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

Certain statements contained in this section and elsewhere in this Form 10-Q 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 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

The Company has created and developed a service offering known as RefrigerantSideŽ Services. RefrigerantSideŽ 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 RefrigerantSideŽ Services to facilitate the growth and development of its service offerings.

The Company focuses its sales and marketing efforts for its RefrigerantSideŽ Services on customers who the Company believes most readily appreciate and understand the value that is provided by its RefrigerantSideŽ Services offering. In pursuing its sales and marketing strategy, the Company offers its RefrigerantSideŽ 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 RefrigerantSideŽ Services offering.

Sales of refrigerants continue to represent a significant portion of the Company's revenues. Certain of the Company's refrigerant sales are CFC based refrigerants, which are no longer manufactured. The demand for CFC based refrigerants has and will continue to decrease as equipment that utilizes non-CFC based refrigerants displaces those units that utilize CFC based refrigerants. The Company has increased its refrigerant sales from non-CFC based refrigerants, including HCFC and HFC refrigerants. The Act limits the production of HCFC refrigerants, which production was further limited in January 2004. Federal regulations enacted in January 2004 also imposed limitations on the importation of certain HCFC refrigerants. Under the Act, production of certain HCFC refrigerants is scheduled to be phased out during the period 2010 through 2020, and production of all HCFC refrigerants is scheduled

to be phased out by the year 2030. To the extent that the Company is unable to source CFC based or non-CFC based refrigerants on commercially reasonable terms or at all, or the demand for CFC based or non-CFC based refrigerants decreases, the Company's financial condition and results of operations could be materially adversely affected.

Results of Operations

Three Month Period ended September 30, 2009 as compared to the three month period ended September 30, 2008

Revenues for the three month period ended September 30, 2009 were $6,499,000, an increase of $658,000 or 11% from the $5,841,000 reported during the comparable 2008 period. The increase in revenues was primarily attributable to an increase in refrigerant revenues of $798,000 and a decrease in RefrigerantSideŽ Services revenues of $140,000. The increase in refrigerant revenues is primarily related to an increase in the number of pounds of certain refrigerant sold, partially offset by a decrease in the price per pound of refrigerant sold. The decrease in RefrigerantSideŽ Services was attributable to a decrease in the numbers of jobs completed when compared to the same period of 2008.

Cost of sales for the three month period ended September 30, 2009 was $5,827,000, an increase of $1,910,000 or 49% from the $3,917,000 reported during the comparable 2008 period. The increase in cost of sales was primarily due to the increase in the number of pounds of refrigerant sold. As a percentage of sales, cost of sales was 90% of revenues for 2009, an increase from the 67% reported for the comparable 2008 period. The increase in cost of sales as a percentage of revenues was primarily attributable to a decrease in the selling price per pound and an increase in the Company's cost of refrigerants it sold.

Operating expenses for the three month period ended September 30, 2009 were $941,000 a decrease of $341,000 from the $1,282,000 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 and eliminations of positions, and reduction in professional fees.

Other income (expense) for the three month period ended September 30, 2009 was ($368,000), compared to the ($298,000) reported during the comparable 2008 period. Other income (expense) includes interest expense of $368,000 and $299,000 for the comparable 2009 and 2008 periods, respectively. The increase in interest expense is primarily attributed to an increase in outstanding indebtedness.

Income tax expense (benefit) for the three month period ended September 30, 2009 and 2008 was $21,000 compared to the (2,395,000) reported during the comparable 2008. The increase in income tax expense was attributable to various state and local taxes. The 2008 income tax benefit of $2,395,000 was due to a reduction of a portion of the valuation allowance against the deferred tax asset.

Net loss for the three month period ended September 30, 2009 was ($658,000) compared to net income of $2,739,000 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 $2,395,000 income tax benefit.

Nine Month Period ended September 30, 2009 as compared to the nine month period ended September 30, 2008

Revenues for the nine month period ended September 30, 2009 were $21,398,000, a decrease of $8,898,000 or 29% from the $30,296,000 reported during the comparable 2008 period. The decrease in revenues was primarily attributable to a decrease in refrigerant revenues of $8,590,000 and a decrease in RefrigerantSideŽ Services revenues of $308,000. The decrease in refrigerant revenues is primarily related to a decrease in the number of pounds of certain refrigerant sold. The decrease in RefrigerantSideŽ Services was attributable to a decrease in the numbers of jobs completed when compared to the same period of 2008.

