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

                                    FORM 10-K

[x]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                                    OF 1934.

                    For the Fiscal Year Ended June 30, 2000.

[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
                                  ACT OF 1934.

                        For the transition period from     to

                        Commission File Number 000-22996

                              GILMAN + CIOCIA, INC.
                           (Exact name of registrant
                          as specified in its charter)

              Delaware                                  11-2587324
       (State or jurisdiction of           (I.R.S. Employer Identification No.)
      incorporation or organization)

1311 Mamaroneck Ave. Suite 160, White                     10605
         Plains, NY                                     (Zip Code)
(address of principal executive offices)

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

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

           Title of each class         Name of Exchange 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-K 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-K or any
amendment to this Form 10-K. [X]

State issuer's revenues for its most recent fiscal year. [$89,578,494]

The  aggregate  market  value of the voting stock held by  non-affiliates  as of
[September 29, 2000] was $16,940,204 based on a sale price of $4.06.

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 29, 2000,
7,838,227 shares of the issuer's common equity were outstanding.

Transitional Small Business Disclosure Format (check one): Yes[ ] No [X]
================================================================================
<PAGE>
                                     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
145 offices operating in 17 states. To complement its tax preparation  services,
the Company also provides  financial  planning  services to its tax  preparation
clients  and  others.  These  financial  planning  services  include  securities
brokerage services, insurance and mortgage agency services.

         In  Fiscal  2000,  the  Company  had  total  revenues  of  $89,578,494,
representing  an increase of  $39,135,088,  or 78%, over  $50,443,406  in Fiscal
1999.  This  growth  was  primarily  attributed  to the  significant  growth  in
commissions  from  financial  planning  service  provided to its clients,  which
increased 97% to $71,267,262 in Fiscal 2000 from  $36,137,862 in Fiscal 1999. In
addition,  revenues  from tax  preparation  increased by 22% to  $18,311,232 in
Fiscal  2000  from  $14,305,544 in Fiscal  1999.  In  Fiscal  2000,  80% of the
Company's   revenues  were  attributed  to  commissions  on  financial  planning
services,  and 20% were  attributed  to tax  preparation,  including  $1,156,640
associated  with e1040.com,  the Company's new on-line tax preparation  business
unit launched in Fiscal 1999.  During Fiscal 2000, the Company  prepared 150,000
federal and state tax return.

         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.

         In February 1999, the Company began preparing  individual  income taxes
online  when  it  formed  its  subsidiary  e1040.com,  Inc.  and  completed  the
acquisition of all the assets of an existing  online tax  preparation  business.
Since its  organization,  e1040.com  has  generated 75 million  web page hits,
representing  1,992,638 visitors to the  e1040.com  web site,  and has prepared
36,131 Federal and State tax returns and 9,193 tax extensions.

         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 "B/D Subsidiaries").  The Company terminated its relationship
with  Royal  Alliance  Associates,   Inc.  ("Royal  Alliance"),  an  independent
registered  broker/dealer,  to which  previously  the Company had  referred  its
clients  for  financial   planning   services.   Royal   Alliance  had  retained
approximately six percent (6%) of the total securities  commissions generated by
its employee financial planners to whom the Company had referred clients. Today,
each of the employee  financial planners to whom a client might be introduced is
a  registered  representative  ("Registered  Representative")  of one of the B/D
Subsidiaries.  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 a B/D Subsidiary,  or an independent contractor with a
contractual agreement to share commissions with the B/D Subsidiary.  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, for
<PAGE>
all  employee  Registered   Representatives  associated  with  one  of  the  B/D
Subsidiaries.  The percent 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 the Company  earns
revenues from these insurance services as well. Each of the B/D Subsidiaries has
its own clients independent of referrals from Gilman + Ciocia.

         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
a licensed  entity for the sale, by the Company,  of life  insurance,  long-term
health care insurance, and fixed-annuity products.

Industry Overview

         The United States  Internal  Revenue  Service (the "IRS") reported that
approximately 120 million  individual 1999 federal income tax returns were filed
in the United States through June 30, 2000. 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 9,000 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 2000 tax season,  which represented  approximately 14% 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.

Tax Return Preparation

         Clients.  The  Company  prepares  federal,  state and local  income tax
returns for individuals,  predominantly in the middle and upper income brackets.
The Company believes that clients 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,  family
status and personal financial  information 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.
<PAGE>
         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,  all of the Company's  offices
are open year round due to the  demand for  financial  planning  services.  As a
result, the Company has avoided opening offices  specifically for tax season and
closing them after the peak period.

         e1040.com is an online tax  preparation  service whereby clients submit
information  concerning  their income,  deductions,  family status and financial
information over the Internet to e1040.com's  website.  The client can elect one
of two preparation options. The first option is completely automated without any
human  intervention  by a tax  professional.  In  other  words,  the  return  is
electronically  filed with the IRS. The second option  allows  clients to submit
their electronic return to the Gilman + Ciocia e1040.com tax preparation  center
for  review by a tax  professional,  before  it is filed  on-line.  The  Company
believes  that it is the only on-line tax  preparation  software to provide this
level of service.

         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 charged 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.  During the tax
season,  the number of Company employees  increases by approximately 300. Almost
all of the Company's  professional  tax preparers  have a college  degree or its
equivalent  and  two  years  of tax  preparation  experience,  and  each  one is
specifically  tested and  trained by the Company to meet the  required  level of
expertise to properly prepare tax returns.  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
<PAGE>
consider other aspects of their financial needs, such as insurance, investments,
retirement and estate  planning.  To capitalize on this  situation,  the Company
offers every client the opportunity to complete a  questionnaire  that discloses
information on his financial  situation.  These  questionnaires are subsequently
reviewed by financial  planners to evaluate  whether the client may benefit from
financial planning services.  Upon request, the client is then introduced to the
financial planner.

         Most middle and upper income individuals require a variety of financial
planning services. If the client seeks insurance products in connection with the
creation of a financial  plan,  he is referred to a financial  planner  (who may
also be a tax preparer) who is an authorized agent of an insurance  underwriter.
If the client seeks mutual fund products or other securities for investment,  he
is  referred  to a  financial  planner  of the  Company  (who  may also be a tax
preparer) who is a Registered  Representative  of one of the B/D Subsidiaries of
the Company. See "--Relationship  with Registered  Representatives of Securities
Broker/Dealer"   and   "--Relationship   with  Authorized  Agents  of  Insurance
Underwriters."

         The Company  does not have  financial  planners at all of its  offices.
Approximately  90% 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.

         Relationship   with  Registered   Representatives   of  Securities
Broker/Dealer.  The Gilman + Ciocia  financial  planners that provide  financial
planning services to the Company's clients are Registered Representatives of the
B/D Subsidiaries,  which are 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.

         The B/D  Subsidiaries  supervise the  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.  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.  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  90%  of  the  securities  transactions  effected  by  Registered
Representatives  of  the  B/D  Subsidiaries   involve  mutual  funds,   variable
annuities,  managed money products and variable life  insurance.  The balance of
the firms' business  includes stocks,  bonds, and other  securities.  Typically,
these transactions are unsolicited and executed at discounted commission rates.

         Each of the Gilman + Ciocia  Registered  Representatives  licensed with
the B/D  Subsidiaries,  except the officers of the  Company,  has entered into a
commission sharing agreement with the Company.  The agreement generally provides
that a specified  percentage of the commissions earned by the Company (generally
43% to 47% of the total  commission) is paid to the  Registered  Representative.
The  Company  maintains  agreements  with its  registered  representatives  that
contain  covenants  requiring  them to maintain  strict  confidentiality  and to
refrain from certain competition with the Company.

