell Electro, Inc.

Charles F. Harkins, Jr. has been Vice President of Sales of the Company since December 2003. Mr. Harkins has served in a variety of capacities since joining the Company in 1992. Prior to joining the Company, Mr. Harkins served in the U.S. Army for 13 years attaining the rank of Staff Sergeant; he is a graduate of the U.S. Army Engineer School and the U.S. Army Chemical School.

Stephen P. Mandracchia, a founder of the Company, has been Vice President Legal and Regulatory of the Company since August 2003 and has been Secretary of the Company since April 1995. Mr. Mandracchia has served in a variety of capacities with the Company since 1993. Mr. Mandracchia was a member of the law firm of Martin, Vandewalle, Donohue, Mandracchia & McGahan, Great Neck, New York until December 31, 1995 (having been affiliated with such firm since August 1983). Mr. Mandracchia is the brother-in-law of Mr. Zugibe.

Vincent P. Abbatecola has been a Director of the Company since June 1994. Mr. Abbatecola is Vice President of Abbey Ice & Spring Water Company, Spring Valley, New York, where he has been employed since May 1971. He was formerly the Chairman of the International Packaged Ice Association and a trustee of Nyack Hospital. Mr. Abbatecola serves on the Rockland Board of Governors and the St. Thomas Aquinas President's Council. We believe that Mr. Abbatecola's qualifications to sit on our Board include his business experience obtained as Vice President of Abbey Ice and Spring Water Company, his 16 years of experience in the air conditioning and refrigeration industry by virtue of his service on our



Board including as Chairman of the Company's Audit Committee for 16 years.

Dominic J. Monetta, DPA has been a Director of the Company since April 1996. Dr. Monetta has been the President of Resource Alternatives, Inc., a corporate development firm concentrating on solving management and technological issues facing chief executive officers and their senior executives, since August 1993. From December 1991 to May 1993, Dr. Monetta served as the Director of Defense Research and Engineering for Research and Advanced Technology, United States Department of Defense. From June 1989 to December 1991, Dr. Monetta served as the Director of the Office of New Production Reactors, United States Department of Energy. We believe that Mr. Monetta's qualifications to sit on our board include his engineering and other experience obtained as a past director for the US Department of Energy and Defense, his 16 years of experience in the air conditioning and refrigeration industry by virtue of his service on our Board including his membership on the Company's Audit Committee for 3 years.

Otto C. Morch has been a Director of the Company since March 1996. Mr. Morch was a Senior Vice President of Commercial Banking at Provident Savings Bank, F.A. for more than five years until his retirement in December 1997. We believe that Mr. Morch's qualifications to sit on our Board include his financial and other experience obtained as a Senior Vice President at Provident Savings Bank, F.A., his 16 years of experience in the air conditioning and refrigeration industry by virtue of his service on our Board including his membership on the Company's Audit Committee for 16 years.

Hudson has established a Compensation/Stock Option Committee of the Board of Directors, which is responsible for recommending the compensation of our executive officers and for the administration of Hudson's Stock Option Plans. The members of the Committee are Messrs. Abbatecola, Coleman, and Morch.

Hudson has an Audit Committee of the Board of Directors, which supervises the audit and financial procedures of Hudson. The members of the Audit Committee are Messrs. Abbatecola, Monetta and Morch, each of whom is an "independent" director as defined under the rules of NASDAQ. The Audit Committee does not have a member that qualifies as a "financial expert" under the federal securities laws. Each of the members of the Audit Committee has been active in the business community and has broad and diverse backgrounds, and financial experience. Two of the current members have served on Hudson's Audit Committee and have overseen the financial review by Hudson's independent auditors for ten (10) years. Hudson believes that the current members of the Audit Committee are able to fully and faithfully perform the functions of the Audit Committee and that Hudson does not need to install a "financial expert" on the Audit Committee.

The By-laws of Hudson provide that the Board of Directors is divided into two classes. Each class is to have a term of two years, with the term of each class expiring in successive years, and is to consist, as nearly as possible, of one-half of the number of directors constituting the entire Board. The By-laws provide for the number of directors to be fixed by the Board of Directors but in any event, shall be no less than five (5) (subject to decrease by a resolution adopted by the shareholders). At Hudson's August 20, 2009, Annual Meeting of the Shareholders, Messrs. Abbatecola, Coleman and Morch were elected as directors to terms of office that will expire at the Annual Meeting of Shareholders to be held in the year 2011. Messrs. Monetta and Zugibe are currently serving as directors and their terms of office expire at the Annual Meeting of Shareholders to be held in the year 2010.

## Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10 percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater than 10 percent shareholders are required by SEC regulation to furnish Hudson with copies of all Section 16(a) forms they file.

Based solely on Hudson's review of copies of such forms received by Hudson, and on representations made to us, we believe that during the year ended December 31, 2009, all filing requirements applicable to all officers directors and greater than 10% beneficial shareholders were complied with, except for one late filing in connection with a stock option exercise by Mr. Morch.

## Code of Conduct and Ethics

We have adopted a written code of conduct and ethics that applies to all directors, and employees, including Hudson's principal executive officer, principal financial officer, principal accounting officer or controller and any persons performing similar functions. We will provide a copy of its code of ethics to any person without charge upon written request addressed to Hudson Technologies, Inc., One Blue Hill Plaza, PO Box 1541, Pearl River, New York 10965, Attention: Stephen P. Mandracchia.

## Page 21

## Item 11. Executive Compensation

The following table discloses, for the years indicated, the compensation for our Chief Executive Officer and for our two most highly compensated executive officers, other than the Chief Executive Officer, who were serving as executive officers at the end of the year ended December 31, 2009 and whose total compensation during the year ended December 31, 2009 exceeded $100,000 (the "Named Executives").

SUMMARY COMPENSATION TABLE

<table><tr><td>Name and Principal Position</td><td>Year</td><td>Salary (\()</td><td>Bonus (\))</td><td>Stock Awards (\))</td><td>Option Awards (1) (\))</td><td>Non-Equity Incentive Plan Compensation (\))</td><td>Non-qualified Deferred Compensation Earnings (\))</td><td>All Other Compensation (\))</td><td>Total (\))</td></tr></table>



<table><tr><td>Kevin J. Zugibe, Chairman, Chief Executive Officer (3)</td><td>2009</td><td>$189,131</td><td>$--</td><td>$--</td><td>$44,437</td><td>$--</td><td>$--</td><td>$--</td><td>$233,568</td></tr><tr><td>Brian F. Coleman, President, Chief Operating Officer, Director (3)</td><td>2008</td><td>$198,021</td><td>$--</td><td>$--</td><td>$--</td><td>$170,000 (2)</td><td>$--</td><td>$--</td><td>$368,021</td></tr><tr><td>Charles F. Harkins, Jr., Vice President Sales</td><td>2009</td><td>$156,629</td><td>$--</td><td>$--</td><td>$41,018</td><td>$--</td><td>$--</td><td>$--</td><td>$197,643</td></tr><tr><td></td><td>2008</td><td>$164,019</td><td>$--</td><td>$--</td><td>$--</td><td>$150,000 (2)</td><td>$--</td><td>$--</td><td>$314,019</td></tr></table>

(1) We utilize the Black-Sholes method for valuing stock option awards. See Note 10 to the Notes to the Consolidated Financial Statements.

(2) Non-Equity Incentive Plan Compensation was earned in 2008 and paid in 2009.

(3) Messrs. Coleman and Zugibe did not receive any compensation for services as a director during the years ended December 31, 2009 and 2008.

## Narrative Disclosure to Summary Compensation Table

On December 17, 2009, each of the Named Executives received employee stock options to purchase shares of the Company's common stock, which options were issued under one of the Company's existing stock incentive plans. The amount of the options, awarded to each Named Executive was approved by our Board of Directors. See "Stock Option Grants or Stock Awards".

For the fiscal year 2008, each of the Named Executives received Non-Equity Incentive Plan Compensation that was paid out of a bonus pool established by our Board of Directors on January 8, 2008. The amount of the bonus pool was not initially established, but was based upon our achieving earnings for the fiscal year 2008 in excess of a pre-determined level for fiscal year 2008, with a maximum bonus pool of $400,000. On February 26, 2009 our Board of Directors increased the fiscal year 2008 cash bonus pool and approved the payment of Non-Equity Incentive Plan Compensation to the Named Executives. The amount of the Non-Equity Incentive Plan Compensation awarded to each Named Executive was determined in the discretion of our Board of Directors based upon our overall 2008 financial results as well as on the personal performance of the Named Executive during 2008.

## Employment, Termination, Change of Control and other Agreements

Kevin J. Zugibe. On October 10, 2006, we entered into an Amended and Restated Employment Agreement with Kevin J. Zugibe, which currently expires in October 2010 and is automatically renewable for successive two year terms unless either party gives notice of termination at least ninety days prior to the expiration date of the then current term. Pursuant to the agreement, as amended by the First Amendment to Restated Employment Agreement dated December 29, 2008, Mr. Zugibe is receiving an annual base salary of $192,800 with such increases and bonuses as our Board of Directors may determine. The agreement provides, in the event of Mr. Zugibe's disability, for the continuation of at least 75% of Mr. Zugibe's salary for up to one hundred twenty days after the commencement of his disability. Mr. Zugibe is also entitled to take up to four weeks of vacation, excluding paid holidays.

## Page 22

As part of the agreement, Mr. Zugibe has agreed to certain covenants and restrictions, which include an agreement that Mr. Zugibe will not compete with us in specified geographic areas for a period of twenty-four months after his termination for any reason. The agreement also provides that, in the event of his involuntary separation from Hudson without cause, or in the event of his voluntary separation for a good reason as enumerated in the agreement, Mr. Zugibe will receive severance payments, in the form of the continuation of his annual base salary and benefits for a period of twenty-four months, and a lump sum payment equivalent to the highest bonus paid to Mr. Zugibe in the three years prior to his termination, pro-rated to the date of his termination. We are the beneficiary of a "key-man" insurance policy on the life of Mr. Zugibe in the amount of $1,000,000.

Brian F. Coleman. On October 10, 2006, we entered into an agreement with Brian F. Coleman, pursuant to which, as amended, Mr. Coleman has agreed to certain covenants and restrictions, which include an agreement that Mr. Coleman will not compete with us in specified geographic areas for a period of eighteen months after his termination for any reason. The agreement provides, in the event of his disability, for the continuation of at least 75% of his salary for up to one hundred twenty days after the commencement of his disability. The agreement also provides that, in the event of his involuntary separation without cause, or in the event of his voluntary separation for a good reason as enumerated in the agreement, Mr. Coleman will receive severance payments, in the form of the continuation of his annual base salary and benefits for a period of eighteen months, and a lump sum payment equivalent to the highest bonus paid to him in the three years prior to his termination, pro-rated to the date of his termination.

Charles F. Harkins. On October 10, 2006, we entered into an agreement with Charles F. Harkins, pursuant to which, as amended, Mr. Harkins has agreed to certain covenants and restrictions, which include an agreement that Mr. Harkins will not compete with us in specified geographic areas for a period of eighteen months after his termination for any reason. The agreement provides, in the event of his disability, for the continuation of at least 75% of his salary for up to one hundred twenty days after the commencement of his disability. The agreement also provides that in the event of his involuntary separation without cause, or in the event of his voluntary separation for a good reason as enumerated in the agreement, Mr. Harkins will receive severance payments, in the form of the continuation of his annual base salary and benefits for a period of eighteen months,



and a lump sum payment equivalent to the highest bonus paid to him in the three years prior to his termination, pro-rated to the date of his termination.

## Stock Option Grants or Stock Awards

On December 17, 2009, pursuant to our 2008 Stock Incentive Plan, Mr. Zugibe was granted options to purchase 78,000 shares of common stock at an exercise price of $1.26 per share. These options expire on December 17, 2019 and became exercisable and vested immediately upon issuance.

On December 17, 2009, pursuant to our 2008 Stock Incentive Plan, Mr. Coleman was granted options to purchase 75,000 shares of common stock at an exercise price of $1.26 per share. These options expire on December 17, 2019 and became exercisable and vested immediately upon issuance.

On December 17, 2009, pursuant to our 2004 Stock Incentive Plan, Mr. Harkins was granted options to purchase 72,000 shares of common stock at an exercise price of $1.26 per share. These options expire on December 17, 2019 and became exercisable and vested immediately upon issuance.

## Page 23

## OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following tables disclose the outstanding option awards held by the Named Executives as of December 31, 2009. No options were exercised by the Named Executives during the fiscal year ended December 31, 2009. No stock awards have been issued to the Named Executives.

<table><tr><td>Name</td><td>Number of Securities Underlying Unexercised Options (#) Exercisable</td><td>Option Exercise Price ($)</td><td>Option Expiration Date</td></tr><tr><td>Kevin J. Zugibe, Chairman, Chief Executive Officer</td><td>87,500</td><td>$1.13</td><td>3/5/2014</td></tr><tr><td></td><td>193,750</td><td>$1.15</td><td>3/31/2014</td></tr><tr><td></td><td>18,750</td><td>$0.83</td><td>9/17/2014</td></tr><tr><td></td><td>18,750</td><td>$0.95</td><td>10/1/2014</td></tr><tr><td></td><td>93,750</td><td>$1.02</td><td>1/3/2015</td></tr><tr><td></td><td>18,750</td><td>$0.87</td><td>4/1/2015</td></tr><tr><td></td><td>18,750</td><td>$0.83</td><td>7/8/2015</td></tr><tr><td></td><td>18,750</td><td>$2.15</td><td>9/30/2015</td></tr><tr><td></td><td>123,750</td><td>$1.76</td><td>12/29/2015</td></tr><tr><td></td><td>35,000</td><td>$1.40</td><td>3/31/2016</td></tr><tr><td></td><td>9,300</td><td>$1.02</td><td>10/10/2016</td></tr><tr><td></td><td>195,000</td><td>$0.85</td><td>11/20/2017</td></tr><tr><td></td><td>78,000</td><td>$1.26</td><td>12/17/2019</td></tr><tr><td>Brian F. Coleman,</td><td></td><td></td><td></td></tr><tr><td>President, Chief Operating Officer, Director</td><td>75,000</td><td>$1.13</td><td>3/5/2014</td></tr><tr><td></td><td>18,750</td><td>$1.15</td><td>3/31/2014</td></tr><tr><td></td><td>12,500</td><td>$0.83</td><td>9/17/2014</td></tr><tr><td></td><td>12,500</td><td>$0.95</td><td>10/1/2014</td></tr><tr><td></td><td>12,500</td><td>$1.02</td><td>1/3/2015</td></tr><tr><td></td><td>12,500</td><td>$0.87</td><td>4/1/2015</td></tr><tr><td></td><td>12,500</td><td>$0.83</td><td>7/8/2015</td></tr><tr><td></td><td>12,500</td><td>$2.15</td><td>9/30/2015</td></tr><tr><td></td><td>82,500</td><td>$1.76</td><td>12/29/2015</td></tr><tr><td></td><td>32,500</td><td>$1.40</td><td>3/31/2016</td></tr><tr><td></td><td>8,100</td><td>$1.02</td><td>10/10/2016</td></tr><tr><td></td><td>160,000</td><td>$0.85</td><td>11/20/2017</td></tr><tr><td></td><td>75,000</td><td>$1.26</td><td>12/17/2019</td></tr><tr><td>Charles F. Harkins, Jr., Vice President Sales</td><td>13,114</td><td>$1.13</td><td>3/5/2014</td></tr></table>

Source: HUDSON TECHNOLOGIES INC / NY, 10-K, March 01, 2010

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.



