<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
/X/ EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED 12/31/97
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
/ / EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission file number 000-22996
GILMAN & CIOCIA, INC.
(Name of small business issuer in its charter)
Delaware 11-2587324
( State of jurisdiction ( I.RS. Employer
of incorporation or Identification No.)
organization)
475 Northern Boulevard, Great Neck, NY 11021
(Address of principal executive offices) (Zip Code)
(516) 482-4860
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes /X/ No / /
State the number of shares outstanding of each class of the issuer's
classes of common equity, as of the latest practicable date. As of February 13,
1998, 5,376,248 shares of the issuer's common equity were outstanding.
<PAGE> 2
PART I
<TABLE>
<CAPTION>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
Page
----
<S> <C>
Consolidated Balance Sheets as of December 31, 1997 and
June 30, 1997 F-1 - F-2
Consolidated Statements of Operations for the six and three-months
ended December 31, 1997 and 1996 F-3
Consolidated Statements of Stockholders' Equity for the six months
ended December 31, 1997 and 1996 F-4
Consolidated Statements of Cash Flows for the six months ended
December 31, 1997 and 1996 F-5 - F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
PLAN OF OPERATION
Over the past two fiscal years, the Company opened 48 new offices which
represents 40% of all offices at December 31, 1997. The Company has opened an
additional seven new offices in 1998. The Company plans to continue its
expansion and open new offices (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.
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.
During the Company's 1996 fiscal year, the Company commenced
operations of a direct mail division in order to control the substantial costs
of advertising its many offices. The Company's direct mail division operates as
an independent division and also solicits its own customers for its direct mail
services.
2
<PAGE> 3
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 COMPARED.
The Company's revenues for the six months ended December 31,1997 were
$6,001,020 as compared to revenues of $4,613,770 for the comparable period of
the prior year. The increase in revenues of 30.1% for the six months ended
December 31, 1997 from the comparable period of the prior year is attributable
to the opening of eight new offices in January 1997, (an increase in tax
preparation revenues of approximately $76,000, increased financial planning
revenues of approximately $921,000 (which was primarily generated in the
pre-1997 offices), and increased revenues of approximately $390,000 from the
direct mail division.
The Company's total revenues for the six months ended December 31, 1997
consist of $444,116 for tax preparation services, $4,120,545 for financial
planning services, and $1,436,359 for direct mail services. The Company's total
revenue for the six months ended December 31, 1996 consist of $368,102 for tax
preparation services, $3,199,228 for financial planning services and $1,046,440
for direct mail division.
The increase in the Company's financial planning revenues for the six
months ended December 31, 1997 compared to the six months ended December 31,
1996 was approximately an increase of 28.8%. The increase in such financial
planning revenues is attributable to additional financial planners which
resulted in approximately $418,000 increase from insurance commissions for the
six months ended December 31, 1997 compared to the six month period of the prior
year. The remaining increase of $503,000 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 six months ended December 31,
1997 were $6,248,810 as compared to operating expenses of $6,373,252 for the
comparable period of the prior year. The decrease of 2.0% in the Company's
operating expenses for its six months ended December 31, 1997 from the
comparable period of the prior year was attributable to a decrease in salaries
and commissions of $212,128 and decrease of $145,518 for direct mail costs.
These decreases in operating expenses were offset by increases in other expenses
as follows: an increase in rent expense of $80,155, an increase in depreciation
and amortization expense of $128,350, an increase in advertising expense of
$316 and an increase in general and administrative expenses of $24,383.
The decrease in operating expenses of $124,442 is due to a decrease in
costs of the Company's direct mail service division amounting to approximately
$166,000, of which $146,000 relates to its direct mail costs. Salaries and
commissions decreased by 7% due to personnel changes. These decreases in
operating expenses were offset by an increase in depreciation and amortization
expenses of 37% due to additions to property, plant
3
<PAGE> 4
and equipment of approximately $728,000 during 1997 and additional amortization
expenses of $30,000 on customer lists. Rent expense increased 8.6% due to
additional offices opened in January 1997.
