U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

[  ]     Annual report under Section 13 or 15(d) of the Securities Exchange Act
         of 1934 [Fee Required] For the
         fiscal year ended June 30, 1999.

{  }     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 or jurisdiction of                         (I.R.S. Employer
        incorporation or organization)                      (Identification No.)

1311 Mamaroneck Ave. Suite 130, White Plains, NY                    10605
    (Address of principal executive offices)                      (Zip Code)

                                 (914) 397-4829
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Act:          Name of Exchange
                   Title of each class                       on which registered

Securities registered under Section 12(g) of the Act:

                     Common Stock, par value $.01 Per share
                                (Title of class)

Check whether the issuer:  (1) filed 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__

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. :

State issuer's revenues for its most recent fiscal year. [$50,443,406]

The  aggregate  market  value of the voting stock held by  non-affiliates  as of
[September 30, 1999] was $48,666,555 based on a sale price of $11.25.

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 [September 30, 1999,
7,511,059] shares of the issuer's common equity were outstanding.

Transitional Small Business Disclosure Format (check one): Yes__ No X

                                  Page 1 of 39
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                                     Part I

Item 1.           DESCRIPTION OF BUSINESS

General

         Gilman + Ciocia, Inc. is a corporation that was organized in 1981 under
the laws of the State of New York (together with its wholly owned  subsidiaries,
the "Company" or "Gilman + Ciocia(R)" [or "GTAX"]).  The company was reorganized
under the laws of the State of Delaware in 1993. The Company  provides  federal,
state and local tax preparation and financial  planning  services to individuals
predominantly in the middle and upper income brackets. The Company currently has
135 offices operating in 15 states. To complement its tax preparation  services,
the Company also provides  financial  planning  services to its tax  preparation
customers.  These  financial  planning  services  include  securities  brokerage
services and insurance and mortgage agency and finder services. The Company also
operates  a direct  mail  service,  which  provides  advertising  and other mail
services for the Company as well as third party customers.

         During the Company's  fiscal year ended June 30, 1999 ("Fiscal  1999"),
Gilman + Ciocia prepared  approximately 120,000 tax returns, which represents an
increase of 26% from the approximately 95,000 tax returns it prepared during its
fiscal year ended June 30, 1998 ("Fiscal 1998").  Also in Fiscal 1999,  Gilman +
Ciocia earned  $36,137,861  in  commissions  from  financial  planning  services
provided by its  customers,  an increase of 118% over the  $16,578,032  received
from financial  planning services in Fiscal 1998. In Fiscal 1999,  approximately
25%  of  the  Company's  revenues  were  from  tax  preparation  services,   and
approximately  72% of the Company's  revenues were from commissions on financial
planning services.  Approximately 3% of the Company's revenues were attributable
to the Company's direct mail service operations.

         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  introducing  its tax
clients, if appropriate, to financial planners. The Company provides tax clients
with  questionnaires  about their financial goals, and the tax clients then have
the  opportunity  to request  the  Company's  assistance  with  their  financial
planning  needs.  When the Company is notified,  it  introduces  the client to a
financial planner.  In approximately 20% of such cases, the financial planner is
also the tax preparer.

         In February 1999, the Company began preparing  individual  income taxes
online  when  its  newly  formed  subsidiary   e1040.com,   Inc.  completed  the
acquisition of all the assets of an existing  online tax  preparation  business.
Since  its  purchase,  e1040.com  has  generated  5.6  million  web  page  hits,
representing  373,000 visitors to the e1040.com web site, and has prepared 1,525
tax returns and 4,400 tax extensions.

         In  July  1999,  the  Company  formed  a  joint  venture   corporation,
GTAX/Career Brokerage, Inc. ("GTAX/CB"),  with Fiengold & Scott, Inc., a company
engaged in the wholesaling of insurance and annuity products. The Company is the
owner of 50% of the stock of GTAX/CB; Fiengold & Scott, Inc. is the owner of the
remaining 50%.  GTAX/CB was formed to become a licensed  insurance  agent in all
states in which the Company markets insurance and annuity products and to act as
licensed entity for the sale by the Company of life insurance,  long-term health
care  insurance,   and   fixed-annuity   products.   The



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parties have made a thousand-dollar investment to the joint venture involved.

         In Fiscal 1999, the Company purchased all of the issued and outstanding
capital  stock of Prime  Capital  Services,  Inc.  ("Prime")  and of North Ridge
Securities Corp. ("North Ridge"),  each a registered  securities  broker/dealer.
The Company  terminated its relationship  with Royal Alliance  Associates,  Inc.
("Royal  Alliance"),   an  independent  registered   broker/dealer,   which  had
previously  been  referred  clients  by  the  company  and  which  had  retained
approximately six percent (6%) of the total securities  commissions generated by
financial  planners  to whom  the  Company  had  referred  clients.  Each of the
financial  planners to whom a client  might be  introduced  is now a  registered
representative  ("Registered  Representative")  of either  Prime or North Ridge.
Each Registered  Representative is also either an employee of the Company,  with
an employment agreement calling for a specified payout on commissions to be made
by Prime or North Ridge, as the case may be, or an independent contractor with a
contractual  agreement to share commissions with either Prime or North Ridge, as
the case may be,  in return  for the  Company's  referral  of new  clients.  The
Company  and its  subsidiaries  therefore  retain six  percent  (6%) more of the
securities  commissions  generated through its referrals than it had in previous
years.  The amount of commission  earned by the Company depends on the financial
planning services that are sold.  Almost all of the financial  planners are also
authorized  agents of  insurance  underwriters  and mortgage  agencies,  and the
Company earns revenues from these insurance and mortgage  services as well. Each
of North  Ridge and Prime has its own  clients  independent  of  referrals  from
Gilman + Ciocia.

         The  Company's  direct mail service  division  assembles,  packages and
sends direct mail  materials of  third-party  customers as well as the Company's
own marketing materials. This division also provides limited consulting services
in connection with the design, creation and testing of direct mail materials.

Industry Overview

         The United States  Internal  Revenue  Service (the "IRS") reported that
approximately 120 million  individual 1998 federal income tax returns were filed
in the United States through June 30, 1999. According to the IRS,  approximately
one-half of the tax returns  filed in the United  States each year are completed
by a paid  preparer.  Among  paid  preparers,  H&R  Block,  Inc.  ("H&R  Block")
dominates the low-cost tax preparation business with approximately 8,000 offices
located throughout the United States.  According to information  released by H&R
Block, H&R Block prepared an aggregate of approximately 16 million United States
tax returns during the 1999 tax season,  which represented  approximately 13% of
all tax  returns  filed in the United  States.  Other  than H&R  Block,  the tax
preparation  industry is highly fragmented and includes regional tax preparation
services,  accountants,  attorneys,  small  independently  owned companies,  and
financial  service  institutions  that prepare tax returns as ancillary parts of
their businesses. The ability to compete in this market depends in large part on
the geographical area,  specific location of the tax preparation  office,  local
economic  conditions,  quality of on-site  office  management and the ability to
file tax returns electronically with the IRS.

         According to data from the National  Association of Securities Dealers,
Inc. (the "NASD"),  approximately 600,000 registered  securities  broker/dealers
are registered in the United States,  some of which provide  financial  planning
services  similar  to those  offered  by the  Company.  A large  number of these
professionals are affiliated with larger financial industry firms. The remaining
portion of the financial  planning  industry is highly  fragmented with services
provided by certified  financial  planners,  stockbrokers and  accountants.  The
Company believes that no other large, national tax preparation firm has combined
tax  preparation  and  financial  planning  services  to the same  extent as the
Company.


<PAGE>


Tax Return Preparation

         Customers.  The Company  prepares  federal,  state and local income tax
returns for individuals,  predominantly in the middle and upper income brackets.
The  Company  believes  that  customers  are  attracted  to  the  Company's  tax
preparation  services  because they prefer not to file their own tax returns and
are unwilling to pay the fees charged by most accountants and tax attorneys.

         Tax  Preparation  Services.  The  preparation  of a tax  return  by the
Company  generally  begins with a personal meeting at a Company office between a
client and an employee of the Company.  At the meeting,  the Company's  employee
solicits  from the client the  information  concerning  income,  deductions  and
family status  necessary to prepare the client's tax return.  After the meeting,
the employee prepares drafts of the client's tax returns. After review and final
correction  by the tax  preparer,  the returns are  delivered  to the client for
filing.

         E1040.com is an online tax  preparation  service whereby clients submit
information  concerning their income,  deductions,  family status, etc. over the
Internet  to  e1040.com's  staff who are  employees  of the  company.  These tax
preparers then prepare the client's federal,  state and local returns,  and then
either files it electronically, or returns it to the client for filing.

         The  Company  believes  that it  offers  clients a cost  effective  tax
preparation service compared to services provided by accountants,  attorneys and
independent  tax preparers.  The Company's  volume allows it to provide  uniform
service at  competitive  prices.  In  addition,  as  compared  to certain of its
competitors that are open only during tax season,  most of the Company's offices
are open year round due to the demand for financial planning services.

         Since 1990, the IRS has made electronic filing available throughout the
United States. The IRS has announced its intention to increase the number of tax
returns filed  electronically  and is currently  reviewing  various proposals to
encourage the growth of its electronic filing program. The Company has qualified
to participate in the electronic  filing program with the IRS and offers clients
the option of filing their federal income tax returns electronically. Under this
system,  the final federal income tax return is transmitted to the IRS through a
publicly available  software package.  As part of its electronic filing program,
Refund  Anticipation  Loans  ("RALs")  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
(less fees charges by the Company and banking institutions) drawn on an approved
bank,  at the office  where he or she had his or her return  prepared.  RALs are
recourse  loans  secured by the  taxpayer's  refund.  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. None of the Company's  funds are used to finance these loans,  and the
Company has no liability for repayment of these loans.

         Tax  Preparers.  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 500 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.  Almost all of the Company's  professional  tax preparers
have a  college  degree  or its  equivalent  and two  years  of tax



<PAGE>

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.
A majority of the  Company's  seasonal  employees  return in the next year.  The
Company  generally  utilizes  advertisements  in local newspapers to recruit the
remainder of its seasonal work force.

         The  Company's  tax  preparers  are  generally  not  certified   public
accountants.  Therefore,  they are limited in the  representation  that they can
provide to clients of the  Company  on an audit by the IRS.  The  Company's  tax
preparation  business  subjects  it to  potential  civil  liabilities  under the
Internal  Revenue 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.  In addition,  the Company does not
maintain professional liability or malpractice insurance policies.  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.

Financial Planning

         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.  To capitalize on this situation,  the Company
offers every client the  opportunity to complete a  questionnaire  that requests
information  on  his/her   financial   situation.   These   questionnaires   are
subsequently  reviewed by financial  planners to evaluate whether the client may
need financial planning services.  Upon request, the clients are then introduced
to the financial planner.  Of all of the financial planners  affiliated with the
Company, approximately 17% also perform tax preparation services as employees of
the  Company.  Approximately  20% of the  Company's  tax  clients  also  use the
Company's financial planning services.

         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 a financial  planner (who may
also  be  the  tax  preparer)  who  is  an  authorized  agent  of  an  insurance
underwriter.  If clients  seek mutual  fund  products  or other  securities  for
investment,  they are  referred to a financial  planner of the Company  (who may
also be the tax preparer) who is a Registered  Representative  of Prime or North
Ridge,  Broker Dealer  subsidiaries  of the company.  See  "--Relationship  with
Registered Representatives of Broker/Dealer" and "--Relationship with Authorized
Agents of Insurance Underwriters."

         The Company  does not have  financial  planners at all of its  offices.
Approximately  75% of the Company's  offices  provide both tax  preparation  and
regular  financial  planning  services.  The remaining  Company  offices provide
predominantly  tax preparation  services and have no regular  financial  planner
associated with them,  although  financial planners from other offices work with
clients  from  all of  these  offices.  In the  offices  that  provide  both tax
preparation and financial  planning services,  approximately  one-third of these
offices have only one person who provides  both tax  preparation  and  financial
planning  services.  No office  has more than a total of ten tax  preparers  and
financial planners.

         Relationship    with   Registered    Representatives    of   Securities
Broker/Dealer.  The financial  planners that provide financial planning services
to the Company's clients are Registered Representatives of either Prime or North
Ridge,  which are both registered  securities  broker/dealers and members of the
NASD. 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.


<PAGE>


         The Company supervises  Registered  Representatives  with regard to all
regulatory matters. In addition to certain mandatory  background checks required
by the NASD,  the Company  also  requires  that each  Registered  Representative
respond in writing to a background questionnaire.

         If clients of the  Company  inquire  about the  acquisition  or sale of
investment  securities,  they are  directed to a  Registered  Representative  of
either Prime or North Ridge. The Registered  Representatives  are able to effect
transactions  in such  securities at the request of clients and retain a certain
percentage of the commissions earned on such transactions. Prime and North Ridge
each have  licensed  principals  in all areas of the  securities  business.  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.

         About  ninety  percent  of  the  securities  transactions  effected  by
Registered  Representatives  of Prime or North Ridge 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 particular  securities,  except in very
limited cases on the specific initiative and request of a client.

         Each of the  Registered  Representatives  licensed  with  the  Company,
except the  officers of the  Company,  has  entered  into a  commission  sharing
agreement with the Company, which generally provides that a specified percentage
of the  commissions  earned by the Registered  Representative  (generally  fifty
percent  (50%)) of the total  commission is paid to the Company.  All Registered
Representatives  have  agreements  that  contain  covenants  requiring  them  to
maintain strict confidentiality and to refrain from certain competition with the
Company.  Agreements with Registered Representatives generally have a term of no
more than one year.

         Approximately 80% of the Company's full-year tax-preparer employees are
also Registered Representatives.  Such individuals, who have two separate roles,
divide their time based upon the needs of clients who come to the offices of the
Company in which they work.  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  based on the overall  commissions  earned on transactions
completed for clients of the Company.

         Relationship with Authorized Agents of Insurance Underwriters.  Certain
of the  Company's  full-time  employees and  financial  planners are  authorized
agents of  insurance  underwriters.  If clients  of the  Company  inquire  about
insurance products,  they are directed to one of these authorized agents.  These
agents are able,  through  several  insurance  underwriters,  to sell  insurance
products to 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.  The  Company's  50% owned  subsidiary,  GTAX/CB  Brokerage  is an
authorized agent under New York law. In  approximately  20% 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 a  commission  sharing  agreement  with  the  Company.  Each  such
agreement  generally  provides that a specified  percentage  of the  commissions
earned  by the  agent  are  paid  to the  Company.  In  the  commission  sharing


<PAGE>


agreements,  the agents also agree to maintain  certain  Company  information as
confidential  and  not to  compete  with  the  Company.  Most  of the  Company's
agreements with insurance agents have terms of no greater than one year.

         Credit Cards. The Company 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.  The
Company  supplies  a list of the names and  addresses  of its  customers  to the
Credit Card Banks that is utilized in direct mail  solicitations for credit card
applications.  The Company receives, 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 a "Gilman + Ciocia"  credit card.  The Company  bears no risk of loss
from default on any of the credit cards issued under this arrangement.

Broker/Dealer Subsidiaries

         North Ridge and Prime (the "B/D  Subsidiaries") are each a wholly owned
subsidiary  of the  Company.  Each  conducts  a  securities  brokerage  business
providing expertise,  products,  and sales support to its brokers and investment
products and services to its customers.

         The B/D Subsidiaries  have been able to recruit and retain  experienced
and productive brokers who seek to establish and maintain personal relationships
with high net worth  individuals.  The B/D  Subsidiaries  generally  do not hire
inexperienced  brokers  or  trainees  to work as  retail  brokers.  The  Company
believes that its performance-based equity incentive compensation has been a key
component  in its ability to recruit new  brokers.  The  Company  believes  that
continuing to add experienced,  highly productive brokers is an integral part of
its growth strategy.

