Investors Capital 10Q 2010 Q3 Quarterly report

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

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

FORM 10-Q

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

For the quarterly period ended December 31, 2009

Commission File Number: 1-16349

INVESTORS CAPITAL HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)


DELAWARE		04-3284631
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

	230 Broadway E.
	Lynnfield, Massachusetts 01940
	(Address of principal executive offices)

	(781) 593-8565
	(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Number of shares outstanding of our only class of common stock as of February 5, 2010: 6,591,919

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Table of Contents

PART I

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FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 4T. CONTROLS AND PROCEDURES

PART II

--------------------------------------------------------------------------------
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 6. EXHIBITS
SIGNATURES

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Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


PART I	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

	INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
	CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		December 31, 2009	March 31, 2009

Assets
Current assets
Cash and cash equivalents		$ 5,548,923	$ 6,151,613
Deposit with clearing organization, restricted		175,000	175,000
Accounts receivable		5,710,358	5,198,575
Accounts receivable-Fidelity Bond		-	956,223
Note receivable (current)		756,432	8,674
Loans receivable from registered representatives, net of allowance		662,351	737,571
Prepaid income taxes		-	295,608
Marketable securities, at market value		3,077	85,436
Prepaid expenses		559,155	858,679
		13,415,296	14,467,379

Property and equipment, net		758,051	950,620

Long-term investments
Loans receivable from registered representatives (long-term)		232,123	129,358
Note Receivable		-	747,617
Investments		223,910	127,143
Non-qualified deferred compensation investment		898,835	533,665
Cash surrender value life insurance policies		528,118	406,089
		1,882,986	1,943,872
Other assets
Deferred tax asset, net		845,504	1,097,952
Other assets		202,238	44,511
		1,047,742	1,142,463

TOTAL ASSETS		$ 17,104,075	$ 18,504,334

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable		$ 628,792	$ 2,029,286
Accrued expenses		840,239	2,347,761
Income taxes payable		274,567	-
Note payable		-	1,044,805
Unearned revenues		1,500,138	94,259
Commissions payable		2,436,485	2,860,093
Securities sold, not yet purchased, at market value		-	7,056
		5,680,221	8,383,260
Long-term liabilities
Non-qualified deferred compensation		923,529	541,993
		923,529	541,993

TOTAL LIABILITIES		6,603,750	8,925,253

Commitments and contingencies

Stockholders' Equity:
Common stock, $.01 par value, 10,000,000 shares authorized;
6,595,804 issued and 6,591,919 outstanding at December 31, 2009;
6,570,177 issued and 6,566,292 outstanding at March 31, 2009		65,955	65,702
Additional paid-in capital		12,043,663	11,852,467
Accumulated deficit		(1,599,330)	(2,285,622)
Less: Treasury stock, 3,885 shares at cost		(30,135)	(30,135)
Accumulated other comprehensive income		20,172	(23,331)
	Total stockholders' equity	10,500,325	9,579,081

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$ 17,104,075	$ 18,504,334


See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)


	2009	2008
Revenue:
Commissions	$ 17,170,742	$ 15,002,034
Advisory fees	3,159,770	2,681,734
Other fee income	514,064	398,811
Marketing revenue	124,574	150,000
Interest, dividend and investment	81,879	118,941
Total revenue	21,051,029	18,351,520

Commission and advisory fee expenses	16,884,955	14,370,627
Gross profit	4,166,074	3,980,893

Operating expenses:
Advertising	259,091	267,918
Communications	167,576	267,047
Selling expense	426,667	534,965

Compensation and benefits	1,820,196	2,197,976
Regulatory, legal and professional	579,701	1,400,626
Occupancy	202,643	251,628
Other administrative	419,416	401,226
Interest expense	1,536	4,374
Administrative Expense	3,023,492	4,255,830

Total operating expense	3,450,159	4,790,795

Operating income (loss) before taxes	715,915	(809,902)
Provision (benefit) for income taxes	287,857	(195,187)
Net income (loss)	$ 428,058	$ (614,715)

Earnings per common share:
Basic earnings (loss) per common share	$ 0.07	$ (0.10)
Diluted earnings per common share	$ 0.06	N/A

Dividends per common share:
Basic earnings per common share	$ -	$ -
Diluted earnings per common share	$ -	$ -

Share data:

Weighted average shares used in basic earnings per common share calculations	6,514,017	6,443,105
Incremental shares from assumed exercise of stock options and restricted shares	266,462	894,569
Weighted average shares used in diluted earnings per common share calculations	6,780,479	7,337,674


See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)

	2009	2008
Revenue:
Commissions	$ 48,241,478	$ 53,740,265
Advisory fees	8,463,511	8,728,455
Other fee income	762,402	676,855
Marketing revenue	829,336	756,465
Interest, dividend and investment	304,937	451,173
Total revenue	58,601,664	64,353,213

Commission and advisory fee expenses	47,135,148	51,595,479
Gross profit	11,466,516	12,757,734

Operating expenses:
Advertising	651,973	1,032,823
Communications	513,431	902,096
Selling expense	1,165,404	1,934,919

Compensation and benefits	5,309,706	7,197,913
Regulatory, legal and professional	1,706,684	3,240,607
Occupancy	642,351	822,827
Other administrative	1,189,268	1,168,040
Interest expense	18,150	25,972
Administrative Expense	8,866,159	12,455,359

Total operating expense	10,031,563	14,390,278

Operating income (loss) before taxes	1,434,953	(1,632,544)
Provision (benefit) for income taxes	748,661	(251,360)
Net income (loss)	$ 686,292	$ (1,381,184)

Earnings per common share:
Basic earnings (loss) per common share	$ 0.11	$ (0.22)
Diluted earnings per common share	$ 0.10	N/A

Dividends per common share:
Basic earnings per common share	$ -	$ -
Diluted earnings per common share	$ -	$ -

Share data:

Weighted average shares used in basic earnings per common share calculations	6,497,885	6,415,869
Incremental shares from assumed exercise of stock options and restricted shares	252,049	607,306
Weighted average shares used in diluted earnings per common share calculations	6,749,934	7,023,175


See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)

	Common Stock						Accumulated
	$.01 Par Value		Additional	Comprehensive	Retained		Other	Total
	Number of	Carrying	Paid-In	Income	Earnings	Treasury	Comprehensive	Stockholders'
	Shares	Amount	Capital	(loss)	(Deficit)	Stock	Income (Loss)	Equity

Balance at April 1, 2008	6,535,871	$ 65,359	$ 10,886,381		$ (455,623)	$ (30,135)	$ 28,674	$ 10,494,656
Stock-based compensation:
Exercise of stock options	34,760	347	121,380					121,727
Amortization of deferred compensation			671,252					671,252
Issuance of common stock under Plans	2,000	20	4,610					4,630
Comprehensive income:
Net loss				(1,381,184)	(1,381,184)			-
Other comprehensive income:
Unrealized gain on securities:
Unrealized holding gain (loss) arising during
the period, no tax effect				(41,982)
Other comprehensive loss				(41,982)			(41,982)

Comprehensive loss				(1,423,166)				(1,423,166)

Balance at December 31, 2008	6,572,631	$ 65,726	$ 11,683,623	-	$ (1,836,807)	$ (30,135)	$ (13,308)	$ 9,869,099
Balance at April 01, 2009	6,570,177	$ 65,702	$ 11,852,467		$ (2,285,622)	$ (30,135)	$ (23,331)	$ 9,579,081
Stock-based compensation:
Amortization of deferred compensation			191,449					191,449
Issuance of common stock under plans	28,701	287	(287)					-
Cancelled restricted shares	(3,074)	(34)	34					-
Comprehensive income:
Net income				686,292	686,292			-
Other Comprehensive Income:
Unrealized gain on securities:
Unrealized holding gains arising during
the period, no tax effect				43,503
Other comprehensive income				43,503			43,503

Comprehensive income				729,795				729,795

Balance at December 31, 2009	6,595,804	$ 65,955	$ 12,043,663	$ -	$ (1,599,330)	$ (30,135)	$ 20,172	$ 10,500,325


See Notes to Condensed Consolidated Financial Statements

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008 (UNAUDITED)

	2009	2008
Cash flows from operating activities:
Net income (loss)	$ 686,292	$ (1,381,184)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization	261,330	291,018
Loss on disposal of equipment	1,199	-
Amortization of discount on U.S. Treasury note	-	(2,139)
Forgivable loan principal charged to commission expense	98,684	-
Registered representative loans written off	(126,311)	-
Allowance for doubtful accounts on loans receivable, net of recovery	76,710	174,150
Valuation allowance income taxes	24,008	-
Deferred taxes	228,440	(322,693)
Stock-based compensation	191,449	675,882
Unrealized loss in marketable securities	748	(9,889)
Non-qualified deferred compensation investment	16,366	4,072
Market adjustment cash surrender value life insurance policy	(31,365)	21,658

Change in operating assets and liabilities:
Accounts receivable	(511,783)	503,078
Accounts receivable - Fidelity Bond	956,223	-
Loans receivable from registered representatives	(76,628)	(198,784)
Prepaid expenses and other assets	272,579	240,372
Prepaid income taxes	295,608	740,935
Income taxes payable	274,567	-
Securities, net	74,555	(9,673)
Accounts payable	(1,400,494)	(45,920)
Accrued expenses	(1,507,522)	113,473
Unearned revenues	1,405,879	1,497,615
Commissions payable	(423,608)	(643,263)
Net cash provided by operating activities	786,926	1,648,708

