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 June 30, 2006


                         Commission File Number: 1-16349


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


          MASSACHUSETTS                                   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 an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Number of shares  outstanding of our only class of common stock as of August 11,
2006:

                                    6,131,472

<PAGE>




--------------------------------------------------------------------------------

                                Table of Contents


PART I

--------------------------------------------------------------------------------
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES

PART II

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




--------------------------------------------------------------------------------
                                     Page 2

<PAGE>

PART I FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>

                                                                   June 30,       March 31,
                                                                     2006           2006
                                                                 -----------    -----------
   Assets

Current Assets

<S>                                                            <C>            <C>
Cash and cash equivalents ...................................  $  7,060,525   $  7,718,682
Deposit with clearing organization, restricted ..............       175,000        175,000
Accounts receivable .........................................     3,066,807      4,163,658
Note receivable-sale of asset (current) .....................        18,813          8,561
Loans receivable from registered representatives(current) ...       491,367        379,222
Prepaid income taxes ........................................       658,508           --
Marketable securities, at market value ......................       131,348         73,702
Prepaid expenses ............................................       303,851        261,888
                                                                --------------------------
                                                                 11,906,219     12,780,713

Property and equipment, net .................................       827,269        772,498

Long Term Investments
Loans receivable from registered representatives ............       198,509        223,019
Note Receivable-sale of asset ...............................       747,617        747,617
Equity Investments,at cost ..................................       190,000        190,000
Investments .................................................       157,776        159,150
Cash surrender value life insurance policies ................       196,852        181,872
                                                                --------------------------
                                                                  1,490,754      1,501,658
Other Assets
Other assets ................................................        25,798         22,644
Deferred tax asset, net .....................................       196,307        248,314
                                                                --------------------------
                                                                    222,105        270,958

TOTAL ASSETS ................................................    14,446,347     15,325,827
                                                                ==========================
Liabilities and Stockholders' Equity

Current Liabilities

Accounts payable ............................................  $  1,252,396   $  1,210,086
Accrued expenses ............................................       446,483        648,298
Notes payable ...............................................        47,833         94,573
Unearned revenues ...........................................        86,591        104,779
Commissions payable .........................................     2,177,286      2,432,596
Income taxes payable ........................................          --          198,026
Securities sold, not yet purchased, at market value .........        40,877         51,386
                                                                --------------------------
                                                                  4,051,466      4,739,744
Long-Term Liabilities

Total Liabilities ...........................................     4,051,466      4,739,744
                                                                --------------------------
Stockholders' Equity:

Common stock, $.01 par value, 10,000,000 shares authorized;
 6,131,472 issued and 6,127,587 outstanding at June 30,
 2006; 5,757,348 issued and 5,753,463 outstanding at March
 31, 2006 ...................................................        61,315         57,942
Additional paid-in capital ..................................     9,390,419      8,740,780
Retained earnings ...........................................       954,949      1,797,789
less: Treasury stock, 3,885 shares at cost ..................       (30,135)       (30,135)
Accumulated other comprehensive income ......................        18,333         19,707

                                                                --------------------------
Total stockholders' equity ..................................    10,394,881     10,586,083

TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY ......................................................  $ 14,446,347   $ 15,325,827
                                                                ==========================

</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


--------------------------------------------------------------------------------
                                     Page 3
<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED JUNE 30, 2006 AND 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                                     June 30,
                                                           ----------------------------
                                                               2006           2005
Revenues                                                   -------------  -------------

<S>                                                        <C>            <C>
Commission ..............................................  $ 17,458,902   $ 13,368,068
Advisory fees ...........................................     1,568,429      1,155,982
Other fee income ........................................        66,397        103,438
Marketing revenue .......................................       324,414        435,224
Other income ............................................       184,030        130,524
                                                           -------------  -------------

Total Revenue ...........................................    19,602,172     15,193,236

Commission and advisory fees expenses ...................    15,815,220     11,982,282
                                                           -------------  -------------
Gross profit ............................................     3,786,952      3,210,954
                                                           -------------  -------------
Operating expenses:
Advertising .............................................       269,627        242,607
Communications ..........................................        65,767        155,508
                                                           -------------  -------------
Total Selling Expenses ..................................       335,394        398,115
                                                           -------------  -------------

Compensation and benefits ...............................     2,716,025      1,735,128
Regulatory, legal and professional ......................     1,202,340        473,144
Occupancy ...............................................       234,006        154,091
Other administrative expenses ...........................       332,604        243,508
                                                           -------------  -------------
Total Administrative Expenses ...........................     4,484,975      2,605,871
                                                           -------------  -------------
Total Operating Expenses ................................     4,820,369      3,003,986
                                                           -------------  -------------
Operating(Loss) income ..................................    (1,033,417)       206,968
                                                           -------------  -------------
Other expense:
Interest expense ........................................         8,032          3,334
                                                           -------------  -------------
Total other expense .....................................         8,032          3,334
                                                           -------------  -------------
Income  (Loss) before taxes .............................    (1,041,449)       203,634
Benefit (provision) for income taxes ....................       443,827        (96,408)
                                                           -------------  -------------
Net(Loss) income ........................................  $   (597,622)  $    107,226
                                                           =============  =============
Earnings per common share:
Basic earnings per common share .........................  $      (0.10)  $       0.02
Diluted earnings per common share .......................  $      (0.10)  $       0.02
                                                           =============  =============
Share data:

Weighted average shares used in basic earnings per
common share calculations ...............................     5,799,998      5,754,015

Incremental shares from assumed exercise of stock options       141,243        173,278
                                                           -------------  -------------
Weighted average shares used in diluted earnings per
common share calculations ...............................     5,941,241      5,927,293
                                                           =============  =============

</TABLE>

           See Notes to Condensed Consolidated Financial Statements.

--------------------------------------------------------------------------------
                                     Page 4

<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                    THREE MONTHS ENDED JUNE 30, 2006 AND 2005
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                   Common    Amount    Additional  Comprehensive   Retained   Treasury   Accumulated
                                   Stock                Paid-In       Income       Earnings    Stock       Other
                                   Shares               Capital                    (Deficit)            Comprehensive     Total
                                                                                                        Income (Loss)
                                 --------------------------------------------------------------------------------------------------
<S>                              <C>        <C>       <C>         <C>            <C>         <C>       <C>            <C>
Balance at April 01, 2005         5,757,348  $ 57,573 $ 8,691,566            -   $ 1,463,779 $ (30,135)            -  $ 10,182,783

Stock based compensation              1,630        17     14,857                                                            14,874

Comprehensive income:
   Net income                                                          107,226       107,226
Other Comprehensive Income:
   Unrealized gain on securities:
      Unrealized holding
      gains arising during
      period no tax effect                                                   -
                                                                   ------------
                                                                             -
                                                                   ------------                        --------------

                                                                   ------------
Other Comprehensive Income                                                   -                                     -
                                                                   ------------                        --------------

                                                                   ------------
   Comprehensive Income                                                107,226                                             107,226
                                                                   ============
   Dividend payment to shareholders                                                 (115,629)                             (115,629)

                                 --------------------------------------------------------------------------------------------------
Balance at June 30, 2005          5,758,978  $ 57,590 $ 8,706,423            -   $ 1,455,376 $ (30,135)            -    10,189,254
                                 ==================================================================================================

Balance at April 01, 2006         5,794,246  $ 57,942 $ 8,740,780            -   $ 1,797,789 $ (30,135) $     19,707  $ 10,586,083

Stock based compensation            337,226     3,373    649,639                                                           653,012

Comprehensive income:
   Net (loss)                                                         (597,622)     (597,622)

Other Comprehensive Income:
   Unrealized gain on securities:
      Unrealized holding gains arising during                           (1,374)
      period no tax effect

                                                                             -
                                                                   ------------
                                                                                                       --------------
Other Comprehensive Income                                              (1,374)                               (1,374)
                                                                   ------------                        --------------

                                                                   ------------
   Comprehensive Income                                               (598,996)                                           (598,996)
                                                                   ============
   Dividend payment to shareholders                                                 (245,218)                             (245,218)

                                 --------------------------------------------------------------------------------------------------
Balance at June 30, 2006          6,131,472  $ 61,315 $ 9,390,419            -   $   954,949 $ (30,135) $     18,333  $ 10,394,881
                                 ==================================================================================================
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

--------------------------------------------------------------------------------
                                     Page 5


<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED JUNE 30, 2006 AND 2005
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                           Three Months Ended June 30,
                                                              2006            2005
                                                              ----            ----
Cash flows from operating activities:

<S>                                                          <C>            <C>
Net(Loss) income .......................................   $ (597,622)    $ 107,226
Adjustments to reconcile net(Loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization ..........................       60,343        49,209
Change in deferred taxes ...............................       52,007        12,164
Stock Based Compensation ...............................      624,025             0
Cash surrender value life insurance policy .............      (14,980)      (88,406)
Stock option compensation ..............................       26,935        11,614
Change in marketable securities ........................      (68,155)     (102,983)
Income (loss) on investment ............................            0          (248)

Change in operating assets and liabilities
Decrease (increase) in accounts receivable .............    1,096,851        67,583
Increase (decrease) in prepaid expenses and other assets      (45,117)       25,997
Decrease (increase) in prepaid income taxes and payable      (856,534)       75,244
Increase (decrease) in accounts payable ................       42,310      (322,997)
Increase in accrued expenses ...........................     (201,815)     (356,978)
(Decrease) increase  in commissions payable ............     (255,310)      495,203
Increase (decrease) in unearned revenues ...............      (18,188)      (13,494)
Net cash used by operating activities ..................     (155,250)      (40,866)

Cash flows from investing activities:

Purchases of property and equipment ....................     (115,114)     (180,630)
Changes in Note Receivable .............................      (10,252)
Loans receivable from registered representatives .......      (87,635)      (61,393)

Net cash used in investing activities ..................     (213,001)     (242,023)

</TABLE>


            See Notes to Condensed Consolidated Financial Statements.