         In addition to executing  transactions,  the B/D  Subsidiaries  provide
services  to  individual  investors,   including  portfolio  strategy,  research
services  and  investment  advice,  as well as other  services  such as sales of
restricted securities.  Certain of the B/D Subsidiaries' retail brokers exercise
discretionary authority over investment decisions in certain customer accounts.

         The B/D  Subsidiaries  business and the securities  industry in general
are subject to extensive regulation in the United States at both the federal and
state levels, as well as by self-regulatory organizations ("SROs").

         In  the  United  States,  the  SEC  is  the  federal  agency  primarily
responsible for the regulation of broker-dealers  and investment  advisers doing
business in the United States, and the Board of Governors of the Federal Reserve
System  promulgates  regulations  applicable to securities  credit  transactions
involving  broker-dealers and certain other United States institutions.  Each of
the B/D  Subsidiaries  is registered as a  broker-dealer  with the SEC.  Certain
aspects of broker-dealer  regulation have been delegated to  securities-industry
SROs, principally the NASD and also the NYSE. These SROs adopt rules (subject to
SEC  approval)  that  govern the  industry,  and,  along  with the SEC,  conduct
periodic examinations of the B/D Subsidiaries' operations.  Securities firms are
also subject to regulation by state securities administrators in those states in
which they conduct business.

         Broker-dealers  are subject to regulations  covering all aspects of the
securities   industry,   including



<PAGE>

sales practices, trade practices among broker-dealers, capital requirements, the
use and  safekeeping  of  customers  funds and  securities,  record-keeping  and
reporting  requirements,  supervisory and organizational  procedures intended to
ensure  compliance  with  securities  laws and to  prevent  unlawful  trading on
material   nonpublic   information,    employee-related    matters,    including
qualification,  and licensing of supervisory and sales personnel, limitations on
extensions  of credit  in  securities  transactions,  clearance  and  settlement
procedures,   requirements  for  the   registration,   underwriting,   sale  and
distribution  of  securities  and rules of the SROs  designed  to  promote  high
standards of  commercial  honor and just and equitable  principles  of trade.  A
particular focus of the applicable regulations concerns the relationship between
broker-dealers  and  their  customers.   As  a  result,   many  aspects  of  the
relationship  between  broker-dealers  and customers are subject to  regulation,
including,  in some  instances,  requirements  that brokers  make  "suitability"
determinations as to certain customer  transactions,  limitations on the amounts
that may be charged to customers,  timing of proprietary  trading in relation to
customers trades, and disclosures to customers.

         Prime and North  Ridge  also are  subject  to "Risk  Assessment  Rules"
imposed by the SEC.  These rules  require,  among  other  things,  that  certain
broker-dealers   maintain  and  preserve  certain  information,   describe  risk
management  policies,  procedures  and  systems  and  report  on  the  financial
condition of certain  affiliates  whose financial and securities  activities are
reasonably likely to have a material impact on the broker-dealers  financial and
operational condition.

         Additional legislation,  changes in rules promulgated by the SEC, state
regulatory  authorities or SRO, or changes in the  interpretation or enforcement
of  existing  laws and rules  may  directly  affect  the mode of  operation  and
profitability of broker-dealers.  The SEC, SRO and state securities  commissions
may conduct administrative proceedings,  which can result in censure, fines, the
issuance  of  cease-and-desist  orders  or  the  suspension  or  expulsion  of a
broker-dealer,  its officers or employees.  The principal  purpose of regulating
and  disciplining   broker-dealers  is  the  protection  of  customers  and  the
securities markets,  rather than the protection of creditors and shareholders of
broker-dealers.

         As  registered  broker-dealers,  the B/D  Subsidiaries  are required to
establish  and maintain a system to  supervise  the  activities  of their retail
brokers,  including their independent  contractor offices,  and other securities
professionals.  The  supervisory  system must be reasonably  designed to achieve
compliance  with  applicable  securities  laws and  regulations,  as well as SRO
rules.  The SROs have  established  minimum  requirements  for such  supervisory
systems;   however,  each  broker-dealer  must  establish  procedures  that  are
appropriate for the nature of its business operations.  Failure to establish and
maintain an adequate  supervisory  system may result in sanctions imposed by the
SEC or a SRO that could limit the B/D  Subsidiaries  abilities to conduct  their
securities business.  Moreover,  under federal law, and certain state securities
laws,  the B/D  Subsidiaries  may be held liable for damages  resulting from the
unauthorized  conduct of their  account  executives  to the extent  that the B/D
Subsidiaries  have failed to establish and maintain an  appropriate  supervisory
system.

         North   Ridge.   Approximately   ninety   percent  of  the   securities
transactions  effected  by  North  Ridge's  Registered  Representatives  involve
packaged products,  including  interests in mutual funds and variable annuities.
The  remainder  of  the  securities   transactions  effected  by  North  Ridge's
Registered  Representatives  involves  corporate  equities  and  bonds and other
securities of operating  issuers.  Individual  stock and bond  transactions  are
processed through Pershing & Co., the clearing  division of Donaldson,  Lufkin &
Jenrette, where all accounts are insured for up to $10 million.

<PAGE>


         North  Ridge  receives  commissions  generated  by  financial  planners
providing  services at North  Ridge's  offices.  As of June 30, 1999 North Ridge
employed approximately 80 Registered  Representatives (for an explanation of the
role   of   licensed   Representatives,    see"-RELATIONSHIP   WITH   REGISTERED
REPRESENTATIVES  OF BROKER/DEALER"  above) in providing  financial  planning and
brokerage services directly to a limited number of clients of North Ridge.

         North  Ridge 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 1990. In
addition,  North Ridge has effected all filings under state law to register as a
broker/dealer in Arizona,  California,  Connecticut,  Florida,  Georgia, Hawaii,
Idaho, Illinois, Massachusetts, Minnesota, New York, North Carolina, New Jersey,
New York, Ohio, Pennsylvania, Rhode Island, Texas, and Virginia.

         Prime.  Approximately  ninety  percent of the  securities  transactions
effected  by  Prime's  Registered  Representatives  involve  packaged  products,
including interests in mutual funds and variable annuities. The remainder of the
securities transactions effected by Prime's Registered  Representatives involved
corporate  equities  and  bonds  and  other  securities  of  operating  issuers.
Individual stock and bond  transactions are processed  through National Fidelity
where all accounts are insured for up to $10 million.

         Prime  receives  commissions  generated by  financial  planners who are
Registered  Representatives  of  Prime.  As of June  30,  1999,  Prime  employed
approximately 400 Registered  Representatives (for an explanation of the role of
licensed Representatives,  see"-RELATIONSHIP WITH REGISTERED  REPRESENTATIVES OF
BROKER/DEALER" above).

         Prime 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 1986. In addition,  Prime
has effected all filings under state law to register as a broker/dealer in every
state.

Insurance Brokerage Joint Venture

         GTAX/CB is a joint venture of the Company and Fiengold & Scott, Inc., a
company  engaged in the  wholesaling of insurance and annuity  products in every
state.  The  Company  is the owner of 50% of the stock of  GTAX/CB;  Fiengold  &
Scott,  Inc. is the owner of the remaining  50%.  GTAX/CB was formed to become a
licensed  insurance agent in all states in which the Company  markets  insurance
and annuity products.

         GTAX/CB  acts as the  Company's  licensed  entity  for the sale of life
insurance and long-term health care insurance in all the states in which GTAX/CB
is licensed and for the sale of fixed annuity products in the state of New York.
GTAX/CB is jointly managed by the Company and Feingold & Scott, Inc. The Company
and its  licensed  insurance  agents  receive  commissions  on the  sale of such
insurance  products  comparable  to sales that the Company  could place  through
third-party insurance brokers. In addition,  the Company as 50% owner of GTAX/CB
will  receive  50% of  dividends  paid by GTAX/CB  from its net  revenues.  Such
dividends  represent  additional income to the Company that it would not receive
if it utilized third-party insurance brokers.


<PAGE>

         GTAX/CB's business and the insurance industry in general are subject to
extensive  regulation at the state level in the United States.  Insurance agents
are  subject to  regulations  covering  all aspects of the  insurance  industry,
including  sales  practices,  record-keeping  requirements,   qualification  and
licensing.

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 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  through
referrals and an employee.

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

         At September  30, 1999,  the Company  employed 19 people on a full-time
basis in its Progressive Mailing division.

Marketing

         The Company  markets its  services  principally  through  direct  mail,
promotions,  and seminars.  The majority of clients in each office return to the
Company for tax  preparation  services during the following  years.  The Company
estimates that in Fiscal 1999, the client retention rate was approximately  75%.
Older offices tend to have higher retention rates than new offices.

         Direct  Mail.  Each year  prior to and  during  the "tax  season"  when
individuals file federal,  state and local income tax returns, the Company sends
direct  mail  advertisements  to each  residence  in the  area  surrounding  the
Company's offices. 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.

         Promotions.  The Company  offers a $50 U.S.  Savings Bond to any client
that refers another two clients to the Company.  In Fiscal 1998 and Fiscal 1999,
the program resulted in approximately 500 new clients per year.

         Seminars.  The  company  supports  its  Registered  Representatives  by
advertising  their  local  financial   planning  seminar.   At  these  seminars,
prospective  new clients can learn about a wide variety of  investment  products
and tax planning opportunities.

         Online.  The  Company  currently  has a web  site  on the  Internet  at
http://www.e1040.com  for income tax and financial  planning  advice and Company
information,  including financial information and the latest news releases.  For
the 1999 tax season, the Company advertised e1040.com with paid links and banner
advertisements  on  the  following  web  sites:  www.irs.com;  www.sidewalk.com;
www.lycos.com; www.yahoo.com; www.snap.com; and www.planetdirect.com.


<PAGE>


         Other  Marketing.  The Company also prints and  distributes  brochures,
flyers and newsletters about its services.

         The Company  believes that its most promising  market for in-office tax
preparation  expansion may lie in areas of high/above average population growth.
Individuals  usually  retain a local  tax  preparer  in  connection  with  their
individual 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,  including H&R Block 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's  on-line tax preparation  competitors  during the 1999-tax season were
Intuit and Secure Tax who have since  combined  their  operations.  The  Company
believes that the primary  elements of competition  are  convenience,  location,
local economic  conditions,  quality of on-site management,  quality of service,
price, and with respect to online operations,  effective  advertising  campaigns
and ease of service.  There is no  assurance  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 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
addition,  the Company depends on the availability of employees  willing to work
for a period of approximately  three months for relatively low hourly wages, and
minimal  benefits.  The  Company's  success in  managing  the  expansion  of its
business  depends in large part upon its ability to hire,  train,  and supervise
seasonal personnel.  If this labor pool is reduced or if the Company is required
to provide its employees higher wages or more extensive and costly benefits, due
to competitive  reasons,  the expenses associated with the Company's  operations
could be  substantially  increased  without the Company's  receiving  offsetting
increases in revenues.

Trademarks

         The Company has  registered  its  "Gilman + Ciocia"  trademark  and has
applied for registration of its "e1040.com" trademark,  with the U.S. Patent and
Trademark  Office.  There  is no  assurance  that  the  Company  would  be  able
successfully   to  defend   its   trademarks   if  forced  to   litigate   their
enforceability.  The Company believes that its trademarks  "Gilman + Ciocia" and
"e1040.com"  constitute  valuable marketing factors. If the Company were to lose
the use of such trademarks, its sales could be adversely affected.


<PAGE>


Regulation

         The Company, as a preparer of federal income tax returns, is subject to
civil  liabilities  for  violations  of  the  Internal  Revenue  Code  or  other
regulations of the IRS. The Internal  Revenue 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 Internal  Revenue 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.

         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 in such circumstances.  None of the full-year employees and
only  several of the seasonal  employees of the Company meet such  requirements.
Most of the  Company  employees  are  limited to  representing  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.

         The IRS prohibits tax preparers 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.

         The Registered  Representatives  themselves  are strictly  regulated in
their  activities as Registered  Representatives  of a  broker/dealer  under the
Exchange  Act,  state  regulation,  the  rules of the NASD and by the  rules and
regulations of the broker/dealer.

         Gilman + Ciocia, Prime, and North Ridge are registered  broker/dealers:
Prime is  registered in every state and North Ridge is registered in every state
it does business.  Gilman + Ciocia have not registered as a broker/dealer in any
states and do not believe that it is currently required to so register. However,
The State of  Washington  made  written  inquiries  in 1996  regarding  possible
requirements  for it 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.

         The Company is the  Respondent  of a Summary  Order to Cease and Desist
from the Securities  Commissioner of the State of Maryland  ordering the Company
to cease and desist from  holding  itself out as offering  "financial  planning"
services and from advertising that "financial  planning"  services are available
at its offices until the Company registers as an investment advisor.  This order
arose not  because  the  company  was itself  acting as a  financial  planner --
because  all  financial  planning  in the  Company's  offices  is  performed  by
registered  representatives  of  Prime  or  North  Ridge,  which  have  made all
appropriate  registrations  -- but because under Maryland law, no entity can use
the words "financial  planner" to promote its business without registering as an
investment advisor.  The Company does advertise that financial planning services
are  available  at its  offices.  The  Company  has  agreed  with  the  Maryland
Securities  Commissioner  to register as an investment  advisor and to reimburse
the State of Maryland for the costs of its proceeding in the amount of $5,000.


<PAGE>


         Gilman + Ciocia registered with the Securities and Exchange  Commission
as an investment advisor in October 1999.

Employees

         As of October 1, 1999, the Company  employed 398 persons on a full-time
full-year basis,  including the Company's four officers. The Company's full-time
employees  include 50 professional  tax preparers,  180 financial  planners,  81
clerical and support staff persons (which include  persons  performing  clerical
work while in training for other positions),  23  administrative  personnel (who
include the  Company's  executive  officers),  19 employees  who are part of the
Company's  direct mail services  division and 45 individuals who are employed by
the Company's broker/dealer subsidiaries. During peak season the Company employs
approximately  700  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 on an examination given by the Company.

         The Company  also is  affiliated  with  approximately  400  independent
financial  planners who have entered into commission sharing agreements with one
of the Company's two broker dealer subsidiaries.

Risk Factors

         This Form  10-KSB  contains  certain  forward-looking  statements  that
involve substantial risks and uncertainties.  When used in this Form 10-KSB, the
words "anticipate," "believe," "estimate," "expect" and similar expressions,  as
they  relate to the Company or its  management,  are  intended to identify  such
forward-looking  statements.  The  Company's  actual  results,   performance  or
achievements  could differ  materially from the results expressed in, or implied
by, these forward-looking statements.  Factors that could cause or contribute to
such differences include those discussed below.

         Risk of Acquiring Broker/Dealers and Expanding into Financial Planning.
The Company  plans to continue  to expand into the area of  financial  planning,
both through the  acquisition of independent  securities  broker/dealers  and by
recruiting  financial  planners.  The Company's continued revenue growth will in
large part depend upon successful integration and continued profitability of the
broker/dealers acquired. The Company's growth will also depend on the successful
operation  of  independent  financial  planners  who are  recruited  to join the
Company.  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.

         Risk of Acquisition of Small Tax Preparation Practices.  As part of its
strategy,  the  Company  intends to pursue the  acquisition  of tax  preparation
practices.  The success of the Company  will in part depend upon the  successful
operation  of the  practices  acquired  and  the  integration  of  the  acquired
businesses  into the  Company.  A rapid  expansion of offices that do not become
profitable  would  reduce the  Company's  net income  and could  depress  future
operating  results.  If the acquired companies do not perform as expected or the
Company could not effectively  integrate the acquired  companies,  the Company's
operating results could be materially adversely affected.


<PAGE>


         Risk of Opening New Offices. 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  results  could  be  materially  adversely
affected in any year that the Company opens a significant number of new offices.

