<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 3/31/97
___
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, 1997, 5,579,236 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, 1997 and
June 30, 1996 F-1 - F-2
Consolidated Statements of Operations for the nine and three-months
ended March 31, 1997 and 1996 F-3
Consolidated Statements of Stockholders' Equity for the nine months
ended March 31, 1997 and 1996 F-4 - F-5
Consolidated Statements of Cash Flows for the nine months ended
March 31, 1997 and 1996 F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F-9
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
PLAN OF OPERATION
Over the past two fiscal years, the Company opened 74 new offices,
which represent 60% of all offices at March 31, 1997. The Company plans to
continue its expansion and open new offices during the next year (although no
specific target has been set), recruit successful financial planners and acquire
existing tax preparation practices. The Company anticipates funding this growth
through operating profits, use of its short-term line of credit and the
availability of additional funds through the exercise of outstanding options and
warrants. However, there can be no assurance that any of such options or
warrants will be exercised.
The Company anticipates that opening new offices will increase its
revenues, but will involve a substantial increase in costs. The Company has no
basis to predict whether its new offices will have a material effect on its
operations. The Company believes that its new offices can ultimately be operated
profitably, but expansion may initially reduce the Company's profits or result
in an overall loss in future years.
During the Company's 1996 fiscal year, the Company commenced
operations of a direct mail division in order to control the substantial costs
of advertising its many offices. The Company believes that the direct mail
division will eventually result in lower advertising costs on a per-office
basis, as the Company takes
2
<PAGE> 3
advantage of economies of scale. The Company intends for its direct mail
division to operate as an independent division and solicit its own customers for
its direct mail services.
No events or transactions have occurred subsequent to March 31, 1997,
and the Company is not aware of any material trend, that would materially affect
an investor's understanding of the Company's financial condition or its results
of operations.
RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1997 AND 1996 COMPARED.
The Company's revenues for the nine months ended March 31, 1997 were
$14,427,028 as compared to revenues of $11,701,354 for the comparable period of
the prior year. The increase in revenues of 23.3% for the nine months ended
March 31, 1997 from the comparable period of the prior year is attributable to
the opening of eight new offices in January 1997 (which generated tax
preparation revenues that contributed approximately $383,000 of the increase in
tax preparation revenues for the nine months ended March 31, 1997) (the "1997
New Offices") and to the existing offices (which accounted for additional tax
preparation revenues of $435,000 from the forty-four offices opened in January
1996 (the "1996 New Offices") as well as approximately $858,000 from all other
offices opened prior to January 1996), increased financial planning revenues of
approximately $826,000 (which was primarily generated in the pre-1997 offices),
and increased revenues of approximately $223,000 from the direct mail division.
The Company's total revenues for the nine months ended March 31, 1997
consist of $7,987,260 for tax preparation services, $4,665,163 for financial
planning services, and $1,774,605 for direct mail services. The Company's total
revenues for the nine months ended March 31, 1996 consist of $6,311,380 for tax
preparation services, $3,838,728 for financial planning services and $1,551,246
for direct mail division.
The increase in the Company's financial planning revenues for the nine
months ended March 31, 1997 compared to the nine months ended March 31, 1996 of
approximately 21.5% was substantially the same as the Company's overall 23.3%
growth in revenues between the two periods. The increase in such financial
planning revenues is attributable to the integration of 10 additional financial
planners, a $404,906 increase in revenues attributable to Gilbert Financial
Services, Inc. for the nine months ended March 31, 1997 as compared to the
comparable period of the prior year, and ordinary growth in the Company's
operations.
3
<PAGE> 4
The Company's operating expenses for the nine months ended March 31,
1997 were $14,525,747 as compared to operating expenses of $11,957,378 for the
comparable period of the prior year. The 21.5% increase in the Company's
operating expenses for its nine months ended March 31, 1997 from the comparable
period of the prior year was attributable to increases of $1,165,403 in salaries
and commissions; $218,775 in general and administrative expenses; $401,529 for
rent; $272,356 for depreciation and amortization; $413,784 in advertising; and
$125,000 as a result of the Company having not received a reimbursement of
financial planning expenses in the nine months ended March 31, 1997.