--------------------------------------------------------------------------------
                                     Page 6
<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              THREE MONTHS ENDED JUNE 30, 2006 AND 2005 (CONTINUED)


<TABLE>
<CAPTION>
                                                    Three Months Ended June 30,
                                                        2006          2005
                                                        ----          ----
Cash flows from financing activities:
<S>                                                 <C>           <C>
Payment of Note Payable ..........................      (46,740)       (7,046)
Payment of dividends .............................     (245,218)     (115,630)
Exercise of stock options ........................        2,052         3,260

Net cash used in financing activities ...              (289,906)     (119,416)

Net Decrease in cash and cash equivalents ........     (658,157)     (402,305)

Cash and cash equivalents, beginning of  year ....  $ 7,718,682   $ 8,618,261

Cash and cash equivalents, end of year ...........  $ 7,060,525   $ 8,215,956

Supplemental disclosures of cash flow information:
Interest paid ....................................        8,032         3,334

Income taxes paid ................................      360,700         9,000
</TABLE>






            See Notes to Condensed Consolidated Financial Statements.



--------------------------------------------------------------------------------
                                     Page 7
<PAGE>



                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE QUARTER ENDED JUNE 30, 2006
                                   (UNAUDITED)


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

ORGANIZATION:

         Incorporated in July 1995, Investors Capital Holdings,  Ltd. ("ICH") is
a financial  services  holding company that operates  through its  subsidiaries,
Investors  Capital  Corporation  ("ICC")  (doing  business as Investors  Capital
Advisors,  "ICA", as a registered  investment advisor),  Eastern Point Advisors,
Inc.  ("EPA"),  ICC  Insurance  Agency,  Inc.  and  Investors  Capital  Holdings
Securities  Corporation ("ICH  Securities") and in two segments of the financial
services  industry.   These  two  segments  provide  for  the  offering  of  (1)
broker-dealer  services  in  support of  trading  in  corporate  equity and debt
securities,  U.S. Government  securities,  municipal  securities,  mutual funds,
variable  annuities and variable life insurance,  including  provision of market
information,   Internet   on-line  trading,   portfolio   tracking  and  records
management,  and (2) investment  advisory and asset management  services.  These
products and services are offered throughout the United States primarily through
our network of independent registered representatives. ICH Securities was formed
in March 2005 to hold  cash,  cash  equivalents,  interest  income and  dividend
income for ICH.


BASIS OF PRESENTATION:

         The accompanying  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 Form  10-Q.  In the  opinion  of  management,  these  financial
statements  contain all of the adjustments  necessary for a fair presentation of
the results of these interim  periods.  Certain  footnote  disclosures  normally
included in  financial  statements  prepared in  accordance  with GAAP have been
condensed or omitted,  although the Company  believes the  disclosures  in these
financial  statements  are  adequate  to  make  the  information  presented  not
misleading.  Operating  results for the three-month  period ending June 30, 2006
are not necessarily  indicative of the results that may be expected for the year
ending March 31, 2007. The balance sheet at March 31, 2006 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.
These unaudited condensed  consolidated  financial  statements should be read in
conjunction with the Company's annual audited financial  statements  included in
the Company's  Form 10-K for the fiscal year ended March 31, 2006 filed with the
Securities and Exchange Commission.


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 the prior periods have been  reclassified to remain
consistent with the current fiscal year financial statement presentation.



--------------------------------------------------------------------------------
                                     Page 8
<PAGE>



                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE QUARTER ENDED JUNE 30, 2006
                                   (UNAUDITED)

NOTE 1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT
        ACCOUNTING POLICIES (continued)


SIGNIFICANT ACCOUNTING POLICIES:

Revenue Recognition

         Summarized below are the Company's revenue recognition policies for the
following income item areas: Mutual Funds/Variable Annuities,  Marketing Revenue
on  production  and for  regional and national  events,  Administration  fees on
Errors and Omissions  ("E&O") and Renewals,  Advisory Fees and Trading  Revenue.
These policies are in compliance with SEC Staff Accounting  Bulletin ("SAB") 104
"Revenue Recognition in Financial Statements".

         Mutual Funds/Variable Annuities.  Mutual Funds/Variable Annuity revenue
is recognized upon receipt of commissions  related to each sale, which generally
is settled on the trade date. The earnings process is substantially  complete at
the point that the fund company distributes payment to the Company.

         Trading.  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 the  National  Association  of  Securities  Dealers  ("NASD")  and the
Securities and Exchange Commissions ("SEC").

         The Company  also  receives  credit  adjustments  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 firm.

         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  between the advisor and the  advisor's
client.  These  revenues  are recorded  quarterly  as and when  billed,  and any
portion  remaining  uncollected at the end of the subsequent  quarter is charged
against earnings at that time.

         In the past,  advisory fees relating to the  management of mutual funds
were  based on  average  daily net fund  assets as  specified  in the  Company's
advisory  agreement  and disclosed in the funds'  prospectuses.  These fees were
recognized  monthly  based  on the  fund  Trustee's  administrative  fee  report
detailing  the amounts  that were earned for the month.  The Company in the past
had  elected  to waive  certain  of these  fees to allow for one of the funds to
maintain its ceiling on administrative  expenses. Per agreement with the trustee
of the funds, the waived fees were subject to a three-year  recovery period,  at
the end of which any uncollected fees were permanently waived and, consequently,
charged against earnings.  The Company ceased its mutual funds advisory services
during the previous fiscal year, and its successor as fund advisor agreed to pay
to the Company all such waived amounts with interest.

         Administration  Fees.  Administration fees for services rendered to its
representatives  respecting  annual NASD license  renewals and E&O insurance are
recognized  as revenue upon  registration  of the  representative  with NASD 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,  if  any,  collected  in  excess  of the E & O
insurance premium and/or fees due NASD are recognized as revenue.

         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 the event offset by its costs.

--------------------------------------------------------------------------------
                                     Page 9
<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE QUARTER ENDED JUNE 30, 2006 (UNAUDITED)

NOTE 1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT
        ACCOUNTING POLICIES (continued)

Accounts Receivable - Allowance for Doubtful Accounts

         Our  policies  for  determining  whether  a  receivable  is  considered
uncollectible are as follows.

         Loans to  representatives.  In  accordance  with SFAS No. 5, we perform
periodic  credit  evaluations  and provide  allowance based on our assessment of
specifically  identified unsecured receivables and other factors,  including the
representative's payment history. Once it is determined that it is both probable
that a loan  has  been  impaired  and the  amount  of  loss  can  reasonably  be
estimated,  the portion of the loan balance  estimated to be uncollectible is so
classified and written off.

         Advisory fees from mutual funds. As disclosed in the respective  mutual
funds'  prospectuses,  in the past the  Company  attempted  to recoup all waived
advisory service fees within a three-year  period.  If management  believed that
the likelihood of collecting  that receivable  within the three-year  period was
doubtful, then the Company provided for an allowance in accordance with SFAS No.
5. Determinations  whether to write off such fees were made annually.  Effective
October 18, 2005,  the Company no longer  provides  advisory  services to mutual
funds and is entitled to payment of all previously  waived  advisory fees by its
successor as fund advisor.

         Advisory  Fees on Asset  Managed  Accounts.  Uncollected  balances  are
written off before the subsequent quarter billing.

         Trade receivables.  As prescribed by the SEC, trade receivables usually
settle  within  three days.  If a trade error  results,  the Company will pursue
remedies  to  collect  on that  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.

Income Taxes

         The Company provides for income taxes at the end of each interim period
based on the estimated  effective tax rate for the full fiscal year.  Cumulative
adjustments  to the tax provision are recorded in the interim  period in which a
change in the estimated annual effective rate is determined.

