<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 09/30/96
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 November 12,
1996, 5,560,582 shares of the issuer's common equity were outstanding.
<PAGE> 2
PART I
<TABLE>
<CAPTION>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
Page
<S> <C>
Consolidated Balance Sheets as of September 30, 1996 and
June 30, 1996 F-1 - F-2
Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1995 F-3
Consolidated Statements of Stockholders' Equity for the three months
ended September 30, 1996 and 1995 F-4
Consolidated Statements of Cash Flows for the three months ended
September 30, 1996 and 1995 F-5 - F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
The Company's revenues for the three months ended September 30, 1996
increased 42.9% to $2,157,129 as compared to $1,509,211 for the three months
ended September 30, 1995. The increase in revenues for the three months ended
September 30, 1996 is primarily attributable to the opening of forty-four 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 three months ended
September 30, 1996 consist of $231,322 for tax preparation, $1,368,421 for
financial planning services and $557,386 for direct mailing services. Total
revenue for the three months ended September 30, 1995 consist of $176,943 for
tax preparation, $1,164,226 for financial planning services and $168,042 for
direct mailing services.
The Company's operating expenses for the three months ended September
30, 1996 increased 88.7% to $3,020,391 as compared to $1,600,649 for the three
months ended September 30, 1995. The increase in the Company's operating
expenses is primarily attributable to increased rent of $181,516, additional
salaries and commissions of $249,169, increased depreciation and amortization
expense of $91,413, increased general and administrative expenses of $341,177
and direct mail costs of $424,210. These increases resulted primarily from
recurring expenses related to the opening of forty-four new offices in January
2
<PAGE> 3
1996, normal increases in business at the company's existing offices and the
establishment and operations of the Company's direct mailing division. The
increase in salaries and commissions is due to increased financial planning
activities as well as $144,773 in salaries for the direct mailing division. The
increase in depreciation and amortization is due primarily to acquisitions of
fixed assets of approximately $270,000 and intangibles of approximately
$169,000.
The decrease in other income of $232,165 or 156.4% is primarily due to
the decrease of approximately $136,000 in income from the Company's investment
in partnership and a decrease of approximately $65,000 in realized gains on the
sale of marketable securities.
The Company's loss before provision for income taxes for the three
months ended September 30, 1996 is $946,951 as compared to income before
provision for income taxes of $57,038 for the three months ended September 30,
1995. The decrease of $1,003,989 is primarily due to decreases in reimbursement
from financial planner and income from investment in partnership of
approximately $125,000 and $136,000, respectively, as well as increases in rent,
salaries and commissions and depreciation and amortization totaling
approximately $522,000 which is primarily attributable to the company's
expansion at January 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow used in operating activities increased
approximately $301,000 to $437,227 from $136,253 for the three months ended
September 30, 1996 and 1995, respectively. The increase is primarily due to a
increase in net loss plus non-cash adjustments of approximately $263,000, an
increase in accounts receivable and prepaid expenses and other current assets
of approximately $338,000 and $360,000, respectively, and a decrease in
accounts payable of approximately $782,000 as a result of the Company's
expansion. The decrease in net loss plus non-cash adjustments is primarily
comprised of increased compensation expense of approximately $40,000 recognized
in connection with amortization of advances to financial planners and
approximately $59,000 recognized in connection with the forgiveness of an
officer's loan, increased depreciation and amortization expense of
approximately $89,000 as a result of capital expenditures of approximately
$270,000 and the acquisition of intangibles of approximately $169,000 and an
increase in net loss of approximately $614,000 resulting from the Company's
expansion.
Net cash used in investing activities was $247,826 and net cash
provided by investing activities of $1,629,650 for the three months ended
September 30, 1996 and 1995, respectively. The decrease of approximately
$1,877,476 is primarily due to proceeds of approximately $2,160,000 from the
sale of marketable securities and increases in capital expenditures of
approximately $232,000 and proceeds from related party transactions of
approximately $218,000.
3
<PAGE> 4
Net cash used in financing activities increased by $227,083 to $276,281
from $49,198 due to increased payments of bank loan transactions of
approximately $514,000 offset by proceeds from bank loan transactions and notes
payable of approximately $250,000.
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 amended, 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
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated July 2, 1996
disclosing a change in its accountants.
4
<PAGE> 5
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: November 19, 1996
GILMAN & CIOCIA, INC.
