<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
X EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED 03/31/96
----
TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
____ EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 000-22996
GILMAN & CIOCIA, INC.
(Name of small business issuer in its charter)
Delaware 11-2587324
________________________ _______________________
( State of jurisdiction ( I.R.S. Employer
of incorporation or Identification No.)
organization)
475 Northern Boulevard, Great Neck, NY 11021
(Address of principal executive offices) (Zip Code)
(516) 482-4860
________________________________________________
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 past 90 days.
Yes X No _______
-----
State the number of shares outstanding of each class of the issuer's
classes of common equity, as of the latest practicable date. As of MAY 13,
1996, 5,550,582 shares of the issuer's common equity were outstanding.
<PAGE> 2
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Consolidated Balance Sheets as of March 31, 1996 and June 30, 1995 F-1 &
F-2
Consolidated Statements of Operations for the nine and three-month
periods ended March 31, 1996 and 1995 F-3
Consolidated Statements of Stockholders' Equity for the nine-month
periods ended March 31, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the nine-month periods
ended March 31, 1996 and 1995 F-5 &
F-6
Notes to Consolidated Financial Statements F-7 &
F-10
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS:
NINE MONTHS ENDED MARCH 31, 1996 AND 1995 COMPARED.
The Company's revenues for the nine months ended March 31, 1996 increased
47.6% to $10,711,096 as compared to $7,258,761 for the nine months ended March
31, 1995. The increase in revenues for the nine months ended March 31, 1996 is
primarily attributable to the opening of 43 new offices in January 1996, the
continued growth of existing offices and increased financial planning revenues
which are not confined to the Company's traditional tax return preparation
"season". The total revenues for the nine months ended March 31, 1996 consist
of $6,310,878 in Tax Preparation, $3,839,645 in Financial Planning Services and
$560,573 in Direct Mailing Services. Total revenue for the nine months ended
March 31, 1995 consist of $5,180,555 in Tax Preparation and $2,078,206 in
Financial Planning Services.
The Company's operating expenses for the nine months ended March 31, 1996
increased 56.3% to $10,095,870 as compared to $6,458,829 for the nine months
ended March 31, 1995. The increase in the Company's operating expenses is
primarily attributable to; increased rent of $351,983, additional salaries
(including officers' salaries) and commissions of $2,306,402, increased
depreciation and amortization expense of $406,015 and increased general and
administrative expenses of $1,085,277 partially offset by an expense
reimbursement for financial planning of $125,000. The increase in operating
expenses is primarily due to the opening of 43 new offices in January 1996 and
the growth of existing offices. The increase in salaries and commissions is due
to increased financial planning activities as well as $489,764 in additional
payroll for employees of the Direct Mailing Division.
2
<PAGE> 3
The Company's interest income for the nine months ended March 31,1996
increased 33.7% to $76,911, from $57,540 for the nine months ended March 31,
1995. The increase is primarily due to interest from outstanding subscriptions
receivable, marketable securities invested from the proceeds of the Company's
initial public offering in December 1994 and other notes receivable. The
Company's interest expense for the nine months ended March 31, 1996 increased
93.5% to $90,448 from $46,739 for the nine months ended March 31, 1995. The
increase is primarily due to significant payments toward the Company's line of
credit amounting to $50,888 in interest expense, as well as other bank
obligations and notes to facilitate the Company's expanded operations. The
Company increased its other income in the nine months ended March 31, 1996
through gains from marketable securities of $68,356 and income from investment
in partnership of $212,086.
The Company's net income before provision for income taxes for the nine
months ended March 31, 1996 increased by 9.6% to $918,524 from $837,917 for the
nine months ended March 31, 1995. This increase is primarily due to the
Company's expansion in January 1996.
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 COMPARED.
The Company's revenues for the three months ended March 31, 1996 and 1995
were $7,802,116 and $5,628,749, respectively. Revenues increased by 38.6% for
the periods compared. Total revenues for the three months ended March 31, 1996
consist of $6,067,296 in Tax Preparation, $1,531,059 in Financial Planning
Services and $203,761 in Direct Mailing Services. Total Revenues for the three
months ended March 31, 1995 consist of $5,044,880 in Tax Preparation and
$583,869 in Financial Planning Services. This increase is principally
attributable to the reasons indicated above.
