Management's Discussion and Analysis reviews our consolidated financial condition as of June 30, 2012 and March 31, 2012, the consolidated results of operations for the three months ended June 30, 2012 and 2011 and, as appropriate, factors that may affect future financial performance. The discussion should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. Unless context requires otherwise, as used in this Management's Discussion and Analysis (i) the "current period" means the three months ended June 30, 2012, (ii) the "prior period" means the three months ended June 30, 2011, (iii) an increase or decrease compares the current period to the prior period, and
(iv) non-comparative amounts refer to the current period.

FORWARD-LOOKING STATEMENTS

This report contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts and may include words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "will," "should," "may," and other similar expressions. These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the 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 SEC. We specifically disclaim any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise.

Overview

We are a financial services holding company that, through our subsidiaries, provides brokerage, investment advisory, insurance and related services. We operate in a highly regulated and competitive industry that is influenced by numerous external factors such as economic conditions, marketplace liquidity and volatility, monetary policy, global and national political events, regulatory developments, competition and investor preferences. Our revenues and net earnings may be either enhanced or diminished from period to period by these and other external factors.

OUR BUSINESS

We operate primarily through our subsidiary, ICC, as a broker-dealer and, doing business as ICA, as a registered investment advisor, with a national network of independent financial representatives.

Broker-Dealer Services

We provide broker-dealer services in support of trading and investment by our representatives' customers in securities, including corporate equity and debt securities, U.S. Government securities, municipal securities, mutual funds, limited partnerships and other alternative investments, variable annuities and variable life insurance. We also provide related services such as market information, Internet brokerage, portfolio tracking facilities and records management.

Investment Advisory Services

We provide investment advisory services, including asset allocation and portfolio rebalancing, for our representative's customers through ICA.

Recruitment and Support of Representatives

A key component of our business strategy is to recruit well-established, productive representatives who provide superior service to their clients. Additionally, we assist our representatives in developing and expanding their business by providing a variety of support services and a diversified range of investment products for their clients. We focus on providing substantial added value to our representatives' practices, enabling them to be more productive, particularly in high margin lines such as advisory services and brokerage.

Support provided to assist representatives in pursuing consistent, profitable sales growth takes many forms, including automated trading systems, targeted financial assistance and a network of communication links with investment product companies. Regional and national conventions provide forums for interaction to improve product knowledge, sales and client satisfaction. In addition, we provide our representatives with programs and tools to grow their businesses both through new client acquisition and advancement of existing client relationships. These programs enhance our ability to attract and retain productive representatives.

OUR PROCESS

Online Brokerage

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

Check and Application

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

Bond Brokerage

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

Asset Allocation

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

CRITICAL ACCOUNTING POLICIES

In General

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). The Company believes that of its significant accounting policies and litigation and regulatory matters to the Company's condensed consolidated financial statements contained herein), those dealing with revenue recognition, allowance for doubtful accounts receivable, taxes and accrual of legal expenses involve a particularly high degree of judgment and complexity. Our accounting policies require estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the condensed consolidated financial statements. By their nature, estimates involve judgment based upon available information. Actual results or amounts can and do differ from estimates and the differences can have a material

effect on the condensed consolidated financial statements. Therefore, understanding these policies is important to understanding the reported results of operations and the financial position of the Company.

Off Balance Sheet Risk

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

Reserves

We record reserves related to legal proceedings in "accrued expenses" in the condensed consolidated balance sheet. The determination of these reserve amounts requires significant judgment on the part of management. Management considers many factors including, but not limited to: the amount of the claim; the amount of the loss in the client's account; the basis and validity of the claim; the possibility of wrongdoing on the part of an employee or representative of the Company; previous results in similar cases; and legal precedents. Each legal proceeding is reviewed with counsel in each accounting period and the reserve is adjusted as deemed appropriate by management. Any change in the reserve amount is recorded in the condensed consolidated financial statements and is recognized as a charge/credit to earnings in that period. The assumptions made by management in determining the estimates of reserves may be incorrect and the actual costs upon settlement of a legal proceeding may be greater or less than the reserved amount. See "Note 6, Litigation and Regulatory Matters".