         A majority of the Company's full-year tax-preparers are also Registered
Representatives, which enables them to prepare tax returns and provide financial
planning  services to their  clients.  They are  compensated by the Company on a
<PAGE>
commission basis, based on the number of returns prepared, but not to fall below
minimum wage. In addition, they are compensated based on the overall commissions
paid to the Company on financial products they sell to their clients.

         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 are paid 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 equity company,  GTAX/CB  Brokerage is
an authorized agent under New York State law.

         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  Company  are  paid  to the  Agent.  In  the  commission  sharing
agreements,  the agents also agree to maintain  certain  Company  information as
confidential and not to compete with the Company.

Broker/Dealer Subsidiaries

         Prime  and  North  Ridge  are each a  wholly  owned  subsidiary  of the
Company.  Each conducts a securities  brokerage  business  providing  regulatory
oversight  and  products/sales  support to its brokers,  who provide  investment
products and services to their clients.

         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.

         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 New York Stock Exchange ("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  sales   practices,   trade  practices  among
broker-dealers,  capital requirements,  the use and safekeeping of clients 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,
<PAGE>
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 clients. As a result, many aspects
of  the  relationship   between   broker-dealers  and  clients  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 clients,  timing of  proprietary  trading in
relation to client's trades, and disclosures to clients.

         Additional legislation,  changes in rules promulgated by the SEC, state
regulatory  authorities or SROs, 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, SROs 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.

         Prime.  Approximately  90% of the securities  transactions  effected by
Prime's Registered  Representatives  involve mutual funds,  variable  annuities,
managed  money  products and variable life  insurance.  The balance of the firms
business  includes  stocks,  bonds,  and  other  securities.   Typically,  these
transactions  are  unsolicited  and  executed at  discounted  commission  rates.
Individual stock and bond transactions are processed through National  Financial
Services,  Corp., a wholly owned subsidiary of Fidelity  Investments,  where all
accounts are insured for up to $100 million.

         Prime  receives  commissions  generated by  financial  planners who are
Registered   Representatives   of  Prime.  As  of  June  30,  2000,   Prime  had
approximately  569 Registered  Representatives,  259 of which are G+C employees,
and  the  remaining  310 are  independent  (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.

         North Ridge.  Approximately 90% of the securities transactions effected
by North Ridge's  Registered  Representatives  involve  mutual  funds,  variable
annuities,  managed money products and variable life  insurance.  The balance of
the firms business  includes  stocks,  bonds, and other  securities.  Typically,
these transactions are unsolicited and executed at discounted  commission rates.
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. As of
June 30, 2000 North Ridge had approximately 82 Registered Representatives, 12 of
which are G+C employees and the remaining 70 are independent (for an explanation
of the role of licensed  Representatives,  see  "-Relationship  with  Registered
Representatives of Broker/Dealer" above).

         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 of the required  filings under state law
to  register  as a  broker/dealer  in the  states  in  which it is  required  to
register.

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.  owns 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.
The Company and Feingold & Scott,  Inc jointly manage  GTAX/CB.  The Company and
its licensed insurance agents receive  commissions on the sale of such insurance
products  comparable to commission  that the Company would receive on 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 the  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.

         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.

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 year.

         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 1999 and Fiscal 2000,
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.
<PAGE>
         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 2000 tax  season,  the  Company  advertised  e1040.com  with  various  media
outlets,  direct mail campaigns,  and with paid links, banner advertisements and
small  buttons  in  the  following  web  sites:  www.irs.com;  www.sidewalk.com;
www.lycos.com;  www.yahoo.com; www.snap.com;  www.infoseek.com;  www.excite.com;
www.goto.com; www.irs.gov; www.about.com;  www.altavista.com;  www.usatoday.com;
www.cbsmarketwatch.com; www.planetdirect.com; and www.freeinternet.com.

         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.

Acquisitions

         The Company  has  developed a  dedicated  acquisition  function,  which
targets  tax,   financial   planning   and/or   broker/dealer   businesses  that
strategically  expand the  Company's  distribution  capacity  to sell  financial
products.  The Company  generally  acquires small  practices,  which have client
lists of 500 to 1,500 per practice. The Company only targets practices where the
principal(s) have a long-standing  client base and where these principal(s) plan
to become active  employees of the Company,  and Registered  Representatives  to
sell financial products.  In addition,  the principal(s) of these practices must
be willing to sign a multiple year employment  contract.  The Company structures
the terms of the  acquisition  to  minimize  the  up-front  purchase  price,  by
establishing post-closing performance targets that must be met before additional
purchase price  consideration  is paid. In Fiscal 2000, the Company  acquired 17
tax practices and 6 financial  planning  practices with total annual revenues on
the date of acquisition in excess of $6,000,000.

Recruiting

         In Fiscal  2000,  the  Company  established  a  centralized  recruiting
function dedicated to hiring Registered Representatives to place in existing and
acquired offices.  In Fiscal year 2000, the Company hired 55 employee Registered
Representatives,  of which  two-thirds  were hired in the last few months of the
year. These registered  representatives had collectively annual gross commission
production of approximately $7 million, prior to acquisition.

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  online tax  preparation  competitors  during the 2000-tax season were
primarily  Intuit  and HR  Block.com.  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.
<PAGE>
         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" and "G+C TaxPlan"  trademarks,  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.

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.  Sixty-five  of  the  full-year
employees  and  many  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
Federal Securities Exchange Act of 1934, state regulation, the rules of the NASD
and by the rules and regulations of the broker/dealer.

         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 has not registered as a broker/dealer in any state and
does not believe that it is currently required to so register.
<PAGE>
         Gilman + Ciocia registered with the Securities and Exchange  Commission
as an investment advisor in October 1999.

Employees

         As of June 30,  2000,  the Company  employed 628 persons on a full-time
full-year basis,  including the Company's four officers. The Company's full-time
employees  include  75  professional  tax  preparers, 271 employee  Registered
Representatives,  137 clerical and support staff persons (which include  persons
performing   clerical   work  while  in  training  for  other   positions),   40
administrative  personnel  (who include the  Company's  executive  officers),  5
employees who are part of e1040.com and 100  individuals who are employed by the
Company's  Broker/Dealer  subsidiaries.  During peak season the Company  employs
approximately  900  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  380  independent
Registered  Representatives,  in  addition  to  the  G + C  employee  Registered
Representatives, who have entered into commission sharing agreements with one of
the Company's B/D subsidiaries.

Risk Factors

         This Form 10-K contains certain forward-looking statements that involve
substantial  risks and  uncertainties.  When used in this Form  10-K,  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, but are not limited to, those discussed below.

         If the  Broker/Dealers and Financial Planners that the Company acquires
or recruits do not perform  successfully  the Company's growth rate and earnings
may decrease. 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.

         If the Tax  Preparation  Practices  that the  Company  acquires  do not
perform successfully the Company's growth and earnings may decrease.  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  acquisition of offices that do not remain
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 can not effectively  integrate the operations of the acquired companies,
the Company's operating results could be materially, adversely affected.

         If the  Company  opens a  number  of new  offices  that do not  perform
successfully  the Company's  growth and earnings may decrease.  In order to open
<PAGE>
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.  However,  the  Company's  current  strategy  does  not
contemplate  opening many new offices.  Instead the Company  expects to grow its
network of offices  through  acquiring tax  preparation  and financial  planning
practices  which  are  accretive  to  earnings  in  the  first  year  after  the
acquisition.

         If the growth in the financial  markets slows or reverses the Company's
financial planning segment will suffer decreased revenues. 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.