The Company's operating expenses for the three months ended March 31, 1996
and 1995 were $6,281,739 and $3,792,402, respectively. This increase of 65.6%
is principally attributable to increased salaries and commissions of
$1,494,421, increased rent of $152,644, increased depreciation and amortization
of $318,268 and increased general and administrative expenses of $802,256.
The Company's interest income for the three months ended March 31, 1996
and 1995 was $10,896 and $21,618, respectively. This decrease of 49.6% is
principally attributable to a reduction of interest on investments.
The Company's interest expense for the three months ended March 31, 1996
and 1995 was $59,775 and $23,272, respectively. This increase of 156.9% is
principally attributable to the reasons indicated above.
The Company's net income before provision for income taxes for the three
months ended March 31, 1996 and 1995 were $1,543,797 and $1,858,952
respectively. The decrease of 17.0% is principally attributable to the
3
<PAGE> 4
Company's expansion in January, 1996.
The Company's business is highly seasonal, with the majority of its
revenue earned in the first four months of the calendar year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had a working capital of $3,422,301
compared to working capital of $4,062,344 at June 30, 1995. The decrease in
working capital for the nine months ended March 31, 1996 is primarily due to
the increase in short-term borrowings of $1,450,000, the investment in
partnership of $348,360 which was transferred from marketable securities and
the purchase of intangible assets of $412,901 consisting of Customer Lists
amortizable over a period of five years from date of acquisition.
Cash used in operating activities in the Company's fiscal period consisted
primarily of an increase in accounts receivable of $1,941,829 and an increase
in prepaid expenses of $1,032,589. .
Cash used in investing activities consists primarily of proceeds from sale
of marketable securities of $2,079,534, cash used for purchase of property and
equipment of ($781,114) and increase in other receivables of ($658,311).
Cash provided by financing activities were primarily due to short-term
borrowings net of repayments of $1,338,889.
4
<PAGE> 5
PART II
ITEM 6. EXHIBITS; LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Registrant's Articles of Incorporation, as amended, incorporated by
reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as mended, File No. 33-70640-NY
3.2 Registrant's by-laws, incorporated by reference to the like-numbered
exhibit in the Registrant's Registration Statement on Form SB-2 under
the Securities Act of 1933, as amended, File No. 33-70640-NY
4.1 Form of Class A Warrant delivered to Bridge Loan lenders, incorporated
by reference to the like numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70640-NY
4.2 Form of Class B Warrant delivered to Bridge Loan lenders, incorporated
by reference to the like numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70640-NY
4.3 Form of Redeemable Warrant included in Units, incorporated by
reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70604-NY
4.4 Form of Purchase Option for Underwriter's Warrants, incorporated by
reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70604-NY
10.1 Restated and Amended Agreement and Plan of Merger dated December 23,
1992 among the Registrant and 15 participating corporations,
incorporated by reference to the like-numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-70604-NY
5
<PAGE> 6
10.2 Asset Sale Agreement dated December 31, 1992, incorporated by
reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70640-NY
10.3 Escrow letter regarding certain shares of Common Stock of the
Registrant, incorporated by reference to the like-numbered exhibit in
the Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70640-NY
10.4 {Omitted}
10.5 Warrant Agreement dated October 31, 1993 between the Registrant and