The increase of $24,383 in general and administrative expenses for the
six months ended December 31, 1997 as compared with the prior period 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. These offices generated increases of $13,462 in
telephone charges, $3,437 in office expense and $8,364 in utilities. These
increases were offset by lower miscellaneous general and administrative expenses
of $880 from the other offices.
The decrease in other expenses of $24,888 or 56.5% is primarily due to
the decrease in losses of $53,080 from the Company's investment in a
partnership, which is in the process of being liquidated in 1998 and management
fee income of $32,088 earned during the period. These decreases in other
expenses were offset by a net increase in interest expense of $40,489, an
unrealized loss on marketable securities $2,548, a realized loss on sale of
marketable securities $16,213, and a decrease of $1,030 in rental income.
The Company's net loss for the six months ended December 31, 1997 is
$182,674 as compared to $1,072,750 for the six months ended December 31, 1996.
The decrease in net loss of approximately 83% is primarily attributable to
higher revenues generated from financial services and direct mail services.
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 COMPARED
The Company's revenues for the three months ended December 31, 1997
were $3,559,560 as compared to revenues of $2,453,970 for the comparable period
of the prior year. The increase in revenues of 45.1% for the quarter ended
December 31, 1997 as compared to the comparable period of the prior year
resulted mainly from an increase in financial planning revenues of $488,066 and
an increase in revenues from the direct mail service division in the amount of
$587,461. Revenues from the tax preparation segment increased by $30,063.
The Company's total revenue for the quarter ended December 31, 1997
consist of $164,172 for tax preparation services, $2,318,873 for financial
planning services and $1,076,515 for direct mail services. The Company's total
revenues for the quarter ended December 31, 1996 consist of $134,109 for tax
preparation services, $1,830,807 for financial planning services and $489,054
for the direct mail division.
The increase in the Company's financial planning revenues for the
quarter ended December 31, 1997 compared to the three months ended December
31, 1996 was
4
<PAGE> 5
$488,066. The increase in such financial planning revenues is attributable to
additional financial planners, which generated an increase in commissions from
financial planning in the amount of $417,000. Revenues from the direct mail
services division increased by $587,461 for the three months ended December 31,
1997 as compared to the prior period due to a larger customer base.
The Company's operating expenses for the quarter ended December 31,
1997 were $3,633,665 as compared to operating expenses of $3,331,958 for the
comparable period of the prior year. The 9.1% increase in the Company's
operating expenses for its quarter ended December 31, 1997 from the comparable
period of the prior year was attributable to an increase in salaries and
commissions of $41,780, an increase of $65,032 in general and administrative
expenses, an increase in direct mail costs of $31,588, an increase in rent
expense of $62,444, and an increase in depreciation and amortization expenses of
$107,040. These increases in operating expenses were offset by a decrease in
advertising costs of $6,177.
The increase in operating expenses of $301,707 is due to an increase in
salaries and commissions of $41,780 which resulted from the new offices opened
in January 1997. The increase in general and administrative expenses of $65,032
was partially the result of the inclusion of three months of expenses for the
eight new offices opened in January 1997. These offices generated increases of
$8,617 in telephone charges, $2,786 in office expense and $4,442 in utilities.
The remaining balance of the increase in general and administrative expenses
amounting to approximately $49,187 resulted from a general increase in costs
generated from the one hundred thirteen other offices. Depreciation and
amortization expense increased by 61.8% due to capital additions of
approximately $400,000 in the period. Additional amortization expense on
customer lists was incurred in the amount of approximately $13,000. Rent
expenses increased 13.5% due to additional offices opened in January 1997.
The increase in other expenses of $82,252 is primarily due to an
increase in losses of $60,420 from the Company's investment in Partnership,
which is in the process of being liquidated in 1998. Net interest expense
increased by $19,317 for the period. An unrealized loss on marketable securities
amounting to $3,705 was incurred during the period. These increases in other
expenses were offset by an increase in rental income of $1,190.