KEY INDICATORS OF FINANCIAL PERFORMANCE FOR MANAGEMENT

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

PRODUCTIVITY OF REPRESENTATIVES

Management believes that improving the overall quality of our independent representatives is a key to achieving growth in revenues and earnings. We believe that upgrading the business practices of our representatives not only grows revenue, but assists in limiting the cost of overhead functions and representative noncompliance. We strive to continually improve the overall quality of our force of representatives by:

· assisting representatives to improve their skills and practices,

· recruiting higher-producing representatives, and

· terminating low quality representatives.

A key metric that we use to assess the average quality of our producing (non-staff) representatives is per capita rep-generated revenue based on a rolling 12-month period. Data for the 12-month periods ended June 30, 2012 and 2011 are presented below:

      Twelve Months Ended        Change


    June 30, 2012     June 30, 2011     Dollar   Percentage


Rep-generated revenue:
 Commission            $ 62,616,936    $ 68,350,777    $ (5,733,841)   -8.4%
 Advisory                15,886,118      15,428,500         457,618    3.0%
 Other fee income           856,306         715,961         140,345    19.6%
                       $ 79,359,360    $ 84,495,238    $ (5,135,878)   -6.1%

Number of representatives 467 525 (58) -11.0%

Average revenue per representative $ 169,934 $ 160,943 $ 8,991 5.6%

We believe that the 5.6% growth in per capita rep-generated revenue is the result of organic revenue growth from recruiting higher-producing representatives, and continually paring down of the number of lower-producing registered representatives.

          COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2012 AND 2011



Results of Operations




                                            Quarter Ended June 30,                Change
                                            2012             2011           Dollar      Percentage
Revenues:
 Commission                            $  16,088,506    $  16,916,508    $  (828,002)     -4.9%
 Advisory fees                             4,110,673        4,183,052        (72,379)     -1.7%
 Other fee income                            339,103          103,393        235,710      228.0%
 Other income                                264,243          239,773         24,470      10.2%
Total revenue                             20,802,525       21,442,726       (640,201)     -3.0%

Expenses:
 Commissions and advisory fees expense    16,610,153       17,094,637       (484,484)     -2.8%
 Compensation and benefits                 1,579,260        2,103,025       (523,765)     -24.9%
 Regulatory, legal and professional          875,632        1,275,790       (400,158)     -31.4%
 Brokerage, clearing and exchange fees       338,101          505,460       (167,359)     -33.1%
 Technology and communications               296,978          368,832        (71,854)     -19.5%
 Marketing and promotion                     241,273          307,018        (65,745)     -21.4%
 Occupancy and equipment                     186,108          235,411        (49,303)     -20.9%
 Other administrative                        217,030          360,771       (143,741)     -39.8%
 Interest                                      8,968            7,944          1,024      12.9%
Total expenses                            20,353,503       22,258,888     (1,905,385)     -8.6%

Operating income (loss)                      449,022         (816,162)     1,265,184     -155.0%
Provision for income taxes                   187,340          439,547       (252,207)     -57.4%

Net income (loss)                       $    261,682    $  (1,255,709)     1,517,391     -120.8%

Adjusted EBITDA:                   $    583,998     $   (352,390)   $   936,388     -265.7%

Adjustments to conform adjusted
EBITDA to GAAP Net income (loss):
 Income tax provision                  (187,340)        (439,547)       252,207      -57.4%
 Interest expense                        (8,968)          (7,944)        (1,024)     12.9%
 Depreciation and amortization          (83,021)        (108,468)        25,447      -23.5%
 Non-cash compensation                  (42,987)         (48,069)         5,082      -10.6%
 Non-recurring professional fees               -        (299,291)       299,291     -100.0%

Net income (loss)                  $    261,682    $  (1,255,709)   $ 1,517,391     -120.8%