the Warrant Agent, incorporated by reference to the like-numbered
exhibit in the Registrant's Registration Statement on Form SB-2 under
the Securities Act of 1933, as amended, File No. 33-70640-NY
10.6 {Omitted}
10.7 1993 Joint Incentive and Non-Qualified Stock Option Plan of the
Registrant, incorporated by reference to the like-numbered exhibit in
the Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70640-NY
10.8 {Omitted}
10.9 {Omitted}
10.10 Form of Lock-up letter executed by shareholders of the Registrant,
incorporated by reference to the like-numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-70640-NY
10.11 Term-loan Promissory Note to State Bank of Long Island, incorporated
by reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-70640-NY
10.12 {Omitted}
6
<PAGE> 7
10.13 {Omitted}
10.14 Form of guarantee of Term-loan Promissory Note to State Bank of Long
Island, incorporated by reference to the like-numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-70640-NY
10.15 Agreement among Registrant and James Ciocia, Thomas Povinelli, Gary
Besmer and Kathryn Travis regarding the repayment of advances,
incorporated by reference to the like-numbered exhibit to the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-70640-NY
10.16 Underwriting Agreement between the Registrant and Patterson Travis,
Inc., incorporated by reference to exhibit number 1.1 in the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-70640-NY
10.17 Stock Purchase Agreement dated February 10, 1995 between Registrant
and Steven Gilbert, incorporated by reference to exhibit 99.1 to the
Company's Current Report on Form 8-K, dated February 10, 1995
10.18 Noncompetition Agreement dated February 10, 1995 between Registrant
and Steven Gilbert, incorporated by reference to exhibit 99.2 to the
Company's Current Report on Form 8-K, dated February 10, 1995
10.19 Employment Agreement dated February 10, 1995 between Registrant and
Steven Gilbert, incorporated by reference to exhibit 99.3 to the
Company's Current Report on Form 8-K, dated February 10, 1995
10.20 Registration Rights Agreement dated February 10, 1995 between
Registrant and Steven Gilbert, incorporated by reference to exhibit
99.4 to the Company's Current Report on Form 8-K, dated February 10,
1995
10.21 Letter Agreement dated April 26, 1995 between the Company and Steven
Gilbert, incorporated by reference to exhibit 10.20 in the Company's
quarterly report on form 10Q for the fiscal quarter ended March 31,
1995
10.22 {Omitted}
10.23 Promissory notes delivered by James Ciocia, Thomas Povinelli, Gary
Besmer and Kathryn Travis in payment for cash value of life insurance
policies held by Registrant on the lives of such officers,
incorporated
7
<PAGE> 8
by reference to the like numbered exhibit in the Registrant's
Registration statement on Form SB-2 under the Securities Act of 1933,
as amended, File No. 33-80627
10.24 Consulting Agreement dated October 9, 1995 between EuroMarket
Advisory, Inc. and Registrant, incorporated by reference to the like
numbered exhibit in the Registrants Registration Statement on Form
SB-2 under the Securities Act of 1933, as amended, File No. 33-80627
10.25 Investment Banking Agreement dated October 17, 1995 between Texas
Capital Securities Inc. and Registrant, incorporated by reference to
the like numbered exhibit in the Registrant's Registration Statement
on Form SB-2 under the Securities Act of 1933, as amended, File No.
33-80627
10.26 Agreements dated November, 1995 among Rummco, Ltd., five executive
officers of Registrant, and Registrant in connection with the sale of
stock options, incorporated by reference to the like numbered exhibit
in the Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33- 80627
10.27 Lock-up Release Letter by Patterson Travis, Inc. dated January 10,
1996, incorporated by reference to the like numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, File No. 33-80627