<table><tr><td>14,063</td><td>$1.15</td><td>3/31/2014</td></tr><tr><td>9,375</td><td>$2.15</td><td>9/30/2015</td></tr><tr><td>21,875</td><td>$1.76</td><td>12/29/2015</td></tr><tr><td>23,125</td><td>$1.40</td><td>3/31/2016</td></tr><tr><td>7,900</td><td>$1.02</td><td>10/10/2016</td></tr><tr><td>150,000</td><td>$0.85</td><td>11/20/2017</td></tr><tr><td>72,000</td><td>$1.26</td><td>12/17/2019</td></tr></table>

## Page 24

## Stock Option Plans

## 1994 Stock Option Plan

We adopted an Employee Stock Option Plan (the "1994 Plan") effective October 31, 1994 pursuant to which 725,000 shares of our common stock were reserved for issuance upon the exercise of options designated as either (i) options intended to constitute incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as amended (the "Code"), or (ii) nonqualified options. ISOs could be granted under the 1994 Plan to our employees and officers. Non-qualified options could be granted to consultants, directors (whether or not they are employees), our employees or officers. Effective November 1, 2004, our ability to grant options under the 1994 Plan expired.

All options granted under the 1994 Plan are not transferable during an optionee's lifetime but are transferable at death by will or by the laws of descent and distribution. In general, upon termination of employment of an optionee, all options granted to such person that are not exercisable on the date of such termination immediately terminate, and any options that are exercisable terminate 90 days following termination of employment.

As of December 31, 2009, we had options outstanding to purchase 59,364 shares of our common stock under the 1994 Plan.

## 1997 Stock Option Plan

We adopted the 1997 Stock Option Plan (the "1997 Plan") effective June 11, 1997 pursuant to which 2,000,000 shares of our common stock were reserved for issuance upon the exercise of options designated as either (i) ISOs under the Code, or (ii) nonqualified options. ISOs could be granted under the 1997 Plan to our employees and officers. Non-qualified options could be granted to consultants, directors (whether or not they are employees), our employees or officers. Stock appreciation rights could also be issued in tandem with stock options. Effective June 11, 2007 our ability to grant options under the 1997 Plan expired.

All options granted under the 1997 Plan are not transferable during an optionee's lifetime but are transferable at death by will or by the laws of descent and distribution. In general, upon termination of employment of an optionee, all options granted to such person that are not exercisable on the date of such termination immediately terminate, and any options that are exercisable terminate 90 days following termination of employment.

As of December 31, 2009, we had options outstanding to purchase 817,678 shares of our common stock under the 1997 Plan.

## 2004 Stock Incentive Plan

We have adopted the 2004 Stock Incentive Plan (the "2004 Plan"), pursuant to which 2,500,000 shares of our common stock are currently reserved for issuance upon the exercise of options, designated as either (i) ISOs, under the Code or (ii) non-qualified options, or for issuance upon the granting of restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2004 Plan to employees and officers of Hudson. Non-qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of Hudson. Stock appreciation rights may also be issued in tandem with stock options.

The 2004 Plan is intended to qualify under Rule 16b-3 under the Exchange Act and is administered by our Compensation/Stock Option Committee of the Board of Directors. The Committee, within the limitations of the 2004 Plan, determines the persons to whom options will be granted, the number of shares to be covered by each option, whether the options granted are intended to be ISOs, the duration and rate of exercise of each option, the exercise price per share and the manner of exercise and the time, manner and form of payment upon exercise of an option. In the case of restricted stock, deferred stock or other stock-based awards, the Committee, within the limitations of the 2004 Plan, determines the persons to whom awards will be granted, the number of shares of stock subject to the award, and the restrictions on issuance and transfer of such shares. Unless the 2004 Plan is sooner terminated, the ability to grant options or other awards under the 2004 Plan will expire on September 10, 2014.

ISOs granted under the 2004 Plan may not be granted at a price less than the fair market value of our common stock on the date of grant (or 110% of fair market value in the case of ISOs granted to a 10% shareholder). In the case of ISOs, the aggregate fair market value of shares for which ISOs granted to any employee are exercisable for the first time by such employee during any calendar year (under all of our stock option plans) may not exceed $100,000. Non-qualified options granted under the 2004 Plan may not be granted at a price less than the fair market value of our common stock. Options granted under the 2004 Plan will expire not more than ten years from the date of grant (five years in the case of ISOs granted to a 10% shareholder). Except as otherwise provided by the Committee with respect to non-qualified options, all options, restricted stock, deferred stock or other stock-based awards granted under the 2004 Plan are not transferable during an grantee's lifetime but are transferable at death by will or by the laws of descent and distribution. In general, upon termination of employment of a grantee, all options, restricted stock, deferred stock or other stock-based

## Page 25

awards granted to such person which are not exercisable on the date of such termination immediately terminate, and any options that are exercisable terminate 90 days following termination of employment.

As of December 31, 2009, we had options outstanding to purchase 2,306,301 shares of common stock and 20,000 shares reserved for future issuances under the 2004 Plan.



We have adopted the 2008 Stock Incentive Plan (the "2008 Plan"), pursuant to which 3,000,000 shares of our common stock are currently reserved for issuance upon the exercise of options, designated as either (i) ISOs, under the Code or (ii) non-qualified options, or for issuance upon the granting of restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2008 Plan to employees and officers of Hudson. Non-qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of Hudson. Stock appreciation rights may also be issued in tandem with stock options.

The 2008 Plan is intended to qualify under Rule 16b-3 under the Exchange Act and is administered by our Compensation/Stock Option Committee of the Board of Directors. The Committee, within the limitations of the 2008 Plan, determines the persons to whom options will be granted, the number of shares to be covered by each option, whether the options granted are intended to be ISOs, the duration and rate of exercise of each option, the exercise price per share and the manner of exercise and the time, manner and form of payment upon exercise of an option. In the case of restricted stock, deferred stock or other stock-based awards, the Committee, within the limitations of the 2008 Plan, determines the persons to whom awards will be granted, the number of shares of stock subject to the award, and the restrictions on issuance and transfer of such shares. Unless the 2008 Plan is sooner terminated, the ability to grant options or other awards under the 2008 Plan will expire on June 19, 2018.

ISOs granted under the 2008 Plan may not be granted at a price less than the fair market value of our common stock on the date of grant (or 110% of fair market value in the case of ISO's granted to a 10% shareholder). In the case of ISOs, the aggregate fair market value of shares for which ISOs granted to any employee are exercisable for the first time by such employee during any calendar year (under all of our stock option plans) may not exceed $100,000. Non-qualified options granted under the 2008 Plan may not be granted at a price less than the fair market value of our common stock. Options granted under the 2008 Plan will expire not more than ten years from the date of grant (five years in the case of ISOs granted to a 10% shareholder). Except as otherwise provided by the Committee with respect to non-qualified options, all options, restricted stock, deferred stock or other stock-based awards granted under the 2008 Plan are not transferable during an grantee's lifetime but are transferable at death by will or by the laws of descent and distribution. In general, upon termination of employment of a grantee, all options, restricted stock, deferred stock or other stock-based awards granted to such person which are not exercisable on the date of such termination immediately terminate, and any options that are exercisable terminate 90 days following termination of employment.

As of December 31, 2009, we had options outstanding to purchase 211,000 shares of common stock and 2,789,000 shares reserved for issuance of future awards under the 2008 Plan.

## Page 26

## Director Compensation

Commencing January 1, 2010, non-employee directors receive an annual fee of $10,000 and receive reimbursement for out-of-pocket expenses incurred for attendance at meetings of the Board of Directors and Board Committee meetings. In 2009, non-employee directors each received an annual fee of $7,000 and reimbursement for out-of-pocket expenses incurred for attendance at meetings of the Board of Directors and Board Committee meetings. The Chairman of the Audit Committee of our Board received additional compensation in 2009 of $2,000, and each independent member of our Audit Committee (excluding the Chairman) received additional compensation in 2009 of $1,000. The following table discloses the compensation of the non-employee directors who served as our directors during the year ended December 31, 2009. We reimburse each of our non-employee directors for their reasonable expenses incurred in connection with attending meetings of our board of directors and related committees.

DIRECTOR COMPENSATION

<table><tr><td>Name</td><td>Fees earned or paid in cash (1)</td><td>Stock Awards</td><td>Option Awards (2)</td><td>Non-Equity Incentive Plan Compensation</td><td>Nonqualified Deferred Compensation Earnings</td><td>All Other Compensation</td><td>Total</td></tr><tr><td>Vincent P. Abbatecola (3)</td><td>$9,000</td><td>$--</td><td>$22,000</td><td>$--</td><td>$--</td><td>$--</td><td>$31,000</td></tr><tr><td>Dominic J. Monetta</td><td>$8,000</td><td>$--</td><td></td><td>$--</td><td>$--</td><td>$--</td><td>$30,000</td></tr><tr><td>Otto C. Morch (3)</td><td>$8,000</td><td>$--</td><td>$22,000</td><td>$--</td><td>$--</td><td>$--</td><td>$30,000</td></tr></table>

1. Excludes compensation for Board and committees participation earned in 2009 and paid in 2010.

2. We utilize the Black-Scholes method for valuing stock option awards. See Note 10 to the Notes to the Consolidated Financial Statements.

3. As of December 31, 2009, Mr. Abbatecola has options to purchase 80,000 shares of common stock outstanding, Mr. Morch has options to purchase 72,500 shares of common stock outstanding, and Mr. Monetta has options to purchase 40,000 shares of common stock outstanding.

## Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information as of February 26, 2010 based on information obtained from the persons named below, with respect to the beneficial ownership of Hudson's common stock by (i) each person known by Hudson to be the beneficial owner of more than 5% of Hudson's outstanding common stock, (ii) the Named Executives, (iii) each director of Hudson, and (iv) all of our directors and executive officers as a group:

BENEFICIAL OWNERSHIP TABLE

<table><tr><td>Title of Class</td><td>Name of Beneficial Owner</td><td>Amount and Nature of Beneficial Ownership (1)</td><td>Percent of Class</td></tr></table>



<table><tr><td>Common stock</td><td>Kevin J. Zugibe</td><td>5,636,705 (2)</td><td>25.80%</td></tr><tr><td>Common stock</td><td>Brian F. Coleman</td><td>947,176 (3)</td><td>4.40%</td></tr><tr><td>Common stock</td><td>Charles F. Harkins</td><td>351,452 (4)</td><td>1.65%</td></tr><tr><td>Common stock</td><td>Vincent P. Abbatecola</td><td>114,500 (5)</td><td>*</td></tr><tr><td>Common stock</td><td>Dominic J. Monetta</td><td>160,100 (6)</td><td>*</td></tr><tr><td>Common stock</td><td>Otto C. Morch</td><td>92,509 (7)</td><td>*</td></tr><tr><td>Common stock</td><td>Marathon Capital Management, LLC</td><td>1,599,500 (8)</td><td>7.6%</td></tr><tr><td>Common stock</td><td>All directors and executive officers as a group (Eight Persons)</td><td>10,281,907 (9)</td><td>43.47%</td></tr></table>

Page 27

(1) A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from February 26, 2010. Each beneficial owner's percentage ownership is determined by assuming that options and warrants that are held by such person (but not held by any other person) and which are exercisable within 60 days from February 26, 2010 have been exercised. Unless otherwise noted, Hudson believes that all persons named in the table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. The address for each beneficial owner, unless otherwise noted, is c/o Hudson Technologies, Inc. at PO Box 1541, One Blue Hill Plaza, Pearl River, New York 10965.

(2) Includes (i) 87,500 shares which may be purchased at $1.13 per share; (ii) 193,750 shares which may be purchased at $1.15 per share; (iii) 37,500 shares which may be purchased at $8.83 per share; (iv) 18,750 shares which may be purchased at $9.95 per share; (v) 93,750 shares which may be purchased at $1.02 per share; (vi) 18,750 shares which may be purchased at $8.87 per share; (vii) 18,750 shares which may be purchased at $2.15 per share; (viii) 123,750 shares which may be purchased at $1.76 per share; (ix) 35,000 shares which may be purchased at $1.40 per share; (x) 9,300 shares which may be purchased at $1.02 per share; (xi) 195,000 shares that may be purchased at $0.85 per share; and (xii) 78,000 shares that may be purchased at $1.26 per share under immediately exercisable options.

(3) Includes (i) 75,000 shares which may be purchased at $1.13 per share; (ii) 18,750 shares which may be purchased at $1.15 per share; (iii) 25,000 shares which may be purchased at $8.83 per share; (iv) 12,500 shares which may be purchased at $9.95 per share; (v) 62,500 shares which may be purchased at $1.02 per share; (vi) 12,500 shares which may be purchased at $8.87 per share; (vii) 12,500 shares which may be purchased at $2.15 per share; (viii) 82,500 shares which may be purchased at $1.76 per share; (ix) 32,500 shares which may be purchased at $1.40 per share; (x) 8,100 shares which may be purchased at $1.02 per share; (xi) 180,000 shares which may be purchased at $0.85 per share; (xii) and 75,000 shares which may be purchased at $1.26 per share under immediately exercisable options.

(4) Includes (i) 13,114 shares which may be purchased at $1.13 per share; (ii) 14,063 shares which may be purchased at $1.15 per share; (iii) 9,375 shares which may be purchased at $2.15 per share; (iv) 61,875 shares which may be purchased at $1.76 per share; (v) 23,125 shares which may be purchased at $1.40 per share; (vi) 7,900 shares which may be purchased at $1.02, (vii) 150,000 which may be purchased at $0.85 per share; and (viii) 72,000 shares which may be purchased at $1.26 per share under immediately exercisable options.