         Seasonality.  The  third  fiscal  quarter  during  tax  season  is  the
Company's strongest.  The Company has significantly  reduced earnings during the
remainder  of the year.  From July 1st to December  31st each year,  the Company
generally  requires  substantial  financing to fund operations  until cash flows
from the upcoming tax season materialize.  If the Company was not able to secure
such financing or if such financing was not available on terms  favorable to the
Company, the Company's operating results could be materially adversely affected,
and the Company would have to curtail its operations.

         Highly Competitive Nature of the Tax Preparation and Financial Planning
Services  Industry.  The income tax preparation and financial  planning services
industries are highly competitive.  The Company's  competitors include companies
specializing in income tax preparation as well as companies that provide general
financial services. The Company's principal competitor is H+R Block, Inc. in the
tax preparation field and many well-known national brokerage and insurance firms
in the financial  services field.  Many of these  competitors have larger market
shares and significantly greater financial and other resources than the Company.
The  Company  may not be able to  compete  successfully  with such  competitors.
Competition  could cause the Company to lose existing  clients,  slow the growth
rate of new clients and increase  advertising  expenditures,  all of which could
have a material adverse effect on the Company's business or operating results.

         Potential  Competition from Departing Employees and Financial Planners.
Departing  employees  and  financial  planners  may  compete  with the  Company.
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
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. If a
substantial amount of such competition  occurs,  the corresponding  reduction of
revenue may materially adversely affect the Company's operating results.

         Dependence on Key Personnel.  The Company  believes that its ability to
successfully  implement its business strategy and operate  profitably depends on
the continued employment of James Ciocia, its President,  Thomas Povinelli,  its
Chief Operating Officer,  Stephen B. Sacher,  its Chief Financial  Officer,  and
Kathryn  Travis,  its  Secretary,  Michael  Ryan,  the  President  of its  Prime
subsidiary, and Daniel Levy, the President of its North Ridge subsidiary. If any
of these  individuals  become  unable or  unwilling  to  continue  in his or her
present  position,  the  Company's  business  and  financial  results  could  be
materially adversely affected.

         Potential  Liability  under the Internal  Revenue  Code.  The Company's
business of preparing tax returns subjects it to potential civil liabilities for
violations  of the  Internal  Revenue  Code or  other  regulations  of the  IRS.
Penalties  could range from $25 to $25,000 per violation.  The Company has never


<PAGE>


been assessed  with material  civil  penalties or fines.  However,  if a Company
violation  resulted  in a material  fine or  penalty,  the  Company's  operating
results could be materially  adversely affected.  In addition,  the Company does
not maintain any professional  liability or malpractice insurance policies.  The
Company  has  never  been the  subject  of a  malpractice  claim.  However,  the
significant  uninsured  liability  and legal and other  costs  relating  to such
claims could materially  adversely  affect the Company's  business and operating
results.

         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,  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.

         Inability  of the Company to Provide  Services  of a  Certified  Public
Accountant.  The  Company  generally  utilizes  seasonal  employees  who are not
certified  public  accountants  or tax  attorneys  to  provide  tax  preparation
services.   The  Company  employs  fewer  than  10  full-time  certified  public
accountants,  two of which do not work as tax  preparers.  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  available 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.

         Infringement and Loss of Trademark and Other  Proprietary  Rights.  The
Company believes that its trademarks and other proprietary  rights are important
to its success and its  competitive  position.  The Company has  registered  its
"Gilman + Ciocia"  trademark and has applied for registration of its "e1040.com"
trademark  with the U.S.  Patent and  Trademark  Office and devotes  substantial
resources to the  establishment and protection of its trademarks and proprietary
rights.  However,  the actions taken by the Company to establish and protect its
trademarks and other  proprietary  rights may be inadequate to prevent imitation
of its  services  and  products  by others or to prevent  others  from  claiming
violations  of their  trademarks  and  proprietary  rights  by the  Company.  In
addition,  others  may  assert  rights  in the  Company's  trademarks  and other
proprietary rights.

         Control of the  Company  by Current  Management.  The  Company's  Chief
Executive  Officer,  Chief Operating Officer and Secretary own approximately 32%
of the outstanding  Company common stock,  par value $.01 per share (the "Common
Stock").  Accordingly,  these officers control the Company and have the power to
elect a majority  of the  directors,  appoint  management  and  approve  certain
actions requiring the approval of a majority of the Company's stockholders.  The
interests  of these  officers  could  conflict  with the  interests of the other
stockholders of the Company. In addition, their ownership could




<PAGE>


pose an obstacle to a purchase of the Company  that might be  desirable to other
stockholders  and/or to a change in  management  if the Company is not operating
profitably in the future.

         Lack of Dividends.  Since its initial public  offering of securities in
1994, the Company has not paid 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 dividends will not
be distributed  in the near future,  which may reduce the  marketability  of the
Company's Common Stock.

         Certain Anti-takeover  Provisions;  Preferred Stock. Certain provisions
of the  Certificate  of  Incorporation  could make it more difficult for a third
party to acquire control of the Company, even if such change in control would be
beneficial to stockholders.  The Certificate of Incorporation allows the Company
to issue preferred stock without stockholder approval. Such issuances could make
it more difficult for a third party to acquire the Company.  The  Certificate of
Incorporation  also provides for a classified  board of  directors,  which would
prevent a third party acquiring a majority of the Common Stock from  immediately
electing a new board of directors.

         Possible  Volatility of Stock Price.  Since  December  1997, the market
price of the Common  Stock has almost  tripled and fallen to  approximately  its
December 1997 range. During that period, the average daily trading volume of the
Common Stock has varied  significantly.  In addition,  prior to August 28, 1998,
the Common Stock traded on the Nasdaq SmallCap Market.  As a result,  historical
market prices may not be indicative of market prices in the future.  There is no
assurance  that an active trading market for the Common Stock will develop or be
sustained in the future. In addition,  the stock market has recently experienced
extreme stock price and volume  fluctuation.  These fluctuations have often been
unrelated to the operation  performance of particular  companies.  The Company's
market  price may be  impacted  by changes in earnings  estimates  by  analysts,
economic  and  other  external  factors  and the  seasonality  of the  Company's
business. Fluctuations or decreases in the trading price of the Common Stock may
adversely affect the ability to buy and sell the Common Stock and the ability to
raise money in a future offering of Common Stock.  See "Market for Common Equity
and Related Stockholder Matters".

         Restrictions  on Possible  Future Sales.  Various  restrictions  on the
possible  future sale of Common  Stock may have an adverse  affect on the market
price of the Common  Stock.  Approximately  [3,500,000]  shares of Common  Stock
outstanding are "restricted  securities" under Rule 144 of the Securities Act of
1933,  as amended  (the  "Act").  In  general,  under Rule 144, 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 do 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.

         The Company has granted  2,713,000 options to purchase shares of Common
Stock to 37 individuals. 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.


<PAGE>


         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.

         New  Rules   Limiting   Broker/Dealer   Sales.   New   rules   limiting
Broker/Dealer  sales of Common Stock could affect the Company's  ability to sell
its  securities  and  discourage  Broker/Dealers  from dealing in the  Company's
Common Stock. For example,  the Company's Common Stock is not currently  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 a net worth in excess of $1,000,000 or annual
income exceeding $200,000 individually,  or $300,000 jointly with their spouse).
However, if the market price of the Common Stock were to fall substantially, the
Common  Stock may be  governed by such a rule in the  future.  For  transactions
covered  by  such a rule,  the  broker/dealer  must  determine  whether  certain
potential  purchasers  are  suitable and then  receive the  purchaser's  written
agreement to the transaction prior to sale.

         Moreover,  there is another  Commission  rule that  imposes  additional
disclosure  requirements on  broker/dealers  in "penny stock"  transactions.  An
underwriter's  participation  in the trading market of the Common Stock could be
governed by this rule if the price of the Common Stock were to fall.  The Common
Stock  is  currently  outside  the  definition  of a  "penny  stock"  under  the
applicable  rules,  however,  in the event the Common Stock were subsequently to
become  characterized  as a "penny stock" as a result of being delisted from The
Nasdaq  National Stock Market or otherwise,  broker/dealers  will be required to
make extensive  disclosures to such clients in certain  circumstances  regarding
the Common  Stock.  Such  additional  burdens  imposed upon  broker/dealers  may
discourage  broker/dealers  from transacting 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.

         Limitations  on Director  Liability.  With  limited  exceptions,  under
Delaware law directors of the Company are not liable individually to the Company
or to its stockholders for corporate decisions.  Specifically,  directors of the
Company are not liable to the Company or its  stockholders  for monetary damages
for breach of their fiduciary duty unless such actions were a breach of the duty
of loyalty,  acts or omissions not in good faith or which  involved  intentional
misconduct  or a  knowing  violation  of law,  for  dividend  payments  or stock
repurchases illegal under Delaware law or in any transaction in which a director
derived an  improper  personal  benefit.  Therefore,  the  Directors  have broad
discretion over actions made on behalf of the Company.

         General Risks of the Securities Industry.  The securities industry,  by
its very nature,  is subject to numerous and  substantial  risks,  including the
risk of  declines in price level and volume of  transactions,  losses  resulting
from the ownership, trading or underwriting of securities, risks associated with
principal  activities,  the  failure  of  counterparties  to  meet  commitments,
customer,  employee or issuer fraud risk,  litigation,  customer claims alleging
improper sales  practices,  errors and misconduct by brokers,  traders and other
employees  and agents  (including  unauthorized  transactions  by brokers),  and
errors and failure in connection with the processing of securities transactions.
Many of these  risks may  increase  in periods of market  volatility  or reduced
liquidity.  In  addition,  the amount and  profitability  of  activities  in the
securities  industry are affected by many  national and  international  factors,
including  economic  and  political  conditions;  broad  trends in industry  and
finance;  level and  volatility of interest  rates;  legislative


<PAGE>

and  regulatory  changes;   currency  values;  inflation;  and  availability  of
short-term  and  long-term  funding  and  capital,  all of which are  beyond the
control of the Company.

         Several  current  trends are also  affecting the  securities  industry,
including increasing consolidation, increasing use of technology, increasing use
of discount and online brokerage services,  greater  self-reliance of individual
investors and greater  investment in mutual funds.  These trends could result in
the Company's facing increased  competition from larger  broker-dealers,  a need
for  increased  investment  in  technology,  or  potential  loss of customers or
reduction in commission  income.  There can be no assurance that these trends or
future  changes  will  not  have a  material  adverse  effect  on the  Company's
business, financial condition, results of operations or cash flows.

         Risk of Reduced Revenue During Periods of Lower Stock Prices or Reduced
Trading  Volume.  The  Company's  revenue  and  profitability  may be  adversely
affected  by  declines in the volume of  securities  transactions  and in market
liquidity,  which generally result in lower revenues from trading activities and
commissions.  Lower  securities price levels may also result in a reduced volume
of  transactions,  as well as  losses  from  declines  in the  market  value  of
securities held in trading, investment and underwriting positions. In periods of
low  volume,  the fixed  nature of  certain  expenses,  including  salaries  and
benefits,  computer  hardware and software  costs,  communications  expenses and
office leases,  will adversely  affect  profitability.  Sudden sharp declines in
market values of  securities  and the failure of issuers and  counterparties  to
perform their  obligations  can result in illiquid  markets in which the Company
may incur losses in its principal trading and market-making activities.

         Regulation.  The SEC, the NYSE and various  other  regulatory  agencies
have stringent rules with respect to the protection of customers and maintenance
of specified levels of net capital by broker-dealers. The regulatory environment
in which the Company operates is subject to change. The Company may be adversely
affected as a result of new or revised legislation or regulations imposed by the
SEC,  other  U.S.  governmental  regulators  or  Self  Regulating  Organizations
("SROs").  The  Company  also  may  be  adversely  affected  by  changes  in the
interpretation  or  enforcement  of  existing  laws and rules by the SEC,  other
federal and state governmental authorities and SROs.

         The B/D  Subsidiaries  are subject to periodic  examination by the SEC,
SROs  and  various  state  authorities.  The B/D  Subsidiaries'  sales  practice
operations, record-keeping, supervisory procedures and financial position may be
reviewed during such examinations to determine if they comply with the rules and
regulations   designed  to  protect   customers  and  protect  the  solvency  of
broker-dealers.  Examinations  may result in the  issuance of letters to the B/D
Subsidiaries  noting perceived  deficiencies and requesting the B/D Subsidiaries
to take corrective action.  Deficiencies could lead to further investigation and
the possible institution of administrative proceedings,  which may result in the
issuance of an order imposing  sanctions upon the B/D Subsidiaries  and/or their
personnel.

         The  Company's  business  may  be  materially   affected  not  only  by
regulations  applicable to it as a financial  market  intermediary,  but also by
regulations of general application. For example, the volume and profitability of
the Company's or its customers trading  activities in a specific period could be
affected  by,  among  other  things,  existing  and  proposed  tax  legislation,
antitrust policy and other governmental  regulations and policies (including the
interest   rate  policies  of  the  Federal   Reserve   Board)  and  changes  in
interpretation  or  enforcement  of  existing  laws and rules  that  affect  the
business and financial communities.


<PAGE>


         Litigation and Potential Securities Law Liability.  Many aspects of the
Company's  business involve  substantial  risks of liability.  There has been an
increase in litigation and arbitration within the securities  industry in recent
years, including class action suits seeking substantial damages.  Broker-dealers
such as the B/D  Subsidiaries  are subject to claims by dissatisfied  customers,
including  claims alleging they were damaged by improper sales practices such as
unauthorized trading,  churning, sale of unsuitable securities,  use of false or
misleading  statements in the sale of  securities,  mismanagement  and breach of
fiduciary duty. The B/D Subsidiaries may be liable for the unauthorized  acts of
their retail  brokers and  independent  contractors  if they fail to  adequately
supervise  their  conduct.  From time to time, in connection  with hiring retail
brokers, the Company is subject to litigation by a broker's former employer. The
adverse  resolution of any legal proceedings  involving the Company could have a
material  adverse effect on its business,  financial  condition,  and results of
operations or cash flows.

Item 2.           DESCRIPTION OF PROPERTY

         The Company  provides  services to its clients at 135 local  offices in
fifteen states:  forty-eight in New York, fifteen in New Jersey, ten in Arizona,
twenty in Florida, six in Ohio, seven in Maryland, six in Connecticut,  seven in
Washington, five in Massachusetts,  five in Nevada, two in Pennsylvania,  one in
Virginia,  one in Illinois,  one in Texas and one in Kentucky. 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 terms remaining from
one to seven years.  The  Company's  rental  expense  during its Fiscal 1999 was
$2,480,067.  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 an
office that is not  replaced  with a nearby  office could  adversely  affect the
Company's business at that office.  Subsequent to year-end,  the Company entered
into a  ten-year  lease for  corporate  office  space.  The lease  commences  on
December 1, 1999 and calls for annual minimum rental  payments of  approximately
$265,000 per fiscal year.

         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.

Item 3.           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.  This action was settled in December 1998
in a settlement agreement under which the Company issued warrants to purchase an
aggregate of 85,000 shares of the Company's common stock and agreed to reimburse
Thomas  Povinelli  for the  transfer  of an  aggregate  of 12,500  shares to the
plaintiffs.  The Company subsequently exchanged the warrants for an aggregate of
34,500 shares of newly issued common stock.


<PAGE>


         On August 21, 1998, Mercedes-Benz Credit Corporation, Allianz Insurance
Company, and Allianz Underwriters, Inc. filed a complaint against the Company in
New York Supreme Court,  Nassau County.  The complaint seeks  indemnification in
the amount of up to  approximately  $3.5 million from Gilman + Ciocia,  Inc. 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, 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). Gilman & Ciocia, Inc. served its answer on September 18, 1998. Gilman &
Ciocia,  Inc. asserted numerous  defenses,  which it believes,  are meritorious.
However,  it is not possible to  determine at this time the ultimate  success of
any asserted allegation or defense.