The Company's net loss for the three months ended December 31, 1997 is
$70,033 as compared to $485,652 for the six months ended December 31, 1996. The
decrease in net loss of approximately 86% is primarily attributable to an
increase in the net profit from direct mail division services amounting to
approximately $336,000 and higher revenues generated from financial planning
services.
5
<PAGE> 6
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows used in operating activities was $2,455,191
and $1,971,902 for the six months ended December 31, 1997 and 1996,
respectively. The increase of approximately $483,000 is primarily due to an
increase in accounts receivable of approximately $442,000, an increase in
security deposits of approximately $14,000, an increase in prepaid expenses and
other current assets of approximately $371,000 and a decrease in accounts
payable and accrued expenses of approximately $583,000. These increases in cash
flows used from operating activities were offset by a decrease in net loss plus
non-cash adjustments of approximately $798,000, a decrease in advances to
financial planners of approximately $107,000, and an increase in the proceeds
from the sale of marketable securities of approximately $22,000.
Net cash used in investing activities was $992,479 and $515,130 for the
six months ended December 31, 1997 and 1996, respectively. The increase of
approximately $477,000 is primarily due to increases in capital expenditures of
approximately $145,000 a net increase in payments to related parties of
approximately $604,000. These increases in net cash used in investing activities
were offset by a decrease in the acquisition of intangibles of approximately
$255,000 and a decrease in investments of approximately $17,000.
Net cash provided by financing activities was $930,030 and $2,049,913
for the six months ended December 31, 1997 and 1996, respectively. The decrease
in net cash provided by financing activities of approximately $1,120,000 is
primarily due to a net decrease in net borrowings from bank and other notes
payable amounting to approximately $1,475,000, a decrease in the proceeds of
stock subscriptions and exercise of stock options of approximately $104,000.
These decreases were offset by a decrease in acquisitions of treasury stock of
approximately $459,000. See Statement of Cash Flows.
The Company has two credit facilities with a bank. The first facility
is a line of credit for up to $2,500,000, which expires on October 31, 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 December 31,
1997, the Company had an outstanding principal balance of $1,750,000.
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 December 31, 1997, the note
had an outstanding principal balance amounting to $666,667.
The Company believes that it could continue to operate without any
additional
6
<PAGE> 7
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 quarter ended December 31, 1997. The adoption
of this standard did not effect the Company's loss per share for the three and
six months ended December 31, 1997.
7
<PAGE> 8
PART II
ITEM 6. EXHIBITS; LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Registrant's Articles of Incorporation, as amended,
incorporated by reference to the like numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70640-NY
3.2 Registrant's by-laws, incorporated by reference to the
like-numbered exhibit in the Registrant's Registration
Statement on Form SB-2 under the Securities Act of 1933, as
amended, File No. 33-70640-NY
4.1 Form of Class A Warrant delivered to Bridge Loan lenders,
incorporated by reference to the like numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70640-NY
4.2 Form of Class B Warrant delivered to Bridge Loan lenders,
incorporated by reference to the like numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70640-NY
4.3 Form of Redeemable Warrant included in Units, incorporated by
reference to the like-numbered exhibit in the Registrant's
Registration Statement on Form SB-2 under the Securities Act
of 1933, as amended, File No. 33-70604-NY
4.4 Form of Purchase Option for Underwriter's Warrants,
incorporated by reference to the like-numbered exhibit in the
Registrant's Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended, File No. 33-70604-NY
27 Gilman & Ciocia, Inc. - Financial Data Schedule, Dated
December 31, 1997.
(b) Reports on Form 8-K
Amendment No. 2 to Form 8-K , dated November 12, 1997, was filed with
the Securities and Exchange Commission on November 26, 1997 regarding a change
in independent auditors.
8
<PAGE> 9
SIGNATURE
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: February 13, 1998
GILMAN & CIOCIA, INC.