The increase in salaries and commissions is due to increased salaries
and commissions for the personnel working at the 1997 New Offices of
approximately $160,000, the 1996 New offices of approximately $137,000 and
increased salaries and commissions for personnel working at existing offices of
approximately $1,020,000 offset by a decrease of approximately $152,000 in
compensation recognized in connection with the issuance of stock. The increase
consists of approximately $967,000 and $198,000 for tax preparation
and financial planning salaries and commissions, respectively, resulting from
increased preparation of tax returns and investments by clients.
The increase in rent is due to the 1997 New Offices of approximately
$47,000, 1996 New Offices in the amount of approximately $255,000 and to normal
increases of approximately $100,000 in rent for existing offices.
The increase of approximately $218,775 in general and administrative
expenses is primarily due to increased office expenses of $193,000 in connection
with the 1997 New Offices and increased business at the 1996 New Offices and
existing offices.
The 83.3% increase in depreciation and amortization (approximately
$3,000 for the 1997 New Offices, approximately $74,000 for the 1996 New Offices
and $195,000 for existing offices) is due primarily to acquisitions of
approximately $2,400,000 in fixed assets and intangibles made during the
Company's last two fiscal years plus the $998,000 made during the nine months of
the Company's 1997 fiscal year.
The increase in advertising of $413,784 is primarily due to an
increase of approximately 1,500,000 additional pieces of mail distributed
during the three months ended March 31, 1997 as well as increased costs of
material totaling approximately $375,000. The increased volume is due to the
opening of the 1997 New Offices and increased mailings to the 1996 New Offices
and existing offices due to the positive response received in the prior year.
The decrease in other income of $354,747 or 117% is primarily due to
the decrease of approximately $185,000 in income from the Company's investment
in partnership (such partnership, a private investment partnership that invests
in fluctuating marketable securities, and in which the Company has invested
certain available funds, experienced a decline in its portfolio value during the
nine months ended March 31, 1997 as compared to appreciation in the comparable
period of the prior year) an increase in interest expense of approximately
$42,000 due to the increased borrowings of approximately $1,700,000 under the
Company's bank loans and a decrease of approximately $91,000 in realized gain
on the sale of marketable securities.
The Company's loss before income tax benefit for the nine months ended
March 31, 1997 is $150,168 as compared to income before provision for income
taxes of $47,274 for the nine months ended March 31, 1996. The increased loss
is primarily attributable to the decrease in income from investment in
partnership of approximately $185,000.
4
<PAGE> 5
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 COMPARED.
The Company's revenues for the three months ended March 31, 1997 were
$9,813,258 as compared to revenues of $8,303,320 for the comparable period of
the prior year. The increase in revenues of 18.2% for the quarter ended March
31, 1997 from the comparable period of the prior year is attributable to the
eight New Offices opened in January 1997 (which generated tax preparation
revenues that contributed approximately $383,000 of the increase in tax
preparation revenues in the quarter ended March 31, 1997) the opening of the
1996 New Offices (which generated tax preparation revenues that contributed
approximately $395,000 of the increase in tax preparation revenues in the
quarter ended March 31, 1997) and to the existing offices (which accounted for
$770,000 of additional tax preparation revenues) and increased revenues of
approximately $23,000 from the direct mail division offset by a decrease in
financial planning revenues of approximately $61,000.
The Company's total revenues for the quarter ended March 31, 1997
consist of $7,619,158 for tax preparation services, $1,465,935 for financial
planning services, and $728,165 for direct mail services. The Company's total
revenues for its quarter ended March 31, 1996 consist of $6,071,507 for tax
preparation services, $1,526,951 for financial planning services and $704,862
for direct mail division.
The Company's operating expenses for the quarter ended March 31, 1997
were $8,152,495 as compared to operating expenses of $7,654,193 for the
comparable period the prior year. The 6.5% increase in the Company's operating
expenses for its quarter ended March 31, 1997 from the comparable period of the
prior year was attributable to increases of $409,165 in advertising; $219,384 in
salaries and commissions; $59,269 in rent and $104,994 in depreciation and
amortization offset by a decrease of $221,190 for direct mail costs.
