INVESTORS CAPITAL HOLDINGS LTD - 10-Q Quarterly Report

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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 SEPTEMBER 30, 2002

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
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 / /

Number of shares outstanding of our only class of common stock as of November
14, 2002:

5,717,380

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements.

1

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

See Notes to Condensed Consolidated Financial Statements.

2

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

3

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

4

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

5

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

SIX MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

6

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

7

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

(UNAUDITED)

See Notes to Condensed Consolidated Financial Statements.

8

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
of Investors Capital Holdings, Ltd. (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. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, these unaudited condensed
consolidated financial statements contain all adjustments, consisting of
only normal and recurring adjustments, necessary for a fair presentation of
the financial position and results of operations. Operating results for the
three-month and nine-month periods ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the year
ended March 31, 2003. The balance sheet at March 31, 2002 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 as of March 31, 2002 included in the Company's Form 10-KSB for
the year ended March 31, 2002 filed with the Securities and Exchange
Commission.

USE OF ESTIMATES

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 be
consistent with the current year's statement presentation.

9

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. SEGMENT INFORMATION

The Company's reportable segments include investment services offered
through Investors Capital Corporation (ICC) and asset management services
offered through Eastern Point Advisors, Inc. (EPA). This investment services
segment includes 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 provides asset management and portfolio
design services to a mutual fund and a variety of investors.

Segment data presented includes the allocation of all corporate
overhead to each segment. Inter-segment revenue and expense, and receivables
and payables, are eliminated between segments. Information concerning
operations in the Company's segments of business is as follows:

10

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. SEGMENT INFORMATION (CONTINUED)

11

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. SEGMENT INFORMATION (CONTINUED)

12

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

2. SEGMENT INFORMATION (CONTINUED)

13

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

3. LEGAL PROCEEDINGS

On January 3, 2001, an action was brought against our broker-dealer
subsidiary by 21st Century Group, Inc. in the Circuit Court of Sarasota, Florida
seeking common law indemnification in the amount of $160,208. This
indemnification action stems from an April 7, 1999 judgment against 21st Century
for that amount rendered by the same court in the case of Crabill v. 21st
Century Group, Inc. vs. Investors Capital Corp. Our broker-dealer subsidiary was
named as a third-party defendant in this case which we successfully defended and
the case against us was dismissed. As such, we believe this January 3, 2001
action is wholly without merit on grounds of estoppel and res judicata and are
awaiting a determination on our anticipated motion for summary judgment.

Our broker-dealer subsidiary, Investors Capital Corporation, is
engaged in a material NASD Arbitration in which one of our registered
representatives is alleged to have made misrepresentations in the sale of
unsecured promissory notes in a Florida company that has since filed for
bankruptcy protection. The product at issue was not approved nor sold through
Investors Capital Corporation. This arbitration, Paul and Irmgard Jung and
Wilhelm Trefz vs. Investors Capital Corporation and Kenneth J. Saunders
originally was filed with the NASD on April 17, 2002 in Boca Raton, Florida.
Damages are alleged in the amount of approximately $221,455. Recent
developments have enabled Investors Capital Corporation to reasonably
estimate its total possible financial exposure in the case to be no greater
than $40,000.

The Company is involved in an action filed with the Commonwealth of
Massachusetts Commission against Discrimination on August 3, 2000. This action
alleges that the petitioner was discriminated against by the Company on the
basis of sex and seeks damages in the amount of $275,000. Legal Counsel is
unable at this time to assess the likelihood of an unfavorable outcome and an
estimate of potential damages.

Our broker-dealer subsidiary, Investors Capital Corporation, is
engaged in a material litigation in which one of our former registered
representatives is alleged to have made misrepresentations in the sale of
unsecured promissory notes in a now defunct Utah company that is currently under
regulatory investigation. The product at issue was not approved by nor sold
through Investors Capital Corporation. This arbitration, Ruth Arvizo, et al vs.
Investors Capital Corporation, et al, was originally filed in California
Superior Court on August 26, 2002 in Los Angeles County. Damages are alleged in
the amount of approximately $200,000. At this time, legal counsel is unable to
assess neither the likelihood of an unfavorable outcome nor an estimate of
potential damages.

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

We are a financial services holding company that, through our subsidiaries,
provides investment advisory, insurance, financial planning 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 these external factors.