NOTE 2.  SEGMENT INFORMATION

         The accounting policies of the segments are described in the summary of
significant  accounting  policies.  The Company  evaluates  performance based on
profit and loss from operations after income taxes.

         The Company accounts for inter-segment services and transfers as if the
services or transfers were to third parties,  that is, at current market prices.
The  Company's  reportable  segments  are  strategic  business  units that offer
different  services.  They are managed separately because each business requires
different technology and marketing strategies.

         The Company's  reportable  segments include investment services offered
through  ICC and asset  management  services  offered  through  ICA ,  including
securities,  insurance,  financial  planning  and  related  services.  ICC earns
commissions as a broker for its customers in the purchase and sale of securities
on major exchanges.  Asset management services generate recurring annual revenue
from fees received on the management of customer accounts.

         EPA had provided  money  management  services to a variety of investors
(See Part 1. Item 1 of March 31, 2006 10-K "Investment  Advisory  Services") and
until October 18, 2005,  provided asset management and portfolio design services
to two  mutual  funds.  ICA's  primary  mission is to offer  clients  investment
advisory and asset management procedures grounded on sound investment principles
of asset allocation, performance monitoring and portfolio rebalancing.

         Under the  guidelines  of FAS 131  "Disclosures  about  Segments  of an
Enterprise and Related Information",  commencing with the quarter ended December
31, 2005,  management reports its segments on a management  approach whereby our
business is presented in segments reflecting the way we make operating decisions
and assess  performance.  Accordingly,  ICA is now reported as part of the asset
management  services  segment.  Segments are currently  reported  based upon the
services  provided,  whereas they were previously  segmented  according to legal
entity.

         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.

--------------------------------------------------------------------------------
                                     Page 10

<PAGE>







                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE QUARTER ENDED JUNE 30, 2006 (UNAUDITED)
NOTE 2.  SEGMENT INFORMATION (CONTINUED

         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.


<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                            June 30,
                                                                  2006                   2005
                                                             ---------------        ---------------
<S>                                                             <C>                    <C>
Inter-company eliminations                                      $ 1,152,360            $ 2,501,849
Deferred income taxes                                                   478                 45,561
Income Taxes                                                         20,354                (25,645)
                                                             ---------------        ---------------
Total Corporate items and eliminations                          $ 1,173,192            $ 2,521,765
                                                             ===============        ===============
</TABLE>


Segment reporting is as follows:

<TABLE>
<CAPTION>
                                                              Quarter Ended March 31,
                                                               2006            2005
                                                           -------------   -------------
Non-interest revenues:
<S>                                                        <C>             <C>
ICC brokerage services .................................   $ 17,834,357    $ 13,869,504
EPA, ICA asset management services......................      1,592,222       1,203,209
ICH investments (loss) gain ............................             --            (141)
                                                           -------------   -------------
         Total..........................................     19,426,579      15,072,572
                                                           =============   =============
Revenues from transaction with other operating segments:
ICC brokerage services .................................      1,139,561         408,438
EPA, ICA asset management services......................             --          45,382
                                                           -------------   -------------
         Total..........................................      1,139,561         453,820
                                                           =============   =============
Interest and dividend income,net:
ICC brokerage services .................................        130,603          79,007
EPA, ICA asset management services......................         18,002             211
ICH ....................................................            226           5,335
ICH Securities .........................................         26,762          36,111
                                                           -------------   -------------
        Total...........................................        175,593         120,664
                                                           =============   =============
Depreciation and amortization expenses:
ICC brokerage services .................................         59,652          46,650
EPA, ICA asset management services......................            691           2,559
                                                           -------------   -------------
        Total...........................................         60,343          49,209
                                                           =============   =============
Income tax provision (benefit):
ICC brokerage services .................................       (614,368)         75,624
EPA, ICA asset management services......................        159,241           1,235
ICH ....................................................         11,300          19,549
                                                           -------------   -------------
        Total...........................................       (443,827)         96,408
                                                           =============   =============
Income (loss) :
ICC brokerage services .................................       (827,230)         84,106
EPA, ICA asset management services......................        214,393           1,374
ICH ....................................................        (11,527)        (14,354)
ICH Securities .........................................         26,742          36,100
                                                           -------------   -------------
        Total...........................................       (597,622)        107,226
                                                           =============   =============
Period end total assets:
ICC brokerage services .................................      9,167,171       9,627,940
EPA, ICA asset management services......................      1,482,984         849,831
ICH ....................................................      1,856,868         982,415
ICH Securities .........................................      3,112,516       4,789,743
Corporate items and eliminations .......................     (1,173,192)     (2,521,765)
                                                           -------------   -------------
        Total...........................................   $ 14,446,347    $ 13,728,164
                                                           =============   =============

</TABLE>

--------------------------------------------------------------------------------
                                     Page 11

<PAGE>


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
              CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE QUARTER ENDED JUNE 30, 2006
                                   (UNAUDITED)

NOTE 3.  LITIGATION

         The Company typically is involved with various judicial, regulatory and
arbitration  proceedings  concerning  matters  arising  in  connection  with the
conduct of its business.

   Massachusetts Proceedings

         By  administrative  complaint  dated  November 16, 2005, the Securities
Division (the  "Division") of the Secretary of the Commonwealth of Massachusetts
(the  "State")   brought  an   adjudicatory   proceeding   (the   "Massachusetts
Proceedings") ICC alleging violation of its supervisory  obligations under State
securities laws in connection with sales of equity-indexed annuities by a few of
ICC's independent registered representatives. The complaint alleges, among other
things,  that ICC failed to properly  supervise these  representatives,  thereby
allowing allegedly unsuitable sales of these insurance products,  and that ICC's
actions constituted  unethical or dishonest conduct. The complaint,  which seeks
an order  instructing  ICC to cease such  violations  and to pay an  unspecified
administrative  fine,  also  requests  that ICC's  registration  as a securities
broker-dealer  in  Massachusetts  be  suspended  or  revoked,  that  the firm be
censured,  and  that  it be  ordered  to  fairly  compensate  purchasers  of the
insurance products for any losses attributable to wrongdoing by ICC.

         We are unable to reasonably estimate any possible range of loss related
to these proceedings due to their uncertain resolution.  However, any conclusion
of these matters  favorable to the Division could have a material adverse effect
on our financial position and results of operations.

   Other Proceedings

         At June 30, 2006,  the Company was the  co-defendant  in various  other
lawsuits other than the Massachusetts Proceedings. Management believes, based on
currently available  information,  that the results of such proceedings,  in the
aggregate,  will not have a  material  adverse  effect on the  firm's  financial
condition.  The Company has Errors and  Omissions  ("E&O")  insurance to protect
itself  from  potential   damages  and/or  legal  costs   associated   with  the
aforementioned lawsuits and, as a result, in the majority of cases the Company's
exposure is limited to between $75,000 and $100,000 per case,  subject to policy
limitations and exclusions.  In accordance with Financial  Accounting  Standards
Board ("FASB") Statement No. 5, "Accounting for Contingencies",  the Company had
accrued expenses of  approximately  $0.86 million for the quarter ended June 30,
2006 related to legal fees and estimated  probable  settlement costs relating to
the Company's defense in various lawsuits.




--------------------------------------------------------------------------------
                                     Page 12

<PAGE>


NOTE 4.  STOCK BASED COMPENSATION

         The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 123(R), Share-Based Payment on April 1, 2006. The adoption of this statement
did  not  have  a  material  impact  on  the  Company's  consolidated  financial
statements given that it adopted the fair value  recognition  provisions of SFAS
No. 123 effective September 28, 2002 using the modified prospective  application
transition  method  within  the  provisions  of SFAS No.  148,  "Accounting  for
Stock-Based Compensation - Transition and Disclosure".

Stock Option Plan

         The Company had granted  options  prior to the  adoption of SFAS 123(R)
and had previously  reported as a footnote  disclosure the proforma effect if we
had  reported an expense  under the  guidelines  of SFAS No.  123.  There was no
expense reported as a proforma for quarter ended June 30, 2005.

In adopting  the SFAS No.  123(R)  there was $0.00  expense to be  reported  for
quarter ended June 30, 2006.

Restricted Stock Plan

         Under the 2005 Equity Incentive Plan the Company is authorized to issue
restricted  shares of common stock to  employees.  Awards under this plan may be
granted by the Company in  connection  with initial  employment or under various
retention  plans for  individuals  who are responsible for a contribution to the
management  growth,  and/or  profitability  of the  Company.  These  shares  are
forfeitable  in the event of  termination  other than for death,  disability  or
retirement.  The compensation  cost is recognized over the vesting period of the
shares and is calculated as the market value of the shares on the date of grant.
The following activity occurred during the three months ended June 30, 2006:


                                  Weighted
                                  Average
                                 Grant Date
                                 Fair Value
                    Shares           ($)
                ---------------------------
Nonvested at
4/1/2006             26,785        $ 3.08

Granted             336,200          3.65
Vested             (171,536)         3.64
Canceled                  -             -
                ---------------------------
Nonvested at
6/30/2006           191,449        $ 3.58



         The  Company's  net loss  for the  three  months  ended  June 30,  2006
includes  $557,196  of  compensation  costs  related  to  the  Company's  Equity
Incentive Plan grants of restricted  stock to employees,  and $66,800 for grants
to Directors,  consultants  and independent  representatives.  The Company's net
income for the three months ended June 30, 2005 includes  $0.00 of  compensation
check costs related to this plan.