         If the Company is unable to secure adequate  working capital  financing
during the  "off-season"  the  Company's  operating  results  may be  materially
affected.  The tax season occurs  predominantly during the third Fiscal quarter,
and,  therefore,  that quarter is generally the Company's most  profitable.  The
Company has historically  experienced  significantly reduced earnings during the
remainder  of the year.  From July 1st to December  31st each year,  the Company
generally  requires  significant  working  capital  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.

         If  competitors  in the industry  began to encroach  upon the Company's
market share the Company's revenues may decrease. 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.

         If a large number of the  Company's  departing  employees and financial
planners were to enter into competition with the Company, the Company may suffer
a decline in revenues.  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
<PAGE>
corresponding reduction of revenue may materially adversely affect the Company's
operating results.

         If any of the  Company's key  personnel  were to leave its employ,  the
Company may suffer a decline in revenues and profitability. 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
and Chief Executive  Officer,  Thomas  Povinelli,  its Chief Operating  Officer,
David D. Puyear,  its Chief Financial  Officer,  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.

         If the IRS were to impose a material  fine under the  Internal  Revenue
Code the  Company  may  suffer a decline in  operating  results.  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
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.

         The  Company's  inability  to hire a large number of CPA's could affect
the  Company's  ability  to provide  adequate  tax-preparation  services  to the
marketplace. The Company utilizes a significant number of 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.

         If the Company were to lose its Trademark or other proprietary  rights,
the Company  could suffer  decreased  revenues.  The Company  believes  that its
<PAGE>
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. If the Company
were  to  lose  the  exclusive  right  to  its  trademarks,   its  revenues  and
profitability could decrease.

         If the decisions of the Company's  current  management were to conflict
with the  interest of the  Company's  stockholders,  the Company  could suffer a
decline in profitability. The Company's Chief Executive Officer, Chief Operating
Officer,  Secretary  and  President  of  Prime  own  approximately  35%  of  the
outstanding Company common stock, par value $.01 per share (the "Common Stock").
Accordingly, in practical effect 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
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.

         The Company's decision not to pay dividends could negatively impact the
marketability  of the  Company's  stock.  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.

         The Company may be unable to increase the revenues of e1040.com to make
it profitable if e1040.com is unable to achieve wide market  recognition  of its
website,  to establish a high client retention rate and to continuously  enhance
its services to meet technology changes; or if changes to government regulations
impair the  profitability  of internet  commerce.  The Company has increased its
operating expenses in order to expand the e1040.com  business,  but was not able
to generate sufficient revenue to achieve  profitability in the 2000 fiscal year
and may be unable to produce  profits in the future.  Wide name  recognition and
acceptance may be necessary to direct users to e1040.com and the Company may not
have the resources to achieve such recognition. In addition, the Company can not
predict how many of its  e1040.com  clients  will  return next year.  Low client
retention may make revenue growth too expensive for the Company to support.  The
Company  also does not know how  future  government  regulation  may  affect the
profitability  of its  internet  business.  New taxes or other  regulations  may
impair the  development  of this portion of the  Company's  business.  Moreover,
internet technology and consequently web site standards are improving rapidly so
that if the Company is unable to efficiently incorporate  technological advances
in  e1040.com,  its  internet  revenues  may not grow and may  decrease.  If the
Company is not able to turn its e1040.com  subsidiary to profitability,  it will
continue to be a drain on the Company's financial resources.

         If a third party  wanted to acquire  control of the Company it could be
prevented by the Company's  classified  board and its ability to issue preferred
stock without shareholder  approval and the marketability of the Company's stock
could be affected.  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.
<PAGE>
         Low trading volume of the Company's stock increases  volatility,  which
could  result in the  impairment  of the  Company's  ability  to  obtain  equity
financing.  Since December 1997, the market price of the Common Stock has almost
quadrupled and fallen to below 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 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 operating  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 stockholders'  ability to buy
and sell the Common Stock and the  Company's  ability to raise money in a future
offering of Common Stock. See "Market for Common Equity and Related  Stockholder
Matters".

         If  restrictions  that are in place on the  future  sale of the  Common
Stock of the Company  were  released  the market price of the stock may decline.
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 one-year holding period, without any volume or other limitation.

         The Company has granted  3,493,872 options to purchase shares of Common
Stock to 285  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.

         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.

         If directors of the Company make mistakes or poor business judgment the
profitability  of  the  Company  could  be  adversely  affected.   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 mistakes or poor business  judgment 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.

         If a material  risk  inherent  to the  securities  industry  were to be
realized the value of the Company's stock may decline.  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,
<PAGE>
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  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  clients  or
reduction in  commission  income.  These trends or future  changes  could have a
material adverse effect on the Company's business,  financial condition, results
of operations or cash flows.

         If new regulations are imposed on the securities industry the operating
results of the Company may be adversely affected.  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 clients'  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.

         If the  Company  were to be found  liable  to  clients  for  misconduct
alleged in several civil proceedings the Company's profitability may decline and
its financial condition may be adversely affected. 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  clients,  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
<PAGE>
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.    The    B/D    Subsidiaries    are    currently
defendants/respondents in several such proceedings. If all such proceedings were
to be resolved  unfavorably to the Company,  the Company's  financial  condition
could be adversely affected. 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 145 local  offices in
seventeen states:  forty-six in New York, sixteen in New Jersey, ten in Arizona,
twenty six in Florida,  five in Ohio,  seven in  Maryland,  six in  Connecticut,
seven in Washington,  six in Massachusetts,  five in Nevada,  three in Illinois,
two in Texas,  one in  Pennsylvania,  one in Virginia,  one in Colorado,  two in
Michigan 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 five 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 Fiscal 2000 was $3,613,146. 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.  The Company generally needs between 1,000 - 2,000 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.

         In Fiscal 2000, the Company entered into a ten-year lease for corporate
office  space.  The lease  commenced  on December  15, 1999 and calls for annual
minimum rental payments of approximately $265,000 per fiscal year.

         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

         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
complainants  in a  settlement  reached  on  October  3, 1996 with the estate of
Thomas Gilman in a wrongful death action, plus an additional  approximately $1.8
million  payment  made to the estate in the  settlement  for which  complainants
ultimately may be held liable (for payments made by another insurance  company).
On January 29, 1999, the complainants filed a motion for summary judgment and on
February  19,  1999,  Gilman + Ciocia,  Inc.  filed a  cross-motion  for summary
judgment. The court has not yet made a ruling on either of the motions. However,
in  October  2000,  in an  action in New York  Supreme  Court  Nassau  County to
determine the liability  allocation  between the two  insurance  company's  that
settled  with the  estate,  the other  insurance  company was ordered to pay the
complainant's  $857,000.  This payment  should  reduce the  complainant's  total
indemnification claim against the Company to an amount less than $900,000.

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

         The Company held an annual meeting of  shareholders  on May 5, 2000. At
the  meeting  Seth  Akabas  and  Michael  Ryan  were  reelected  to the board of
<PAGE>
directors  of the  Company.  A proposal to amend the  Company's  Certificate  of
Incorporation in order to change the Company's name from "Gilman + Ciocia, Inc."
to "G+C,  Inc." was approved by a vote of 5,210,091 for and 135,983 against with
22,740  abstaining.  A proposal to approve the  Company's  2000  Employee  Stock
Purchase Plan was approved by a vote of 2,436,317 for and 369,765 against,  with
39,450 abstaining. A proposal to ratify the reappointment of Arthur Andersen LLP
as the  Company's  auditors was  approved by a vote of 5,323,524  for and 24,030
against, with 21,260 abstaining. The voting for the election of directors was as
follows:

Director                            For                       Withholding
--------                            ---                       -----------
Michael Ryan                       5,280,486                      500
Seth Akabas                        5,280,886                      100

         As a  result  of the  election  the  current  members  of the  board of
directors are James Ciocia,  Thomas Povinelli,  Katherine  Travis,  Louis Karol,
Michael Ryan and Seth Akabas.