In addition, the passage of the Graham-Leach-Bliley Act in November of 1999
repealed depression-era laws that separated commercial, investment banking and
insurance activities. Such repeal may result in the intensification of the
environment in which we compete by increasing the number of companies doing
business in the financial services arena.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2001

The Company had consolidated operating income of $72,092 for the three
months ended September 30, 2002 as compared to a consolidated operating loss of
$200,650 for the three months ended September 30, 2001. This increase in
consolidated operating income of $272,742, or 136.0%, after the elimination of
all inter-company revenues and expenses, was attributable to a $316,870 increase
in operating income provided by the Company's subsidiary, Investors Capital
Corporation (ICC), a $16,221 increase in operating income provided by Investors
Capital Holdings, Ltd (ICH), on a stand-alone basis, and a $60,349 decrease in
operating income provided by the Company's subsidiary Eastern Point Advisors
(EPA). The $316,870 increase in operating income provided by ICC was
attributable to a $121,160 increase in the gross margin and a $195,710 decrease
in selling and administrative expenses. The $60,349 decrease in operating income
provided by EPA was mainly attributable to a $50,370 decline in the Company's
gross margin resulting from a reduction in the value of assets under management.

Consolidated commissions and advisory fee income of $8,192,633 for the
three months ended September 30, 2002 increased by $1,581,532, or 24.2%, as
compared to consolidated commissions and advisory fee income of $6,611,101 for
the three months ended September 30, 2001. This increase in gross revenues,
after the elimination of all inter-company revenues and expenses, was
attributable to a $1,688,030 increase in revenues provided by ICC and a $106,498
decrease in advisory fee income provided by EPA. The $1,688,030 increase in
revenues provided by ICC was mainly attributable to a $1,258,772 increase in
revenues from variable annuities and mutual funds. The $106,498 decrease in
advisory fee income generated by EPA was the result of a reduction in the value
of assets under management.

Consolidated commissions and advisory fee expense of $6,693,999 for the
three months ended September 30, 2002 increased by $1,510,742, or 29.1%, as
compared to consolidated commissions and advisory fee expense of $5,183,257 for
the three months ended September 30, 2001. This increase, after the elimination
of all inter-company revenues and expenses, was attributable to a $1,566,870
increase in commission expense incurred by ICC and a $56,128 decrease in
advisory fee expense incurred by EPA. This increase in commission expense and
decrease in advisory fee expense was a direct result of the associated increase
in commission revenue and decrease in advisory fee income as mentioned above.

Consolidated administrative expenses of $1,266,889 for the three months
ended September 30, 2002 decreased by $113,416, or 8.2%, as compared to
consolidated administrative expenses of $1,380,305 for the three months ended
September 30, 2001. This decrease, after the elimination of all inter-company
revenues and expenses, was attributable to a $147,413 decrease in administrative
expenses incurred by ICC, a $20,529 increase in administrative expenses incurred
by

15

ICH and a $13,468 increase in administrative expenses incurred by EPA. The
decrease of $147,413 in administrative expenses incurred by ICC was driven by a
decrease of $174,321 in legal and lawsuit related expenses.

Consolidated selling expenses of $159,653 for the three months ended
September 30, 2002 decreased by $88,536, or 35.7%, as compared to consolidated
selling expenses of $248,189 for the three months ended September 30, 2001. This
decrease, after the elimination of all inter-company revenues and expenses, was
attributable to a $48,297 decrease in selling expenses incurred by ICC, a
$36,750 decrease in selling expenses incurred by ICH and a $3,489 decrease in
selling expenses incurred by EPA. These decreases were the result of a general
reduction in various expenses as part of the cost cutting measures put in place
during the past fiscal year.

The Company had consolidated income taxes of $67,059 for the three months
ended September 30, 2002 as compared to a consolidated income tax benefit of
$41,500 for the three months ended September 30, 2001. This increase of
$108,559, or 261.6%, in income taxes was attributable to the Company's increased
profitability from the same period last year.

The Company had consolidated net income of $23,967 for the three months
ended September 30, 2002 as compared to a consolidated net loss of $123,323 for
the three months ended September 30, 2001. This $147,290, or 119.4%, increase in
net earnings, after the elimination of all inter-company revenues and expenses,
was attributable to a $153,604 increase in net income provided by ICC, a $31,150
increase in net income provided by ICH and a $37,464 decrease in net income
provided by EPA. The $153,604 increase in net income provided by ICC was driven
by a reduction in selling and administrative expenses.