By
- --------------------
Ralph V. Esposito
Chief Financial Officer
5
<PAGE> 6
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
CASH $1,260,461 $2,221,795
ACCOUNTS RECEIVABLE, NET 773,091 976,686
RECEIVABLE FROM RELATED PARTIES, CURRENT PORTION 215,636 403,545
PREPAID INCOME TAXES 280,743 ---
PREPAID EXPENSES AND OTHER CURRENT ASSETS 79,003 100,866
---------- ----------
TOTAL CURRENT ASSETS 2,608,934 3,702,892
---------- ----------
PROPERTY & EQUIPMENT, NET 1,671,783 1,501,701
---------- ----------
OTHER ASSETS:
INTANGIBLE ASSETS, NET 1,136,060 1,030,820
INVESTMENT IN PARTNERSHIP 553,938 646,525
ADVANCES AND NOTES RECEIVABLE FROM FINANCIAL
PLANNERS 438,310 501,531
SECURITY DEPOSITS 215,650 209,852
RECEIVABLES FROM RELATED PARTIES, NET OF CURRENT
PORTION 77,928 139,595
DEFERRED TAX ASSETS 191,002 133,585
---------- ----------
TOTAL OTHER ASSETS 2,612,888 2,661,908
---------- ----------
TOTAL ASSETS $6,893,605 $7,866,501
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE> 7
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1996 1996
---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 138,887 $ 680,556
ACCOUNTS PAYABLE 49,223 291,554
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 464,513 395,450
NOTES PAYABLE-OTHER 121,928 ---
----------- -----------
TOTAL CURRENT LIABILITIES 774,551 1,367,560
----------- -----------
NOTE PAYABLE - BANK, NET OF CURRENT PORTION 150,000 ---
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
PREFERRED STOCK - $.001 PAR VALUE
AUTHORIZED - 100,000 SHARES
ISSUED AND OUTSTANDING - NONE
COMMON STOCK - $.01 PAR VALUE
AUTHORIZED - 9,000,000 SHARES
ISSUED AND OUTSTANDING -5,550,582
SHARES 55,505 55,505
PAID IN CAPITAL 6,213,810 6,184,075
RETAINED EARNINGS 148,671 717,375
----------- -----------
6,417,986 6,956,955
STOCK SUBSCRIPTIONS AND ACCRUED INTEREST
RECEIVABLE (448,932) (458,014)
TOTAL STOCKHOLDERS' EQUITY 5,969,054 6,498,941
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,893,605 $ 7,866,501
----------- ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 8
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
SEPTEMBER 30,
1996 1995
------------------------------
<S> <C> <C>
REVENUES:
TAX PREPARATION FEES $ 231,322 $ 176,943
FINANCIAL PLANNING SERVICES 1,368,421 1,164,226
DIRECT MAIL SERVICES 557,386 168,042
----------- -----------
TOTAL REVENUES 2,157,129 1,509,211
----------- -----------
OPERATING EXPENSES:
SALARIES & COMMISSIONS 1,105,751 856,582
GENERAL AND ADMINISTRATIVE EXPENSES 840,108 498,931
DIRECT MAIL COSTS 424,210 ---
RENT 462,783 281,267
DEPRECIATION & AMORTIZATION 164,976 73,563
REIMBURSEMENT OF FINANCIAL PLANNING EXPENSE --- (125,000)
ADVERTISING 22,563 15,306
----------- -----------
TOTAL OPERATING EXPENSES 3,020,391 1,600,649
OPERATING LOSS (863,262) (91,438)
OTHER INCOME (EXPENSES) (83,689) 148,476
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (946,951) 57,038
PROVISION (CREDIT) FOR INCOME TAXES (378,247) 12,252
NET INCOME (LOSS) $ (568,704) $ 44,786
NET INCOME (LOSS) PER SHARE $ ( .10) $ .01
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES: 5,550,582 5,635,213
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 9
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTIONS TOTAL STOCK-
COMMON STOCK PAID-IN RETAINED AND ACCRUED TREASURY STOCK HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INTEREST SHARES AMOUNT EQUITY
RECEIVABLE
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996
BALANCE AT JULY 1, 1996 5,550,582 $ 55,505 $6,184,075 $ 717,375 $(458,014) --- --- $6,498,941
REPAYMENTS OF STOCK
SUBSCRIPTIONS --- --- --- --- 19,387 --- --- 19,387
COMPENSATION RECOGNIZED IN
CONNECTION WITH THE
ISSUANCE OF STOCK OPTIONS --- --- 29,735 --- --- --- --- 29,735
ACCRUED INTEREST INCOME --- --- --- (10,305) --- --- (10,305)
NET LOSS --- --- --- (568,704) --- --- --- (568,704)
--------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996 5,550,582 $ 55,505 $6,213,810 $148,671 $(448,932) 0 0 $5,969,054
==================================================================================================
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,1995
BALANCE AT JULY 1, 1995 5,634,864 $ 56,348 $5,815,194 $805,403 ($773,980) 116,964 ($411,875) $5,491,090
REPAYMENTS OF STOCK
SUBSCRIPTIONS --- --- --- --- 36,684 --- --- 36,684
ISSUANCE OF COMMON STOCK 1,429 14 5,523 --- --- --- --- 5,537
ACCRUED INTEREST INCOME --- --- --- --- (14,006) --- --- (14,006)
NET INCOME --- --- --- 44,786 --- --- --- 44,786
--------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 5,636,293 $56,362 $5,820,717 $850,189 $(751,302) 116,964 $(411,875) $5,564,091
