GILMAN & CIOCIA INC, 424B1, 1998-11-18

GILMAN & CIOCIA INC
424B1, 1998-11-18
PERSONAL SERVICES

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Filed Pursuant to Rule 424(b)(1)
File Number 333-80627

Gilman & Ciocia, Inc.

507,926 Shares of Common Stock

--------------------

233,421 Shares of Common Stock by Selling Security Holders

--------------------

50,783 Redeemable Public Warrants by Selling Security Holders

Supplement to Prospectus Dated September 28, 1998

The salary amounts for the executive officers of the Company for its 1997
fiscal year that are set forth in the Section in the Prospectus entitled
"REMUNERATION OF OFFICERS AND DIRECTORS" are corrected to be as follows: James
Ciocia: $151,200; Thomas Povinelli: $99,951; Gary Besmer: $92,149; Kathryn
Travis: $92,149.

The last two paragraphs of the Section of the Prospectus entitled "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" are deleted and the following text is
inserted:

The Company made these loans: $100,000 and $240,000 to James Ciocia;
$100,000 and $240,000 to Thomas Povinelli; $50,000 and $72,000 to Kathryn
Travis; $50,000 to Gary Besmer; and $50,000 to Steven Gilbert, a
stockholder. These loans are due in fully amortizing bi-weekly
installments (including interest at 7% per annum) through June 30, 2000,
except that the $240,000 loans to Messrs. Ciocia and Povinelli and the
$72,000 loan to Ms. Travis mature August 1, 2001.

In December 1997, the Company loaned $225,000 each to James Ciocia
and Thomas Povinelli. These loans did not bear interest, and such
officers/directors repaid them in March 1998.

The Company employs the professional services of Sacher & Co. P.C.
The president of Sacher & Co. P.C. is the Chief Financial Officer of the
Company. During the Company's 1998 fiscal year fees for such services
totaled approximately $125,000.

The Company loaned $150,000 to Steven Gilbert, a stockholder of the
Company, repayable in bi-weekly installments through June 15, 1999 with
interest at 9% per annum,

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and $100,000 to Mr. Gilbert repayable on October 9, 1999 with interest at
9% per annum.

The Company holds notes receivable from Dominic Ciocia, the brother
of the Company's Chief Executive Officer. One of the notes receivable is
for $50,319 and is due June 3, 1999 with interest at 8.5% per annum, and
the other is for $106,000 and is due June 19, 2000 with interest at 6% per
annum.

In the Section of the Prospectus entitled "LEGAL PROCEEDINGS" the
following text is added:

On August 21, 1998, Mercedes-Benz Credit Corporation, Allianz
Insurance Company, and Allianz Underwriters, Inc. filed a complaint
against Gilman & Ciocia, Inc. (the "Company") in New York Supreme Court,
Nassau County. The complaint seeks indemnification in the amount of up to
approximately $3.5 million from the Company. The allegations in the
complaint are based upon a $1.7 million payment made by the plaintiffs in
a settlement reached on October 3, 1996 with the Estate of Thomas Gilman
in a wrongful death action, and upon an additional approximately $1.8
million payment made to the estate in the settlement, for which plaintiffs
ultimately may be held liable. (An action is currently pending in New York
Supreme Court, Nassau County to determine the liability allocation between
the settlors with the estate.) The Company served its answer on September
18, 1998. In the answer, the Company asserted numerous defenses, which it
believes are meritorious. However, the case is currently entering the
discovery phase, and, therefore, it is not possible to determine at this
time the ultimate success of any asserted allegation or defense.

The Date of this Supplement is October 14, 1998

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GILMAN & CIOCIA, INC.
507,926 SHARES OF COMMON STOCK
---------------
233,421 SHARES OF COMMON STOCK BY SELLING SECURITY HOLDERS
---------------
50,783 REDEEMABLE PUBLIC WARRANTS BY SELLING SECURITY HOLDERS
This Prospectus relates to the offering by the Company (the "Offering") of
507,926 shares of common stock (the "Common Stock"), par value $.01 per share,
of Gilman & Ciocia, Inc., a Delaware corporation (the "Company"), issuable upon
the exercise of the Company's outstanding redeemable public warrants (the
"Redeemable Public Warrants") for the purchase of Common Stock at an exercise
price of $4.67 per share (the "Redeemable Public Warrant Exercise Price"),
expiring on October 30, 1998. Each Redeemable Public Warrant is redeemable at a
price of $.01 per warrant, provided that (i) notice of redemption is given to
the Redeemable Public Warrantholders not less than 30 days prior to redemption;
(ii) the average of the closing bid and asked quotations of the Common Stock
shall have been at least 25% above the Redeemable Public Warrant Exercise Price
for the 20 trading days ending on the third day prior to the day on which
notice of redemption is given; and (iii) holders of Redeemable Public Warrants
shall be entitled to exercise Redeemable Public Warrants until the close of
business on the day prior to the date fixed for redemption.

This Prospectus also relates to the offering (the "Offering") by holders
or prospective holders of securities of the Company (the "Selling Security
Holders") of: (i) 65,000 shares of Common Stock issuable upon the exercise of
outstanding options; (ii) 101,566 shares issuable upon the exercise of the
50,783 Underwriter's Warrants (the "Underwriter's Warrants") for the purchase
of Units (each "Unit" consisting of two shares of Common Stock and one
Redeemable Public Warrant), which Underwriter's Warrants were issued to the
underwriter of the Company's initial public offering of Units; (iii) 50,783
Redeemable Public Warrants issuable upon the exercise of the Underwriter's
Warrants; (iv) 50,783 shares of Common Stock issuable upon the exercise of the
Redeemable Public Warrants that are issuable upon the exercise of the
Underwriter's Warrants; and (v) 16,072 shares of Common Stock held by an
employee of the Company.

Shares underlying the Redeemable Public Warrants will be offered by the
Company immediately upon effectiveness of this Registration Statement and will
be sold as Redeemable Public Warrants are exercised.

The Common Stock and 50,783 Redeemable Public Warrants to be sold by
Selling Security Holders will be offered immediately upon effectiveness of this
Registration Statement, but the Selling Security Holders have not yet
determined any specific plan of distribution. Such Common Stock and Redeemable
Public Warrants may be sold by the Selling Security Holders in transactions on
the over-the-counter market, in negotiated transactions, or through a
combination of such methods of sale, or at fixed prices, which may be changed.
The Selling Security Holders may effect such transactions by selling the Common
Stock or Redeemable Public Warrants to or through broker/dealers, and such
broker/dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Security Holders and/or the purchasers of the
Common Stock or Redeemable Public Warrants for whom such broker/dealers may act
as agent or to whom they may sell as principal, or both (which compensation as
to a particular broker/dealer might be in excess of customary commissions). See
"PLAN OF DISTRIBUTION" and "SELLING SECURITY HOLDERS."

None of the proceeds of the sale of the shares of Common Stock or the
Redeemable Public Warrants by the Selling Security Holders will be received by
the Company. The Company could receive approximately $3,198,248 of gross
proceeds from the exercise of the currently outstanding Redeemable Public
Warrants, as well as the 65,000 outstanding stock options, the Underwriter's
Warrants, and the Redeemable Public Warrants issuable upon the exercise of the
Underwriter's Warrants. However, the exercise of any of such options and
warrants is not assured.

The shares of Common Stock are traded on The Nasdaq National Market System
under the symbol "GTAX", and the Redeemable Public Warrants are traded on The
Nasdaq SmallCap Stock Market under the symbol "GTAX-W," respectively. As of
September 15, 1998, the trading price for shares of the Company's Common Stock
was $9.00 per share and for Redeemable Public Warrants was $4.25 per warrant.
(COVER CONTINUED ON NEXT PAGE)

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF
RISK AND SHOULD BE PURCHASED ONLY BY INVESTORS ABLE TO SUSTAIN A TOTAL LOSS OF
THEIR INVESTMENT. PROSPECTIVE PURCHASERS SHOULD CAREFULLY CONSIDER THE MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" LOCATED ON PAGE 7.

---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

---------------
The Date of This Prospectus is September 28, 1998.
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(COVER CONTINUED FROM PREVIOUS PAGE)

UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) ISSUER (3)
-------------- ----------------- ------------
Per Share of Common Stock
507,926 Shares ......... $ 4.67(4) $-0- $2,372,014
----------
Total ................. $2,372,014
==========
- ---------
(1) The 507,926 shares of Common Stock issuable at $4.67 per share consist of
the shares issuable upon the exercise of the 507,926 currently outstanding
Redeemable Public Warrants.
(2) The securities registered hereunder will not be sold through an
underwriter, however, the Company paid to First Colonial Securities, Inc.
as advisor in connection with this offering $35,000 advance fee, although
such engagement has expired.
(3) All expenses of this registration other than commissions and concessions
are payable by the Company, and are estimated at $350,000, which is
cross-referenced at footnote number 2 for the following chart. The Selling
Security Holders are not paying any of the costs associated with this
registration. The expenses payable by the Company in connection with the
issuance and distribution of the securities being registered are as
follows:

Securities and Exchange Commission Fees ........ $ 1,511
NASDAQ Stock Market listing fees ............... -0-
Transfer/Warrant Agent's Fee and Expenses ...... 1,000
Accounting Fees and Expenses ................... 240,000
Blue Sky Fees and Expenses ..................... 5,000
Printing Expenses .............................. 10,000
First Colonial Securities Group, Inc ........... 40,000
Legal Fees ..................................... 50,000
Miscellaneous .................................. 2,489
--------
Total ....................................... $350,000
========

(4) The price received by the Company is the price at which warrantholders may
buy Common Stock upon the exercise of Redeemable Public Warrants.

The sale of securities by Security Holders will not result in any proceeds
to the Company. However, it presumes exercise of outstanding warrants and
options, and proceeds to the issuer as follows:

UNDERWRITING
PRICE PAID DISCOUNTS AND PROCEEDS TO
TO ISSUER COMMISSIONS (1) ISSUER (2)
-------------- ----------------- ------------
Per Share of Common Stock
65,000 Shares .............. $ 2.50(3) $-0- $162,500
101,566 Shares ............. $ 4.20(4) $-0- $426,577
50,783 Shares .............. $ 4.67(5) $-0- $237,157
Per Redeemable Public Warrant
50,783 Warrants ............ $ -0-(6) $-0- $ -0-
--- --------
Total .................... $-0- $826,234
=== ========
- ---------
(1) The securities registered hereunder will not be sold through an
underwriter.
(2) All expenses of this registration other than commissions and concessions
are payable by the Company, and are estimated at $350,000
(cross-referenced in the previous chart footnote 3 which also provides
detail of such expenses). The Selling Security Holders are not paying any
of the expenses associated with this registration.
(3) Shares of Common Stock issuable upon the exercise of outstanding options.
(4) The 101,566 shares of Common Stock issuable at $4.20 per share are the
shares of Common Stock issuable upon the exercise of the Underwriter's
Warrants.
(5) The 50,783 Shares of Common Stock issuable at $4.67 per share are the
shares issuable upon exercise of those Redeemable Public Warrants that are
issuable on the exercise of the Underwriter's Warrants.
(6) The 50,783 Redeemable Public Warrants are issuable upon the exercise of the
Underwriter's Warrants. For the purposes of this chart, the entire
exercise price of the Underwriter's Warrants has been allocated to the
Common Stock issuable thereon.

2
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---------------
The Company's fiscal year ends on June 30th. The Company is currently a
reporting company under the Securities Exchange Act of 1934, as amended. The
Company will provide without charge to each shareholder a copy of all reports
filed thereunder. Such requests should be addressed to the Company at 475
Northern Boulevard, Great Neck, NY 11021, telephone number (516) 482-4860,
Attention: Secretary. Such reports will also be available for inspection at The
Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006. In
addition, such reports and other information will be available for inspection
at the public reference facilities of the Securities and Exchange Commission in
Washington D.C., and at its regional offices at 7 World Trade Center, New York,
NY 10048 and at the Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60604, and copies of such materials could be obtained from the
Public Reference Section of the Securities and Exchange Commission (the
"Commission") in Washington, D.C. at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. Copies of this filing, reports, proxy and
information statements and other information regarding the Company are
available on the Commission's website at http://www.sec.gov.

3
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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS INTENDED ONLY TO SUMMARIZE CERTAIN MATERIAL IN
THIS REGISTRATION. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS THAT APPEAR ELSEWHERE HEREIN.

THE COMPANY

Gilman & Ciocia, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on September 3, 1993, the successor in interest to Gilman
& Ciocia, Inc., a New York corporation organized on November 4, 1981, and is a
preparer of federal, state and local income tax returns for individuals
predominantly in middle and upper income brackets.

The preparation of a tax return by the Company usually involves a personal
meeting at the office between a client and an employee of the Company. In
addition, while preparing tax returns, clients often consider other aspects of
their financial needs, such as insurance, investments, pension and estate
planning. The Company capitalizes on this situation by providing financial
planning questionnaires to all of its tax preparation clients.

After review of such questionnaires by financial planners, if appropriate,
financial planners will recommend the tax preparer to introduce the tax
preparation client to a financial planner. Each of the financial planners to
which a client might be introduced is a registered representative of an
independent registered securities broker/dealer, Royal Alliance Associates,
Inc. ("Royal Alliance"), and each has agreed to share commissions with the
Company. In approximately 20% of the cases, such financial planner is the tax
preparer himself.

If such clients do utilize the financial planners to assist them on their
other financial needs, the Company earns commissions (depending on what service
is provided) from the services that the financial planners provide to the
client. More than 99% of the financial planners are also authorized agents of
insurance underwriters, and approximately 2% of the financial planners are also
authorized to act as mortgage brokers, and thus, the Company also earns
revenues from commissions for acting as an insurance agent and a mortgage
broker.

All commissions on sales and purchases of securities are earned by the
Company's wholly owned subsidiary, JT Securities, Inc. (a registered securities
broker/dealer) ("JT Securities").

Royal Alliance, unaffiliated with the Company, is a corporation which is a
registered securities broker/dealer and a member of the National Association of
Security Dealers, Inc. ("NASD").

The Company also has a division operating as a direct mail service. It
assembles, packages and mails, but does not design, create or draft the test
for direct mail materials, however, it provides limited consulting services in
these areas.

Based on the Company's total revenues during its 1997 fiscal year,
approximately 40% of the Company's business is tax preparation services;
approximately 51% of the Company's business is commission sharing on financial
planning services (with approximately 32% from securities transactions and 19%
from mortgage brokerage, insurance and other related services); and
approximately 9% of the Company's business is direct mail and related services.

The Company has a total of one hundred twenty eight offices: forty three
in New York, fifteen in New Jersey, fourteen in Florida, nine in Arizona, nine
in Ohio, seven in Maryland, seven in Connecticut, seven in Washington, seven in
Massachusetts, five in Nevada, two in Pennsylvania, one in Virginia, one in
Illinois and one in Georgia and it maintains its principal executive office at
475 Northern Boulevard, Great Neck, NY 11021, telephone (516) 482-4860.

Out of the total number of offices: 34 offices provide predominantly tax
preparation services and have no regular financial planner associated with them
(although financial planners from other offices do work with clients from all
of such 34 offices); and 94 offices provide both tax preparation and regular
financial planning services.

Out of the 94 offices that provide both tax preparation and financial
planning services: 21 of these offices have only one person who provides both
tax preparation and financial planning services; and 73 of these offices have
two or more persons who perform tax preparation and financial planning
services. No office has more than a total of ten tax preparers and financial
planners.

The Company opened fifteen new offices in January 1994, twenty two new
offices in January 1995, forty four new offices in 1996 (closing four in the
first half of 1996), eight new offices in 1997 and seven new offices in 1998.

4
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THE OFFERING

Securities Outstanding:

Before the Offering............ 5,606,913 shares of Common Stock(1)

507,926 Redeemable Public Warrants

After the Offering............. 6,332,188 shares of Common Stock (2)

Securities Offered.............. 741,347 shares of Common Stock (3)

50,783 Redeemable Public Warrants (4)(5)

Use of Proceeds................. The Company would receive $2,372,014 from
the exercise of the outstanding Redeemable
Public Warrants. Such exercise, however, is
not assured.

The Company will not receive any of the
proceeds from the sale of shares of Common
Stock or Redeemable Public Warrants by the
Selling Security Holders; all proceeds will
be paid directly to the Selling Security
Holders. See "SELLING SECURITY HOLDERS." The
Company could receive $826,234 of gross
proceeds from the exercise of the
outstanding options, the Underwriter's
Warrants and the Redeemable Public Warrants
issuable upon exercise of the Underwriter's
Warrants described herein. However, such
exercise of any of the outstanding options
and warrants is not assured. The Company
will use such proceeds for working capital
purposes.

Risk Factors.................... An investment in the Common Stock offered
hereby involves a high degree of risk and
immediate substantial dilution. Common Stock
should not be purchased by a person who
cannot afford the loss of his or her entire
investment. A prospective purchaser of Common
Stock should carefully consider the factors
discussed under the caption "RISK FACTORS."

The Company's NASDAQ Symbols:

Common Stock................... GTAX

Redeemable Warrants............ GTAX-W
- ---------
(1) Does not include 65,000 shares of Common Stock issuable upon the exercise
of options at $2.50 per share, 101,566 shares of Common Stock and 50,783
Redeemable Public Warrants, all issuable pursuant to the Underwriter's
Warrants to acquire up to 50,783 Units, each Unit consisting of two shares
of Common Stock, par value $.01 per share, of the Company and one
redeemable warrant ("Redeemable Public Warrant" as defined above) at an
exercise price of $8.40 per Unit. See "RISK FACTORS -- The Sale of
Underwriter's Warrants, Other Warrants and Certain Options and Shares
being Registered in this Registration Statement May have an Adverse Affect
on the Market Price of the Company's Common Stock and Dilute the
Percentage Ownership Interest of Holders of Common Stock." Does not
include options to purchase a total of 2,702,779 shares of Common Stock at
prices ranging from $2.00 per share to $20.00 per share, some as granted
under the Company's 1993 Joint Incentive and Non-Qualified Stock Option
Plan (the "Plan"), and some granted under non-Plan employee stock option
agreements. All such options (other than options held by directors of the
Company to acquire in the aggregate 334,779 shares of Common Stock and
options recently granted to accquire 887,000 shares of Common Stock) have
been included in registration statements on Form S-8 filed with the
Commission.

(2) Assumes the issuance of 507,926 shares of Common Stock issuable on the
exercise of Public Redeemable Warrants at $4.67 per share, 65,000 shares
of Common Stock issuable on the exercise of options at $2.50 per share,
101,566 shares of Common Stock issuable pursuant to the Underwriter's
Warrants, and 50,783 shares of Common Stock issuable upon the exercise of
the Redeemable Public Warrants that are issuable upon exercise of the
Underwriter's Warrants. Does not include options and warrants to purchase
a total of 2,702,779 shares of Common Stock at prices ranging from $2.00
per share to $20.00 per share, some as granted under the Company's 1993
Joint Incentive and Non-Qualified Stock Option Plan (the "Plan"), and some
granted under non-Plan employee stock option agreements. All such options
and warrants

5
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(other than options to acquire an aggregate of 334,779 shares of Common
Stock and options recently granted to acquire 887,000 shares of Common
Stock) have been included in registration statements on Form S-8 filed with
the Commission.

(3) The Common Stock offered hereunder will be issued in connection with the
exercise of the outstanding Redeemable Public Warrants, outstanding
options, the Underwriter's Warrants, and the Redeemable Public Warrants
issuable on exercise of Underwriter's Warrants.

(4) Assumed to be exercised in connection with the Offering.

(5) The Redeemable Public Warrants registered hereunder are issuable upon and
assume the exercise of the Underwriter's Warrants.

6
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RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Common Stock should not be purchased by a person who cannot afford the
loss of his or her entire investment. The following risks are all of the
principal risk factors and should be considered carefully in evaluating the
Company and its business prior to purchasing any of the securities offered
hereby.

1. THE HIGH EXPENSE AND INITIAL NON-PROFITABILITY OF OPENING NEW OFFICES
EACH YEAR COULD RESULT IN LOSSES. In order to open new offices, the Company
incurs significant expenses to purchase furniture, equipment and supplies. The
Company has found that a new office usually suffers a loss in its first year of
operation, shows no material profit or loss in its second year of operation and
does not attain profitability, if ever, until its third year of operation.
Therefore, the Company's operating income may be reduced in any year that the
Company opens a number of new offices that is significant in relation to the
number of its existing older offices. The Company opened 15 new offices in
January 1994, and during its 1994 fiscal year, the Company earned $687,159 from
operations. In January 1995 the Company opened 22 new offices, and in its 1995
fiscal year, the Company earned $583,164 from operations, a decrease of 15% as
compared to 1994. In addition, the Company believes that income from offices
opened in 1994 had begun to contribute to the Company's earnings in 1995. In
January 1996, the Company opened 44 new offices and closed five by the end of
the year, and the Company generated for the 1996 fiscal year $594,529 in
operating income. In January 1997, the Company opened 8 new offices and
generated for the 1997 fiscal year $875,994 from operations, an increase of
67.9% as compared to 1996.

A rapid expansion of offices may, therefore, reduce the Company's
short-term net income or result in losses. No assurance, however, can be given
that new offices will ultimately operate profitably and increase the Company's
net income in the long term.

If the Company continues to open new offices and if such offices do not
become profitable, losses at such offices could depress future earnings or
result in charges of expenses to close such offices.

2. THE ACQUISITION OF SMALL TAX PREPARATION PRACTICES COULD RESULT IN
LOSSES. In 1997, the Company acquired two tax preparation practices. As part of
its plan of operations, the Company plans to continue to acquire small tax
preparation practices. The success of the Company will in part be dependent
upon the successful operation of the practices acquired. No assurance can be
given that the Company will be able to successfully operate the practices that
it acquires.

If the Company continues to acquire tax preparation practices, and if such
practices do not operate profitably, losses at such practices could depress
future earnings or result in charges of expenses to close such offices.