SIX MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH SIX MONTHS ENDED SEPTEMBER 30,
2001

The Company had consolidated operating income of $316,328 for the six
months ended September 30, 2002 as compared to a consolidated operating loss of
$738,405 for the six months ended September 30, 2001. This increase in
consolidated operating income of $1,054,733, or 142.8%, after the elimination of
all inter-company revenues and expenses, was attributable to a $943,077 increase
in operating income provided by the Company's subsidiary, Investors Capital
Corporation (ICC), a $73,363 increase in operating income provided by the
Investors Capital Holdings, Ltd (ICH), on a stand-alone basis, and a $38,293
increase in operating income provided by the Company's subsidiary Eastern Point
Advisors (EPA). The $943,077 increase in operating income provided by ICC was
attributable to an increase of $598,999 in the gross profit in this segment of
the business largely due to an increase in variable annuity sales. In addition,
selling and administrative expenses decreased by $344,078 resulting from an
overall effort to reduce expenses. The $73,363 increase in operating income
provided by ICH was the result of decline in selling and administrative expenses
resulting from an overall effort to reduce expenses.

Consolidated commissions and advisory fee income of $17,497,392 for the six
months ended September 30, 2002 increased by $3,988,985 or 29.5%, as compared to
consolidated commissions and advisory fee income of $13,508,407 for the six
months ended September 30, 2001. This increase in gross revenues, after the
elimination of all inter-company revenues and expenses, was attributable to a
$4,120,925 increase in revenues provided by ICC and a $131,940 decrease in
advisory fee income provided by EPA. The $4,120,925 increase in revenues
provided by ICC was attributable to an increase of $3,163,222 in revenues
generated from the sales of variable annuities and mutual funds. The remaining
increase of $957,703 resulted from miscellaneous transactions.

Consolidated commissions and advisory fee expense of $14,374,317 for the
six months ended September 30, 2002 increased by $3,382,060, or 30.8%, as
compared to consolidated commissions and advisory fee expense of $10,992,257 for
the six months ended September 30, 2001. This increase, after the elimination of
all inter-company revenues and expenses, was attributable to a $3,521,926
increase in commission expense incurred by ICC and a $139,866 decrease in
advisory fee expense incurred by EPA. The increase of $3,521,926 in commission
expense incurred by ICC and the decrease of $139,866 in advisory fee expense
incurred by EPA was a direct result of the associated increase in commission
revenue and decrease in advisory fee income as mentioned above.

16

Consolidated administrative expenses of $2,445,066 for the six months ended
September 30, 2002 decreased by $286,364, or 10.5%, as compared to consolidated
administrative expenses of $2,731,430 for the six months ended September 30,
2001. This decrease, after the elimination of all inter-company revenues and
expenses, was attributable to an $233,362 decrease in administrative expenses
incurred by ICC, a $28,062 decrease in administrative expenses incurred by EPA
and a $24,940 decrease in administrative expenses incurred by ICH. These
decreases were driven by a general reduction in various expenses as part of the
cost cutting measures that were put in place during the past fiscal year.

Consolidated selling expenses of $361,681 for the six months ended
September 30, 2002 decreased by $161,444, or 30.9%, as compared to consolidated
selling expenses of $523,125 for the six months ended September 30, 2001. This
decrease, after the elimination of all inter-company revenues and expenses, was
attributable to a $110,716 decrease in selling expenses incurred by ICC, a
$48,423 decrease in selling expenses incurred by ICH and a $2,305 decrease in
selling expenses incurred by EPA. These decreases were driven by a general
reduction in various expenses as part of the cost cutting measures put in place
during the past fiscal year.

The Company had consolidated income taxes of $195,391 for the six months
ended September 30, 2002 as compared to a consolidated income tax benefit of
$207,500 for the six months ended September 30, 2001. This increase of $402,891,
or 194.2%, in income taxes was attributable to the Company's increased
profitability from the same period last year.

The Company had consolidated net income of $193,766 for the six months
ended September 30, 2002 as compared to a consolidated net loss of $397,852 for
the six months ended September 30, 2001. This $591,618, or 148.7%, increase in
net earnings, after the elimination of all inter-company revenues and expenses,
was attributable to a $545,410 increase in net income provided by ICC, a $23,215
increase in net income provided by EPA and a $22,993 increase in net income
provided by ICH. The $545,410 increase in net income provided by ICC was
attributable to an increase in gross profit in this segment of the business
largely due to an increase in variable annuity and mutual fund sales and an
effort to reduce selling and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

We believe that return on equity is primarily based on the use of capital
in an efficient manner. Historically, we have financed our operations primarily
through an initial public offering, private equity and internally generated cash
flow and not by incurring debt.

As of September 30, 2002, cash and cash equivalents totaled $6,479,379 as
compared to $6,337,445 as of March 31, 2002. Working capital as of September 30,
2002 was $7,518,137 as compared to $7,276,218 as of March 31, 2002.