==================================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 10
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1996 1995
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (568,704) $ 44,786
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH THE
ISSUANCE OF STOCK OPTIONS 29,735 5,537
DEPRECIATION AND AMORTIZATION 162,964 73,563
LOSS FROM INVESTMENT IN PARTNERSHIP 92,587 ---
INCREASE IN DEFERRED TAX ASSETS (57,417) ---
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH THE
FORGIVENESS OF OFFICER'S LOAN 59,116 ---
GAIN ON SALE OF MARKETABLE SECURITIES --- 16,216
EXPENSE REIMBURSEMENT FOR FINANCIAL PLANNING --- (125,000)
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH AMORTIZATION
OF ADVANCES TO FINANCIAL PLANNERS 40,407 ---
INTEREST ON STOCK SUBSCRIPTIONS (10,305) (3,572)
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLE 203,595 (134,032)
ADVANCES TO FINANCIAL PLANNERS 22,814 ---
SECURITY DEPOSITS (5,798) (29,938)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 302,606 (57,102)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (708,827) 73,289
------------------------------
NET CASH USED IN OPERATING ACTIVITIES (437,227) (136,253)
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (269,759) (37,431)
PURCHASE OF MARKETABLE SECURITIES --- ---
PROCEEDS FROM SALE OF MARKETABLE SECURITIES --- 2,160,413
ACQUISITION OF INTANGIBLE ASSETS (168,515) (146,500)
INVESTMENT IN PARTNERSHIP --- (348,360)
PROCEEDS FROM RELATED PARTY TRANSACTIONS 219,448 1,528
PAYMENT TO RELATED PARTIES (29,000) ---
------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (247,826) 1,629,650
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BANK LOAN TRANSACTIONS 150,000 (47,670)
PAYMENTS OF BANK LOAN TRANSACTIONS (541,669) (27,778)
PAYMENT OF NOTE PAYABLE (3,998) ---
PROCEEDS FROM NOTE PAYABLE 100,000 ---
PROCEEDS FROM ST0CK SUBSCRIPTIONS 19,386 26,250
------------------------------
NET CASH USED IN FINANCING ACTIVITIES (276,281) (49,198)
------------------------------
NET INCREASE (DECREASE) IN CASH (961,334) 1,444,199
CASH AT BEGINNING OF PERIOD 2,221,795 1,335,762
------------------------------
CASH AT END OF PERIOD $ 1,260,461 $ 2,779,961
------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 11
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------
1996 1995
-----------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR THE PERIOD:
<S> <C> <C>
INTEREST $ 16,937 $ 5,138
======== ========
INCOME TAXES $ 22,515 $122,034
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 12
GILMAN + CIOCIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Gilman +
Ciocia, Inc. and its three wholly-owned subsidiaries, JT Securities,Inc, BT
Telemarketing, Inc. and Gilbert Financial Services, Inc., and have been prepared
as if the entities had operated as a single consolidated group since their
respective dates of incorporation. All intercompany balances and transactions
have been eliminated.
The consolidated financial statements and related notes thereto as of
September 30, 1996 and for the three months ended September 30, 1996 and 1995
are presented as unaudited but in the opinion of management include all
adjustments necessary to present fairly the information set forth therein. These
adjustments consist solely of normal recurring accruals. The consolidated
balance sheet information for June 30, 1996 was derived from the audited
financial statements included in the Company's Form 10-KSB. These interim
financial statements should be read in conjunction with that report. These
interim financial statements are not necessarily indicative of the results for
any future periods.
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosures
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
F-7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000914142
<NAME> GILMAN & CIOCIA, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,260,461
<SECURITIES> 0
<RECEIVABLES> 773,091
<ALLOWANCES> 120,974
<INVENTORY> 0
<CURRENT-ASSETS> 2,608,934
<PP&E> 1,671,783
<DEPRECIATION> 253,058
<TOTAL-ASSETS> 6,893,605
<CURRENT-LIABILITIES> 774,551
<BONDS> 0
0
0
<COMMON> 55,505
<OTHER-SE> 5,913,549
<TOTAL-LIABILITY-AND-EQUITY> 6,893,605
<SALES> 0
<TOTAL-REVENUES> 2,157,129
<CGS> 0
<TOTAL-COSTS> 3,020,392
<OTHER-EXPENSES> 83,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (946,951)
<INCOME-TAX> (378,247)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (568,704)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