                                     PART II

Item 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 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

September 30, 1999        $ 12 3/4       $ 10 1/4
December 31, 1999         $ 11 28/64     $ 7 3/4
March 31, 2000            $ 9 3/4        $ 5 3/4
June 30, 2000             $ 6 7/8        $ 4 33/64

           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.

           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.
<PAGE>
           As of  September  29, 2000 there were  approximately 241 registered
holders of Common  Stock.  On September 29, 2000 the closing price of the Common
Stock was $4.06 per share.

Item 6.    SELECTED FINANCIAL DATA

                                                For the Years Ended June 30,
<TABLE>
<CAPTION>

                           2000         1999             1998           1997          1996
                           -----------  ------------    -------------  ------------  ------------
<S>                        <C>          <C>             <C>             <C>           <C>
Total Revenues             $89,578,494  $50,443,406     $28,533,083     $24,574,571   $20,990,482
Net Income (Loss)          (4,013,092)  2,181,143       2,011,345       875,994       534,726
Net Income (Loss)
Per Share
Basic                        (0.53)       0.35           0.37         0.16         0.10
Diluted                      (0.53)       0.32           0.32         0.16         0.10


                                                        As of June 30,

<S>                     <C>             <C>             <C>           <C>            <C>
                          2000          1999             1998          1997           1996
                          ------------  -------------    ------------  ------------   ----------
Working Capital           $(1,611,436)  $ 5,249,516      $ 4,950,652   $ 3,450,102    $2,335,332
(Deficit)
Total Assets                43,905,178   32,998,980        9,751,187     9,025,576     7,866,501
Total Liabilities              846,476    2,738,124           -            552,000         2,267
-Long Term
Total Liabilities           19,192,337    8,039,039          733,600     2,006,587     1,367,560
Total Shareholders'         24,712,841   24,959,941        9,017,587     7,018,989     6,498,941
Equity

</TABLE>

Item 7.    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 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.  Factors that
could  contribute to such  differences are discussed in this Annual Report under
the headings "Description of Business -- Risk Factors."

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 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
<PAGE>
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% equity  interest in GTAX/CB,  an
insurance broker.

           During Fiscal 2000,  approximately 19% of the Company's revenues were
earned  from tax  preparation  services,  80%  were  earned  from all  financial
planning and related  services (with 32% from  securities  transactions  and 67%
from insurance,  mutual funds,  mortgage  brokerage and other related services),
and 1% were earned from e1040.com and other services.

           The Company's financial planning clients 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.

Plan of Operation

         Tax Preparation and Financial Planning

         The Company opens new tax offices and acquires existing tax preparation
and financial planning 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 is a potential new financial  planning client.  The Company
plans to continue to expand and acquire tax preparation  and financial  planning
practices  during  the next year  (although  no  specific  target has been set),
recruit   successful   financial   planners  and  acquire  existing   securities
broker/dealers.  The Company  anticipates funding this growth through the senior
and  subordinate  debt  financing,  possible  private  placement  of equity  and
operating cash flow.

         The  Company   anticipates  that  acquiring  new  tax  preparation  and
financial  planning  businesses  will  continue to increase  its  revenues.  The
Company has no basis to predict  whether its  acquisitions  will have a material
effect  on its net  income.  However,  the  Company  believes  that its  current
acquisition model ultimately reduces the potential loss exposure to the Company,
but expansion  could reduce the Company's  profits or result in losses in future
years.  In Fiscal 2000, the Company  formalized an acquisition  model  requiring
each acquired  practice to commit to delivering a minimum level of profitability
in  the  first  year  of  post  acquisition  operations.  These  minimum  future
performance and profitability targets,  established at the closing, limit future
purchase  payments  unless  the  targets  are  met,  as well as help to keep the
principals of the acquired practices focused on delivering profitability,  which
is accretive to the Company's earnings.  In addition to establishing  contingent
purchase price performance  criteria,  the company generally uses its stock as a
significant component of the initial and future purchase price.

         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.  For this reason the Company has sought
to emphasize  acquisitions of existing  practices rather than the opening of new
offices in the Company's expansion.
<PAGE>
e1040.com

         In Fiscal 1999,  the Company  formed its  subsidiary  e1040.com,  which
acquired all of the assets of an existing on-line tax preparation business. This
subsidiary has grown  considerably  from  preparing  1,525 Federal and State tax
returns in Fiscal 1999 to 34,399  Federal and State tax returns in Fiscal  2000,
contributing  $203,180 and $ 1,156,640 in revenues to the Company in Fiscal 1999
and Fiscal 2000,  respectively.  The Company does not expect to make significant
capital  investments or incur  extraordinary  marketing expenses in future years
related to expanding e1040.com. With an established on-line tax platform already
in  place,  future  marketing  initiatives  are  expected  to be in the  form of
strategic  partnerships  and revenue  sharing  arrangements  who are looking for
consumer-oriented content and services like e1040.com has to offer.

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, Fiscal 1999 and
Fiscal 2000. The trends  illustrated in the following  table are not necessarily
indicative of future results.

<TABLE>
<CAPTION>
                                     As a Percentage of Revenue                  Percentage
                                        Year Ended June 30,                    Increase (Decrease)
<S>                             <C>          <C>         <C>         <C>                <C>
                                 2000         1999        1998        2000 to 1999       1999 to 1998
--------------------------------------------------------------------------------------------------------------------
Tax preparation fees             20.4%        28.0%        42.0%           -8%               -14%

Financial planning commissions   79.6%        72.0%        58.0%            8%                14%
                                ---------    ----------   --------      ----------         ----------
     Total revenue              100.0%       100.0%       100.0%            0%                 0%
                                ---------    ----------   --------      ----------         ----------
Salaries and commissions         74.8%        63.0%        51.0%           12%                12%

General and administrative       13.6%        12.0%        17.0%            2%                -5%
        expense

Advertising                      10.2%         8.0%        10.0%            2%                -2%

Depreciation and amortization     2.8%         3.0%         3.0%            0%                 0%

Other operating expenses          6.1%         7.0%         7.0%           -1%                 0%
                                ---------     ---------   --------      ----------         ----------
    Total operating expenses    108.0%        93.0%        88.0%           15%                 5%
                                ---------     ---------   --------      ----------         ----------
Other income (expense), net       0.7%         0.0%         0.0%            1%                 0%
                                ---------     ---------   --------      ----------         ----------
Income (loss) before taxes       -6.9%         7.0%        12.0%          -14%                -5%

Provision (benefit)income        -2.4%         3.0%         5.0%           -5%                -2%
        taxes                   ---------     ---------   --------      ----------         ----------

    Net income (loss)            -4.5%         4.0%         7.0%           -9%                -3%
-------------------------------==========---==========----=========----================---================
-------------------------------==========---==========----=========----================---================
</TABLE>
Fiscal 2000 Compared to Fiscal 1999

         The  Company's  revenues for Fiscal 2000 were  $89,578,494  compared to
<PAGE>
$50,443,406  for Fiscal 1999, an increase of  $39,135,088  or 78%. This increase
was primarily  attributed to an increase in Financial  Planning services as well
as a full year of revenues in Fiscal 2000 from Prime and North Ridge, which were
acquired in Fiscal 1999.