Cash flows from investing activities:
Acquisition of property and equipment	(69,961)	(128,853)
Capitalized internal software costs	(130,781)	-
(Payments) cash surrender value life insurance policies	(90,664)	(54,664)
Note receivable	(141)	(141)
Proceeds from maturity of Certificate of deposit	-	250,000
Purchase of investments	(53,264)	(3,323)
Net cash (used in) provided by investing activities	(344,811)	1,063,019

Cash flows from financing activities:
Payments on note payable	(1,044,805)	(853,412)
Exercise of stock options	-	121,727
Net cash used in financing activities	(1,044,805)	(731,685)

Net increase (decrease) in cash and cash equivalents	(602,690)	1,980,042
Cash and cash equivalents, beginning of period	6,151,613	4,340,082
Cash and cash equivalents, end of period	$ 5,548,923	$ 6,320,124

Supplemental disclosures of cash flow information:
Interest paid	$ 18,150	$ 25,972
Income taxes paid	$ 140,094	$ -


See Notes to Condensed Consolidated Financial Statements.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
(UNAUDITED)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Incorporated in July 1995 under Massachusetts law and redomiciled under Delaware law in November 2007, Investors Capital Holdings, Ltd. ("ICH") is a holding company whose wholly-owned subsidiaries assist a nationwide network of independent registered representatives ("representatives") in providing a diversified line of financial services to the public including securities brokerage, investment advice, asset management, financial planning and insurance. Our subsidiaries include the following:

Investors Capital Corporation ("ICC") is duly registered under the Securities Exchange Act of 1934, theInvestment Advisers Act of 1940 and applicable state law to provide broker-dealer and investment advisoryservices nationwide. ICC’s national network of independent financial representatives is licensed to provide theseservices through ICC under the regulatory purview of the Securities and Exchange Commission (the “SEC”), theFinancial Industry Regulatory Agency (“FINRA”) and state securities regulators. ICC clears its public customeraccounts on a fully disclosed basis through a clearing broker. ICC, doing business as Investors Capital Advisors(“ICA”), also provides investment advisory services.
ICC Insurance Agency, Inc. facilitates the sale of insurance and annuities by our representatives.
Investors Capital Holdings Securities Corporation ("ICH Securities") holds cash, cash equivalents, interest incomeand dividend income for ICH.
In the past, Eastern Point Advisors, Inc. ("EPA") had been the Company’s primary provider of investmentadvisory services. EPA withdrew its investment advisor registration with the SEC on May 5, 2008. EPA ceasedoperations and voluntarily dissolved during the fiscal quarter ended June 30, 2008. EPA’s net assets and equitywere transferred to ICC and ICH, respectively.

INTERIM FINANCIAL REPORTING:

The accompanying interim unaudited condensed consolidated financial statements of Investors Capital Holdings, Ltd. and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Quarterly Report on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all of the adjustments necessary for a fair presentation of the results of the interim periods presented. Operating results for the three and nine month period ended December 31, 2009 are not necessarily indicative of the results that may be expected for the year ending March 31, 2010. The balance sheet at March 31, 2009 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended March 31, 2009 filed with the SEC.

USE OF ESTIMATES AND ASSUMPTIONS:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS:

Certain amounts in prior periods have been reclassified to remain consistent with the current period financial statement presentation.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

Company revenue recognition policies are summarized below.

Mutual Funds/Variable Annuities.Revenue from the sale of mutual funds and variable annuities is recognized as of the date the check and application is accepted by the investment company.

Brokerage.The Company earns commissions through stock purchase and sale transactions, mutual fund purchases, government and corporate bonds transactions, fee-based managed accounts and ticket charges. The Company also earns revenue in the form of 12b-1 fees and interest on account balances. The earnings process is substantially complete at trade date in accordance with the rules of FINRA and the SEC.

The Company also receives credit for clearing charge adjustments that are netted against any clearing charges the Company may incur for the period. These adjustments are recognized as income in the period received unless otherwise noted by the clearing Company.

Unrealized gains and losses are recorded at the time that the Company reconciles its trading positions with the market value. The unrealized gains or losses are adjusted to market until the position is settled or the trade is cancelled.

Advisory Fees.Our managed accounts advisory fees are based on the amount of assets managed per agreement negotiated between our independent representatives and their clients. These revenues are recorded quarterly as and when billed based on the fair market value of assets managed throughout the quarter. Any portion remaining uncollected due to account adjustments after account rebalancing is charged against earnings at quarter end.

Administration Fees.Administration fees for services rendered to the Company’s representatives respecting annual FINRA license renewals and Error and Omissions (“E&O”) insurance are recognized as revenue upon registration of the representative with FINRA and listing of the registered representative with the E&O insurance carrier. The funds received from the registered representative are initially recorded as unearned revenue. The amounts collected in excess of the E & O insurance premium and/or fees due FINRA, if any, are recognized as revenue. Fees collected to maintain books and records are deferred and recognized ratably throughout the year.

Marketing Revenue.Revenue from marketing associated with product sales is recognized quarterly based on production levels. Marketing event revenues are recognized at the commencement of each event offset by its costs.

Accounts Receivable – Allowance for Doubtful Accounts

The Company’s policy for determining whether a receivable is considered uncollectible is as follows:

Loans to Representatives. Management performs periodic evaluations and provides an allowance based on the assessment of specifically identified unsecured receivables and other factors, including the representative's payment history and production levels. Once it is determined that it is both probable that a loan has been impaired, typically due to the termination of the relationship, and the amount of loss can reasonably be estimated, the portion of the loan balance estimated to be uncollectible is so classified. See “Note 6 - Loans to Registered Representatives”.

Trade Receivables.As prescribed by the SEC, trade receivables usually settle within three days. If a trade error results, the Company pursues remedies to collect on the trade error. The Company does not record a receivable resulting from a trade error that is in litigation or whose outcome is otherwise not reasonably determinable. In such a case, the Company applies any proceeds from settlements or insurance against any trade losses incurred.

Internal Use Software

Cost incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Capitalized costs are recorded as part of equipment and improvements. Training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life, generally three years.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Income Taxes

The Company uses the asset and liability method to account for income taxes, which requires recognition of deferred tax assets, subject to valuation allowances, and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income or loss in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has recorded a valuation allowance against the deferred tax assets in the current period. Management believes it is more likely than not that the remaining deferred tax assets will be realized.

We provide reserves for potential payments of tax to various tax authorities related to uncertain tax positions and other issues. Reserves related to uncertain tax positions are based on a determination of whether and how much of a tax benefit taken in our tax filings or positions is more likely than not to be realized, assuming that the matter in question will be raised by the tax authorities. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense. We believe appropriate provisions for outstanding issues have been made.

RECENTLY ISSUED ACCOUNTING STANDARDS:

In June 2008, the FASB issued FASB ASC 260 which requires unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents to be treated as participating securities and, therefore, included in the earnings allocation in computing earnings per share under the two-class method. It is effective for fiscal years beginning after December 15, 2008 (April 1, 2009 for the Company), and interim periods within those fiscal years. The adoption of ASC 260 did not have an impact on the Company’s consolidated financial statements.

NOTE 2 - SEGMENT INFORMATION

The Company evaluates segment performance based on several factors, including operating profit. The Company uses operating profit as a measure of the operating segment performance because it excludes the impact of corporate-driven decisions related to interest expense and income taxes. The Company's reportable segments include broker/dealer and related services offered through ICC and asset management (investment advisory) services offered through ICA and, previously, EPA. The Company's reportable segments are strategic business units that offer different services. They are managed separately because each business requires distinct marketing strategies and varied technological and operational support.

ICC earns commissions as a broker for its customers in the purchase and sale of securities on major exchanges and other public markets. Asset management services generate recurring revenue from fees received on the management of customer accounts.

Our business is presented in segments reflecting the way we make operating decisions and assess performance. In presenting segment data, all corporate overhead items are allocated to the segments, and inter-segment revenue, expense, receivables and payables are eliminated. Currently it is impractical to report segment information using geographical concentration.

Assets are allocated among ICH and its subsidiaries based upon legal ownership and the services provided. Total period-end assets are presented in this Note 2 on a stand-alone basis, i.e., without inter-company eliminations. Corporate items and eliminations are presented in the following table for the purpose of reconciling the stand-alone asset amounts to total consolidated assets.

Effective October 1, 2008, management modified the expense sharing agreement between ICH and ICC to allocate overhead expenses, previously allocated entirely to ICH, separately to the parent and subsidiary. Costs associated with shared personnel are allocated between the two entities based upon time studies and a determination of which entities are the beneficiaries of the services rendered by the personnel. Within ICC, expenses are further allocated between the brokerage and asset management segments as follows: overhead expenses pro rata to revenue, direct full-time and timeshared employee costs based on the segments being served, and other personnel-related expenses pro rata to head count.