(b) Reports on Form 8-K
No Report on Form 8-K was filed by the Company during the quarter ended
March 31, 1996.
8
<PAGE> 9
SIGNATURE
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: May 14, 1996
GILMAN & CIOCIA, INC.
By /s/ Ralph V. Esposito
________________________
Ralph V. Esposito
Chief Financial Officer
9
<PAGE> 10
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
------------- -----------
1996 1995
------------- -----------
<S> <C> <C>
CURRENT ASSETS:
CASH & CASH EQUIVALENTS $1,940,557 $1,335,762
INVESTMENT IN MARKETABLE SECURITIES 0 2,095,750
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $45,974 AND $23,685
RESPECTIVELY 2,481,879 562,339
NOTES RECEIVABLE - STOCKHOLDERS - CURRENT PORTION 56,771 44,625
OTHER RECEIVABLES - STOCKHOLDERS 839,206 180,895
NOTES RECEIVABLE - FORMER STOCKHOLDER-
CURRENT PORTION 4,570 4,242
PREPAID AND REFUNDABLE INCOME TAXES 0 118,589
PREPAID AND OTHER CURRENT ASSETS 967,241 127,652
---------- ----------
TOTAL CURRENT ASSETS 6,290,224 4,469,854
---------- ----------
PROPERTY & EQUIPMENT - NET OF ACCUMULATED
DEPRECIATION AND AMORTIZATION OF $719,851 AND
$617,768 RESPECTIVELY 1,561,289 926,967
---------- ----------
OTHER ASSETS:
NOTE RECEIVABLE - STOCKHOLDERS, NET OF CURRENT
PORTION 30,852 72,569
NOTE RECEIVABLE - FORMER STOCKHOLDER, NET OF
CURRENT PORTION 19,644 23,143
INTANGIBLE ASSETS, NET OF ACCUMULATED
AMORTIZATION OF $122,046 AND $20,467 RESPECTIVELY 770,217 471,561
INVESTMENT IN JOINT VENTURE 0 20,000
SECURITY DEPOSITS 208,950 109,366
INVESTMENT IN PARTNERSHIP 560,446 0
---------- ----------
TOTAL OTHER ASSETS 1,590,109 696,639
---------- ----------
TOTAL ASSETS $9,441,622 $6,093,460
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE> 11
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
--------- ----------
1996 1995
--------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 60,043 $ 34,248
NOTES PAYABLE - BANK, CURRENT PORTION 1,666,667 216,667
NOTES PAYABLE - OTHER, CURRENT PORTION 25,351 21,807
ACCRUED PAYROLL AND PAYROLL TAXES 562,659 38,979
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 254,765 95,809
INCOME TAXES PAYABLE 298,438 0
---------- ----------
TOTAL CURRENT LIABILITIES 2,867,923 407,510
---------- ----------
LONG TERM DEBT:
NOTE PAYABLE - BANK, NET OF CURRENT PORTION 55,556 166,667
NOTE PAYABLE - OTHER, NET OF CURRENT PORTION 8,968 28,193
---------- ----------
TOTAL LONG TERM DEBT 64,524 194,860
---------- ----------
STOCKHOLDERS' EQUITY:
PREFERRED STOCK - $.001 PAR VALUE
AUTHORIZED - 100,000 SHARES
ISSUED - NONE
COMMON STOCK - $.01 PAR VALUE
AUTHORIZED - 9,000,000 SHARES
ISSUED -5,678,140 and 5,634,864 SHARES RESPECTIVELY 56,781 56,348
PAID IN CAPITAL - COMMON STOCK 5,969,222 5,767,039
PAID IN CAPITAL - WARRANTS & OPTIONS 82,268 48,155
RETAINED EARNINGS 1,373,927 805,403
---------- ----------
7,482,198 6,676,945
LESS: STOCK SUBSCRIPTIONS AND ACCRUED INTEREST
RECEIVABLE 561,148 773,980
TREASURY STOCK -AT COST 116,964 SHARES 411,875 411,875
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,509,175 5,491,090
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,441,622 $6,093,460
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 12
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
March 31, March 31,
---------------------------- ----------------------------
1996 1995 1996 1995
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
NET REVENUES $10,711,096 $7,258,761 $7,802,116 $5,628,749
----------- ---------- ---------- ----------
OPERATING EXPENSES:
SALARIES & COMMISSIONS 4,884,166 2,577,764 2,948,613 1,454,192
ADVERTISING 1,222,589 1,610,225 1,156,908 1,435,160
RENT 1,011,862 659,879 422,495 269,851
DEPRECIATION & AMORTIZATION 555,760 149,745 377,540 59,272
GENERAL AND ADMINISTRATIVE EXPENSES 2,546,493 1,461,216 1,376,183 573,927
EXPENSE REIMBURSEMENT FOR FINANCIAL PLANNING (125,000) 0 0 0
----------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 10,095,870 6,458,829 6,281,739 3,792,402