The increase in advertising of $409,165 is primarily due to an increase
of approximately 1,500,000 additional pieces of mail distributed during the
three months ended March 31, 1997 as well as increased costs of materials
totaling approximately $375,000. The increased volume is due to the 1997 New
Offices and increased mailings to the 1996 New Offices and existing offices due
to the positive response received in the prior year.
The increase in salaries and commissions is due to increased salaries
and commissions for the personnel working at the 1997 New Offices of
approximately $160,000, the 1996 New Offices of approximately $83,000 and
approximately $139,000 for existing offices offset by decreases of approximately
$75,000 for financial planning salaries and approximately $88,000 for
compensation recognized in connection with the issuance of stock. The increase
in salaries and commissions consists of approximately $294,000 for tax
preparation salaries in connection with increased preparation of the tax returns
offset by a decrease of approximately $75,000 for financial planning salaries
and commissions attributable to a decrease in investments by clients.
5
<PAGE> 6
The 70.6% increase in depreciation and amortization (approximately
$3,000 for the 1997 New Offices, $12,000 for the 1996 New Offices and $89,000
for existing offices) is due primarily to acquisitions of fixed assets and
intangibles made during the Company's last two fiscal years plus the $998,000
made during the nine months ended March 31, 1997.
The decrease in other income of $30,817 or 131.6% is primarily due to
an increase of approximately $47,000 in interest expense which is due to the
$1,700,000 in increased borrowings.
The Company's income before provision for income taxes for the three
months ended March 31, 1997 was $1,653,366 as compared to $672,547 for the three
months ended March 31, 1996. The increase is attributable to the increased
operating income of approximately $1,012,000 resulting primarily from increased
tax preparation revenues of approximately $1,500,000 offset by a decrease in
other expenses of approximately $31,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows used in operating activities was approximately
$840,000 for the nine months ended March 31, 1997 as compared to cash flows
provided by operating activities of approximately $974,000 for the nine months
ended March 31, 1996. The decrease of approximately $1,814,000 is primarily due
to a decrease in proceeds from the sales of marketable securities of
approximately $2,080,000, which were used to fund the acquisition and start-up
of operations of the 1996 New Offices, an increase in advances to financial
planners of approximately $106,000 and an increase in accounts receivable of
approximately $577,000 due to the seasonality of the Company's operations. These
increases were offset by an increase in net loss plus non-cash adjustments of
approximately $830,000. This increase is primarily due to increased depreciation
and amortization of approximately $272,000, increased compensation recognized in
connection with the amortization of advances to financial planners and the
forgiveness of loans to related parties of approximately $308,000, the decrease
in gain from investment in partnership of approximately $185,000 and an
increased provision for doubtful accounts of approximately $125,000.
Net cash used in investing activities was approximately $553,000 and
$2,148,000 for the nine months ended March 31, 1997 and 1996, respectively. The
decrease of approximately $1,595,000 is primarily due to increased proceeds from
related party transactions of approximately $269,000 offset by decreased
payments of $550,000, a decrease in capital expenditures of approximately
$187,000 due to the opening of only eight new offices in early 1997 as compared
to forty-four new offices opened in early 1996 and a return of capital of
approximately $252,00 from the Company's investment in partnership as compared
to contributions totaling $348,000 during the nine months ended March 31, 1996.
Net cash provided by financing activities increased by approximately
$766,000 to approximately $2,544,000 from $1,779,000 due to increased proceeds
from bank loan transactions of approximately $2,161,000 and proceeds from note
payable of $200,000 offset by repayments of bank loan transactions and note
payable of approximately $791,000, the acquisition of treasury stock for
approximately $685,000 and a decrease of approximately $71,000 in proceeds
from the sale common stock and the exercise of stock options.
The Company has two credit facilities with a bank. The first facility
is a line of credit for up to $2,500,000, which expires on October 31, 1997.
Borrowings under this
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<PAGE> 7
line are in the form of short-term notes with interest charged monthly at the
bank's prime lending rate plus 1-1/2 %. At March 31, 1997, the Company had an
outstanding principal balance of $2,500,000.