As of September 30, 2002, our net capital ratio for the broker-dealer was
1.89 to 1 as compared to 2.27 to 1 as of September 30, 2001. The SEC requires
that we maintain a net capital of $100,000 and a ratio of aggregate indebtedness
to net capital not to exceed 15 to 1. This SEC requirement is also referred to
as the "net capital ratio" or the "net capital 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 the subordinated loans from being
withdrawn or cash dividends from being paid if our net capital ratio would
exceed 10 to 1 if we would have less than our minimum required net capital. As
of September 30, 2002, we had net capital of $1,036,757 as compared to net
capital of $855,319 as of September 30, 2001. This resulted in excess net
capital of $906,189 and $725,864, respectively, for the applicable periods.

Net cash provided by operating activities was $166,312 for the six months
ended September 30, 2002 as compared to net cash used for operating activities
of $514,612 for the six months ended September 30, 2001. This increase in cash
flow provided by operating activities resulted from an increase in revenues and
a decline in operating expenses.

Net cash provided by investing activities was $44,576 for the six months
ended September 30, 2002 as compared to cash used of $275,792 for the six months
ended September 30, 2001. This increase in cash flow provided by investing
activities mainly resulted from a reduction in spending on plant, property and
equipment and a reduction in loans made to registered representatives.

17

Net cash used in financing activities was $68,954 for the six months ended
September 30, 2002 as compared to $403,014 for the six months ended September
30, 2001. This decrease in cash flow used for financing activities was mainly
the result of a decrease in cash used to pay outstanding notes.

EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

FASB has issued SFAS No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This Statement replaces
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" and rescinds SFAS Statement No. 127, "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125." SFAS No.
140 provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. This Statement provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. This Statement is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001; however, the disclosure provisions
are effective for fiscal years ending after December 15, 2000. The adoption of
this Statement did not have a material impact on the Company's financial
position or results of operations.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
This Statement addresses financial accounting and reporting for business
combinations and supercedes Accounting Principles Board ("APB") Opinion No. 16,
"Business Combinations", and SFAS No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." Under Opinion 16, business combinations
were accounted for using one of two methods, the pooling-of-interests method or
the purchase method. All business combinations in the scope of SFAS No. 141 are
to be accounted for using one method--the purchase method. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001
and to all business combinations accounted for using the purchase method for
which the date of acquisition is July 1, 2001, or later.

The adoption of SFAS No. 141 had no immediate effect on the Company's
financial statements since it had no pending business combinations as of June
30, 2001 or as of the date of the issuance of these consolidated financial
statements. If the Company consummates business combinations in the future, any
such combinations that would have been accounted for by the pooling-of-interests
method under Opinion 16 will be accounted for under the purchase method and the
difference in accounting could have a substantial impact on the Company's
consolidated financial statements.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." This Statement addresses financial accounting and reporting
for required goodwill and other intangible assets and supercedes APB Opinion No.
17, "Intangible Assets." The initial recognition and measurement provisions of
SFAS No. 142 apply to intangible assets which are defined as assets (not
including financial assets) that lack physical substance. The term "intangible
assets" is used in SFAS No. 142 to refer to intangible assets other than
goodwill. The accounting for a recognized intangible asset is based on its
useful life. An intangible asset with a finite useful life is amortized; an
intangible asset with an indefinite useful life is not amortized. An intangible
asset that is subject to amortization shall be reviewed for impairment in
accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."

SFAS No. 142 provides that goodwill shall not be amortized. Goodwill
is defined as the excess of the cost of an acquired entity over the net of the
amounts assigned to assets acquired and liabilities assumed. SFAS No. 142
further provides that goodwill shall be tested for impairment at a level of
reporting referred to as a reporting unit. Impairment is the condition that
exists when the carrying amount of goodwill exceeds its implied fair value.

SFAS No. 142 is effective as follows:

All of the provisions of SFAS No. 142 shall be applied in fiscal years
beginning after December 15, 2001, to all goodwill and intangible assets
recognized in an entity's statement of financial position at the beginning of
that fiscal year, regardless of when those previously recognized assets were
initially recognized.

The effect of SFAS No. 142 on the Company's consolidated financial
statements was immaterial.

18

EFFECTS OF INFLATION

The Company's assets are primarily 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.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material or significant changes to the litigation
described in Note 3.

19

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.

Date: November 14, 2002 By: /s/ Timothy B. Murphy

Timothy B. Murphy
Chief Financial Officer

20

CERTIFICATION

I, Theodore E. Charles, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Investors Capital
Holdings, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002

BY: /s/ THEODORE E. CHARLES
- ----------------------------
Theodore E. Charles
Chief Executive Officer

21

CERTIFICATION

I, Timothy B. Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Investors Capital
Holdings, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

Date: November 14, 2002

By: /s/ TIMOTHY B. MURPHY
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Timothy B. Murphy
Chief Financial Officer

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