----------- ---------- ---------- ----------
INCOME FROM OPERATIONS 615,226 799,932 1,520,377 1,836,347
----------- ---------- ---------- ----------
OTHER INCOME (EXPENSES):
INTEREST INCOME 76,911 57,540 10,896 21,618
INTEREST EXPENSE (90,448) (46,739) (59,775) (23,272)
RENT INCOME 13,574 4,365 5,040 1,440
INCOME FROM INVESTMENT IN PARTNERSHIP 212,086 0 62,426 0
GAIN ON SALE OF MARKETABLE SECURITIES 91,175 22,819 4,833 22,819
----------- ---------- ---------- ----------
TOTAL OTHER INCOME 303,298 37,985 23,420 22,605
----------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 918,524 837,917 1,543,797 1,858,952
PROVISION FOR INCOME TAXES 350,000 328,000 575,000 694,000
----------- ---------- ---------- ----------
NET INCOME $568,524 $509,917 $968,797 $1,164,952
=========== ========== ========== ==========
EARNINGS PER SHARE:
Primary $.09 $.10 $.14 $.20
=========== ========== ========== ==========
Fully Diluted $ - $.10 $ - $.20
=========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Primary 6,615,982 5,298,908 6,750,923 5,817,677
=========== ========== ========== ==========
Fully Diluted - 5,298,908 - 5,817,677
=========== ========== ========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 13
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PIC
COMMON STOCK PAID-IN WARRANTS RETAINED
SHARES AMOUNT CAPITAL & OPTIONS EARNINGS
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31, 1996
BALANCE AT JULY 1, 1995 5,634,864 $56,348 $5,767,039 $ 48,155 $ 805,403
COLLECTION OF STOCK
SUBSCRIPTIONS AND ACCRUED
INTEREST RECEIVABLE
COMMON STOCK ISSUANCE 42,821 428 159,690
CANCELLATION OF C/S
PREVIOUSLY ISSUED (10,000) (100) (17,400)
ISSUANCE OF C/S FOR CASH AND
SUBSCRIPTIONS REC. 10,455 105 59,893
COMPENSATORY ELEMENT OF
STOCK OPTIONS GRANTED 4,113
ACCRUED INTEREST RECEIVABLE
NET INCOME FOR NINE MONTHS
ENDED MARCH 31, 1996 568,524
---------------------------------------------------------------
BALANCE AT MARCH 31, 1996 5,678,140 $56,781 $5,969,222 $ 82,268 $1,373,927
===============================================================
FOR THE NINE MONTHS ENDED
MARCH 31,1995
BALANCE AT JULY 1, 1994 4,114,465 $41,144 $1,170,745 $226,080 $714,923
COLLECTION OF COMMON STOCK
SUBSCRIPTIONS AND ACCRUED
INTEREST RECEIVABLE
PROCEEDS FROM PUBLIC OFFERING 1,015,852 10,158 3,544,491
LESS: UNDERWRITING COSTS (278,094)
DEFERRED REGISTRATION (189,877)
ISSUANCE OF COMMON STOCK FOR
CASH AND SUBSCRIPTIONS REC. 38,545 386 97,114
RECEIPT OF STOCK IN LIEU OF
REPAY. OF OFFICERS LOANS REC.
ACQUISITION OF TREASURY STOCK
S CORP. DIVIDEND DISTRIBUTION (202,868)
ACCRUED INTEREST RECEIVABLE
NET INCOME FOR NINE MONTHS
ENDED MARCH 31, 1995 509,917
---------------------------------------------------------------
BALANCE AT MARCH 31, 1995 5,168,862 $51,688 $4,344,379 $226,080 $1,021,972
===============================================================
<CAPTION>
TOTAL STOCK-
SUBSCRIPTION TREASURY STOCK HOLDERS'
RECEIVABLE SHARES AMOUNT EQUITY
-----------------------------------------------------
<S> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31, 1996
BALANCE AT JULY 1, 1995 ($773,980) 116,964 ($411,875) $5,491,090
COLLECTION OF STOCK
SUBSCRIPTIONS AND ACCRUED
INTEREST RECEIVABLE 292,731 292,731
COMMON STOCK ISSUANCE 160,118
CANCELLATION OF C/S
PREVIOUSLY ISSUED (17,500)
ISSUANCE OF C/S FOR CASH AND
SUBSCRIPTIONS REC. (40,000) 19,998
COMPENSATORY ELEMENT OF
STOCK OPTIONS GRANTED 34,113
ACCRUED INTEREST RECEIVABLE (39,899) (39,899)
NET INCOME FOR NINE MONTHS
ENDED MARCH 31, 1996 568,524
---------------------------------------------------
BALANCE AT MARCH 31, 1996 ($561,148) 116,964 ($411,875) $6,509,175
===================================================
FOR THE NINE MONTHS ENDED
MARCH 31,1995
BALANCE AT JULY 1, 1994 ($694,148) $1,458,744
COLLECTION OF COMMON STOCK
SUBSCRIPTIONS AND ACCRUED
INTEREST RECEIVABLE 75,146 75,146
PROCEEDS FROM PUBLIC OFFERING 3,554,649