         As  of  June  30,  2006,  there  was  $684,907  of  total  unrecognized
compensation  cost related to grants under the Company's  Equity Incentive Plan.
These costs are  expected to be  recognized  over a weighted  average  period of
approximately  4.64 years. The total fair value of shares vested under this plan
during the three months ended June 30, 2006 was $608,599.


NOTE 5 - NOTE RECEIVABLE

         On October 24, 2005,  the Company  entered into a definitive  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 to permit the  appointment by the Trust of
DGA to supersede the Company as the Trust's investment advisor.  The Company had
served since 1999 as  Investment  Advisor for the Funds,  which are 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.

--------------------------------------------------------------------------------
                                    Page 13

<PAGE>

         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 has 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 "market to market"  adjustments.  These
fees are to be 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 totally separate.

         The  note  provides  for a  principle  amount  of  $747,617,  quarterly
payments of interest  accruing thereon at a 5.5% annual rate, and a full payment
on or before October 31, 2010. Prepayments are permitted without penalty.



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 June 30, 2006 and March 31, 2006,  the  consolidated  results of
operations  for the  three  months  ended  June 30,  2006 and  2005  and,  where
appropriate,   factors  that  may  affect  future  financial  performance.   The
discussion  should  be read  in  conjunction  with  the  consolidated  financial
statements  and  related  notes,  included  elsewhere  in the Form 10-Q.  Unless
context requires otherwise, as used in this Management's Discussion and Analysis
(i) the "current  period" means the fiscal quarter ended June 30, 2006, (ii) the
"prior period" means the fiscal  quarter ended June 30, 2005,  (iii) an increase
and  decrease  compares  the current  period to the prior  period,  and (iv) all
non-comparative amounts refer to the current period.

         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,  asset  management,
financial  planning,  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 any one of or by a
multiple of such external factors.

OUR BUSINESS

         A key  component  of our  business  strategy  is to recruit and provide
productive  support to independent  representatives  who generate  comparatively
large sales  volumes and are  motivated to  continually  grow their  business by
offering a wide  variety  of  services  and a  diversified  range of  investment
products to their clients.  The Company focuses on providing  substantial  added
value  to  our  representatives   that  enables  them  to  be  more  productive,
particularly in high margin lines such as advisory services. Support provided to
assist  representatives in pursuing consistent and profitable sales growth takes
many forms.  These forms include hi-tech  trading  systems,  targeted  financial
assistance  and  a  network  of  communication  links  with  investment  product
companies  including  regional and national  conventions that provide forums for
interaction to improve products, sales and client satisfaction.

         The Company  operates  primarily  through its  subsidiary,  ICC, in two
segments of the financial services industry:

       Broker-Dealer Services

         Broker-dealer   services  in  support  of  trading  and  investment  in
corporate  equity and debt securities,  U.S.  Government  securities,  municipal
securities,  mutual  funds,  variable  annuities  and variable  life  insurance,
including  provision  of market  information,  internet  trading  and  portfolio
tracking facilities and records management, and


--------------------------------------------------------------------------------
                                    Page 14

<PAGE>

Investment Advisory Services

         The Company provides  investment advisory services of asset allocation
and portfolio  rebalancing  through  ("ICA").  In the past  investment  advisory
services were performed by EPA; however,  to avoid the duplication of efforts to
support two  advisory  service  entities,  the Company  operates as a registered
investment adviser under ICA.

OUR PROCESS

Check and Application

         The  majority  of  transactions  are  conducted  through  a  check  and
application  process  whereby a check  and an  investment  company's  particular
product  application is delivered to us for processing.  This includes principal
review and submission to the investment company or clearing firm.

Online Trading

         Registered  representatives  can  efficiently  submit  a wide  range of
security  investments  online  through  the use of our remote  electronic  entry
trading platform.

Bond Trading

         The Company's  fixed-income trading desk uses a network of regional and
primary  dealers to execute trades across all  fixed-income  asset classes.  The
desk also utilizes several  dealer-only  electronic services that allow the desk
to offer inventory and to execute trades.

Asset Allocation

         Asset Allocation  services are made available through Investors Capital
Advisory, the Company's registered investment advisor subsidiary. The allocation
services,  for the most part, are conducted through our online trading platform.
Other allocation services are performed directly by the fund company.

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
recruiting  statistics  for quality  representatives,  top line  commission  and
advisory services  revenues,  gross margins,  operating  expenses,  legal costs,
earnings per share, and average revenue per representative.

RECRUITING

         Revenue  growth  continues to be supported by our success in recruiting
sophisticated,  experienced  representatives  who are  qualified  and  likely to
engage in trading  (brokerage)  services.  As indicated in the following  table,
compared to the prior period we recruited  42.86% more new  representatives  who
generated 114.32% more trading commission revenues. This performance contributed
to a Company-wide $1.64 million, or 45.57%, increase in commission revenues from
trading.


<TABLE>
<CAPTION>

Recruiting Statistics                          Quarter Ended
                                                   June 30,      Change      Percent Change
                                             2006       2005  2006 vs. 2005  2006 vs. 2005
                                             ----       ----  -------------  -------------
<S>                                          <C>        <C>      <C>            <C>
Revenues from New Recruits
Mutual Funds, Variable Annuities, Direct
  Participation Programs, Other            $122,537   $103,805   $ 18,732        18.05%
Trading Services(brokerage)                  52,631     24,558   $ 28,073       114.32%
Advisory Services                               672     24,488   -$23,816       -97.26%
                                           --------   --------   --------       ------

Total                                      $175,840   $152,851   $ 22,989        15.04%
                                           ========   ========   ========       ======

Representatives Recruited                        20         14          6        42.86%


</TABLE>


-------------------------------------------------------------------------------
                                    Page 15

<PAGE>

RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                     Percent of Revenue
                                                                        Quarter Ended            Percent
                                   Quarter Ended June 30,                   June 30,              Change
                                -----------------------------------------------------------------------------
                                                                                                    2006
                                   2006             2005            2006            2005          vs. 2005
                                ------------   ---------------   ------------    ------------   -------------
Revenues:
<S>                             <C>              <C>                  <C>          <C>                <C>
     Commission                $ 17,458,902      $ 13,368,068         89.07%       87.99%             30.60%
     Advisory                     1,568,429         1,155,982          8.00%        7.61%             35.68%
     Other fee income                66,397           103,438          0.34%        0.68%            -35.81%
     Marketing revenue              324,414           435,224          1.65%        2.86%            -25.46%
     Other income                   184,030           130,524          0.94%        0.86%             40.99%
                                ------------   ---------------
Total Revenue                    19,602,172        15,193,236        100.00%       100.00%            29.02%
                                ============   ===============
Commission and advisory
       expenses                  15,815,220        11,982,282         80.68%       78.87%             31.99%

          Gross Profit            3,786,952         3,210,954         19.32%       21.13%             17.94%

Operating Expenses:

     Advertising                    269,627           242,607          1.38%        1.60%             11.14%
     Communications                  65,767           155,508          0.34%        1.02%            -57.71%
                                ------------   ---------------
Total Selling Expenses              335,394           398,115          1.71%        2.62%            -15.75%

     Compensation and benefits    2,716,025         1,735,128         13.86%       11.42%             56.53%
     Regulatory, legal
         and professional         1,202,340           473,144          6.13%        3.11%            154.12%
     Occupancy                      234,006           154,091          1.19%        1.01%             51.86%
     Other administrative
         expenses                   332,604           243,508          1.70%        1.60%             36.59%
                                ------------   ---------------
Total Administrative Expenses     4,484,975         2,605,871         22.88%       17.15%             72.11%

Total Operating Expenses          4,820,369         3,003,986         24.59%       19.77%             60.47%
                                ============   ===============

         Operating (Loss)
          Income                 (1,033,417)          206,968         -5.27%        1.36%           -599.31%

Other Expense:

     Interest expense                 8,032             3,334          0.04%        0.02%            140.91%

Total Other Expense                   8,032             3,334          0.04%        0.02%            140.91%

Income before taxes              (1,041,449)          203,634         -5.31%        1.34%           -611.43%

(Benefit) Provision for
       income taxes                (443,827)           96,408         -2.26%        0.63%           -560.36%

Net (Loss) Income                $ (597,622)        $ 107,226         -3.05%        0.71%           -657.35%
                                ============   ===============
</TABLE>


-------------------------------------------------------------------------------
                                    Page 16

<PAGE>


Revenues

         The Company  continues to grow revenues in the  diversified  investment
sector of the financial services industry.  Our revenues rose $4.40 million,  or
29.02%,  to $19.60  million as we  continue  our  efforts to  increase  top line
revenues in commissions and advisory  services.  Leading this  performance was a
$4.09 million or 30.60%  increase in  commissions  and a $0.41 million or 35.68%
increase in advisory services revenue between the comparative periods.