The second credit facility is an installment note in the principal
amount of $1,000,000. The note is payable in 36 equal monthly installments of
approximately $28,000, plus interest at the bank's prime lending rate plus 1
3/4%. The final installment is due December, 1999. At March 31, 1997, the note
had an outstanding principal balance amounting to $917,000.
In July 1996, the Company acquired a building to house one of its
offices in Babylon, NY for approximately $221,000. In January 1997, the Company
acquired a building to house one of its offices in Massachusetts for
approximately $190,000.
The Company believes that it could continue to operate without any
additional financing (other than its seasonal bank loans) during the next 12
months. The Company anticipates that it will not pay dividends on its Common
Stock in the foreseeable future, but will apply any profits to fund the
Company's expansion.
RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 121, "Accounting
For the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of", which is effective for fiscal years beginning after December 15, 1995. The
Company's adoption of SFAS No. 121 as of July 1, 1996, did not have a material
impact on its results of operations, financial position or cash flows.
In October 1995, FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which is effective for transactions entered into for fiscal years
that begin after December 15, 1995. SFAS No. 123 establishes a fair value method
for accounting for stock-based compensation plans either through recognition or
disclosure. The Company's adoption of the employee stock-based compensation
provisions of SFAS No. 123 as of July 1, 1996 will require disclosure of the pro
forma net income and pro forma net income per share amounts assuming the fair
value method was adopted July 1, 1995. The adoption of this standard did not
impact the Company's consolidated results of operations, financial position or
cash flows.
In February 1997, FASB issued Statement No. 128, "Earnings Per Share,"
which is effective for fiscal years ending after December 15, 1997. The Company
will adopt Statement No. 128 for the year ended June 30, 1998. The adoption of
this standard will not have a material impact on the Company's earnings per
share on a fully dilutive basis.
7
<PAGE> 8
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
No Report on Form 8-K was filed by the Company during the quarter ended
March 31, 1997.
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 19, 1997
GILMAN & CIOCIA, INC.
By/s/Thomas Povinelli
- --------------------
Thomas Povinelli
Chief Financial Officer
9
<PAGE> 10
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
CASH & CASH EQUIVALENTS $ 3,373,671 $2,221,795
ACCOUNTS RECEIVABLE, NET 3,347,900 976,686
RECEIVABLE FROM RELATED PARTIES, CURRENT PORTION 213,177 403,545
PREPAID EXPENSES AND OTHER CURRENT ASSETS 66,173 100,866
----------- ----------
TOTAL CURRENT ASSETS 7,000,921 3,702,892
----------- ----------
PROPERTY & EQUIPMENT, NET 1,795,280 1,501,701
----------- ----------
OTHER ASSETS:
INTANGIBLE ASSETS, NET 1,135,702 1,030,820
INVESTMENT IN PARTNERSHIP 367,240 646,525
ADVANCES AND NOTES RECEIVABLE FROM FINANCIAL
PLANNERS 398,114 501,531
SECURITY DEPOSITS 218,633 209,852
RECEIVABLES FROM RELATED PARTIES, NET OF CURRENT
PORTION 15,080 139,595
DEFERRED TAX ASSETS 233,929 133,585
----------- ----------
TOTAL OTHER ASSETS 2,368,698 2,661,908
----------- ----------
TOTAL ASSETS $11,164,899 $7,866,501
=========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE> 11
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 2,874,998 $ 680,556
ACCOUNTS PAYABLE 102,109 291,554
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 1,508,267 395,450