LESS: UNDERWRITING COSTS (278,094)
DEFERRED REGISTRATION (189,877)
ISSUANCE OF COMMON STOCK FOR
CASH AND SUBSCRIPTIONS REC. (20,000) 77,500
RECEIPT OF STOCK IN LIEU OF
REPAY. OF OFFICERS LOANS REC. 96,964 (339,375) (339,375)
ACQUISITION OF TREASURY STOCK 20,000 ( 72,500) ( 72,500)
S CORP. DIVIDEND DISTRIBUTION (202,868)
ACCRUED INTEREST RECEIVABLE (43,042) (43,042)
NET INCOME FOR NINE MONTHS
ENDED MARCH 31, 1995 509,917
---------------------------------------------------
BALANCE AT MARCH 31, 1995 ($682,044) 116,964 ($411,875) $4,550,200
===================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 14
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 568,524 $ 509,917
---------- ----------
DEPRECIATION AND AMORTIZATION 555,760 149,745
BAD DEBT EXPENSE 22,289
COMPENSATORY ELEMENT OF STOCK ISSUANCE 178,462 30,875
UNREALIZED (GAIN) LOSS ON MARKETABLE SECURITIES 16,216 (7,476)
EXPENSE REIMBURSEMENT FOR FINANCIAL PLANNING (125,000)
INCOME FROM INVESTMENT IN PARTNERSHIP (212,086)
INCREASE/(DECREASE) IN CASH FLOWS AS A RESULT OF CHANGES IN
ASSET AND LIABILITY ACCOUNT BALANCES
ACCOUNTS RECEIVABLE (1,941,829) (1,594,062)
PREPAID EXPENSES (1,032,589) (557,619)
SECURITY DEPOSITS (99,584) (8,715)
ACCOUNTS PAYABLE 25,795 (100,670)
ACCRUED PAYROLL AND PAYROLL TAXES 523,680 127,398
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 158,956 (16,229)
INCOME TAXES PAYABLE 417,028 246,486
---------- ----------
TOTAL ADJUSTMENTS (1,512,902) (1,730,267)
========== ==========
NET CASH USED IN OPERATING ACTIVITIES (944,378) (1,220,350)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
ACQUISITION OF PROPERTY & EQUIPMENT (781,114) (424,911)
PROCEEDS FROM SALE OF MARKETABLE SECURITIES 2,079,534
INVESTMENT IN JOINT VENTURE 20,000
INVESTMENT IN PARTNERSHIP (348,360)
PURCHASE OF INTANGIBLE ASSETS (412,901) (72,021)
RECEIPT ON NOTE FROM STOCKHOLDERS 29,571
INVESTMENT IN MARKETABLE SECURITIES (986,034)
INCREASE IN OTHER RECEIVABLES-STOCKHOLDERS (658,311) (250,656)
INCREASE IN ACCRUED INTEREST 53,159 (22,920)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (18,422) (1,756,542)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
ACQUISITION OF TREASURY STOCK (72,500)
PROCEEDS FROM BRIDGE LOAN NOTES PAYABLE 1,910
RECEIPTS ON NOTE FROM FORMER STOCKHOLDER 3,171 2,897
PAYMENT ON NOTE PAYABLE TO STOCKHOLDER-OTHER (15,681)
DECREASE IN DEMAND LOANS PAYABLE (72,150)
BORROWINGS/REPAYMENT ON NOTE PAYABLE FROM BANK 1,338,889 575,000
PROCEEDS FROM SALE OF COMMON STOCK - NET OF UNDERWRITING COSTS 81,544 3,324,055
INCREASE IN INTANGIBLE ASSETS
COMMON STOCK SUBSCRIPTIONS COLLECTED 159,672 55,024
"S" CORPORATION DIVIDEND DISTRIBUTIONS (202,868)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,567,595 3,611,368
---------- ----------
NET INCREASE IN CASH 604,795 634,476
CASH AT BEGINNING OF PERIOD 1,335,762 1,176,425
---------- ----------
CASH AT END OF PERIOD 1,940,557 1,810,901
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 15
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR THE PERIOD:
INTEREST $ 90,448 $ 46,739
======== ========
INCOME TAXES $122,834 $ 62,704
======== ========
NON CASH TRANSACTIONS FOR THE PERIOD:
ISSUANCE OF COMMON STOCK SUBJECT TO RECISION
IN EXCHANGE FOR COMMON STICK SUBSCRIPTIONS
RECEIVABLE $ 0 $ 20,000
======== ========
ISSUANCE OF COMMON STOCK AND COMPENSATORY
ELEMENT OF STOCK OPTIONS GRANTED $113,474 $ 0
======== ========
INCOME FROM INVESTMENT IN PARTNERSHIP $149,660 $ 0
======== ========
DEFERRED REGISTRATION COSTS WHICH WERE CHARGED TO
ADDITIONAL PAID IN CAPITAL UPON THE COMPLETION
OF THE PUBLIC OFFERING IN DECEMBER 1994 $ 0 $186,245
======== ========
ACQUISITION OF GILBERT FINANCIAL SERVICES, INC. IN FEBRUARY
1995 IN EXCHANGE FOR 203,428 SHARES OF THE COMPANY'S
COMMON STOCK, ACCOUNTED FOR AS A POOLING OF INTERESTS $ 0 $108,231
======== ========
RECEIPT OF 96,964 SHARES OF STOCK IN LIEU OF REPAYMENT OF
OFFICERS' LOANS RECEIVABLE $ 0 $339,375