         In  July  1999,  Euromarket  Advisory,  Inc.  instituted  a suit in the
Circuit  Court  in and  for  Fasco  and  Pinellas  Counties,  Florida  demanding
issuance,  collectively,  of 150,000  warrants to purchase the Company's  common
stock at $5.13 per share  (alleged  to have been  issuable  under an  investment
banking  agreement  pursuant  to which  Euromarket  Advisory,  Inc.  was to have
provided  investment  banking services to the Company),  plus $16,000 in monthly
investment banking fees, as well as attorney's fees and exemplary  damages.  The
Company believes that Euromarket  Advisory,  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.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         The Company held an annual meeting of shareholders on June 22, 1999. At
the meeting all of the  directors of the Company were  reelected to the board of
directors  of the  Company.  A proposal to amend the  Company's  Certificate  of
Incorporation in order to change the Company's name form "Gilman & Ciocia, Inc."
to Gilman + Ciocia,  Inc.;  increase the number of shares of  authorized  common
stock from 9,000,000 to 20,000,000 shares and to establish a classified board of
directors  consisting of three classes,  was approved by a vote of 3,889,192 for
and 883,771 against, with 9,300 abstaining.  A proposal to approve the Company's
1999 Common Stock and Incentive and Non-Qualified Stock Option Plan was approved
by a vote of  4,176,261  for and  597,552  against,  with  8,450  abstaining.  A
proposal to ratify the  reappointment  of Arthur  Andersen LLP as the  Company's
auditors was approved by a vote of 6,936,478 for and 45,565 against,  with 3,700
abstaining. The voting for the election of directors was as follows:

Director                               For                    Against
--------                               ---                    -------
James Ciocia                           6,856,397              129,346
Thomas Povinelli                       6,855,997              129,746
Kathryn Travis                         6,856,397              129,346
Louis Karol                            6,856,397              129,346
Seth Akabas                            6,856,397              129,346

                                     PART II

Item 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER


<PAGE>


MATTERS

         The principal  market on which the Company's Common Stock trades is The
Nasdaq  National Stock Market under the symbol "GTAX." Prior to August 28, 1998,
the principal  market on which the Company's  Common Stock traded was 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
-------------                        ----                               ---
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                        $ 26 3/8                         $ 13 3/4

September 30, 1998                   $ 18 1/4                         $  7 1/2
December 31, 1998                    $ 10 1/8                         $  5 1/4
March 31, 1999                       $ 19 1/8                         $  9 1/2
June 30, 1999                        $ 15 7/16                        $  7 3/4

           The Company has no basis for knowing the cause of the  volatility  of
its stock 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 30, 1999,  there were  approximately  225  registered
holders of Common Stock.  On September 30, 1999, the closing price of the Common
Stock was $11 1/4 per share.

Item 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

           The  following  discussion  should  be read in  conjunction  with the
Company's  financial  statements  and related  notes  thereto and the  "Selected
Consolidated  Financial Data" set forth in Item 7 of this Annual Report.  Except
for the historical information contained herein, this and other sections of this
Annual  Report  contain   certain   forward-looking   statements   that  involve
substantial risks and uncertainties.  When used in this Annual Report, the words
"anticipate," "believe," "estimate," "expect", and similar expressions,  as they
relate  to  the  Company  or its  management,  are  intended  to  identify  such
forward-looking  statements.  The  Company's  actual  results,  performance,  or
achievements  could differ  materially from the results expressed in, or implied
by, these forward-looking statements.

Overview

           Gilman + Ciocia,  Inc.  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



<PAGE>

planning.  The Company  capitalizes on this situation by making available
financial planning services. The financial planners who provide such service are
employees  or  independent   contractors  of  the  Company  and  are  registered
representatives of the Company's broker/dealer subsidiaries.  The Company or its
broker/dealer  subsidiaries  earn 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.

           Almost all of the financial  planners are also  authorized  agents of
insurance  underwriters,  and  approximately  2% of the  financial  planners are
authorized  to act as mortgage  brokers.  As a result,  the  Company  also earns
revenues  from  commissions  for  acting as an  insurance  agent and a  mortgage
broker.  In  addition,  the Company  owns a 50% stake in GTAX/CB,  an  insurance
broker.

           The Company also has a division  operating as a direct mail  service.
This division assembles, packages and mails direct mail materials, including the
Company's own marketing  materials as well as materials of third  parties.  This
division  also  provides  limited  consulting  services in  connection  with the
design, creation and testing of direct mail materials.

           During Fiscal 1999,  approximately 25% of the Company's revenues were
earned  from tax  preparation  services,  72%  were  earned  from all  financial
planning and related  services (with 26% from  securities  transactions  and 46%
from mortgage  brokerage,  insurance and other  related  services),  and 3% were
earned from direct mail and related services.

           Direct mail services historically have not materially  contributed to
the Company's net income. The Company's tax return preparation  business and its
financial planning business are closely linked together. These lines of business
generally  use the  same  individuals,  assets,  marketing  and  facilities.  In
addition, the Company's financial planning customers generally are introduced to
the Company through the Company's tax preparation services. 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.

           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,  seven new offices in 1998, and
seven new offices in Fiscal 1999.

Plan of Operation

           Tax Preparation and Financial Planning

           The  Company  opens  new  tax  offices  and  acquires   existing  tax
preparation  businesses.  New offices have historically attracted more potential
tax  preparation  clients,  which have  resulted in increased  revenues and have
contributed  to  the  Company's  growth.  In  addition,  each  of  the  new  tax
preparation  clients are potential new financial  planning clients.  The Company
plans to continue to expand and open new offices  during the next year (although
no specific  target has been set),  recruit  successful  financial  planners and
acquire existing securities  broker/dealers and tax preparation  practices.  The
Company   anticipates  funding  this  growth  through  the  proceeds  of  future
offerings, if any, operating profits and use of its credit facility.


<PAGE>


           During  Fiscal  1996  and  Fiscal  1997,   in  connection   with  the
acquisitions of two tax preparation practices,  the Company bought a building in
which the tax preparation  practices 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 Fiscal 1999, 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 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.

Results of Operations

           The  following  table sets forth for the  periods  indicated  certain
items from the  Company's  statements  of income  expressed as a  percentage  of
revenue and the percentage change in such items for Fiscal 1998 and Fiscal 1999.
The trends illustrated in the following table are not necessarily  indicative of
future results.


                                                Percentage of Revenue
                                                               Percentage
                                    Year Ended             Increase (Decrease)
                                       June 30,       As a Percentage of Revenue

                                1998      1999     1998 to 1999
                                ----      ----     ------------
Tax preparation fees             36%      25%             (11%)
Financial planning               58%      72%               14%
     Commissions

Direct mail services                       3%

                                 6%                        (3%)
     Total revenue             100%      100%               --
General and administrative
    Expense

                                 15%      13%              (2%)
Advertising                      11%       8%              (3%)


<PAGE>


                                                Percentage of Revenue
                                                               Percentage
                                    Year Ended             Increase (Decrease)
                                       June 30,       As a Percentage of Revenue

                                1998      1999     1998 to 1999
                                ----      ----     ------------
Depreciation and                  3%       3%               0%
     Amortization

Other operating expenses         59%      69%
                                                           10%

Operating expenses               88%      93%               5%
Other income (expense), net       0%       0%               0%
Income before taxes              12%       7%             (5)%
Provision for income taxes        5%       3%
                                                          (2)%

Net income                        7%       4%             (3)%

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


Fiscal 1999 Compared to Fiscal 1998

         The Company's  revenues for Fiscal 1999 were $50,443,406 as compared to
$28,533,083  for Fiscal 1998, an increase of  $21,910,323  or 77%. This increase
was  attributable to an increase in Financial  Planning  services as well as the
acquisitions of Prime and North Ridge.

         The Company's total revenues for Fiscal 1999 consist of $12,813,113 for
tax  preparation  services,  $36,137,862  for  financial  planning  services and
$1,492,431 for direct mailing  services.  Tax preparation  services  represented
25%,  financial  planning  services  represented 72% and direct mailing services
consisted of 3% of the Company's  total  revenues for Fiscal 1999. The Company's
total  revenues  for Fiscal  1998  consist of  $10,164,550  for tax  preparation
services; $16,578,032 for financial planning services; and $1,790,501 for direct
mailing services.  Tax preparation  services represented 36%, financial planning
services  represented  58% and direct  mailing  services  represented  6% of the
Company's total revenues for Fiscal 1998.

         The growth in the tax preparation segment is primarily  attributable to
the acquisition of seven new tax practices during fiscal 1999 and additional tax
revenues  generated  from the remaining one hundred  twenty-eight  offices.  The
growth in the  financial  planning  segment  is  attributable  to the  hiring of
additional financial planners who generated additional commissions from securing
transaction activities. The remaining growth in financial planning revenues is a
result of additional financial planning revenues generated from the North Ridge,
Prime and related acquisitions.

         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 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 Company has previously  experienced a 6 to 12
month  delay after the  opening of a new office  before  such  office  generated
significant financial planning revenues.

         The Company's  operating  expenses for Fiscal 1999 were  $46,646,555 or
92% of revenues, an increase of $21,516,142 or 86% as compared to $25,130,413 or
88% of  revenues  for Fiscal  1998.  The



<PAGE>

increase in operating expenses was attributable to an increase of $17,378,147 in
salaries and  commissions;  $2,150,154 in general and  administrative  expenses;
$442,950 in rent;  $582,997 in  depreciation  and  amortization;  $1,140,713  in
advertising, offset by a decrease of $178,819 in direct mail costs.

         Salaries and commissions  increased  $17,378,147 or 120% in Fiscal 1999
to $31,915,652  compared to $14,537,505 in Fiscal 1998. The increase in salaries
and commission  expense is primarily  attributable to an increase in commissions
payable to financial  planners as a result of the  increased  sales of financial
planning  services and the addition of financial  planners  form North Ridge and
Prime.

         General  and  administrative  expense  increased  $2,150,154  or 51% in
Fiscal 1999 to $6,344,215 as compared to $4,194,061in  Fiscal 1998. The increase
in general and administrative is primarily  attributable to opening of seven new
offices in Fiscal 1999  relating  to an  increase in office  expenses at the new
offices.  The  additional  increase  in general  and  administrative  expense is
attributable to North Ridge and Prime.

         Rent expense increased $442,950 or 22% in Fiscal 1999 to $2,480,067, as
compared to $2,037,117 in Fiscal 1998. The increase in rent expense is primarily
attributable  to the opening of the  Company's  seven new offices  during Fiscal
1999 and the offices opened during the second half of Fiscal 1998.

         Depreciation  and  amortization  expense  increased  $582,997 or 68% in
Fiscal 1999 to $1,441,388  as compared to $858,391 in Fiscal 1998.  The increase
in  depreciation  and  amortization  is  primarily  attributable  to  additional
purchases  of  computer   equipment  during  Fiscal  1999  and  also  additional
amortization incurred on purchase acquisitions and tax practices.

         The increase in other  expense of $111,193 is  predominantly  due to an
increase in interest expense on debt.

         The Company's  income after  provision for income taxes for Fiscal 1999
is $2,181,143 as compared to $2,011,345  for Fiscal 1998.  The increase of 8% is
primarily  attributable to higher net operating  income generated from financial
planning services and tax preparation.

         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.

Liquidity and Capital Resources

         The  Company's  revenues  have been,  and are  expected  to be,  highly
seasonal.  As a result, the Company must generate sufficient cash during the tax
season, in addition to its available bank credit facility, to fund its operation
in the first half of the following  fiscal year.  Operations  during the non-tax
season  are  primarily  focused  on  financial  planning  services.   Since  its
inception,  the Company has utilized  funds from  operations,  proceeds from its
initial  public  offering and bank  borrowings  to support  operations,  finance
working capital requirements and complete acquisitions. Since its inception, the
Company  has  utilized  funds  from its  initial  public  offering  and/or  bank
borrowings to support  operations,  finance  working  capital  requirements  and
complete  acquisitions.  The Company  received gross  proceeds of  approximately
$3,000,000 million from the exercise of warrants and options during Fiscal 1999.


<PAGE>


         The  Company's  cash  flows  provided  by  operating   activities  were
$3,675,563 and $1,654,601 for the Fiscal 1999 and Fiscal 1998, respectively. The
increase  of  $2,020,962  is  due  primarily  to  additional   depreciation  and
amortization of $743,531,  an increase from an income tax benefit on exercise of
stock  options of  $894,000,  an increase  in  unrealizable  gain on  marketable
securities of $200,316 and an increase in net income of $169,798.

         Net cash used in investing activities was $8,479,798 and $1,115,824 for
Fiscal  1999 and  Fiscal  1998,  respectively.  The  increase  of  approximately
$7,363,974 is primarily due to an increase in  acquisitions  of  $6,566,432,  an
increase in loans to officers and  stockholders  of $600,952 and a decrease from
sale of investments of $214,652.

         Net cash used in financing  activities was $6,551,758 and  ($1,753,435)
for Fiscal 1999 and Fiscal 1998,  respectively.  The  increase of  approximately
$8,305,193 is primarily due to an increase in bank borrowings of $5,500,000,  an
increase in proceeds from sale of common stock and exercise of stock options and
warrants  of  $2,920,120,  and a  decrease  in  deferred  registration  costs of
$314,819. These amounts were offset by an increase in payments of bank and other
loans of  $384,884  and a  decrease  in  proceeds  from stock  subscriptions  of
$87,869.

         The Company  had two joint  credit  facilities  with State Bank of Long
Island  and  EAB  Bank.  The  first  facility  was a line  of  credit  for up to
$4,500,000. Borrowings under this line were in the form of short-term notes with
interest  charged  monthly at the bank's prime lending rate plus 1 1/2%. At June
30, 1999, the Company had an outstanding  principal  balance of $2,500,000.  The
second credit  facility was a revolver for up to $3,500,000.  Borrowings on this
revolver are in the form of short-term  notes with interest  charged  monthly at
the bank's prime lending rate plus 1 1/2 %. At June 30, 1999, the Company had an
outstanding  principal  balance of $1,500,000.  During  September  1999, the two
credit  facilities were refinanced with Merrill Lynch. The new facility consists
of three  separate loans as follows:  $10,000,000  comprises a line of credit of
$4,000,000 and two revolver  loans for a total of $6,000,000.  The interest rate
on the line of credit is 2.9% plus the 30-day commercial paper rate. The line of
credit facility  expires on June 30, 2000. The interest rate on the two revolver
loans is 3.15%  plus the  30-day  commercial  paper  rate.  The terms of the two
revolving loan  facilities are sixty months.  Both  facilities are guaranteed by
all of the business  assets of the company and  guaranteed  by each of the three
principal officers of the company up to $1,250,000.

         The Company  believes  that it could  continue  to operate  without any
additional  financing  (other than its seasonal  bank loans)  during the next 12
months. The Company anticipates that it will not pay any dividends on its Common
Stock  in the  foreseeable  future,  but  will  apply  any  profits  to fund the
Company's expansion.

New Accounting Pronouncements

In April 1998,  the AICPA  issued  Statement of Position  (SOP) 98-5  "Reporting
Costs of Start-Up Activities," which establishes standards for the accounting of
start-up costs.  Costs of start-up  activities,  including  organization  costs,
should be expensed as incurred.  SOP 98-5 is effective for financial  statements
for fiscal years beginning after December 15, 1998, although earlier application
is  encouraged.  The  Company  has  adopted  SOP 98-5  during  fiscal year 1998;
however,  the effects of this standard have no material  impact on the Company's
results of operations, earnings per share or financial position.


<PAGE>


Year 2000 Compliance

         The  Company  has  completed  the  installation  of  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 not 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.

Item 7.           FINANCIAL STATEMENTS

INDEX

                                                                            Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS:
Consolidated Balance Sheet
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE

         None.