------------ -----------
TOTAL CURRENT LIABILITIES 4,485,374 1,367,560
NOTE PAYABLE - BANK, NET OF CURRENT PORTION 583,333 0
NOTE PAYABLE - OTHER, NET OF CURRENT PORTION 50,000 0
------------ -----------
5,118,707 1,367,560
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
PREFERRED STOCK - $.001 PAR VALUE
AUTHORIZED - 100,000 SHARES
ISSUED - NONE 0 0
COMMON STOCK - $.01 PAR VALUE
AUTHORIZED - 9,000,000 SHARES
ISSUED AND OUTSTANDING -5,579,236 and 5,550,582
SHARES RESPECTIVELY 55,792 55,505
ADDITIONAL PAID IN CAPITAL 6,260,593 6,184,075
RETAINED EARNINGS 624,824 717,375
------------ -----------
6,941,209 6,956,955
STOCK SUBSCRIPTIONS AND ACCRUED
INTEREST RECEIVABLE (253,386) (458,014)
TREASURY STOCK, 145,033 SHARES AT COST (641,631) 0
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 6,046,192 6,498,941
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,164,899 $ 7,866,501
============ ===========
</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,
1997 1996 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
TAX PREPARATION FEES $ 7,987,260 $ 6,311,380 $ 7,619,158 $ 6,071,507
FINANCIAL PLANNING SERVICES 4,665,163 3,838,728 1,465,935 1,526,951
DIRECT MAIL SERVICES 1,774,605 1,551,246 728,165 704,862
------------ ------------ ----------- -----------
TOTAL REVENUES 14,427,028 11,701,354 9,813,258 8,303,320
------------ ------------ ----------- -----------
OPERATING EXPENSES:
SALARIES & COMMISSIONS 6,049,569 4,884,166 3,167,997 2,948,613
GENERAL AND ADMINISTRATIVE EXPENSES 2,765,268 2,546,493 1,302,863 1,376,183
DIRECT MAIL COSTS 961,780 990,258 280,014 501,204
RENT 1,413,391 1,011,862 481,764 422,495
DEPRECIATION & AMORTIZATION 599,366 327,010 253,784 148,790
ADVERTISING 2,736,373 2,322,589 2,666,073 2,256,908
REIMBURSEMENT OF FINANCIAL PLANNING EXPENSE 0 (125,000) 0 0
------------ ------------ ----------- -----------
TOTAL OPERATING EXPENSES 14,525,747 11,957,378 8,152,495 7,654,193
------------ ------------ ----------- -----------
OPERATING INCOME (LOSS) (98,719) (256,024) 1,660,763 649,127
------------ ------------ ----------- -----------
OTHER INCOME (EXPENSES):
INCOME (LOSS) FROM INVESTMENT IN PARTNERSHIP 26,962 212,086 84,290 62,426
INTEREST INCOME 47,332 76,911 13,864 10,896
INTEREST EXPENSE (132,922) (90,448) (106,299) (59,775)
RENTAL INCOME 7,179 13,574 748 5,040
REALIZED GAIN ON SALE OF MARKETABLE SECURITIES 0 91,175 0 4,833
------------ ------------ ----------- -----------
OTHER INCOME (EXPENSES) (51,449) 303,298 (7,397) 23,420
------------ ------------ ----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT ) (150,168) 47,274 1,653,366 672,547
INCOME TAX PROVISION (BENEFIT) (57,617) 17,964 673,167 255,568
------------ ------------ ----------- -----------
NET INCOME (LOSS) ($ 92,551) $ 29,310 $ 980,199 $ 416,979
============ ============ =========== ===========
NET INCOME (LOSS) PER SHARE ($ .02) $ 0 $ .18 $ .06
============ ============ =========== ===========
PRIMARY AND FULLY DILUTED WEIGHTED AVERAGE
COMMON AND COMMON EQUIVALENT SHARES 5,575,765 6,615,982 5,439,253 6,750,923
============ ============ =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 13
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTIONS
ADDITIONAL AND ACCRUED
COMMON STOCK PAID-IN RETAINED INTEREST
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31, 1997
BALANCE AT JULY 1, 1996 5,550,582 $ 55,505 $6,184,075 $ 717,375 ($458,014)
REPAYMENTS OF STOCK
SUBSCRIPTIONS 228,353
ISSUANCE OF COMMON STOCK 28,654 287 91,725
COMPENSATION RECOGNIZED IN
CONNECTION WITH THE
ISSUANCE OF STOCK (25,419)
ISSUANCE OF TREASURY STOCK
AS BONUS TO EMPLOYEES
ACQUISITION OF TREASURY STOCK
ACCRUED INTEREST INCOME (23,725)
INCOME TAX BENEFIT RELATED
TO EXERCISE OF COMMON
STOCK OPTION 10,212
NET LOSS (92,551)