(5) Includes (i) 40,000 shares which may be purchased at $0.85 per share, and (ii) 40,000 shares which may be purchased at $1.21 per share under immediately exercisable options.

(6) Includes 40,000 shares which may be purchased at $1.21 per share under immediately exercisable options.

(7) Includes (i) 10,000 shares, which may be purchased at $0.94 per share; (ii) 2,500 shares, which may be purchased at $1.12 per share; and (iii) 20,000 shares which may be purchased at $0.85 per share, and (iv) 40,000 shares which may be purchased at $1.21 per share under immediately exercisable options.

(8) Represents aggregate amount of beneficially owned common stock as reported in Schedule 13G filed by Marathon Capital Management, LLC on January 19, 2010. The address of Marathon Capital Management, LLC is 4 North Park Drive, Suite 106, Hunt Valley, MD 21030.

(9) Includes exercisable options to purchase 2,711,347 shares of common stock, which may be purchased under immediately exercisable options.

## Page 28

## Equity Compensation Plan

The following table provides certain information with respect to all of Hudson's equity compensation plans as of December 31, 2009.



<table><tr><td>Plan Category</td><td>Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)</td><td>Weighted-average exercise price of outstanding options, warrants and rights (b)</td><td>Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)</td></tr><tr><td>Equity compensation plans approved by security holders</td><td>3,394,343</td><td>1.20</td><td>2,809,000</td></tr><tr><td>Equity compensation plans not approved by security holders (1)</td><td>173,500</td><td>1.69</td><td>--</td></tr><tr><td>Total</td><td>3,567,843</td><td>1.22</td><td>2,809,000</td></tr></table>

1. Includes (i) 100,000 five-year warrants, issued in 2008 to our lenders, in connection with an amendment to the Facility exercisable at $1.88 per share and (ii) 73,500 five-year warrants, issued in 2009 to our placement agent in connection with the Offering, exercisable at $1.4375 per share.

## Item 13. Certain Relationships and Related Transactions, and Director Independence

On March 26, 2009, we borrowed $1,000,000 from Catherine F. Zugibe, the mother of Kevin J. Zugibe, which loan was evidenced by a Secured Subordinated Promissory Note in the same amount, which note provided for monthly payments of interest only at the rate of ten (10%) percent per annum and matured and was payable on September 30, 2009. On September 30, 2009, we made final payment of all amounts due, inclusive of all principal and interest, under the note issued to Catherine F. Zugibe.

Our Board of Directors is comprised of five members, of which three directors are independent as defined under NASDAQ marketplace rules. The independent members of the Board are Messrs. Abbatecola, Monetta and Morch. Messrs. Coleman and Zugibe are not independent as defined under NASDAQ marketplace rules.

The independent members of our Board of Directors determine the compensation of our executive officers. The Board of Directors has established a Compensation/Stock Option Committee, which is responsible for recommending to the independent directors the compensation of our executive officers and for the administration of our employee benefit plans. The members of such committee are Messrs. Abbatecola, Coleman and Morch.

In September 2007, the Board established a Nominating Committee consisting of Messrs. Abbatecola, Monetta and Zugibe, and which is responsible for recommending to the independent directors nominees for election to the Board. Nominations to the Board are made by vote of the independent directors of the Board.

The members of our Audit Committee of our Board of Directors are Messrs. Abbatecola, Monetta, and Morch, all of whom are independent as defined under NASDAQ marketplace rules.

## Review, approval or ratification of transactions with related persons

Each year, all of our directors and officers are asked to disclose the existence of family relationships and other related transactions in Director and Officer Questionnaires. Our Audit Committee is responsible for reviewing and approving or ratifying related-person transactions. A related person is any executive officer, director or more than 5% stockholder, or any immediate family member of the foregoing persons, or entity owned or controlled by such person. In addition, pursuant to our Code of Business Conduct and Ethics, all of our employees and directors are required to bring any conflict of interest to the attention of one of the Company's executive officers or directors. In determining whether to approve or ratify a related party transaction, the Audit Committee will consider, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable to us than terms generally available to us from an unaffiliated third-party' under the same or similar circumstances, and the extent of the related party's interest in the transaction. Any transaction which is deemed to be a related party transaction requires the approval, initially by a majority of the non-interested Audit Committee members and finally by a majority of the non-interested Board members. There are no written procedures governing any review of related person transactions.

## Item 14. Principal Accounting Fees and Services

Audit Fees. The aggregate fees billed by BDO Seidman, LLP for professional services rendered for the audits and reviews of the Company's financial statements for the years ended December 31, 2009 and 2008 totaled $221,000 and $209,000, respectively.

Audit-Related Fees. In 2009, the aggregate fees billed by BDO Seidman, LLP for assurance and related services that are reasonably related to the performance of the audit or review of the Company's financial statements was none. In 2008, the aggregate fees billed by BDO Seidman, LLP for professional services rendered for assurance and related services that are reasonable related to the performance of the audit or review of the Company's financial statements totaled $1,000.

Tax Fees. In 2009 and 2008 the aggregate fees billed by BDO Seidman, LLP for professional services rendered for tax advice totaled $34,000 and $30,000, respectively.

All Other Fees. In 2008 all other fees billed by BDO Seidman LLP for professional services rendered other than the services described in the paragraphs caption "Audit Fees", "Audit Related Fees" and "Tax Fees" were $20,000. In 2009, the Company did not

## Page 29

utilize BDO Seidman, LLP for products and services, other than the services described in the paragraphs caption "Audit Fees", "Audit Related Fees" and "Tax Fees."



The Audit Committee has established its pre-approval policies and procedures, pursuant to which the Audit Committee approved the foregoing audit services provided by BDO Seidman, LLP in 2009. Consistent with the Audit Committee's responsibility for engaging the Company's independent auditors, all audit and permitted non-audit services require pre-approval by the Audit Committee. The full Audit Committee approves proposed services and fee estimates for these services. The Audit Committee chairperson or their designee has been designated by the Audit Committee to approve any services arising during the year that were not pre-approved by the Audit Committee. Services approved by the Audit Committee chairperson are communicated to the full Audit Committee at its next regular meeting and the Audit Committee reviews services and fees for the fiscal year at each such meeting. Pursuant to these procedures, the Audit Committee approved the foregoing audit services provided by BDO Seidman, LLP.

## Page 30

## Part IV

## Item 15. Exhibits, Financial Statement and Schedules

(A)(1) Financial Statements
The consolidated financial statements of Hudson Technologies, Inc. appear after Item 15 of this report

(A)(2) Financial Statement Schedules
None

(A)(3) Exhibits

3.1 Certificate of Incorporation and Amendment. (1)
3.2 Amendment to Certificate of Incorporation, dated July 20, 1994. (1)
3.3 Amendment to Certificate of Incorporation, dated October 26, 1994. (1)
3.4 Amended By-Laws, as amended March 10, 2006. (11)
3.5 Certificate of Amendment of the Certificate of Incorporation dated March 16, 1999. (2)
3.6 Certificate of Correction of the Certificate of Amendment dated March 25, 1999. (2)
3.7 Certificate of Amendment of the Certificate of Incorporation dated March 29, 1999. (2)
3.8 Certificate of Amendment of the Certificate of Incorporation dated February 16, 2001. (4)
3.9 Certificate of Amendment of the Certificate of Incorporation of Hudson Technologies, Inc., dated March 20, 2002. (5)
3.10 Amendment to Certificate of Incorporation dated January 3, 2003. (6)
3.11 Company's By-Laws, as amended September 19, 2007. (12)
10.1 Assignment of patent rights from Kevin J. Zugibe to Registrant. (1)
10.2 1997 Stock Option Plan of the Company, as amended. (3) (*)
10.3 1994 Stock Option Plan of the Company. (1)*
10.4 Form of Common stock Purchase Warrants to be issued to Holders of 10% Subordinated Convertible Note dated December 20, 2002. (6)
10.5 2004 Stock Incentive Plan. (10) *
10.6 Form of Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with full vesting upon issuance. (7)
10.7 Form of Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with options vesting in equal quarterly installments over two year period. (7)
10.8 Form of Non-Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with full vesting upon issuance. (7)
10.9 Commercial Mortgage, dated May 27, 2005, between Hudson Technologies Company and Busey Bank. (8)
10.10 Commercial Installment Mortgage Note, dated May 27, 2005, between Hudson Technologies Company and Busey Bank.



10.16 Amended and Restated Loan Agreement between Hudson Technologies Company and Keltic Financial Partners, L.P., dated June 26, 2007. (12)

10.17 Mortgage and Security Agreement between Hudson Technologies Company and Keltic Financial Partners, L.P., dated June 26, 2007. (12)

10.18 Amended and Restated Revolving Note, dated June 26, 2007. (12)

10.19 Amended and Restated Term Note A, dated June 26, 2007 in the amount of $2,500,000 (12)

10.20 Term Note B, dated June 26, 2007, in the amount of $4,500,000. (12)

10.21 Stock Purchase Agreement between Hudson Technologies, Inc. and Fleming Funds, dated June 28, 2007. (12)

10.22 Stock Purchase Agreement between Kevin J. Zugibe and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)

10.23 Stock Purchase Agreement between Stephen P. Mandracchia and Fleming, U.S. Discovery Fund III, L.P., dated June 28, 2007. (12)

10.24 Stock Purchase Agreement between Brian F. Coleman and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)

10.25 Stock Purchase Agreement between James R. Buscemi and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)

10.26 Stock Purchase Agreement between Hudson Technologies, Inc., Fleming U.S. Discovery Fund III, L.P. and Fleming U.S. Offshore Discovery Fund III, L.P. dated September 25, 2007. (13)

10.27 Second Amendment to Amended and Restated Loan Agreement between Hudson Technologies Company, Keltic Financial Partners, L.P and Bridge Healthcare Finance, LLC, dated April 17, 2008. (14)

10.28 Second Amended, Restated and Bifurcated Revolving Note, dated April 17, 2008, in the amount of $10,000,000. (14).

## Page 31

10.29 Second Amended, Restated and Bifurcated Revolving Note, dated April 17, 2008, in the amount of $5,000,000. (14)

10.30 Second Amended, Restated and Bifurcated Term Note A, dated April 17, 2008 in the amount of $1,666,667. (14)

10.31 Second Amended, Restated and Bifurcated Term Note A, dated April 17, 2008 in the amount of $833,333. (14)

10.32 Amended, Restated and Bifurcated Term Note B, dated April 17, 2008, in the amount of $3,000,000. (14)

10.33 Amended, Restated and Bifurcated Term Note B, dated April 17, 2008, in the amount of $1,500,000. (14)

10.34 Warrant to Purchase Common Stock, dated April 17, 2008, for 66,667 shares of Common Stock issued to Keltic Financial Partners, L.P. (14)

10.35 Warrant to Purchase Common Stock, dated April 17, 2008, for 33,333 shares of Common Stock issued to Bridge Healthcare Finance, LLC. (14)

10.36 2008 Stock Incentive Plan. (15)

10.37 Form of Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (16)

10.38 Form of Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with options vesting in equal installments over two year period. (16)

10.39 Form of Non-Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (16)

10.40 Form of Non-Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with options vesting in equal installments over two year period. (16)

10.41 Third Amendment to Amended and Restated Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated March 20, 2009. (17)

10.42 Note Purchase Agreement between Hudson Technologies Company and Richard Parrillo, dated March 19, 2009 and executed March 20, 2009. (17)

10.43 10% Secured Subordinated Promissory Note of the Company in the amount of $1,000,000, dated March 26, 2009 issued in favor of Richard Parrillo. (17)

10.44 General Security Agreement between Hudson Technologies Company and Richard Parrillo, dated March 19, 2009 and executed March 20, 2009. (17)

10.45 Subordination and Intercreditor Agreement among Richard Parrillo, Keltic Financial Partners, L.P., Bridge Healthcare Finance, LLC and Hudson Technologies Company, dated March 26, 2009. (17)

10.46 Note Purchase Agreement between Hudson Technologies Company and Catherine Zugibe, dated March 26, 2009. (17)

10.47 10% Secured Subordinated Promissory Note of the Company in the amount of $1,000,000, dated March 26, 2009 issued in favor of Catherine Zugibe. (17)

10.48 General Security Agreement between Hudson Technologies Company and Catherine Zugibe, dated March 26, 2009. (17)

10.49 Subordination and Intercreditor Agreement between Catherine Zugibe, Keltic Financial Partners, L.P., Bridge Healthcare Finance, LLC and Hudson Technologies Company, dated March 26, 2009. (17).

10.50 Fourth Amendment to Amended and Restated Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated July 15, 2009. (18)

10.51 Waiver to Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated July 15, 2009. (18)



10.52 First Amendment to Note of the Company in the amount of $1,000,000 dated September 30, 2009 issued in favor of Richard Parrillo. (19)

10.53 Placement Agent Agreement between Roth Capital Partners, LLC and Hudson Technologies, Inc., dated July 31, 2009. (20)

10.54 Warrant, dated August 5, 2009, for 73,500 shares of Common Stock issued to Roth Capital Partners, LLC. (22)

10.55 Form of Subscription Agreement. (20)

10.56 Fifth Amendment to Amended and Restated Loan Agreement between Hudson Technologies Company, Keltic Financial Partners II, LP and Bridge Healthcare Finance LLC, dated August 12, 2009. (21)

14 Code of Business Conduct and Ethics. (9)

21 Subsidiaries of the Registrant. (22)

23.1 Consent of BDO Seidman, LLP. (22)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (22)

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (22)

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (22)

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (22)

## Page 32

(1) Incorporated by reference to the comparable exhibit filed with the Company's Registration Statement on Form SB-2 (No. 33-80279-NY).

(2) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999.

(3) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.

(4) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.

(5) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001.

(6) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002.

(7) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004.

(8) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005

(9) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K, for the event dated March 3, 2005, and filed May 31, 2005.

(10) Incorporated by reference to Appendix B to the Company's Definitive Proxy Statement on Schedule 14A filed August 18, 2004.

(11) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 2007.

(12) Incorporated by reference to the comparable exhibit filed with the Company's Schedule TO filed June 29, 2007.

(13) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K for the event dated September 19, 2007, filed September 25, 2007.

(14) Incorporated by reference to comparable exhibit filed with the Company's Current Report on Form 8-K for the event dated April 17, 2008, filed April 22, 2008.

(15) Incorporated by reference to Appendix I to the Company's Definitive Proxy Statement on Schedule 14A filed July 29, 2008.

(16) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

(17) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2009.