                                    PART III

 Item 9.          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         The  following  table sets forth  information  regarding  the executive
officers and directors of the Company:

Name               Age    Position

James Ciocia         42   Chief Executive Officer, President and Director
Thomas Povinelli     39   Chief Operating Officer, Executive Vice President
                          and Director
Kathryn Travis       50   Secretary, Vice President and Director
Stephen B. Sacher    40   Chief Financial Officer and Treasurer


<PAGE>

Michael P. Ryan      41   Director and President of Prime Capital Services, Inc.
Seth A. Akabas       43   Director
Louis P. Karol       40   Director

Executive Officers and Directors

James Ciocia, Chief Executive Officer, President and Director

         Mr. Ciocia is a principal founder of the Company having opened the
Company's first tax preparation office in 1981. In addition to serving the
Company as its Chief Executive Officer since its founding, Mr. Ciocia is a
registered representative of Prime. Mr. Ciocia holds a B.S. in Accounting from
St. John's University and is a member of the International Association for
Financial Planners.

Thomas Povinelli, Chief Operating Officer, Executive Vice President 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 Gilman + Ciocia offices, Mr. Povinelli is a
registered representative of Prime. Mr. Povinelli holds a B.S. in Accounting
from Iona College.

Kathryn Travis, Secretary, Vice President and Director

         Ms. Travis began her career with the Company in 1986 as an accountant
and has served as Secreatary, Vice President and a Director since November 1989.
Ms. Travis currently manages the Company's Great Neck office, supervises all
e1040.com tax preparation personnel, and is a registered representative of
Prime. Ms. Travis holds a B.A. in Mathematics from the College of New Rochelle.

Stephen B. Sacher, Chief Financial Officer and Treasurer

         Mr. Sacher joined the Company as its Chief Financial Officer in January
1998. Mr. Sacher is a Certified Public Accountant, holds a B.A in Accounting
from Queens College of the City of New York and has been practicing in the
public accounting profession since 1981. Mr. Sacher is currently 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

         Mr. Akabas has served as a partner at the law firm of Akabas & Cohen
since June 1991. Mr. Akabas holds a B.A. in Economics from Princeton University
and a J.D. form Columbia University's School of Law and Journalism.

Louis P. Karol, Director

         Mr. Karol is a partner of the law firm of Karol, Hausman & Sosnick. Mr.
Karol holds a B.S. from George Washington University, a J.D from Cardozo Law
School and an L.L.M in Taxation from New York University's School of Law. Mr.
Karol currently serves on the Board of Directors of the Long Island Chapter of
the International Association of Financial Planning and is a Certified Public
Accountant.


<PAGE>


Michael P. Ryan, Director and President of Prime Capital Services, Inc.

         Mr. Ryan is President of Prime Capital Services, Inc., Gilman +
Ciocia's wholly owned broker/ dealer subsidiary. Mr. Ryan co-founded this
company and has served as its President since 1987. Mr. Ryan is a Certified
Financial Planner and a founding member and past President of the Mid-Hudson
Chapter of the International Association for Financial Planning. Mr. Ryan is a
Registered Principal with the National Association of Securities Dealers and
serves on the Independent Firms Committee of the Securities Industry Association
(SIA). Mr. Ryan holds a B.S. in Finance from Syracuse University.

Item 10.          EXECUTIVE COMPENSATION

Summary Compensation

         The following table sets forth, as to the Chief Executive Officer and
the three other executive officers whose annual salary and bonus exceeded
$100,000 in Fiscal 1999 (collectively, the "Named Executive Officers"),
information with respect to annual and long-term compensation earned during the
last three fiscal years:

         Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                             Long Term
                                                                                                           Compensation
                                                               Annual Compensation                            Awards
           Name and                                                            Other Annual        Number of Shares Underlying
      Principal Position           Year       Salary          Bonus*           Compensation                   Options

James Ciocia
<S>                              <C>         <C>              <C>            <C>                            <C>
Chief Executive Officer,         1997        $151,200         $240,000       $ 9,580(1)                     10,000
President and Director           1998        $190,000                        $12,393(1)
                                 1999        $190,000                        $15,266(1)                     60,000

Thomas Povinelli
Chief Operating Officer,         1997         $99,951         $145,000       $78,600(3)                     10,000
Executive Vice President and     1998         $190,000
Director                         1999         $190,000                                                      60,000

Kathryn Travis
Secretary, Vice President        1997         $92,149         $3,000         $  7,149(1)                    10,000
and Director                     1998         $135,000                       $ 10,758(1)
                                 1999         $135,000                       $ 10,758(1)                    30,000

</TABLE>

<PAGE>


<TABLE>
<CAPTION>
                                                                                                             Long Term
                                                                                                           Compensation
                                                               Annual Compensation                            Awards
           Name and                                                            Other Annual        Number of Shares Underlying
      Principal Position           Year       Salary          Bonus*           Compensation                   Options

<S>                              <C>         <C>              <C>            <C>                            <C>
Stephen B. Sacher                1998         $36,667                        $125,717(2)                   200,000
Chief Financial Officer and      1999         $80,000                        $120,000(4)                    15,000
Treasurer

</TABLE>

------------------------------
*Represents commission earned from non-affiliated entities.  See "Certain
Relationships and Related Transactions."

 (1) Auto expense.

 (2) Includes professional fees paid to Sacher & Company, PC, a company of which
     Mr. Sacher is President.
 (3) Includes $18,600 for auto expense and $60,000 for  forgiveness  of loan.
 (4) Includes  professional  fees paid to Sacher & Co., a  company of which Mr.
     Sacher is President.

Key Man Insurance

         The Company  maintains $2.0 million key-man life insurance  policies on
both Thomas Povinelli and James Ciocia.

Directors

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

Option Grants

         The  following  table  sets  forth  information  regarding  options  to
purchase shares of Common Stock granted to the Named  Executive  Officers during
Fiscal 1999.

<TABLE>
<CAPTION>
                                                    OPTION GRANTS IN FISCAL 1999
                                                         Individual Grants

         Name            Number of Securities     Percent of Total
                              Underlying        Options/SARs Granted
                         Options/SARs Granted      to Employees in     Exercise of Base Price
                                  (#)                Fiscal Year               ($/Sh)               Expiration
                                                                                                       Date
<S>                             <C>                     <C>                    <C>                    <C>
James Ciocia                    60,000                  11.4%                  $9.50                  1/05/04
Thomas Povinelli                60,000                  11.4%                  $9.50                  1/05/04
Kathyrn Travis                  30,000                  5.7%                   $9.50                  1/05/04
Stephen Sacher                  15,000                  2.8%                   $9.50                  1/05/04

</TABLE>

Option Exercises and Holdings

         The following  table sets forth  information  concerning the number and
value of  unexercised  options to  purchase  shares of Common  Stock held by the
Named Executive Officers as of June 30, 1999.

               Aggregated Option/SAR Exercises in Last Fiscal Year
                      and Fiscal Year-End Option/SAR Values


<PAGE>


<TABLE>
<CAPTION>
                                                                    Number of Securities               Value of Unexercised
Name                               Shares                          Underlying Unexercised                  In-the-Money
                                  Acquired                               Options at                          Options
                                    upon          Value             Fiscal Year-End (#)                Fiscal Year-End ($)
                                  Exercise       Realized        Exercisable/Unexercisable         Exercisable/Unexercisable(1)

<S>                                <C>           <C>                   <C>                                  <C>
James Ciocia                       83,105        485,537               10,000/60,000                        $64,375/--
Chief Financial Officer
Thomas Povinelli                   83,105        485,537               10,000/60,000                         $64,375/--
Chief Operating Officer
Kathryn Travis                     62,337        364,196               10,000/30,000                         $64,375/--
Chief Operating Officer
Stephen B. Sacher                  12,680        106,195               20,000/195,000                    $33,750/$27,500
Chief Financial Officer
</TABLE>

(1)      Based on a year-end fair market value of the underlying securities
         equal to $9.1875.

Stock Option Plans

         On September 14, 1993, the Company adopted the 1993 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"
("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 1993 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 Stock
Options or Non-Qualified Options, and other terms and provisions of the options.
The exercise price of the Incentive Stock Options granted under the 1993 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 1993 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 1993
Plan.

         The Company has granted under the 1993 Plan Incentive Stock 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 that remain outstanding. In total,
the Company has granted options that are still outstanding to purchase 200,000
shares and options to purchase [110,998] shares remain to be granted under the
1993 Plan.

         On April 20, 1999, the Board of Directors of the Company adopted the
Company's 1999 Common Stock and Incentive and Non-Qualified Stock Option Plan
(the "Plan"). The Plan was approved by the Company's stockholders on June 22,
1999.

         Under the Plan, the Company may grant options to purchase up to 300,000
shares of Common Stock to key employees of the Company and its subsidiaries, and
directors, consultants and other



<PAGE>


`individuals providing services to the Company. Such options may either qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or they may not qualify under such Section
("non-qualified stock options").

         The Board of Directors will administer the Plan. The Plan allows the
Board of Directors of the Company to designate a committee of at least two
non-employee directors to administer the Plan for the purpose of complying with
Rule 16(b)(3) under the Securities Exchange Act of 1934, as amended, with
respect to future grants under the Plan. Until such delegation, the Board will
select the persons who are to receive options and the number of shares to be
subject to each option (the administrator of the Plan, whether the Board of
Directors or a committee thereof, is referred to herein as the "Committee"). In
selecting individuals for options and determining the terms, the Board may
consider any factors that it deems relevant, including present and potential
contributions to the success of the Company. Options granted under the Plan must
be exercised within a period fixed by the Board, which may not exceed ten years
from the date of grant. Options may be made exercisable immediately or in
installments, as determined by the Board.

         The purchase price of each share for which an incentive stock option is
granted and the number of shares covered by such Option will be within the
discretion of the Committee based upon the value of the grantee's services, the
number of outstanding shares of Common Stock, the market price of such Common
Stock, and such other factors as the Committee determines are relevant; provided
however, that such purchase price may not be less than the par value of the
Common Stock. The purchase price of each share for which an incentive stock
option is granted under the Plan ("Incentive Option Price") shall not be less
than the amount which the Committee determines, in good faith, at the time such
incentive stock option is issued or granted, constitutes 100% of the then Fair
Market Value of a Share of Common Stock.

         Grantees under the Plan may not transfer options otherwise than by will
or the laws of descent and distribution; provided that the Committee may
determine with respect to any particular Option that such Option shall be
transferable. No transfer of an Option permitted by terms of such Option or by
will or the laws of descent and distribution will bind the Company unless the
Company has been furnished with written notice thereof and a copy of the will
and/or such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of such Option. In the case of an Option, during the
lifetime of the grantee, unless transferred as permitted by this Plan and the
Option, the Option may only be exercised by the grantee, except in the case of
disability of the grantee resulting in termination of employment, in which case
the Option may be exercised by such grantee's legal representative.

         The Committee will adjust the total number of shares of Common Stock
which may be purchased upon the exercise of Options granted under the Plan for
any increase or decrease in the number of outstanding shares of Common Stock
resulting from a stock dividend, subdivision, combination or reclassification of
shares or any other change in the corporate structure or shares of the Company;
provided, however, in each case, that, with respect to incentive stock options,
no such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b)(1) of the Code. If the Company
dissolves or liquidates or upon any merger or consolidation, the Committee may
make such adjustment with respect to Options or act as it deems necessary or
appropriate to reflect or in anticipation of such dissolution, liquidation,
merger or consolidation including, without limitation, the substitution of new
Options or the termination of existing options.

         Under the Plan,  the  Company  will  grant to each  employee  and those
affiliated   financial   planners



<PAGE>

who have entered into commission sharing agreements with the Company, including
officers and directors, 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 the calendar years 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. The Company
will grant options following the end of the calendar year. The Company
anticipates that it will grant between 50,000 and 100,000 options per year under
this program.

         For Federal  income tax  purposes,  an optionee  will not recognize any
income upon the grant of a  non-qualified  stock  option or an  incentive  stock
option.

         Upon the exercise of a non-qualified stock option, the optionee will
realize ordinary income equal to the excess (if any) of the fair market value of
the shares purchased upon such exercise over the exercise price. The Company
will be allowed a deduction from income in the same amount and at the same time
as the optionee realizes such income. Upon the sale of shares purchased upon
such exercise, the optionee will realize capital gain or loss measured by the
difference between the amount realized on the sale and the fair market value of
the shares at the time of exercise of the option. In the case of options granted
to executive and principal officers, directors and stockholders owning greater
than 10% of the outstanding Common Stock, income will be recognized upon
exercise of a non-qualified option only if the option has been held for at least
six months prior to exercise. If such option is exercised within six months
after the date of grant, then such an officer, director or greater than 10%
stockholder will recognize income six months after the date of grant, unless he
or she files an election under Section 83(b) of the Code to be taxed on the date
of exercise.

         In contrast, upon the exercise of an incentive stock option, an
optionee will not realize income, and the Company will not be allowed a
deduction. If the optionee retains the shares issued to him upon exercise of an
incentive stock option for more than one year after the date of issuance of such
shares and two years after the date of grant of the option, then any gain or
loss realized on a subsequent sale of such shares will be treated as long-term
capital gain or loss. If, on the other hand, the optionee sells the shares
issued upon exercise within one year after the date of issuance or within two
years after the date of grant of the option, then the optionee will realize
ordinary income, and the Company will be allowed a deduction from income, to the
extent of the excess of the fair market value of the shares on the date of
exercise or the amount realized on the sale (whichever is less) over the
exercise price. Any excess of the sale price over the fair market value of such
shares on the date of exercise will be treated as capital gain. In addition, the
difference between the fair market value of the shares on the date of exercise
and the exercise price constitutes an item of tax preference for purposes of
calculating an alternative minimum tax, which, under certain circumstances,
could cause tax liability as a result of an exercise.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following  table sets forth,  as of October 14, 1999, 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.


<PAGE>

                                      Amount and Nature of
Name of Beneficial Owner              Beneficial Ownership     Percent of Class
------------------------              --------------------     ----------------
James Ciocia                              1,063,616(1)                14%
1311 Mamaroneck Avenue
White Plains, NY 10605

Thomas Povinelli                          1,118,616(2)              14.8%
1311 Mamaroneck Avenue
White Plains, NY 10605

Kathryn  Travis                             415,481(3)               5.5%
1311 Mamaroneck Avenue
White Plains, NY 10605

Seth  Akabas                                  8,966(4)                 *
488 Madison Avenue - 11th Floor
New York, NY 10022

Louis  Karol                                    780                    *
600 Old Country Road
Garden City, NY 11530

Steven  Gilbert                             684,000(5)               8.5%
2420 Enterprise Road, Suite 100
Clearwater, FL 33763

Stephen  Sacher                              35,000(6)                 *
1311 Mamaroneck Avenue
White Plains, NY 10605

Arlington Financial Services, Inc.          755,004(7)                10%
11 Raymond Avenue
Poughkeepsie, NY 12603

All directors and officers
as a group (6 persons)                    3,397,459                   44%

---------------------------
 *       Less than 1%.

(1)      Includes  10,000  shares of Common Stock  issuable upon the exercise of
         currently  exercisable  options  at prices of $2.75.  Does not  include
         60,000  shares  issuable  upon the exercise of options that do not vest
         until 2001.

(2)      Includes 10,000 shares of Common Stock and 60,000 shares issuable upon
         the exercise of currently exercisable options at prices of $2.75 and
         $9.50, respectively.

(3)      Includes 10,000 shares of Common Stock and 30,000 shares issuable upon
         the exercise of

<PAGE>

         currently exercisable options at prices of $2.75 and $9.50,
         respectively.

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

(5)      Includes 169,000 shares owned by the Gilbert Family Limited Partnership
         of which Steven  Gilbert is a 97%  beneficiary.  In addition,  includes
         340,000 shares, 100,000 shares and 75,000 shares issuable upon exercise
         of options at $3.50, 4.75, and 13.75, respectively.