-------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 5,579,236 $ 55,792 $6,260,593 $624,824 ($253,386)
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL STOCK-
TREASURY STOCK HOLDERS'
SHARES AMOUNT EQUITY
--------------------------------------------
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31, 1997
BALANCE AT JULY 1, 1996 0 $0 $6,498,941
REPAYMENTS OF STOCK
SUBSCRIPTIONS 228,353
ISSUANCE OF COMMON STOCK 92,012
COMPENSATION RECOGNIZED IN
CONNECTION WITH THE
ISSUANCE OF STOCK (25,419)
ISSUANCE OF TREASURY STOCK
AS BONUS TO EMPLOYEES (8367) 42,882 42,882
ACQUISITION OF TREASURY STOCK 153,400 (684,513) (684,513)
ACCRUED INTEREST INCOME (23,725)
INCOME TAX BENEFIT RELATED
TO EXERCISE OF COMMON
STOCK OPTIONS 10,212
NET LOSS (92,551)
----------------------------------------
BALANCE AT MARCH 31, 1997 145,033 ($641,631) $6,046,192
========================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 14
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTIONS
ADDITIONAL AND ACCRUED
COMMON STOCK PAID-IN RETAINED INTEREST
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31,1996
BALANCE AT JULY 1, 1995 5,634,864 $ 56,348 $5,815,194 $805,403 ($773,980)
REPAYMENTS OF STOCK
SUBSCRIPTIONS 292,731
CANCELLATION OF COMMON
STOCK PREVIOUSLY ISSUED (10,000) (100) (17,400)
ISSUANCE OF STOCK
SUBSCRIPTIONS 10,455 105 59,893 (40,000)
ISSUANCE OF COMMON STOCK 42,821 428 159,690
COMPENSATION RECOGNIZED IN
CONNECTION WITH THE ISSUANCE
OF STOCK OPTIONS 34,113
ACCRUED INTEREST INCOME (39,899)
NET INCOME 29,310
-------------------------------------------------------------------------
BALANCE AT MARCH 31, 1996 5,678,140 $56,781 $6,051,490 $834,713 ($561,148)
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
TOTAL STOCK-
TREASURY STOCK HOLDERS'
SHARES AMOUNT EQUITY
--------------------------------------------
<S> <C> <C> <C>
FOR THE NINE MONTHS ENDED
MARCH 31,1996
BALANCE AT JULY 1, 1995 116,964 ($411,875) $5,491,090
REPAYMENTS OF STOCK
SUBSCRIPTIONS 292,731
CANCELLATION OF COMMON
STOCK PREVIOUSLY ISSUE (17,500)
ISSUANCE OF STOCK
SUBSCRIPTIONS 19,998
ISSUANCE OF COMMON STOCK 160,118
COMPENSATION RECOGNIZED IN
CONNECTION WITH THE
ISSUANCE OF STOCK
OPTIONS 34,113
ACCRUED INTEREST INCOME (39,899)
NET INCOME 29,310
----------------------------------------
BALANCE AT MARCH 31, 1996 116,964 ($411,875) $5,969,961
========================================
</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,
---------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (92,551) $ 29,310
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH
(USED IN) PROVIDED BY OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH THE
ISSUANCE OF STOCK OPTIONS 17,463 34,113
DEPRECIATION AND AMORTIZATION 599,366 327,010
(GAIN) LOSS FROM INVESTMENT IN PARTNERSHIP 26,962 (212,086)
INCREASE IN DEFERRED TAX ASSETS (100,344) 0
LOSS ON SALE OF MARKETABLE SECURITIES 0 16,216
EXPENSE REIMBURSEMENT FOR FINANCIAL PLANNING 0 (125,000)
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH AMORTIZATION
OF ADVANCES TO FINANCIAL PLANNERS 209,032 0
PROVISIONS FOR DOUBTFUL ACCOUNTS 147,188 22,289
COMPENSATION EXPENSE RECOGNIZED IN
CONNECTION WITH FORGIVENESS OF
LOANS TO RELATED PARTIES 121,953 23,276
INTEREST ON STOCK SUBSCRIPTIONS (23,725) (39,899)
(INCREASE) DECREASE IN:
PROCEEDS FROM SALE OF MARKETABLE SECURITIES 0 2,079,534
ACCOUNTS RECEIVABLE (2,518,402) (1,941,829)
ADVANCES TO FINANCIAL PLANNERS (105,615) 0
SECURITY DEPOSITS (8,781) (99,584)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 34,693 67,411
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES 852,809 793,423
----------- -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (839,952) 974,184
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (593,762) (781,114)