(18) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009

(19) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

(20) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K, for the event dated July 31, 2009, filed August 3, 2009.

(21) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K, for the event dated August 12, 2009, filed August 18, 2009.

(22) Filed herewith.

(*) Denotes Management Compensation Plan, agreement or arrangement.



## Consolidated Financial Statements

## Contents

Report of Independent Registered Public Accounting Firm 34
Audited Consolidated Financial Statements:
Consolidated Balance Sheets 35
Consolidated Statements of Operations 36
Consolidated Statements of Stockholders' Equity 37
Consolidated Statements of Cash Flows 38
Notes to the Consolidated Financial Statements 39

## Page 34

## Report of Independent Registered Public Accounting Firm

To Stockholders and Board of Directors

Hudson Technologies, Inc.

Pearl River, New York

We have audited the accompanying consolidated balance sheets of Hudson Technologies, Inc. and subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. 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 from material misstatement. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hudson Technologies, Inc. and subsidiaries as of December 31, 2009 and 2008 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

/s/ BDO Seidman, LLP

Valhalla, New York

March 1, 2010

Page 35

Hudson Technologies, Inc. and subsidiaries

Consolidated Balance Sheets

(Amounts in thousands, except for share and par value amounts)

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2009</td><td>2008</td></tr><tr><td>Assets</td><td></td><td></td></tr><tr><td>Current assets:</td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$</td><td>$</td></tr><tr><td></td><td>299</td><td>214</td></tr><tr><td>Trade accounts receivable - net</td><td>1,594</td><td>1,731</td></tr><tr><td>Inventories</td><td>16,410</td><td>23,613</td></tr><tr><td>Prepaid expenses and other current assets</td><td>815</td><td>665</td></tr><tr><td>Total current assets</td><td>19,118</td><td>26,223</td></tr></table>

Source: HUDSON TECHNOLOGIES INC / NY, 10-K, March 01, 2010

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.



<table><tr><td>Property, plant and equipment, less accumulated depreciation and amortization</td><td>2,925</td><td>2,921</td></tr><tr><td>Other assets</td><td>104</td><td>158</td></tr><tr><td>Deferred tax asset</td><td>4,120</td><td>4,120</td></tr><tr><td>Intangible assets, less accumulated amortization</td><td>78</td><td>73</td></tr><tr><td>Total Assets</td><td>$26,345</td><td>$33,495</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Liabilities and Stockholders&#x27; Equity</td><td></td><td></td></tr><tr><td>Current liabilities:</td><td></td><td></td></tr><tr><td>Accounts payable and accrued expenses</td><td>$ 4,178</td><td>$ 5,590</td></tr><tr><td>Accrued payroll</td><td>114</td><td>1,010</td></tr><tr><td>Short-term debt and current maturities of long-term debt</td><td>5,457</td><td>8,524</td></tr><tr><td>Total current liabilities</td><td>9,749</td><td>15,124</td></tr><tr><td>Long-term debt, less current maturities</td><td>4,581</td><td>5,665</td></tr><tr><td>Total Liabilities</td><td>14,330</td><td>20,789</td></tr></table>

## Commitments and contingencies

## Stockholders' equity:

<table><tr><td>Preferred stock, shares authorized 5,000,000:</td><td></td><td></td></tr><tr><td>Series A Convertible Preferred stock, $0.01 par value ($100</td><td></td><td></td></tr><tr><td>liquidation preference value); shares authorized 150,000</td><td>--</td><td>--</td></tr><tr><td>Common stock, $0.01 par value; shares authorized 50,000,000;</td><td></td><td></td></tr><tr><td>issued and outstanding 20,941,706 and 19,424,533</td><td>209</td><td>194</td></tr><tr><td>Additional paid-in capital</td><td>37,609</td><td>35,820</td></tr><tr><td>Accumulated deficit</td><td>(25,803)</td><td>(23,308)</td></tr><tr><td>Total Stockholders&#x27; Equity</td><td>12,015</td><td>12,706</td></tr><tr><td>Total Liabilities and Stockholders&#x27; Equity</td><td>$26,345</td><td>$33,495</td></tr></table>

See accompanying Notes to the Consolidated Financial Statements.

Page 36

Hudson Technologies, Inc. and subsidiaries

Consolidated Statements of Operations

(Amounts in thousands, except for share and per share amounts)

<table><tr><td rowspan="2"></td><td colspan="2">For the years ended December 31,</td></tr><tr><td>2009</td><td>2008</td></tr><tr><td>Revenues</td><td>$24,167</td><td>$33,167</td></tr><tr><td>Cost of sales</td><td>20,356</td><td>21,857</td></tr><tr><td>Gross Profit</td><td>3,811</td><td>11,310</td></tr><tr><td>Operating expenses:</td><td></td><td></td></tr><tr><td>Selling and marketing</td><td>1,796</td><td>2,118</td></tr><tr><td>General and administrative, includes $350 and $59 for share-based payment arrangements</td><td></td><td></td></tr><tr><td></td><td>3,229</td><td>3,776</td></tr><tr><td>Total operating expenses</td><td>5,025</td><td>5,894</td></tr></table>

Source: HUDSON TECHNOLOGIES INC / NY, 10-K, March 01, 2010

Powered by Morningstar \( ^{®} \)  Document Research \( ^{SM} \)



<table><tr><td>Operating income (loss)</td><td>(1,214)</td><td>5,416</td></tr><tr><td>Other income (expense):</td><td></td><td></td></tr><tr><td>Interest expense</td><td>(1,401)</td><td>(1,170)</td></tr><tr><td>Other income</td><td>1</td><td>3</td></tr><tr><td>Total other income (expense)</td><td>(1,400)</td><td>(1,167)</td></tr><tr><td>Income (loss) before income taxes</td><td>(2,614)</td><td>4,249</td></tr><tr><td>Income tax benefit</td><td>(119)</td><td>(2,420)</td></tr><tr><td>Net income (loss)</td><td>($2,495)</td><td>$6,669</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Net income (loss) per common share - basic</td><td>($0.12)</td><td>$0.35</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Net income (loss) per common share - diluted</td><td>($0.12)</td><td>$0.33</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Weighted average number of shares outstanding - basic</td><td>20,054,000</td><td>19,271,530</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Weighted average number of shares outstanding - diluted</td><td>20,054,000</td><td>20,306,207</td></tr><tr><td></td><td>=====</td><td>=====</td></tr></table>

See accompanying Notes to the Consolidated Financial Statements.

Page 37

Hudson Technologies, Inc. and subsidiaries
Consolidated Statements of Stockholders' Equity
(Amounts in thousands, except for share amounts)

<table><tr><td></td><td>Shares</td><td>Common stock Amount</td><td>Additional Paid-in Capital</td><td>Accumulated Deficit</td><td>Total</td></tr><tr><td>Balance at</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>December 31, 2007</td><td>19,072,264</td><td>$191</td><td>$35,349</td><td>($29,977)</td><td>$5,563</td></tr><tr><td>Issuance of common stock upon exercise of stock options and warrants</td><td>352,269</td><td>3</td><td>338</td><td>--</td><td>341</td></tr><tr><td>Value of share-based arrangements</td><td>--</td><td>--</td><td>59</td><td>--</td><td>59</td></tr><tr><td>Value of warrant issuances</td><td>--</td><td>--</td><td>74</td><td>--</td><td>74</td></tr><tr><td>Net income</td><td>--</td><td>--</td><td>--</td><td>6,669</td><td>6,669</td></tr><tr><td>Balance at</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>December 31, 2008</td><td>19,424,533</td><td>194</td><td>35,820</td><td>(23,308)</td><td>12,706</td></tr></table>



<table><tr><td>Sale of common stock</td><td>1,470,000</td><td>15</td><td>1,380</td><td>--</td><td>1,395</td></tr><tr><td>Issuance of common stock upon exercise of stock options</td><td>15,000</td><td>--</td><td>15</td><td>--</td><td>15</td></tr><tr><td>Issuance of common stock for services</td><td>32,173</td><td>--</td><td>44</td><td>--</td><td>44</td></tr><tr><td>Value of share-based arrangements</td><td>--</td><td>--</td><td>350</td><td>--</td><td>350</td></tr><tr><td>Net loss</td><td>--</td><td>--</td><td>--</td><td>(2,495)</td><td>(2,495)</td></tr><tr><td>Balance at</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>December 31, 2009</td><td>20,941,706</td><td>$209</td><td>$37,609</td><td>($25,803)</td><td>$12,015</td></tr><tr><td>See accompanying Notes to the Consolidated Financial Statements.</td><td></td><td></td><td></td><td></td><td></td></tr></table>

See accompanying Notes to the Consolidated Financial Statements.

Page 38

Hudson Technologies, Inc. and subsidiaries

Consolidated Statements of Cash Flows

Increase (Decrease) in Cash and Cash Equivalents

(Amounts in thousands)

<table><tr><td rowspan="2"></td><td colspan="2">For the years ended December 31,</td></tr><tr><td>2009</td><td>2008</td></tr><tr><td>Cash flows from operating activities:</td><td></td><td></td></tr><tr><td>Net income (loss)</td><td>($2,495)</td><td>$6,669</td></tr><tr><td>Adjustments to reconcile net income (loss)</td><td></td><td></td></tr><tr><td>to cash provided (used) by operating activities:</td><td></td><td></td></tr><tr><td>Depreciation and amortization</td><td>524</td><td>547</td></tr><tr><td>Allowance for doubtful accounts</td><td>--</td><td>27</td></tr><tr><td>Amortization of deferred finance cost</td><td>25</td><td>18</td></tr><tr><td>Value of share-based payment arrangements</td><td>350</td><td>59</td></tr><tr><td>Deferred tax benefit</td><td>--</td><td>(2,600)</td></tr><tr><td>Compensation expense for stock purchases</td><td>31</td><td>--</td></tr><tr><td>Changes in assets and liabilities:</td><td></td><td></td></tr><tr><td>Trade accounts receivable</td><td>137</td><td>(12)</td></tr><tr><td>Inventories</td><td>7,203</td><td>(11,011)</td></tr><tr><td>Prepaid expenses and other current assets</td><td>(137)</td><td>(423)</td></tr><tr><td>Other assets</td><td>30</td><td>(57)</td></tr><tr><td>Accounts payable and accrued expenses</td><td>(2,308)</td><td>2,394</td></tr><tr><td>Cash provided (used) by operating activities</td><td>3,360</td><td>(4,389)</td></tr><tr><td>Cash flows from investing activities:</td><td></td><td></td></tr><tr><td>Additions to patents</td><td>(39)</td><td>(35)</td></tr><tr><td>Additions to property, plant, and equipment</td><td>(391)</td><td>(558)</td></tr><tr><td>Cash used by investing activities</td><td>(430)</td><td>(593)</td></tr></table>

Cash flows from financing activities:



<table><tr><td>Proceeds from issuance of common stock - net</td><td>1,410</td><td>341</td></tr><tr><td>Proceeds (repayment) of short-term debt - net</td><td>(3,091)</td><td>5,371</td></tr><tr><td>Proceeds from long-term debt</td><td>--</td><td>333</td></tr><tr><td>Repayment of long-term debt</td><td>(1,164)</td><td>(1,132)</td></tr><tr><td>Cash provided (used) by financing activities</td><td>(2,845)</td><td>4,913</td></tr><tr><td>Increase (decrease) in cash and cash equivalents</td><td>85</td><td>(69)</td></tr><tr><td>Cash and cash equivalents at beginning of period</td><td>214</td><td>283</td></tr><tr><td>Cash and cash equivalents at end of period</td><td>$ 299</td><td>$ 214</td></tr><tr><td></td><td>=====</td><td>=====</td></tr><tr><td>Supplemental disclosure of cash flow information:</td><td></td><td></td></tr><tr><td>Cash paid during period for interest</td><td>$ 1,321</td><td>$ 1,198</td></tr><tr><td>Cash paid for income taxes</td><td>$ 41</td><td>$ 700</td></tr><tr><td>Supplemental schedule of non-cash investing and financing activities:</td><td></td><td></td></tr><tr><td>Debt issued in connection with purchase of property, plant and equipment</td><td>$ 104</td><td>$ 333</td></tr><tr><td>Stock issued for services</td><td>$ 13</td><td>$ --</td></tr></table>

See accompanying Notes to the Consolidated Financial Statements.

Page 39

## Hudson Technologies, Inc. and subsidiaries

## Notes to the Consolidated Financial Statements

## Note 1 - Summary of Significant Accounting Policies

## Business

Hudson Technologies, Inc., incorporated under the laws of New York on January 11, 1991, is a refrigerant services company providing innovative solutions to recurring problems within the refrigeration industry. The Company's products and services are primarily used in commercial air conditioning, industrial processing and refrigeration systems, including (i) refrigerant sales, (ii) refrigerant management services consisting primarily of reclamation of refrigerants and (iii) RefrigerantSide® Services performed at a customer's site, consisting of system decontamination to remove moisture, oils and other contaminants. In addition, RefrigerantSide® Services include predictive and diagnostic services for industrial and commercial refrigeration applications, which are designed to predict potential catastrophic problems and identify inefficiencies in an operating system. The Company's Chiller Chemistry®, Chill Smart®, Fluid Chemistry ™, and Performance Optimization are predictive and diagnostic service offerings. The Company operates through its wholly-owned subsidiary, Hudson Technologies Company. Unless the context requires otherwise, reference to the "Company", "Hudson", "we", "us", "our", or similar pronouns refer to Hudson Technologies, Inc. and its subsidiaries.

In preparing the accompanying consolidated financial statements, and in accordance with recently issued SFAS No. 165 "Subsequent Events" (ASC 855-10), the Company's management has evaluated subsequent events through March 1, 2010, which is the date that the financial statements were filed.

In the opinion of management, all estimates and adjustments considered necessary for a fair presentation have been included and all such adjustments were normal and recurring.

## Consolidation

The consolidated financial statements represent all companies of which Hudson directly or indirectly has majority ownership or otherwise controls. Significant intercompany accounts and transactions have been eliminated. The Company's consolidated financial statements include the accounts of wholly-owned subsidiaries Hudson Holdings, Inc. and Hudson Technologies Company.

## Fair value of financial instruments

The carrying values of financial instruments including trade accounts receivable and accounts payable approximate fair value at December 31, 2009, because of the relatively short maturity of these instruments. The carrying value of short-and long-term debt approximates fair value, based upon quoted market rates of similar debt issues, as of December 31, 2009 and December 31, 2008.

## Credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade accounts receivable. The Company maintains its temporary cash investments in highly-rated financial institutions and, at times, the balances exceed FDIC insurance coverage. The Company's trade accounts receivables are primarily due from companies throughout the United



States. The Company reviews each customer's credit history before extending credit.

The Company establishes an allowance for doubtful accounts based on factors associated with the credit risk of specific accounts, historical trends, and other information. The carrying value of the Company's accounts receivable is reduced by the established allowance for doubtful accounts. The allowance for doubtful accounts includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve for the remaining accounts receivable balances. The Company adjusts its general or specific reserves based on factors that affect the collectability of the accounts receivable balances.

For the years ended December 31, 2009 and 2008, no one customer accounted for more than 10% of the Company's revenues.

The loss of a principal customer or a decline in the economic prospects of and/or a reduction in purchases of the Company's products or services by any such customer could have an adverse effect on the Company's future financial position and results of operations.

## Cash and cash equivalents

Temporary investments with original maturities of ninety days or less are included in cash and cash equivalents.

## Page 40

## Inventories

Inventories, consisting primarily of refrigerant products available for sale, are stated at the lower of cost, on a first-in first-out basis, or market.

## Property, plant, and equipment

Property, plant, and equipment are stated at cost, including internally manufactured equipment. The cost to complete equipment that is under construction is not considered to be material to the Company's financial position. Provision for depreciation is recorded (for financial reporting purposes) using the straight-line method over the useful lives of the respective assets. Leasehold improvements are amortized on a straight-line basis over the shorter of economic life or terms of the respective leases. Costs of maintenance and repairs are charged to expense when incurred.

Due to the specialized nature of the Company's business, it is possible that the Company's estimates of equipment useful life periods may change in the future.

## Revenues and cost of sales

Revenues are recorded upon completion of service or product shipment and passage of title to customers in accordance with contractual terms. The Company evaluates each sale to ensure collectability. In addition, each sale is based on an arrangement with the customer and the sales price to the buyer is fixed. License fees are recognized over the period of the license based on the respective performance measurements associated with the license. Royalty revenues are recognized when earned. Cost of sales is recorded based on the cost of products shipped or services performed and related direct operating costs of the Company's facilities. To the extent that the Company charges its customers shipping fees such amounts are included as a component of revenue and the corresponding costs are included as a component of cost of sales.

The Company's revenues are derived from refrigerant and reclamation sales and RefrigerantSide \( ^{®} \)  Services, including license and royalty revenues. The revenues for each of these lines are as follows:

<table><tr><td>Years Ended December 31, (in thousands)</td><td>2009</td><td>2008</td></tr><tr><td>Refrigerant and reclamation sales</td><td>$21,028</td><td>$29,531</td></tr><tr><td>RefrigerantSide® Services</td><td>3,139</td><td>3,636</td></tr><tr><td>Total</td><td>$24,167</td><td>$33,167</td></tr><tr><td></td><td>=====</td><td>=====</td></tr></table>

## Income taxes

The Company utilizes the asset and liability method for recording deferred income taxes, which provides for the establishment of deferred tax asset or liability accounts based on the difference between tax and financial reporting bases of certain assets and liabilities. The tax benefit associated with the Company's net operating loss carry forwards ("NOL's") is recognized to the extent that the Company is expected to recognize future taxable income. The Company assesses the recoverability of its deferred tax assets based on its expectation that it will recognize future taxable income and adjusts its valuation allowance accordingly. As December 31, 2009, the net deferred tax asset is $4,120,000.

Certain states either do not allow or limit NOL's and as such the Company will be liable for certain state taxes. To the extent that the Company utilizes its NOL's, it will not pay tax on such income but may be subject to the federal alternative minimum tax. In addition, to the extent that the Company's net income, if any, exceeds the annual NOL limitation it will pay income taxes based on existing statutory rates. Moreover, as a result of a "change in control", as defined by the Internal Revenue Service, which limits the Company's ability to utilize its existing NOL's. The Company's NOL's are subject to annual limitations ranging from $1,300,000 to $2,500,000.

As a result of an Internal Revenue Service audit, the 2006 and prior federal tax years have been closed. The Company operates in many states throughout the United States and, as of December 31, 2009, the various states' statutes of limitations remain open for tax years subsequent to 2004.

## Page 41

## Income (loss) per common and equivalent shares

If dilutive, common equivalent shares (common shares assuming exercise of options and warrants) utilizing the treasury stock method are



considered in the presentation of diluted earnings per share. The reconciliation of shares used to determine net income (loss) per share is as follows ($ in 000's):

<table><tr><td rowspan="2"></td><td colspan="2">Years Ended December 31,</td></tr><tr><td>2009</td><td>2008</td></tr><tr><td>Net income (loss)</td><td>($2,495)</td><td>$6,669</td></tr><tr><td>Weighted average number of shares - basic</td><td>20,054,007</td><td>19,271,530</td></tr><tr><td>Shares underlying options &amp; warrants</td><td>-</td><td>1,034,677</td></tr><tr><td>Weighted average number of shares outstanding - diluted</td><td>20,054,007</td><td>20,306,207</td></tr><tr><td></td><td>========</td><td>========</td></tr></table>

For the years ended December 31, 2009 and 2008 certain options and warrants aggregating 3,567,843 and 259,625 shares, respectively, have been excluded from the calculation of diluted shares, due the fact that their effect would be anti-dilutive.

## Estimates and risks

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect reported amounts of certain assets and liabilities, the disclosure of contingent assets and liabilities, and the results of operations during the reporting period. Actual results could differ from these estimates.

Several of the Company's accounting policies involve significant judgments, uncertainties and estimations. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. To the extent that actual results differ from management's judgments and estimates, there could be a material adverse effect on the Company. On a continuous basis, the Company evaluates its estimates, including, but not limited to, those estimates related to its allowance for doubtful accounts, inventory reserves, valuation allowance for the deferred tax assets relating to its NOL's and commitments and contingencies. With respect to accounts receivable, the Company estimates the necessary allowance for doubtful accounts based on both historical and anticipated trends of payment history and the ability of the customer to fulfill its obligations. For inventory, the Company evaluates both current and anticipated sales prices of its products to determine if a write down of inventory to net realizable value is necessary. In determining the Company's valuation allowance for its deferred tax assets, the Company assesses its ability to generate taxable income in the future.

The Company participates in an industry that is highly regulated, changes in which could affect operating results. Currently the Company purchases virgin, hydrochlorofluorocarbons ("HCFC") and hydrofluorocarbons ("HFC") refrigerants and reclaimable, primarily HCFC and chlorofluorocarbon ("CFC"), refrigerants from suppliers and its customers. Effective January 1, 1996, the Clean Air Act (the "Act") prohibited the production of virgin CFC refrigerants and limited the production of virgin HCFC refrigerants. Effective January 2004, the Act further limited the production of virgin HCFC refrigerants and federal regulations were enacted which impose limitations on the importation of certain virgin HCFC refrigerants. Additionally, effective January 2010, the Act further limited the production of virgin HCFC refrigerants and additional federal regulations were enacted which impose further limitation on the use, production and importation of virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants is scheduled to be phased out during the period 2010 through 2020, and production of all virgin HCFC refrigerants is scheduled to be phased out by 2030. Notwithstanding the limitations under the Act, the Company believes that sufficient quantities of new and used refrigerants will continue to be available to it at a reasonable cost for the foreseeable future. To the extent that the Company is unable to source sufficient quantities of refrigerants or is unable to obtain refrigerants on commercially reasonable terms or experiences a decline in demand and/or price for refrigerants, the Company could realize reductions in refrigerant processing and possible loss of revenues, which would have a material adverse effect on operating results.

The Company is subject to various legal proceedings. The Company assesses the merit and potential liability associated with each of these proceedings. In addition, the Company estimates potential liability, if any, related to these matters. To the extent that these estimates are not accurate, or circumstances change in the future, the Company could realize liabilities, which would have a material adverse effect on operating results and its financial position.

## Page 42

## Impairment of long-lived assets and long-lived assets to be disposed of

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less the cost to sell.

## Recent accounting pronouncements

In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles" (SFAS No. 168) (ASC 105-10). SFAS No. 168



replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" and establishes the FASB Accounting Standards Codification ("Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with generally accepted accounting principles ("GAAP"). Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification has become the exclusive authoritative reference effective September 30, 2009. This Form 10-K includes a dual presentation of the Codification and the former reference.

In September 2006, the FASB issued FASB statement No. 157 ("SFAS No. 157"), (ASC 820-10) "Fair Value Measurements," which establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The FASB agreed to defer the effective date of Statement 157 for one year for non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The adoption of SFAS No. 157 did not have a material impact on the Company's results of operations or its financial position.

In December 2007, the FASB issued Statement No. 141 (revised 2007), "Business Combinations" ("FAS 141r") (ASC 805-10). FAS No. 141r requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. This standard also requires the fair value measurement of certain other assets and liabilities related to the acquisition such as contingencies. FAS 141r (ASC 805-10) applies prospectively to business combinations and is effective for fiscal years beginning on or after December 15, 2008. The adoption of FAS141r did not have a material impact on the Company's results of operations or its financial position.

In June 2008, the Emerging Issues Task Force of the FASB published EITF Issue 07-5 "Determining Whether an Instrument is Indexed to an Entity's Own Stock" ("EITF 07-5") (ASC 815-40) to address concerns regarding the meaning of "indexed to an entity's own stock" contained in FASB Statement 133 (ASC 815-10) "Accounting for Derivative Instruments and Hedging Activities". This related to the determination of whether a freestanding equity-linked instrument should be classified as equity or debt. If an instrument is classified as debt, it is valued at fair value, and this value is remeasured on an ongoing basis, with changes recorded in earnings in each reporting period. EITF 07-5 was effective for years beginning after December 15, 2008. Adoption of EITF 07-5 did not have a financial statement impact on the Company.

## Note 2 - Other income

For the years ended December 31, 2009 and 2008, other income consisted of interest income of $1,000 and $3,000, respectively.

## Page 43

## Note 3 - Income taxes

During the year ended December 31, 2009 and 2008, the Company was subject to federal income taxes and state income taxes for the states that do not allow or limit the usage of NOL's of $21,000 and $180,000, respectively. For the year ended December 31, 2009, the Company recognized a tax benefit of $140,000 to reflect the current recoverable federal income tax paid for the prior year. For the year ended December 31, 2008, the Company recognized a federal tax benefit of $2,600,000 related to the reduction of the valuation allowance relating to its deferred tax asset.

Reconciliation of the Company's actual tax rate to the U.S. Federal statutory rate is as follows:

<table><tr><td>Years ended December 31,</td><td>2009</td><td>2008</td></tr><tr><td>Income tax rates</td><td></td><td></td></tr><tr><td>- Statutory U.S. federal rate</td><td>34%</td><td>34%</td></tr><tr><td>- States, net U.S. benefits</td><td>4%</td><td>4%</td></tr><tr><td>- Non-Statutory federal and state taxes</td><td>(1%)</td><td>- %</td></tr><tr><td>- Change in valuation allowance</td><td>(32%)</td><td>(95%)</td></tr><tr><td>Total</td><td>5%</td><td>(57%)</td></tr><tr><td></td><td>===</td><td>===</td></tr></table>

As of December 31, 2009, the Company had NOL's of approximately $21,000,000 expiring 2012 through 2029. Approximately $20,000,000 of the Company's NOL's are subject to an annual limitations ranging from $1,300,000 to $2,500,000.

Elements of deferred income tax assets (liabilities) are as follows:

<table><tr><td>December 31, (in thousands)</td><td>2009</td><td>2008</td></tr><tr><td>Deferred tax assets (liabilities)</td><td></td><td></td></tr><tr><td>- Depreciation &amp; amortization</td><td>$ 118</td><td>$ 101</td></tr><tr><td>- Reserves for doubtful accounts</td><td>83</td><td>91</td></tr><tr><td>- Accrued payroll</td><td>--</td><td>329</td></tr><tr><td>- Inventory reserve</td><td>227</td><td>43</td></tr><tr><td>- NOL</td><td>8,177</td><td>7,312</td></tr><tr><td>Subtotal</td><td>8,605</td><td>7,876</td></tr><tr><td>- Valuation allowance</td><td>(4,485)</td><td>(3,756)</td></tr><tr><td>Total</td><td>$ 4,120</td><td>$ 4,120</td></tr><tr><td></td><td>===</td><td>===</td></tr></table>



The Company considered its projected future taxable income, and associated annual limitations, in determining the amount of deferred tax assets to recognize. The Company believes that the overall United States economy will improve compared to the economic recession experienced in 2009. Additionally, the Company believes that given the extended time period that it may recognize its deferred tax assets, it is more likely than not it will realize the benefit of these assets prior to their expiration. The Company continues to reserve deferred tax assets relating to the utilization of NOL's for periods that it cannot reasonably predict operating results.

## Note 4 - Trade accounts receivable - net

At December 31, 2009 and 2008, trade accounts receivable are net of reserves for doubtful accounts of $229,000 and $254,000, respectively.