3. THE SEASONALITY OF THE COMPANY'S BUSINESS REQUIRES ADDITIONAL
FINANCING. The Company will require approximately $2,000,000 of financing each
year to fund its operations during tax season, particularly because, in the
past, the Company experiences quarterly losses from July 1st to December 31st
each year. No assurance can be given that such financing will be available to
the Company, or, if it is available, that it will be on terms favorable to the
Company.

If the Company cannot secure sufficient seasonal financing, the Company
may be required to curtail its operations.

4. STRONG COMPETITION FROM OTHER COMPANIES OFFERING TAX PREPARATION AND
FINANCIAL PLANNING SERVICES COULD ADVERSELY AFFECT COMPANY'S GROWTH. The income
tax preparation and financial planning services industry is highly competitive.
The Company's competitors include companies specializing in income tax
preparation as well as companies that provide general financial services. Many
of these, which include H&R Block, Inc., H.D. Vest, Inc., Jackson Hewitt Tax
Service, Inc. and Triple Check Income Tax Service, Inc. in the tax preparation
field, and many well-known brokerage and other firms in the financial services
field, have significantly greater financial and other resources than the
Company. No assurance can be given that the Company will be able to compete
successfully with other older, more established companies. See "BUSINESS --
Competition." If the Company cannot effectively compete with other companies,
the Company will not be able to maintain its rate of growth of new clients,
which will adversely affect the Company.

5. POTENTIAL COMPETITION FROM DEPARTING EMPLOYEES AND AFFILIATED FINANCIAL
PLANNERS MAY DIVERT BUSINESS FROM COMPANY'S CLIENTS. The Company may suffer
from competition from departing employees and affiliated financial planners.
Although the Company attempts to restrict such competition contractually, as a
practical matter, enforcement of contractual provisions prohibiting small-scale
competition by individuals is difficult. In the past, departing employees and
affiliated financial planners have competed with the Company. They have the
advantage of knowing the Company's methods and, in some cases, having access to
the Company's clients. No assurance can be given that the Company will be able
to retain its most important employees and financial planners or that the
Company will be able to prevent competition from them or successfully compete
against them.

7
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Departing employees may attract clients away from the Company, which will
result in a reduction of revenues and will adversely affect the Company.

6. THE COMPANY'S DEPENDENCE UPON ITS THREE EXECUTIVE OFFICERS MAKES IT
VULNERABLE TO THE LOSS OF ANY SUCH OFFICERS. The Company is dependent upon the
services of James Ciocia, its President, Thomas Povinelli, its Executive Vice
President, and Kathryn Travis, its Secretary. The loss or interruption of the
services of any of these individuals, would result in a material loss of
efficiency and productivity and would have a material adverse affect on the
Company.

7. POTENTIAL CIVIL AND CRIMINAL LIABILITIES UNDER THE INTERNAL REVENUE
CODE BECAUSE OF THE COMPANY'S BUSINESS OF PREPARING TAX RETURNS MAY RESULT IN
MATERIAL LIABILITIES. The Company's business of preparing tax returns subjects
it to potential civil liabilities under the Internal Revenue Code and the
regulations promulgated thereunder. Civil penalties, ranging from $50 to
$10,000 per violation, could be assessed against the Company for failure to
observe certain ministerial requirements, failure to keep required records,
improper disclosure of taxpayer records, or failure to maintain required
ethical standards with respect to the accuracy of the returns and the positions
taken therein regarding taxpayer liability for taxes. Although the Company has
not been assessed with material civil penalties or fines, and although the
Company intends to comply with all applicable laws and regulations, no
assurance can be given that the Company will never incur any material fines or
penalties. The Company does not maintain any professional liability or
"malpractice" insurance policy. The Company has never been the subject of a
malpractice claim, but if such claims were made, they would require significant
expenses for legal fees and other costs in defense and could result in
significant liability and could adversely affect the Company by damaging its
reputation.

In addition, making fraudulent statements on a tax return, willfully
delivering fraudulent documents to the IRS and unauthorized disclosure of
taxpayer information can constitute criminal offenses. Criminal penalties for
such offenses range from $1,000 and/or one year of imprisonment to $500,000
and/or three years of imprisonment per violation. The Company has never been
charged with a criminal offense. If the Company were to be charged with a
criminal offense and found guilty or if any of its employees or executives were
convicted of a criminal offense, in addition to the costs of defense and
possible fines set forth above, the Company would likely experience an adverse
affect to its reputation, which could directly lead to a decrease in revenues
from the loss of clients.

8. INABILITY OF THE COMPANY TO PROVIDE SERVICES OF A CERTIFIED PUBLIC
ACCOUNTANT MAY HAMPER COMPANY'S MARKETING AND/OR INCREASE RISK OF LIABILITY.
The Company earns almost $10 million in revenues related to tax preparation
services, however, the Company employs only two full-time certified public
accountants, who do not work as tax preparers, and the Company does not employ
any full-time tax attorneys to provide advice to tax preparers in connection
with the proper preparation of returns.

Ninety three percent of the tax preparation services are conducted by
seasonal employees who are not certified public accountants or tax attorneys.
Under state law, the Company is not allowed to provide legal tax advice, and
the Company does not employ nor does it retain any tax attorneys on a full-time
basis. Because most of the Company's employees who prepare tax returns are not
certified public accountants, tax attorneys or otherwise enrolled to practice
before the IRS, such employees of the Company are strictly limited as to the
roles they may take in assisting a client in an audit with the IRS. These
limitations on services that the Company may provide could hinder the Company's
ability to market its services.

Furthermore, the small percentage of certified public accountants or tax
attorneys to provide assistance and guidance to the Company's tax preparers may
increase the risk of the improper preparation of tax returns by the Company.
The improper preparation of tax returns could result in significant defense
expenses and civil liability as discussed in "RISK FACTORS -- Potential Civil
and Criminal Liabilities under the Internal Revenue Code because of the
Company's Business of Preparing Tax Returns May Result in Material
Liabilities."

9. FAILURE TO REGISTER AS A BROKER/DEALER OR AN INVESTMENT ADVISER BEFORE
THE FORMATION OF JT SECURITIES, INC. MAY RESULT IN ENFORCEMENT ACTIONS. As of
July 1, 1994, all of the Company's business relationships with registered
representatives of an unaffiliated securities broker/dealer have been
transacted through the Company's wholly owned subsidiary, JT Securities, a
registered securities broker/dealer. The Company believes that, prior to the
registration of JT Securities, the Company's business activities did not
constitute it as a broker/dealer of securities.

Prior to such registrations, if the Company was acting as a broker/dealer,
then it would have been required to register as such with the Commission, with
the National Association of Securities Dealers, Inc. ("NASD"), and possibly
with various state authorities. In addition, the fact that the Company has not
registered in the past could subject it to civil liabilities, and, possibly, a
final order barring the participation of the Company and its principals in the
securities industry, in the case

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<PAGE>

that it is determined by an appropriate governmental authority that such
registration was required. Registration and the related reporting obligations
impose additional costs on the Company and limitations on its manner of doing
business.

JT Securities, a subsidiary of the Company, eanrs a material portion of
consolidated revenue from commissions remitted by Royal Alliance in connection
with transactions by financial planners who have entered into commission
sharing agreements with the Company JT Securities is registered as a securities
broker/dealer with the Securities and Exchange Commission and is a member of
the NASD. JT Securities is also registered as a broker/dealer in New York
State, and a registered investment advisor in New York State and Florida, but
is not currently registered as a broker/dealer in any of the other states in
which the Company has offices. The Company does not believe that JT Securities
is required to register as a broker/dealer in such other states based upon its
current activities, however, no assurance can be given that state securities
officials would not consider JT Securities to be acting as an unregistered
broker/dealer in such states, which could subject the Company to fines,
enforcement actions and related defense costs.

10. TRADEMARK INFRINGEMENTS AND LOSS OF TRADEMARK COULD DAMAGE THE
COMPANY'S MARKETING. The Company has registered its "Gilman + Ciocia(R)"
trademark with the U.S. Patent and Trademark Office. No assurance can be given
that the Company would be able successfully to defend its trademark if forced
to litigate its enforceability. The Company believes that its trademark "Gilman
+ Ciocia(R)" constitutes a valuable marketing factor. If the Company were to
lose the use of such trademark, its sales could be adversely affected.

If another entity utilizes the Company's trademark and the Company cannot
enforce its trademark against such entity, then the Company may lose clients to
the infringing entity, which would adversely affect the Company revenues and
profitability.

11. CONTINUED EXPANSION INTO FINANCIAL PLANNING AND THE DEPENDANCE ON
INDIVIDUAL FINANCIAL PLANNERS MAKES THE COMPANY VULNERABLE TO LACK OF SUCCESS
OF FINANCIAL PLANNERS. The Company plans to continue to expand into the area of
financial planning and recruit financial planners. The success of the Company
will in large part be dependent upon the successful operation of the financial
planners who are recruited. No assurance can be given that such financial
planners will be successful in their ventures. The financial planning segment
of the Company's business has generated an increasing portion of the Company's
revenues during the past few years, and if such segment does not continue to be
successful, the Company's rate of growth may decrease.

12. CONTROL OF THE COMPANY BY CURRENT MANAGEMENT WHICH OWNS OR COULD
ACQUIRE 42.4% OF THE OUTSTANDING COMMON STOCK OF THE COMPANY. The current
management of the Company owns or could acquire approximately 42.4% of the
outstanding Common Stock of the Company. No cumulative voting is in effect for
the election of directors of the Company, and no such arrangement is currently
contemplated. The current management will, therefore, be able to elect all of
the directors and thereby effectively continue to control the Company. Current
management, therefore, through its share ownership of the Company could pose an
obstacle to a purchase of the Company that might be desirable to other
shareholders and/or to a change in management if the Company is not operating
profitably in the future. See "DESCRIPTION OF SECURITIES."

13. THE ISSUANCE OF PREFERRED STOCK THAT DOES NOT REQUIRE APPROVAL OF THE
SHAREHOLDERS MAY INHIBIT CHANGE OF CONTROL. The Company has authorized 100,000
shares of Preferred Stock (see "DESCRIPTION OF SECURITIES"), which may be
issued, without approval by the shareholders of the Company, by the Board of
Directors of the Company in such classes, with such designations, rights and
preferences and at such prices as the Board of Directors determines to be in
the best interest of the Company. Holders of such Preferred Stock so issued
could have preferential rights over the holders of Common Stock in a
liquidation of the Company. In addition, although management of the Company
does or could control approximately 42.4% of the outstanding Common Stock, if
at any time in the future management does not control a majority of the
outstanding Common Stock, then Preferred Stock with special voting or other
rights could be issued that could entrench current management and adversely
affect any proposed change of control of the Company.

Current management, therefore, through the issuance of Preferred Stock of
the Company could pose an obstacle to a purchase of the Company that might be
desirable to other shareholders and/or to a change in management if the Company
is not operating profitably in the future.

14. MANAGEMENT'S BROAD DISCRETION OVER THE ALLOCATION OF THE COMPANY'S
PROCEEDS MEANS THAT PROCEEDS COULD BE USED FOR RISKY VENTURES NOT APPROVED BY
SHAREHOLDERS. The proceeds of the Offering will be utilized predominately for
the opening of new offices, recruiting financial planners, acquiring existing
tax preparation practices, marketing and sales, general and administrative
expenses and working capital requirements. However, management will have broad
discretion over

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<PAGE>

the application and allocation of the use of the net proceeds. See "USE OF
PROCEEDS." The Company's management is not restricted in the use of the
proceeds, which may be utilized for risky ventures and in ways that may not be
productive for the Company.

15. IMMEDIATE SUBSTANTIAL DILUTION OF THE COMPANY'S COMMON STOCK MEANS
THAT THE NET BOOK VALUE OF A SHARE OF COMMON STOCK IS FAR LESS THAN ITS MARKET
PRICE. At the market price on September 15, 1998 of $9.00 and assuming that all
outstanding warrants and options registered hereby are exercised and shares of
Common Stock are sold, purchasers of Common Stock will experience a substantial
dilution of $7.17.(1) If the Company were to be liquidated, then shareholders
would almost certainly receive less than approximately $1.83 for each share of
Common Stock purchased for $9.00.

16. DIVIDENDS HAVE NOT BEEN DISTRIBUTED BY THE COMPANY. Since its initial
public offering of securities in 1994, the Company has paid no dividends, and
it does not plan to pay dividends in the foreseeable future. The Company
currently intends to retain any earnings to finance the growth of the Company.
It is very likely that no dividends will be distributed in the near future,
which may reduce the marketability of the Company's Common Stock.

17. CONTINGENT TAX LIABILITY MAY BE IMPOSED IN RESPECT OF PAST
COMPENSATION PAID TO FINANCIAL PLANNERS AFFILIATED WITH THE COMPANY. Of the
financial planners affiliated with the Company, approximately 66% also perform
tax preparation, managerial or other services for the Company and receive
compensation as employees of the Company for such services
("Employee/Planners"). Three Employee/Planners also received compensation from
the Company for tax preparation, managerial and/or other services as
independent contractors. If the Internal Revenue Service were to consider these
three Employee/ Planners as employees, then the Company may have tax
liabilities in connection with past compensation paid to such three
Employee/Planners. The Company believes that it is unlikely that such
contingent tax liabilities, if any, would have a material effect on the
financial position, results of operations or cash flows of the Company.

The financial planners affiliated with the Company receive their share of
commissions directly from Royal Alliance as independent contractors and
registered representatives of Royal Alliance. The Company's opinion is that
this tax reporting method is appropriate. No assurance can be given that the
U.S. Internal Revenue Service or State authorities will not attempt to assert
payroll tax claims in respect of such commissions, and if such claims were
ultimately decided against the Company, the payment of such tax liabilities
could have a material adverse affect on the Company's financial condition.

18. POTENTIAL FUTURE SALES OF RESTRICTED STOCK PURSUANT TO RULE 144 MAY
HAVE AN ADVERSE AFFECT ON THE MARKET PRICE OF THE COMPANY'S COMMON STOCK. Of
the 5,606,913 shares of Common Stock currently issued and outstanding
approximately 3,500,000 shares are "restricted securities" as that term is
defined under the Securities Act of 1933, as amended (the "Act"). In general,
under Rule 144 promulgated under the Act, a person who has satisfied a one-year
holding period may, under certain circumstances, sell, within any three-month
period, a number of shares of "restricted securities" that does not exceed the
greater of one percent of the then outstanding shares of Common Stock or the
average weekly trading volume of such shares during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the
sale of shares of Common Stock by a person who is not an "affiliate" of the
Company (as defined in Rule 144) and who has satisfied a two-year holding
period, without any volume or other limitation. Of the shares of Common Stock
currently outstanding, almost all of the "restricted" shares have already been
held for the one-year holding period mentioned above, and about 1,400,000 of
the "restricted" shares have been held for longer than two years and are not
owned by "affiliates" of the Company shareholders.

The Company has granted 2,148,000 options to purchase shares of the
Company's Common Stock to 31 individuals in addition to the 619,779 granted to
employees in conjunction with its 1993 Joint Incentive and Non-qualified Stock
Option Plan, of which 65,000 were sold to an outside party. The shares issuable
upon exercise of such options would be eligible for resale under Rule 144 after
one year following the exercise of such options or earlier if the underlying
Common Stock were registered by the Company. Certain shares are registered in
the Company's registration statements on Form S-8 filed on October 28, 1996 and
April 13, 1998 and certain shares are registered in the Company's registration
statement of which this prospectus is a part.

The sale of restricted Common Stock in the future, or even the possibility
that it may be sold, may have an adverse affect on the market price for the
Common Stock and reduce the marketability of the Common Stock.

- ---------
(1) This calculation assumes that the following shares of common stock and
warrants will be fully exercised: 507,926 Redeemable Public Warrants,
65,000 options to an outside party, 50,783 Underwriter's Warrants and
50,783 Redeemable Public Warrants issuable upon the exercise of
Underwriter's Warrants.

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<PAGE>

19. THE SALE OF UNDERWRITER'S WARRANTS, OTHER WARRANTS AND CERTAIN OPTIONS
AND SHARES BEING REGISTERED IN THIS REGISTRATION STATEMENT MAY HAVE AN ADVERSE
AFFECT ON THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AND DILUTE THE
PERCENTAGE OWNERSHIP INTEREST OF HOLDERS OF COMMON STOCK. The Company is
registering for sale up to 507,926 shares underlying the Redeemable Public
Warrants, 65,000 shares issuable upon exercise of options at $2.50 per share,
101,566 shares of Common Stock issuable pursuant to the Underwriter's Warrants,
50,783 Public Redeemable Warrants issuable upon exercise of the Underwriter's
Warrants, 50,783 shares of Common Stock issuable upon the exercise of
Redeemable Public Warrants that are issuable upon exercise of the Underwriter's
Warrants, and 16,072 shares held by an employee. Exercise of such Underwriter's
Warrants could occur at a time that the Company could probably obtain financing
on better terms, and such exercise would likely dilute the percentage ownership
interest of holders of Common Stock. In addition, the offering for sale of some
or all of such underlying Common Stock, or even the possibility of such sale,
may have an adverse affect on the market price for the Common Stock and reduce
the marketability of the Company's Common Stock. See "DESCRIPTION OF
SECURITIES" and "PLAN OF DISTRIBUTION."

This prospectus does not include options to purchase a total of 2,767,779
shares of Common Stock at prices ranging from $2.00 per share to $20.00 per
share, some as granted under the Company's 1993 Joint Incentive and
Non-Qualified Stock Option Plan (the "Plan"), and some granted under non-Plan
employee stock option agreements. All such options (other than options held by
directors of the Company to acquire in the aggregate 619,779 shares of Common
Stock and options recently granted to accquire 887,000 shares of Common Stock)
have been included in registration statements on Form S-8 filed with the
Commission.

A sale of such securities, or even the possibility of such sale, may have
an adverse affect on the market price for the Common Stock and reduce the
marketability of the Company's Common Stock.

20. THE IMPOSITION OF ADDITIONAL RULES LIMITING BROKER/DEALER SALES OF
SHARES OF COMMON STOCK MAY ADVERSELY AFFECT THE COMPANY'S ABILITY TO SELL ITS
SECURITIES AND DISCOURAGE BROKER/DEALERS FROM EFFECTING TRANSACTIONS IN THE
COMPANY'S COMMON STOCK. The Company's Common Stock is not currently covered by,
but it is possible that the Company's Common Stock, if its market price were to
fall substantially, in the future might come to be covered by a Commission rule
that imposes additional sales practice requirements on broker/dealers who sell
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 jointly with their spouse). For transactions covered by
the rule, the broker/dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale.

In addition, it is possible that an underwriter's participation in the
trading market of the Common Stock and the Redeemable Public Warrants will be
covered by a Commission rule that imposes additional disclosure requirements on
broker/dealers in "penny stock" transactions. Although the Common Stock is
currently outside the definition of a "penny stock" under the applicable rules,
in the event the Common Stock were subsequently to become characterized as a
"penny stock," as a result of being delisted from The Nasdaq SmallCap Stock
Market or otherwise, broker/dealers effecting transactions for clients in the
Common Stock will be required to make extensive disclosures to such clients in
certain circumstances regarding the Common Stock, including bid, offer and
other pricing information relating to the Common Stock, such broker/dealer's
compensation and the compensation of associated persons in connection with the
transaction, and such client's specific account information. Such additional
burdens imposed upon broker/dealers may discourage broker/dealers from
effecting transactions in the Common Stock. Consequently, these rules may
affect the ability of broker/dealers to sell the Company's securities and also
may affect the ability of purchasers of Common Stock to sell their securities
in the secondary market.

21. DIRECTORS OF THE COMPANY ARE GENERALLY NOT INDIVIDUALLY LIABLE FOR
MONETARY DAMAGES TO THE COMPANY OR TO ITS STOCKHOLDERS FOR DECISIONS MADE BY
THE BOARD WITH LIMITED EXCEPTIONS UNDER DELAWARE LAW. Pursuant to the Company's
Certificate of Incorporation and under Delaware law, directors of the Company
are not liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty, except for liability in connection with a breach of
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for dividend payments or
stock repurchases illegal under Delaware law or any transaction in which a
director has derived an improper personal benefit. See "MANAGEMENT." Because of
the lack of individual liability of the Directors, the Directors have broad
discretion over what actions shall be made on behalf of the Company, which
actions may by ill-advised and may adversely affect the Company without
resulting in any liability on the part of Directors to compensate the Company
for such adverse results.

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<PAGE>

MARKET INFORMATION

The Principal market on which the Company's Common Stock trades is The
NASDAQ Stock Market under the symbol "GTAX." Prior to August 28, 1998, the
Company's Common Stock traded on the Nasdaq SmallCap Stock Market. Prior to
December 1994 no public market existed for the Company's securities.

The following table sets forth the high and low sales prices for the
Common Stock during the period indicated:

SALES PRICES
-----------------------
QUARTER ENDED HIGH LOW
- ------------------------------ --------- -----------
December 31, 1994 .......... $ 3 3/4 $ 3 1/2
March 31, 1995 ............. $ 4 $ 2 1/4
June 30, 1995 .............. $ 4 1/8 $ 2 1/4
September 30, 1995 ......... $ 5 5/8 $ 3 1/8
December 31, 1995 .......... $ 7 1/2 $ 5 1/4
March 31, 1996 ............. $7 7/16 $ 5 1/2
June 30, 1996 .............. $ 7 1/4 $ 5 3/8
September 30, 1996 ......... $ 6 1/2 $ 5 1/4
December 31, 1996 .......... $ 3 1/2 $ 2
March 31, 1997 ............. $2 3/16 $ 2 1/16
June 30, 1997 .............. $2 1/16 $1 15/16
September 30, 1997 ......... $ 5 1/8 $ 4 1/8
December 31, 1997 .......... $ 8 3/8 $ 4 3/8
March 31, 1998 ............. $14 7/8 $ 7
June 30, 1998 .............. $24 1/2 $ 13 3/4

Since December 1997, the market price of the Common Stock of the Company
has tripled and fallen to approximately its December 1997 range. The Company,
however, has no basis for knowing the cause of such volatility or how long it
will continue, and no assurance can be given that the Company's performance
during recent periods is predictive of its future performance.