By/s/Thomas Povinelli
- --------------------
Thomas Povinelli
Chief Financial Officer
9
<PAGE> 10
GILMAN & CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
1997 1997
---- ----
(UNAUDITED)
-----------
<S> <C> <C>
CURRENT ASSETS:
CASH $ 402,849 $2,920,489
MARKETABLE SECURITIES 8,575 49,658
ACCOUNTS RECEIVABLE, NET 1,328,566 1,109,535
RECEIVABLE FROM RELATED PARTIES, CURRENT PORTION 749,191 373,039
PREPAID EXPENSES AND OTHER CURRENT ASSETS 2,708,000 451,968
---------- ----------
TOTAL CURRENT ASSETS 5,197,181 4,904,689
---------- ----------
PROPERTY AND EQUIPMENT, NET 1,924,158 1,679,106
---------- ----------
OTHER ASSETS:
INTANGIBLE ASSETS, NET 1,117,149 1,147,297
ADVANCES AND NOTES RECEIVABLE FROM FINANCIAL
PLANNERS, NET OF CURRENT PORTION 91,824 169,239
RECEIVABLES FROM RELATED PARTIES, NET OF CURRENT
PORTION 485,497 447,806
DEFERRED TAX ASSETS 141,899 27,899
OTHER ASSETS 654,265 649,540
---------- ----------
TOTAL OTHER ASSETS 2,490,634 2,441,781
---------- ----------
TOTAL ASSETS $9,611,973 $9,025,576
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
<PAGE> 11
GILMAN & CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER JUNE 30,
1997 1997
---- ----
(UNAUDITED)
-----------
<S> <C> <C>
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS $ 2,133,334 $ 899,487
ACCOUNTS PAYABLE 254,287 168,210
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES 100,348 318,690
INCOME TAXES PAYABLE 68,200
----------- -----------
TOTAL CURRENT LIABILITIES 2,487,969 1,454,587
----------- -----------
LONG-TERM LIABILITIES:
LONG-TERM BORROWINGS 333,334 552,000
----------- -----------
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 5,588,913 (DECEMBER 31, 1997) 55,889 55,789
PAID-IN-CAPITAL 6,270,751 6,231,555
RETAINED EARNINGS 1,410,695 1,593,369
LESS- TREASURY STOCK, AT COST: 212,665 SHARES (DEC. 31, 1997) (791,701) (638,556)
----------- -----------
6,945,634 7,242,157
STOCK SUBSCRIPTIONS AND ACCRUED INTEREST RECEIVABLE (154,964) (223,168)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,790,670 7,018,989
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,611,973 $ 9,025,576
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 12
GILMAN & CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
December 31 December 31
1997 1996 1997 1996
----------- ----------- ----------- -----------
REVENUES:
<S> <C> <C> <C> <C>
TAX PREPARATION FEES $ 444,116 $ 368,102 $ 164,172 $ 134,109
FINANCIAL PLANNING SERVICES 4,120,545 3,199,228 2,318,873 1,830,807
DIRECT MAIL SERVICES 1,436,359 1,046,440 1,076,515 489,054
----------- ----------- ----------- -----------
TOTAL REVENUES 6,001,020 4,613,770 3,559,560 2,453,970
----------- ----------- ----------- -----------
OPERATING EXPENSES:
SALARIES AND COMMISSIONS 2,669,444 2,881,572 1,621,922 1,580,142
GENERAL AND ADMINISTRATIVE EXPENSES 1,486,788 1,462,405 830,286 765,254
ADVERTISING 70,616 70,300 41,429 47,606
DIRECT MAIL COSTS 536,248 681,766 334,144 302,556
RENT 1,011,782 931,627 525,739 463,295
DEPRECIATION AND AMORTIZATION 473,932 345,582 280,145 173,105
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 6,248,810 6,373,252 3,633,665 3,331,958
----------- ----------- ----------- -----------
OPERATING (LOSS) (247,790) (1,759,482) (74,105) (877,988)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
INCOME (LOSS) FROM INVESTMENT IN PARTNERSHIP (4,248) (57,328) (25,161) 35,259
INTEREST INCOME 40,813 33,469 19,354 12,554
INTEREST EXPENSE (74,456) (26,623) (35,803) (9,686)
RENTAL INCOME 5,400 6,430 2,700 1,510
REALIZED LOSS ON SALE OF MARKETABLE SECURITIES (16,213) -- -- --
UNREALIZED LOSS ON MARKETABLE SECURITIES (2,548) -- (3,705) --
OTHER INCOME 32,088 -- -- --
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) (19,164) (44,052) (42,615) 39,637
----------- ----------- ----------- -----------
(LOSS) BEFORE INCOME TAX (BENEFIT) (266,954) (1,803,534) (116,720) (838,351)
INCOME TAX (BENEFIT) (84,280) (730,784) (46,687) (352,699)
----------- ----------- ----------- -----------