## Note 5- Inventories

Inventories consist of the following:

<table><tr><td>December 31,</td><td>2009</td><td>2008</td></tr><tr><td>(in thousands)</td><td></td><td></td></tr><tr><td>Refrigerant and cylinders</td><td>$ 6,485</td><td>$ 5,808</td></tr><tr><td>Packaged refrigerants</td><td>9,925</td><td>17,805</td></tr><tr><td>Total</td><td>$16,410</td><td>$23,613</td></tr><tr><td></td><td>=====</td><td>=====</td></tr></table>

Page 44

## Note 6 - Property, plant, and equipment

Elements of property, plant, and equipment are as follows:

<table><tr><td>December 31,</td><td>2009</td><td>2008</td><td>Estimated Lives</td></tr><tr><td>(in thousands)</td><td></td><td></td><td></td></tr><tr><td>Property, plant, &amp; equipment</td><td></td><td></td><td></td></tr><tr><td>- Land</td><td>$ 535</td><td>$ 530</td><td></td></tr><tr><td>- Buildings</td><td>830</td><td>830</td><td>39 years</td></tr><tr><td>- Building improvements</td><td>743</td><td>709</td><td>39 years</td></tr><tr><td>- Equipment</td><td>6,825</td><td>6,584</td><td>3-10 years</td></tr><tr><td>- Equipment under capital lease</td><td>138</td><td>25</td><td>5-7 years</td></tr><tr><td>- Vehicles</td><td>1,046</td><td>1,046</td><td>5 years</td></tr><tr><td>- Lab equipment and computers</td><td>739</td><td>675</td><td>3-5 years</td></tr><tr><td>- Furniture &amp; fixtures</td><td>151</td><td>151</td><td>7-8 years</td></tr><tr><td>- Leasehold improvements</td><td>68</td><td>39</td><td>3 years</td></tr><tr><td>- Equipment under construction</td><td>53</td><td>56</td><td></td></tr><tr><td>Subtotal</td><td>11,128</td><td>10,645</td><td></td></tr><tr><td>Accumulated depreciation &amp; amortization</td><td>8,203</td><td>7,724</td><td></td></tr><tr><td>Total</td><td>$2,925</td><td>$2,921</td><td></td></tr><tr><td></td><td>=====</td><td>=====</td><td></td></tr></table>

## Note 7 - Short-term and long-term debt

Elements of short-term and long-term debt are as follows:

<table><tr><td>December 31,</td><td>2009</td><td>2008</td></tr><tr><td>(in thousands)</td><td></td><td></td></tr><tr><td>Short-term &amp; long-term debt</td><td></td><td></td></tr><tr><td>Short-term debt:</td><td></td><td></td></tr><tr><td>- Bank credit line</td><td>$3,282</td><td>$7,373</td></tr><tr><td>- Long-term debt: current</td><td>2,175</td><td>1,151</td></tr><tr><td>Subtotal</td><td>5,457</td><td>8,524</td></tr><tr><td>Long-term debt:</td><td></td><td></td></tr><tr><td>- Bank credit line</td><td>4,500</td><td>5,500</td></tr><tr><td>- Building and land mortgage</td><td>1,039</td><td>1,099</td></tr><tr><td>- Vehicle loans</td><td>108</td><td>182</td></tr><tr><td>- Subordinated loan</td><td>1,000</td><td>--</td></tr><tr><td>- Capital lease obligations</td><td>109</td><td>35</td></tr></table>



<table><tr><td>- Less: current maturities</td><td>(2,175)</td><td>(1,151)</td></tr><tr><td>Subtotal</td><td>4,581</td><td>5,665</td></tr><tr><td>Total short-term &amp; long-term debt</td><td>10,038</td><td>14,189</td></tr><tr><td></td><td>=====</td><td>=====</td></tr></table>

## Bank Credit Line

On June 26, 2007 the Company entered into a credit facility (the "Facility") with Kelti Financial Partners, LLP ("Kelti") and on April 17, 2008, the Facility was amended to secured participation from Bridge Healthcare Financial, LLC ("Bridge") and to provide for borrowings up to $15,000,000. On August 12, 2009, the loan agreement evidencing the Facility to, among other things, restate certain of the Company's financial covenants. On September 23, 2009, Kelti advised the Company that it had acquired all of Bridge's rights under the Facility. The Facility consists of a revolving line of credit and the term loans, which expires on June 20, 2011. Advances under the revolving line of credit are limited to (i) 85% of eligible trade accounts receivable and (ii) 55% of eligible inventory. Advances available to Hudson under the A and B term loans may not exceed $2,500,000 and $4,500,000, respectively. At December 31, 2009, the facility bore interest at 6.5%. Substantially all of Hudson's assets are pledged as collateral for its obligations under the Facility. In addition, among other things, the loan agreement restricts Hudson's ability to declare or pay any cash dividends on its capital stock. As of December 31, 2009 and 2008, Hudson had in the aggregate $3,300,000 and $7,373,000, respectively, of borrowings outstanding and $3,000,000 and $2,127,000, respectively, available for borrowing under the revolving line of credit. In addition, as of December 31, 2009 and 2008, the Company had $4,500,000 and $5,500,000, respectively, of borrowings outstanding under the A and B term loans.

## Page 45

In connection with the April 2008 amendment to the Facility, the Company issued an aggregate of 100,000 five-year common stock purchase warrants exercisable at $1.88 per share. The Company utilizes the Black-Scholes pricing model to compute the fair value of the 100,000 stock purchase warrants. The $74,000, representing fair value of the warrants, is being amortized over the life of the Facility. As of December 31, 2009, there was $31,000 unamortized debt cost, which is included in other assets on the balance sheet.

On July 15, 2009, the Company obtained a waiver from Kelti with respect to the Facility, which, among other things, waived the Company's violation of the minimum EDITDA covenant as required under the Facility.

## Building Mortgage

In May 2005, the Company purchased its Champaign, Illinois facility for a total purchase price of $999,999. The Company financed the purchase with a 15 year amortizing loan in the amount of $945,000, with a balloon payment due on June 1, 2012. The note bears interest at 7% for the first five years and then adjusts annually based on prime plus 2%. As of December 31, 2009 and 2008, the Company has approximately $759,000 and $806,000, respectively, outstanding under the loan.

## Land Mortgage

In April 2008, the Company purchased five acres of vacant land adjacent to its Champaign, Illinois facility for $300,000. The Company financed the purchase with a 15 year amortization loan in the amount of $300,000 with a balloon payment due on June 1, 2012. The note bears an interest rate at 6.7% and as of December 31, 2009, $280,000 is outstanding.

## Vehicle Loans

During 2006, the Company entered into various vehicle loans. The vehicles are primarily used in connection with the Company's RefrigerantSide® Services. The loans are payable in 60 monthly payments through August 2012 and bear interest from 2% to 9.5%.

## Subordinated Loan

On March 20, 2009, the Company borrowed $1,000,000 from a non-affiliate for a period of six months at an interest rate of 10% per annum. The borrowing is subordinated to the Facility. On September 30, 2009, the due date of the loan was extended to June 30, 2010.

Scheduled maturities of the Company's long-term debt and capital lease obligations are as follows:

<table><tr><td>Years ended December 31, (in thousands)</td><td>Amount</td></tr><tr><td>- 2010</td><td>$2,175</td></tr><tr><td>- 2011</td><td>3,626</td></tr><tr><td>- 2012</td><td>931</td></tr><tr><td>- 2013</td><td>19</td></tr><tr><td>- 2014</td><td>5</td></tr><tr><td>Total</td><td>$6,756</td></tr><tr><td></td><td>=====</td></tr></table>

## Capital Lease Obligations

The Company rents certain equipment with a net book value of approximately $125,000 at December 31, 2009 under leases, which have been classified as capital leases. Scheduled future minimum lease payments under capital leases net of interest are as follows:



<table><tr><td>Years ended December 31,</td><td>Amount</td></tr><tr><td>(in thousands)</td><td></td></tr><tr><td>- 2010</td><td>$43</td></tr><tr><td>- 2011</td><td>28</td></tr><tr><td>- 2012</td><td>28</td></tr><tr><td>- 2013</td><td>20</td></tr><tr><td>- 2014</td><td>6</td></tr><tr><td></td><td>125</td></tr><tr><td>Less Interest Expense</td><td>(16)</td></tr><tr><td>Total</td><td>$109</td></tr><tr><td></td><td>===</td></tr></table>

## Page 46

On March 26, 2009, Hudson borrowed $1,000,000 from Catherine F. Zugibe, the mother of Kevin J. Zugibe, the Company's Chairman and Chief Executive Officer, which loan was evidenced by a Secured Subordinated Promissory Note in the same amount, which note provided for monthly payments of interest only at the rate of ten (10%) percent per annum and matured and was payable on September 30, 2009. On September 30, 2009, we made final payment of all amounts due, inclusive of all principal and interest, under the note issued to Catherine F. Zugibe.

## Note 8 - Stockholders' equity

On September 5, 2008, the Company's shelf registration statement on Form S-3 (the "Shelf Registration") was declared effective by the SEC.

On July 31, 2009, Hudson entered into a Placement Agent Agreement with Roth Capital Partners, ("Roth"), engaging Roth to act as placement agent for a registered direct offering under the Shelf Registration to sell, on a best efforts basis, 3,870,000 shares of the Company's common stock at a sale price of $1.15 per share (the "Offering").

A closing of the Offering was held on August 5, 2009, at which time, Hudson sold 1,470,000 shares of its common stock at $1.15 per share and received net proceeds of approximately $1,400,000 and no other closings were completed. As placement agent for the Offering, Roth received $101,000 and a warrant to purchase 73,500 shares of common stock at an exercise price of $1.4375 per share, plus reimbursement of its expenses of $56,000. The estimated fair value of the warrant was approximately $48,000 and such warrant was charged to additional paid in capital as compensation expense to Roth. As of October 1, 2009, the Company discontinued, and ceased pursuing further sales under, the Offering.

In September 2009, the Company issued an aggregate of 32,173 shares of its common stock to certain vendors and the Company expensed approximately $44,000 as professional fees for these services.

## Note 9 - Commitments and contingencies

Rents and operating leases

Hudson utilizes leased facilities and operates equipment under non-cancelable operating leases through March 1, 2013.

Properties

<table><tr><td>Location</td><td>Annual Rent</td><td>Lease Expiration Date</td></tr><tr><td>Auburn, Washington</td><td>$ 25,000</td><td>Month to Month</td></tr><tr><td>Baton Rouge, Louisiana</td><td>$ 27,000</td><td>10/2010</td></tr><tr><td>Champaign, Illinois</td><td>$241,000</td><td>12/2011</td></tr><tr><td>Charlotte, North Carolina</td><td>$ 58,000</td><td>1/2013</td></tr><tr><td>Orangeburg, New York</td><td>$179,000</td><td>6/2011</td></tr><tr><td>Pearl River, New York</td><td>$107,000</td><td>2/2013</td></tr><tr><td>Pottsboro, Texas</td><td>$ 18,000</td><td>8/2011</td></tr><tr><td>Hampstead, New Hampshire</td><td>$ 21,000</td><td>8/2010</td></tr></table>

The Company rents properties and various equipment under operating leases. Rent expense for the years ended December 31, 2009 and 2008 totaled approximately $628,000 and $440,000, respectively. In addition to the properties above, the Company does at times utilize public warehouse space on a month to month basis. The Company typically enters into short-term leases for the facilities and wherever possible extends the expiration date of such leases.

Future commitments under operating leases are summarized as follows:

<table><tr><td>Years ended December 31,</td><td>Amount</td></tr><tr><td>(in thousands)</td><td></td></tr><tr><td>- 2010</td><td>643</td></tr><tr><td>- 2011</td><td>487</td></tr><tr><td>- 2012</td><td>159</td></tr><tr><td>-2013</td><td>40</td></tr><tr><td>Total</td><td>$1,329</td></tr><tr><td></td><td>=====</td></tr></table>



## Legal Proceedings

On April 1, 1999, the Company reported a release of approximately 7,800 lbs. of R-11 refrigerant (the "1999 Release"), at its former leased facility in Hillburn, NY the ("Hillburn Facility"), which the Company vacated in June 2006 A failed hose connection to one of

## Page 47

the Company's outdoor storage tanks allowed liquid R-11 refrigerant ("R-11") to discharge from the tank into the concrete secondary containment area in which the subject tank was located.

Between April 1999 and May 1999, with the approval of the New York State Department of Environmental Conservation ("DEC"), the Company constructed and put into operation a remediation system to remove R-11 levels in the groundwater under and around the Hillburn Facility.

In September 2000, the Company signed an Order on Consent with the DEC, which was amended in May 2001, whereby the Company agreed to operate the remediation system and perform monthly testing at the Hillburn Facility until remaining groundwater contamination has been effectively abated. In July 2005, the DEC approved a modification of the Order on Consent to reduce the frequency of testing from monthly to quarterly. The Company is continuing to operate the remediation system pursuant to the approved modifications to that Order on Consent and, as of December 31, 2009, the Company has accrued, as an expense in its consolidated financial statements, the costs that the Company believes it will incur in connection with its compliance with the Order on Consent through December 31, 2011. There can be no assurance that additional testing will not be required or that the Company will not incur additional costs, and such costs in excess of the Company's estimate may have a material adverse effect on the Company financial condition or results of operations.

In May 2000, the Hillburn Facility, as a result of the 1999 Release, was nominated by the United States Environmental Protection Agency ("EPA") for listing on the National Priorities List ("NPL") pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). The Company submitted opposition to the listing within the sixty-day comment period. In September 2003, the EPA advised the Company that it has no current plans to finalize the process for listing of the Hillburn Facility on the NPL and that the EPA will not withdraw the proposal for listing on the NPL.

In October 2001, the Company learned that trace levels of R-11 were detected in one of the wells operated by United Water of New York, Inc. ("United") that is in the closest proximity to the Village of Suffern's ("Village") well system. No contamination of R-11 has ever been detected in any of the Village's wells and, since October 2002, the level of R-11 in the United well closest to the Village has been below 1 ppb. In September 2004, the Village advised that it intends to continue performing additional sampling of its wells at a cost of approximately $5,000 per year and the Company has reimbursed the Village for sampling costs through September 2005.

The Company has exhausted all insurance proceeds available for the 1999 Release under all applicable policies.

During the years ended December 31, 2009 and 2008, the Company incurred $76,000 and $34,000, respectively, in additional remediation costs in connection with the matters above. There can be no assurance that the 1999 Release will not impact the Village wells, or that the ultimate outcome of the 1999 Release will not have a material adverse effect on the Company's financial condition and results of operations. There can be no assurance that the EPA will not change its current plans and seek to finalize the process of listing the Hillburn Facility on the NPL, or that the ultimate outcome of such a listing will not have a material adverse effect on the Company's financial condition and results of operations.

## Employment Agreements

The Company has entered into a two-year employment agreement with Kevin J. Zugibe, which currently expires in October 2010 and is automatically renewable for successive two-year terms unless either party gives notice of termination at least ninety days prior to the then expiration date of the then current term. Pursuant to the agreement, Mr. Zugibe is receiving an annual base salary of $192,800 with such increases and bonuses as the Company's Board of Directors may determine. The Company is the beneficiary of a "key-man" insurance policy on the life of Mr. Zugibe in the amount of $1,000,000.

## Note 10 - Share-Based compensation

Share-based compensation represents the cost related to share-based awards, typically stock options, granted to employees, non-employees, officers and directors. Share-based compensation is measured at grant date, based on the estimated fair value of the award, and such amount is charged to compensation expense on a straight-line basis (net of estimated forfeitures) over the requisite service period. For the year ended December 31, 2009 and 2008, the share-based compensation expense of $350,000 and $59,000 respectively, is reflected in general and administrative expenses in the consolidated statements of operations.

Share-based awards have historically been stock options issued pursuant to the terms of the Company's 1994, and 1997 stock option plans and the Company's 2004 and 2008 stock incentive (the "Plans"), described below. The Plans may be administered by the Board of Directors or the Compensation and Stock Option Committee of the Board, or by another committee appointed by the Board from among its members as provided in the Plans. Presently, the Plans are administered by a committee consisting of non-employee directors. As of December 31, 2009, the Plans authorized the issuance of stock options to purchase 5,500,000 shares of the Company's common stock and, as of December 31, 2009 there were 2,809,000 shares of the Company's common stock available for issuance for future stock option grants.