As of September 15, 1998, the approximate number of holders of record of
the Common Stock was 263.

The Company has not paid dividends to its shareholders since its initial
public offering and does not plan to pay dividends in the foreseeable future.
The Company currently intends to retain any earnings to finance the growth of
the Company.

The Company's NASDAQ symbols are:

Common Stock ................ GTAX
Redeemable Warrants ......... GTAX-W

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<PAGE>

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of shares
of Common Stock by the Selling Security holders; all proceeds will be paid
directly to the Selling Security Holders. See "SELLING SECURITY HOLDERS." The
Company could receive up to $3,198,248 of gross proceeds from the exercise of
all of the currently outstanding Redeemable Public Warrants, 65,000 options
currently outstanding for the purchase of Common Stock, the Underwriter's
Warrants, and the Redeemable Public Warrants issuable upon exercise of the
Underwriter's Warrants. However, such exercise of any of the outstanding
options and warrants is not assured.

The Company estimates that it will incur approximately $350,000 in
expenses relating to this offering and intends to use the net proceeds for
working capital purposes. Such funds will not be kept separate from other funds
of the Company and collectively will be used to pay all obligations of the
Company including compensation to the officers. No proceeds are allocated
specifically to any other payment, directly or indirectly, to directors,
officers or their affiliates. The officers of the Company have broad discretion
over the use of proceeds. See "Risk Factors -- Management's Broad Discretion
Over the Allocation of the Company's Proceeds Means that Proceeds Could Be Used
for Risky Ventures Not Approved by
Shareholders."

The sale and issuance of securities upon the exercise of Redeemable Public
Warrants will result in proceeds directly to the Company as follows:

(2) The securities registered hereunder will not be sold through an
underwriter, however, the Company paid to First Colonial Securities, Inc.
as advisor in connection with this offering $35,000 advance fee, although
such engagement has expired.

(3) All expenses of this registration other than commissions and concessions
are payable by the Company, and are estimated at $350,000, which is
cross-referenced at footnote number 2 for the following chart. The Selling
Security Holders are not paying any of the costs associated with this
registration. The expenses payable by the Company in connection with the
issuance and distribution of the securities being registered are as
follows:

(4) The price received by the Company is the price at which warrantholders may
buy Common Stock upon the exercise of Redeemable Public Warrants.

13
<PAGE>

The sale of securities by Security Holders will not result in any proceeds
to the Company. However, it presumes exercise of outstanding warrants and
options, and proceeds to the issuer as follows:

(2) All expenses of this registration other than commissions and concessions
are payable by the Company, and are estimated at $260,000
(cross-referenced in the previous chart footnote 3 which also provides
detail of such expenses). The Selling Security Holders are not paying any
of the expenses associated with this registration.

(3) Shares of Common Stock issuable upon the exercise of outstanding options.

(4) The 101,566 shares of Common Stock issuable at $4.20 per share are the
shares of Common Stock issuable upon the exercise of the Underwriter's
Warrants.

(5) The 50,783 Shares of Common Stock issuable at $4.67 per share are the
shares issuable upon exercise of those Redeemable Public Warrants that are
issuable on the exercise of the Underwriter's Warrants.

(6) The 50,783 Redeemable Public Warrants are issuable upon the exercise of the
Underwriter's Warrants. For the purposes of this chart, the entire
exercise price of the Underwriter's Warrants has been allocated to the
Common Stock issuable thereon.

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<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

Gilman & Ciocia, Inc. (the "Company") is a preparer of federal, state and
local income tax returns for individuals predominantly in middle and upper
income brackets. In addition, while preparing tax returns, clients often
consider other aspects of their financial needs, such as insurance,
investments, pension and estate planning. The Company capitalizes on this
situation by making available affiliated financial planners. These financial
planners are registered representatives of an independent registered securities
broker/dealer, Royal Alliance Associates, Inc. ("Royal Alliance"), and each has
agreed to share commissions with the Company.

More than 99% of the affiliated financial planners are also authorized
agents of insurance underwriters and approximately 2% of the financial planners
are authorized to act as mortgage brokers, and thus the Company also earns
revenues from commissions for acting as an insurance agent and a mortgage
broker.

The Company earns a share of commissions (depending on what service is
provided) from the services that the financial planners provide to the clients
in transactions for securities, insurance and related products.

The Company also has a division operating as a direct mail service.

During its 1997 fiscal year, approximately 40% of the Company's revenues
were earned from tax preparation services; 51% were earned from all financial
planning and related services (with 32% from securities transactions and 19%
from mortgage brokerage, insurance and other related services); and 9% were
earned from direct mail and related services.

Direct mail services have not historically made any material contribution
to the Company's net income. The Company's tax return preparation business and
its financial planning business are closely linked together in that such
various lines of business generally use the same individuals, assets, marketing
and facilities. The Company believes that its tax return preparation business
is inextricably intertwined with, and a necessary adjunct to, its financial
planning activities, that neither segment would operate profitably by itself
and that the two segments can be viewed meaningfully only as a whole.

PLAN OF OPERATION

TAX PREPARATION AND FINANCIAL PLANNING

During the 1996 and 1997 fiscal years, the Company opened 48 new offices,
which represents 40% of all offices at June 30, 1997. New offices attract more
potential tax preparation clients, resulting in increased revenues and
contributing to the Company's growth. In addition, an increase in the clients
for whom the Company prepares tax returns also directly increases the potential
for the Company to earn a share of commissions from financial planning for such
clients. 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 and use
of its short-term line of credit, but anticipates that additional funds may be
available through the exercise of outstanding options and warrants because the
sale and/or resale of the common stock underlying such securities has been
registered under the registration statement of which this prospectus is a part.
However, there can be no assurance that the offering will be consummated or
that any of such options or warrants will be exercised.

During the 1996 and 1997 fiscal year, in connection with the acquisitions
of two practices, the Company bought the building in which the practice had
offices. The Company may purchase other real estate in connection with future
acquisitions but it has no plans to invest in real estate apart from its other
businesses.

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 net
income. 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.

DIRECT MAIL DIVISION

During the Company's 1997 fiscal year, the Company continued its
operations of a direct mail division in order to control the substantial costs
of advertising its many offices. This division was acquired to specifically
reduce the costs of advertising for the Company. The Company believes that the
direct mail division results in lower advertising costs on a per-office

15
<PAGE>

basis, as the Company takes advantage of economies of scale. The Company's
direct mail division operates as an independent division and solicits its own
customers for its direct mail services. From the first quarter to the second
quarter of 1998, the direct mail division has experienced a 250% increase in
revenues due to new accounts of unrelated parties.

No events or transactions have occurred subsequent to March 31, 1998, 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

1997 AND 1996 FISCAL YEARS COMPARED

The Company's revenues for the fiscal year ended June 30, 1997 were
$24,574,571 as compared to revenues of $21,521,537 for the prior fiscal year.
The increase in revenues for its 1997 fiscal year from its 1996 fiscal year is
attributable to: (1) the Company's opening of eight new offices in January 1997
(the "1997 New Offices") and the acquisition of ten customer lists which
resulted in increased revenues from tax preparation services of $476,518; (2)
continued growth of the existing offices which resulted in increased revenues
from tax preparation services of approximately $1,297,000; and (3) increased
financial planning revenues of approximately $1,780,000 over all offices;
offset partially by (4) a decrease of revenues of approximately $502,000 from
its direct mailing services resulting from the loss of a few customers.

The Company's total revenues for the year ended June 30, 1997 consist of
$9,921,967 for tax preparation services, $12,464,284 for financial planning
services and $2,188,320 for direct mailing services. The Company's total
revenues for the year ended June 30, 1996 consist of $8,147,986 for tax
preparation services and $10,683,765 for financial planning services; and
$2,689,786 for direct mailing services.

The consolidated statements of operations for the years ended June 30,
1997 and 1996 have been restated to reflect the total of the commission revenue
received by the Company and the commissions paid by Royal Alliance directly to
the financial planners (who are registered representatives of Royal Alliance
but are affiliated with the Company) as the Company's revenue from financial
planning services. The resulting increase in commission revenue is offset by an
increase in commission expense equal to the same amount. Accordingly, this
restatement had no effect on the Company's consolidated financial position, net
income (loss) or cash flows.

The growth in the tax preparation segment is primarily attributable to the
additional revenues generated by the 1997 New Offices, the continual growth of
the existing offices, and the increase of production from the tax preparers.
The growth in the financial planning segment is also attributable to the
continual growth of the existing offices and the increase of production from
the acquisition of new financial planners.

The remaining growth in financial planning revenues is a result of the
Company's benefiting from a year of rapidly rising equity security prices in
the marketplace, which induced clients to invest funds with financial planners
affiliated with the Company, generating commission revenues for the Company.
Any reduction in the rate of increase of equity securities' prices in the
marketplace could reduce the increase in investments that the Company's clients
make through financial planners affiliated with the Company, and falling market
prices of securities could result in a reduction that would offset other
sources of growth in the Company's financial planning revenues. The 1997 growth
of the financial planning services was not significantly affected by the
opening of the 1997 New Offices. The Company has normally experienced a 6 to 12
month delay after the opening of a new office before such office generates
significant financial planning revenues.

The Company's operating expenses for the 1997 fiscal year were $23,283,697
as compared to operating expenses of $20,927,008 for the 1996 fiscal year. The
increase of 11.3% in the Company's operating expenses for its 1997 fiscal year
from its 1996 fiscal year was attributable to increases of $1,381,867 and
commissions; $518,333 in general and administrative expenses; $234,816 in
advertising; $381,980 in rent; and $260,454 in depreciation and amortization;
and the absence of any reimbursement of financial planning expenses ($125,000
in 1996); and offset by a reduction in direct mail costs of $545,761.

The reasons for the increases in operating expenses are the increase in
financial planning services, the addition of the 1997 New Offices and having a
full year of operating expenses for the 40 net new offices opened in January of
1996.

The increase in salaries and commissions is due to increased tax
preparation salaries and financial planning activities (which generate
commissions that are generally shared between the Company and those affiliated
financial planners that have entered into commission sharing agreements with
the Company). The increase in salaries and commissions pertains to

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the personnel working at the 1997 New Offices as well as the commissions that
resulted from increased financial planning activities, which are predominantly
the result of increased investments by clients that resulted in increased
commissions.

The increase in depreciation and amortization is due primarily to the
acquisition of ten customer lists for approximately $487,000 and the capital
expenditures of approximately $592,000 made during the Company's 1997 fiscal
year including the purchase of two buildings. The increase in advertising is
primarily due to the 1997 New Offices. The increase in rent is due to
approximately $46,000 for the 1997 New Offices, approximately $17,000 for the
direct mail division and approximately $319,000 for existing offices.

The increase of $518,333 in general and administrative expenses from the
Company's 1996 to its 1997 fiscal years resulted from the Company's expansion
of operations. Such increase was primarily the result of the inclusion of six
months of expenses for the eight new offices opened in January 1997, as well as
a full year of expenses for the 40 net new offices opened in January 1996.
These offices generated increases of approximately $15,000 in office supplies,
$14,000 in office expenses and $19,000 in telephone charges. In addition,
increased financial planning activities resulted in an increase of
approximately $120,000 in clearing fees, and the direct mail division incurred
$350,000 of general and administrative expenses during the Company's 1997
fiscal year.

The decrease in other income of $314,124 or 107% is due to the decrease in
income from the Company's investment in partnership of approximately $125,000,
a decrease in realized gains of approximately $84,000 on the sale of marketable
securities and an increase in interest expense of approximately $95,000. In
July 1995, the Company, together with an officer of the Company and one of its
former officers, formed an investment partnership, which yielded income of
approximately $73,000 during the Company's 1997 fiscal year as compared to
$198,000 for the 1996 fiscal year. Such partnership began liquidating its
investments and distributing its assets to its partners in the Company's 1997
fiscal year, and is in the process of liquidating its remaining investments.

The Company's income after provision for income taxes for its 1997 fiscal
year is $875,994 as compared to $534,726 for its 1996 fiscal year. The increase
of 63.8% is primarily attributable to increases in the Company's tax
preparation segment of approximately $396,000 and financial planning segment of
approximately $367,000. These increases are offset by a decrease in the
Company's direct mail division of approximately $68,000 and by a decrease in
other income of approximately $314,000.

The Company's business is highly seasonal, with the majority of its
revenue earned in the first four months of the calendar year. The effect of
inflation has not been significant to the Company's business in recent years.

NINE MONTHS ENDED MARCH 31, 1998 AND 1997 COMPARED

The Company's revenues for the nine months ended March 31, 1998 were
$21,710,413 as compared to revenues of $18,342,712 for the comparable period of
the prior year. The increase in revenues of 18.4% for the nine months ended
March 31, 1998 from the comparable period of the prior year is attributable
partly to the opening of seven new offices in January 1998 (resulting in an
increase in tax preparation revenues of approximately $235,000), and the
remaining one hundred twenty one offices which accounted for additional tax
preparation revenues of approximately $497,000. Financial planning revenues
increased by approximately $2,849,000 (which was primarily generated in the
pre-1998 offices). These increases were offset by a decrease of approximately
$213,000 in revenues from the direct mail division due to a lower customer
base.

The Company's total revenues for the nine months ended March 31, 1998
consisted of $8,718,884 for tax preparation services, $11,429,991 for financial
planning services, and $1,561,538 for direct mail services. The Company's total
revenues for the nine months ended March 31, 1997 consisted of $7,987,260 for
tax preparation services, $8,580,847 for financial planning services and
$1,774,605 for direct mail services.

The consolidated statements of operations for the nine mkonths ended March
31, 1998 and 1997 have been restated to reflect the total of the commission
revenue received by the Company and the commissions paid by Royal Alliance
directly to the financial planners (who are registered representatives of Royal
Alliance but are affiliated with the Company) as the Company's revenue from
financial planning services. The resulting increase in commission revenue is
offset by an increase in commission expense equal to the same amount.
Accordingly, this restatement had no effect on the Company's consolidated
financial position, net income (loss) or cash flows.

The increase in the Company's financial planning revenues for the nine
months ended March 31, 1998 compared to the nine months ended March 31, 1997
was an increase of 33.2%. The increase in such financial planning revenues is
attributable to additional financial planners which resulted in an
approximately $1,250,000 increase in insurance commissions for the nine months
ended March 31, 1998 compared to the comparable nine month period of the prior
year. The remaining

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increase of approximately $1,600,000 in financial planning revenues resulted
from a period of rising market prices which induced clients to increase their
security transaction activities. This resulted in additional commissions earned
by the Company.

The Company's operating expenses for the nine months ended March 31, 1998
were $18,980,802 as compared to operating expenses of $18,441,431 for the
comparable period of the prior year. The increase of 2.9% in the Company's
operating expenses for its nine months ended March 31, 1998 from the comparable
period of the prior year was attributable to an increase in salaries and
commissions of $702,271, a decrease of $241,369 for direct mail costs and a
decrease in advertising costs of $184,639. These decreases in operating
expenses were offset by increases in other expenses as follows: an increase in
rent expense of $116,291, an increase in depreciation and amortization expense
of $9,642, and an increase in general and administrative expenses of $137,175.

The increase in operating expenses of $539,372 is due to an increase in
salaries and commissions of 7.1% due to an increase in financial planning
business, a decrease in advertising costs of 6.7% due to a reduction in direct
mail advertising and a decrease in direct mail division costs of 33.5% due to
reduced customer base. These decreases in operating expenses were offset by an
increase in depreciation and amortization expenses of 1.6% due to additions to
property, plant and equipment of approximately $700,000 during 1998. Rent
expense increased 8.2% due to additional offices opened in January 1998.

The increase of $137,175 in general and administrative expenses for the
nine months ended March 31, 1998 as compared with the comprable period of the
prior year resulted from the Company's expansion of operations. Such increase
was primarily the result of the inclusion of nine months of expenses for the
seven new offices opened in January 1998. These offices generated increases of
$11,412 in telephone charges, $14,601 in office expense and $2,049 in
utilities. The remaining increase of $109,113 in general and administrative
expenses resulted from a general increase in costs generated from the other one
hundred twenty-one offices.

The decrease in other expenses of $6,395 or 12.4% was due to an increase
in income of $2,167 from the Company's investment in a partnership, additional
other income of $32,088 earned during the period and an increase in rental
income of $921. These decreases in other expenses were offset by a net increase
in interest expense of $5,938, an unrealized loss on marketable securities of
$6,630, and a realized loss on sale of marketable securities of $16,213.

The Company's net income for the nine months ended March 31, 1998 was
$1,651,557 as compared to a net loss of $(92,551) for the nine months ended
March 31, 1997. The increase in net income of approximately $1,744,000 was
primarily attributable to higher net operating income generated from financial
services, tax preparation and direct mail services.

LIQUIDITY AND CAPITAL RESOURCES

1997 AND 1996 FISCAL YEARS COMPARED

The Company's cash flows provided by operating activities was $1,516,445
and 2,621,862 for the years ended June 30, 1997 and 1996, respectively. The
decrease of approximately $1,105,000 is due primarily to a decrease in proceeds
from the sale of marketable securities of approximately $2,154,000, an increase
in prepaid expenses and other current assets of approximately $142,000, a
decrease in accounts payable, accrued expenses and other current liabilities,
and income taxes payable of approximately $566,000. This decrease was offset by
an increase in net income plus non-cash adjustments of approximately $576,000
in advances to financial planners, a decrease in accounts receivable of
approximately $267,000 and a decrease in security deposits of approximately
$84,000.

Net cash used in investing activities was $1,129,500 and $2,420,386 for
the years ended June 30, 1997 and 1996, respectively. The decrease of
approximately $1,290,000 is primarily due to decreases in capital expenditures
of approximately $308,000, due to a decrease in acquisitions of intangible
assets of approximately $243,000 and an increase in investment in partnership
of $378,000 and by an increase in proceeds from related party transactions of
approximately $246,000. The decrease is offset by an increase in payments of
related parties of approximately $182,000.

Net cash provided by financing activities decreased by $372,808 from
$684,557 to $311,749 due to the acquisition of treasury stock for approximately
$733,000 and a decrease in net proceeds from the issuance of common stock and
collections of stock subscriptions totaling approximately $86,000. The decrease
is offset by an increase in net borrowings of approximately $446,000.

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<PAGE>

NINE MONTHS ENDED MARCH 31, 1998 AND 1997 COMPARED

The Company's cash flows used in operating activities was $666,351 and
$839,952 for the nine months ended March 31, 1998 and 1997, respectively. The
decrease in cash flows used in operating activities of approximately $174,000
is primarily due to an increase in net income plus non-cash adjustments of
approximately $1,329,000, a decrease in advances to financial planners of
approximately $104,000, an increase in accounts payable and accrued expenses of
approximately $1,008,000 and an increase in the proceeds from the sale of
marketable securities of approximately $22,000. These decreases in cash flows
used in operating activities were off-set by a increase in accounts receivable
of approximately $1,442,000, an increase in security deposits of approximately
$18,000 and an increase in prepaid expenses and other current assets of
approximately $830,000.

Net cash used in investing activities was $741,543 and $552,574 for the
nine months ended March 31, 1998 and 1997, respectively. The increase of
approximately $189,000 is primarily due to increases in capital expenditures of
approximately $99,000, an increase in investments of approximately $266,000 and
a net increase in notes receivable from related parties of approximately
$84,000. These increases in net cash used in investing activities were offset
by a decrease in the acquisition of intangible assets of approximately
$260,000.

Net cash provided by financing activities was $646,976 and $2,544,402 for
the nine months ended March 31, 1998 and 1997, respectively. The decrease in
net cash provided by financing activities of approximately $1,897,000 is
primarily due to a net decrease in net borrowings from bank and other notes
payable amounting to approximately $700,000, a decrease in the proceeds of
stock subscriptions and exercise of stock options of approximately $210,000,
and an increase in payments of bank and other loans of approximately
$1,527,000. These decreases were offset by a decrease in acquisitions of
treasury stock of approximately $538,000.

FINANCIAL CONDITION

The Company has two credit facilities with State Bank of Long Island. The
first facility is a line of credit for up to $2,500,000, which expires on
October 31, 1998. Borrowings under this 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, 1998, the Company had an outstanding principal balance of
$1,500,000. 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, 1998, the note
had an outstanding principal balance amounting to $583,336.

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 any dividends on its
Common Stock in the foreseeable future, but will apply any profits to fund the
Company's expansion.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1997, FASB issued Statement No. 128, "Earnings Per Share,"
which is effective for periods ending after December 15, 1997. The Company has
adopted Statement No. 128 for the nine months ended March 31, 1998 and has
restated its weighted-average shares for all prior periods represented.

YEAR 2000 COMPLIANCE

The Company is currently in the process of installing the Great Plains
accounting system, which is year 2000 compliant. The Company does not
anticipate any material additional costs with regard to its year 2000
compliance. The year 2000 issue is expected to affect the systems of various
entities with which the Company interacts. However, there can be no assurance
that the systems of other companies on which the Company relies will be timely
converted, or that a failure by another company's systems to be year 2000
compliant would not have a material adverse effect on the Company.

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<PAGE>

BUSINESS

GENERAL

After review of such questionnaires by financial planners, if appropriate,
financial planners will recommend the tax preparer to introduce the tax
preparation client to a financial planner. Each of the financial planners to
which a client might be introduced is a registered representative of an
independent registered securities broker/dealer, Royal Alliance Associates,
Inc. ("Royal Alliance"), and each has agreed to share commissions with the
Company. In approximately 22% of the cases, such financial planner is the tax
preparer himself.

All commissions on sales and purchases of securities are earned by the
Company's wholly owned subsidiary, JT Securities, Inc. (a registered securities
broker/dealer) ("JT Securities").

Royal Alliance, unaffiliated with the Company, is a corporation which is a
registered securities broker/dealer and a member of the National Association of
Security Dealers, Inc. ("NASD").