NET (LOSS) $ (182,674) $(1,072,750) $ (70,033) $ (485,652)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (0.03) $ (0.19) $ (0.01) $ (0.09)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
BASIC EARNINGS PER SHARE 5,374,348 5,556,486 5,372,800 5,562,390
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 13
GILMAN & CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
SUBSCRIPTIONS TOTAL STOCK-
AND ACCRUED TREASURY STOCK HOLDERS'
COMMON STOCK PAID-IN RETAINED INTEREST SHARES AMOUNT EQUITY
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE
--------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1997 5,578,913 $ 55,789 $ 6,231,555 $1,593,369 $(223,168) $ 157,433 $(638,556) 7,018,989
REPAYMENTS/CANCELLATIONS OF STOCK
SUBSCRIPTIONS 75,847 75,847
PURCHASE OF TREASURY STOCK 60,700 (179,123) (179,123)
COMPENSATION RECOGNIZED IN CONNECTION
WITH REISSUANCE OF TREASURY STOCK 21,171 (5,468) 25,978 47,149
ISSUANCE OF COMMON STOCK 10,000 100 18,025 18,125
ACCRUED INTEREST INCOME (7,643) (7,643)
NET INCOME (LOSS) (182,674) (182,674)
========= ========= =========== ========== ========= ========= ========= ===========
BALANCE AT DECEMBER 31, 1997 5,588,913 $ 55,889 $ 6,270,751 $1,410,695 $(154,964) 212,665 $(791,701) $ 6,790,670
========= ========= =========== ========== ========= ========= ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 14
GILMAN & CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
NET (LOSS) $ (182,674) $(1,072,750)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES:
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH THE
ISSUANCE OF STOCK OPTIONS 47,149 22,126
DEPRECIATION AND AMORTIZATION 361,379 346,682
(INCOME) FROM INVESTMENT 4,248 57,328
LOSS ON SALE OF MKT SEC 16,213 --
DEFERRED TAX BENEFIT (114,000) (83,711)
UNREALIZED LOSS ON MARKETABLE SECURITIES 2,548 --
COMPENSATION EXPENSE RECOGNIZED IN CONNECTION WITH AMORTIZATION
OF ADVANCES TO FINANCIAL PLANNERS 112,553 165,676
PROVISION FOR DOUBTFUL ACCOUNTS -- 25,000
INTEREST ON STOCK SUBSCRIPTIONS (7,643) (18,579)
PROCEEDS FROM SALE OF MARKETABLE SECURITIES 22,323 --
(INCREASE)DECREASE IN:
ACCOUNTS RECEIVABLE (219,031) 222,762
ADVANCES TO FINANCIAL PLANNERS 150 (106,240)
SECURITY DEPOSITS (25,926) (11,754)
PREPAID EXPENSES AND OTHER CURRENT ASSETS (2,216,456) (1,845,413)
INCREASE(DECREASE)IN:
ACCOUNTS PAYABLE,ACCRUED EXPENSES, AND OTHER CURRENT LIABILITIES (256,024) 326,971
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (2,455,191) (1,971,902)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (454,220) (308,733)
ACQUISITION OF INTANGIBLE ASSETS (141,367) (396,392)
INVESTMENTS 16,951 --
PURCHASE OF MARKETABLE SECURITIES -- --
REPAYMENT OF NOTES RECEIVABLE FROM RELATED PARTIES 62,385 268,995
NOTES RECEIVABLE FROM RELATED PARTIES (476,228) (79,000)
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (992,479) (515,130)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
ACQUISITION OF TREASURY STOCK (179,123) (638,200)
PROCEEDS FROM BANK AND OTHER LOANS 1,750,000 3,000,000
PROCEEDS FROM SALE OF COMMON STOCK & EXERCISE OF STOCK OPTIONS 18,125 92,012
PAYMENTS OF BANK AND OTHER LOANS (734,819) (609,897)
PROCEEDS FROM NOTE PAYABLE -- 100,000
PROCEEDS FROM STOCK SUBSCRIPTIONS 75,847 105,998
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES 930,030 2,049,913
---------- ----------
NET DECREASE IN CASH (2,517,640) (437,119)
CASH AT BEGINNING OF PERIOD 2,920,489 2,221,795
---------- ----------
CASH AT END OF PERIOD $ 402,849 $ 1,784,676
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 15
GILMAN + CIOCIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------
1997 1996
-------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAYMENTS FOR THE PERIOD:
<S> <C> <C>
INTEREST $ 64,811 $16,937
======== =======
INCOME TAXES $108,390 $22,515
======== =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 16
GILMAN + CIOCIA, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
(Unaudited)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Gilman +
Ciocia, Inc. and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated.