Average Revenue Per Representative

<TABLE>
<CAPTION>

                             June 30, 2006        June 30, 2005     Percentage Increase

<S>                          <C>                  <C>
     Commission              $ 17,458,902         $ 13,368,068
     Advisory                   1,568,429            1,155,982
     Other fee income              66,397              103,438
                             -------------        -------------
                             $ 19,093,727         $ 14,627,488

Number of representatives             724                  641             12.95%

Average Revenue Per Rep      $  26,372.55         $  22,819.79             15.57%
</TABLE>




         Our  average  revenue  per  representative   grew  by  15.57%  for  the
comparative  periods of June 30,  2006 versus  June 30,  2005.  This is a direct
result of recruiting qualified and sophisticated representatives in the industry
who are  capable of  providing  a more  diversified  range of  products to their
clients.  As we continue our aggressive  recruiting  process, we can continue to
achieve revenue growth per representative.

         Commissions.  Commissions from variable  annuities and trading provided
$3.34 million, or 81.76%, of a $4.09 million, or 30.60%,  increase in commission
revenue  compared to the prior  period.  Commissions  from direct  participation
programs,  which predominantly include REITs (Real Estate Investment Trusts) and
oil and gas programs, increased by $0.70 million or 17.20%.


<TABLE>
<CAPTION>
                                                                                  Percentage       Percentage
                                                                                    of Total        increase
Product Type                        2006              2005        2006 vs. 2005     Increase     2006 vs. 2005
<S>                             <C>              <C>            <C>                <C>              <C>
Variable Annuities              $  7,163,507     $  5,461,204     $ 1,702,303        41.61%          31.17%
Trading (brokerage)(1)             5,246,499        3,604,120       1,642,379        40.15%          45.57%
Mutual Funds                       2,492,900        2,485,872           7,028         0.17%           0.28%
Direct Participation Programs      2,391,976        1,688,171         703,805        17.21%          41.69%
Other                                164,020          128,701          35,319         0.86%          27.44%

                                -------------    --------------------------------------------    --------------
Total Commission Revenue        $ 17,458,902     $ 13,368,068     $ 4,090,834       100.00%          30.60%
                                =============    ============================================    ==============
</TABLE>

         1.       Revenue  designated as Trading  (brokerage)  includes  revenue
                  from mutual funds sold through our trading platform.



         Although  commissions from variable  annuities continue to comprise the
largest component of commission revenue, the Company's  commissions revenue base
has been shifting  toward  trading,  which  increased by 45.57%  compared to the
31.17% increase achieved in variable annuities commissions.  The tendency of our
representatives to conduct more of their business in brokerage accounts helps to
improve  our  margins  since  percentage   margins   generated  by  trading  are
significantly higher than those generated by the sale of annuities.

         The trend towards  trading  reflects a concerted  effort on our part to
recruit  sophisticated  representatives  with series 7 licenses  who utilize our
brokerage  platform.  As a result  of the shift  toward  trading  products,  the
Company  experienced  higher  overall profit margins from sales of the resulting
product mix during the current  period  compared  to the prior  period.  See "--
Gross Margins" below.

-------------------------------------------------------------------------------
                                    Page 17

<PAGE>


         Advisory Fees. Advisory services typically provide significantly higher
margins than traditional  broker-dealer  products such as variable annuities and
mutual funds. See " - Gross Margins".  Accordingly, we have been encouraging our
representatives to convert more of their business to advisory services. Although
we do not control which advisory services our representatives  provide for their
clients,  we  continue  to  make  concerted  efforts  to  attract  them  to  our
proprietary advisory services programs through seminars,  trade shows and direct
telemarketing.

         Fees from our rep-directed  asset-managed  program,  A-MAP, where asset
allocation and other investment  advisory  services are provided directly by our
independent  representatives,  continue to be the  leading  source of revenue in
this  category.  Revenues  from this program  grew by $0.45  million or 78.2% to
$1.02 million  compared to $0.57 million the prior period.  Supported by our Net
Exchange Pro and Pershing direct mainframe  trading  platforms,  this program is
becoming   increasingly   popular  with  our  representatives   because  of  the
opportunities  it provides to deliver to their clients superior asset management
services at a potentially  lower cost and the  potential  for increased  overall
market performance.

         Revenues  from our  fund-managed  F-MAP  or  separately  managed  S-MAP
accounts,  where investment advisory services are provided by ICA instead of our
independent  representatives,  increased by only $0.03  million or 8.05% between
the comparative  periods.  Over recent quarters  revenues from the  fund-managed
category have slightly  declined due to the  termination of accounts where asset
values  have  fallen  below a  minimum  level.  Also,  management  has not  been
aggressively  marketing this program compared to the rep-directed  asset-managed
program and S-MAP program.

         A slight decrease was experienced in the quarter ended June 30, 2006 in
revenues from asset-managed  programs where investment  services are provided by
outside advisors. ICA has been continuing to direct their marketing efforts away
from  these  third  party   management   programs  and  toward  their  internal,
proprietary  asset-managed  models.  ICA has been  providing  sales,  marketing,
trading platform and other technical  support to our  representatives  to enable
them to deliver improved investment advisory services.

         Revenues from advisory  services  provided to mutual funds decreased by
$0.08  million when  compared to the prior period,  reflecting  the  termination
during the prior year of the Company's management agreement pursuant to which it
had been providing advisory services to mutual funds.

         Revenues from our rep-directed asset managed program,  A-MAP, have been
contributing  an increasing  proportion of our overall asset  advisory  services
revenue  growth.  Our current  success in promoting our A-MAP advisory  services
program in large part due to our  providing an enhanced  online  platform to our
representatives  that enables them to perform their asset allocation services in
a more cost effective  manner.  Resulting  transactional  cost savings have been
passed on to our representatives' clients in the form of lower fees for improved
service.

         Other Fee Income. Other fee income decreased by $0.04 million or 35.8%,
including  (i) a $0.01  million  decrease in  administrative  fees for providing
regulatory services to our representatives in connection with annual renewals of
their NASD licenses and errors and  omissions  (E&O) policy  enrollment,  mostly
stemming  from the write off of  uncollected  renewals,  (ii) a  combined  $0.01
million decrease in fees in portfolio  consolidation  reporting  services and in
mortgage referral fees, reflecting a drop off in interest in these services, and
(iii) a $0.02 million decrease in administration fees on asset-managed  accounts
resulting from the  termination of several of these accounts when asset balances
fall below minimum levels.

         Marketing Revenue. Net marketing revenues decreased by $0.11 million or
25.5%,  reflecting a $0.15 million decrease in marketing support to assemble our
West Coast  National  meeting.  Offsetting  this  decrease  was a $0.06  million
increase in marketing  support  revenues from several product  companies to host
our  regional  meetings.  We also  saw a  combined  $0.02  million  decrease  in
marketing  support  revenues  from product  companies  and in sales of ancillary
items such as apparel, bags, hats with Company logo and blast email services.

         Other  Income.  Other  income,  consisting  primarily  of interest  and
dividends and gains or losses on investments, increased by $0.05 million for the
comparative  current  period to the prior  period.  The majority of the increase
came from interest earned on account  balances due to an increase in the average
daily balance in our trading accounts.



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                                     Page 18

<PAGE>


Gross Margins

<TABLE>
<CAPTION>
                                                                         Gross Margin         Percent of
                                                                          Retention          Gross Margin
                                               Gross Margin             Quarter Ended        Quarter Ended      Gross Margin
                                          Quarter Ended June 30,           June 30,             June 30,       Percent Change
                                       ---------------------------    -----------------                        --------------
                                                                                                                    2006
                                           2006           2005         2006      2005       2006      2005        vs. 2005
                                       ------------   ------------    -------  --------   --------  --------   --------------
<S>                                    <C>            <C>             <C>      <C>        <C>       <C>       <C>
Commission - Mutual Funds
      and Variable Annuities           $ 1,516,892    $ 1,252,582      12.60%    13.00%     40.06%    39.01%       21.10%
(Check and Application distribution)

Commission - Trading                     1,182,053        714,655      22.53%    19.80%     31.21%    22.26%       65.40%

Commission - Insurance Products             68,674        115,587      99.50%    99.00%      1.81%     3.60%      -40.59%

Commission - Underwriting                    9,502          1,200      10.00%    10.00%      0.25%     0.04%      691.80%

Advisory Services                          483,220        523,872      30.30%    43.30%     12.76%    16.32%       -7.76%

Licensing                                   37,828         33,815        N/A    100.00%      1.00%     1.05%       11.87%

Marketing                                  324,414        435,224        N/A     49.60%      8.57%    13.55%      -25.46%

Other income                               164,369        134,019        N/A     90.80%      4.34%     4.17%       22.65%
                                       ------------   ------------
Total Gross Margin                     $ 3,786,952    $ 3,210,954      19.30%    21.10%    100.00%   100.00%       17.94%
                                       ============   ============
</TABLE>

         Gross margin rose by $0.58  million or 17.90% to $3.79  million for the
current  period  primarily  due to a $0.47  million or 65.4%  increase  in gross
margin derived from trading over the prior period.