(6)       Includes 20,000 shares of Common Stock and 15,000 shares issuable upon
          exercise of currently exercisable options at $7.00 and $9.50,
          respectively.

(7)       Includes 604,000 shares held in Arlington Financial Services, Inc.
          and 151,004 shares held in escrow.  Shares are jointly owned by
          Michael P. Ryan and Ralph Porpora.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Each of James Ciocia, Thomas Povinelli and Kathryn Travis acted as a
Registered Representative for Royal Alliance and as an authorized agent for
insurance carriers. These relationships no longer existed as of July 1, 1999.
See "Executive Compensation".

         The three principal stockholders, Messrs. Ciocia, Povinelli and Ms.
Travis personally guaranteed the repayment of the Company's long-term loan in
the amount of $4,000,000 collectively from the State Bank of Long Island,
European American Bank, as well as the seasonal loans in the form of lines of
credit as described in the "Management's Discussion and Analysis" section. These
referenced loans were refinanced with Merrill Lynch subsequent to June 30, 1999.
Said stockholders guaranteed the Merrill Lynch loans, each with an individual
limit of $1,250,000. Such stockholders 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 Chief Operating
Officer - $198,000, Thomas Povinelli, Sr., father of the 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. During Fiscal 1998, the Partnership was
dissolved, and the Company wrote-off a $100,000 loan to the Partnership.

         The Company loaned the following individuals the following amounts:
$100,000 and $240,000 to James Ciocia, $100,000 and $240,000 to Thomas
Povinelli, $50,000 and $72,000 to Kathryn Travis, and $50,000 to Steven Gilbert.
These loans are due in fully amortizing biweekly installments (including
interest at 7% per annum) through maturity on June 30, 2000, with the exception
of the $240,000 loans to Messrs. Ciocia and Povinelli and the $72,000 loan to
Kathryn Travis, which have a maturity date of August 1, 2001. During Fiscal
1999, additional loans of $100,000 to Thomas Povinelli, $339,877 to James Ciocia
and $228,589 to Kathryn Travis were loaned and are payable upon demand. The
officers, namely James Ciocia, Thomas Povinelli and Kathryn Travis have pledged
certain shares of their stock in the company (with an aggregate market value of
approximately $1,440,000) as collateral for these loans.

<PAGE>


         In December 1997, the Company loaned  $225,000 each to James Ciocia and
Thomas Povinelli. These loans were non-interest bearing loans and were repaid by
such officers/stockholders in March 1998.

         From time to time 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. The amounts paid to Mr. Sacher in this capacity are set
forth above in "Executive Compensation."

         The Company has also made two loans to Steven Gilbert, a stockholder of
the  Company.  The first loan is for  $150,000,  due in  bi-weekly  installments
through June 15, 1999.  Interest is charged at 9% per annum.  This loan has been
paid in full at June 30, 1999.  The second loan is for $100,000,  due on October
9, 1999. Interest on this loan is charged at 9% per annum.

         In addition,  the Company holds a note  receivable from Dominic Ciocia,
the brother of the Company's Chief Executive Officer. The note receivable is for
$112,000  and is due on June 19,  2000.  Interest  is  charged  at 6% per annum,
respectively.

Item 13. EXHIBITS, LIST AND REPORTS OF FORM 8-K

(a)      Exhibits

(b) Reports on Form 8-K

         In June 1999,  the Company filed  Amendment No. 1 to its Current Report
on Form 8-K dated  April 5,  1999,  amending  Item 7  Financial  Statements  and
Exhibits. The Amendment included the following financial statements:

                  Prime Capital Services, Inc. (PFSI), Prime Financial Services,
                  Inc., a New York Corporation (Oldco) and Asset & Financial
                  Planning, Ltd. (AFPL) Audited Combined Balance Sheets as of
                  April 30, 1998 and March 31, 1999.

                  PCSI, Oldco and AFPL Audited Combined  Statement of Income and
                  Retained Earnings for the fiscal year ended April 30, 1998.

                  PCSI, Oldco and AFPL Audited Combined  Statement of Cash Flows
                  for the fiscal year ended April 30, 1998.

                  PCSI, Oldco and AFPL Audited Combined  Statement of Income and
                  Retained Earnings for the eleven months ended March 31, 1999.

                  PCSI, Oldco and AFPL Audited Combined  Statement of Cash Flows
                  for the eleven months ended March 31, 1999.

                  PCSI's,   Oldco's  and  AFPL's  Notes  to  Combined  Financial
                  Statements  for fiscal  year ended  April 30,  1998 and eleven
                  months ended March 31, 1999.


<PAGE>


                  Gilman & Ciocia, Inc. & Subsidiaries Combined Balance Sheet
                  Pro Forma as of March 31, 1999.

                  Gilman & Ciocia,  Inc. & Subsidiaries  Combined  Statements of
                  Income Pro Forma for the year ended June 30, 1998 and the nine
                  months ended March 31, 1999.

                                   SIGNATURES

         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.

                                GILMAN + CIOCIA, INC.

                       By:

                                -----------------------------------------
                                Thomas Povinelli, Chief Operating Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

Signature                           Title                                               Date
---------                           -----                                               ----
<S>                               <C>                                                   <C>
James Ciocia                      Chief Executive Officer                               October 20, 1999
                                  and President (principal
                                  executive officer)


Stephen B. Sacher                   Chief Financial Officer,                            October 20, 1999
                                    and Treasurer
                                    (principal financial officer and principal
                                    accounting officer)

 Thomas Povinelli                   Director                                            October 20, 1999

 Kathryn Travis                     Director                                            October 20, 1999

 Michael Ryan                       Director                                            October 20, 1999

 Louis Karol                        Director                                            October 20, 1999

 Seth Akabas                        Director                                            October 20, 1999

</TABLE>


<PAGE>




                                     INDEX

                                                                      Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                               F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheet                                             F-3
Consolidated Statements of Income                                      F-4
Consolidated Statements of Stockholders' Equity                        F-5-6
Consolidated Statements of Cash Flows                                  F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                             F-8-22
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Gilman + Ciocia, Inc.

     We have audited the accompanying consolidated balance sheet of Gilman +
Ciocia, Inc. and subsidiaries as of June 30, 1999, and the related consolidated
statements of income, stockholder's equity and cash flows for the years then
ended June 30, 1999 and 1998. 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 to 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, 1999, and the results of their operations and cash
flows for the years ended June 30, 1999 and 1998, in conformity with generally
accepted accounting principles.


                                        ARTHUR ANDERSEN LLP

                                        /s/ ARTHUR ANDERSEN LLP

New York, New York
October 6, 1999


                                      F-2
<PAGE>

                     GILMAN + CIOCIA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 1999

                                     ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                       $  3,453,354
  Marketable securities                                                316,937
  Accounts receivable, net of allowance
    for doubtful accounts of $87,500                                 3,585,518
  Receivables from officers and stockholders,
    current portion                                                    568,233
  Prepaid expenses and other current assets                            983,130
  Prepaid income taxes                                               1,460,259
  Deferred tax assets, current portion                                 183,000
                                                                  ------------
         Total current assets                                       10,550,431

  Property and equipment, net                                        2,372,174
  Intangible assets, net of accumulated
    amortization of $1,635,581                                      17,387,317
  Receivables from officers and stockholders,
    net of current portion                                           1,570,964
  Security deposits                                                    374,348
  Deferred tax assets                                                   10,000
  Other assets                                                         733,746
                                                                  ------------
         Total assets                                             $ 32,998,980
                                                                  ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                               $  1,695,529
  Accounts payable and accrued expenses                              3,605,386
                                                                  ------------
         Total current liabilities                                   5,300,915
                                                                  ------------
  Long-term debt - net of current protion                            2,738,124
                                                                  ------------

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
  Preferred stock - $.001 par value - shares
    authorized 100,000; none issued and outstanding
  Common stock - $.01 par value - shares authorized
    20,000,000; issued and outstanding 7,508,266 shares                 75,083
  Paid-in capital                                                   20,027,444
  Retained earnings                                                  5,785,858
                                                                  ------------
                                                                    25,888,385

  Less- Treasury Stock, at cost; 199,645 shares                       (777,039)
  Stock subscriptions and accrued interest receivable                 (159,646)
  Unrealized gain on marketable securities, net of income taxes          8,241
                                                                  ------------
         Total stockholders' equity                                 24,959,941
                                                                  ------------
         Total liabilities and stockholders' equity               $ 32,998,980
                                                                  ============

 The accompanying notes are an integral part of this consolidated balance sheet.


                                      F-3
<PAGE>


                      GILMAN + CIOCIA INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                   FOR THE YEARS ENDED JUNE 30, 1999 AND 1998

                                                      1999            1998
                                                  ------------    ------------
REVENUES:
     TAX PREPARATION FEES                         $ 12,813,113     $ 10,164,550
     FINANCIAL PLANNING SERVICES                    36,137,862       16,578,032
     DIRECT MAIL SERVICES                            1,492,431        1,790,501
                                                  ------------     ------------
          TOTAL REVENUES                            50,443,406       28,533,083
                                                  ------------     ------------

OPERATING EXPENSES:
     SALARIES AND COMMISSIONS                       31,915,652       14,537,505
     GENERAL AND ADMINISTRATIVE EXPENSES             6,344,215        4,194,061
     ADVERTISING                                     3,873,580        2,732,867
     DIRECT MAIL COSTS                                 591,653          770,472
     RENT                                            2,480,067        2,037,117
     DEPRECIATION AND AMORTIZATION                   1,441,388          858,391
                                                  ------------     ------------
          TOTAL OPERATING EXPENSES                  46,646,555       25,130,413
                                                  ------------     ------------
           OPERATING INCOME                          3,796,851        3,402,670
                                                  ------------     ------------

OTHER INCOME (EXPENSE):
     INTEREST AND INVESTMENT INCOME                    129,041          107,953
     INTEREST EXPENSE                                 (280,961)        (175,536)
     OTHER INCOME                                       56,212           83,068
                                                  ------------     ------------
          TOTAL OTHER (EXPENSE) INCOME                 (95,708)          15,485
                                                  ------------     ------------
INCOME  BEFORE PROVISION FOR INCOME TAXES            3,701,143        3,418,155

PROVISION FOR INCOME TAXES                           1,520,000        1,406,810
                                                  ------------     ------------
          NET  INCOME                             $  2,181,143     $  2,011,345
                                                  ============     ============
NET INCOME PER SHARE:
          BASIC                                   $       0.35     $       0.37
          DILUTED                                         0.32             0.32
WEIGHTED AVERAGE SHARES:
          BASIC                                      6,264,228        5,383,093
          DILUTED                                    6,917,436        6,315,345

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


                                      F-4
<PAGE>

                     GILMAN & CIOCIA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>
                                                             1999           1998
                                                         -------------  -----------
<S>                                                      <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                             $ 2,181,143    $ 2,011,345
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Compensation expense recognized in connection
        with the reissuance of treasury stock and the
        issuance of stock options                            184,927         61,831
     Depreciation and amortization                         1,441,388        858,391
     Income from investment in partnership                     5,984        (25,051)
     Deferred tax provision (benefit)                        (42,000)      (124,000)
     (Gain) loss on sale of marketable securities               (342)        16,213
     Deferred and other compensation expense                 458,332        162,477
     Provision for doubtful collections                     (100,000)       100,000
     Interest on stock subscriptions                         (10,801)       (13,546)
      Proceeds from sale of marketable securities               --           22,323
     (Increase) decrease in:
          Accounts receivable                                612,662     (1,141,576)
          Prepaid expenses and other current assets         (743,382)      (180,974)
          Advances to financial planners                     133,039        (87,500)
          Security deposits                                  (70,949)       (28,732)
          Accounts payable and accrued expenses             (284,712)        33,883
          Income taxes payable                              (162,889)        94,689
                                                         -----------    -----------
             Net cash provided by operating activities     3,602,400      1,759,773
                                                         -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                        (751,394)      (772,930)
Cash payments for acquisitions- net of cash acquired      (3,997,569)
Acquisition of intangible assets                          (2,714,039)      (145,176)
Investments                                                 (97,272)       (105,172)
Deferred acquisition costs                                      --          (54,955)
Proceeds from sales of investments                              --          214,652
Loan repayments from officers and stockholders               385,819        273,813
Loans to officers and stockholders                        (1,232,180)      (631,228)
                                                         -----------    -----------
             Net cash used in investing activities        (8,406,635)    (1,220,996)
                                                         -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock                               (136,116)      (179,123)
Proceeds from bank and other loans                         8,500,000      3,000,000
Payments of bank and other loans                          (4,786,371)    (4,401,487)
Proceeds from sale of common stock
     and exercise of stock options and warrants            2,974,245         54,125
Proceeds from stock subscriptions                               --           87,869
Incurrence of deferred registration costs                       --         (314,819)
                                                         -----------    -----------
             Net cash provided by (used in)
               financing activities                        6,551,758     (1,753,435)
                                                         -----------    -----------
             Net  increase (decrease) in cash              1,747,523     (1,214,658)
CASH, and cash equivalents beginning of year               1,705,831      2,920,489
                                                         -----------    -----------
CASH, and cash equivalents end of year                     3,453,354      1,705,831
                                                         ===========    ===========
</TABLE>


                                      F-5
<PAGE>

                     GILMAN & CIOCIA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE YEARS ENDED JUNE 30, 1999 AND 1998

                                                         1999           1998
                                                      -----------    -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for-
     Interest                                         $   280,961    $   188,592
     Income taxes                                       2,267,011      1,297,320
Noncash transactions-
     Liquidation of investment in partnership into
        marketable securities                                --          110,793
     Reissuance of treasury stock at fair value              --           32,897
     Issuance of common stock as consideration
        in business combinations                        9,420,995
     Exercise of stock options                              2,412

SUPPLEMENTAL SCHEDULE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:
      Details of business combinations:
      Fair value of assets acquired                   $21,424,445
      Less:  Liabilities assumed                       (4,039,411)
                 Stock issued                          (9,420,995)
                                                      -----------
      Cash paid for acquisitions                        7,964,039
      Cash acquired in acquisitions                    (1,252,431)
                                                      -----------
      Net cash paid for acquisitions                  $ 6,711,608
                                                      ===========

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


                                      F-6
<PAGE>

                     GILMAN + CIOCIA, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   FOR THE YEARS ENDED JUNE 30, 1999 AND 1998

<TABLE>
<CAPTION>


                                                       COMMON STOCK            PAID-IN         RETAINED           TREASURY STOCK
                                                  SHARES        AMOUNT         CAPITAL         EARNINGS        SHARES      AMOUNT
                                                ------------------------------------------------------------------------------------
<S>                                             <C>          <C>             <C>             <C>              <C>       <C>
BALANCE AT JULY 1, 1997                         5,578,913    $     55,789    $  6,231,555    $  1,593,369     157,433   $  (638,556)

PAYMENTS RECEIVED ON STOCK
PURCHASE OF TREASURY STOCK                                                                                     60,700      (179,123)
 REISSUANCE OF TREASURY STOCK                                                      28,934                      (6,818)       32,897
ISSUANCE OF COMMON STOCK ON EXERCISE
  OF STOCK OPTIONS                                 28,000             280          53,845
ACCRUED INTEREST INCOME
INCOME TAX BENEFIT ON EXERCISE OF
  STOCK OPTIONS                                                                    63,000
COMPREHENSIVE INCOME:
  UNREALIZED LOSS ON MARKETABLE SECURITIES
NET INCOME                                                                                      2,011,346
                                                                                             ------------
TOTAL COMPREHENSIVE INCOME                                                                      2,011,346
                                                ------------------------------------------------------------------------------------

BALANCE AT JUNE 30, 1998                        5,606,913    $     56,069    $  6,377,334    $  3,604,715     211,315   $  (784,782)
                                                ====================================================================================

BALANCE AT JULY 1, 1998                         5,606,913    $     56,069    $  6,377,334    $  3,604,715     211,315   $  (784,782)