Effective July 1, 2009, ICC agreed to reimburse ICH in the form of a management fee for ICH-incurred overhead expenses that are necessary for ICC to effectively conduct its operations. This overhead primarily is in the nature of salaries and professional and legal fees incurred to obtain such services as audit engagements, legal advice, and industry expertise.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


Segment reporting is as follows for the quarters ended:
	December 31,
	2009	2008
Non-interest revenues:
ICC brokerage services	$ 17,757,249	$ 15,501,594
ICA asset management services	3,217,189	2,730,985
ICH gain (loss) on investment	(9,005)	(11,188)
Total	$ 20,965,433	$ 18,221,391

Interest and dividend income, net:
ICC	$ 83,402	$ 126,714
ICH	2,180	3,402
ICH Securities	13	13
Total	$ 85,595	$ 130,129

Depreciation and amortization expenses:
ICC brokerage services	$ 84,863	$ 94,923
ICA asset management services	1,167	1,167
Total	$ 86,030	$ 96,090

Operating income (loss):
ICC brokerage services	$ 488,676	$ (447,634)
ICA asset management services	336,727	252,946
ICH	(109,501)	(615,227)
ICH Securities	13	13
Total	$ 715,915	$ (809,902)

Period end total assets:
ICC brokerage services	$ 14,317,172	$ 12,986,493
ICA asset management services	1,223,954	1,187,881
ICH	3,003,951	3,716,731
ICH Securities	10,226	10,175
Corporate items and eliminations	(1,451,228)	(1,358,670)
Total	$ 17,104,075	$ 16,542,610

Corporate items and eliminations:
Inter-company eliminations	$ (831,458)	$ (1,358,670)
Income taxes	(619,770)	-
Total	$ (1,451,228)	$ (1,358,670)

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


Segment reporting is as follows for the nine months ended:

	December 31,
	2009	2008
Non-interest revenues:
ICC brokerage services	$ 49,683,146	$ 55,016,348
ICA asset management services	8,645,775	8,885,693
ICH gain (loss) on investment	(18,365)	(4,071)
Total	$ 58,310,556	$ 63,897,970

Interest and dividend income, net:
ICC	$ 284,058	$ 445,521
ICH	7,012	9,684
ICH Securities	38	38
Total	$ 291,108	$ 455,243

Depreciation and amortization expenses:
ICC brokerage services	$ 257,830	$ 287,518
ICA asset management services	3,500	3,500
Total	$ 261,330	$ 291,018

Operating income (loss):
ICC brokerage services	$ 1,448,985	$ (143,766)
ICA asset management services	807,323	912,932
ICH	(821,393)	(2,401,748)
ICH Securities	38	38
Total	$ 1,434,953	$ (1,632,544)

Period end total assets:
ICC brokerage services	$ 14,317,172	$ 12,986,493
ICA asset management services	1,223,954	1,187,881
ICH	3,003,951	3,716,731
ICH Securities	10,226	10,175
Corporate items and eliminations	(1,451,228)	(1,358,670)
Total	$ 17,104,075	$ 16,542,610

Corporate items and eliminations:
Inter-company eliminations	$ (831,458)	$ (1,358,670)
Income taxes	(619,770)	-
Total	$ (1,451,228)	$ (1,358,670)

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

NOTE 3 - LITIGATION AND REGULATORY MATTERS

In the ordinary course of business, the Company routinely is a defendant in or party to pending and threatened legal actions and proceedings, including actions and arbitrations brought on behalf of various investors. Certain of these actions and proceedings are based on alleged violations of consumer protection, securities and other laws and may involve claims for substantial monetary damages asserted against the Company and its subsidiaries. Also, the Company and its subsidiaries are subject to regulatory examinations, information gathering requests, inquiries, investigations and formal administrative proceedings that may result in fines or other negative impact on the Company. ICC, as a duly registered broker/dealer and investment advisor, is subject to regulation by the SEC, FINRA, NYSE Amex (formerly the American Stock Exchange) and state securities regulators.

The Company maintains E&O insurance to protect itself from potential damages and/or legal costs associated with certain litigation and arbitration proceedings and, as a result, in the majority of cases the Company’s exposure is limited to $100,000 in any one case, subject to policy limitations and exclusions. The maximum exposure in any one case with coverage was $75,000 per the Company’s E&O policy through December 31, 2008. The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to a $200,000 deductible per case, subject to policy limitations and exclusions.

The Company had accrued expenses of $446,452 and $2,267,522 as of December 31, 2009 and March 31, 2009, respectively, related to legal fees and estimated probable settlement costs.

NOTE 4 - STOCK BASED COMPENSATION

The Company measures and recognizes compensation expense for all share-based awards made to representatives, officers, employees and directors based on estimated fair values. Under the modified prospective transition method selected by the Company, all equity-based awards granted to employees and modifications of existing awards are accounted for at fair value with compensation expense recorded as a component of net (loss) income. The Company periodically issues common stock to employees, directors, officers, representatives and other key individuals in accordance with the provisions of the shareholder approved equity compensation plans.

Stock Awards

Shares of stock granted under Company’s 2005 Equity Incentive Plan (the “2005 Plan”) as of December 31, 2009 have been either fully vested at date of grant or subject to vesting over time periods varying from one to five years after the date of grant, unvested shares being subject to forfeiture in the event of termination of the grantee’s relationship with the Company, other than for death or disability. The compensation cost associated with these stock grants is recognized over the vesting period of the shares and is calculated as the market value of the shares on the date of grant. Stock grants have been recorded as deferred compensation, which is a component of paid-in capital within stockholders’ equity on the Company’s Consolidated Balance Sheets.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


The following activity occurred during the three months ended December 31, 2009:
		Weighted Ave	Weighted Average
	Shares	Stock Price	Vested Life	Fair Value
Non-vested at October 1, 2009	94,745	$ 3.63	0.99 years	$ 343,924
Granted	-			-
Vested	(15,460)	$ 3.94		(60,912)
Canceled	(2,366)	$ 3.67		(8,683)
Non-vested at December 31, 2009	76,919	$ 3.56	0.86 years	$ 273,832

The following activity occurred during the nine months ended December 31, 2009:
		Weighted Ave	Weighted Average
	Shares	Stock Price	Vested Life	Fair Value
Non-vested at April 1, 2009	96,913	$ 4.11	1.66 yrs	$ 398,312
Granted	28,701	$ 2.65		76,058
Vested	(45,620)	$ 4.12		(187,954)
Canceled	(3,075)	$ 3.97		(12,208)
Non-vested at December 31, 2009	76,919	$ 3.56	1.83 years	$ 273,832

The Company’s net income for the three months ended December 31, 2009 includes $33,635 of compensation costs related to the Company’s grants of stock to executives and employees, and $34,443 for grants to independent representatives, under the Plan. During the three months ended December 31, 2008 the Company incurred $166,047 of compensation costs related to the Company’s grants of stock to executives and employees, and $34,028 for grants to independent representatives, under the Plan.

The Company’s net income for the nine months ended December 31, 2009 includes $96,544 of compensation costs related to grants to executives and employees, and $94,905 for grants to independent representatives, under the Plan. For the nine months ended December 31, 2008 the Company incurred $531,791 of compensation costs related to grants to executives and employees, and $144,091 for grants to independent representatives, under the Plan.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Stock Options

The following table summarizes information regarding the Company's employee and director fixed stock options as of December 31, 2009 and, 2008:


Employee, Director and Officers	2009		2008
Fixed Options		Weighted-Average		Weighted-Average
	Shares	Exercise Price	Shares	Exercise Price

Outstanding at beginning of year	150,000	$1.00	150,000	$1.00
Granted	-		-
Forfeited	-		-
Exercised	-		-
Reclassified(non-employee)	-		-

Outstanding at quarter end	150,000	$1.00	150,000	$1.00

Options exercisable at quarter-end	150,000		150,000

The following table summarizes further information about employee and Directors' fixed stock options outstanding as of December 31, 2009:


Options Outstanding		Options Exercisable

		Weighted-Average
Range Of	Number	Remaining		Number	Weighted-Average
Exercise Prices	Outstanding	Contractual Life	Exercise Price	Exercisable	Exercise Price


$1.00	150,000	No Stated Maturity	$1.00	150,000	$1.00

NOTE 5 - NOTE RECEIVABLE

On October 24, 2005, the Company entered into an agreement (the “Transition Agreement”) with Dividend Growth Advisors, LLC (“DGA”). Pursuant to the Transition Agreement, the Company agreed to terminate its Investment Advisory Agreement with Eastern Point Advisors Funds Trust (the “Trust”) effective October 18, 2005 and to permit the appointment by the Trust of DGA to succeed the Company as the Trust’s investment advisor. The Company had served since 1999 as Investment Advisor for the funds sponsored by the Trust, and DGA had provided investment advisory services to the Trust since 2004 pursuant to a subcontract with the Company. DGA entered into a new advisory agreement directly with the Trust.

Under the terms of the Transition Agreement and an associated promissory note, the receivable owed by the Funds to the Company was assigned to DGA and DGA agreed to pay the Company an amount equal to the total of all fees that the Company had waived or remitted to a fund in the Trust through October 18, 2005. In addition, DGA agreed to pay the Company 10 basis points on the assets raised by the Company’s broker dealer, ICC, at the effective time of transition, October 18, 2005 subject to “mark to market” adjustments. These fees are paid to the Company on a quarterly basis. Although these payments are part of the agreement between DGA and the Trust, they are not part of the terms of the note and are deemed separate.