         Trading. The increase in gross margin from trading reflects an increase
in brokerage  commissions  and a reduction in clearing  charges due to increased
sales volume,  increased  commission retention rates, and more fee income within
corporate accounts.

         Contributing  to this  improvement  in gross margins from trading was a
combined  increase of $0.12 million in the margin from our trails and from money
market income on account balances. Another contributing factor was $0.35 million
contribution  from net trading  commissions of which $0.18 million resulted from
lower payouts to representatives.

         The  combined  effect of these  factors  was an increase in our average
payout retention in brokerage services from 31.60% in the prior period to 35.01%
in the current  period that, in turn,  contributing  to an increase in our gross
trading  margin from 19.80% to 22.53%.  Please refer to the Gross Margin  Table,
above.

         We are  continuing  our  efforts to  recruit  capable  and  experienced
representatives  who can offer a broader range of brokerage products that have a
greater  profit margin  compared to the normal mutual fund and variable  annuity
products (see "--Commissions", above).

         Advisory  Services.  Advisory services profit margin decreased slightly
by $0.04 million or 7.80% for the current  period  compared to the prior period.
The  majority  of  the  profit  margin  in  advisory  services  stems  from  our
rep-directed  asset-managed  programs which contributed a $0.14 million increase
to our profit margin.  Offsetting this increase was a $0.09 million  decrease in
margins in asset managed services of our mutual funds resulting from termination
of our  Investment  Advisory  Agreement with Eastern Point Advisors Funds Trust.
See Footnote 1 - "Advisory fees from mutual funds" to our Condensed Consolidated
Financial Statements.


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                                     Page 19

<PAGE>


         Other decreases in profit margins  included a $0.06 million decrease as
a result of increased payouts for sub-advisor fees, advisory reporting fees, and
financial planning fees. These payouts vary depending upon the number and market
value of asset managed accounts.

         Finally,  there was a combined $0.03 million decrease in profit margins
from ICA and third party  directed  advisory  services  reflecting  management's
focus on marketing our rep-directed asset-managed program, A-MAP.

         Positive movement in the Company's profit margin from Advisory Services
has come mainly from our  rep-directed  asset-managed  programs.  These programs
make it possible for representatives to manage client accounts to trade directly
online  using  our  automated  trading  platform.  Resulting  increases  in  the
representative's  trading volume effectively  increase the Company's  commission
revenues and gross margin.  Additionally,  by processing more  transactions at a
stable fixed cost, our enhanced trading  technology  fosters  economies of scale
that control operating  expenses required to process the increased trade volume.
Refer to "Our Process" above.

         In addition to  experiencing  a decrease in profit margin from advisory
services during the  comparative  period,  a couple of factors  contributed to a
decrease in our retention rate from 43.30% to 30.30%. Advisory fee rates derived
from  rep-directed  business  declined  slightly,  reflecting  decreases  in the
commission retention rate for client accounts whose balances reached levels that
trigger  automatic  retention rate reductions.  Also, as a result of terminating
the management  agreement associated with the mutual funds, we no longer receive
any advisory fees from that revenue component which had directly  contributed to
our margin.

         Although our retention rate from advisory services  decreased  compared
to the prior period, this category on a percentage-retention basis still retains
a higher  profit  margin than most of the other  products or services we and our
representatives provide. (See -"Gross Margin Table", above).

         Mutual Funds, Variable Annuities,  Etc. Profit margins from mutual fund
sales, variable annuity sales, direct participation programs and other check and
application distribution programs generated $1.52 million or 40.10% of the total
gross margin  compared to $1.25 million or 39.00%  during the prior  period.  As
presented  in the  previous  gross  margin  table,  margin  from our  check  and
application  distribution programs comprised the greatest portion of our overall
profit margin;  however,  trading  achieved the largest  percentage  increase in
gross margin in our principal categories.

Commission Retention

         Commission payouts to our independent representatives,  as a percentage
of commissioned revenues, increased to 82.80% for this fiscal quarter ended June
30, 2006 from 81.90% for the fiscal  quarter  ended June 30, 2005.  As a result,
our retention  rates  decreased from 18.10% to 17.20%.  Management is continuing
their  efforts to improve  commission  retention  rates by refining our business
model  to   emphasize   the   recruitment   and   retention   of   sophisticated
representatives.

         Sophisticated  representatives  can offer a variety  of  brokerage  and
advisory products and services that provided for a higher  commission  retention
rate  than  those  obtained  from  mutual  funds  and  variable  annuities.   We
experienced  higher  margins from trading as a result of ticket charges and fees
pertaining  to increases in account  balances  that flow  entirely to the profit
margin.  From  advisory  services  we receive  fees on the asset  balance in the
account that go directly to the firm.  Refer to Note 1 --"Revenue  Recognition -
Advisory Fees" to our Condensed Consolidated Financial Statements.

Operating Expenses

         Operating  expenses,  which  experienced  a  $1.82  million  or  60.50%
increase for the quarter ended June 30, 2006, are discussed in detail below:

         Compensation and benefits.  The largest component of operating expenses
is compensation and benefits,  which increased by $0.98 million or 56.50% during
the  current  period.  This  change  was due  primarily  to (i) a $0.62  million
increase in stock-based  compensation  resulting from the issuance of restricted
common  stock to employee  and  directors on June 12, 2006 under our 2005 Equity
Incentive  Plan, (ii) a $0.31 million  increase in general  salaries and (iii) a
$0.09 million increase in compensation  expenses from 401(k)  contributions  and
payroll taxes. Partially offsetting these increases was a $0.04 million decrease
in officer's  salaries primarily as a result of the resignation of the president
of Eastern Point Advisor in the previous fiscal year.

         The $0.31  increase in general  salaries  resulted  primarily  from the
hiring of 13 additional  personnel to support  continued  growth,  including (i)
$0.07 million in the trading and operations sector to continue providing quality
customer  service  to our  sophisticated  representative  force  in the  face of
increasing   transactional   volume,  (ii)  $0.06  million  to  hire  additional
compliance  personnel to meet the growing needs within the industry for internal
control,  quality supervision and continuing  education to our independent reps,
(iii) $0.07 in our  marketing  recruiting  department  to enhance our ability to
recruit quality  representatives,  (iv) $0.09 million in our legal department to
help reduce the need for  expensive  outside  counsel  and (v) $0.02  million in
other general administrative areas.


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                                     Page 20

<PAGE>

         Regulatory, legal and professional.  Regulatory, legal and professional
expenses  increased by $0.73 million or 154.10%.  The largest  component of this
increase was a $0.37  million or 254.10%  increase in  non-in-house  legal fees,
$0.22  million  of which  was  incurred  in  connection  with the  Massachusetts
Proceedings  described  in Footnote 3 to the  Condensed  Consolidated  Financial
Statements.  An  additional  $0.15  million  of this  increase  arose from other
actions that management  believes,  with advice of counsel, are of the exposures
likely to be presented by our ongoing operations.

         There were $0.27 million in legal settlements from dealings relating to
our business that contributed to the increase in lawsuit settlement expenses.

         We increased our accruals for legal expenses from $0.26 million for the
prior period to $0.86 million for the current period. Please refer to Footnote 3
to the  Condensed  Consolidated  Financial  Statements.  In  addition,  since we
operate in an industry  embedded  with  regulation,  we will  continue to invest
significant resources to reduce the likelihood of future litigation by promoting
accuracy,  ensuring  sound  operational  techniques  and  providing  appropriate
compliance measures.

         Finally,  we experienced a $0.09 million increase in professional  fees
for  outside  consulting  services  in  connection  with  the  installation  and
integration of our new accounting  software and data entry and scanning  support
for the operations departments.

         Advertisement  and  marketing.   Advertising  and  marketing   expenses
increased  by $0.02  million or 11.10% due to a change in the overall  marketing
approach in our  recruitment  process.  Management  determined that an effective
means  to  communicate  to  a  potential  representative  force  is  by  placing
advertisements  in  industry  wide  magazines.  As a  result  of this  strategy,
advertising  expenses  increased by $0.01. Also there was $0.01 million increase
in meals and entertainment as a result of the officers of the Company continuing
to meet potential representatives.