        The Company's total revenues for Fiscal 2000 consisted of $18,311,232,
including $1,153,640 for e1040.com, for tax preparation services and $71,267,262
for financial  planning  services.  Tax preparation  services  represented  19%,
financial planning services represented 80% and e1040.com consisted of 1% of the
Company's  total  revenues for Fiscal 2000.  The  Company's  total  revenues for
Fiscal 1999 consisted of $14,102,364 for tax preparation  services;  $36,137,862
for financial  planning  services;  and $203,180 for e1040.com.  Tax preparation
services  represented  28%,  financial  planning  services  represented  72% and
e1040.com represented .4% of the Company's total revenues for Fiscal 1999.

         The growth in the tax  preparation  segment is primarily  attributed to
the  acquisition  of 17 new tax practices  during Fiscal 2000. The growth in the
financial  planning segment is attributed to the hiring of additional  financial
planners,  which generated additional  commissions,  as well as the inclusion in
Fiscal 2000 of a full year of  revenues  from the Fiscal  1999  acquisitions  of
North  Ridge and  Prime.  In Fiscal  2000,  the  Company  hired 55 new  employee
Registered Representatives who had $7 million of annual gross revenue commission
production  prior  to  being  hired  by  the  Company.  Prime  and  North  Ridge
revenue was $31,364,277 more in  Fiscal  2000  over  1999.  e1040.com
contributed   significantly   higher  revenues  in  Fiscal  2000  with  revenues
increasing  from  $203,180 in Fiscal 1999 to  $1,156,640  in Fiscal  2000.  This
increase  was  attributed  to the media  campaign  used to  publicly  launch the
website.

         The Company's  operating expenses for Fiscal 2000 were $96,366,820,  or
108% of revenues,  an increase of $49,720,265,  or 107%, compared to $46,646,555
or 92% of  revenues,  for Fiscal 1999.  The  increase in operating  expenses was
attributed to an increase of $35,108,963 in salaries and commissions  associated
with higher financial planning revenue; $6,199,202 in general and administrative
expenses  associated  with  new  and  acquired  offices;   $1,133,079  in  rent;
$1,073,620  in  depreciation  and  amortization;  $5,282,499 in  advertising,  a
majority of which is associated  with the launch of  e1040.com,  and $922,902 in
brokerage fees and licenses.

         Included in Fiscal 2000 operating  expenses were $7,000,000 of one-time
costs primarily attributed to launching e1040.com,  which incurred $5,200,000 of
advertising  costs  along with other  one-time  related  charges.  In  addition,
various other expense  categories  increased in Fiscal 2000  associated with the
general  increase in central  management  support required to support the actual
growth  experienced  in Fiscal  2000,  as well as to support the planned  future
growth in both Registered Representatives and field offices, which will increase
through future acquisitions.

         Salaries and Commissions increased $35,108,963, or 110%, in Fiscal 2000
to  $67,024,615  from  $31,915,652  in Fiscal 1999. The increase in Salaries and
Commission expense is primarily attributed to an increase in commissions paid to
financial  planners as a result of the  increased  sales of  financial  planning
services and the addition of financial  planners  from Prime and North Ridge for
the entire Fiscal 2000.

         General and administrative  expense increased  $6,199,202,  or 104%, in
Fiscal 2000 to  $12,185,678  from  $5,986,476  in Fiscal  1999.  The increase in
general and  administrative  expense is  attributed  to the opening of seven new
offices in Fiscal 2000 and the inclusion of a full year of the seven new offices
opened in Fiscal 1999 as well as the acquisitions during Fiscal 1999, of Prime
and North Ridge.

         Rent  expense  increased   $1,133,079,   or  46%,  in  Fiscal  2000  to
$3,613,146,  compared to $2,480,067 in Fiscal 1999. The increase in rent expense
is primarily  attributed  to the net increase of the  Company's  offices by nine
<PAGE>
during Fiscal 2000 and the full year inclusion of offices opened in Fiscal 1999.

         Depreciation and amortization expense increased $1,073,620,  or 74%, in
Fiscal 2000 to $2,515,008 compared to $1,441,388 in Fiscal 1999. The increase in
depreciation and amortization is primarily attributed to additional purchases of
computer   equipment  during  Fiscal  2000  and  also  additional   amortization
associated with acquired businesses.

         Advertising  expense  increased  $5,282,499,  or 136% in Fiscal 2000 to
$9,156,079 compared to $3,873,580 in Fiscal 1999. The increase in advertising is
almost entirely  attributed to increased print, media and banner  advertisements
associated  with the media launch of the  e1040.com  website.  This  increase is
associated with a non-recurring advertising campaigns.

         Brokerage fees and license expense increased  $922,902 or 97% in Fiscal
2000 to  $1,872,294  compared  to  $949,392  in Fiscal  1999.  The  increase  in
brokerage  fees  and  licenses  is  primarily  attributed  to the  increased  in
financial  planning  business and the  addition of financial  planners in fiscal
2000.

         The increase in other income of $723,942 is primarily  attributed  to a
$979,489  gain on the sale of  marketable  securities  offset by an  increase of
$649,174 in interest expense on debt.

         The Company's loss after a benefit for income taxes for Fiscal 2000 was
$4,013,092  compared to income of  $2,181,143  for Fiscal 1999.  The decrease of
284% is primarily  attributed  to higher  operating  expenses  incurred from the
non-recurring   expense  of  launching   e1040.com   along  with  certain  other
non-recurring  expenses which  contributed  $7,000,000 of pre-tax  non-recurring
expenses.  Also adding to the decrease was the reduction to the Company's
effective tax rate to 35% in Fiscal 2000 from 41% in Fiscal 1999, which has a
negative effect to the Company's benefit for income tax provision computation.

         The Company's business is still somewhat  seasonal,  with a significant
component of its revenue  earned during the tax season.  The effect of inflation
has not been significant to the Company's business in recent years.

Fiscal 1999 Compared to Fiscal 1998

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

         The Company's  total  revenues for Fiscal 1999 consisted of $14,102,364
for tax preparation  services,  $36,137,862 for financial  planning services and
$203,180 for e1040.com.  Tax preparation  services  represented  28%,  financial
planning  services  represented  72%  and  e1040.com  consisted  of  .4%  of the
Company's  total  revenues for Fiscal 1999.  The  Company's  total  revenues for
Fiscal 1998 consisted of $11,955,051 for tax preparation  services;  $16,578,032
for financial planning services; and $0 for e1040.com.  Tax preparation services
represented 42%, financial planning services represented 58%.

         The growth in the tax  preparation  segment is primarily  attributed 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
securities  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.
<PAGE>
         The Company's operating expenses for Fiscal 1999 totaled $46,646,555 or
92% of revenues,  an increase of  $21,516,142  or 86% compared to $25,130,413 or
88% of  revenues  for Fiscal  1998.  The  increase  in  operating  expenses  was
attributed to an increase of $17,378,147 in salaries and commissions; $1,021,943
in  general  and  administrative   expenses;   $442,950  in  rent;  $582,997  in
depreciation and amortization; $1,140,713 in advertising.

         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  attributed 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  from North Ridge and
Prime.

         General  and  administrative  expense  increased  $1,021,943  or 21% in
Fiscal 1999 to $5,986,476 compared to $4,964,533 in Fiscal 1998. The increase in
general and  administrative  expense is primarily  attributed  to the 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,
compared to $2,037,117 in Fiscal 1998. The increase in rent expense is primarily
attributed to the opening of the Company's  seven new offices during Fiscal 1999
and the offices opened in Fiscal 1998.