PURCHASE OF TREASURY STOCK                                                                                     16,400      (136,116)
 REISSUANCE OF TREASURY STOCK                                                      86,067                     (28,070)      143,859
ISSUANCE OF COMMON STOCK ON EXERCISE
  OF STOCK OPTIONS                                372,227           3,722         361,529
ISSUANCE OF COMMON STOCK UPON
  EXERCISE OF WARRANTS-NET                        700,852           7,009       2,556,986
ISSUANCE OF COMMON STOCK UPON
  PURCHASE ACQUISITIONS                           793,774           7,938       9,413,056
ACCRUED INTEREST INCOME
DEFERRED COMPENSATION                                                             136,867
SHARES TO BE ISSUED UPON
  SETTLEMENT OF LITIGATION                         34,500             345         138,605
INCOME TAX BENEFIT ON EXERCISE OF
  STOCK OPTIONS                                                                   957,000
COMPREHENSIVE INCOME:
  UNREALIZED GAIN ON MARKETABLE SECURITIES
NET INCOME                                                                                      2,181,143
                                                                                             ------------
TOTAL COMPREHENSIVE INCOME                                                                      2,181,143
                                                ------------------------------------------------------------------------------------

BALANCE AT JUNE 30, 1999                        7,508,266    $     75,083    $ 20,027,444    $  5,785,858     199,645   $  (777,039)
                                                ====================================================================================

<CAPTION>
                                                       STOCK         ACCUMULATED
                                                 SUBSCRIPTIONS AND    AND OTHER        TOTAL
                                                  ACCRUED INTEREST  COMPREHENSIVE  STOCKHOLDERS'
                                                    RECEIVABLE          INCOME        EQUITY
                                                -----------------------------------------------
<S>                                                <C>              <C>            <C>
BALANCE AT JULY 1, 1997                            $   (223,168)    $        --    $  7,018,989

PAYMENTS RECEIVED ON STOCK                               87,869                          87,869
PURCHASE OF TREASURY STOCK                                                             (179,123)
 REISSUANCE OF TREASURY STOCK                                                            61,831
ISSUANCE OF COMMON STOCK ON EXERCISE
  OF STOCK OPTIONS                                                                       54,125
ACCRUED INTEREST INCOME                                 (13,546)                        (13,546)
INCOME TAX BENEFIT ON EXERCISE OF
  STOCK OPTIONS                                                                          63,000
COMPREHENSIVE INCOME:
  UNREALIZED LOSS ON MARKETABLE SECURITIES                              (86,903)        (86,903)
NET INCOME                                                                            2,011,346
                                                                   ----------------------------
TOTAL COMPREHENSIVE INCOME                                              (86,903)      1,924,443
                                                -----------------------------------------------

BALANCE AT JUNE 30, 1998                           $   (148,845)   $    (86,903)   $  9,017,588
                                                ===============================================

BALANCE AT JULY 1, 1998                            $   (148,845)   $    (86,903)   $  9,017,588

PURCHASE OF TREASURY STOCK                                                             (136,116)
 REISSUANCE OF TREASURY STOCK                                                           229,926
ISSUANCE OF COMMON STOCK ON EXERCISE
  OF STOCK OPTIONS                                                                      365,251
ISSUANCE OF COMMON STOCK UPON
  EXERCISE OF WARRANTS-NET                                                            2,563,995
ISSUANCE OF COMMON STOCK UPON
  PURCHASE ACQUISITIONS                                                               9,420,994
ACCRUED INTEREST INCOME                                 (10,801)                        (10,801)
DEFERRED COMPENSATION                                                                   136,867
SHARES TO BE ISSUED UPON
  SETTLEMENT OF LITIGATION                                                              138,950
INCOME TAX BENEFIT ON EXERCISE OF
  STOCK OPTIONS                                                                         957,000
COMPREHENSIVE INCOME:
  UNREALIZED GAIN ON MARKETABLE SECURITIES                               95,144          95,144
NET INCOME                                                                            2,181,143
                                                                   ----------------------------
TOTAL COMPREHENSIVE INCOME                                               95,144       2,276,287
                                                -----------------------------------------------

BALANCE AT JUNE 30, 1999                           $   (159,646)   $      8,241    $ 24,959,941
                                                ===============================================
</TABLE>

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

                                      F-7
<PAGE>


                     GILMAN + CIOCIA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1999

1.  ORGANIZATION AND
    NATURE OF BUSINESS

Business

Gilman + Ciocia, Inc. and subsidiaries (the "Company" or "G+C"), 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 nine
wholly owned subsidiaries, three of which are inactive. The active subsidiaries
are: Prime Capital Services, Inc ("PCS") and Northridge Securities, Inc.
("Northridge") which are registered broker-dealers pursuant to the provisions of
the Securities Exchange Act of 1934; Prime Financial Services, Inc. ("PFS") and
Northshore Capital Management, Inc. ("Northshore"), which manage PCS and
Northridge, respectively, as well as sell life insurance and fixed annuities;
Asset and Financial Planning, Ltd. ("AFP"), an asset management business; and
e1040.com, Inc. ("e1040") an internet tax preparation business.

2.  SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICIES

Principles of Consolidation

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

The Company has several investments in 20% to 50% owned companies, which are
accounted for on the equity method. Accordingly, the Company's share of the
earnings of these companies, of approximately $4,000, is included in other
income as of June 30, 1999.

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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents include
investments in money market funds and are stated at cost, which approximates
market value.

                                       F-8


<PAGE>



Marketable Securities

The Company has classified its short-term investments in debt instruments as
available for sale securities that are reported at fair value with unrealized
gains and losses included in earnings or stockholders' equity, respectively.

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 lease terms which range
from one to seven years.

Intangible Assets

Intangible assets represent the identifiable intangible assets and goodwill in
connection with the acquisitions of income tax businesses, broker-dealers,
related covenants not to compete, customer lists and others. Amortization
expense is computed on a straight-line basis over a period of five to twenty
years, and amounted to $814,683 and $354,649 for the years ended June 30, 1999
and 1998, 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 un-discounted
estimated 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.

During fiscal 1999 and 1998, the Company acquired intangible assets for
approximately $2,994,445 and $145,000, respectively.

Impairment of Long-Lived Assets

The Company follows the Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of." This 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.

Website Costs

In accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use, " the Company
capitalizes costs incurred in the application development stage related to the
development of its website.

                                       F-9


<PAGE>



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.

Revenue Recognition

The Company recognizes all revenues associated with income tax preparation and
direct mail services upon completion of the services. Securities transactions
and related commission revenue and expenses are recognized on a trade date
basis. Commission revenue and expenses on sales of life insurance policies are
recognized when the policies are effective.

The consolidated statements of income includes as revenue, commissions received
from financial planning services and insurance underwriters, the commissions
received directly by the Company as well as the commissions paid by Royal
Alliance, Inc. ("Royal") to financial planners. Accordingly, the payments made
directly to the financial planners are also included in salaries and commission
expense.

As of July 1, 1999, all of these financial planners had removed their security
licenses from Royal and placed them with PCS. Accordingly, effective as of that
date, the financial planners received their commissions directly from the
Company.

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 tax season
programs 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 programs.

Income Taxes

Income taxes have been provided using the liability method in accordance with
SFAS No. 109 "Accounting for Income Taxes." Under SFAS No. 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.

Stock-based Compensation

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 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 follows 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 10).

                                      F-10


<PAGE>



Net Income Per Share

The Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings
Per Share" which establishes standards for computing and presenting earnings per
share (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. 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. (Note 11)

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 June 30, 1999 because of the
relatively short-term maturity of these instruments and their market interest
rates.

Comprehensive Income

The FASB issued SFAS No. 130, "Reporting Comprehensive Income," which
established standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity, except those resulting from investments by owners, and
distributions to owners. Among other disclosures, SFAS No. 130 requires that all
items that are required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.

Segment Disclosure

The FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 131 requires entities to disclose financial and
detailed information about their operating segments in a manner consistent with
internal segment reporting used by the Company to allocate resources and assess
financial performance. (Note 13).

New Accounting Pronouncements

In April 1998, the AICPA issued Statement of Position "SOP" 98-5 "Reporting
Costs of Start-Up Activities," which establishes standards for the accounting of
start-up costs. Costs of start-up activities, including organization costs,
should be expensed as incurred. SOP 98-5 is effective for financial statements
for fiscal years beginning after December 15, 1998, although earlier application
is encouraged. The Company has adopted SOP 98-5 during fiscal year 1998;
however, the effects of this standard have no material impact on the Company's
results of operations, earnings per share or financial position.

3. Business Combinations

In November 1998, the Company acquired all of the outstanding stock of North
Ridge and North Shore (collectively "NSR") for $5,250,000. The acquired business
is a full-service financial organization, which provides its clients with a wide
range of financial investment services. The acquisition has been accounted for
by the purchase method. The results of operations of NSR have been included in
the Company's results of operations from November 1998.

                                      F-11


<PAGE>



On April 5, 1999 the Company consummated the acquisition of all of the issued
and outstanding capital stock of PCS and AFP. A newly-formed subsidiary of the
Company, consummated the acquisition of certain assets of PFS, pursuant to a
Stock and Asset Purchase Agreement. PCS, AFP and PFS are collectively
hereinafter referred to as Prime.

The Company delivered at the closing of the Acquisition 751,004 shares of its
Common Stock, for all the outstanding shares of the common stock of PCS and AFP
and for the assets acquired from PFS. The amount of Purchase Shares may be
adjusted downward, if the 1999 adjusted pre-tax profits of Prime fails to meet
certain targets set forth in the Purchase Agreement. The purchase method of
accounting was used to record the transaction.

Unaudited proforma data assuming the business combinations were completed
effective the beginning of Fiscal 1999 and Fiscal 1998 is as follows:

<TABLE>
<CAPTION>
Fiscal 1999:                                       G&C          NSR           Prime       Pro Forma
<S>                                           <C>           <C>            <C>           <C>
Revenues                                      $36,491,000   $ 5,529,000    $24,993,000   $67,013,000

Net Income                                    $ 1,110,000   $    42,000    $   982,000   $ 2,134,000

Income per share of common stock - basic                                                       $0.30
                                                    $0.18
Income per share of common stock - diluted                                                     $0.28
                                                    $0.16

Weighted average shares outstanding - basic     6,264,228                      751,000      7,015,228
Weighted average shares outstanding -           6,917,430                      751,000      7,668,436
diluted

Fiscal 1998:                                      G&C           NSR          Prime         Pro Forma
Revenues                                      $28,533,000   $ 6,016,000    $15,562,000   $50,511,000

Net Income (Loss)                             $ 2,011,000   ($  324,000)   $   181,000   $ 1,868,000

Income per share of common stock - basic                                                        $0.30
                                                    $0.37
Income per share of common stock - diluted                                                      $0.26
                                                    $0.32

Weighted average shares outstanding - basic     5,383,093                      751,000      6,134,093
Weighted average shares outstanding -           6,315,345                      751,000      7,066,345
diluted
</TABLE>

                                      F-12


<PAGE>



4.  RECEIVABLES FROM OFFICERS AND STOCKHOLDERS

<TABLE>
<CAPTION>
<S>                                                                                                 <C>
     Notes receivable from officers of the Company that are due in                                  $   142,450
     aggregate bi-weekly installments of $2,295 (including interest at 7%
     per annum)  through June 30,2000
     Notes receivable from officers of the Company that are due in
     aggregate monthly payments of  $9,634 (including interest at 7% per
     annum) commencing September 1, 1998
     through August 1, 2001.                                                                            590,640(a)

     Demand loans to officers                                                                           689,512(a)

     Notes receivable from stockholders of the Company that are due in aggregate
     bi-weekly installments of $2,295 (including interest at 7%
     per annum)  through June 30,2000                                                                    74,168
     Notes receivable of $33,915 and $112,000 from stockholders of the
     Company  due on June 3, 2000 and June 19,  2000  respectively.  Interest is
     charged at 8.5% and 6% per annum, respectively.                                                    145,915

     Receivable from stockholders of the Company, due in biweekly
     installments of $500 through March 9, 2007. Interest is charged at 7%
     per annum.                                                                                          81,502
     Note receivable from a stockholder of the Company due on October 9,
     1999.  Interest is charged at 8% per annum.                                                        129,989

     Other                                                                                              285,021
                                                                                                    -----------
                                                                                                      2,139,197
     Less-  Current portion                                                                             568,233
                                                                                                    -----------
                                                                                                    $ 1,570,964
                                                                                                    -----------
     (a) The officers have pledged their stock in the Company (with an aggregate
     market value of approximately $1,440,000) as collateral for these loans.

Interest income from officers and stockholders was approximately $82,000 and
$21,000, for the years ended June 30, 1999 and 1998, respectively.

5.  PROPERTY AND EQUIPMENT, NET

Major classes of property and equipment, net consist of the following:

       Buildings                                                                                    $   626,864
       Equipment                                                                                      3,330,151
       Furniture and fixtures                                                                           495,175
       Leasehold improvements                                                                           340,769
                                                                                                    -----------
                                                                                                      4,792,959
       Less- Accumulated depreciation and amortization                                                2,420,785
                                                                                                    -----------
                                                                                                    $ 2,372,174
                                                                                                    ===========
</TABLE>
                                      F-13


<PAGE>



For the years ended June 30, 1999 and 1998 depreciation and amortization expense
from   property  and  equipment   was   approximately   $605,000  and  $504,000,
respectively.

6.    INTANGIBLE ASSETS

<TABLE>
<CAPTION>
Intangible assets consit of the following as of June 30, 1999

<S>                                                                                                  <C>
       Customer Lists                                                                                $4,652,918
       Broker-Dealer Registration                                                                       200,000
       Non-Compete Contracts                                                                            800,000
       House Accounts                                                                                   900,000
       Administrative Infrastructure                                                                    700,000
       Independent Contractor Agreements                                                              5,700,000
       Goodwill                                                                                       6,069,980
                                                                                                    -----------
                                                                                                     19,022,898
       Less Accumulated Amortization                                                                 (1,635,581)
                                                                                                    -----------
       Net                                                                                          $17,387,317
                                                                                                    ===========
Amortization  expense is computed on a straight-line  basis over periods of five
to twenty years,  and amounted to $814,683 and $354,649 for the years ended June
30, 1999 and 1998, respectively.

7. DEBT

Debt consists of the following:

       Bank line of credit (a)                                                                      $ 1,500,000
       Revolving line of credit (b)                                                                   2,500,000
       Notes payable for client settlements, payable over periods of 3-5
            years at varying interest rates between 9% to 10%                                           304,141
       Capitalized lease obligations                                                                    129,512
                                                                                                    -----------
                                                                                                      4,433,653
       Less:  Current portion                                                                         1,695,529
                                                                                                    ===========
                                                                                                      2,738,124
                                                                                                    ===========

</TABLE>

(a) The line of credit  facility  provided for borrowings up to $4,500,000.  The
purpose  of the line is to be used to  support  the  Company's  working  capital
needs.  The rate of interest  charged is prime plus 1.5%.  The maturity  date is
November 30, 1999

(b) Represent  drawdowns in an aggregate  principal amount not to exceed, at any
one time outstanding, $3,500,000. The proceeds of the revolving credit loans are
used by the Company to fund new  acquisitions.  The rate of interest  charged is
prime plus 1.5%. The maturity date is October 31, 2001.

Both  loan  facilities  are  secured  by all of the  Company's  assets  and  are
personally  guaranteed  by the three  principal  officers  of the  company.  The
Company is  required,  under this  agreement  to maintain  financial  ratios and
agrees not to pay or accrue for any  dividends  on  distributions  to any of its
shareholders or officers.