Cost of sales for the nine month period ended September 30, 2009 was $17,682,000, a decrease of $1,950,000 or 10% from the $19,632,000 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 83% of revenues for 2009, an increase from the 65% 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 refrigerants it sold.

Operating expenses for the nine month period ended September 30, 2009 were $3,395,000 a decrease of $765,000 from the $4,160,000 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 and eliminations of positions and reduction in professional fees.

Other income (expense) for the nine month period ended September 30, 2009 was ($1,138,000), compared to the ($865,000) reported during the comparable 2008 period. Other income (expense) includes interest expense of $1,138,000 and $868,000 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 nine month period ended September 30, 2009 and 2008 was ($48,000) and ($1,851,000), 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.

Net loss for the nine month period ended September 30, 2009 was ($769,000) compared to net income of $7,490,000 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 $2,395,000 income tax benefit.

Liquidity and Capital Resources

At September 30, 2009, the Company had working capital, which represents current assets less current liabilities, of $10,566,000 a decrease of $533,000 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 September 30, 2009, the Company had inventories of $14,270,000 a decrease of $9,343,000 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 September 30, 2009, the Company had trade receivables, net of allowance for doubtful accounts of $3,030,000 an increase of $1,299,000 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 nine month period ended September 30, 2009, was $3,516,000 compared with net cash used by operating activities of $1,822,000 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 an increase in accounts receivable and a decrease in accounts payable and accrued expenses.

Net cash used by investing activities for the nine month period ended September 30, 2009, was $380,000 compared with net cash used by investing activities of $498,000 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 nine month period ended September 30, 2009, was $1,912,000 compared with net cash provided by financing activities of $2,777,000 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 September 30, 2009, the Company had cash and cash equivalents of $1,438,000. 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 2009 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 September 30, 2009 (in 000's):

                                          Twelve Month Period ended September 30,

                                         2010     2011     2012   2013    2014    Total
Long and short term debt and capital
lease
     obligations (1) & (2)             $6,839   $4,388     $999   $ 25     $ 7  $12,258
Operating leases                          657      484      167     56      --    1,364

Total contractual cash obligations     $7,496   $4,872   $1,166   $ 81     $ 7  $13,622
                                        =====    =====    =====   ====    ====    =====


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(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 September 30, 2009.

(2) Long and short term debt and capital lease obligations include payment of obligations of outstanding principal amounts of debt as of September 30, 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, through HTC, entered into the Facility with and Keltic and on April 17, 2008, the Facility with Keltic was amended to secure the participation of Bridge and to provide for borrowings of up to $15,000,000. 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 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 September 30, 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 September 30, 2009, Hudson had $3,900,000 of borrowings outstanding and $3,000,000 available for borrowing under the revolving line of credit. In addition, as of September 30, 2009, Hudson had $4,750,000 of borrowings outstanding under the A and B term loans.

In connection with the April 2008 amendment to the Facility, the Company issued to the lenders 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, through HTC, entered into a waiver to the loan agreement with respect to the Facility which, among other things, waived HT's violation of the minimum EBITDA for the fiscal year ending June 30, 2009 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 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").

An initial 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.

During the three month period ended September 30, 2009, the Company issued 32,173 shares of its common stock to certain vendors and the Company will expense approximately $44,000 as professional fees as the services are rendered by the vendors.

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 5 acres of vacant land immediately adjacent to its Champaign, Illinois facility for a total purchase price of $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 its existing credit 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 RefrigerantSideŽ Services and/or refrigerant sales or additional expansion or acquisition costs that may arise in the future 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, primarily 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 refrigerants, which are the most widely used refrigerants. Effective January 1, 1996, the Act limits the production of HCFC refrigerants, which production was further limited in January 2004. Federal regulations enacted in January 2004 also imposed limitations on the importation of certain HCFC refrigerants. Under the Act, production of certain 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 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 nine month period ended September 30, 2009, one customer accounted for approximately 10% of the Company's revenues. For the nine month period ended September 30, 2008, one customer accounted for approximately 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 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. 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 RefrigerantSideŽ Service revenues as refrigerant sales. The Company is continuing to assess its RefrigerantSideŽ 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 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-Q 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 generally accepted accounting principles 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. There is no deferral for financial assets and financial liabilities, nor for the rare non-financial assets and non-financial liabilities that are remeasured at fair value at least annually. 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 . . .