The consolidated financial statements and related notes thereto as of
December 31, 1997 and for the three months and six months ended December 31,
1997 and 1996 are presented as unaudited but in the opinion of management
include all adjustments necessary to present fairly the information set forth
therein. These adjustments consists solely of normal recurring accruals. The
consolidated balance sheet information for June 30, 1997 was derived from the
audited financial statements included in the Company's Form 10-KSB. These
interim financial statements are not necessarily indicative of the results for
any future periods.
The Company's business is highly seasonal, with a majority of its
revenue earned in the first four months of the calendar year.
In preparing financial statements in conformity with generally accepted
accounting principles, Management is required to make estimates and assumptions
that effect the reported amounts of assets and liabilities and the disclosures
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
For interim reporting purposes certain costs, primarily advertising
costs incurred in the first and second quarters of the fiscal year, are
deferred and recognized as an expense in the period of benefit, primarily the
third quarter.
F-7
<PAGE> 17
NOTE 2 - EARNINGS PER SHARE
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 quarter ending December 31, 1997. The
disclosure requirements for Statement No. 128 are as follows:
Loss per Share:
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
December 31 December 31
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Loss $ (182,674) $(1,072,750) $ (70,033) $ (485,652)
Shares 5,374,348 5,556,486 5,372,800 5,562,390
Basic/Loss
Per Share $ (0.03) $ (0.19) $ (0.01) $ (0.09)
========== ========== ========== ==========
</TABLE>
Basic loss per common share was computed by dividing net loss by the weighted
average number of shares outstanding during the period. 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.
<TABLE>
<CAPTION>
Options/Warrants
<S> <C>
Six months Ended Dec. 31, 1997 1,795,992
Six months Ended Dec. 31, 1996 1,245,351
Three Months Ended Dec. 31, 1997 2,073,634
Three Months Ended Dec. 31, 1996 1,245,351
</TABLE>
For all periods presented, basic loss per share is the same as diluted earnings
per share. The accounting change has no effect on previously reported earnings
per share data.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GILMAN
& CIOCIA, INC. CONSOLIDATED FINANCIAL STATEMENTS OF 12/31/97.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 402,849
<SECURITIES> 8,575
<RECEIVABLES> 1,328,566
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,197,181
<PP&E> 3,445,645
<DEPRECIATION> 1,521,487
<TOTAL-ASSETS> 9,611,973
<CURRENT-LIABILITIES> 2,487,969
<BONDS> 0
0
0
<COMMON> 55,889
<OTHER-SE> 6,734,781
<TOTAL-LIABILITY-AND-EQUITY> 9,611,973
<SALES> 6,001,020
<TOTAL-REVENUES> 6,001,020
<CGS> 0
<TOTAL-COSTS> 6,248,810
<OTHER-EXPENSES> (55,292)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,456
<INCOME-PRETAX> (266,954)
<INCOME-TAX> (84,280)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182,674)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