ACQUISITION OF INTANGIBLE ASSETS (404,065) (392,901)
INVESTMENT IN PARTNERSHIP 252,323 (348,360)
PROCEEDS FROM RELATED PARTY TRANSACTIONS 271,930 3,171
PAYMENT TO RELATED PARTIES (79,000) (628,740)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (552,574) (2,147,944)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM BANK LOAN TRANSACTIONS 3,500,000 1,338,889
PAYMENTS OF BANK LOAN TRANSACTIONS (722,225) 0
PROCEEDS FROM NOTE PAYABLE - OTHER 200,000 0
PAYMENT OF NOTE PAYABLE - OTHER (69,225) (15,681)
REPAYMENT OF STOCK SUBSCRIPTIONS 228,353 292,731
PROCEEDS FROM SALE OF COMMON STOCK AND EXERCISE OF STOCK 92,012 162,616
OPTIONS
ACQUISITION OF TREASURY STOCK (684,513) 0
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,544,402 1,778,555
----------- -----------
NET INCREASE IN CASH 1,151,876 604,795
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 2,221,795 1,335,762
----------- -----------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 3,373,671 $ 1,940,557
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 16
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1997 1996
--------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR THE PERIOD:
INTEREST $132,752 $ 90,448
======== ========
INCOME TAXES $ 35,940 $122,834
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE> 17
GILMAN + CIOCIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Gilman +
Ciocia, Inc. and its two wholly-owned subsidiaries, JT Securities, Inc. and
Gilbert Financial Services, Inc., and a 50% owned subsidiary, Suffolk Service
Bureau Corp. ("Suffolk") 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 Company acquired Suffolk effective July 1, 1996 over which it
exercises control. Suffolk is a provider of income tax preparation and financial
planning services to individuals and businesses.
The Company dissolved its inactive wholly owned subsidiary BT
Telemarketing as of January 6, 1997.
The consolidated financial statements and related notes thereto as of
March 31, 1997 and for the nine and three months ended March 31, 1997 and 1996
are presented as unaudited, but in the opinion of management include all
adjustments necessary to present fairly the information set forth therein. These
adjustments consists 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/A. 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 effect 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.
Certain items in the 1996 presentation were reclassified to conform
with the 1997 presentation.
F-8
<PAGE> 18
NOTE 2- RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share," which is effective for fiscal years
ending after December 15, 1997. The Company will adopt Statement No. 128 for the
year ended June 30, 1998. The adoption of this standard will not have a material
impact on the Company's earnings per share on a fully dilutive basis.
F-9
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-START> JAN-01-1997 JAN-31-1997
<PERIOD-END> MAR-31-1997 MAR-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 3,373,671 0
<SECURITIES> 0 0
<RECEIVABLES> 3,347,900 0
<ALLOWANCES> 193,162 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,000,921 0
<PP&E> 2,999,639 0
<DEPRECIATION> 1,204,359 0
<TOTAL-ASSETS> 11,164,899 0
<CURRENT-LIABILITIES> 4,485,374 0
<BONDS> 0 0
0 0
0 0
<COMMON> 55,792 0
<OTHER-SE> 5,990,400 0
<TOTAL-LIABILITY-AND-EQUITY> 11,164,899 0
<SALES> 0 0
<TOTAL-REVENUES> 14,427,028 9,813,258
<CGS> 0 0
<TOTAL-COSTS> 11,760,479 6,849,632
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (132,922) (106,299)
<INCOME-PRETAX> (150,168) 1,653,366
<INCOME-TAX> (57,617) 673,167
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (92,551) 980,189
<EPS-PRIMARY> (.02) .18
<EPS-DILUTED> (.02) .18
</TABLE>