The note provides for a principal amount of $747,617, quarterly payments of interest accruing thereon at a 5.5% annual rate, and full payment on or before October 31, 2010. Prepayments are permitted without penalty. Interest accrued for the periods ended December 31, 2009 and March 31, 2009 were $8,815 and $8,674, respectively.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

NOTE 6 – LOANS TO REGISTERED REPRESENTATIVES

ICC has granted loans to certain registered representatives with the stipulation that the loans will be forgiven if the representatives remain licensed with the Company for an agreed upon period of time, generally one to five years, and/or meet specified performance goals. Upon forgiveness, the loans are charged to commission expense for financial reporting purposes.

Some loans to registered representatives are not subject to a forgiveness contingency. These loans, as well as loans that have failed the forgiveness contingency, typically are repayable to the Company by deducting a portion of the representatives’ commission payouts throughout the commission cycle until the loans are paid off. Interest charged on these loans to representatives range from 3.1% to 11.25% annually.


Loans to registered representatives are as follows:

	December 31,	March 31,
	2009	2009

Non-forgiveable	$ 237,354	$ 567,576
Forgiveable	704,798	396,632
Less: allowance	(47,678)	(97,279)
Total loans	$ 894,474	$ 866,929

NOTE 7 - INVESTMENTS

Securities not readily marketable include investment securities (a) for which there is no market on a securities exchange or no independent publicly quoted market, (b) that cannot be publicly offered or sold unless registration has been effected under the Securities Act of 1933, or (c) that cannot be offered or sold because of other arrangements, restrictions, or conditions applicable to the securities or to the Company. The Company became aware of factors that indicated a decrease in the value of their private equity investments which was considered to be other than temporary. The Company reduced the value of these investments to $0 as of March 31, 2009. The Company also had a mutual fund investment, deemed available for sale, ‘The Rising DividendGrowthFund’. The fair market value of this investment, respectively, was $173,910 and $127,143 as of December 31, 2009 and March 31, 2009.

As of December 31, 2009, the Companyclassified its investments as held to maturity. These investments are presented at fair value as follows as of December 31, 2009:



Purchase	Purchase			Interest
Date	Price	Description	Face Value	Date

		Insight Real Estate Series 2007 – A
12/1/2009	$ 50,000	Secured debentures	$ 50,000	Quarterly

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

NOTE 8 – FAIR VALUE MEASUREMENTS

On April 1, 2008, the Company adopted the provisions of FASB ASC 820 for certain financial assets and financial liabilities that are measured at fair value on a recurring basis. ASC 820 provides a consistent definition of fair value, with a focus on exit price from the perspective of a market participant.

The Company holds short-term money market investments, commercial paper, investments in private equity, and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted prices when available or through the use of alternative approaches when market quotes are not readily accessible or available.

Valuation techniques for fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s best estimate, considering all relevant information. These valuation techniques involve some level of management estimation and judgment. The valuation process to determine fair value also includes making appropriate adjustments to the valuation model outputs to consider risk factors.

The fair value hierarchy of the Company’s inputs used in the determination of fair value for assets and liabilities during the current period consists of three levels. Level 1 inputs are comprised of unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 inputs incorporate the Company’s own best estimate of what market participants would use in pricing the asset or liability at the measurement date where consideration is given to the risk inherent in the valuation t echnique and the risk inherent in the inputs to the model. If inputs used to measure an asset or liability fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the asset or liability. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table presents financial assets and liabilities measured at fair value on a recurring basis and their related valuation inputs as of December 31, 2009:

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


Assets and Liabilities Measured at Fair Value on a Recurring Basis

December 31, 2009		Fair Value Measurements of Reporting Date Using

		Quotes Prices in	Significant
		Active Markets for	Other	Significant
	Total Fair Value of	Identical Assets	Observable	Unobservable
	Asset or Liability	(Level 1)	Input (Level 2)	Inputs (Level 3)
Non-qualified deferred compensation investment	$ 898,835	$ 898,835	-	-
Cash surrender value of life insurance policies	528,118	528,118	-	-
Investments	223,910	173,910	50,000	-
Marketable securities, at market value	3,077	3,077	-	-
Loans receivable from registered representatives	894,474	-	-	894,474
Note receivable	747,617	-	-	747,617
Accounts receivable - employees/other	22,978	-	-	22,978
Total Assets	$ 3,319,009	$ 1,603,940	$ 50,000	$ 1,665,069

Non-qualified deferred compensation plan	$ 923,529	$ 923,529	-	-
Total Liabilities	$ 923,529	$ 923,529	$ -	$ -

The following table is a roll forward of those investment assets classified as Level 3 as of December 31, 2009:


Balance as of April 1, 2009	$ 1,711,825
Receipts	(334,756)
Distributions	288,000
Balance as of December 31, 2009	$ 1,665,069


March 31, 2009		Fair Value Measurements of Reporting Date Using

		Quotes Prices in
		Active Markets for	Significant Other	Significant
	Total Fair Value of	Identical Assets	Observable Input	Unobservable
	Asset or Liability	(Level 1)	(Level 2)	Inputs (Level 3)
Non-qualified deferred compensation investment	$ 533,665	$ 533,665	$ -	$ -
Cash surrender value of life insurance policies	406,089	406,089	-		-
Investments	127,143	127,143	-		-
Marketable securities, at market value	85,436	85,436	-		-
Total assets	$ 1,152,333	$ 1,152,333	$ -	$ -

Securities sold, not yet purchased, at market value	7,056	7,056	$ -	$ -
Non-qualified deferred compensation plan	541,993	541,993	-		-
Total liabilities	$ 549,049	$ 549,049	$ -	$ -

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

NOTE 9 – NON-QUALIFIED PLAN

Non-Qualified Deferred Compensation Plan.Effective December 2008, the Company established the Investors Capital Holdings, Ltd. Deferred Compensation Plan (the “NQ Plan”) as well as a Rabbi Trust Agreement for this Plan. ICH is the NQ Plan’s sponsor. The unfunded NQ Plan enables eligible ICC registered representatives to elect to defer a portion of fees earned by them, as well as any gains or losses on the underlying investments, as defined by the NQ Plan. The total amount of compensation deferred by the participating representatives was $62,563 and $221,921, respectively, for the three and nine months ended December 31, 2009 and $84,159 and $368,123 for the three and nine months ended December 31, 2008.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis reviews our consolidated financial condition as of December 31, 2009 and March 31, 2009, the consolidated results of operations for the three and nine months ended December 31, 2009 and 2008 and, where appropriate, factors that may affect future financial performance. The discussion should be read in conjunction with the condensed consolidated financial statements and related notes, included elsewhere in this Form 10-Q. Unless context requires otherwise, as used in this Management’s Discussion and Analysis (i) the “current period” means the three or nine months ended December 31, 2009, (ii) the “prior period” means the three or nine months ended December 31, 2008, (iii) an increase or decrease compares the current period to the prior period, and (iv) all non-comparative amounts refer to the current period.

FORWARD-LOOKING STATEMENTS

The statements, analysis, and other information contained herein relating to trends in our operations and financial results, the markets for our products, the future development of our business, and the contingencies and uncertainties to which we may be subject, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," and other similar expressions, are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Such statements are made based upon management's current expectations and beliefs concerning future events and their effects on the Company and are subject to many risks and uncertainties. Our actual results may differ materially from the results anticipated in these forward-looking statements. Readers are directed to discussions of risks and uncertainties that may be found in this report and other documents filed by the Company with the United States Securities and Exchange Commission. We specifically disclaim any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

OVERVIEW

We are a financial services holding company that, through our subsidiaries, provides brokerage, investment advisory, insurance and related services. We operate in a highly regulated and competitive industry that is influenced by numerous external factors such as economic conditions, marketplace liquidity and volatility, monetary policy, global and national political events, regulatory developments, competition, and investor preferences. Our revenues and net earnings may be either enhanced or diminished from period to period by external factors. We remain focused on reducing redundant operating costs, upgrading operating efficiency, recruiting quality representatives and growing our revenue base.

Broker-Dealer Services

We provide broker-dealer services in support of trading and investment on behalf of our representatives’ customers in corporate equity and debt securities, U.S. Government securities, municipal securities, mutual funds, variable annuities and other securities. We also provide ancillary services such as market information, internet brokerage, portfolio tracking facilities and records management.

Investment Advisory Services

We provide investment advisory services, including asset allocation and portfolio rebalancing, for our representatives’ customers. In the past, investment advisory services were performed by both ICC and EPA. We have consolidated our investment advisory services into ICA, and EPA ceased operations and was dissolved during the fiscal quarter ended June 30, 2008.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Recruitment and Support of Representatives

A key component of our business strategy is to recruit well-established, productive representatives who generate substantial revenues from an array of investment products and services. Additionally, we assist our representatives in developing and expanding their business by providing a variety of support services and a diversified range of investment products for their clients. We focus on providing substantial added value to our representatives’ practices, enabling them to be more productive in their investment advisory and brokerage businesses.

Support provided to assist representatives in pursuing consistent and profitable sales growth takes many forms, including online brokerage systems, asset management models, training in practice management, targeted financial assistance and a network of communication links with investment product companies. Regional symposiums and national conventions provide forums for interaction to improve product knowledge, sales and client satisfaction. In addition, our dedicated transition and business development teams focus on providing representatives with programs and tools to grow their businesses both through new client acquisition and advancement of existing client relationships. These programs enhance our ability to attract and retain productive representatives.