         Depreciation  and  amortization  expense  increased  $582,997 or 68% in
Fiscal 1999 to $1,441,388  compared to $858,391 in Fiscal 1998.  The increase in
depreciation and amortization is primarily attributed 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  compared to  $2,011,345  for Fiscal 1998.  The increase of 8% is
primarily  attributed to higher net operating  income  generated  from financial
planning services and tax preparation.

         The  Company's  business is seasonal,  with a large  percentage  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,  somewhat
seasonal.  As a result, the Company must generate sufficient cash during the tax
season, in addition to its available bank credit facility, to fund any operating
cash flow  deficits in the first half of the following  fiscal year.  Operations
during the non-tax season are primarily  focused on financial  planning services
along  with some  on-going  accounting  and  corporate  tax  revenue.  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. In addition, the Company
received  gross  proceeds  of  approximately  $3,000,000  from the  exercise  of
warrants and options during Fiscal 1999. However,  the significant recent growth
in  financial  planning  revenue is expected to  substantially  increase  future
operating cash flow in the first two quarters of the fiscal year.

         The  Company's  cash  flows  used  in  operating   activities   totaled
<PAGE>
$2,117,446  for Fiscal  2000,  compared  to cash  flows  provided  by  operating
activities  of  $3,602,400  for Fiscal 1999.  The increase of $5,719,846 in cash
used is due primarily to a decrease in net income of $6,194,235  resulting  from
the decrease in net income from  $2,181,143  in 1999 to a net loss of $4,013,092
in 2000 and an increase in gain on sale of  marketable  securities  of $979,147,
an increase in accounts receivable of $3,441,030 and an increase in income taxes
receivable of $1,389,038.  These  increases  in cash  flows used in  operating
activities  were  offset by additional  depreciation  and  amortization  of
$1,073,620,  and an increase in deferred and other compensation expense of
$488,652 and an increase in accounts payable of $4,921,367.

         Net cash used in investing activities totaled $1,361,388 and $8,406,635
for Fiscal 2000 and Fiscal 1999,  respectively.  The decrease of  $7,045,247  is
primarily due to a decrease in  acquisitions  of  $5,352,320,  a net decrease in
loans to officers and stockholders of $1,439,039 and an increase in the proceeds
from  sale of  investments  of  $1,215,141.  These  decreases  in  cash  used in
investing   activities   were  partially   offset  by  an  increase  in  capital
expenditures of $1,067,550  associated with property  improvements and equipment
purchases of the Company.

         Net cash  provided  by  financing  activities  totaled  $4,586,773  and
$6,551,758  in Fiscal  2000 and  Fiscal  1999,  respectively.  The  decrease  of
$1,964,985  is  attributed  to a decrease in the  exercise of stock  options and
warrants  of  $2,509,369  and an increase in payments of bank and other loans of
$1,422,650.  These  amounts were offset by an increase in the proceeds from bank
and other loans of $2,005,100.

         The Company has a $10,000,000  credit facility with Merrill Lynch. This
facility  consists  of three  separate  loans as  follows:  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
interest  rate on the two  revolving  loans is 3.15% plus the 30-day  commercial
paper rate. The terms of the two revolving loan facilities are sixty months, and
the line of credit  facility  expired  on June 30,  2000.  Both  facilities  are
secured by a pledge of all of the business  assets of the Company and guaranteed
by three principal officers of up to $1,750,000. The outstanding balance at June
30, 2000 under the credit facility is $7,255,101.  The loan  agreements  contain
certain  negative  covenants  that require the Company to maintain,  among other
things,  specific  minimum  net  tangible  worth and a maximum  ratio of debt to
tangible  net worth at March 31, 2000.  As of that date,  the Company was not in
compliance with these two covenants,  and, accordingly,  classified all debt due
to Merrill Lynch as a current liability.  On June 15, 2000 Merrill Lynch elected
to forbear from  exercising its remedies under the loan documents until November
30, 2000 in order to allow the Company to seek a  replacement  credit  facility.
The  forbearance  agreement  entered into between  Merrill Lynch and the Company
obligates the Company to pay every two weeks a minimum of $30,000  together with
a monthly payment equal to 5% of the Company's  monthly  collections.  Principal
and interest payments are required to continue to be paid in accordance with the
terms of the original  debt  agreements.  The  agreement  further  requires that
proceeds  from  specific  liquidations  and  collections  go to Merrill Lynch to
pay-down principal.  In addition, the Company will pay Merrill Lynch $250,000 on
October 16, 2000 and  November 5, 2000.  The Company has reached an agreement in
principle with two institutions  that will issue replacement  facilities.  These
facilities are expected to close in the second quarter of Fiscal 2001,  totaling
more than  $12,000,000.  After the  financing is closed on the  proposed  terms,
working capital as of June 30, 2000, would increase to approximately $4,640,646,
on a pro forma basis.

         The Company  believes  that after the  replacement  of Merrill  Lynch's
credit  facility is in place,  the Company could continue to operate without any
additional  financing  during the next 12 months.  Additionally,  the Company is
presently  talking  to several  sources of  institutional  capital  regarding  a
possible capital investment in the Company to continue to fund acquisitions. The
ability of the Company to secure this  additional  capital could affect the rate
of growth of the Company. However, additional capital will be obtained primarily
associated  with  acquisitions  that  would  be  structured  to  be  immediately
accretive  to  earnings.  The  Company  anticipates  that  it  will  not pay any
dividends  on its Common  Stock in the  foreseeable  future,  but will apply any
<PAGE>
profits to fund the Company's expansion.

Year 2000

         In 1999,  the  Company  completed  the  implementation  of its plans to
become  Year 2000  ready,  through  the final  remediation  and  testing  of its
systems. As a result of those planning and implementation  efforts,  the Company
has not experienced any significant  disruptions in mission critical information
technology  and  non-information  technology  systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues,  either with its services
or internal  systems,  or with the products and services of third  parties.  The
Company will continue to monitor its mission critical computer  applications and
those of its suppliers and vendors  throughout  the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.

New Accounting Pronouncements

         In March 2000,  FASB  Interpretation  No. 44,  "Accounting  for Certain
Transactions  Involving  Stock  Compensation"  ("FIN  44")  was  issued  and  is
effective  July  1,  2000.  FIN  44  clarifies  the  application  of  Accounting
Principles  Board Opinion No. 25,  "Accounting  for Stock Issued to  Employees,"
with respect to the definition of an employee,  the criteria for noncompensatory
plans, the  consequences of modifying  previous awards and the exchange of stock
compensation awards in business combinations.

          In December  1999,  the  Securities  and Exchange  Commission  ("SEC")
issued SEC Staff Accounting Bulletin No. 101, "Revenue  Recognition in Financial
Statements"  ("SAB  101").  SAB 101  summarizes  certain  of the SEC's  views in
applying  generally  accepted  accounting  principles to revenue  recognition in
financial statements. The effective date of SAB 101 was delayed and SAB 101 will
be effective for the Company in the second  quarter of Fiscal 2001.  The Company
is reviewing the requirements of SAB 101 and currently believes that its revenue
recognition policy is consistent with the guidance of SAB 101.