         Communications.  Communications  expenses decreased by $0.09 million or
57.70%,   primarily   due  to  decreases   in  printing  and  website   expenses
approximating $0.03 million and $0.05 million,  respectively.  The costs savings
were incurred by  communicating to our perspective  representatives  by emailing
our product  literature  instead of direct  mailing.  The  company's  website is
currently used to target new revenue streams by providing  access to information
through the website and other Internet  publications.  Communication efforts and
related expenses, which also include investor/public relations,  conference, and
telephone,  have historically been positively correlated with the overall growth
of our  business.  Our  website  and  newsletter  "The  Capitalist"  have become
effective  medium to  communicate  to potential  qualified  representatives  for
recruitment purposes.

         Occupancy.  Occupancy  expenses  increased  by $0.08  million or 51.90%
primarily  as a result  of $0.06  million  in  added  costs  for rent in our new
locations.  The Company added investment centers in Miami,  Florida,  Braintree,
Massachusetts and Manhattan,  New York. The Company also experienced an increase
of $0.01 million in  depreciation  and acquired  additional  fixed assets in the
form of new computers  for the  additional  staff,  leasehold  improvements  and
additional furniture and fixtures to the home office in Lynnfield, Massachusetts
to accommodate the increase in number of employees.

         Other  administrative.  Other  administrative  expenses,  which include
various insurance,  postage, office and computer-related expenses,  increased by
$0.09 million or 36.60%.  The Company  experienced  a $0.02 million  increase in
donations  to  local  charities  and  a  $0.02  million   increase  in  computer
maintenance and software for Microsoft upgrades and Website server upgrades.

Operating Income

         Operating  income  decreased  by $1.24  million  or  599.30%  due to an
increase in operating  expenses of $1.81 million or 60.50%. The most significant
contributors to the increase in operating expenses were a $0.62 million increase
in  stock  based  compensation,  a $0.31  million  increase  in  general  salary
compensation  from the hiring of new personnel,  and a $0.67 million increase in
legal fees and  settlements.  Partially  offsetting these increases in operating
overhead  was a  $0.58  million  increase  in our  gross  margin,  primarily  in
brokerage business.

         We will  continue to make  substantial  investments  in our selling and
administrative   services  capabilities,   including  additions  to  management,
personnel  and  service  infrastructure,  as part  of a  concerted  strategy  to
increase revenues and profitability. Management firmly believes that a sustained
focus on enhancing our clearing firm's  state-of-the-art  business platform will
facilitate  accelerated  recruitment  of  independent  representatives  that are
focused on growing revenues,  particularly in high margin lines such as advisory
and trading services. As part of this effort, the Company continues to invest in
an  automated  trading  system that  enables  sophisticated  representatives  to
enhance client base and activity.


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                                     Page 21

<PAGE>


Net Income

         Net income  decreased by $0.70  million or 657.30%,  or $0.12 basic and
diluted per share, due to a decrease in operating income offset by an income tax
benefit  of $0.44  million.  The  decrease  in  operating  income is a result of
incurring  more  operating   expenses,   primarily  in  compensation   expenses,
proportionate  to the increase in revenues and profit margins when comparing the
fiscal quarter ended June 30, 2006 to the fiscal quarter ended June 30, 2005.


                         Liquidity and Capital Resources

         The Company believes that achieving its return on equity goals requires
the efficient use of capital.  We have financed our  operations  primarily  with
internally generated cash flow.

         Cash inflows  historically  come mainly from the  profitability  of the
Company's  core services and  investment  products.  For the last several years,
profitability  has  typically  followed an annual  cycle of  relatively  average
profitability  during  the first  and  third  fiscal  quarters,  relatively  low
profitability  during the second fiscal quarter (when many  representatives  and
their clients are on summer vacation),  and relatively high profitability during
the fourth fiscal quarter (when many  representatives  and their clients start a
new business and investment year).

         Uncertainty in the financial markets can have a negative impact on cash
flow.  The Company  works to minimize  this  impact by  aggressively  recruiting
sophisticated  representatives who can offer diversified  products that continue
to meet the needs of their clients, despite changing market conditions.

         The  Company  takes  a  proactive   approach  to  minimizing,   if  not
preventing,  the  occurrence  of other events that may lead to  unexpected  cash
outflows,  including  lawsuits,  trade errors and fines from regulatory agencies
such as the NASD or the SEC. A key to this  approach is ensuring  that  adequate
controls over our operations and those of our  representatives  are  implemented
and periodically  updated.  As part of this effort,  substantial  resources have
been committed to enhancing the  capabilities  of our  compliance  team members,
whose tasks include assuring that our representatives  give proper weight to the
circumstances  and  interests  of their  clients  when  recommending  investment
options.  The Company  also  allocates  resources  to stay current with the many
rules and  regulations  applicable to our business by assisting in the education
and training of our sales representatives and staff.

         As of June 30, 2006, cash and cash equivalents totaled $7.06 million as
compared to $7.72 million as of March 31, 2006.  Working  capital as of June 30,
2006 was $7.85  million as compared to $8.04  million as of March 31, 2006.  The
ratio of current assets to current liabilities was 2.94 to 1 as of June 30, 2006
as compared to 2.70 to 1 as of March 31, 2006.

         Operations  used $0.16  million in cash for the quarter  ended June 30,
2006 as  compared to $0.04  million in cash used for the quarter  ended June 30,
2005.  Cash flow from  operations,  in comparing the current period to the prior
period, decreased by $0.12 million as a result of several factors.

         We  experienced  a $0.70  million  decrease  in net  income and a $0.93
million decrease in cash for payment of income taxes. We experienced a cash flow
decrease  of $0.28  million  for  payment of current  liabilities  primarily  in
commission's  payable.  Offsetting  these  decreases was a cash flow increase of
$1.03 million from our trade receivables.

         Cash  outflows  from  investing   activities  for  the  current  period
comprised of $0.21 million of which $0.12 million was for  purchasing  equipment
as well as technology and leasehold  improvements.  Also we had cash outflows of
$0.09  million used to grant loans to  registered  representatives  to help grow
their businesses.  Finally, we had a $0.01 million decrease in cash for interest
on a Note  Receivable  see Footnote 5 to our  condensed  consolidated  Financial
Statements.

         Finally,  from  financing  activities  we  paid a  $0.25  million  cash
dividend on June 29, 2006 to shareholders of record as of June 15, 2006.

         By  comparison,  for the  quarter  ended  June 30,  2005,  cash used in
operations was $0.04 million.  Cash outflows for the prior period included $0.18
million for purchasing  equipment,  technology,  and leasehold  improvements and
$0.68  million  for paying  current  liabilities  (accounts  payable and accrued
expenses).

         Cash disbursements contributing to quarter ended June 30, 2005 included
$0.24  million  for legal  related  matters,  $0.10  million for  insurance  and
professional fees, $0.14 million for membership and NASD dues, $0.11 million for
mutual fund  administration  costs, and $0.29 million for payroll related items.
Finally,  a $0.12 million cash dividend was paid on May 16, 2005 to shareholders
of record as of May 2, 2005.



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                                     Page 22

<PAGE>


         Cash disbursements  contributing  significantly to cash outflows during
our most recent  quarter  included  $0.64 million for legal  related  matters of
which  $0.35  million  was  for  legal  fees  pertaining  to  the  Massachusetts
Proceedings.  In addition  the Company paid out $0.36  million in income  taxes.
Finally, a $0.25 million cash dividend was paid on June 29, 2006 to shareholders
of record as of June 15, 2006.



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                                     Page 22

<PAGE>

         Management  anticipates  that the current  period net cash outflows are
not indicative of a future cash outflow trend but, rather,  reflected payment on
legal defense for a complaint that is atypical of other legal  proceedings  made
towards the Company. However, those disbursements during the current quarter did
have a significant impact on our brokerage firm's net capital ratio.

         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 a
company, and net capital includes 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,  the  Company's  net capital  ratio would
exceed 10 to 1 or if we would have less than 120% of our  minimum  required  net
capital.

         As of June 30,  2006 ICC had net  capital of $1.04  million  (i.e.,  an
excess of $0.69  million)  and a 5.07 to 1 net capital  ratio as compared to net
capital of $0.96 million (i.e.,  an excess of $0.53 million) and a 6.63 to 1 net
capital ratio as of March 31, 2006.

         The  Company's  legal  accrual  increased  to $0.86  million from $0.26
million as a result of the  Massachusetts  Proceedings and various  arbitrations
filed against the company.  During the current  period the increase in our legal
accrual  impacted  ICC's net capital  ratio and excess net capital.  The Company
does not  consider  this to be a trend and does not  currently  anticipate  that
similar accrual increases will be a recurring  necessity.  See Footnote 3 to our
Condensed Consolidated Financial Statements.