## Page 48

Stock options are awards, which allow the recipient to purchase shares of the Company's common stock at a fixed price, are typically granted at an exercise price equal to the Company's stock price at the date of grant. Typically, the Company's stock option awards have generally vested from immediately to two years from the grant date and have had a contractual term ranging from five to ten years.

For the years ended December 31, 2009 and 2008, the Company issued 551,000 and 220,000 stock options, respectively, and the fair value of these awards was $312,000 and $133,000, respectively. At December 31, 2009, there was $35,000 of unrecognized compensation cost related to non-vested previously granted option awards.

Effective October 31, 1994, the Company adopted an Employee Stock Option Plan ("1994 Plan") pursuant to which 725,000 shares of common stock were reserved for issuance upon the exercise of options designated as either (i) options intended to constitute incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as amended, ("Code") or (ii) nonqualified options. ISOs could be granted under the 1994 Plan to



employees and officers of the Company. Non-qualified options could be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Effective November 1, 2004, the Company's ability to grant options under the 1994 Plan expired.

Effective July 25, 1997, the Company adopted its 1997 Employee Stock Option Plan, which was amended on August 19, 1999, ("1997 Plan") pursuant to which 2,000,000 shares of common stock were reserved for issuance upon the exercise of options designated as either (i) ISOs under the Code, or (ii) nonqualified options. ISOs could be granted under the 1997 Plan to employees and officers of the Company. Non-qualified options could be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights could also be issued in tandem with stock options. Effective September 11, 2007, the Company's ability to grant options or stock appreciation rights under the 1997 Plan expired.

Effective September 10, 2004, the Company adopted its 2004 Stock Incentive Plan ("2004 Plan") pursuant to which 2,500,000 shares of common stock are currently reserved for issuance upon the exercise of options, designated as either (i) ISOs under the Code or (ii) nonqualified options, restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2004 Plan to employees and officers of the Company. Non qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2004 Plan is sooner terminated, the ability to grant options or other awards under the 2004 Plan will expire on September 10, 2014.

ISOs granted under the 2004 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2004 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2004 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

Effective August 27, 2008, the Company adopted its 2008 Stock Incentive Plan ("2008 Plan") pursuant to which 3,000,000 shares of common stock are currently reserved for issuance upon the exercise of options, designated as either (i) ISOs under the Code or (ii) nonqualified options, restricted stock, deferred stock or other stock-based awards. ISOs may be granted under the 2008 Plan to employees and officers of the Company. Non qualified options, restricted stock, deferred stock or other stock-based awards may be granted to consultants, directors (whether or not they are employees), employees or officers of the Company. Stock appreciation rights may also be issued in tandem with stock options. Unless the 2008 Plan is sooner terminated, the ability to grant options or other awards under the 2008 Plan will expire on August 27, 2018.

ISOs granted under the 2008 Plan may not be granted at a price less than the fair market value of the common stock on the date of grant (or 110% of fair market value in the case of persons holding 10% or more of the voting stock of the Company). Nonqualified options granted under the 2008 Plan may not be granted at a price less than the fair market value of the common stock. Options granted under the 2008 Plan expire not more than ten years from the date of grant (five years in the case of ISOs granted to persons holding 10% or more of the voting stock of the Company).

All stock options have been granted to employees and non-employees at exercise prices equal to or in excess of the market value on the date of the grant.

The Company determines the fair value of shared based awards at the grant date by using the Black-Scholes option-pricing model, and is incorporating the simplified method to compute expected lives of share based awards with the following weighted-average assumptions:

Page 49

<table><tr><td>Years Ended</td><td></td><td></td></tr><tr><td>December 31,</td><td>2009</td><td>2008</td></tr><tr><td>Assumptions</td><td></td><td></td></tr><tr><td>Dividend Yield</td><td>0 %</td><td>0 %</td></tr><tr><td>Risk free interest rate</td><td>0.16%</td><td>1.7%</td></tr><tr><td>Expected volatility</td><td>54%</td><td>52% to 55%</td></tr><tr><td>Expected lives</td><td colspan="2">2 to 5 years 2.5 to 5 years</td></tr></table>

A summary of the status of the Company's Plans as of December 31, 2009 and 2008 and changes for the years ending on those dates is presented below:

<table><tr><td>Stock Option Plan Grants</td><td>Shares</td><td>Weighted Average Exercise Price</td></tr><tr><td>Outstanding at December 31, 2007</td><td>3,009,643</td><td>$1.15</td></tr><tr><td>• Granted</td><td>220,000</td><td>$1.44</td></tr><tr><td>• Forfeited</td><td>(60,000)</td><td>$1.09</td></tr><tr><td>• Exercised</td><td>(309,800)</td><td>$0.97</td></tr><tr><td>Outstanding at December 31, 2008</td><td>2,859,843</td><td>$1.19</td></tr><tr><td>• Exercised</td><td>(15,000)</td><td>$1.01</td></tr></table>



• Forfeited (1,500) $1.87

• Granted 551,000 $1.25

Outstanding at December 31, 2009 3,394,343 $1.20

===

The following is the weighted average contractual life in years and the weighted average exercise price at December 31, 2009 of:

<table><tr><td></td><td>Number of Options</td><td>Weighted Average Remaining Contractual Life</td><td>Weighted Average Exercise Price</td></tr><tr><td>Options outstanding</td><td>3,394,343</td><td>7.2 years</td><td>$1.20</td></tr><tr><td>Options vested</td><td>3,336,482</td><td>7.3 years</td><td>$1.20</td></tr></table>

The following is the intrinsic value at December 31, 2009 of:

<table><tr><td>Options outstanding</td><td>$1,141,000</td></tr><tr><td>Options vested</td><td>$ 135,000</td></tr><tr><td>Options exercised</td><td>$ 1,750</td></tr></table>

The intrinsic value of options exercised during the year ended December 31, 2008 was $496,000.

The following is the weighted average fair value for the year ended December 31, 2009 of:

<table><tr><td>Options granted</td><td>$1.25</td></tr><tr><td>Options vested</td><td>$1.33</td></tr></table>

Page 50

## SIGNATURES

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

HUDSON TECHNOLOGIES, INC.

By: /s/ Kevin J. Zugibe
Kevin J. Zugibe, Chairman and Chief Executive Officer

Date: March 1, 2010

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

<table><tr><td>Signature</td><td>Title</td><td>Date</td></tr><tr><td>/s/ Kevin J. Zugibe</td><td>Chairman of the Board and Chief Executive Officer (Principal</td><td>March 1, 2010</td></tr><tr><td>Kevin J. Zugibe</td><td>Executive Officer)</td><td></td></tr><tr><td>/s/ James R. Buscemi</td><td>Chief Financial Officer (Principal Financial and Accounting</td><td>March 1, 2010</td></tr><tr><td>James R. Buscemi</td><td>Officer)</td><td></td></tr><tr><td>/s/ Vincent P. Abbatecola</td><td>Director</td><td>March 1, 2010</td></tr><tr><td>Vincent P. Abbatecola</td><td></td><td></td></tr><tr><td>/s/ Brian F. Coleman</td><td>Director and President and Chief Operating Officer</td><td>March 1, 2010</td></tr><tr><td>Brian F. Coleman</td><td></td><td></td></tr><tr><td>/s/ Dominic J. Monetta</td><td>Director</td><td>March 1, 2010</td></tr><tr><td>Dominic J. Monetta</td><td></td><td></td></tr></table>



## Page 51

## Index to Exhibits

Exhibit
Number Description
(A)(1) Financial Statements
The consolidated financial statements of Hudson Technologies, Inc. appear after Item 15 of this report
(A)(2) Financial Statement Schedules
None
(A)(3) Exhibits
3.1 Certificate of Incorporation and Amendment. (1)
3.2 Amendment to Certificate of Incorporation, dated July 20, 1994. (1)
3.3 Amendment to Certificate of Incorporation, dated October 26, 1994. (1)
3.4 Amended By-Laws, as amended March 10, 2006. (11)
3.5 Certificate of Amendment of the Certificate of Incorporation dated March 16, 1999. (2)
3.6 Certificate of Correction of the Certificate of Amendment dated March 25, 1999. (2)
3.7 Certificate of Amendment of the Certificate of Incorporation dated March 29, 1999. (2)
3.8 Certificate of Amendment of the Certificate of Incorporation dated February 16, 2001. (4)
3.9 Certificate of Amendment of the Certificate of Incorporation of Hudson Technologies, Inc., dated March 20, 2002. (5)
3.10 Amendment to Certificate of Incorporation dated January 3, 2003. (6)
3.11 Company's By-Laws, as amended September 19, 2007. (12)
10.1 Assignment of patent rights from Kevin J. Zugibe to Registrant. (1)
10.2 1997 Stock Option Plan of the Company, as amended. (3) (*)
10.3 1994 Stock Option Plan of the Company. (1)*
10.4 Form of Common stock Purchase Warrants to be issued to Holders of 10% Subordinated Convertible Note dated December 20, 2002. (6)
10.5 2004 Stock Incentive Plan. (10) *
10.6 Form of Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with full vesting upon issuance. (7)
10.7 Form of Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with options vesting in equal quarterly installments over two year period. (7)
10.8 Form of Non-Incentive Stock Option Agreement under the 2004 Stock Incentive Plan of the Company with full vesting upon issuance. (7)
10.9 Commercial Mortgage, dated May 27, 2005, between Hudson Technologies Company and Busey Bank. (8)
10.10 Commercial Installment Mortgage Note, dated May 27, 2005, between Hudson Technologies Company and Busey Bank.  (8)
10.11 Amended and Restated Employment Agreement with Kevin J. Zugibe, as amended (16)*
10.12 Agreement with Brian F. Coleman, as amended. (16)*
10.13 Agreement with James R. Buscemi, as amended. (16)*
10.14 Agreement with Charles F. Harkins, as amended (16)*
10.15 Agreement with Stephen P. Mandracchia, as amended (16)*
10.16 Amended and Restated Loan Agreement between Hudson Technologies Company and Kelti Financial Partners, L.P., dated June 26, 2007. (12)
10.17 Mortgage and Security Agreement between Hudson Technologies Company and Kelti Financial Partners, L.P., dated June 26, 2007. (12)
10.18 Amended and Restated Revolving Note, dated June 26, 2007. (12)
10.19 Amended and Restated Term Note A, dated June 26, 2007 in the amount of $2,500,000 (12)
10.20 Term Note B, dated June 26, 2007, in the amount of $4,500,000. (12)
10.21 Stock Purchase Agreement between Hudson Technologies, Inc. and Fleming Funds, dated June 28, 2007. (12)
10.22 Stock Purchase Agreement between Kevin J. Zugibe and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)
10.23 Stock Purchase Agreement between Stephen P. Mandracchia and Fleming, U.S. Discovery Fund III, L.P., dated June 28, 2007. (12)
10.24 Stock Purchase Agreement between Brian F. Coleman and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)
10.25 Stock Purchase Agreement between James R. Buscemi and Fleming, U.S. Discovery Fund III, L.P. dated June 28, 2007. (12)
10.26 Stock Purchase Agreement between Hudson Technologies, Inc., Fleming U.S. Discovery Fund III, L.P. and Fleming U.S. Offshore Discovery Fund III, L.P. dated September 25, 2007. (13)



10.27 Second Amendment to Amended and Restated Loan Agreement between Hudson Technologies Company, Keltic Financial Partners, L.P and Bridge Healthcare Finance, LLC, dated April 17, 2008. (14)

10.28 Second Amended, Restated and Bifurcated Revolving Note, dated April 17, 2008, in the amount of $10,000,000. (14)

## Page 52

10.29 Second Amended, Restated and Bifurcated Revolving Note, dated April 17, 2008, in the amount of $5,000,000. (14)

10.30 Second Amended, Restated and Bifurcated Term Note A, dated April 17, 2008 in the amount of $1,666,667. (14)

10.31 Second Amended, Restated and Bifurcated Term Note A, dated April 17, 2008 in the amount of $833,333. (14)

10.32 Amended, Restated and Bifurcated Term Note B, dated April 17, 2008, in the amount of $3,000,000. (14)

10.33 Amended, Restated and Bifurcated Term Note B, dated April 17, 2008, in the amount of $1,500,000. (14)

10.34 Warrant to Purchase Common Stock, dated April 17, 2008, for 66,667 shares of Common Stock issued to Keltic Financial Partners, L.P. (14)

10.35 Warrant to Purchase Common Stock, dated April 17, 2008, for 33,333 shares of Common Stock issued to Bridge Healthcare Finance, LLC. (14)

10.36 2008 Stock Incentive Plan. (15)

10.37 Form of Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (16)

10.38 Form of Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with options vesting in equal installments over two year period. (16)

10.39 Form of Non-Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with full vesting upon issuance. (16)

10.40 Form of Non-Incentive Stock Option Agreement under the 2008 Stock Incentive Plan with options vesting in equal installments over two year period. (16)

10.41 Third Amendment to Amended and Restarted Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated March 20, 2009. (17)

10.42 Note Purchase Agreement between Hudson Technologies Company and Richard Parrillo, dated March 19, 2009 and executed March 20, 2009. (17)

10.43 10% Secured Subordinated Promissory Note of the Company in the amount of $1,000,000, dated March 26, 2009 issued in favor of Richard Parrillo. (17)

10.44 General Security Agreement between Hudson Technologies Company and Richard Parrillo, dated March 19, 2009 and executed March 20, 2009. (17)

10.45 Subordination and Intercreditor Agreement among Richard Parrillo, Keltic Financial Partners, L.P., Bridge Healthcare Finance, LLC and Hudson Technologies Company, dated March 26, 2009. (17)

10.46 Note Purchase Agreement between Hudson Technologies Company and Catherine Zugibe, dated March 26, 2009. (17)

10.47 10% Secured Subordinated Promissory Note of the Company in the amount of $1,000,000, dated March 26, 2009 issued in favor of Catherine Zugibe. (17)

10.48 General Security Agreement between Hudson Technologies Company and Catherine Zugibe, dated March 26, 2009. (17)

10.49 Subordination and Intercreditor Agreement between Catherine Zugibe, Keltic Financial Partners, L.P., Bridge Healthcare Finance, LLC and Hudson Technologies Company, dated March 26, 2009.