The Company has a total of one hundred twenty eight offices: forty three
in New York, fifteen in New Jersey, fourten in Florida, nine in Arizona, nine
in Ohio, seven in Maryland, seven in Connecticut, seven in Washington, seven in
Massachusetts, five in Nevada, two in Pennsylvania, one in Virginia, one in
Illinois and one in Georgia, and it maintains its principal executive office at
475 Northern Boulevard, Great Neck, NY 11021, telephone (516) 482-4860.

HISTORY

Following its organization in 1981, most of the Company's expansion was
effected through separate corporations under common control with the Company.
In December 1992, the Company merged with fifteen of such affiliated
corporations conducting the same business as the Company. Several of such
affiliated corporations, which did not participate in the

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<PAGE>

merger, were liquidated prior to such merger. Their clients and territories
were absorbed by other nearby offices of the Company. The Company opened
fifteen offices in January 1994, twenty two offices in January 1995, forty four
offices in 1996 (closing four in the first half of 1996), eight in 1997 and
seven in 1998. The Company now has a total of 128 offices.

In December 1994, the Company consummated its initial public offering
("IPO") of 507,926 units, including the underwriter's overallotment option, of
its securities to the public for $7.00 per unit. Each unit consisted of two
shares of the Company's common stock and a warrant to purchase another share of
common stock at $4.67 per share. Proceeds of the offering less underwriting
discounts of approximately $278,000 were approximately $3,277,000. Expenses for
the IPO totaled approximately $190,000, resulting in net proceeds to the
Company of approximately $3,087,000. In connection with the IPO, the Company
issued warrants to purchase 50,783 units to the underwriter at an exercise
price of $8.40.

On February 10, 1995, effective November 1, 1994, the Company acquired all
the outstanding stock of Gilbert Financial Services Inc. (a Florida
corporation) in exchange for 203,428 shares of the Company's common stock.

In May 1995, all of the Company's class a bridge loan warrants ("Class A
Bridge Loan Warrants"), which were registered under the Company's IPO, were
exercised at $2.08 per share, generating additional capital of $748,800 for the
Company.

On June 30, 1995, the Company acquired certain assets in order to commence
a direct mail service business under the name of "Progressive Mailing." The
Company uses direct mail as its main form of advertising and has expanded its
Progressive Mailing operations into an independent business.

MARKET AND STRATEGIC OVERVIEW

The Company believes that most middle and upper income Americans require
services for preparing income tax returns. Other financial services, such as
brokerage for mutual fund investment and the sale of insurance products, have
historically been supplied by segmented firms, but the Company believes that
the current trend to multiservice firms that provide clients with the
convenience of personalized, "one-stop" financial shopping will enable the
Company to extend the services that it delivers to its existing tax preparation
clients and to attract more clients for its full range of services.

TAX RETURN PREPARATION

The Company prepares federal, state and local income tax returns for
individuals, predominantly in the middle and upper income brackets. The
preparation of a tax return by the Company usually involves a personal meeting
at the office between a prospective client and an employee of the Company. At
the meeting the Company's employee solicits from the client the information on
income and deductions and family status necessary to prepare the client's tax
return. After the meeting, drafts of the client's tax returns are prepared.
After review and final correction by the tax preparer, the returns are
delivered to the client for filing.

The Company employs only two full-time certified public accountants, and
only approximately 7% of the Company's seasonal tax preparers are certified
public accountants or tax attorneys. Most of the Company's tax preparers are,
therefore, limited in the representation that they can provide to clients of
the Company on an audit by the IRS. See "RISK FACTORS -- Inability of the
Company to Provide Services of a Certified Public Accountant may Hamper
Company's Marketing and/or Increase Risk of Liability." Ninety-nine percent of
the Company's professional tax preparers have a college degree or its
equivalent and two years of tax preparation experience, and each one is
specifically tested and trained by the Company to meet the required level of
expertise to properly prepare tax returns.

In keeping with the trend toward increasingly automated filing of income
tax returns, the Company offers to clients the option of filing their federal
income tax returns electronically. Under this system, the final federal income
tax return is transmitted to the Internal Revenue Service ("IRS") through a
publicly available software package.

Refund Anticipation Loans are also available to the clients of the Company
through arrangements with approved banking institutions. Using this service, a
client is able to receive a check in the amount of his federal refund, drawn on
an approved bank, at the office where he or she had his or her return prepared.
The Company acts only as a facilitator between the client and the bank in
preparing and submitting the loan documentation and receives a fee for these
services payable upon consummation of the loan. The Company has no liability in
connection with these loans. The Company makes no loans, and its funds are not
disbursed in any fashion to reimburse customers.

The Company's business of preparing income tax returns subjects it to
potential civil liabilities under the Internal Revenue Code (the "Code").
Although the Company believes that it complies with all applicable laws and
regulations, no assurance can be given that the Company will never incur any
material fines or penalties.

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<PAGE>

In addition, the Company does not maintain any professional liability or
malpractice insurance policy. Although the Company complies with all applicable
laws and regulations, no assurance can be given that the Company will not be
subject to professional liability or malpractice suits.

SEASONALITY

The Company's tax preparation business is conducted predominantly in the
months of February, March and April when most individuals prepare their
federal, state and local income tax returns. The Company hires approximately
300 seasonal employees in conjunction with the utilization of its existing
employees to meet the demand imposed during those months, and as a result, has
avoided opening offices especially for tax season and closing them after the
peak period. Approximately 75% of the Company's seasonal employees return in
the next year, and the Company uses predominantly advertisements in local
newspapers to recruit the remainder its seasonal work force.

To assist in funding operations during the off season and to facilitate
its plans for expansion, the Company has a credit facility in the form of a
line of credit up to $2,500,000 with State Bank of Long Island. Borrowings
under this line are in the form of short-term notes with interest charged
monthly at the bank's prime lending rate plus 1 1/2% to 1 3/4%.

BROKER/DEALER SUBSIDIARY

JT Securities is registered as a securities broker/dealer under the
Securities Exchange Act of 1934, as amended, and has been a member of the
National Association of Securities Dealers, Inc. ("NASD") since July 1994. In
addition, JT Securities has effected all filings under New York State law to
register as a broker/dealer in New York and Florida. See "DESCRIPTION OF
BUSINESS -- Regulation."

JT Securities receives the commission sharing payments from Royal Alliance
(approximately 47% of the total commissions) that are generated from
commissions earned by financial planners providing services at the Company's
offices. Prior to January 1, 1998, three of the Company's officers acted as
registered representatives (each financial planner is a registered
representative -- for an explanation of the role of registered representatives,
see " -- Relationship With Registered Representatives of Broker/Dealer" below)
of JT Securities in providing financial planning and brokerage services
directly to a limited number of clients of the Company.

Such services provided by JT Securities in the aggregate have never been
material to the Company's overall operations, and effective January 1, 1998,
all financial planning services and securities transactions in connection with
clients of the Company have been and will be effected by registered
representatives of Royal Alliance and not JT Securities. JT Securities,
however, will continue to receive the commission sharing payments from Royal
Alliance that are generated from commissions earned by financial planners
providing services at the Company's offices.

Although Royal Alliance is not affiliated with the Company by contract,
ownership, common directors or officers, approximately 90, or 82%, of the
Company's full-year tax-preparer employees are also registered representatives
of Royal Alliance. Such individuals, who have two separate roles, divide their
time based upon the needs of clients who come to the offices of the Company
with which they are affiliated. They are compensated by the Company based on
the hours they work preparing tax returns and on the number of returns
prepared, and they are compensated by Royal Alliance based on approximately 47%
of the total commissions earned on transactions effected for clients of the
Company. Almost all of the registered representatives of Royal Alliance who are
affiliated with the Company through commission sharing agreements work
exclusively in connection with the offices of the Company. For a detailed
breakdown of the different services by the number of employees see "BUSINESS --
Employees".

FINANCIAL PLANNING SERVICES

While preparing tax returns, clients often consider other aspects of their
financial needs, such as insurance, investments and pension and estate
planning. The Company attempts to capitalize on this situation by offering to
every client the opportunity to complete a questionnaire that requests
information on his/her financial situation. These questionnaires are
subsequently reviewed by financial planners (who are have entered into
commission sharing agreements with the Company and who are registered
representatives of Royal Alliance) to evaluate if the client may need financial
planning services. If the financial planners recommend that these clients be
referred to a financial planner and if the clients agree, the Company
introduces such clients of its tax preparation business to one of the financial
planners who are registered representatives of Royal Alliance and/or authorized
agents of insurance carriers. In approximately 22% of the cases of tax
preparation clients referred to financial planners, the tax preparer and the
financial planner/registered representative are the same person. Of all

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<PAGE>

of the financial planners affiliated with the Company, approximately 66% also
perform tax preparation services as employees of the Company.

Most middle and upper income individuals require a variety of financial
planning services. If clients seek insurance products in connection with the
creation of a financial plan, they are referred to an employee or affiliated
financial planner of the Company (who may be the tax preparer himself) who is
an authorized agent of an insurance underwriter. If clients seek mutual fund
products or other securities for investment, they are referred to an affiliated
financial planner of the Company (who may be the tax preparer himself) who is a
registered representative of Royal Alliance, an independent securities
broker/dealer. The financial planners affiliated with the Company do not effect
transactions in securities of individual issuers, but rather deal only with
packaged products such as mutual funds and annuities. See "DESCRIPTION OF
BUSINESS -- Relationship with Registered Representatives of Broker/Dealer;" and
" -- Relationship with Authorized Agents of Insurance Underwriters."

The financial planners affiliated with the Company perform all financial
planning services as registered representatives of Royal Alliance. (For an
explanation of the role of registered representatives, see " -- Relationship
With Registered Representatives of Broker/Dealer" below.) In order to maintain
the financial planning services of Royal Alliance's registered representatives
separate from the Company, such registered representatives orally explain to
clients that their services as financial planners are delivered on behalf of
Royal Alliance. In addition, Royal Alliance maintains a separate telephone
number at each office and a separate nameplate or sign on the door of each
office, uses separate stationery and deposits all revenues in separate bank
accounts. For further information on the number of employees and those
employees that have entered into commission sharing agreements with the Company
see "BUSINESS -- Employees."

RELATIONSHIP WITH REGISTERED REPRESENTATIVES OF BROKER/DEALER

The Company's affiliated financial planners are all registered
representatives ("Registered Representatives") of Royal Alliance Associates,
Inc. ("Royal Alliance"), an unaffiliated corporation, which is a registered
securities broker/dealer and a member of the NASD. Registered Representatives
are the general employees of a securities brokerage firm that are authorized to
broker securities transactions for clients on behalf of the firm. To become a
registered representative, a person must pass one or more of a series of
qualifying exams administered by the NASD that test the person's knowledge of
securities and related regulations.

Registered Representatives who work with Royal Alliance are supervised by
Royal Alliance with regard to all regulatory matters. Royal Alliance is
exclusively responsible for all supervision and record keeping in connection
with the Registered Representatives and their activities.

If clients of the Company inquire about the acquisition or sale of
investment securities, they are directed to one of such Registered
Representatives. Such Registered Representatives are able, through Royal
Alliance, to effect transactions in such securities at the request of clients
and retain a certain percentage of the commissions earned on such transactions.
Royal Alliance has licensed principals in all areas of the securities business.

When a client of the Company requests to meet with a financial planner, as
part of the financial planner's discussion with such client, the financial
planner may initiate a discussion regarding the purchase of securities as part
of the client's overall financial investment plan, but not in regard to a
particular security of an issuer. Ninety-nine percent of the securities
transactions effected by Registered Representatives who are affiliated with the
Company, involve packaged products, including interests in mutual funds and
variable annuities, and do not involve corporate equities and bonds and other
securities of operating issuers. Registered Representatives do not provide
advice regarding particular securities nor do they transact any investments in
such particular securities except in very limited cases on the specific
initiative and request of a client.

All security transactions are introduced and cleared on a fully disclosed
basis through a correspondent broker that is a member of the New York Stock
Exchange.

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For a securities transaction effected through Royal Alliance, Royal
Alliance retains approximately 6% of the total commission, and a majority of
the individual Registered Representatives and JT Securities each receives
approximately 47% of the total commission. Each of the Registered
Representatives except the officers of the Company has entered into an
commission sharing agreement with the Company, which generally provides that a
specified percentage of the commissions earned by the Registered Representative
(generally one-half, or 47% of the total commission) is paid by Royal Allliance
at the direction of such financial planner to JT Securities. All Registered
Representatives have agreements that contain covenants requiring them to
maintain strict confidentiality and to refrain from certain competition with
the Company. Each agreement with a Registered Representative has a duration of
no more than one year from the date of the agreement.

The financial planners are paid their share of securities commissions
directly by Royal Alliance and therefore do not receive compensation either as
employees or independent contractors of the Company in regard to their receipt
of a share of securities commissions. Of the financial planners affiliated with
the Company, approximately 66% also perform tax preparation, managerial or
other services for the Company and receive compensation as employees of the
Company for such services ("Employee/Planners").

The Company has no written agreement with Royal Alliance, and either the
Company or Royal Alliance could terminate their relationship at any time. The
Company believes that other broker/dealers, including JT Securities, could be
found to affiliate with and supervise the Registered Representatives if the
Company's relationship with Royal Alliance were terminated.

RELATIONSHIP WITH AUTHORIZED AGENTS OF INSURANCE UNDERWRITERS

Certain of the Company's full-time employees and affiliated financial
planners are authorized agents of insurance underwriters. If clients of the
Company inquire about insurance products, then they are directed to one of such
authorized agents. Such agents are able, through several insurance
underwriters, to sell insurance products at the request of clients and retain a
certain percentage of the commissions earned on such sales. The Company is an
authorized insurance agent under both New York and Florida law. In
approximately 22% of the cases where a tax preparation client of the Company is
referred to an insurance agent, such authorized agent is the same person as the
tax preparer working with such client.

Each of the insurance agents (except the Company's officers) has entered
into an commission sharing agreement with the Company. Each such agreement
generally provides that a specified percentage of the commissions earned by the
agent is paid to the Company. The agreements also contain covenants requiring
the agent to maintain strict confidentiality and to refrain from certain
competition with the Company. Each agreement with an insurance agent has a
duration of no greater than one year from the date of the agreement.

CREDIT CARDS

The Company recently entered into a Bankcard Agreement with First USA Bank
(the "Credit Card Bank") for the Credit Card Bank to issue MasterCard and/or
Visa credit cards denominated as "Gilman & Ciocia" credit cards. Pursuant to
such agreement, the Company will supply a list of the names and addresses of
its customers for the purpose of the Credit Card Bank's doing a direct mail
solicitation for applications for such credit cards, and the Company will
receive, among other consideration, $15.00 for each "Gilman & Ciocia" credit
card issued under a Credit Card Bank marketing plan, $30.00 for each "Gilman &
Ciocia" credit card issued under a Company marketing plan, plus 5% of all
finance charges collected by the Credit Card Bank from holders of such "Gilman
& Ciocia" credit cards. The Company bears no risk of loss from default on any
of the cards issued under this agreement. The Company cannot at this time
estimate the amount of revenues that may result from such agreement, however,
the Company does not anticipate that any material cost will be imposed on the
Company in connection with such agreement.

MARKETING

Most of the Company's clients are repeat clients from prior years. The
majority of clients in each office return to the Company for tax preparation
services during the following years, and the retention rate is approximately
75%. In addition, the Company markets its services principally through direct
mail and promotions.

DIRECT MAIL. Each year prior to the "tax season" when individuals file
federal, state and local income tax returns, the Company sends direct mail
advertisements. The direct mail advertising solicits business principally for
the Company's tax preparation services. A large majority of the Company's new
clients each year are first introduced to the Company through its direct mail
advertising.

24
<PAGE>

PROMOTIONS. The Company offers a $50 U.S. Savings Bond to any client that
refers another two clients to the Company. The program has resulted in
approximately 300 new clients per year.

ONLINE. The Company currently has a web site on the Internet:
http://www.gtax.com for income tax and financial planning advice, 10K/Q
information and the latest news releases.

OTHER MARKETING. The Company also prints and distributes brochures and
flyers about its services.

The Company believes that its most promising market for expansion may lie
in areas where Americans and other nationals are migrating. Individuals usually
retain a local tax preparer in connection with their personal tax returns. When
people move, therefore, they usually seek to find a new income tax preparer. At
or shortly after the time that they move, therefore, individuals are most
susceptible to the direct mail advertising of the Company's tax preparation
services. The Company has not conducted any analysis of demographic data or any
formal market surveys.

COMPETITION

The income tax preparation and financial planning services industry is
highly competitive. The Company's competitors include companies specializing in
income tax preparation as well as companies that provide general financial
services. Many of these competitors, which include H&R Block, Inc., HD Vest,
Inc., Jackson Hewitt Tax Service, Inc. and Triple Check Income Tax Service,
Inc. in the tax preparation field and many well-known brokerage firms in the
financial services field, have significantly greater financial and other
resources than the Company. The Company believes that the primary elements of
competition are convenience, quality of service and price. No assurance can be
given, however, that the Company will be able to compete successfully with
larger and more established companies.

In addition, the Company may suffer from competition from departing
employees and affiliated financial planners. Although the Company attempts to
restrict such competition contractually, as a practical matter, enforcement of
contractual provisions prohibiting small scale competition by individuals is
difficult.

TRADEMARKS

The Company has registered its "Gilman + Ciocia" trademark with the U.S.
Patent and Trademark Office. No assurance can be given that the Company would
be able successfully to defend its trademark if forced to litigate its
enforceability. The Company believes that its trademark "Gilman + Ciocia"
constitutes a valuable marketing factor. If the Company were to lose the use of
such trademark, its sales could be adversely affected.

DIRECT MAIL DIVISION

The Company commenced operations of a direct mail service division in July
1995 under the name "Progressive Mailing". Progressive Mailing does not design,
create or draft the text for direct mail materials, but does provide limited
consulting services in these areas. The Progressive Mailing division uses
equipment acquired from a liquidated company and is operated by certain
personnel hired from that company.

The Company's principal marketing medium is direct mail solicitation, and
the Company's solicitations constitute the majority of Progressive Mailing's
services. Currently, Progressive Mailing is soliciting business solely through
word of mouth and referrals. The Company has hired a salesperson to help market
its services.

The direct mail business is highly competitive with many large and small
entities competing for business. The principal factors of competition are
timeliness, accurate service and price.

At September 1, 1998, the Company employed twenty nine persons on a
full-time basis in its Progressive Mailing division: one executive person, one
clerical personnel, and nineteen staff personnel.

REGULATION

The Company, as a preparer of federal income tax returns, is subject to
the regulations of the Code and regulations promulgated thereunder. The Code
requires, for example, that tax preparers comply with certain ministerial
requirements with respect to the preparation and filing of tax returns and
rules on the maintenance of taxpayer records. The Code also imposes regulations
relating to the truthfulness of the contents of tax returns, the
confidentiality of taxpayer information, and the proper methods of negotiating
taxpayer refund checks. Penalties for violations are specified in the Code.

To represent a taxpayer before the IRS after the initial audit, an
individual must meet certain requirements. Only an attorney, a certified public
accountant or a person specifically enrolled to practice before the IRS can
represent a taxpayer

25
<PAGE>

in such circumstances. None of the full-year employees and only several of the
employees of the Company meet such requirements. Most of the full-time
employees of the Company, therefore, are limited in that they may appear as a
representative of a taxpayer only through the stage of an audit examination at
the office of a District Director, and then only upon complying with applicable
regulations.

Tax preparers are prohibited by regulations promulgated by the IRS from
using information on a taxpayer's tax return for certain purposes involved in
the solicitation of other business from such taxpayer without the consent of
such taxpayer. The Company believes that it complies with all applicable IRS
regulations.

Neither the employees of the Company nor its affiliated financial planners
generally give investment advice about particular investments to clients.
Instead, financial planning services involve making clients aware of the types
of vehicles available for savings, investment and planning for retirement and
death, disability and other contingencies. Furthermore, any advice given by
employees of the Company or affiliated financial planners is incidental to
their work in connection with the purchases and sales of mutual fund shares and
other securities. They are registered representatives of a broker/dealer and
work under the supervision of such broker/dealer.

If the Commission were to determine that, prior to the registration of JT
Securities as a securities broker/dealer, the Company was required to be
registered as a broker/dealer, then the Company may be subject to regulatory
action.

The registered representatives themselves are strictly regulated in their
activities as registered representatives of a securities broker/dealer under
the Securities Act of 1934, as amended, and the rules and regulations
promulgated thereunder, state regulation, the rules of the NASD and by the
rules and regulations of the broker/dealer.

JT Securities, is a registered broker/dealer under the Securities Exchange
Act of 1934, as amended, and a member of the NASD, is subject to detailed rules
and regulations, including extensive record keeping requirements, incumbent
upon registered broker/dealers.

JT Securities has not registered as a broker/dealer in any states other
than New York and Florida, although the Company has offices in 12 other states.
The Company does not believe that JT Securities is currently required to so
register. The State of Washington made written inquiries in 1996 regarding
possible requirements for JT Securities to register as a securities
broker/dealer in the State of Washington. The Company responded to such
inquiries and has not received any further communication from the State of
Washington in this regard.

EMPLOYEES

At September 1, 1998, the Company employed 183 persons on a full-time
full-year basis, including the Company's four officers. See "DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS." The Company's full-time
employees include 50 professional tax preparers, 81 clerical and support staff
persons (which includes persons performing clerical work while in training for
other positions), and 23 administrative personnel (who include the Company's
executive officers), and 29 employees who are part of the Company's direct mail
services division. During peak season the Company employs approximately 500
full-time employees, of which approximately 300 of these employees are seasonal
and do only tax preparation. Approximately 75% of the Company's seasonal
employees return the following year, and the Company uses advertisements in the
local newspapers to meet the balance of its recruiting needs. The minimum
requirements for a tax preparer at the Company are generally a college degree
or its equivalent, two years of tax preparation experience and a passing grade
of an examination given by the Company. See "BUSINESS -- Seasonality."

The Company also is affiliated with approximately 138 financial planners
who have entered into commission sharing agreements with the Company while
serving as registered representatives of Royal Alliance and/or as insurance
agents. Of such 138 financial planners, 47 do only financial planning, and the
others serve separately as employees of the Company performing tax preparation,
managerial and other services for the Company. Of the total number of financial
planners who have entered into the commission sharing agreements with the
Company, 91 do tax preparation, management and other services for the Company
("Employee/Planners").