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 16
GILMAN + CIOCIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
NOTE 1 - PREPARATION OF FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
balance sheet as at March 31,1996 and the related unaudited consolidated
statements of operations for the nine and three months ended March 31, 1996 and
1995 and statements of stockholders' equity and cash flows for the nine months
ended March 31, 1996 and 1995 include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the Company's
financial position as at March 31, 1996, results of operations for the nine and
three months ended March 31, 1996 and 1995 and changes in stockholders' equity
and cash flows for the nine months ended March 31, 1996 and 1995.
The accompanying consolidated balance sheet as at June 30, 1995 is
presented herein as unaudited. Such consolidated balance sheet was
prepared from the audited year-end June 30, 1995 financial statements,
and does not reflect all disclosures and footnotes contained therein.
The footnotes should be read in conjunction with the audited financial
statements for the year ended June 30, 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation:
The consolidated financial statements include the accounts of Gilman +
Ciocia, Inc. (The Parent) (a Delaware Corporation) and its wholly-owned
subsidiaries, JT Securities, Inc. (New York), BT Telemarketing, Inc. (New York)
and Gilbert Financial Services, Inc. (Florida), and its seventy-five percent
owned subsidiary, Mid Wood Tax Service, Inc. (See Note 3). All significant
intercompany transactions have been eliminated in consolidation.
(b) Per Share Data:
Primary net income per share of common stock for the nine and three
months ended March 31, 1996 and 1995 have been computed based on the weighted
average number of common shares outstanding including common stock that may be
subject to recision. The acquisition of Gilbert Financial Services, Inc.,
accounted for as a pooling of interests, has been retroactively reflected as of
the beginning of all periods presented.
F-7
<PAGE> 17
(c) Investment in ATM Partners
The Company is using the equity method to account for its 35.88%
ownership in ATM Partners. The Partnership reflects its investment at fair
market value.
The condensed balance sheet of ATM Partners at March 31, 1996 is as
follows:
<TABLE>
<S> <C>
Investment in Marketable Securities $1,562,000
==========
Partners Capital $1,562,000
==========
</TABLE>
Income of the Partnership for the nine months ended March 31, 1996
amounted to $590,976. The Company's prorata share amounted to $212,086.
(d) Expense Reimbursement for Financial Planning
As per an agreement between the Company and a manager, the manager is
required to reimburse the Company for certain expenses incurred in behalf of the
Company should he fail to achieve certain gross revenue criteria. Based on
these criteria the Company is entitled to be reimbursed for $125,000 of these
expenses. The Company will offset the managers future earnings to collect this
reimbursement.
NOTE 3 - MERGERS AND ACQUISITIONS
On September 18, 1995 the Company acquired seventy-five percent of the
outstanding stock of Midwood Tax Service Inc. ("Midwood"). Previously the
Company and Midwood were engaged in a joint-venture. The Company has accounted
for the acquisition as an investment in a subsidiary using the equity method.
Midwood's results of operations for the nine months ended March 31, 1996
have been included in the financial statements presented herein. Due to the
immateriality of Midwood's results of operations for the period and the
minority interest in the equity of Midwood, the Company has presented Midwood
herein as if it were a wholly owned subsidiary.
NOTE 4 - SEGMENT REPORTING (UNAUDITED)
The Company is a service business which operates primarily in two
segments; Tax Preparation Services and Financial Planning Services.