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities,"  as  amended in June 2000  ("SFAS  13"),
effective for the Company's fiscal year ending June 30, 2001.  However,  in June
1999,  the FASB issued  Statement of  Financial  Accounting  Standards  No. 137,
"Accounting for Derivative  Instruments and Hedging Activities - Deferral of the
Effective  Date of FASB  Statement  No. 133" ("SFAS  137").  SFAS 137 delays the
effective date of SFAS 133, which will now be effective for the Company's fiscal
year ending June 30,  2002.  SFAS 133 requires  companies  to record  derivative
instruments as assets or liabilities, measured at fair value. The recognition of
gains  or  losses  resulting  in  changes  in the  values  of  those  derivative
instruments  is based on the use of each  derivative  instrument  and whether it
qualifies for hedge  accounting.  The key criterion for hedge accounting is that
the  hedging  relationship  must be highly  effective  in  achieving  offsetting
changes in fair value or cash flows.  The Company does not  anticipate  that the
implementation  of SFAS 133 will  have a  material  impact  on the  consolidated
financial statements.
<PAGE>
Item 8.           FINANCIAL STATEMENTS

INDEX
                                                     Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS             F-2
FINANCIAL STATEMENTS:
Consolidated Balance Sheets                          F-3
Consolidated Statements of Operations                F-4
Consolidated Statements of Cash Flows                F-5
Consolidated Statements of  Stockholders' Equity     F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           F-8

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
       ACCOUNTING AND FINANCIAL DISCLOSURE

         None.
                                    PART III

Item 10.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        43     Chief Executive Officer, President and Director
Thomas Povinelli    40     Chief Operating Officer, Executive Vice President and
                           Director
Kathryn Travis      51     Secretary, Vice President and Director
David D. Puyear(1)  36     Chief Financial Officer
Stephen B. Sacher(2)41     Treasurer
Michael P. Ryan     42     Director and President of Prime Capital Services, Inc
Seth A. Akabas      44     Director
Louis P. Karol      41     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.  Mr. Ciocia is serving a term as director that expires in
2002.
[FN]
--------
  1 On July 6, 2000, David D. Puyear replaced Stephen B. Sacher as Chief
    Financial Officer of the Company.  Mr. Sacher continues to be an employee of
    the Company responsible for tax matters of the Company and is involved in
    performing due diligence on prospective tax practice acquisitions.
  2 See FN 1, above.
</FN>
<PAGE>
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.  Mr. Povinelli is serving a term as director that
expires in 2001.

Kathryn Travis, Secretary, Vice President and Director

         Ms.  Travis began her career with the Company in 1986 as an accountant
and has served as Secretary,  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.
Ms. Travis is serving a term as director that expires in 2001.

Stephen B. Sacher, Former Chief Financial Officer and Treasurer

         Mr.  Sacher  joined the  Company  as its  Treasurer  and  former  Chief
Financial  Officer  in  January  1998.   Effective  July  6,  2000,  Mr.  Sacher
relinquished his duties as the Company's Chief Financial Officer. His new duties
involve  tax  matters  and  conducting  due  diligence  related to tax  practice
acquisitions.  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.

David D. Puyear, Chief Financial Officer

         Mr. Puyear joined the Company as its Chief Financial Officer on July 6,
2000.  Prior to joining the Company,  Mr.  Puyear served as the CFO for the past
four years with two,  private  equity  investment  advisory firms located in New
York City and Boston.  From 1999 until  mid-2000,  Mr.  Puyear  served as CFO of
J.E.R.  Partners, an institutional advisory firm with assets under management in
excess of $3 billion,  and from 1993 until 1999 Mr.  Puyear served as Controller
and CFO of A.E.W. Capital Management, an institutional advisory firm with assets
under management in excess of $13 billion.  From 1986 to 1993, Mr. Puyear worked
for  KPMG  Peat  Marwick  where he  served  as audit  manager,  specializing  in
Financial  Services and  Technology.  Mr. Puyear holds a B.S. in accounting from
Moorehead State University and passed all parts of the CPA exam in 1986.

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.  Mr. Ryan was
first elected a director on June 22, 1999, and is serving a term that expires in
2003.

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.from Columbia  University's  School of Law and Journalism.  Mr. Akabas
was first elected a director on April 1, 1995 and is serving a term that expires
in 2003.
<PAGE>
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 the
Benjamin  N.  Cardozo  School  of Law 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.  Mr. Karol was first  elected a
director on April 1, 1995 and is serving a term that expires in 2002.

Audit Committee

         The Audit  Committee  is composed of two  independent  directors,  Seth
Akabas and Louis Karol, as well as Thomas Povinelli.

Option Committee

         Seth Akabas and Louis Karol sit on the Option Committee.

The  Company's  executive  officers  serve  at the  discretion  of the  Board of
Directors  except  for Mr.  Ryan  who has an  employment  agreement  with a term
expiring on December 31, 2004.

Item 11.          EXECUTIVE COMPENSATION

Summary Compensation

         The following table sets forth,  as to the Chief Executive  Officer and
the four other  executive  officers  whose annual  salary  exceeded  $100,000 in
Fiscal 2000  (collectively,  the "Named Executive  Officers"),  information with
respect to annual and long-term compensation earned during the last three fiscal
years:
<PAGE>
                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                               Long Term
                                                                             Compensation
                                                                                Awards
Name and                                                     Other Annual  Number of Shares
Principal Position               Year   Salary    Loans*     Compensation  Underlying Options
---------------------------------------------------------------------------------------------
<S>                              <C>      <C>      <C>       <C>           <C>
James Ciocia                     1998   $190,000             $12,393(1)
------------
Chief Executive Officer,         1999   $190,000             $15,266(1)    60,000
President and Director           2000   $367,754  $314,809   $16,455(3)

Thomas Povinelli
----------------
Chief Operating Officer,         1998   $190,000
Executive  Vice  President and   1999   $190,000                           60,000
Director                         2000   $365,384  $311,086     $4,596(3)

Kathryn Travis
--------------
Secretary, Vice President        1998   $135,000             $10,758(1)
and Director                     1999   $135,000             $10,758(1)    30,000
                                 2000   $154,230  $118,030   $10,758(1)
Michael P. Ryan
---------------
Director and President
Prime Capital Services, Inc.     1999(4)$60,000              $2,400 (1)
                                 2000   $240,000            $226,197(5)

Stephen B. Sacher                1998   $36,667             $125,717(2)    220,000
-----------------
Chief  Financial   Officer  and  1999   $80,000             $120,000(2)    15,000
Treasurer                        2000   $250,741             $34,930(2)
</TABLE>
--------------------
*Represents  loans  taken in  previous  years  that  are  being  applied  to the
individuals current W-2 statement.

(1)      Auto expense.
(2)      Includes professional fees paid to Sacher & Company, PC, a company of
         which Mr. Sacher is President.
(3)      Represents commission override payment.
(4)      Represents  the period from April 5, 1999,  the date of  acquisition of
         Prime, to June 30, 1999.
(5)      Includes $216,597 paid as bonus compensation and $9,600 paid as auto
         expense.

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.
<PAGE>
Option Grants

         The  following  table  sets  forth  information  regarding  options  to
purchase shares of Common Stock granted to the Named  Executive  Officers during
Fiscal 2000

                          OPTION GRANTS IN FISCAL 2000
                                Individual Grants

Name         Number of    Percent of Total   Average   Expiration  Grant Present
             Securities    Options/SARs     Exercise of   Date     Date   Value
             Underlying     Granted to      Base Price
             Options/SARs  Employees in      ($/Sh)
              Granted (#)   Fiscal Year

James
Ciocia(1)       2,508         0.3%          $9.15625      7/1/05     (1)    (1)
Thomas
Povinelli(1)    1,521         0.2%          $9.15625      7/1/05     (2)    (2)

(1)  The options were granted on 7/1/99 and 12/31/99 and have a present value of
     $8,499 and $14,883, respectively.
(2)  The options were granted on 7/1/99 and 12/31/99 and have a present value of
     $5,657 and $8,403, respectively.