The Company's offices are partially staffed by financial planners who have
entered into commission sharing agreements with the Company, particularly
during the off season. During a portion of the year, approximately ten of the
Company's offices are not staffed full-time by employees and/or full-time
financial planning affiliates of the Company. During such periods, such offices
are staffed part-time by affiliated financial planners and/or calls to such
offices when no personnel are present are forwarded automatically to an office
of the Company that is fully staffed.

26
<PAGE>

DESCRIPTION OF PROPERTY

The Company provides services to its clients at 128 local offices in
fourteen states: Forty three in New York, fifteen in New Jersey, nine in
Arizona, fourteen in Florida, nine in Ohio, seven in Maryland, seven in
Connecticut, seven in Washington, seven in Massachusetts, five in Nevada, two
in Pennsylvania, one in Virginia, one in Illinois and one in Georgia. Seven of
such offices opened in January 1998. A majority of the offices are leased in
commercial office buildings. Most of the Company's offices are leased pursuant
to standard form office leases, although ten offices are leased on an oral
month-to-month basis. The leases range in remaining terms from one to seven
years. The Company's rental expense during its fiscal year ended June 30, 1997
was $1,884,768. The Company believes that any of its offices could be replaced
with comparable office space, however location and convenience is an important
factor in marketing the Company's services to its clients. Since the Company
advertises in the geographic area surrounding the office location, the loss of
such a office that is not replaced with a nearby office could adversely affect
the Company's business at that office.

The Company needs less than 1,000 square feet of usable floor space to
operate an office, and its needs can be flexibly met in a variety of real
estate environments. Therefore, the Company believes that its facilities are
adequate for its current needs.

The Company also owns two buildings housing two of its offices, one in
Babylon, New York and the other in Palmer, Massachusetts.

LEGAL PROCEEDINGS

In April 1998, Texas Capital Securities, Inc. and its assignee, Harbor
Financial, Inc. instituted a suit in the U.S. District Court in Austin, Texas,
demanding issuance, collectively, of 100,000 warrants to purchase the Company's
common stock at $5.125 per share (alleged to have been issuable under an
investment banking agreement pursuant to which Texas Capital Securities, Inc.
was to have provided investment banking services to the Company), as well as
attorney's fees and exemplary damages. The Company believes, among other
defenses, that Texas Capital Securities, Inc. defaulted under such agreement
and provided no material services to the Company. The Company has answered the
complaint and intends to defend such suit vigorously. In addition, the Company
has received a demand letter from Euromarket Advisory, Inc. (an entity believed
to be affiliated with Texas Capital Securities, Inc.) demanding the issuance of
150,000 warrants to purchase the Company's common stock at $5.13 per share,
alleged to have been issuable under a consulting agreement pursuant to which
Euromarket Advisory, Inc. was to have provided consulting services to the
Company. The Company believes that Euromarket Advisory, Inc. defaulted under
such agreement and provided no material services to the Company. The Company
has denied such demand. While the ultimate results of the matters described
above cannot be determined, management does not expect that they will have a
material adverse effect on the Company's results of operations or financial
position.

27
<PAGE>

MANAGEMENT

DIRECTORS AND OFFICERS

<TABLE>
<CAPTION>
EXECUTIVE OFFICER OR
NAME AGE POSITION DIRECTOR SINCE
- --------------------- ----- ------------------------------------------------- ---------------------
<S> <C> <C> <C>
James Ciocia 41 Chief Executive Officer, President and Director 11/81
Thomas Povinelli 37 Chief Operating Officer, and Director 11/84
Kathryn Travis 49 Secretary, Vice President and Director 11/89
Stephen B. Sacher 38 Chief Financial Officer 1/98
Seth A. Akabas 41 Director 4/95
Louis P. Karol 39 Director 4/95
</TABLE>

JAMES CIOCIA, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR

Mr. Ciocia is a principal founder of the Company. He opened his first
office in 1981 and has served in his current capacity since that time. In
addition to serving the company as its Chief Executive Officer, he prepares tax
returns, serves as a life insurance agent and sells life and other insurance
products to clients of the Company. Mr. Ciocia is a Registered Representative
of JT Securities and is a Registered Representative of Royal Alliance. A
graduate of St. John's University with a B.S. degree in accounting, he is a
member of the International Association for Financial Planners.

THOMAS POVINELLI, CHIEF OPERATING OFFICER, AND DIRECTOR

Mr. Povinelli began his tenure with the Company as an accountant in 1983
and has served as an executive officer since November 1984. In addition to
supervising the opening of all new offices, he prepares tax returns, serves as
a life insurance agent, selling life and other insurance products to clients as
well as effecting transactions in mutual funds shares and other securities. Mr.
Povinelli is a Registered Representative of JT Securities and Royal Alliance.
He graduated from Iona College with a B.S. in accounting.

KATHRYN TRAVIS, SECRETARY, VICE PRESIDENT AND DIRECTOR

Ms. Travis began her career with the Company in 1986 as an accountant and
has served as Vice President and a director since November 1989. She prepares
tax returns and manages the company's Great Neck office. She also serves as
President, a director and a Registered Representative of JT Securities and is a
Registered Representative of Royal Alliance. Ms. Travis graduated from the
College of New Rochelle with a B.A. in mathematics.

STEPHEN B. SACHER, CHIEF FINANCIAL OFFICER

Mr. Sacher joined the Company as its Chief Financial Officer in January
1998. Mr Sacher is a Certified Public Accountant and has been practicing in the
public accounting profession since 1981. He is a graduate of Queens College of
the City University of New York with a B.A. in accounting. He is a member of
the SEC Committee of the New York State Society of Certified Public Accountants
and a Member of the American Institute of Certified Public Accountants.

SETH A. AKABAS, DIRECTOR

Since June 1991, Mr. Akabas has been a partner at the law firm of Akabas &
Cohen. Mr. Akabas is a graduate of Princeton University with a BA degree in
economics and a graduate of Columbia University Schools of Law and Journalism.

LOUIS P. KAROL, DIRECTOR

Mr. Karol has been a partner of the law firm of Karol, Hausman & Sosnick
and its predecessors for more than the prior five years. Mr. Karol is a
graduate of George Washington University and a graduate of Cardozo Law School
and has received an LLM degree in Taxation from New York University School of
Law. Mr. Karol is a Certified Public Accountant. Mr. Karol is on the Board of
Directors of the Long Island Chapter of the International Association of
Financial Planning.

BOARD OF DIRECTORS

Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until his or her successor is duly elected
by the stockholders. Officers are elected by and serve at the will of the Board
of Directors. The Company has a stock option plan committee and an audit
committee of its Board of Directors. The Company has no nominating,
compensation or other committees. The Stock Option Plan Committee administers
the Company's 1993 Joint Incentive and Non-Qualified Stock Option Plan and the
1997 Common Stock and Incentive and Non-Qualified Stock Option

28
<PAGE>

Plan of Gilman & Ciocia, Inc. The audit committee is responsible for carrying
out the functions specified in Section 6 of Schedule E of the NASD by-laws.
These functions include: (i) review of the scope of each audit of the Company,
(ii) review, with the independent auditors, of the Company's accounting
practices and policies, (iii) review, with the independent auditors, of their
final report, (iv) review of the Company's overall accounting and financial
controls with internal and independent auditors, and (v) consultation, as
needed, with the independent auditors.

REMUNERATION OF OFFICERS AND DIRECTORS

MANAGEMENT

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
FISCAL ANNUAL OTHER OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS* COMPENSATION (SHARES)
- -------------------------------------------------- -------- ----------- ----------- ---------------- ---------
<S> <C> <C> <C> <C> <C>
James Ciocia 1995 $267,200 $163,000 -0- 18,850
Chief Executive Officer, President and Director 1996 $267,200 $240,000 $ 30,500(1) -0-
1997 $251,200 $240,000 $ 9,580(2) 10,000

Thomas Povinelli 1995 $259,600 $125,000 -0- 18,850
Chief Operating Officer, and Director 1996 $339,300 $145,000 $ 78,600(3) -0-
1997 $199,951 $210,000 $ 9,951(4) 10,000

Gary Besmer (9) 1995 $145,100 $ 2,000 -0- 11,310
Vice President and Director 1996 $168,800 $ 3,000 $ 19,000(5) -0-
1997 $142,149 $ 1,000 $ 7,149(6) 10,000

Kathryn Travis 1995 $156,300 $ 4,000 -0- 14,170
Secretary, Vice Pres. and Director 1996 $166,200 $ 19,000 $ 49,300(7) -0-
1997 $142,149 $ 3,000 $ 7,149(8) 10,000
</TABLE>

- ---------
* Represents commission earned from non-affiliated entities. See Certain
Relationships and Related Transactions
(1) Includes $11,000 for auto expense and $19,500 for forgiveness of loan.
(2) Auto expense.
(3) Includes $18,600 for auto expense and $60,000 for forgiveness of loan.
(4) Auto expense.
(5) Includes $7,000 for auto expense and $12,000 for forgiveness of loan.
(6) Auto expense.
(7) Includes $8,900 for auto expense, $32,300 for forgiveness of loan and
$8,100 for health insurance.
(8) Auto expense.
(9) On May 19, 1998 Mr. Besmer announced that he was retiring from the Company
effective immediately.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- -------------------------- --------------------------- ------------------------------
<S> <C> <C>
James Ciocia ............. 135,370 / -- $279,200 / --
Thomas Povinelli ......... 135,370 / -- 279,200 / --
Gary Besmer .............. 85,223 / -- 175,772 / --
Kathryn Travis ........... 104,039 / -- 214,580 / --
</TABLE>

- ---------
(1) Based on a year-end fair market value of the underlying securities equal to
$2-1/16.

Messrs. Ciocia, Povinelli and Besmer and Ms. Travis earned commissions
from the sale of securities and insurance products to clients of JT Securities
out of which commissions such individuals compensate JT Securities for clerical
and support services and client references. See "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."

DIRECTORS

Directors of the Company receive no compensation for serving as a
director.

29
<PAGE>

STOCK OPTION PLAN

On September 14, 1993, the Company adopted the Company's 1993 Joint
Incentive and Non-Qualified Stock Option Plan, as amended October 14, 1993 (the
"Plan"), pursuant to which the Company may grant options to purchase up to an
aggregate of 816,000 shares. Such options may be intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or they may be intended not to qualify under
such Section ("Non-Qualified Options").

The Plan is administered by the committee of two independent directors of
the Board of Directors of the Company, which has authority to determine the
persons to whom the options may be granted, the number of shares of Common
Stock to be covered by each option, the time or times at which the options may
be granted or exercised, whether the options will be Incentive Options or
Non-Qualified Options, and other terms and provisions of the options. The
exercise price of the Incentive Stock Options granted under the Plan may not be
less than the fair market value of a share of Common Stock on the date of grant
(110% of such value if granted to a person owning in excess of ten percent of
the Company's securities). Options granted under the Plan may not have a term
longer than 10 years from the date of grant (five years if granted to a person
owning in excess of ten percent of the Company's securities) and may not be
granted more than ten years from the date of adoption of the Plan.

To the date of this Prospectus, Non-Qualified Options to purchase 83,604
shares, 83,604 shares, 50,163 shares, and 62,710 shares of Common Stock at the
price of $2.60 per share have been granted under the Plan to James Ciocia,
Thomas Povinelli, Gary Besmer and Kathryn Travis, respectively; Non-Qualified
Options to purchase 41,766 shares, 41,766 shares, 25,060 shares, and 31,329
shares of Common Stock at the price of $3.65 per share have been granted under
the Plan to James Ciocia, Thomas Povinelli, Gary Besmer and Kathryn Travis,
respectively; Non-Qualified Options to purchase 18,850 shares, 18,850 shares,
11,310 shares, and 14,170 shares of Common Stock at the price of $2.50 per
share have been granted under the Plan to James Ciocia, Thomas Povinelli, Gary
Besmer and Kathryn Travis, respectively. The Company has granted Incentive
Options to purchase 20,000 shares at $7.00, 20,000 shares at $7.50, 20,000
shares at $8.00, 20,000 shares at $8.50, 20,000 shares at $9.00, 20,000 shares
at 9.50 and 100,000 shares at $20.00 to Stephen Sacher. Mr. Besmer's options
expired subsequent to his resignation as a director of the Company. In total,
the Company has granted options that are still outstanding to purchase 619,779
shares and options to purchase 196,221 shares remain to be granted under the
Plan.

On May 19, 1997, the Company adopted the Company's 1997 Common Stock and
Incentive and Non-Qualified Stock Option Plan of Gilman & Ciocia, Inc. (the
"1997 Plan"). Under the 1997 Plan, the Company may issue shares of Common Stock
and grant options to purchase up to an aggregate of 300,000 shares. Such
options may be intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("Incentive Options"), or they may be intended not to qualify under such
Section ("Non-Qualified Options"). No Incentive Options will be issued pursuant
to the 1997 Plan until such 1997 Plan is approved by the shareholders of the
Company.

The 1997 Plan is administered by the committee of two independent
directors of the Board of Directors of the Company, which has authority to
determine the persons to whom stock is issued, the persons to whom the options
may be granted, the number of shares of Common Stock to be covered by each
option, the time or times at which the options may be granted or exercised,
whether the options will be Incentive Options or Non-Qualified Options, and
other terms and provisions of the options. The exercise price of the Incentive
Stock Options granted under the Plan may not be less than the fair market value
of a share of Common Stock on the date of grant. Options granted under the Plan
may not have a term longer than 10 years from the date of grant and may not be
granted more than ten years from the date of adoption of the Plan.

The Company recently adopted a program under the 1997 Plan that will
entitle each employee and those affiliated financial planners who have entered
into commission sharing agreements with the Company, including officers and
directors, to be granted options to purchase 100 shares of Common Stock for
each whole $25,000 of revenues for tax preparation and commissions generated by
such individual for the Company in 1998, 1999 and 2000. Each option will be
exercisable for a period of five years to acquire one share of Common Stock at
the market price on the date of grant of the option. Options will be granted
following the end of each calendar year. The Company anticipates that it will
grant between 50,000 and 100,000 options per year under this program.

INDEMNIFICATION

The Company's Certificate of Incorporation includes a provision that
eliminates or limits the personal financial liability of the Company's
directors, except in situations where there has been a breach of the duty of
loyalty, failure to act in good faith, intentional misconduct or violation of
the law.

30
<PAGE>

In addition, the Company's By-laws include provisions to indemnify its
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection with threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
as officers, directors or in other capacities, except in relation to matters
with respect to which persons shall be determined to have acted not in good
faith, unlawfully or not in the best interests of the Company. With respect to
matters as to which the Company's officers and directors and others are
determined to be liable for misconduct or negligence in the performance of
their duties, the Company's By-laws provide for indemnification only to the
extent that the Company determines that such person acted in good faith and in
a manner not opposed to the best interests of the Company.

INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED
THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS
THEREFORE UNENFORCEABLE.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 1, 1998, to the extent
known to the Company, the ownership of the Company's Common Stock, par value
$.01 per share, by (i) each person who is known by the Company to own of record
or beneficially more than 5% of the issued and outstanding Common Stock, (ii)
each of the Company's directors and executive officers, and (iii) all directors
and executive officers as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ----------------------------------------------------- ---------------------- -----------
<S> <C> <C>
James Ciocia 1,050,473(1) 18.4%
17 Folgers Lane
Dix Hills, NY 11746

Thomas Povinelli 1,093,473(2) 19.1%
3427 Bayfront Place
Baldwin, NY 11510

Gary Besmer 405,580(3) 7.2%
35 Deer Run
East Islip, NY 11730

Kathryn Travis 368,185(4) 6.5%
31 Wood Lane
Lattingtown, NY 11560

Seth Akabas 8,966(5) .2%
245 West 107th Street
New York, NY 10025

Louis Karol 780 .01%
28 Fairview Avenue
East Williston, NY 11596

Steven Gilbert 771,154(6) 12.6%
2420 Enterprise Road; Suite 100
Clearwater, FL 34623

Stephen Sacher 20,000(7) .4%
2677 Broadview Drive
Yorktown Heights, NY 10598

All directors and officers as a group (6 persons) 2,541,877 42.4%
</TABLE>

- ---------
(1) Includes 83,604 shares, 41,766 shares and 10,000 shares of Common Stock
issuable upon the exercise of currently exercisable options at prices of
$2.60, $3.65 and $2.75, respectively.

(2) Includes 83,604 shares, 41,766 shares and 10,000 shares of Common Stock
issuable upon the exercise of currently exercisable options at prices of
$2.60, $3.65 and $2.75, respectively.

(3) Does not include any shares of Common Stock issuable upon the exercise of
options that expired subsequent to Mr. Besmer's resignation as a director
of the Company.

31
<PAGE>

(4) Includes 62,710 shares, 31,329 shares and 10,000 shares of Common Stock
issuable upon the exercise of currently exercisable options at prices of
$2.60, $3.65 and $2.75, respectively.

(5) Includes 8,081 shares owned by the law firm of Akabas & Cohen of which Mr.
Akabas is a partner.

(6) Includes 246,154 shares owned by the Gilbert Family Limited Partnership of
which Steven Gilbert is a 97% beneficiary. In addition, includes 340,000
shares issuable upon exercise of options at $3.50 per share, 100,000
shares issuable upon exercise of options at $4.75 per share, and 75,000
shares issuable upon exercise of options at 13.75 per share.

(7) Includes 20,000 shares issuable upon exercise of currently exercisable
options at $7.00 per share.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Each of James Ciocia, Thomas Povinelli, and Kathryn Travis, acts, and Gary
Besmer while he was a director of the Company acted, as a Registered
Representative for Royal Alliance and as an authorized agent for insurance
carriers.

Mr. Ciocia earned gross commissions from sales of securities and insurance
products in connection with his work with the Company equal to approximately
$271,000 in the Company's 1997 fiscal year and $250,000 in the Company's 1996
fiscal year and paid approximately $103,000 and $95,000 in such years to the
Company for clerical, support staff, office space and client references.

Mr. Povinelli earned gross commissions from sales of securities and
insurance products in connection with his work with the Company equal to
approximately $210,000 in the Company's 1997 fiscal year and $145,000 in the
Company's 1996 fiscal year and paid approximately $80,000 and $55,000 in such
years to the Company for clerical, support staff, office space and client
references.

Mr. Besmer earned gross commissions from sales of securities and insurance
products in connection with his work with the Company equal to approximately
$1,000 in the Company's 1997 fiscal year and $3,000 in the Company's 1996
fiscal year and paid approximately $500 and $1,000 in such years to the Company
for clerical, support staff, office space and client references. On May 19,1998
Mr. Besmer announced that he was retiring from the Company effective
immediately.

Ms. Travis earned gross commissions from sales of securities and insurance
products in connection with her work with the Company equal to approximately
$3,000 in the Company's 1997 fiscal year and $19,000 in the Company's 1996
fiscal year and paid approximately $1,000 and $7,000 in such years to the
Company for clerical, support staff, office space and client references.

In 1991, the four principal shareholders, Messrs. Ciocia, Povinelli and
Besmer and Ms. Travis, personally agreed to purchase the Common Stock of a
former stockholder and executed and delivered a promissory note in the original
principal amount of $360,000 in connection with such purchase. From 1991
through 1994, annual payments thereunder, in the amount of approximately
$75,000 with interest, were advanced by the Company, and each shareholder's
allocable portion thereof was deducted from his or her salary that would
otherwise be payable by the Company. In January 1995, the Company paid such
former shareholder in full on behalf of the four principal shareholders. In
January and July 1995, the four principal shareholders agreed to surrender a
total of 96,964 shares of Common Stock in lieu of repayment of such loans
advanced by the Company. In such transactions, such Common Stock was valued at
its then current market price.

The four principal shareholders, Messrs. Ciocia, Povinelli and Besmer and
Ms. Travis, personally guaranteed the repayment of the Company's long-term loan
in the amount of $500,000 from State Bank of Long Island as well as the
seasonal loans in the form of lines of credit as described in the Management's
Discussion and Analysis Section. Such shareholders received no consideration
for such guarantees other than their salaries and other compensation.

On July 1, 1995, the Company, Ralph Esposito, who was then its Chief
Financial Officer, Kathryn Travis, a executive officer of the Company, four
individuals who are relatives of the officers and an employee of the Company
formed ATM Partners, LP (the "Partnership"). Such individuals and their initial
investments are as follows: Madeline Esposito, the wife of the former Chief
Financial Officer -- $196,000, Anna Saras, the wife of the present Chief
Operating Officer -- $198,000, Thomas Povinelli, Sr., father of the present
Chief Operating Officer -- $71,000, Tracy Ciocia, wife of the President --
$150,000, and Joseph Bonocore, an employee -- $10,000. The Company's initial
investment was $348,000 and Kathryn Travis' initial investment was $6,000. At
June 30, 1997, the Company had a 41% interest in the Partnership and recognized
income of approximately $73,000 and $198,000 from the Partnership for the years
ended June 30, 1997 and 1996. During fiscal year 1997 the Partnership began
liquidating its investments and distributing its assets to its partners. The
liquidation of the Partnership is expected to be completed during fiscal year
1998.

32
<PAGE>

In November 1995, the four executive officers and Ralph Esposito, then the
Company's chief financial officer, sold options to purchase a total of 65,000
shares at $2.50 per share to Rummco, Ltd., a Cayman Islands company. In
connection with such sale, the Company agreed to consent to such sale and
register shares underlying such options with the registration statement of
which this Prospectus is a part. These options to purchase shares of common
stock were subsequently sold to Rozel International Holding, Ltd. in an
agreement dated June 10, 1996.

The Company holds term loans due from officers/stockholders aggregating
$350,000. These loans are due in fully amortizing biweekly installments
(including interest at 7% per annum) commencing October 3, 1997 through
maturity on June 30, 2000.

In December 1997, the Company loaned $450,000 to two
officers/stockholders. These loans are non-interest bearing loans and have been
repaid by such officers/stockholders in March 1998.