ADJUSTED EBITDA

Earnings before interest, taxes, depreciation and amortization ("EBITDA"), as adjusted by eliminating other non-cash expense, gains or losses on sales of assets, and various non-recurring items ("adjusted EBITDA"), is a key metric we use in evaluating our financial performance. Adjusted EBITDA eliminates items that we believe

are not part of our core operations, are non-recurring items of revenue or expense, or do not involve a cash outlay, such as stock-related compensation and professional fees incurred in connection with the Company's registration statement on Form S-3 that closed on August 2, 2011 and related matters. We consider adjusted EBITDA important in monitoring and evaluating our financial performance on a consistent basis across multiple time periods. We also use adjusted EBITDA as an important measure, among others, to analyze and evaluate financial and strategic planning decisions.

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

First quarter Adjusted EBITDA, was $0.58 million, an increase of 265.7% from a $0.35 million loss before interest, taxes, depreciation, amortization, and non-recurring professional fees in the comparative quarter, primarily due to increased operating income in the current period.

REVENUE

Revenues decreased by $0.64 million or by 3.00% primarily due to a reduction in commission revenue while advisory fees were consistent with the prior period. The decline in commission revenue can be attributed to lower trading volume resulting from investor's cautious sentiment due to current market conditions.
Also, commissions earned from our direct business slowed, with resulting fewer investment contributions. Advisory fees remained steady mostly because of asset values increasing concurrent with positive market growth comparative to the financial markets during the prior period.

Our advisor-directed managed assets program, A-MAP, where investment advisory services are provided directly by our independent representatives, continues to contribute the majority of advisory services revenue.

Other fee income increased primarily as a result of technology fees from newly released Capital Connect, as well as licensing fees, annual administrative fees, and financial planning fees.

The increase in other revenue, which consists of net marketing revenues and interest income, resulted primarily from an increase in marketing allowances from product sponsor programs reflecting an increase in sales volumes of alternative investment products.

EXPENSES

Total expenses decreased by $1.91 million, or 8.56 %, principally as a result of decreases in commissions and advisors fees paid to our representatives, compensation and benefits, and regulatory, legal and non-recurring professional fees.

Commissions and advisory fees paid to our representatives represent a percentage of revenue of our broker-dealer; accordingly, much of the $0.48 million decrease in commissions and advisor fees payout reflects a corresponding decrease in revenue. Our ratio of commission payout as compared to the total of representative-produced revenue increased this quarter as a result of forgivable loan amortization, advisory platform fees, and a reduction in trading volume.

The decrease in regulatory, legal and professional expenses was driven principally by a decrease in nonrecurring professional fees related to our registration statement on Form S-3 and related matters which were completed in the prior period. Also, there was also a decline in legal settlements in this period as compared to the prior period in which we had a settlement for disgorgement of commissions on alternative investments products.

We will continue to incur legal fees and settlement costs as we operate in a litigious, regulated industry. In addition, from time to time regulatory agencies and self-regulatory organizations institute investigations into

industry or firm practices, that also may result in the imposition of financial or other sanctions. We invest significant resources to mitigate litigation and regulatory exposure by promoting sound operational procedures and obtaining comprehensive insurance coverage.

The decrease in compensation and benefits is attributable to the cost management initiatives the Company implemented in January 2012, offset by increased health benefit costs and one-time separation costs associated with former employees.

We had an income tax provision of $0.19 million for the three months ended June 30, 2012 as compared to $0.44 million income tax provision for the prior period. The income tax rates for the 2012 and 2011 periods do not bear a customary relationship to effective tax rates primarily as a result of the increase in the permanent differences created by various accruals for each of the periods presented, particularly regulatory assessments, costs that were associated with our registration statement filing, and non-deductible executive compensation.

OPERATING AND NET INCOME

Results of operations were positively impacted by reduced operating costs in all categories. Specifically, we had fewer litigation and regulatory settlements, reduced professional fees and lower total compensation costs. The Company reported $0.45 million in operating income as compared to $0.82 million of operating loss for the prior period. The Company's net income was $0.26 million, or $0.04 per basic and diluted net income per share, compared to net loss of $1.26 million, or $0.19 basic and diluted net loss per share, for the prior period.