                                      F-14


<PAGE>



Subsequent  to year-end,  the Company has  replaced  both its  revolving  credit
facility  and its line of credit with a new  facility.  The new  facility of $10
million  comprises a line of credit of $4 million,  and two revolver loans for a
total of $6 million.  The  interest  rate on the line of credit is 2.9% plus the
30-day  commercial  paper rate. The line of credit facility  expires on June 30,
2000.  The  interest  rate on the two  revolver  loans is 3.15%  plus the 30-day
commercial  paper rate. The terms of the two revolving loan facilities are sixty
months. Both facilities are secured by all of the business assets of the Company
and  guaranteed  by each of the three  principal  officers  of the Company up to
$1,250,000 each.

The  facility  contains   covenants  that  require,   among  other  things,  the
maintenance  of a minimum  tangible  net worth,  a maximum  debt to tangible net
worth ratio, and minimum net cash flow as defined in the agreement.

8.  CAPITALIZED LEASE OBLIGATIONS

The Company is the leasee of certain  equipment  under capital  leases  expiring
through 2002.  The assets and  liabilities  under capital leases are recorded at
the lower of the  present  value of minimum  lease  payments  or the fair market
value of the asset.  The  assets are  depreciated  over their  estimated  useful
lives.  Depreciation  of assets under capital leases is included in depreciation
expense for the year ended June 30, 1999.

Minimum future lease payments under capital leases as of June 30 are as follows:

    2000                                                   $    75,992
    2001                                                        42,881
    2002                                                        10,639
    ----                                                        ------
                                                               129,512
    Less:  Amount representing interest                         15,744
                                                                ------
    Present value of net minimum lease payments             $  113,768
                                                            ==========

Interest rates on capital leases vary from 8.25% to 11.32% and are imputed based
on the lower of the  Company's  incremental  borrowing  rate at the inception of
each lease or the lessor's implicit rate of return.

9.  COMMITMENTS AND CONTINGENCIES

Leases

The Company is obligated under various  non-cancelable  lease agreements for the
rental of office  space  through  2004.  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,
1999.

            2000                                                    $ 2,320,066
            2001                                                      1,959,283
            2002                                                      1,304,059
            2003                                                        894,546
            2004                                                        765,094
      thereafter                                                      1,435,417
                                                                    -----------
                                                                      8,678,465

Subsequent to year-end,  the Company entered into a ten-year lease for corporate
office  space.  The lease  commences  on  December  1, 1999 and calls for annual
minimum rental payments of approximately $265,000 per fiscal year.


                                      F-15


<PAGE>



Rent  expense for the fiscal  years ended June 30, 1999 and 1998 was  $2,480,067
and $2,037,117, respectively.

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 Company is a party to clearing agreements with unaffiliated correspondent
brokers which state that the Company will assume customer obligations should a
customer default. At June 30, 1999, approximately $100,000 of cash is held as a
deposit requirement by the correspondent brokers.

Net Capital Requirements

PCS and Northridge are subject to the SEC's Uniform Net Capital Rule 15c 3-1
[PCS] and 15c 3-3 [Northridge], which require the maintenance of minimum
regulatory net capital and that the ratio of aggregate indebtedness to net
capital, both as defined, shall not exceed the greater of 15 to 1 or $100,000.
At June 30, 1999, PCS and Northridge had net capital of $302,055 and $111,998,
which was $91,732 and $86,998 in excess of its required net capital of $210,323
and $25,000, respectively.

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, PCS and Northridge execute, as agents,
transactions on behalf of customers. If the agency transactions do not settle
because of failure to perform by either the customer or the counterparties, PCS
and Northridge 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.

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

Litigation

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 $5.13 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. This action was
settled in December 1998 in a settlement agreement under which the Company
issued warrants to purchase an aggregate of 85,000 shares of the Company's
common stock and agreed to reimburse its Executive Vice President for the
transfer of an aggregate of 12,500 shares to the plaintiffs. The Company
subsequently exchanged the warrants for an aggregate of 34,500 shares of common
stock. Expense of $139,000 was recognized in fiscal year 1999 relating to the
34,500 shares of common stock.

                                      F-16


<PAGE>



In August 1998, a legal action was instituted against the Company pertaining to
a wrongful death matter allegedly sustained in a Company automobile more than
ten years ago. The complaint seeks indemnification in the amount of up to $3.5
million. The allegations in the complaint are based upon a $1.7 million payment
made by the plaintiffs (former defendants) plus an additional $1.8 million
payment for which plaintiffs ultimately may be held liable. An additional action
is currently pending to determine the liability allocation. The Company answered
the complaint by asserting numerous defenses, which it believes are meritorious.
The Company is unable to determine at this time the ultimate success of any
asserted allegation or defense.

In addition, in July 1999, a lawsuit was initiated against the Company by 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 answered the complaint and intends to defend such suit vigorously.

Payroll Taxes

The Company annually provides its employees with Form W-2 and its outside
consultants with Form 1099 in accordance with tax law and industry practices.
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.

10.  STOCKHOLDERS' EQUITY

Warrants

During fiscal 1999, 507,926 warrants were exercised and 50,783 warrants that had
been outstanding to the public and the underwriter, respectively, in connection
with the Initial Public Offering in 1994. The exercise resulted in net proceeds
of $2,563,995.

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 NonQualified 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 of Directors. The Plan will terminate in September 2003.
At June 30, 1999, of the 420,002 options that had been granted under the Option
Plan, 344,779 were exercised and 75,223 had expired during fiscal 1999.

The Company charged earnings for compensation expense of $90,124 and $134,823
for the years ended June 30, 1999 and 1998 respectively, in connection with the
issuance of stock options.

                                      F-17


<PAGE>



The table below summarizes plan and nonplan stock option activity:

                                                             Weighted
                                                             Average
                                      Number of Shares    Exercise Price
                                      ---------------     --------------

Outstanding, July 1, 1997                 1,366,002             3.59

    Granted                               1,748,000             9.18
    Exercised                               (28,000)            1.93
    Canceled                               (250,000)            5.13

Outstanding, June 30, 1998                2,836,002             6.92

     Granted                                525,500             8.59
     Exercised                             (560,779)            3.16
     Cancelled                              (75,223)            3.07
Outstanding,  June 30, 1999               2,725,500             8.12

Exercisable,  June 30, 1998                 845,000             3.54
Exercisable,  June 30, 1999                 522,000             3.82



The weighted  average grant date fair value of options  granted during the years
ended June 30, 1999 and 1998 is $ 5.72 and $5.41 per option, respectively.

Options  outstanding  and  exercisable  at June 30,  1999 and  related  weighted
average exercise price and life information follows:

<TABLE>
<CAPTION>
             Fiscal Year            Options Outstanding               Options Exercisable            Remaining
              Grant Date          Shares            Price           Shares           Price         Life (Years)
<S>       <C>                      <C>               <C>            <C>               <C>                <C>
          1995                     340,000           3.50           340,000           3.50               7
          1996                     -                    -              -               -                 -
          1997                     162,000           2.75           162,000           2.75               4
          1998                   1,698,000           9.29            20,000           7.50               8
          1999                     525,000           8.59            -                -                  5


</TABLE>

The Company has adopted the disclosure-only provision of SFAS No. 123.
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-18


<PAGE>



                                                     Years ended June 30,
                                                     1999            1998
                                                     ----            ----
   Net income , as reported                        $2,181,143      $2,011,345

   Net loss, pro forma

                                                   (3,506,734)        (46,191)

   Earnings per share, as reported
                                                         0.32            0.32
   Loss per share, pro forma

                                                        (0.51)          (0.01)

The pro forma effect on net income or loss for fiscal years 1999 and 1998 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:

                                 June 30, 1999                    74.5 %
                                 June 30,                         73.6 %
                            1998

                            Dividend yield                           0 %

The Company adopted the Company's 1999 Common Stock and Incentive and
Non-Qualified Stock Option Plan of Gilman & Ciocia, Inc. (the "1999 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").

On April 20, 1999, the Board of Directors of the Company adopted the Company's
1999 Common Stock and Incentive and Non-Qualified Stock Option Plan (the
"Plan"). The Plan was approved by the Company's stockholders on June 22, 1999.

Treasury Stock

During fiscal 1999, the Company acquired 16,400 shares of its common stock for
an aggregate cost of $136,116 and reissued 28,070 of these shares to employees.
The re-issuance gave rise to the recognition of compensation expense in the
amount of $229,926 representing the excess of the fair value of these shares at
re-issuance over proceeds received.

During fiscal 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.
The re-issuance 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 proceeds received.

                                      F-19


<PAGE>



Stock Subscriptions and
Accrued Interest Receivable

Stock  subscription  receivable of $159,646 at June 30, 1999; bear interest at a
rate of 9% per annum.  For the years ended June 30,  1999 and 1998,  the Company
recognized  interest  income of $10,801 and $13,546,  respectively.  At June 30,
1999 accrued interest receivable was $33,661. Principal and interest is expected
to be paid in fiscal 2000.

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:

                                 2000                          $      125,985


11.  EARNINGS PER SHARE

In accordance  with SFAS No. 128, a  reconciliation  between the  numerators and
denominators  of the basic and diluted EPS  computations  for net earnings is as
follows:

<TABLE>
<CAPTION>
                                    Year Ended June 30, 1999                     Year Ended June 30, 1998
                                                              Per Share                                     Per Share
                           Net Income       Shares            Amounts     Net Income          Shares         Amounts
                           ----------       ------            -------     ----------          ------         -------
<S>                       <C>                <C>              <C>          <C>                <C>           <C>
Basic EPS                 $2,181,143         6,264,228        $   0.35     $2,011,345         5,383,093     $   0.37

Dilutive Stock options
& warrants                   653,208           932,252
Dilutive EPS              $2,181,143         6,917,436        $   0.32     $2,011,345         6,315,345     $   0.32

</TABLE>

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

                           Year Ended June 30, 1999                  520,000
                           Year Ended June 30, 1998                  675,000


12. 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 former (the "Partnership"),  an Investment Partnership.  At July 1,
1997, the Company had  approximately a 41%,  interest in the  Partnership.  Such
partnership  fully  liquidated its remaining  investment in fiscal 1998.  During
fiscal  1998,  the  Company  wrote-off  a  $100,000   receivable  due  from  the
Partnership.

                                      F-20


<PAGE>



Professional Fees

During  fiscal  1999 and  1998,  professional  firms  related  to  officers  and
directors  of the  Company  charged  the  Company  fees  totaling  approximately
$440,000 and $200,000, respectively.

13. SEGMENTS OF BUSINESS

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


<TABLE>
<CAPTION>
                                                               Tax          Financial
                                                           Preparation      Planning   Direct Mail   Eliminations      Consolidation
Year ended June 30, 1999
<S>                                                        <C>            <C>             <C>            <C>            <C>
                Revenues from unaffiliated customers       $ 12,813,113   $ 36,137,862    $  1,492,431                  $ 50,443,406
                Intersegment revenues                                                        2,629,833     (2,629,833)           --
                                                           ------------   ------------    ------------   ------------   ------------
                                  Total revenues             12,813,113     36,137,862       4,122,264     (2,629,833)    50,443,406
Direct costs                                                  5,951,233     25,550,995       3,608,124     (2,629,833)    32,480,519
Depreciation and amortization                                   262,820      1,148,002          30,566                     1,441,388
General corporate expenses                                    2,229,218     10,237,421         258,009                    12,724,648
                                                           ------------   ------------    ------------   ------------   ------------
                                  Operating income (loss)  $  4,369,842   $   (798,556)   $    225,565   $       --     $  3,796,851
                                                           ------------   ------------    ------------   ------------   ------------
Interest expense                                                 73,050        207,911                                       280,961
Identifiable assets                                          12,914,444     40,653,346         513,629    (21,082,439)    32,998,980
Capital expenditures                                            567,905         29,915         131,592                       729,412

Direct costs consist of the following:
                Direct mail costs                                                              591,653                       591,653
                Advertising                                   1,003,530      2,861,776       2,638,107     (2,629,833)     3,873,580
                Rent                                            596,112      1,827,435          56,520                     2,480,067
                Salaries and commissions                      4,351,591     20,861,784         321,844                    25,535,219
                                                           ------------   ------------    ------------   ------------   ------------
                                  Total direct costs       $  5,951,233   $ 25,550,995    $  3,608,124   $ (2,629,833)  $ 32,480,519
                                                           ------------   ------------    ------------   ------------   ------------



Year ended June 30, 1998:
                Revenues from unaffiliated customers         10,164,550     16,578,032       1,790,501           --       28,533,083
                Intersegment revenues                              --             --         2,369,447     (2,369,447)           --
                                                           ------------   ------------    ------------   ------------    -----------
                                    Total revenues           10,164,550     16,578,032       4,159,948     (2,369,447)    28,533,083
Direct costs                                                  6,608,421      9,868,394       3,553,154     (2,369,447)    17,660,522
Depreciation and amortization                                   311,418        508,102          38,871           --          858,391
General corporate expenses                                    2,427,443      3,960,564         223,493           --        6,611,500
                                                           ------------   ------------    ------------   ------------    -----------
                                    Operating income            817,268      2,240,972         344,430           --        3,402,670
Interest expense                                                 89,207         86,329            --             --          175,536
Identifiable assets                                           6,245,447      6,043,903         593,101     (3,131,264)     9,751,187
Capital expenditures                                            772,930           --            79,867           --          852,797
Direct costs consist of the following:
                Direct mail costs                                  --             --           770,472           --          770,472
                Advertising                                   1,376,457      1,332,030       2,393,827     (2,369,447)     2,732,867
                Rent                                            746,906      1,218,636          71,575           --        2,037,117
                Salaries and commissions                      4,485,058      7,317,728         317,280           --       12,120,066
                                                           ------------   ------------    ------------   ------------    -----------
                                  Total direct costs          6,608,421      9,868,394       3,553,154     (2,369,447)    17,660,522

</TABLE>

                                      F-21


<PAGE>

14. TAXES ON INCOME

Provisions for income taxes in the consolidated  financial statements consist of
the following:

<TABLE>
<CAPTION>
                                                                         June 30,          June 30,
                                                                        ----------        ----------
                                                                           1999              1998
                                                                        ----------        ----------
               Current:
<S>                                                                  <C>                 <C>
                  Federal                                            $ 1,292,165         $ 1,247,828
                  State and local                                        269,835             282,982
                                                                     -----------         -----------
                              Total current                           1,562,000           1,530,810
                                                                     -----------         -----------
              Deferred:
                  Federal                                                (34,734)            (90,304)
                  State and local                                         (7,266)            (33,696)
                                                                     -----------         -----------
                               Total deferred tax (benefit)              (42,000)           (124,000)
                                                                     $ 1,520,000         $ 1,406,810
                                                                     -----------         -----------


Deferred tax assets as of June 30, 1999 consist of the following:

        Compensation expense recognized for financial reporting purposes in
            connection with common
            stock option grants                                                          $   152,000
        Book amortization of intangibles in excess of tax                                    225,000
        Provision for bad debts
                                                                                              36,000
        Provision for deferred rent liability
                                                                                             (15,000)
        Book depreciation in excess of tax                                                  (157,000)
        Investments in marketable securities
                                                                                              10,000
        Investments accounted for under equity method                                        (58,000)
                                                                                         -----------
                                                                                         $   193,000
                                                                                         ===========
</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 provision for income taxes
is as follows:

<TABLE>
<CAPTION>
                                                                         1999                   1998
                                                                  -------------------    --------------------
       Year ended June 30:
<S>                                                               <C>            <C>     <C>            <C>
                     Federal income taxes computed at statutory   $1,257,000     34.0%   $1,162,173     34.0%
                       rates
           State and local taxes, net of federal                     241,000      6.5       205,089      6.0
              tax benefit
           Reversal of under/(over) accruals                            --        0.0        22,810      0.7
           Amortization of intangible assets with

                 no benefit                                          145,000      3.9
                             Other                                  (123,000)    (3.3)       16,738      0.5
                                                                  $1,520,000     41.1%   $1,406,810     41.2%
</TABLE>



                                      F-22