PLAN OF DISTRIBUTION

The 507,926 shares of Common Stock issuable upon exercise of the currently
outstanding Redeemable Public Warrants and registered hereby will be issued by
the Company to the holders of the Redeemable Public Warrants upon the exercise
thereof by such holders. Upon the effectiveness of the registration of which
this Prospectus is a part, the Company currently intends to notify holders of
the effectiveness of such registration, and, because the Redeemable Public
Warrants expire shortly, the Company believes, most of the Redeemable Public
Warrants will be promptly exercised, and, therefore, the Company currently has
no plans to actively solicit the exercise of the Redeemable Public Warrants.

Under some circumstances, however, the Company may engage in solicitations
through its officers and directors or through placement agents to induce the
holders of such securities to exercise them. Upon exercise, the Common Stock
issuable upon exercise of the Redeemable Public Warrants will be held by such
holders and any further distribution will not be in the Company's control.

SELLING SECURITY HOLDERS

All of the shares of Common Stock (collectively, the "Shares") offered
herein for the accounts of the persons identified in the following table (the
"Selling Security Holders") are intended to be offered to the public
immediately upon effectiveness. The Selling Security Holders and the amount of
securities that may be acquired by each are set forth below.

All of the Shares, which will be offered by the Selling Security Holders,
may be acquired by them as follows: 65,000 shares at an exercise price of $2.50
pursuant to outstanding employee options sold to Rozel International Holding,
Ltd., 101,566 shares of Common Stock and 50,783 Redeemable Public Warrants
issuable to LCP Capital Corp. may be acquired at a price of $8.40 per unit,
each unit consisting of two shares of Common Stock and one Public Redeemable
Warrant, and 50,783 shares of Common Stock issuable to LCP Capital Corp. upon
exercise of the Redeemable Public Warrants that are issuable upon exercise of
the Underwriter's Warrants may be acquired at a price of $4.67. As of the date
of this Prospectus, no Selling Security Holder has exercised any of the
warrants or options described above.

<TABLE>
<CAPTION>
SELLING SECURITY HOLDER AMOUNT OF COMMON STOCK AMOUNT OF PERCENTAGE OF COMMON STOCK
AND POSITION TO COMPANY OWNED BEFORE OFFERING COMMON STOCK OFFERED OWNED AFTER OFFERING (>1%)
- --------------------------------------- ------------------------ ---------------------- ---------------------------
<S> <C> <C> <C>
LCP Capital Corp.
underwriter of Company's
initial public offering .............. 101,566 101,566 -0-
Rozel International Holding, Ltd. ..... 65,000 65,000 -0-
</TABLE>

<TABLE>
<CAPTION>
AMOUNT OF PUBLIC PERCENTAGE OF PUBLIC
SELLING SECURITY HOLDER REDEEMABLE WARRANTS AMOUNT OF PUBLIC REDEEMABLE WARRANTS OWNED
AND POSITION TO COMPANY OWNED BEFORE OFFERING REDEEMABLE WARRANTS OFFERED AFTER OFFERING (>1%)
- --------------------------- ----------------------- ----------------------------- --------------------------
<S> <C> <C> <C>
LCP Capital Corp. ......... 50,783 50,783 -0-
</TABLE>

SELLING SECURITY HOLDER STOCK OWNED STOCK STOCK OWNED AFTER
AND POSITION TO COMPANY BEFORE OFFERING OFFERED OFFERING (>1%)
- ------------------------------- ----------------- --------- ------------------
Edward Haas, employee ......... 64,286 16,072 -0-

PLAN OF DISTRIBUTION BY SELLING SECURITY HOLDERS

All of the shares of Common Stock (collectively, the "Shares") offered
herein for the accounts the Selling Security Holders are intended to be offered
to the public immediately upon effectiveness of the registration statement of
which this

33
<PAGE>

prospectus is a part. Currently, no underwriter is involved in the distribution
of the securities that may be owned by the Selling Security Holders, but rather
sales will be made by the Selling Security Holders either directly or through
one or more securities brokers or dealers in over-the-counter transactions on
The NASDAQ Stock Market, or in privately negotiated transactions. At the time
that a particular offer of any of the Shares is made by or on behalf of a
Selling Security Holder, to the extent required, a Prospectus Supplement will
be distributed that will set forth the number of Shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, the purchase price paid by any underwriter for Shares purchased from
the Selling Security Holder and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, and the proposed selling price to the
public.

Shares sold in over-the-counter transactions will be sold at the current
market prices at the time of sale, and any Shares sold in private transactions
will be sold at prices acceptable to the buyer and seller. Broker/dealers
through which the Selling Security Holders effect sales of the Shares may
receive compensation in the form of discounts, concessions or commissions from
the Selling Security Holders and/or the purchasers of the Shares for whom such
broker/dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker/dealer may be in excess of
customary compensation). No Selling Security Holder has any plans currently
with any particular broker/dealer.

The Selling Security Holders and any broker/dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting discounts
and commissions under the Securities Act.

The Redeemable Public Warrants offered herein for the accounts the Selling
Security Holders are intended to be offered to the public immediately upon
effectiveness of the registration statement of which this prospectus is a part.
The holder of the Underwriter's Warrants, on the exercise of which such
Redeemable Public Warrants are issuable, has not determined yet whether it will
sell such Redeemable Public Warrants publicly or whether it will exercise them
and sell the Shares issuable upon such exercise to the Public. If it determines
to sell the Redeemable Public Warrants publicly, they will be sold in a manner
similar to the sale of the Shares described above.

Under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the regulations promulgated thereunder, any person engaged in a
distribution of Common Stock offered by this Prospectus may not simultaneously
engage in market-making activities with respect to the Common Stock during the
applicable "cooling off" period (9 days) prior to the commencement of such
distribution. In addition, and without limiting the foregoing restriction, the
Selling Security Holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations promulgated thereunder, including,
without limitation, Regulation M in connection with transactions in the Shares,
which provisions may limit the timing of purchases and sales of shares of
Common Stock by the Selling Security Holders.

The Selling Security Holders will receive the entire proceeds from the
sale of their Shares, less any commissions paid to brokers or dealers for
executing such offers. Although the Company will not receive any funds from the
sale of the Selling Security Holders' shares, the Company will pay for all
expenses of the offering and will furnish current prospectuses to the Selling
Security Holders at their request.

DESCRIPTION OF SECURITIES

UNITS

Each Unit (a "Unit") issued upon the exercise of an Underwriter's Warrant
consists of two shares of Common Stock, par value $.01 per share, of the
Company and one redeemable warrant (each a "Redeemable Public Warrant"), each
Redeemable Public Warrant to purchase one additional share of such Common Stock
at an exercise price of $4.67 per share. The Units are no longer traded as
units, and the Common Stock and Redeemable Public Warrants composing the Units
are separately transferrable.

COMMON STOCK

The Company, a Delaware corporation, is authorized to issue nine million
(9,000,000) shares of Common Stock, par value $.01 per share. At the date of
this Prospectus the Company has five million, six hundred and six thousand,
nine hundred thirteen (5,606,913) shares of Common Stock outstanding. Upon
payment in full of the subscription price therefor, the shares of Common Stock
are not subject to further assessment or call.

The following summary description of the Common Stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation, as
amended. The holders of the Common Stock are entitled to one vote for each
share held of

34
<PAGE>

record on each matter submitted to a vote of stockholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock that may from time to time be outstanding, if any,
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the Board of Directors out of funds legally available therefor,
and, in the event of liquidation, dissolution or winding up of the Company, are
entitled to share ratably in all assets remaining after payment of liabilities.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is,
and the Common Stock to be outstanding upon completion of this offering will
be, validly issued, fully paid and nonassessable.

REDEEMABLE PUBLIC WARRANTS

Each Redeemable Public Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $4.67 per share, subject to
adjustment in the event of certain occurrences, such as stock dividends, splits
and combinations. The Redeemable Public Warrants are exercisable until October
30, 1998, by surrendering the certificate representing the Redeemable Public
Warrant to the Company, or its authorized transfer agent, with the subscription
form attached thereto properly completed and executed together with payment in
full by certified or bank teller's check of the aggregate exercise price of all
the Redeemable Public Warrants then exercised. The Redeemable Public Warrants
are redeemable by the Company at a price of one cent ($.01) per Redeemable
Public Warrant, provided that (i) notice of redemption is given to the
Redeemable Public Warrantholder not less than thirty days prior to the date
fixed for redemption; (ii) the aggregate average of the closing bid and asked
quotations of the Common Stock shall have been at least 25% above the
Redeemable Public Warrant Exercise Price per share for the twenty trading days
ending on the third day prior to the day on which notice of redemption is
given; and (iii) holders of the Redeemable Public Warrants shall be entitled to
exercise Redeemable Public Warrants until the close of business on the day
prior to the date fixed for redemption.

The Company may at any time, and from time to time, extend the exercise
period of the Redeemable Public Warrants provided that written notice of such
extension is given to the Redeemable Public Warrantholders prior to the
expiration date then in effect. Also, the Company may reduce the exercise price
of the Redeemable Public Warrants for limited periods of time through the end
of the exercise period. Changes in the terms of outstanding Redeemable Public
Warrants may constitute an offering of a new security for which an appropriate
registration statement (or post-effective amendment to the registration
statement of which this Prospectus is a part) would have to be filed and
declared effective prior to any exercise under such changed terms. In addition,
the Company may be deemed to be engaged in a self tender offer or a going
private transaction, which would result in additional required filings. The
Company must give notice of any reduction of the exercise price to the
Redeemable Public Warrantholders.

Each Redeemable Public Warrant is separately traded and quoted. No
assurance can be given, however, that any trading market for the Redeemable
Public Warrants will continue. Upon the expiration of the Redeemable Public
Warrants following the exercise period referred to above, any market that might
have existed for the Redeemable Public Warrants will terminate.

The exercise price of the Redeemable Public Warrants and the number of
shares issuable upon exercise will be adjusted upon the occurrence of certain
events, including (a) the issuance of dividends payable in Common Stock, (b)
subdivisions or combinations of the Common Stock, (c) the issuance of rights or
options entitling the holder to acquire shares of Common Stock at less than the
then current market price and the then current Redeemable Warrant Exercise
Price, and (d) the issuance of shares of Common Stock or of obligations or
other securities convertible into or exchangeable for shares of Common Stock,
in each case for a consideration less than the then current market price and
the then current Redeemable Warrant Exercise Price; provided that no adjustment
will be required for the issuance of shares upon the exercise of conversion,
option, warrant or other rights currently outstanding and described elsewhere
in this Prospectus, and no adjustment will be required in the event that a
merger or acquisition is undertaken by the Company, and no adjustment will be
required upon the issuance or exercise of options under a bona fide employee
stock option plan and in certain other circumstances.

The Redeemable Public Warrants have been issued pursuant to a Warrant
Agreement between the Company and Corporate Stock Transfer, Inc., as Warrant
agent. Corporate Stock Transfer, Inc. acts as the Company's transfer agent for
its Common Stock. The foregoing brief description of the Redeemable Public
Warrants is a summary of the rights and privileges of Redeemable Public
Warrantholders, does not purport to be complete and is qualified in its
entirety by reference to the Warrant Agreement, a copy of the form of which is
an exhibit to the Registration Statement of which this Prospectus forms a part.

35
<PAGE>

UNDERWRITER'S WARRANTS

The Company granted to the underwriter of its initial public offering of
securities five-year Underwriter's Warrants to purchase up to 50,783 Units
exercisable until September 9, 1999, at $8.40 per Unit, subject to adjustment
in the event of certain occurrences, such as stock dividends, splits and
combinations. The Underwriter's Warrants also contain certain provisions
further protecting the holder against dilution.

The Underwriter's Warrants may be exercised by surrendering the
certificate representing the Underwriter's Warrants to the Company, or its
authorized transfer agent, with the subscription form attached thereto properly
completed and executed together with payment in full of the aggregate exercise
price. The Underwriter's Warrants and the securities underlying them are
covered by the Registration Statement of which this Prospectus is a part.

PREFERRED STOCK

The Company is authorized to issue 100,000 shares of Preferred Stock, none
of which is outstanding, and the Company has no current understanding to issue
any of such Preferred Stock. The Board of Directors of the Company is vested
with authority to divide the authorized shares of Preferred Stock into one or
more series of such shares and to fix and determine the relative rights and
preferences of any such series. A series of such shares may, among other
matters, establish (a) the number of shares of Preferred Stock to constitute
such series and the designations thereof; (b) the rate and preference of
dividends, if any, the time of payment of dividends, whether dividends are
cumulative and the date from which any dividend shall accrue; (c) whether
Preferred Stock may be redeemed, and, if so, the redemption price and the terms
and conditions of redemption; (d) the liquidation preferences payable on
Preferred Stock in the event of liquidation; (e) sinking fund or other
provisions, if any, for redemption or purchase of such shares; (f) the terms
and conditions by which Preferred Stock may be converted, if the series is
issued with the privilege of conversion; and (g) voting rights, if any. The
Board of Directors, without the approval of the Company's shareholders, has the
power to authorize the issuance of Preferred Stock with voting and conversion
rights that could adversely affect the voting power of the Common Stock. See
"RISK FACTORS -- The Issuance of Preferred Stock that does not Require Approval
of the Shareholders."

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

BDO Seidman, LLP was dismissed as the independent accountants of the
Company as of September 16, 1997. Such former independent accountants' report
on the financial statements of the Company for the prior year did not contain
an adverse opinion or disclaimer of opinion, and was not modified as to
uncertainty, audit scope or accounting principles. The decision to replace the
Company's independent accountants was made by the Company's Board of Directors.
There was no disagreement with the former accountants, either that was resolved
or that remained unresolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. On
September 16, 1997, the Company engaged Arthur Andersen, LLP as its new
independent certified public accountants.

LEGAL MATTERS

The legality of the securities offered hereby has been passed on for the
Company by Akabas & Cohen, 488 Madison Avenue, 11th floor, New York, NY 10022.
Akabas & Cohen is the beneficial and record owner of 8,081 shares, and Seth
Akabas is the beneficial and record owner of 885 shares, of the Company's
Common Stock. Seth Akabas, a partner in the law firm of Akabas & Cohen, is a
director of the Company.

In addition, in regard to questions as to whether the Company has properly
treated affiliated financial planners who serve the Company as common law
employees, the Company has relied in part on the authority of its counsel,
Akabas & Cohen, which has prepared an opinion to such effect, a copy of which
is filed as an exhibit to the registration statement of which this Prospectus
is a part.

EXPERTS

The financial statements included in this registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.

36
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the office of the Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, its Registration
Statement on Form SB-2 (Registration No. 33-80627 under the Securities Act of
1933, with respect to the securities offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information, reference is hereby made to the Registration Statement.
Statements contained in the Prospectus as to the contents of any document are
not necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement and such other reports filed by the Company may be
inspected without charge at the Public Reference Section of the Commission in
Washington D.C. at the address set forth above, at the Commission's regional
office in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60604, and at the Commission's office at 7 World Trade Center, New York, NY
10048, and copies of all or any part thereof may be obtained from the
Commission at prescribed rates. Copies of this filing, reports, proxy and
information statements and other information regarding the Company are
available on the Commission's website at http://www.sec.gov.

Any document or part thereof which is incorporated by reference within
this Prospectus and not delivered herewith, will be provided, without charge,
to each person, including any beneficial owner, to whom a Prospectus is
delivered, upon written or oral request of such person; however, exhibits to
documents that are incorporated by reference shall not be furnished unless such
exhibits are specifically incorporated by reference into the information that
the Prospectus incorporates. Such information may be obtained by writing the
Company at 475 Northern Boulevard, Great Neck, NY 11021, telephone (516)
482-4860, Attn: Secretary.

37
<PAGE>

INDEX TO FINANCIAL STATEMENTS

PAGE
-----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS .................. F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet ............................... F-3
Consolidated Statements of Operations .................... F-4
Consolidated Statements of Cash Flows .................... F-5
Consolidated Statements of Stockholders' Equity .......... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................ F-7

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GILMAN & CIOCIA, INC. AND SUBSIDIARIES:

We have audited the accompanying consolidated balance sheet of Gilman & Ciocia,
Inc. and subsidiaries as of June 30, 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended June 30, 1997 and 1996 as restated-see Note 2(i). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gilman & Ciocia, Inc. and
subsidiaries as of June 30, 1997, and the results of their operations and their
cash flows for the years ended June 30, 1997 and 1996 in conformity with
generally accepted accounting principles.

New York, New York
April 3, 1998 (except with respect to
the matter discussed in Note 2(i), as
to which the date is September 15, 1998).

F-2
<PAGE>

GILMAN & CIOCIA, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
-------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ..................................................................................... $ 2,159,571 $2,920,489
Marketable securities .................................................................... 18,350 49,658
Accounts receivable, net of allowance for doubtful accounts of $100,000 (March 31, 1998)
and $87,500 (June 1997) ................................................................. 5,069,590 1,109,535
Receivables from related parties, current portion ........................................ 250,074 373,039
Prepaid expenses and other current assets ................................................ 1,231,083 451,968
----------- ----------
Total current assets ..................................................................... 8,728,668 4,904,689
PROPERTY AND EQUIPMENT, net .............................................................. 2,009,003 1,679,106
INTANGIBLE ASSETS, net of accumulated amortization of $655,518 (March 31, 1998) and
$468,249 (June 30, 1997) ................................................................ 1,104,203 1,147,297
ADVANCES AND NOTES RECEIVABLE FROM FINANCIAL PLANNERS, Net of current portion ............ 89,427 169,239
RECEIVABLES FROM RELATED PARTIES, net of current portion ................................. 439,903 447,806
DEFERRED TAX ASSETS ...................................................................... 167,899 27,899
OTHER ASSETS ............................................................................. 685,316 649,540
----------- ----------
Total assets ............................................................................. $13,224,419 $9,025,576
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings .................................................................... $ 1,883,331 $ 899,487
Accounts payable ......................................................................... 310,708 168,210
Accrued expenses and other current liabilities ........................................... 1,161,247 318,690
Income taxes payable ..................................................................... 943,548 68,200
----------- ----------
Total current liabilities ................................................................ 4,298,834 1,454,587
----------- ----------
LONG-TERM LIABILITIES:
Long-term borrowings ..................................................................... 250,002 552,000
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
Preferred stock -- $.001 par value--shares authorized 100,000; none issued and
outstanding ............................................................................. -- --
Common stock -- $.01 par value--shares authorized 9,000,000; issued 5,606,913 shares
(March 31, 1998) and 5,578,913 shares (June 30, 1997) ................................... 56,069 55,789
Paid-in capital .......................................................................... 6,314,334 6,231,555
Retained earnings ........................................................................ 3,244,926 1,593,369
Less -- Treasury Stock, at cost; 211,315 shares (March 31, 1998) and 157,433 shares
(June 30, 1997) ......................................................................... (784,782) (638,556)
----------- ----------
8,830,547 7,242,157
Stock subscriptions and accrued interest receivable ...................................... (154,964) (223,168)
----------- ----------
Total stockholders' equity ............................................................... 8,675,583 7,018,989
----------- ----------
Total liabilities and stockholders' equity ............................................... $13,224,419 $9,025,576
=========== ==========
</TABLE>

The accompanying notes are an integral part of this consolidated statement.