OUR PROCESS

Check and Application

The largest segment of our revenues is obtained through a check and application process where a check and a product application is delivered to us for processing that includes principal review and submission to the variable annuity, mutual fund, direct participation or other investment product company. Investments in technology are facilitating our migration over time from a paper intensive to a more paperless process. This shortens the transaction cycle, reduces errors and creates greater efficiencies.

Online Brokerage

Registered representatives have direct market access to submit security transactions for their clients through the use of online brokerage platform for trade execution serviced by our clearing firm, Pershing LLC.

Bond Brokerage

Our fixed-income brokerage desk uses a network of regional and primary dealers to execute trades across a broad array of fixed income asset classes. The desk also utilizes dealer-only electronic services that allow the desk to offer inventory and to execute trades. Our fixed income traders work with our representatives to develop portfolios for clients.

Asset Allocation

Asset allocation services are made available through ICA. Our services include the design, selection and rebalancing of investment portfolios on behalf of our representatives' clients. We also provide tools, services and guidance that enable our representatives to provide these investment services directly to their clients. These services, for the most part, are conducted through our online brokerage platform. Other allocation services are performed directly by fund companies.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

CRITICAL ACCOUNTING POLICIES

In General

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company believes that of its significant accounting policies (see Note 1 to the Company’s condensed consolidated financials statements contained herein), those dealing with revenue recognition, allowance for doubtful accounts receivable, and taxes involve a particularly high degree of judgment and complexity. Our accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the condensed consolidated financial statements. By their nature, estimates involve judgment based upon available information. Actual results or amounts can and do differ from estimates and the differences can have a material effect on the condensed consolidated financial sta tements. Therefore, understanding these policies is important to understanding the reported results of operations and the financial position of the Company.

Off Balance Sheet Risk

We execute securities transactions on behalf of our customers on a fully-disclosed basis. If either the customer or a counter-party fails to perform, we, by agreement with our clearing broker, may be required to discharge the obligations of the non-performing party. In such circumstances, we may sustain a loss if the market value of the security is different from the contract value of the transaction. We seek to control off-balance sheet risk by monitoring the market value of securities held or given as collateral in compliance with regulatory and internal guidelines. Pursuant to such guidelines, our clearing company requires that we reduce positions when necessary. We also complete credit evaluations where there is thought to be credit risk.

Reserves

We record reserves related to legal proceedings as accrued expenses in the condensed consolidated balance sheet. The determination of these reserve amounts requires significant judgment on the part of management. We consider many factors including, but not limited to: the amount of the claim; the amount of the loss in the client’s account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee or representative of the Company; previous results in similar cases; and legal precedents. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the condensed consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions made by management in determining the estimates of r eserves may be incorrect and the actual costs upon settlement of a legal proceeding may be greater or less than the reserved amount.

KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT

Management periodically reviews and analyzes our financial performance across a number of measurable factors considered to be particularly useful in understanding and managing our business. Key metrics in this process include productivity and practice diversification of representatives, top line commission and advisory services revenues, gross margins, operating expenses, legal costs, taxes, earnings per share and adjusted EBITDA.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


COMPARISON OF THE FISCAL QUARTERS ENDED DECEMBER 31, 2009 AND 2008

RESULTS OF OPERATIONS

			Percentage of Revenue		Percent
	Quarter Ended December 31,		Quarter Ended December 31,		Change
	2009	2008	2009	2008	2009 vs. 2008

Revenue:
Commissions	$ 17,170,742	$ 15,002,034	81.6%	81.7%	14.5%
Advisory fees	3,159,770	2,681,734	15.0%	14.6%	17.8%
Other fee income	514,064	398,811	2.4%	2.2%	28.9%
Marketing revenue	124,574	150,000	0.6%	0.8%	-17.0%
Interest, dividend and investment	81,879	118,941	0.4%	0.7%	-31.2%
Total revenue	21,051,029	18,351,520	100.0%	100.0%	14.7%

Commission and advisory fee expenses	16,884,955	14,370,627	80.2%	78.3%	17.5%
Gross profit	4,166,074	3,980,893	19.8%	21.7%	4.7%

Operating expenses:

Advertising	259,091	267,918	1.2%	1.4%	-3.3%
Communications	167,576	267,047	0.8%	1.5%	-37.2%
Total selling expenses	426,667	534,965	2.0%	2.9%	-20.2%

Compensation and benefits	1,820,196	2,197,976	8.6%	12.0%	-17.2%
Regulatory, legal and professional	579,701	1,400,626	2.8%	7.6%	-58.6%
Occupancy	202,643	251,628	1.0%	1.4%	-19.5%
Other administrative	419,416	401,226	2.0%	2.2%	4.5%
Interest	1,536	4,374	0.0%	0.0%	-64.9%
Total administrative expenses	3,023,492	4,255,830	14.4%	23.2%	-29.0%

Total operating expenses	3,450,159	4,790,795	16.4%	26.1%	-28.0%

Operating income (loss)	715,915	(809,902)	3.4%	-4.4%	-188.4%

Provision (benefit) for income taxes	287,857	(195,187)	1.4%	-1.1%	-247.5%

Net income (loss)	428,058	(614,715)	2.0%	-3.3%	-169.6%

Adjusted earnings before interest, income
taxes, depreciation and amortization
("adjusted EBITDA")	$ 857,973	$ (509,363)	4.1%	-2.8%	-268.4%

Adjustments to reconcile adjusted EBITDA
to GAAP Net income (loss):
Income tax benefit	-	195,187	0.0%	1.1%	-100.0%
Interest exense	(1,536)	(4,374)	0.0%	0.0%	-64.9%
Income tax provision	(287,857)	-	-1.4%	0.0%	0.0%
Depreciation	(86,030)	(96,090)	-0.4%	-0.5%	-10.5%
Non-cash compensation	(54,492)	(200,075)	-0.3%	-1.1%	-72.8%

Net income (loss)	$ 428,058	$ (614,715)	2.0%	-3.3%	-169.6%

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization (“EBITDA”), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items (“adjusted EBITDA”), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across various periods. We also use adjusted EBITDA as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions.

Adjusted EBITDA is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Adjusted EBITDA should be considered in conjunction with, rather than as a substitute for, important GAAP financial measures including pre-tax income, net income and cash flows from operating activities. Items excluded from adjusted EBITDA are significant and necessary components to the operations of our business; therefore, adjusted EBITDA should only be used as a supplemental measure of our operating performance.

Productivity

A key metric that we use to assess the average quality of our producing (non-staff) representatives is per capita rep-generated revenue based on a rolling 12-month period. Data for the 12-month periods ended December 31, 2009 and 2008 are presented below:


			Increase/	% Increase/
	2009	2008	decrease	decrease
Rep-generated revenue:
Commission	$ 62,720,527	$ 72,057,772	$ (9,337,245)	-13.0%
Advisory	10,825,564	11,773,146	(947,582)	-8.0%
Other fee income	890,424	1,042,961	(152,537)	-14.6%
	$ 74,436,515	$ 84,873,879	$ (10,437,364)	-12.3%
Number of representatives	577	646	(69)	-10.7%
Average revenue per representative	$ 129,006	$ 131,384	$ (2,378)	-1.8%

We believe that the relatively small decline, given the market environment, in average revenue per representative reflects both the recruitment and retention of increasingly productive representatives.

REVENUES

Revenues increased by $2.70 million, led by growth of $2.17 million in commissionable revenues and $0.50 million in advisory fees as markets rebounded from the crisis that had negatively impacted us during the prior period. The Company has been experiencing an increase in revenues since our fiscal year end.

The increase in revenues reflects improvement in the stock market and rising asset values. In addition, more clients have been investing back into the market rather than keeping their funds in money market accounts. Although the Company had increases in revenue from commissions and advisory services, it continues to experience a decrease in revenues from money market balances as target rates on federal funds decreased.

Commissions

Commission revenues increased by 14.5 %, led by a $2.70 million rise in commissions from the sale of variable annuities and brokerage. Variable annuities offer an alternative to the volatile stock market for clients seeking a more fixed rate of return on their money.

Brokerage commissions increased by $1.05 million led by trading in OTC bond and listed equities. Bond investments were an attractive investment option due to lower interest rates .

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


The following table details commission revenue by product type:

					Percentage
				Percent of	change 2009 vs.
Product Type	2009	2008	2009 vs. 2008	total change	2008
Variable Annuities	$ 7,850,947	$ 6,198,345	$ 1,652,602	76.2%	26.7%
Brokerage (1)	6,284,906	5,237,223	1,047,683	48.3%	20.0%
Mutual Funds	1,444,873	1,247,252	197,621	9.1%	15.8%
Direct Participation Programs	1,571,731	2,261,369	(689,638)	-31.8%	-30.5%
Other	18,285	57,845	(39,560)	-1.8%	-68.4%
Total Commissions Revenue	$ 17,170,742	$ 15,002,034	$ 2,168,708	100.0%	14.5%

1. Revenue designated as brokerage includes revenue from mutual funds sold through our trading platform. Revenue from direct check and application sales of mutual funds are listed above under "Mutual Funds".

Advisory

Fees from advisory services increased by 17.8%, or $0.48 million. The increase was attributable largely to market-related increases in asset values as markets regained a significant portion of their losses during the prior period.

Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue. Revenue from this program increased by $0.29 million, or 19.5%, due to an increase in assets under management which, in turn, reflected market-wide increases in asset values, managed assets performance and increasing new investment.