         The Company  currently has ample cash to cover additional  accruals and
disbursements  resulting from these other arbitrations and proceedings.  Despite
these arbitrations and legal proceedings,  that increased our legal accrual, the
Company  remains focused on committing  their resources  necessary for continued
growth.

         In its role as investment  advisor to the Eastern Point  Advisors Funds
Trust family of mutual funds,  Company  disbursements  to pay fund expenses that
exceed their  respective  ceiling caps averaged $0.08 million per quarter during
the  duration of the previous  fiscal year.  As  previously  noted,  the Company
agreed to terminate its management contract with the Trust and, accordingly, the
Company  received a relative cash flow infusion of $0.09 million for the quarter
ended June 30, 2006 versus a $0.12  million cash  outflow for the quarter  ended
June 30, 2005. See condensed Footnote 5 to our Condensed  Consolidated Financial
Statements.


CONTRACTUAL OBLIGATIONS

<TABLE>
<CAPTION>
<S>                                 <C>         <C>            <C>           <C>                   <C>
Contractual Obligations                       Payments Due by period
-----------------------------------------------------------------------------------------------------------------------

                                            April 1, 2006-   April 1, 2007    April 1, 2010 -         April 1, 2012
Period                                      March 31, 2007   March 31, 2010   March 31, 2012          and thereafter
                                    Total   less than 1 year    1-3 years       4-5 years             After 5 years
Fiscal Years Ended March 31,                     2007           2008-2010       2011-2012          2013 and thereafter
-----------------------------------------------------------------------------------------------------------------------
Short-term loans and Notes payable:
      Lines of credit and
       other short-term
           borrowings                47,833      47,833

Operating leases:                   663,616     303,565          360,051            0                       0

                                  -------------------------------------------------------------------------------------
Total Contractual Obligations      $711,449    $351,398         $360,051            0                       0
                                  -------------------------------------------------------------------------------------
</TABLE>




NOTES PAYABLE

         At June 30, 2006 and 2005 notes  payable  consisted  of debt to finance
insurance  premiums.  The annual rate of interest on the outstanding loan, which
matures on November 08,  2006,  was 6.95% and 6.00%,  respectively  for June 30,
2006 and 2005.



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                                     Page 23

<PAGE>




COMMITMENTS AND CONTINGENCIES

         The  Company is  obligated  under  various  lease  agreements  covering
offices and equipment. These agreements are considered to be operating leases in
accordance  with the  requirements  under FASB 13 "Accounting  for Leases".  The
terms of the leases expire between  fiscal year 2007 and 2009.  Options to renew
for additional terms are included under the lease agreements.  The total minimum
rental due in future periods under these existing agreements is as follows as of
June 30, 2006:

                  Year ending March 31, 2007                      $ 303,565
                  Year ending March 31, 2008                        283,362
                  Year ending March 31, 2009                         76,689
                                                                   ---------
                  Total minimum lease payments                     $663,616
                                                                   =========

         Certain leases  contain  provisions for minimum lease payments that are
contingent  upon  increases  in real  estate  taxes.  The total  lease  expenses
amounted  to  $147,273  for  quarter  ended June 30 2006 and $99,931 for quarter
ended June 30 2005.  The related  party leases to Arlsburg  Trust and  Investors
Realty, LLC amounted to $88,153 and $56,418, respectively for the quarters ended
June 30 2006 and 2005.

RISK MANAGEMENT

         Risk is an inherent part of the Company's business and activities. Risk
management is critical to the Company's financial strength and profitability and
requires robust  auditing,  constant  communications,  judgment and knowledge of
financial trends and the economy as a whole.  Senior  management takes an active
role in the  risk  management  process.  The  principal  risks  involved  in the
Company's business activities are market, operational, regulatory and legal.

MARKET RISK

         Market risk is the risk  attributable to common  macroeconomic  factors
such as gross domestic product,  employment,  inflation,  interest rates, budget
deficits  and  sentiment.  Consumer  and  producer  sentiment is critical to our
business.  The level of consumer confidence determines an investor's willingness
to spend,  especially in the financial markets.  It is this willingness to spend
in the  financial  markets that is key to our  business.  A shift in spending in
this area could negatively  impact the Company.  However,  senior  management is
constantly monitoring these economic trends in order to enhance the product line
to offset any potential negative impact.

OPERATIONAL RISK

         Operational  risk  refers  to the  risk  of  loss  resulting  from  the
Company's  operations,  including,  but not limited to, improper or unauthorized
execution, processing of transactions,  deficiencies in the Company's technology
or financial  operating  systems,  and inadequacies or breaches in the Company's
control  processes.  Managing  these risks is critical,  especially in a rapidly
changing environment with increasing transaction volume. Failure to manage these
risks could result in financial  loss to the Company.  To mitigate  these risks,
the Company has developed specific policies and procedures  designed to identify
and manage  operational  risk.  These  policies and  procedures are reviewed and
updated on a continuing basis to ensure that this risk is minimized.


REGULATORY AND LEGAL RISK

         Regulatory and legal risk includes non-compliance with applicable legal
and regulatory  requirements  and the risk of a large number of customer  claims
that could  result in adverse  judgments  against  the  Company.  The Company is
subject to extensive  regulation in all  jurisdictions in which it operates.  In
this regard,  the Company has  instituted  comprehensive  procedures  to address
issues such as regulatory capital requirements, sales and trading practices, use
and  safekeeping of customer  funds,  credit  granting,  collection  activities,
money-laundering, and record-keeping.



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                                     Page 24

<PAGE>

EFFECTS OF INFLATION

         The  Company's  assets  primarily  are  liquid  in  nature  and are not
significantly  affected by inflation.  Management  believes that the replacement
cost of property and equipment will not  materially  affect  operating  results.
However,  the  rate  of  inflation  affects  our  expenses,  including  employee
compensation  and  benefits,  communications,  and  occupancy,  which may not be
readily recoverable through charges for services provided.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The  information  required by this item is contained  in  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations" under
the caption "Market Risk" of this Form 10-Q.


ITEM 4. CONTROLS AND PROCEDURES

         Based on an  evaluation  by our  management  in which  they or  persons
performing similar functions participated, our principal executive and financial
officers have concluded that reasonably  effective  controls and procedures were
in place as of the end of the  period  covered  by this  report to  ensure  that
information  required to be disclosed in our reports filed under the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time  periods  specified in the rules and forms of the  Securities  and Exchange
Commission.


                           PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

         The Company operates in a highly litigious and regulated  business and,
as such,  is a defendant or  codefendant  in various  lawsuits and  arbitrations
incidental to its securities business.  The Company is vigorously contesting the
allegations  of the  complaints  in these  cases  and  believes  that  there are
meritorious  defenses  in each.  Counsel  is unable to  respond  concerning  the
likelihood of an outcome, whether favorable or unfavorable,  because of inherent
uncertainty  routine in these matters.  For the majority of pending claims,  the
Company's  errors and omissions (E&O) policy limits the maximum  exposure in any
one case to between  $75,000 and $100,000  and, in certain of these  cases,  the
Company  has the  contractual  right to seek  indemnity  from  related  parties.
Management,  in consultation  with counsel,  believes that resolution of pending
litigation will not have a material adverse effect on the consolidated financial
results of the Company.


ITEMS 3 - 5.  Not applicable.


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ITEM 6.  EXHIBITS


Exhibit
Number                              Description                      Location

3.1 Articles of Organization, as amended                          (2)(Exh. 3.1)

3.2 By-Laws                                                       (2)(Exh. 3.2)

4.1 Form of Stock Certificate                                     (2)(Exh. 4.1)

10.1 Employment Agreement with Theodore E. Charles               (2)(Exh. 10.1)

10.2 Employment Agreement with Timothy B. Murphy                 (2)(Exh. 10.2)

10.3 The 1994 Stock Option Plan                                  (3)(Exh. 10.3)

10.4 The 2005 Equity Incentive Plan                               (4)(Exh. 4.5)

31.1 Certification of Theodore E. Charles pursuant to Rule 13a-14(a)        (1)

31.2 Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)          (1)

32.1 Certification of Theodore E. Charles pursuant to
     18 U.S.C. Section 1350                                                 (1)

32.2 Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350  (1)

---------------

(1)      Filed herewith.

(2)      Incorporated by reference to the indicated  exhibit to the Registrant's
         Registration  Statement on Form SB-2 (File No.  333-05327) filed August
         14, 2000.

(3)      Incorporated by reference to the indicated  exhibit to the Registrant's
         Annual Report on Form 10-K for the year ended March 31, 2005.

(4)      Incorporated by reference to the indicated  exhibit to the Registrant's
         Registration  Statement on Form S-8 (File No.  333-43664) filed June 9,
         2006

Any  exhibit  not  included  with  this  Form  10-Q  will  be  furnished  to any
shareholder  of record 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.

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<PAGE>



                                   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/ Timothy B. Murphy
                                         --------------------------------
                                         Chief Financial Officer


Date: August 14, 2006


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