F-3
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, YEARS ENDED JUNE 30,
----------------------------- ---------------------------
1998 1997 1997 1996
-------------- -------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
RESTATED RESTATED RESTATED RESTATED
<S> <C> <C> <C> <C>
REVENUES:
Tax preparation fees ...................................... $ 8,718,884 $ 7,987,260 $ 9,921,967 $ 8,147,986
Financial planning commissions ............................ 11,429,991 8,580,847 12,464,284 10,683,765
Direct mail services ...................................... 1,561,538 1,774,605 2,188,320 2,689,786
----------- ----------- ----------- -----------
Total revenues ............................................ 21,710,413 18,342,712 24,574,571 21,521,537
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Salaries and commissions .................................. 10,667,524 9,965,253 13,083,818 11,701,951
General and administrative expenses ....................... 2,902,443 2,765,268 3,572,901 3,054,568
Advertising ............................................... 2,551,734 2,736,373 2,819,941 2,585,125
Direct mail costs ......................................... 720,411 961,780 1,136,347 1,682,108
Rent ...................................................... 1,529,682 1,413,391 1,884,768 1,502,788
Depreciation and amortization ............................. 609,008 599,366 785,922 525,468
Reimbursement of financial planning expenses .............. -- -- -- (125,000)
----------- ----------- ----------- -----------
Total operating expenses .................................. 18,980,802 18,441,431 23,283,697 20,927,008
----------- ----------- ----------- -----------
Operating income (loss) ................................... 2,729,611 (98,719) 1,290,874 594,529
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES):
Income (loss) from investment in partnership .............. 29,129 26,962 73,127 198,165
Interest income ........................................... 61,151 47,332 77,162 91,435
Interest expense .......................................... (152,679) (132,922) (201,534) (107,111)
Rental income ............................................. 8,100 7,179 16,557 19,180
Realized gain (loss) on sale of marketable securities ..... (16,213) -- 6,580 91,175
Unrealized gain (loss) on marketable securities ........... (6,630) -- 6,828 --
Other income .............................................. 32,088 -- -- --
----------- ----------- ----------- -----------
Total other income (expense) .............................. (45,054) (51,449) (21,280) 292,844
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES ........... 2,684,557 (150,168) 1,269,594 887,373
PROVISION FOR INCOME TAXES ................................ 1,033,000 (57,617) 393,600 352,647
----------- ----------- ----------- -----------
Net income (loss) ......................................... $ 1,651,557 $ (92,551) $ 875,994 $ 534,726
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE:
Basic ................................................... $ 0.31 $ (0.02) $ .16 $ .10
Diluted ................................................. 0.28 (0.02) .16 .09
WEIGHTED AVERAGE SHARES:
Basic ................................................... 5,377,010 5,492,696 5,479,611 5,606,804
Diluted ................................................. 5,975,024 5,492,696 5,572,854 6,168,870
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
-------------------------------
1998 1997
--------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................................... $ 1,651,557 $ (92,551)
Adjustments To Reconcile Net Income (Loss) To Net Cash Provided By
(Used In) Operating Activities:
Compensation expense recognized in connection with the reissuance of
treasury stock and the issuance of stock options ....................... 47,550 17,463
Depreciation and amortization ........................................... 550,068 599,366
(Income) loss from investment in partnership ............................ (9,379) 26,962
Deferred tax (benefit) provision ........................................ (140,000) (100,344)
Compensation expense recognized in connection with the forgiveness of
officers' loans ........................................................ -- 121,953
Loss (gain) on sale of marketable securities ............................ 16,213 --
Compensation expense recognized in connection with amortization of
advances to financial planners ......................................... 119,004 209,032
Provisions for doubtful accounts ........................................ 12,500 147,188
Interest on stock subscriptions ......................................... (7,643) (23,725)
Gain on disposal of property and equipment ..............................
Unrealized (gain) loss on marketable securities ......................... 6,692 --
Proceeds from sale of marketable securities ............................. 22,323 --
(Increase) Decrease In:
Accounts receivable ..................................................... (3,972,555) (2,518,402)
Advances to financial planners .......................................... (1,169) (105,615)
Security deposits ....................................................... (26,397) (8,781)
Prepaid expenses and other current assets ............................... (795,456) 34,693
Accounts payable, accrued expenses and other current liabilities ........ 1,860,341 852,809
Income taxes payable ....................................................
Net cash (used in) provided by operating activities ..................... (666,351) (839,952)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................... (692,696) (593,762)
Acquisition of intangible assets ........................................ (144,176) (404,065)
Investments ............................................................. (13,858) --
Investment in partnership ............................................... 252,323
Proceeds from sales of investments ...................................... -- --
Proceeds from related party transactions ................................ 109,187 271,930
Payments to related parties ............................................. (79,000)
-------------
Net cash (used in) investing activities ................................. (741,543) (552,574)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock ........................................... (146,226) (684,513)
Proceeds from bank and other loans ...................................... 3,000,000 3,700,000
Payments of bank and other loans ........................................ (2,318,154) (791,450)
Proceeds from sale of common stock and exercise of stock options ........ 35,508 92,012
Proceeds from stock subscriptions ....................................... 75,848 228,353
Incurrence of deferred registration costs ............................... -- --
------------- -------------
Net cash provided by financing activities ............................... 646,976 2,544,402
------------- -------------
Net (decrease) increase in cash ......................................... (760,918) 1,151,876
CASH, Beginning Of Period ............................................... 2,920,489 2,221,795
------------- -------------
CASH, end of period ..................................................... $ 2,159,571 $ 3,373,671
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest ................................................................ $ 152,679 $ 132,752
Income taxes ............................................................ 35,940 439,724
Noncash Transactions:
Liquidation of investment in partnership into marketable securities ..... -- --
Reissuance of treasury stock at fair value .............................. 32,897 --
Issuance of common stock in exchange for stock subscriptions
receivable ............................................................. -- --
Acquisition of treasury stock and write-off of stock subscriptions
receivable ............................................................. -- --
Retirement of all outstanding treasury stock ............................ -- --

<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ....................................................... $ 875,994 $ 534,726
Adjustments To Reconcile Net Income (Loss) To Net Cash Provided By
(Used In) Operating Activities:
Compensation expense recognized in connection with the reissuance of
treasury stock and the issuance of stock options ....................... 41,551 232,782
Depreciation and amortization ........................................... 785,922 525,468
(Income) loss from investment in partnership ............................ (73,127) (198,165)
Deferred tax (benefit) provision ........................................ 105,686 (133,585)
Compensation expense recognized in connection with the forgiveness of
officers' loans ........................................................ -- 123,899
Loss (gain) on sale of marketable securities ............................ (6,580) (91,175)
Compensation expense recognized in connection with amortization of
advances to financial planners ......................................... 235,013 79,851
Provisions for doubtful accounts ........................................ 41,526 99,175
Interest on stock subscriptions ......................................... (27,108) (22,433)
Gain on disposal of property and equipment .............................. -- (9,000)
Unrealized (gain) loss on marketable securities ......................... (6,828) --
Proceeds from sale of marketable securities ............................. 32,580 2,186,925
(Increase) Decrease In:
Accounts receivable ..................................................... (174,375) (441,136)
Advances to financial planners .......................................... (78,214) (653,768)
Security deposits ....................................................... (16,872) (100,486)
Prepaid expenses and other current assets ............................... (115,009) 26,786
Accounts payable, accrued expenses and other current liabilities ........ (109,312) 461,998
Income taxes payable .................................................... 5,598 --
------------- -------------
Net cash (used in) provided by operating activities ..................... 1,516,445 2,621,862
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................... (592,362) (900,385)
Acquisition of intangible assets ........................................ (487,442) (730,076)
Investments ............................................................. (150,000) (448,360)
Investment in partnership ...............................................
Proceeds from sales of investments ...................................... 378,009 --
Proceeds from related party transactions ................................ 398,545 152,655
Payments to related parties ............................................. (676,250) (494,220)
------------- -------------
Net cash (used in) investing activities ................................. (1,129,500) (2,420,386)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock ........................................... (733,200) --
Proceeds from bank and other loans ...................................... 3,602,000 2,297,222
Payments of bank and other loans ........................................ (2,859,262) (2,000,000)
Proceeds from sale of common stock and exercise of stock options ........ 100,857 76,526
Proceeds from stock subscriptions ....................................... 261,954 310,809
Incurrence of deferred registration costs ............................... (60,600) --
------------- -------------
Net cash provided by financing activities ............................... 311,749 684,557
------------- -------------
Net (decrease) increase in cash ......................................... 698,694 886,033
CASH, Beginning Of Period ............................................... 2,221,795 1,335,762
------------- -------------
CASH, end of period ..................................................... $ 2,920,489 $ 2,221,795
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest ................................................................ $ 196,405 $ 107,184
Income taxes ............................................................ 449,276 224,235
Noncash Transactions:
Liquidation of investment in partnership into marketable securities ..... 68,830 --
Reissuance of treasury stock at fair value .............................. 94,644 --
Issuance of common stock in exchange for stock subscriptions
receivable ............................................................. -- 40,000
Acquisition of treasury stock and write-off of stock subscriptions
receivable ............................................................. -- 67,590
Retirement of all outstanding treasury stock ............................ -- 479,465
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE, July 1, 1995 ................. 5,634,864 $ 56,348 $5,815,194 $ 660,838
Purchase of treasury stock ............ -- -- -- --
Retirement of treasury stock .......... (127,558) (1,276) -- (478,189)
Issuance of common stock .............. 26,307 263 53,063 --
Exercise of stock options ............. 10,000 100 23,100 --
Compensation recognized in
connection with the issuance of
stock options ........................ -- -- 232,782 --
Repayments of stock subscriptions ..... -- -- -- --
Issuance of stock subscriptions ....... 6,969 70 39,930 --
Accrued interest income ............... -- -- -- --
Accrued tax benefit related to
exercise of common stock options -- -- 20,006 --
Net income ............................ -- -- -- 534,726
--------- -------- ---------- ----------
BALANCE, June 30, 1996 ................ 5,550,582 55,505 6,184,075 717,375
Purchase of treasury stock ............ -- -- -- --
Reissuance of treasury stock .......... -- -- (53,093) --
Issuance of common stock .............. 28,331 284 100,573 --
Repayments of stock subscriptions ..... -- -- -- --
Accrued interest income ............... -- -- -- --
Net income ............................ -- -- -- 875,994
--------- -------- ---------- ----------
BALANCE, June 30, 1997 ................ 5,578,913 55,789 6,231,555 1,593,369
Repayments of stock subscriptions ..... -- -- -- --
Purchase of treasury stock ............ -- -- -- --
Compensation recognized in
connection with reissuance of
common stock ......................... 28,934
Exercise of stock options ............. 28,000 280 53,845 --
Accrued interest income ............... -- -- -- --
Net Income ............................ -- -- -- 1,651,557
--------- -------- ---------- ----------
BALANCE, March 31, 1998
(unaudited) .......................... 5,606,913 $ 56,069 $6,314,334 $3,244,926
========= ======== ========== ==========

<CAPTION>
STOCK
SUBSCRIPTIONS
AND
ACCRUED TREASURY STOCK TOTAL
INTEREST ---------------------------- STOCKHOLDERS'
RECEIVABLE SHARES AMOUNT EQUITY
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
BALANCE, July 1, 1995 ................. $ (773,980) 116,964 $ (411,875) $5,346,525
Purchase of treasury stock ............ 67,590 10,594 (67,590) --
Retirement of treasury stock .......... -- (127,558) 479,465 --
Issuance of common stock .............. -- -- -- 53,326
Exercise of stock options ............. -- -- -- 23,200
Compensation recognized in
connection with the issuance of
stock options ........................ -- -- -- 232,782
Repayments of stock subscriptions ..... 310,809 -- -- 310,809
Issuance of stock subscriptions ....... (40,000) -- -- --
Accrued interest income ............... (22,433) -- -- (22,433)
Accrued tax benefit related to
exercise of common stock options -- -- -- 20,006
Net income ............................ -- -- -- 534,726
---------- -------- ---------- ----------
BALANCE, June 30, 1996 ................ (458,014) -- -- 6,498,941
Purchase of treasury stock ............ -- 175,900 (733,200) (733,200)
Reissuance of treasury stock .......... -- (18,467) 94,644 41,551
Issuance of common stock .............. -- -- -- 100,857
Repayments of stock subscriptions ..... 261,954 -- -- 261,954
Accrued interest income ............... (27,108) -- -- (27,108)
Net income ............................ -- -- -- 875,994
---------- -------- ---------- ----------
BALANCE, June 30, 1997 ................ (223,168) 157,433 (638,556) 7,018,989
Repayments of stock subscriptions ..... 75,847 -- -- 75,847
Purchase of treasury stock ............ -- 60,700 (179,123) (179,123)
Compensation recognized in
connection with reissuance of
common stock ......................... (6,818) 32,897 61,831
Exercise of stock options ............. -- -- -- 54,125
Accrued interest income ............... (7,643) -- -- (7,643)
Net Income ............................ -- -- -- 1,651,557
---------- -------- ---------- ----------
BALANCE, March 31, 1998
(unaudited) .......................... $ (154,964) 211,315 $ (784,782) $8,675,583
========== ======== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION PERTAINING TO THE NINE-MONTH PERIODS
ENDED MARCH 31, 1998 AND 1997 IS UNAUDITED)

1. ORGANIZATION AND NATURE OF BUSINESS

BUSINESS

Gilman & Ciocia, Inc. and subsidiaries (the "Company"), which is
incorporated in Delaware, provides income tax preparation and financial
planning services to individuals and businesses as well as direct mail services
through its Progressive Mailing Services ("Progressive") division. The Company
has three wholly owned subsidiaries, two of which are inactive. The active
subsidiary, JT Securities, Inc. ("JT"), is a registered broker-dealer pursuant
to the provisions of the Securities Exchange Act of 1934.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany transactions have
been eliminated.

The Company's investments in 20% to 50% owned companies in which it has
the ability to exercise significant influence over operating and financial
policies are accounted for on the equity method. Accordingly, the Company's
share of the earnings of these companies is included in consolidated net
income.

(B) USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

The Company has classified its short-term investments in debt instruments
as trading securities that are reported at fair value with unrealized gains and
losses included in earnings.

(D) ADVANCES TO FINANCIAL PLANNERS

The Company entered into agreements with independent financial planners
("Planners"), which require the Planners to become captive agents of the
Company. In connection therewith, the Company advanced funds to financial
planners. The agreements require the advances to be forgiven over three years
as long as the Planners remain with the Company. As such, all advances are
amortized on a straight-line basis over three years.

(E) PROPERTY AND EQUIPMENT

Property and equipment are carried at cost. Depreciation and amortization
are determined using straight-line or accelerated methods over the estimated
useful lives of the assets or, for leasehold improvements, over the lease terms
which range from one to seven years.

(F) INTANGIBLE ASSETS

Intangible assets represent the costs of $1,759,721 and $1,615,546 for
March 31, 1998 and June 30, 1997, respectively, to acquire lists of customer
accounts and related covenants not to compete. Amortization expense is computed
on a straight-line basis over a period of five years, and amounted to $188,269,
$299,183, $274,613, $190,817 for the nine-month periods ended March 31, 1998
and 1997 and the years ended June 30, 1997 and 1996, respectively.

The Company's operational policy for the assessment and measurement of any
impairment in the value of the intangible assets acquired which is other than
temporary is to evaluate the recoverability and remaining life of the
intangible assets and determine whether the intangible assets should be
completely or partially written-off or the amortization period accelerated. The
Company will recognize impairment in the value of the intangible assets if the
undiscounted estimated

F-7
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

future operating cash flows of the relevant assets acquired are determined to
be less than their carrying amount. If the Company determines that impairment
has occurred, the measurement of the impairment will be equal to the excess of
the carrying amount of the intangible assets over the amount of the discounted
estimated operating cash flows.

For the nine month periods ended March 31, 1998 and 1997 and the years
ended June 30, 1997 and 1996, the Company acquired customer lists and entered
into non-competition agreements for approximately $145,000, $315,000, $487,000
and $730,000, respectively.

(G) IMPAIRMENT OF LONG-LIVED ASSETS

During March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of." The Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that full recoverability is questionable.
Management evaluates the recoverability of its intangible assets and other
long-lived assets and several factors are used in the valuation including, but
not limited to, management's plans for future operations, recent operating
results and projected cash flows. The Company adopted SFAS No. 121 in fiscal
1997, the adoption of which did not have any effect on the results of
operations or financial condition.

(H) DEFERRED RENT

Certain of the Company's lease agreements provide for scheduled rent
increases during the lease term or for rental payments commencing at a date
other than initial occupancy. Provision has been made for the excess of
operating lease rental expense, computed on a straight-line basis over the
lease term, over cash rentals paid.

(I) REVENUE RECOGNITION

The Company recognizes all revenues upon completion of the services
associated with income tax preparation and direct mail services. Commission
revenue on securities transactions are on a trade date basis.

The consolidated statements of operations for the nine months ended March
31, 1998 and 1997 and the years ended June 30, 1997 and 1996 have been restated
to reflect the total of the commission revenue received (approximately 47%) and
the commissions paid by Royal Alliance, Inc. ("Royal") directly to the
financial planners (approximately 53%) as the Company's revenue from financial
planning services. The increase in commission revenue of $4,776,344 and
$3,915,684 for the nine months ended March 31, 1998 and 1997, respectively, and
$5,502,682 and $5,011,860 for the years ended June 30, 1997 and 1996,
respectively, is offset by an increase in commission expense by the same
amount. Accordingly, this restatement had no effect on the Company's
consolidated financial position, net income (loss) or cash flows.

(J) ADVERTISING

Costs to develop advertising are accumulated and expensed upon the first
mailing of such advertising in accordance with SOP 93-7. Costs to develop the
program and associated printing and paper costs are deferred in the first and
second fiscal quarters and expensed in the third fiscal quarter upon the first
use of such advertisement in the advertising program.

(K) REIMBURSEMENT OF FINANCIAL PLANNING EXPENSES

Based on an employment agreement between the Company and one of its
managers, the manager was required to reimburse the Company for certain
expenses incurred on behalf of the Company should he fail to achieve certain
gross revenue criteria. Based on these criteria, the Company was entitled to be
reimbursed for $125,000 of these expenses in fiscal 1996. The Company offset
the manager's earnings by this amount in fiscal 1997.

(L) INCOME TAXES

Income taxes have been provided using the liability method in accordance
with SFAS No. 109 "Accounting for Income Taxes." Under SFAS 109, deferred tax
assets and liabilities are determined based on differences between the
financial reporting and tax basis of assets and liabilities and are measured by
applying estimated tax rates and laws to taxable years in which such
differences are expected to reverse.

F-8
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

(M) STOCK-BASED COMPENSATION

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock Based Compensation," encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation awards to employees using the intrinsic value method prescribed in
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations. Accordingly, compensation
cost for stock options awarded to key employees and directors is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the amount an employee or director must pay to acquire the
stock.

As required, the Company has adopted SFAS No. 123 to account for
stock-based compensation awards to outside consultants. Accordingly,
compensation costs for stock option awards granted to outside consultants and
non-employee financial planners is measured at the date of grant based on the
fair value of the award using the Black-Scholes option pricing model. (Note 9).

(N) NET INCOME PER SHARE

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per
Share." This statement establishes new standards for computing and presenting
earnings per share (EPS), replacing the presentation of primary EPS with a
presentation of basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both basic EPS and diluted EPS on
the face of the statement of operations. Under this new standard, basic EPS is
computed based on weighted average shares outstanding and excludes any
potential dilution. Diluted EPS reflects potential dilution from the exercise
or conversion of securities into common stock or from other contracts to issue
common stock. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, and earlier application is not permitted. The
Company has adopted Statement No. 128 for the nine month period ended March 31,
1998 and has restated its weighted-average shares for all prior periods
presented.

A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net earnings is as follows:

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, 1998 NINE MONTHS ENDED MARCH 31, 1997
------------------------------------ ------------------------------------
PER SHARE PER SHARE
NET INCOME SHARES AMOUNTS NET LOSS SHARES AMOUNTS
------------ ----------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS ........................ $1,651,557 5,377,010 $ 0.31 $ (92,551) 5,492,696 $ (0.02)
Dilutive Stock Options & Warrants. 598,014
---------
Diluted EPS ...................... $1,651,557 5,975,024 $ 0.28 $ (92,551) 5,492,696 $ (0.02)
========= =========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997 YEAR ENDED JUNE 30, 1996
------------------------------------ -----------------------------------
PER SHARE PER SHARE
NET INCOME SHARES AMOUNTS NET INCOME SHARES AMOUNTS
------------ ----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS ........................ $875,994 5,479,611 $ 0.16 $534,726 5,606,804 $ 0.10
Dilutive Stock Options & Warrants. 93,243 562,066
--------- ---------
Dilutive EPS ..................... $875,994 5,572,854 $ 0.16 $534,726 6,168,870 $ 0.09
========= =========
</TABLE>

F-9
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

The potentially dilutive shares that were not included in the computation
of diluted earnings per share because to do so would be antidilutive consist of
stock options and warrants as follows:

OPTIONS/WARRANTS
-----------------
Nine Months Ended March 31, 1998 .. 590,000
Nine Months Ended March 31, 1997 .. 2,006,277
Year Ended June 30, 1997 .......... 2,026,277
Year Ended June 30, 1996 .......... 2,282,277

(O) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of financial instruments, including cash, marketable
securities, accounts receivable, notes receivable, accounts payable and
borrowings, approximated fair value as of March 31, 1998 and June 30, 1997,
because of the relatively short-term maturity of these instruments and their
market interest rates.

(P) INTERIM PERIODS PRESENTED

The interim consolidated financial statements for the nine months ended
March 31, 1998 and 1997 are unaudited. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
fair presentation have been included. Operating results for the nine month
period ended March 31, 1998, are not necessarily indicative of the results that
may be expected for the year ending June 30, 1998.

3. RECEIVABLES FROM RELATED PARTIES

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
Notes receivable from officers/stockholders of the Company that are
due in aggregate bi-weekly installments of $2,295 (including interest
at 7% per annum) commencing October 3, 1997 through June 30, 2000. .................... $240,813 $350,000
Notes receivable of $52,250 and $100,000 from independent
contractors/stockholders of the Company due on December 18, 1998 and
June 19, 1999, respectively. Interest is charged at 9% and 6% per annum, respectively. 160,125 152,250
Receivable from stockholder of the Company, due in bi-weekly
installments of $3,156 through June 15, 1999........................................... 98,284 147,362
Note receivable from stockholder of the Company due on October 8, 1999
Interest is charged at 8% per annum ................................................... 119,989 113,989
Other ................................................................................... 70,766 57,244
-------- --------
689,977 820,845
Less -- Current portion ................................................................. 250,074 373,039
-------- --------
$439,903 $447,806
======== ========
</TABLE>

Interest income from these receivables was approximately $33,000, $10,000,
$10,000, and $13,000 for the nine-month periods ended March 31, 1998 and 1997
and the years ended June 30, 1997 and 1996, respectively.

F-10
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. ADVANCES AND NOTES RECEIVABLE -- FINANCIAL PLANNERS
Advances and notes receivable -- financial planners consist of the
following:

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
Unamortized portion of non-interest bearing advances to
financial planners ....................................... $191,079 $287,232
Notes receivable from financial planner due December 4, 1998
Interest is charged at 6% per annum ...................... 57,500 57,500
-------- --------
248,579 344,732
Less -- Current portion .................................... 159,152 175,493
-------- --------
$ 89,427 $169,239
======== ========
</TABLE>

5. PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------- -------------
<S> <C> <C>
Buildings ................................................ $ 405,866 $ 402,367
Equipment ................................................ 2,677,621 2,038,237
Furniture and fixtures ................................... 400,780 367,484
Leasehold improvements ................................... 199,932 183,415
---------- ----------
3,684,199 2,991,503
Less -- Accumulated depreciation and amortization ........ 1,675,196 1,312,397
---------- ----------
$2,009,003 $1,679,106
========== ==========
</TABLE>

For the nine-month periods ended March 31, 1998 and 1997 and the years
ended June 30, 1997 and 1996, depreciation and amortization expense from
property and equipment was approximately $421,000, $300,000, $394,000 and
$321,000, respectively.