Assisted by Pershing’s on-line platform, A-MAP remains popular with our representatives because of the opportunities it provides them to deliver superior asset management services and overall investment performance at a lower cost. Resulting transactional cost savings has been shared with our representatives' clients in the form of lower fees.

Other Fee Income

The increase in other fee income reflects increases in annual representative renewal fees instituted to help fund rising licensing and other regulatory costs.

Marketing Revenue

A $0.23 million, or 17.0%, decrease in marketing revenues was attributable primarily to a decline in product sales from companies participating in our partnership programs.

Other Income

Other income, primarily interest, declined 31.2% during the prior period. The decrease is attributable to a reduction in interest income earned on declining trade and related cash balances influenced by reductions in federal funds rates.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

GROSS MARGINS

The following table reports gross margin for each of our operating segments for the quarters ended December 31, 2009 and 2008, respectively:


	Amount		% of Sales		% of Total		Percent Change
	Quarter Ended December 31,		Retention Rate		Gross Margin		2009
	2009	2008	2009	2008	2009	2008	vs. 2008
Commissions:
Brokerage	$ 1,482,224	$ 1,616,132	23.6%	30.9%	35.6%	40.6%	-8.3%
Check and Application	1,412,781	1,261,906	13.0%	13.0%	33.9%	31.7%	12.0%
Fixed Insurance	18,285	25,245	100.0%	100.0%	0.4%	0.6%	-27.6%
Underwriting	-	3,220	0.0%	9.9%	0.0%	0.1%	-100.0%
Total	2,913,290	2,906,503			69.9%	73.0%	0.2%
Advisory Services:
A-MAP	387,176	342,228	22.1%	23.3%	9.3%	8.6%	13.1%
F-MAP	145,178	109,051	37.3%	42.8%	3.5%	2.8%	33.1%
Other	164,719	108,635	n/a¹	n/a¹	4.0%	2.7%	51.6%
Total	697,073	559,914	21.7%	20.5%	16.8%	14.1%	24.5%
Licensing	431,989	326,125	n/a¹	n/a¹	10.4%	8.2%	32.5%
Marketing	124,574	150,000	n/a¹	n/a¹	2.9%	3.8%	-17.0%
Other Income	(852)	38,351	n/a¹	n/a¹	0.0%	0.9%	-102.2%
Total Gross Margin	$ 4,166,074	$ 3,980,893	19.8%	21.7%	100.0%	100.0%	4.7%

1. Due to account composition of the notated products, profit margin retention is not deemed a useful indicator of performance and is not tracked.

Gross margin increased 4.7%, or by $0.19 million, to $4.17 million primarily due to increases in gross margin from our check and application programs and advisory services which were partially offset by a decline in profit margin from trading.

Commissions

Profit margin from commissions increased mainly as a result of a $1.65 million increase in sales of variable annuities that generated a $0.21 increase to the profit margin. Profit margin from brokerage declined principally as a result of a reduction in recurring revenues due to a reduction in the target rate on federal funds.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Advisory Services

The quarter ended December 31, 2009 saw a 24.5% profit margin increase by our Advisory Services division known as ICA. This increase reflects the continued focus on the benefits of working with clients on an advisory basis. The large increase was due to more registered representatives becoming interested in working together with clients on an advisory basis as well as increased asset values due to more favorable market conditions.

Led by our rep-directed A-MAP program and ICA-directed F-MAP wrap account programs, the increase in advisory services margins also reflected contributions from other services including financial planning, the in-house Separate Account S-MAP program and the newly created Fund Select program.

Marketing

The Company experienced a 17.0% decrease in net marketing revenues, largely due to declining marketing support revenue.

Commission and Advisory Fees Expenses

Profit margins are inversely aligned with payout of commission and advisory fees to our representatives as a percentage of revenue generated by them. We strive to recruit quality independent representatives who generate recurring revenues that do not flow through the commission and advisory expense payout grid, primarily as brokerage commissions and advisory fees. Management monitors the amount of revenue an independent representative brings in compared to his or her payout on that revenue.

Commission and advisory fee expenses during the current period were $16.9 million as compared to $14.4 million for the prior period. As a percentage of revenue generated by representatives (defined as commissions, advisory fees and other fees), commission and advisory expenses increased from 79.5% in the prior period to 81.0% in the current period due primarily to relative increases in the percentage of commissionable revenue paid to high producing representatives. These expenses include commissions to representatives, clearing and execution costs and other direct costs that are necessary to produce revenue.

OPERATING EXPENSES

Operating expenses, which decreased by 28.0% from $4.79 million to $3.45 million, are discussed in detail below.

Compensation and Benefits

Compensation and benefits are the largest component of our operating expenses. These costs decreased by $0.38 million or 17.2% due primarily to suspension of the Company’s match to the 401(k) Plan, reductions in stock compensation expense and the resignation of an executive officer midway during the prior period. We also experienced cost savings related to health care benefits resulting from changing health care providers.

Regulatory, Legal and Professional

Regulatory, legal and professional expenses declined by $0.82 million, or 58.6%, reflecting significant reductions in both litigation and settlement costs incurred as compared to a significant lawsuit in the prior period.

We will continue to incur legal fees and settlement costs as we operate in a litigious, regulated industry. In addition, from time to time regulatory agencies and self-regulatory organizations institute investigations into industry practices, which can also result in the imposition of sanctions. We invest significant resources to contain litigation and regulatory exposure by promoting sound operational procedures.

Advertising

Advertising (including marketing and meals and entertainment) expense remained relatively level for the comparative periods.

Communications

Communications expenses decreased 37.2%, or $0.10 million, due primarily to reductions in telephone expenses, and the increased use of electronic rather than print for direct marketing efforts.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Occupancy

Occupancy expenses, which include depreciation, decreased 19.5% or by $0.05 million due largely to consolidation of home office space and negotiated rent decreases for retained space.

Other Administrative

Other administrative expenses, which include postage, training, office and other office-related expenses, increased by 4.5%. Increases in bank fees for processing credit card transactions, particularly for rep license renewals, were offset in part by reduced allowance for uncollectable representative loans.

OPERATING AND NET INCOME

We reported our third consecutive quarter with operating income; $0.72 million as compared to a $0.81 million operating loss for the prior period. Our net income totaled $0.43 million, or $0.07 and $0.06 per basic and diluted net income per share, compared to net loss of $0.61 million, or $0.10 basic and diluted net loss per share, for the prior period. We have realized growth in every category of top-line revenue during each of the last fiscal three quarters compared to the immediately preceding quarter, as declines in the overall economy have tapered. Management attributes the stabilization in results of operations primarily to reduced operating costs, recent growth in the recruitment of productive representatives, enhanced operating efficiency, and growth of our advisory segment’s asset values.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

COMPARISON OF THE NINE MONTH PERIODS ENDED DECEMBER 31, 2009 AND 2008

Results reported for the current nine-month period compared to the year ago nine-month period are discussed below to the extent that explanations for comparative variances in year to date results differ from the explanations for comparative quarterly results discussed above. Please refer to the comparative quarterly results analysis for a general explanation of variances concerning the current nine-month period that are not discussed below.

RESULTS OF OPERATIONS


			Percent of Revenue		Percent
			Nine Months Ended		Change
	Nine Months Ended December 31,		December 31,		2009
	2009	2008	2009	2008	vs. 2008

Revenues:
Commission	$ 48,241,478	$ 53,740,265	82.3%	83.5%	-10.2%
Advisory fees	8,463,511	8,728,455	14.5%	13.6%	-3.0%
Other fee income	762,402	676,855	1.3%	1.1%	12.6%
Marketing revenue	829,336	756,465	1.4%	1.1%	9.6%
Other income	304,937	451,173	0.5%	0.7%	-32.4%
Total revenue	58,601,664	64,353,213	100.0%	100.0%	-8.9%

Commission and advisory expenses	47,135,148	51,595,479	80.4%	80.2%	-8.6%
Gross profit	11,466,516	12,757,734	19.6%	19.8%	-10.1%

Operating expenses:
Advertising	651,973	1,032,823	1.1%	1.6%	-36.9%
Communications	513,431	902,096	0.9%	1.4%	-43.1%
Total selling expenses	1,165,404	1,934,919	2.0%	3.0%	-39.8%

Compensation and benefits	5,309,706	7,197,913	9.1%	11.2%	-26.2%
Regulatory, legal and professional	1,706,684	3,240,607	2.9%	5.0%	-47.3%
Occupancy	642,351	822,827	1.1%	1.3%	-21.9%
Other administrative expenses	1,189,268	1,168,040	2.0%	1.8%	1.8%
Interest expense	18,150	25,972	0.0%	0.0%	-30.1%
Total administrative expenses	8,866,159	12,455,359	15.1%	19.3%	-28.8%

Total operating expenses	10,031,563	14,390,278	17.1%	22.4%	-30.3%

Operating income (loss)	1,434,953	(1,632,544)	2.5%	-2.5%	-187.9%

Provision (benefit) for income taxes	748,661	(251,360)	1.3%	-0.4%	-397.8%

Net income (loss)	$ 686,292	$ (1,381,184)	1.2%	-2.1%	-149.7%

Adjusted earnings before interest, income
taxes, depreciation and amortization
("adjusted EBITDA")	$ 1,905,882	$ (639,672)	3.3%	-1.0%	-397.9%

Adjustments to reconcile adjusted EBITDA
to GAAP Net income (loss):
Income tax benefit	-	251,360	0.0%	0.3%	-100.0%
Interest expense	(18,150)	(25,972)	0.0%	0.1%	-30.1%
Income tax provision	(748,661)	-	-1.3%	0.0%	0.0%
Depreciation	(261,330)	(291,018)	-0.4%	-0.6%	-10.2%
Non-cash compensation	(191,449)	(675,882)	-0.3%	-1.2%	-71.7%

Net income (loss)	$ 686,292	$ (1,381,184)	1.2%	-2.2%	-149.7%

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

REVENUES

Revenues decreased by $5.75 million, or 8.9%, from the nine-month comparative period. The decline was due primarily to a $5.50 million or 10.2% decline in commissionable revenues.