(a) Tax Preparation Services
The Company is engaged in providing tax return preparation, filing and
related services to the general public. This segment of the Company's business
is seasonal and generates most of its revenues between February and April.
(b) Financial Planning Services
The Company provides financial services such as insurance, investments,
pensions and estate planning to its existing clients.
Financial information pertaining to the above segments are as follows:
F-8
<PAGE> 18
For the nine months ended March 31, 1996
<TABLE>
Tax Prep. Financial Planning Other Consolidated
<S> <C> <C> <C> <C>
Revenues $6,310,878 $3,839,645 $ 560,573 $10,711,096
Direct Costs $6,381,057 $2,807,282 $ 907,531 $10,095,870
---------- ---------- --------- -----------
Operating Profit(loss) $ (70,179) $1,032,363 $(346,958) $ 615,226
========== ========== ========= ===========
Identifiable assets $7,999,508 $1,306,376 $ 135,739 $ 9,441,622
========== ========== ========= ===========
</TABLE>
For the nine months ended March 31, 1995
<TABLE>
Tax Prep. Financial Planning Consolidated
<S> <C> <C> <C>
Revenues $5,180,555 $2,078,206 $ 7,258,761
Direct Costs $4,734,819 $1,724,010 $ 6,458,829
---------- ---------- -----------
Operating Profit $ 445,736 $ 354,196 $ 799,932
========== ========== ===========
Identifiable assets $6,194,025 $ 540,368 $ 6,734,393
========== ========== ===========
</TABLE>
For the three months ended March 31, 1996
<TABLE>
Tax Prep. Financial Planning Other Consolidated
<S> <C> <C> <C> <C>
Revenues $6,067,296 $1,531,059 $ 203,761 $ 7,802,116
Direct Costs $4,127,026 $1,661,665 $ 493,048 $ 6,281,739
---------- ---------- --------- -----------
Operating Profit(loss) $1,940,270 $ (130,606) $(289,287) $ 1,520,377
========== ========== ========= ===========
Identifiable assets $7,999,508 $1,306,376 $ 135,739 $ 9,441,622
========== ========== ========= ===========
</TABLE>
For the three months ended March 31, 1995
<TABLE>
Tax Prep. Financial Planning Consolidated
<S> <C> <C> <C>
Revenues $5,044,880 $ 583,869 $5,628,749
Direct Costs $2,902,142 $ 890,260 $3,792,402
---------- ---------- ----------
Operating Profit(loss) $2,142,738 $ (306,391) $1,836,347
========== ========== ==========
Identifiable assets $6,194,025 $ 540,368 $6,734,393
========== ========== ==========
</TABLE>
The Company has allocated advertising, rent and other expenses based upon
management's estimates. The allocation of salaries has been based on the
specific service provided by the employee, except for administrative costs
which have been allocated based upon management's estimates.
F-9
<PAGE> 19
NOTE 5 - REFERENCE TO THE JUNE 30, 1995 AUDITED FINANCIAL STATEMENTS
See the notes to the Company's audited financial statements included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1995 for disclosures of significant accounting policies and other pertinent
disclosures which have not materially changed.
F-10
<PAGE> 20
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 1,940,557 1,335,762
<SECURITIES> 0 2,095,750
<RECEIVABLES> 2,527,853 586,024
<ALLOWANCES> (45,974) (23,685)
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,290,224 4,469,854
<PP&E> 2,281,140 1,544,735
<DEPRECIATION> 719,851 617,768
<TOTAL-ASSETS> 9,441,662 6,093,460
<CURRENT-LIABILITIES> 2,867,923 407,510
<BONDS> 0 0
<COMMON> 56,781 56,348
0 0
0 0
<OTHER-SE> 6,452,394 5,434,742
<TOTAL-LIABILITY-AND-EQUITY> 9,441,622 6,093,460
<SALES> 10,711,096 7,802,116
<TOTAL-REVENUES> 10,711,096 7,802,116
<CGS> 0 0
<TOTAL-COSTS> 10,095,870 6,281,739
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 90,448 59,775
<INCOME-PRETAX> 918,524 1,543,797
<INCOME-TAX> 350,000 575,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 568,524 968,797
<EPS-PRIMARY> $ 0.09 $ 0.14
<EPS-DILUTED> 0 0
</TABLE>