6. OTHER ASSETS

Other assets consist of the following:

MARCH 31, JUNE 30,
1998 1997
----------- -----------
Investment in ATM Partners, LP (Note 10) ......... $256,386 $271,870
Security deposits ................................ 253,125 226,724
Other assets ..................................... 175,805 150,946
-------- --------
$685,316 $649,540
======== ========

F-11
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. BANK DEBT
Bank debt consists of the following:

MARCH 31, JUNE 30,
1998 1997
------------- ------------
Bank line of credit ................... $1,500,000 $ 500,000
Term loan ............................. 583,333 833,333
Notes payable -- other ................ 50,000 118,154
---------- ----------
2,133,333 1,451,487
Less -- Short-term borrowings......... 1,883,331 899,487
---------- ----------
$ 250,002 $ 552,000
========== ==========

The Company has a bank line of credit which provides for borrowings up to
a maximum amount of $2,500,000 and expires on October 31, 1998. The line of
credit is guaranteed by the four principal stockholders of the Company. At
March 31, 1998 and June 30, 1997, the Company had borrowings of $1,500,000 and
$500,000 outstanding, respectively, under this line of credit. Interest is
charged at the prime rate (8.5% at March 31, 1998 and June 30, 1997) plus 1.5%.

The Company also has a $1,000,000 term loan with the bank which requires
monthly payments of $27,778 plus interest at the prime rate (8.5% at March 31,
1998 and June 30, 1997) plus 1.75% through December 17, 1999. The loan is
collateralized by all of the Company's assets. At March 31, 1998 and June 30,
1997, the Company's outstanding balance under this loan was $583,333 and
$833,333, respectively.

8. COMMITMENTS AND CONTINGENCIES

LEASES

The Company is obligated under various noncancelable lease agreements for
the rental of office space and equipment through 2002. The lease agreements for
office space contain escalation clauses based principally upon real estate
taxes, building maintenance and utility costs. The following is a schedule by
fiscal year of future minimum rental payments required under operating leases
as of June 30, 1997.

1998 ......... 1,512,988
1999 ......... 1,059,640
2000 ......... 723,293
2001 ......... 415,111
2002 ......... 129,104
---------
3,840,136
=========

PROFESSIONAL LIABILITY OR MALPRACTICE INSURANCE

The Company does not maintain any professional liability or malpractice
insurance policy. Although the Company believes it complies with all applicable
laws and regulations, no assurance can be given that the Company will not be
subject to professional liability or malpractice suits.

CLEARING AGREEMENTS

The clearing agreement with the Broker states that JT will assume customer
obligations should a customer of JT default. At March 31, 1998 and June 30,
1997, approximately $25,000 of cash is held as a deposit requirement by the
Broker.

NET CAPITAL REQUIREMENTS

JT is subject to the SEC's Uniform Net Capital Rule 15c 3-1, which
requires the maintenance of minimum regulatory net capital and requires that
the ratio of aggregate indebtedness to net capital, both as defined, shall not
exceed 15 to 1. At March 31, 1998 and June 30, 1997, JT had net capital of
$300,161 and $2,007,331, respectively, which was $275,161 and $1,982,331,
respectively, in excess of its required net capital of $25,000.

F-12
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES -- (Continued)

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, JT executes, as an agent, transactions
on behalf of customers. If the agency transactions do not settle because of
failure to perform by either the customer or the counterparties, JT may be
obligated to discharge the obligation of the nonperforming party and, as a
result, may incur a loss if the market value of the security is different from
the contract amount of the transactions.

JT does not anticipate nonperformance by customers or counterparties in
the above situation. JT's policy is to monitor its market exposure and
counterparty risk. In addition, JT has a policy of reviewing, as considered
necessary, the credit standing of each counterparty and customer with which it
conducts business.

STOCK WARRANTS

In April 1998, an investment banker and its assignee, instituted a suit in
the U.S. District Court in Austin Texas, demanding issuance, collectively, of
100,000 warrants to purchase the Company's common stock at $5.125 per share
(alleged to have been issuable under an investment banking agreement pursuant
to which the investment banker was to have provided investment banking services
to the Company), as well as attorney's fees and exemplary damages. The Company
believes, among other defenses, that the investment banker defaulted under such
agreement and provided no material services to the Company. The Company intends
to defend such suit vigorously. In addition, the Company has received a demand
letter from a consultant (an entity believed to be affiliated with the
investment banker) demanding the issuance of 150,000 warrants to purchase the
Company's common stock at $5.13 per share, alleged to have been issuable under
a consulting agreement pursuant to which the consultant was to have provided
consulting services to the Company. The Company believes that the consultant
defaulted under such agreement and provided no material services to the
Company. The Company has denied such demand. While the ultimate results of the
matters described above cannot be determined, management does not expect that
they will have a material adverse effect on the Company's results of operations
or financial position.

PAYROLL TAXES

The Company annually provides its employees with form W-2 and its outside
consultants with form 1099 and Royal provides the financial planners with form
1099, all of which are in accordance with tax law and industry practice. While
the Company has not experienced any federal or state payroll tax audits, should
a taxing authority assert that an outside consultant is an employee, the
Company believes that it is unlikely that any such audit would have a material
effect on its consolidated financial position, results of operations or cash
flows.

9. STOCKHOLDERS' EQUITY

WARRANTS

The Company has 507,926 and 50,783 warrants outstanding pertaining to
those issued to the public and the underwriter, respectively, in connection
with the Initial Public Offering in 1994. Each warrant issued to the public
grants the holder the right to purchase one share of common stock at an
exercise price of $4.67 and expires in September 1998. For an exercise price of
$8.40 per warrant, each of the warrants issued to the underwriter gives the
holder two shares of common stock and a warrant to purchase another share of
common stock at an exercise price of $4.67 and expire in September 1999.

STOCK OPTION AGREEMENTS AND STOCK OPTION PLAN

The Company has granted stock options to employees, directors and
consultants pursuant to individual agreements or to its incentive and
non-qualified stock option plan.

In September 1993, the Company's Board of Directors and Stockholders
adopted the Company's Joint Incentive and Non-Qualified Stock Option Plan (the
"Option Plan"). The Option Plan provides for the granting, at the discretion of
the Board of Directors, of: (i) options that are intended to qualify as
incentive stock options, within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, to employees and (ii) options not intended to
so qualify to employees, officers and directors. The total number of shares of
common stock for which options may be granted under the Option Plan is 816,000
shares. The number of shares granted, prices, terms of exercise, and expiration
dates are determined by the Board

F-13
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCKHOLDERS' EQUITY -- (Continued)

of Directors. The Plan will terminate in September 2003. At December 31, 1997
and June 30, 1997, 420,002 options have been granted under the Option Plan.

The table below summarizes plan and nonplan stock option activity:

WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
------------- ---------------
Outstanding, July 1, 1995 ........ 1,110,002 $ 3.48
Granted ......................... 355,000 4.43
Exercised ....................... (10,000) 2.00
Canceled ........................ (63,000) 3.50
---------
Outstanding, June 30, 1996 ....... 1,392,002 3.89
Granted ......................... 273,000 2.70
Canceled ........................ (299,000) 4.21
---------
Outstanding, June 30, 1997 ....... 1,366,002 3.59
Granted ......................... 1,223,000 6.71
Exercised ....................... (28,000) 1.93
Cancelled ....................... (250,000) 5.13
---------
Outstanding, March 31, 1998 ...... 2,311,002 5.10
=========
Exercisable, June 30, 1997 ....... 1,093,002 3.81
=========
Exercisable, March 31, 1998 ...... 825,002 3.46
=========

The weighted average grant date fair value of options granted during the
years ended June 30, 1997 and June 30, 1996 is $1.00 and $2.52 per option,
respectively.

Options outstanding and exercisable at March 31, 1998 and June 30, 1997
and related weighted average exercise price and life information follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------- ---------------------- REMAINING
FISCAL YEAR GRANT DATE SHARES PRICE SHARES PRICE LIFE (YEARS)
- ------------------------ ------------ ---------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1994 ................. 420,002 $ 2.95 420,002 $ 2.95 1/2
1995 ................. 405,000 3.34 405,000 3.34 5
1996 ................. -- -- --
1997 ................. 273,000 2.70 -- -- 4
1998 ................. 1,213,000 6.75 -- -- 10
</TABLE>

Options outstanding and exercisable at June 30, 1997 and related weighted
average exercise price and life information follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------- ---------------------- REMAINING
FISCAL YEAR GRANT DATE SHARES PRICE SHARES PRICE LIFE (YEARS)
- ------------------------ --------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
1994 ................. 420,002 $ 2.9 420,002 $ 2.95 1
1995 ................. 405,000 3.34 405,000 3.34 6
1996 ................. 268,000 4.88 268,000 4.88 3
1997 ................. 273,000 2.70 -- -- 4
</TABLE>

The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
employee stock options. Had compensation cost for the Company's employee stock
options been determined based on the fair value at the grant date for options
granted since July 1, 1995 consistent with the provisions of SFAS No. 123, the
Company's net income or loss and earnings or loss per share would have been
reduced to the pro forma amounts indicated below:

F-14
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCKHOLDERS' EQUITY -- (Continued)

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31, YEARS ENDED JUNE 30,
----------------------------- ---------------------------
1998 1997 1997 1996
--------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income (loss), as reported ............. $ 1,651,557 $ (92,551) $ 875,994 $ 534,726
Net income (loss), pro forma ............... 710,470 (186,889) 832,418 101,098
Earnings (loss) per share, as reported ..... 0.28 (0.02) 0.16 0.10
Earnings (loss) per share, pro forma ....... 0.12 (0.03) 0.15 0.02
</TABLE>

The pro forma effect on net income or loss for fiscal years 1997 and 1996
does not take into consideration pro forma compensation expense related to
grants made prior to fiscal year 1996.

The fair value of options at date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:

Expected life (years) ......... 3
Interest rate ................. 7.00%
Volatility:
March 31, 1998 ................ 71.2%
June 30, 1997 ................. 61.9%
Dividend yield ................ 0%

During fiscal 1998, the Company granted a total of 1,176,000
non-compensatory options to thirteen financial planners who also serve the
Company in various employment capacities. Six of these thirteen individuals
receiving a total of 362,000 options earn much of their total compensation
directly from Royal for security transactions.

On May 19, 1997, the Company adopted the Company's 1997 Common Stock and
Incentive and Non-Qualified Stock Option Plan of Gilman & Ciocia, Inc. (the
"1997 Plan"), pursuant to which the Company may grant options to purchase up to
an aggregate of 300,000 shares. Such options may be intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Incentive Options"), or they may be intended
not to qualify under such Section ("Non-Qualified Options"). No Incentive
Options will be issued pursuant to the 1997 Plan until such 1997 Plan is
approved by the shareholders of the Company.

TREASURY STOCK

During fiscal 1995, the Board of Directors resolved to accept 85,930 and
11,034 shares, respectively, of the Company's common stock from four officers
in lieu of repayment of certain loans due to the Company. The shares were
valued at the approximate fair market value of $3.50 per share for an aggregate
value of $339,375. Of the 96,964 shares, 85,930 were returned to treasury stock
on August 23, 1995. The remaining 11,034 shares were returned to treasury stock
on September 22, 1995.

During fiscal 1996, the Board of Directors of the Company resolved to
cancel and return all existing shares of the Company's treasury stock to
authorized and unissued shares of common stock.

During fiscal 1997, the Company acquired 175,900 shares of its common
stock for an aggregate cost of $733,200 and reissued 18,467 of these shares to
employees and consultants. The reissuance gave rise to the recognition of
compensation expense in the amount of $41,551 representing the excess of the
fair value of these shares at reissuance over their cost.

During the nine months ended March 31, 1998, the Company acquired 60,700
shares of its common stock for an aggregate cost of $179,123 and reissued 6,818
of these shares to employees and consultants. The reissuance gave rise to the
recognition of compensation expense in the amount of $61,831 representing the
excess of the fair value of these shares at reissuance over their cost.

STOCK SUBSCRIPTIONS AND ACCRUED INTEREST RECEIVABLE

Stock subscriptions receivable of $154,964 and $223,168 at March 31, 1998
and June 30, 1997, respectively, bear interest at a rate of 9% per annum. For
the nine-month periods ended March 31, 1998 and 1997 and the years ended

F-15
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCKHOLDERS' EQUITY -- (Continued)

June 30, 1997 and 1996, the Company recognized interest income of $7,643,
$23,725, $27,108 and $35,879, respectively. At March 31, 1998 and June 30, 1997
accrued interest receivable were $20,049 and $23,518, respectively.

The Company is holding in escrow all of the shares of its common stock
related to the stock subscription receivable. The shares will be released when
the stock subscription receivables are collected.

The following is a schedule by year of principal payments to be received:

YEAR ENDING JUNE 30:
- ----------------------
1998 ............... $ 90,013
1999 ............... 64,387
2000 ............... 45,250
--------
$199,650
========

10. RELATED PARTY TRANSACTIONS

INVESTMENT IN ATM PARTNERS, L.P.

In July 1995, the Company, together with one of its officers and five
individuals who are relatives of the officers of the Company formed ATM
Partners, LP (the "Partnership"), an Investment Partnership. All investment
transactions are executed through JT. At March 31, 1998, June 30, 1997 and
1996, the Company had approximately 41%, 41% and 35%, respectively, interest in
the Partnership. The Company recognized income (loss) of approximately
$(15,000), $27,000, $73,000 and $198,000 from the Partnership for the
nine-month periods ended March 31, 1998 and 1997 and for the years ended June
30, 1997 and 1996, respectively. Such partnership began liquidating its
investments and distributing its assets to its partners in the Company's 1997
fiscal year, and is in the process of liquidating its remaining investments.

COMMISSIONS EARNED BY OFFICERS

The Company's principal officers/stockholders act as registered
representatives of the Broker and authorized agents of insurance carriers.
During fiscal 1997 and 1996, these individuals earned commissions of
approximately $302,000 and $402,000 respectively, from sales of securities and
insurance products. For the nine-month periods ended March 31, 1998 and 1997,
the individuals earned commissions of approximately $312,000 and $348,000
respectively, from sales of securities and insurance products.

SALE OF OPTIONS BY OFFICERS/STOCKHOLDERS

In November 1995, five executive officers sold options to purchase a total
of 65,000 shares of the Company's common stock for $2.50 per option to Rummco,
Ltd. ("Rummco"), a Cayman Islands company. In connection with such sale, the
Company agreed to consent to such sale. These options to purchase shares of
common stock were subsequently sold to Rozel International Holding. Ltd.
("Rozel") for $4.50 per option, in an agreement dated June 10, 1996. Both
Rummco and Rozel are independent of the Company.

FORGIVENESS OF INDEBTEDNESS OF OFFICERS/STOCKHOLDERS

The four principal stockholders/officers were indebted to the Company
under demand loans totaling $123,899. The loans were converted to notes
receivable upon the Company's demand for repayment in March 1996, and then
subsequently forgiven and charged to compensation.

11. SEGMENTS OF BUSINESS

The Company is a provider of income tax preparation and financial planning
services to individuals and business in various states across the country.
Direct mail services are provided primarily to businesses and individuals in
the New York metropolitan area.

F-16
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. SEGMENTS OF BUSINESS -- (Continued)

The following presents financial information by segment for the years
ended June 30, 1997 and 1996:

<TABLE>
<CAPTION>
TAX FINANCIAL DIRECT
PREPARATION PLANNING MAIL ELIMINATIONS CONSOLIDATION
------------- -------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Revenues from unaffiliated customers ..... $9,921,967 $12,464,204 $2,188,320 $ -- $24,574,571
Intersegment revenues .................... -- -- 2,275,000 (2,275,000) --
---------- ----------- ---------- ------------ -----------
Total revenues ......................... 9,921,967 12,464,284 4,463,320 (2,275,000) 24,574,571
Direct costs .............................. 6,025,407 9,729,797 4,162,670 (2,275,000) 17,642,874
Depreciation and amortization ............. 450,091 315,761 20,070 -- 785,922
General corporate expenses ................ 2,647,426 1,857,300 350,175 -- 4,854,901
---------- ----------- ---------- ------------ -----------
Operating income ....................... $ 799,042 561,428 (69,595) -- 1,290,874
========== =========== ========== ============ ===========
Interest expense .......................... $ 118,442 $ 83,092 $ -- $ -- $ 201,534
========== =========== ========== ============ ===========
Identifiable assets ....................... $7,135,360 $ 5,005,800 $ 329,938 $ (3,376,844) $ 9,094,254
========== =========== ========== ============ ===========
Capital expenditures ...................... $ 553,446 $ -- $ 38,916 $ -- $ 592,362
========== =========== ========== ============ ===========
Direct costs consist of the following:
Direct mail costs ........................ $ -- $ -- $1,136,347 $ -- $ 1,136,347
Advertising .............................. 1,642,630 1,152,386 2,299,925 (2,275,000) 2,819,941
Rent ..................................... 1,044,261 732,599 107,908 -- 1,884,768
Salaries and commissions ................. 3,338,516 7,844,812 618,490 -- 11,801,818
---------- ----------- ---------- ------------ -----------
Total direct costs ..................... $6,025,407 $ 9,729,797 $4,162,670 $ (2,275,000) $17,642,874
========== =========== ========== ============ ===========
</TABLE>

<TABLE>
<CAPTION>
TAX FINANCIAL DIRECT
PREPARATION PLANNING MAIL ELIMINATIONS CONSOLIDATION
------------- -------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996:
Revenues from unaffiliated customers ..... $8,147,986 $10,683,765 $2,689,786 $ -- $21,521,537
Intersegment revenues .................... -- -- 2,000,000 (2,000,000) --
---------- ----------- ---------- ------------ -----------
Total revenues ......................... 8,147,986 10,683,765 4,689,786 (2,000,000) 21,521,537
Direct costs .............................. 4,260,631 8,064,597 4,429,177 (2,000,000) 14,754,405
Depreciation and amortization ............. 302,304 210,076 13,088 -- 525,468
General corporate expenses ................ 3,182,122 2,215,025 249,988 -- 5,647,135
---------- ----------- ---------- ------------ -----------
Operating income ....................... $ 402,929 $ 194,067 $ (2,467) $ -- $ 594,529
========== =========== ========== ============ ===========
Interest expense .......................... $ -- $ -- $ -- $ -- $ 107,111
========== =========== ========== ============ ===========
Identifiable assets ....................... $5,519,630 $ 2,048,485 $ 298,386 $ -- $ 7,866,501
========== =========== ========== ============ ===========
Capital expenditures ...................... $ 813,750 $ -- $ 86,635 $ -- $ 900,385
========== =========== ========== ============ ===========
Direct costs consist of the following:
Direct mail costs ........................ $ -- $ -- $1,682,108 $ -- $ 1,682,108
Advertising .............................. 1,509,001 1,048,628 2,027,496 (2,000,000) 2,585,125
Rent ..................................... 831,303 577,685 93,800 -- 1,502,788
Salaries and commissions ................. 1,920,327 6,438,284 625,773 -- 8,984,384
---------- ----------- ---------- ------------ -----------
Total direct costs .................... $4,260,631 $ 8,064,597 $4,429,177 $ (2,000,000) $14,754,405
========== =========== ========== ============ ===========
</TABLE>

Intersegment sales are recognized upon the completion of the services
associated with direct mail services.

F-17
<PAGE>

GILMAN & CIOCIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. TAXES ON INCOME
Provisions for income taxes in the consolidated financial statements
consist of the following:

JUNE 30, JUNE 30,
1997 1996
---------- -------------
Current:
Federal ............................... $211,903 $ 362,297
State and local ....................... 76,011 123,935
-------- ----------
Total current ........................ 287,914 486,232
-------- ----------
Deferred:
Federal ............................... 82,025 (103,483)
State and local ....................... 23,661 (30,102)
-------- ----------
Total deferred tax (benefit) ......... 105,686 (133,585)
-------- ----------
$393,600 $ 352,647
======== ==========

Deferred tax assets as of June 30, 1997 consist of the following:

<TABLE>
<CAPTION>
<S> <C>
Compensation expense recognized for financial reporting purposes in connection with
common stock option grants issued at below market value .................................. $ 93,200
Book amortization of intangibles in excess of tax ........................................ 129,600
Provision for bad debts .................................................................. 35,200
Provision for deferred rent liability .................................................... 29,200
Book depreciation in excess of tax ....................................................... (139,823)
Investments accounted for under the equity method ........................................ (119,478)
----------
$ 27,899
==========
</TABLE>

No valuation allowance has been established against the deferred tax
assets because management believes that all of the deferred tax assets will be
realized.

A reconciliation of the federal statutory rate to the income taxes is as
follows:

<TABLE>
<CAPTION>
1997 1996
------------------------- -----------------------
<S> <C> <C> <C> <C>
Year ended June 30:
Federal income taxes computed at statutory rates . $ 431,662 34.0% $301,706 34.0%
State and local taxes, net of federal tax benefit 76,176 6.0 44,225 5.0
Reversal of overaccruals ......................... (156,000) (12.3) -- --
Other ............................................ 41,762 3.3 6,716 .7
---------- ----- -------- ----
$ 393,600 31.0% $352,647 39.7%
========== ===== ======== ====
</TABLE>

F-18
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.

--------------------------------
TABLE OF CONTENTS

PAGE
-----
Prospectus Summary ...................................... 4
Risk Factors ............................................ 7
Market Information ...................................... 12
Use of Proceeds ......................................... 13
Management's Discussion and Analysis
of Financial Condition and Results of
Operations ........................................... 15
Business ................................................ 20
Management .............................................. 28
Remuneration of Officers and Directors .................. 29
Principal Stockholders .................................. 31
Certain Relationships and Related Transactions .......... 32
Plan of Distribution .................................... 33
Selling Securityholders ................................. 33
Description of Securities ............................... 34
Legal Matters ........................................... 36
Experts ................................................. 36
Additional information .................................. 37

DEALERS AND SELLING SECURITYHOLDERS MUST DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS AND
THE COMPANY MUST DELIVER A PROSPECTUS WITH RESPECT TO ALL SALES OF THE
REGISTERED SECURITIES ISSUED BY THE COMPANY.

507,926 SHARES OF COMMON STOCK
($.01 PAR VALUE)

233,421 SHARES OF COMMON STOCK
BY SELLING SECURITY HOLDERS

50,783 REDEEMABLE PUBLIC WARRANTS
BY SELLING SECURITY HOLDERS

-------------------------------------
PROSPECTUS
-------------------------------------
GILMAN & CIOCIA, INC.
475 NORTHERN BOULEVARD
GREAT NECK, NY 11021

SEPTEMBER 28, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------