The Company's net profit of $0.26 million was principally the result of decreased non-recurring professional fees, as well as ongoing evaluation of strategic costs. The Company implemented specific expense reductions during the fourth quarter of last year to lessen exposure to operating losses while applying resources to sustain our recruiting and technology initiatives, all the while addressing growing compliance requirements. The Company is focused on growing revenues organically, therefore is supporting its representatives in growing their business through our internally developed CapitalCONNECT technology and related practice management programs.

Liquidity and Capital Resources

Our primary source of liquidity remains cash flows from operations, primarily from our broker-dealer and investment advisory business. Decisions on the allocation of capital include projected profitability and available cash flows, risk management and regulatory capital requirements. A key to this approach is ensuring that industry-standard controls are effective to support our operations and those of our representatives while ensuring sufficient liquidity.

As of June 30, 2012, cash and cash equivalents totaled $4.22 million as compared to $4.54 million as of March 31, 2012. Working capital as of June 30, 2012 was $4.88 million as compared to $4.16 million as of March 31, 2012. The ratio of current assets to current liabilities was 1.79 to 1 as of June 30, 2012, as compared to 1.61 to 1 as of March 31, 2012.

Operations provided $0.36 million in cash for the current period, as compared to $0.69 million of operating cash provided in the prior period. When comparing the current period cash flow to the prior period cash flow from operating activities the significant changes were from net income and from account balances held at our clearing firm.

For our current level of operating activities, we believe that our operations and current capital resources will be sufficient to fund our working capital needs for the next twelve months. The Company may, however, seek additional capital within the next 12 months, should it elect to continue pursuing a strategy that incorporates the use of both forgivable and non-forgivable loans to induce newly-recruited financial advisors to join ICC.

Net cash flows used in investing activities in the current period represent purchases in equipment, collection of principal payments on a note receivable, capitalization of software for internal use, and contributions on an executive life insurance policy. Net cash flows used in the prior period were relatively consistent with the current period's investing activities.

Cash flows for financing activities in the current period increased slightly when compared to the prior period as we paid $0.67 million and $0.53 million in loan payments to finance E&O insurance premiums, respectively, for the periods ended June 30, 2012 and 2011. The Company has a line of credit ("line") with specific financial covenants with its financial institution. This line was renewed and amended, effective April 19, 2012. Although there were no borrowings, the Company achieved the required operating results to meet those covenants as of June 30, 2012.

REGULATORY NET CAPITAL

Cash disbursements can have a material impact on our registered broker dealer's regulatory net capital. ICC is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1) which requires our broker-dealer subsidiary to maintain minimum net capital. As of March 31, 2011 and going forward, ICC computes net capital requirements under the alternative method, which requires firms to maintain minimum net capital, as defined, equal to the greater of $250,000 or 2% of aggregate debit balances. Repayment or prepayment of subordinated debt, if any, and withdrawal of equity from retiring partners or officers is subject to net capital not falling below 5% of aggregate debits or 120% of minimum net capital requirement.

As of June 30, 2012, ICC had net capital of $2.01 million (i.e., an excess of $1.76 million) as compared to net capital of approximately $1.43 million (i.e., an excess of $1.18 million) as of March 31, 2012.

Commitments and Contingencies

We are obligated under various lease agreements covering office space, which will expire March 31, 2015. Options to renew for additional terms are included under the lease agreement. Certain leases contain provisions for escalation of minimum lease payments contingent upon increases in real estate taxes. The Company is currently attempting to resolve a dispute with the lessor, specific to the tenancy at 230 Broadway Lynnfield, MA as a result of property damages that are preventing occupancy and use of all leased space.

The total minimum rental due in future periods under these existing agreements as of June 30, 2012 is as follows for the years ended March 31,

    2013 $       211,687
    2014        276,354
    2015        282,214
    2016         24,000
    2017         24,000

         $       818,255

Total lease expense for office space approximated $0.06 and $0.09 million for the three months ended June 30, 2012 and 2011, respectively.