Commissions

		Commission Revenue
	Nine Months Ended December 31, 2009 and 2008
					Percentage
				Percent of	change 2009
Product Type¹:	2009	2008	2008 vs. 2007	total change	vs 2008
Variable Annuities	$ 21,066,743	$ 21,845,751	$ (779,008)	-14.2%	-3.6%
Brokerage	18,948,280	17,487,207	1,461,073	26.6%	8.4%
Mutual Funds	3,697,456	5,770,950	(2,073,494)	-37.7%	-35.9%
Direct Participation Programs	4,469,394	8,434,054	(3,964,660)	-72.1%	-47.0%
Other	59,605	202,303	(142,698)	-2.6%	-70.5%
Total Commission Revenue	$ 48,241,478	$ 53,740,265	$ (5,498,787)	-100.0%	-10.2%

1. Revenue designated as Brokerage (Trading) includes revenue from mutual funds sold through our trading platform. Revenue from direct check and application sales of mutual funds are listed above under "Mutual Funds".

The decline in commissionable revenue was mainly the result of reduced commissions from direct business including variable annuities, mutual funds, and DPPs. On the other hand, brokerage revenues, led by increased OTC bond trading, grew by 26.6%.

Advisory Fees

A $0.27 million, or 3.0 %, decline in advisory fees resulted principally from declines in asset values reflecting the downward trend in the stock market, asset managed performance, and new investment dollar contributions compared to the prior period.

Other Fee Income

Other fee income increased by12.6 % as a result of increased fees to fund the rise in annual regulatory and licensing fees.

Marketing Revenue

Marketing revenues increased by 9.6% as the result of an overall growth in marketing support for hosting our conventions and symposiums coupled with strategic reductions in those event-related costs.

Other Income

Other income decreased by 32.4% over the year ago period reflecting reduced interest income on balances from our trading accounts for the same reason mentioned in our quarterly analysis.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


GROSS MARGINS
			% of Sales (Retention Rate)		% of Total Gross Margin
	Nine Months Ended		Nine Months Ended		Nine Months Ended
	December 31 ,		December 31,		December 31,		% Change
							2009
	2009	2008	2009	2008	2009	2008	vs. 2008
Commissions:
Brokerage	4,396,527	4,681,489	23.2%	26.8%	38.4%	36.7%	-6.1%
Check & Application	$ 3,800,367	$ 4,686,597	13.0%	13.0%	33.1%	36.7%	-18.9%
Fixed Insurance	59,605	80,702	100.0%	100.0%	0.5%	0.6%	-26.1%
Underwriting	-	22,262	0.0%	18.3%	0.0%	0.2%	-100.0%
Total	8,256,499	9,471,050			72.0%	74.2%	-12.8%
Advisory Services:	-	-
A-MAP	1,037,905	1,159,681	22.4%	23.1%	9.1%	9.2%	-10.5%
F-MAP	368,531	342,276	39.6%	41.3%	3.2%	2.7%
Other	368,009	365,511	n/a¹	n/a¹	3.2%	2.9%	0.7%
Total	1,774,445	1,867,468	20.5%	21.0%	15.5%	14.8%	-5.0%
Licensing	506,130	453,517	n/a¹	n/a¹	4.4%	3.5%	11.6%
Marketing	829,335	756,465	n/a¹	n/a¹	7.2%	5.9%	9.6%
Other income	100,107	209,234	n/a¹	n/a¹	0.9%	1.6%	-52.2%
Total Gross Margin	$ 11,466,516	$ 12,757,734	19.6%	19.8%	100.0%	100.0%	-10.1%

1. Due to account composition, profit margin retention for these products is not deemed a useful indicator of performance.

Commissions

Gross profit from our check and application business declined in the current period versus the prior period as consumers were reluctant to invest in alternative investments, mutual funds, and variable annuities. Declines to our brokerage margin was mainly due to a decrease in recurring revenues earned from money market fund investments only partially offset by increased margins from bond trading.

Advisory Services

The decline in profit margins from advisory services was due principally to a decline in advisory fees in our A-Map program. Lower asset values and a decline in investments in these asset managed accounts lead to lower fees and profit margin. Profit margin from our ICA-directed F-MAP program posted increased profit margins due to increased asset values resulting from improvement in performance and asset contributions.

Commission and Advisory Fees Expenses

Commission and advisory fees expenses during the current nine-month period were $47.14 million versus $51.60 million in the prior period. As a percentage of revenue generated by representatives (i.e., commissions, advisory fees and other fees), commission and advisory expenses remained consistent at approximately 82.0% and 81.7%, respectively. These expenses include commissions earned by our representatives, clearing and execution costs and other direct costs that are necessary to produce revenue. Management continuously monitors these costs as they have a substantial effect on our profit margin.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

OPERATING EXPENSES

Operating expenses decreased by 30.3% from $14.39 million to $10.03 million, and is discussed in detail below.

Compensation and Benefits

Compensation and benefits decreased by 26.2%, or $1.89 million, reflecting suspension of the employer 401(k) match, effective January 2009. In addition, there was a reduction in equity compensation resulting from the vesting of stock awards to executives. These stock awards vested fully in the prior period whereas in the current period there were no stock awards issued to executives. We also achieved cost savings in health care benefits as a result of changing insurance providers.

Regulatory, Legal and Professional

Regulatory, legal and professional expenses declined by $1.53 million, or 47.3%, due principally to a decrease in legal and professional fees related to strategic corporate matters and defense and settlement costs as compared to the prior period.

Advertising

The 36.9% decrease in advertising expenses was due primarily to restricting advertising to fewer publications, fewer company-sponsored conventions and an overall reduction in travel and entertainment expenses.

Communications

Communication expenses declined by $43.1% due primarily to reasons explained in our quarterly analysis along with decreases in website connectivity costs following closing of our investment centers. In addition, we sponsored a reward trip during August 2008, whereas we combined that event with sponsored events in the current year.

Occupancy

Occupancy expenses decreased by 21.9 % in the current period versus the prior period due to closing various investment centers as well as downsizing home office space upon the expiration of a lease. Also depreciation decreased as a result of a decrease in capital expenditures combined with existing assets fully depreciating.

Other Administrative

Expenses relevant to other administrative costs, which include training, office and computer-related expenses, remained relatively constant for the nine month comparative periods.

OPERATING AND NET INCOME

We reported operating income of $1.43 million compared to a $1.63 million operating loss for the prior period. Our net income totaled $0.69 million, or $0.11 per basic and $0.10 diluted net income per share, compared to net loss of $1.38 million, or $0.22 basic and diluted net loss per share, for the prior period. The Company has achieved profitability for three consecutive quarters, primarily due to prudent cost cutting and better than expected top line revenue growth, while maintaining service quality. We continue to seek synergies within and among all departments to improve operational efficiency. The Company also remains focused on aggressively recruiting quality representatives from other independent firms and wire houses to achieve revenue growth and sustainable profitability.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

LIQUIDITY AND CAPITAL RESOURCES

We strive for efficient use of capital. Our primary source of liquidity remains our cash flows from operations. Market fluctuations, general uncertainty and continued negative sentiment in financial markets have had an adverse impact on this cash flow.

We take a proactive approach to minimizing the occurrence and impact of events that may lead to unpredictable cash outflows, including major legal proceedings, trade errors, and fines and other sanctions imposed by regulatory agencies such as FINRA, the SEC and state securities regulators. The Company allocates considerable resources to stay current with the many rules and regulations applicable to our business and to provide up-to-date education and training to our staff and independent representatives. A key to this approach is ensuring that industry-standard controls over our operations and those of our representatives are maintained.

Approximately 66% and 61% of our total assets at December 31, 2009 and March 31, 2009, respectively, consisted of cash and cash equivalents, receivables from clearing brokers and other broker-dealers, all of which fluctuate, depending upon the levels of customer business and trading. As of December 31, 2009, cash and cash equivalents totaled $5.5 million compared to $6.2 million as of March 31, 2009. Although our total assets fell by 7.6%, our working capital increased 13.2% to $7.7 million as of December 31, 2009 compared to $6.8 million as of March 31, 2009. The ratio of current assets to current liabilities was 2.36 to 1 as of December 31, 2009 compared to 1.81 to 1 as of March 31, 2009.

For the nine months ended December 31, 2009, we used net cash flows of $0.60 million, largely due to payments made on accrued expenses incurred for litigation net of proceeds from our fidelity bond

Cash outflows from investing activities for the current period totaled $0.34 million, primarily for payments on officers’ life insurance in addition to capital expenditures on software development for internal use, whereas in the prior period there were inflows of $1.06 million due to the maturity of three treasury notes totaling $1.00 million.