10.50 Fourth Amendment to Amended and Restated Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated July 15, 2009. (18)

10.51 Waiver to Loan Agreement among Hudson Technologies Company, Keltic Financial Partners, L.P. and Bridge Healthcare Finance, LLC, dated July 15, 2009. (18)

10.52 First Amendment to Note of the Company in the amount of $1,000,000 dated September 30, 2009 issued in favor of Richard Parrillo. (19)

10.53 Placement Agent Agreement between Roth Capital Partners, LLC and Hudson Technologies, Inc., dated July 31, 2009. (20)

10.54 Warrant dated August 5, 2009, for 73,500 shares of Common Stock issued to Roth Capital Partners, LLC. (22)

10.55 Form of Subscription Agreement. (20)

10.56 Fifth Amendment to Amended and Restated Loan Agreement between Hudson Technologies Company, Keltic Financial Partners II, LP and Bridge Healthcare Finance LLC, dated August 12, 2009. (21)

14 Code of Business Conduct and Ethics. (9)

21 Subsidiaries of the Registrant. (22)

23.1 Consent of BDO Seidman, LLP. (22)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (22)

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (22)

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (22)

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (22)



(1) Incorporated by reference to the comparable exhibit filed with the Company's Registration Statement on Form SB-2 (No. 33-80279-NY).

(2) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999.

(3) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.

(4) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.

(5) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001.

(6) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002.

(7) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004.

(8) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005

(9) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K for the event dated March 3, 2005, and filed May 31, 2005.

(10) Incorporated by reference to Appendix B to the Company's Definitive Proxy Statement on Schedule 14A filed August 18, 2004.

(11) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 2007.

(12) Incorporated by reference to the comparable exhibit filed with the Company's Schedule TO filed June 29, 2007.

(13) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K for the event dated September 9, 2007, filed September 25, 2007.

(14) Incorporated by reference to comparable exhibit filed with the Company's Current Report on Form 8-K for the event dated April 17, 2008, filed April 22, 2008.

(15) Incorporated by reference to Appendix I to the Company's Definitive Proxy Statement on Schedule 14A filed July 29, 2008.

(16) Incorporated by reference to the comparable exhibit filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

(17) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 2009.

(18) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.

(19) Incorporated by reference to the comparable exhibit filed with the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

(20) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K, for the event dated July 31, 2009, filed August 3, 2009.

(21) Incorporated by reference to the comparable exhibit filed with the Company's Current Report on Form 8-K, for the event dated August 12, 2009, filed August 18, 2009.

(22) Filed herewith.

(*) Denotes Management Compensation Plan, agreement or arrangement.



# HUDSON TECHNOLOGIES, INC.

# WARRANT

# Warrant No. 01 Original Issue Date: August 5, 2009

Hudson Technologies, Inc., a New York corporation (the "Company"), hereby certifies that, as partial compensation for placement agent services, Roth Capital Partners, LLC or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of Seventy Three Thousand Five Hundred (73,500) shares of Common Stock (each such share, a "Warrant Share" and collectively, the "Warrant Shares"), at any time and from time to time from and after the date that is six (6) months after the Original Issue Date and through and including August 5, 2014 (the "Expiration Date"), and subject to the following terms and conditions:

1. Definitions. As used in this Warrant, the following terms shall have the respective definitions set forth in this Section 1.

"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

"Business Day" means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of New York or State of California are authorized or required by law or other governmental action to close.

"Common Stock" means the common stock of the Company, par value $0.01 per share, and any securities into which such common stock may hereafter be reclassified.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exercise Price" means $1.4375, subject to adjustment in accordance with Section 9.

"Fundamental Transaction" means any of the following: (i) the Company effects any merger or consolidation of the Company with or into another Person (other than a merger or consolidation in which the Company is the surviving corporation and there is no reclassification of the Common Stock), (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer by the Company during the period in which this Warrant is not exercisable, is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

"New York Courts" means the state courts sitting in the County of Rockland, State of New York and the United District Court for the Southern District of New York.

"Original Issue Date" means the Original Issue Date first set forth on the first page of this Warrant.

"Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

"Rule 144" means Rule 144 promulgated by the Securities and Exchange Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission having substantially the same effect as such Rule.

"Securities Act" means the Securities Act of 1933, as amended.

"Subsidiary" means any "significant subsidiary" as defined in Rule 1-02(w) of the Regulation S-X promulgated by the Securities and Exchange Commission under the Exchange Act.

"Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over the counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over the counter market as reported by the Pink OTC Markets Inc. (or any similar organization or agency succeeding to its functions of reporting



prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

"Trading Market" means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

2. Registration of Warrant. The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3. Registration of Transfers. The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. Notwithstanding the foregoing, if deemed necessary by the Company, as a condition of transferring any portion of this Warrant, it shall have received from the proposed transferee such information and documents as is reasonably necessary so that the portion of the Warrant may be issued to the transferee in compliance with the Act and any applicable state securities laws without registration or qualification thereunder.

4. Exercise and Duration of Warrants. This Warrant shall be exercisable by the registered Holder at any time and from time to time after the date that is 6 months after the Original Issue Date through and including the Expiration Date. At 5:00 p.m. California time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value. The Company may not call or redeem any portion of this Warrant without the prior written consent of the affected Holder.

## 5. Delivery of Warrant Shares.

(a) To effect exercises hereunder, the Holder shall not be required to physically surrender this Warrant unless the aggregate Warrant Shares represented by this Warrant is being exercised. Upon delivery of the Exercise Notice (in the form attached hereto) to the Company (with the attached Warrant Shares Exercise Log) at its address for notice set forth herein (or such other address as the Company shall advise the Holder in writing) and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, the Company shall promptly (but in no event later than seven (7) Trading Days after the Date of Exercise (as defined herein)) issue and deliver to the Holder, a certificate for the Warrant Shares issuable upon such exercise. The Company shall, upon request of the Holder and subsequent to the date on which the Warrant Shares have been publicly sold pursuant to an effective registration statement covering the resale of the Warrant Shares or Rule 144, use its commercially reasonable efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation ("DTC") or another established clearing corporation performing similar functions, if available, provided, that, the Company may, but will not be required to change its transfer agent if its current transfer agent cannot deliver the Warrant Shares electronically through the DTC. A "Date of Exercise" means the date on which the Holder shall have delivered to the Company: (i) the Exercise Notice (with the Warrant Exercise Log attached to it), appropriately completed and duly signed and (ii) if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, payment of the Exercise Price for the number of Warrant Shares so indicated by the Holder to be purchased.

(b) If by the seventh (7th) Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), then the Holder will have the right to rescind such exercise.

(c) If by the seventh (7th) Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), and if after such third (3rd) Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the



Holder in connection with the exercise at issue by (B) the closing bid price of the Common Stock on the Date of Exercise and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

(d) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates representing Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.

6. Investment Representation and Legend. Unless the offering and sale of this Warrant by the Company to Holder is subject to an effective registration statement under the Securities Act, the Holder, by acceptance of this Warrant, represents and warrants to the Company that the holder is acquiring the Warrant for its own account for investment purposes and not with a view toward the distribution thereof. Unless the offering and sale of the Warrant Shares to be issued upon the particular exercise of the Warrant shall have been effectively registered under the Securities Act, the Company shall be under no obligation to issue the Warrant Shares covered by such exercise unless and until the Holder who exercises the Warrant shall provide the Company with such information that it may reasonably request to satisfy itself that the issuance of the Warrant Shares upon exercise of the Warrant complies with an applicable federal and state securities laws, including, but not limited to, a representation by such Holder to the Company, at the time of such exercise, that such person or entity is acquiring such Warrant Shares for his or her or its own account, for investment and not with a view to, or for sale in connection with, the distribution of any such Warrant Shares, in which event the person acquiring such Warrant Shares shall be bound by the provisions of a legend, substantially as follows, which shall be endorsed upon the certificate(s) evidencing the Warrant Shares issued pursuant to such exercise:

"The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"). Such shares may not be sold, transferred or otherwise disposed of unless they have first been registered under the Securities Act or, unless, in the opinion of counsel satisfactory to the Company's counsel, such registration is not required."

7. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

8. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company's obligation to issue the New Warrant.

9. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of Persons other than the Holder (taking into account the adjustments and restrictions of Section 10). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and



fully paid and nonassessable.

10. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 10.

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b) Fundamental Transactions. If, at any time while this Warrant is outstanding there is a Fundamental Transaction, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's option and request, any successor to the Company or surviving entity in such Fundamental Transaction (if other than the Company) shall issue to the Holder a new warrant substantially in the form of this Warrant and consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (b) and ensuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

(c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to this Section 10 the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(d) Calculations. All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(e) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 10, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's transfer agent.

(f) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction (but only to the extent such disclosure would not result in the dissemination of material, non-public information to the Holder) at least ten (10) calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein



shall not affect the validity of the corporate action required to be described in such notice.

11. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners:

(a) Cash Exercise. The Holder may deliver immediately available funds; or

(b) Cashless Exercise. The Holder may notify the Company in an Exercise Notice of its election to utilize cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

 \[ \mathsf{X}=\mathsf{Y}\left[\left(\mathsf{A}-\mathsf{B}\right)/\mathsf{A}\right] \] 

where:

X = the number of Warrant Shares to be issued to the Holder.

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.

A = the average of the closing prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Date of Exercise.

B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.

12. Limitations on Exercise. Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 10 of this Warrant. This restriction may not be waived. Notwithstanding anything to the contrary contained in this Warrant, (a) no term of this Section may be waived by any party, nor amended such that the threshold percentage of ownership would be directly or indirectly increased, (b) this restriction runs with the Warrant and may not be modified or waived by any subsequent holder hereof and (c) any attempted waiver, modification or amendment of this Section will be void ab initio.

13. No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would, otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable Trading Market on the date of exercise.

14. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (California time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:00 p.m. (California time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to Hudson Technologies, Inc., 1 Blue Hill Plaza, Suite 1541, Pearl River, New York 10965, Attn: Chief Executive Officer, or to facsimile no.: (845) 512 6070 (or such other address as the Company shall indicate in writing in accordance with this Section), or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section.

15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon ten (10) days' notice to the



Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.

## 16. Miscellaneous.

(a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns. The foregoing sentence shall be subject to the restrictions on waivers and amendments set forth in Section 12 of this Warrant.

(b) All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated ("Proceedings") (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either party shall commence a Proceeding to enforce any provisions of this Warrant, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorney's fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

(c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(e) The Holder is not entitled to any registration rights, except for the right of the Placement Agent to require the Company to include this Warrant, the exercise of this Warrant and the Warrant Shares in the Prospectus (as defined in the Placement Agent Agreement, dated as of July 31, 2009, by and between Roth Capital Partners, LLC and the Company).

(f) In accordance with Rule 5110(g) of the FINRA Rules, this Warrant and the Warrant Shares shall not be shall not be sold during the Offering (as defined in the Placement Agent Agreement, dated as of July 31, 2009, by and between Roth Capital Partners, LLC and the Company), or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the Original Issue Date.

(g) Prior to exercise of this Warrant, the Holder hereof shall not, by reason of being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

## [SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.



# EXERCISE NOTICE
HUDSON TECHNOLOGIES, INC.
WARRANT DATED AUGUST 5, 2009

The undersigned Holder hereby irrevocably elects to purchase ___ shares of Common Stock pursuant to the above referenced Warrant. Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

(1) The undersigned Holder hereby exercises its right to purchase ___ Warrant Shares pursuant to the Warrant.

(2) The Holder intends that payment of the Exercise Price shall be made as (check one): ___ "Cash Exercise" under Section 11
___ "Cashless Exercise" under Section 11

(3) If the holder has elected a Cash Exercise, the holder shall pay the sum of $___ to the Company in accordance with the terms of the Warrant.

(4) Pursuant to this Exercise Notice, the Company shall deliver to the holder ___ Warrant Shares in accordance with the terms of the Warrant.

(5) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 12 of this Warrant to which this notice relates.

Dated: ___, ___

Name of Holder:

(Print)

By:

Name:

Title:

(Signature must conform in all respects to name of holder as specified on the fact of the Warrant)

## WARRANT SHARES EXERCISE LOG

<table><tr><td>Date</td><td>Number of Warrant Shares Available to be Exercised</td><td>Number of Warrant Shares Exercised</td><td>Number of Warrant Shares Remaining to be Exercised</td></tr><tr><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td><tr><td></td><td></td><td></td><td></td></tr></tr></table>



<table><tr><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td><td></td></tr><tr><td></td><td></td><td></td><td></td><td></td><td></td></tr></table>

# HUDSON TECHNOLOGIES, INC.
WARRANT DATED AUGUST 5, 2009
WARRANT NO. 01

## FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___ the right represented by the above-captioned Warrant to purchase ___ shares of Common Stock to which such Warrant relates and appoints ___ attorney to transfer said right on the books of the Company with full power of substitution in the premises.

Dated: ___ , ___

(Signature must conform in all respects to name of holder as specified on the face of the Warrant)

Address of Transferee

In the presence of:



## Exhibit 21:

Subsidiaries of the Registrant

Hudson Technologies of Tennessee d/b/a Hudson Technologies Company incorporated in the State of Tennessee

Hudson Holdings, Inc. incorporated in the State of Nevada



## Exhibit 23.1:

## Consent of Independent Registered Public Accounting Firm

Hudson Technologies, Inc.

Pearl River, New York

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-17133, No. 333-38598, No. 333-129057 and No. 333-164650) and Form S-3 (No. 333-151973) of Hudson Technologies, Inc. of our report dated March 1, 2010 relating to the consolidated financial statements, which appears in this Form 10-K.

/s/ BDO Seidman, LLP

Valhalla New York

March 1, 2010



# Hudson Technologies, Inc.
Certification of Principal Executive Officer

I, Kevin J. Zugibe, certify that:

1. I have reviewed this annual report on Form 10-K of Hudson Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



/s/ Kevin J. Zugibe
Kevin J. Zugibe
Chief Executive Officer and
Chairman of the Board



# Hudson Technologies, Inc.
Certification of Principal Executive Officer

I, James R. Buscemi, certify that:

1. I have reviewed this annual report on Form 10-K of Hudson Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 1, 2010

/s/ James R. Buscemi
James R. Buscemi
Chief Financial Officer



# CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Hudson Technologies, Inc. (the "Company") on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin J. Zugibe, as Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kevin J. Zugibe
Kevin J. Zugibe
Chief Executive Officer and
Chairman of the Board

March 1, 2010



# CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Hudson Technologies, Inc. (the "Company") on Form 10-K for the period ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof ("Report"), I, James R. Buscemi, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James R. Buscemi
James R. Buscemi
Chief Financial Officer

March 1, 2010