Finally, cash flows used in financing activities in the current period paralleled the prior period as we disbursed $1.04 million in loan payments to finance E&O insurance premiums for the nine month period ended December 31, 2009 versus $0.85 million for the same nine month period last year.

REGULATORY NET CAPITAL

Cash disbursements can have a material impact on our brokerage firm’s regulatory net capital. The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that ICC, our broker-dealer subsidiary, maintain net capital of $100,000 and a ratio of aggregate indebtedness to net capital (a “net capital ratio”) not to exceed 15 to 1. Under the rule, indebtedness generally includes all money owed by ICC, and net capital includes ICC cash and assets that are easily converted into cash. SEC rules also prohibit "equity capital" (which, under the net capital rule, includes subordinated loans) from being withdrawn, cash dividends from being paid and other specified actions of similar effect from being taken, if, among other specified contingencies, ICC’s net capital ratio would exceed 10 to 1 or if ICC would have less than 120% of its minimum required net capital.

As of December 31, 2009, ICC had net capital of $3.64 million (an excess of $3.23 million) and a 1.67 to 1 net capital ratio as compared to net capital of $1.94 million (an excess of $1.41 million) and a 4.10 to 1 net capital ratio as of March 31, 2009. We are continually focused on timely implementation of measures designed to ensure the maintenance of adequate capital. The results reported were not fully reflected in our net capital due to non-cash expenses including $0.19 million from the vesting of stock awards that were issued to employees and executives, and $0.26 million in depreciation.

Investors Capital Holdings, Ltd. Report on Form 10-Q Quarter Ended December 31, 2009

COMMITMENTS AND CONTINGENCIES

We are obligated under various lease agreements covering offices and equipment. These agreements are considered to be operating leases. The terms of the leases expire between fiscal year 2010 and 2015. On August 25, 2009 the Board ratified a lease extension. Options to renew for additional terms are included under the lease agreements. Certain leases contain provisions for escalation of minimum lease payments contingent upon increases in real estate taxes.

The total minimum rental due in future periods under these existing agreements is as follows as of December 31, 2009:


2010		$ 94,433
2011		370,758
2012		357,841
2013		260,413
2014		270,477
2015 and thereafter		306,214
		$ 1,660,136

Total lease expense approximated $0.10 and $0.13 million for the three months ended December 31, 2009 and 2008, respectively. Total lease expense approximated $0.32 and $0.45 million for the nine months ended December 31, 2009 and 2008, respectively.

The Company offers loans and transition assistance to its representatives mainly for recruiting or retention purposes. These commitments are contingent upon certain events occurring, including but not limited to the representatives joining the Company and meeting certain production requirements. As of December 31, 2009, the Company estimates that it had made commitments of $0.30 million in loans and transition assistance, which have not yet been funded.

ITEM 4T. CONTROLS AND PROCEDURES

Report of Management on Internal Control Over Financial Reporting

Disclosure controls are procedures designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, as the Company's are designed to do, and management necessarily was required to apply its judg ment in evaluating the cost-benefit relationship of possible controls and procedures.

As of December 31, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings within the required time period, and to ensure that information required to be disclosed in such reports that we file or submit under the Securities Exchange Act of 1934 is accumulated an communicated to our management, including our Principa l Executive Officer and Principal Financial Officer, to allow timely decisions required regarding required disclosure.

There have been no changes in our internal controls over financial reporting that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company operates in a highly litigious and regulated business, and the Company often is made a defendant in various lawsuits and arbitrations that are incidental to our securities business. The Company typically vigorously contests the allegations of the complaints and believes that there are meritorious defenses in these matters. From time to time the Company also is the subject of regulatory investigations and proceedings. Counsel is unable to respond concerning the likelihood of outcomes, whether favorable or unfavorable, in these matters because of routine and inherent uncertainties.

The Company's errors and omissions (E&O) policy frequently limits the Company’s maximum exposure in any one case to $75,000, subject to policy limitations and exclusions ($100,000 for claims filed after December 31, 2008). The Company also maintains a fidelity bond to protect itself from potential damages and/or legal costs related to fraudulent activities pursuant to which the Company’s exposure is usually limited to $200,000 per case, subject to policy limitations and exclusions. In certain of these cases, the Company has the contractual right to seek indemnity from related parties. Despite these mitigating factors, total expenses incurred in connection with legal proceedings have been significant in prior periods and may so continue.

ITEMS 2 – 5.

None.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009


ITEM 6. EXHIBITS


Exhibit Number	Description	Location
3.1	Certificate of Incorporation	(2)(Exh. 3.1)
3.2	By-Laws	(2)(Exh. 3.2)
4.1	Form of Stock Certificate	(3)(Exh. 4.1)
10.1	Employment Agreement with Theodore E. Charles (4)	(3)(Exh. 10.1)
10.2	Employment Agreement with Timothy B. Murphy (4)	(3)(Exh. 10.2)
10.3	The 1994 Stock Option Plan (4)	(5)(Exh. 10.3)
10.4	The 1996 Stock Incentive Plan (4)	(3)(Exh. 10.3)
10.6	The 2001 Equity Incentive Plan (4)	(6)(Exh. 4.4)
10.7	The 2005 Equity Incentive Plan (4)	(7)(Exh. 4.5)
10.8	Form of June 2006 Stock Grant Agreement (4)	(8)(Exh. 10.8)
10.9	Form of February 2008 Stock Grant Agreement (4)	(8)(Exh. 10.9)
31.1	Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)	(1)
31.2	Certification of Kathleen L. Donnelly pursuant to Rule 13a-14(a)	(1)
32.1	Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350	(1)
32.2	Certification of Kathleen L. Donnelly pursuant to 18 U.S.C. Section 1350	(1)

_____________________________________

(1)	Filed herewith.
(2)	Incorporated by reference to the indicated exhibit to the Registrant’s Quarterly Report on Form 10-Q filed November 14, 2007
(3)	Incorporated by reference to the indicated exhibit to the Registrant's Registration Statement on Form SB-2 (File No. 333-05327) filed November 14, 2000.
(4)	A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(b) of this report.
(5)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2005
(6)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-117807) filed July 30, 2004.
(7)	Incorporated by reference to the indicated exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-134885) filed June 9, 2006.
(8)	Incorporated by reference to the indicated exhibit to the Registrant’s Annual Report on Form 10-K filed June 30, 2008.

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Any exhibit not included with this Form 10-Q when furnished to any shareholder of record will be furnished to such shareholder upon written request and payment of up to $.25 per page plus postage. Such requests should be directed to Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, MA 01940-2320.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

                                                                                                                                      INVESTORS CAPITAL HOLDINGS, LTD.

                                                                                                                                                      By:/s/ Kathleen L. Donnelly

                                                                                                                                                      Chief Accounting Officer
                                                                                                                                                      (Duly authorized officer)

; Date: February 12, 2010

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Exhibit 31.1

CERTIFICATION

I, Timothy B. Murphy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;
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 company as of, and for, the periods presented in said report;
4.	The smaller reporting company’s other certifying officer 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 smaller reporting company 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 smaller reporting company, 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 smaller reporting company’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 smaller reporting company’s internal control over financial reporting that occurred during the smaller reporting company's most recent fiscal quarter (the smaller reporting company's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the smaller reporting company's internal control over financial reporting; and
5.	The smaller reporting company’s other certifying officer(s) and I have disclosed, based on our most recent evaluationof internal control over financial reporting, to the smaller reporting company’s auditors and the audit committee of thesmaller reporting company’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 smaller reporting company’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 smaller reporting company’s internal control over financial reporting.

Date:	February 12, 2010

By: /s/ Timothy B. Murphy

Timothy B. Murphy, President,
Chief Executive Officer and Director
(Principal executive officer)

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Exhibit 31.2

CERTIFICATION

I, Kathleen L. Donnelly, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Investors Capital Holdings, Ltd.;
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 smaller reporting company as of, and for, the periods presented in said report;
4.	The smaller reporting company's other certifying officer 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 smaller reporting company 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 the smaller reporting company, 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 smaller reporting company'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 smaller reporting company's internal control over financial reporting that occurred during the smaller reporting company's most recent fiscal quarter (the smaller reporting company's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the smaller reporting company's internal control over financial reporting; and
5.	The smaller reporting company's other certifying officer(s) and I have disclosed, based on our most recent evaluationof internal control over financial reporting, to the smaller reporting company's auditors and the audit committee of thesmaller reporting company'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 smaller reporting company'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 smaller reporting company's internal control over financial reporting.

Date:	February 12, 2010

By: /s/ Kathleen L. Donnelly

Kathleen L. Donnelly
Chief Financial Officer
(Principal financial officer)

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Exhibit 32.1

CERTIFICATION

I, Timothy B. Murphy, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd.

Date: February 12, 2010

By: /s/ Timothy B. Murphy

Timothy B. Murphy, President,
Chief Executive Officer and Director
(Principal executive officer)

Investors Capital Holdings, Ltd. Report on Form 10-Q
Quarter Ended December 31, 2009

Exhibit 32.1

CERTIFICATION

I, Kathleen L. Donnelly, certify that this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Investors Capital Holdings, Ltd.

Date: February 12, 2010

By: /s/ Kathleen L. Donnelly

Kathleen L. Donnelly
Chief Financial Officer
(Principal financial officer)

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