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, 2000.

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

                          Number of Securities             Value of Unexercised
                    Underlying Unexercised Options at         In-the-Money
                          Fiscal Year-End (#)                   Options
                         Exercisable/Unexercisable         Fiscal Year-End ($)
Name                     -------------------------  Exercisable/Unexercisable(1)
----                                                  -------------------------
James Ciocia                 20,000/52,508                     $18,750/--
Chief Executive Officer
Thomas Povinelli             20,000/51,521                     $18,750/--
Chief Operating Officer
Kathryn Travis               20,000/20,000                     $18,750/--
Vice President
Stephen B. Sacher            60,000/155,000                      --/--
Chief Financial Officer

(1) Based on our fiscal year-end fair market value of the underlying securities
    equal to $4.625

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"
<PAGE>
("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  Stock 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 of which 200,000 are still  outstanding.  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 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
<PAGE>
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  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.  In Fiscal  2000,  the Company  granted  options to
purchase  229,877  shares under the Plan,  with 70,123  options  remaining to be
granted 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
<PAGE>
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.

Stock Purchase Plan

         On February 1, 2000, the Board of Directors of the Company  adopted the
Company's 2000 Employee  Stock  Purchase Plan (the "Plan"),  and on May 5, 2000,
the Plan became  effective after majority  approval by stockholders was obtained
at the 2000 annual  meeting.  Under the Plan,  the  Company  will sell shares to
participants at a price equal to 85% of the closing price of the Common Stock on
(i) the first  business day of such Plan Period or (ii) the  Exercise  Date (the
last  day of the Plan  Period),  whichever  closing  price  shall be less.  Plan
Periods are six-month periods  commencing January 1st and July 1st. Such closing
price  shall be (a) the  closing  price  of the  Common  Stock  on any  national
securities  exchange on which the Common Stock is listed,  (b) the closing price
of the Common Stock on the Nasdaq  National  Market System or (c) the average of
the closing bid and asked  prices in the  over-the-counter-market,  whichever is
applicable, as published in The Wall Street Journal. If no sales of Common Stock
were made on such a day,  the price of the Common  Stock for purposes of clauses
(a) and (b) above  shall be the  reported  price for the next  preceding  day on
which sales were made.  The Plan is intended  to qualify as an  "employee  stock
purchase  plan"  under  Section 423 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code"). The Board of Directors believes that the Plan will further
encourage  broader  stock  ownership  by  employees  of the  Company and thereby
provide an  incentive  for  employees to  contribute  to the  profitability  and
success of the Company.  In particular,  the Board intends that the plan offer a
convenient  means for  employees who might not otherwise own Common Stock in the
Company to purchase and hold Common Stock,  and that the discounted sale feature
of the Plan  provides  a  meaningful  inducement  to  participate.  The  Company
believes that employees' continuing economic interest,  as shareholders,  in the
performance and success of the Company will further enhance the  entrepreneurial
spirit of the Company,  which can greatly contribute to the long-term growth and
profitability  of the  Company.  As of  September  1, 2000,  97  employees  have
participated in the automatic withholding election for the Plan.

Description of the Plan

         The Plan will be  administered by the Company's Board of Directors (the
"Board") or by a Committee  appointed by the Board (the "Committee").  The Board
or  the  Committee  has  authority  to  make  rules  and   regulations  for  the
administration  of the Plan and its  interpretation  and  decisions  with regard
thereto shall be final and conclusive.  The Board may at any time, and from time
to time, amend this Plan in any respect,  except that (a) if the approval of any
such amendment by the  shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any  amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.

         All employees of the Company,  including  Directors who are  employees,
and all employees of any subsidiary of the Company (as defined in Section 424(f)
of the  Code)  designated  by the  Board or the  Committee  from time to time (a
"Designated Subsidiary"),  are eligible to participate in any one or more of the
offerings of Options to purchase  Common Stock under the Plan provided that: (a)
they are customarily employed by the Company or a Designated Subsidiary for more
than 20 hours a week and for more than five months in a calendar  year;  and (b)
they have been employed by the Company or a Designated  Subsidiary  for at least
[six months]  prior to enrolling in the Plan;  and (c) they are employees of the
Company  or a  Designated  Subsidiary  on the first day of the  applicable  Plan
Period.
<PAGE>
         No employee may be granted an Option  under the Plan if such  employee,
immediately  after the Option is granted,  owns 5% or more of the total combined
voting  power or value of the  stock of the  Company  or any  subsidiary  of the
Company.  For  purposes of the  preceding  sentence,  the  attribution  rules of
Section 424(d) of the Code shall apply in determining  the stock ownership of an
employee,  and all stock that the employee has a  contractual  right to purchase
shall be treated as stock owned by the employee.

         The Company will make one or more offerings  ("Offerings") to employees
to purchase stock under this Plan.  Offerings will begin each January 1 and July
1, or the first business day thereafter  (the  "Offering  Commencement  Dates").
Each Offering  Commencement Date will begin a six-month period (a "Plan Period")
during which payroll deductions will be made and held for the purchase of Common
Stock at the end of the Plan  Period.  The Board or the  Committee  may,  at its
discretion,  choose a  different  Plan  Period of twelve (12) months or less for
subsequent Offerings.

         An employee eligible on the Offering  Commencement Date of any Offering
may  participate  in such  Offering  by  completing  and  forwarding  a  payroll
deduction  authorization  form to the employee's  appropriate  payroll office at
least 14 days prior to the applicable Offering  Commencement Date. The form will
authorize a regular  payroll  deduction  from the  Compensation  received by the
employee  during  the  Plan  Period.  Unless  an  employee  files a new  form or
withdraws  from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.

         The  Company  will  maintain   payroll   deduction   accounts  for  all
participating  employees.  With respect to any Offering made under this Plan, an
employee may  authorize a payroll  deduction in any dollar amount from a minimum
of 2% up to a  maximum  of 10%,  only in a whole  integral  percentage,  or such
lesser amount as the Board or Committee shall determine before the start of each
Plan Period,  of the  Compensation  he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made.

         No  employee  may be  granted  an Option  that  permits  his  rights to
purchase Common Stock under this Plan and any other employee stock purchase plan
(as defined in Section  423(b) of the Code) of the Company and its  subsidiaries
to accrue at a rate  which  exceeds  $25,000  of the fair  market  value of such
Common Stock  (determined at the Offering  Commencement Date of the Plan Period)
for each calendar year in which the Option is outstanding at any time.

         An employee  may decrease or  discontinue  his payroll  deduction  once
during any Plan Period by filing a new  payroll  deduction  authorization  form.
However,  an  employee  may not  increase  his payroll  deduction  during a Plan
Period.  If an employee  elects to discontinue his payroll  deductions  during a
Plan Period,  but does not elect to withdraw his funds, the funds deducted prior
to his election to  discontinue  will be applied to the purchase of Common Stock
on the Exercise Date (as defined below).

         Interest  will not be paid,  unless  required by law,  on any  employee
accounts,  except to the  extent  that the Board or the  Committee,  in its sole
discretion,  elects to credit employee  accounts with interest at such per annum
rate as it may from time to time determine.
<PAGE>
         An employee  may at any time prior to the close of business on the last
business  day in a Plan  Period  and for any  reason  permanently  draw  out the
balance  accumulated  in  the  employee's  account  and  thereby  withdraw  from
participation  in an  Offering.  Partial  withdrawals  are  not  permitted.  The
employee  may not begin  participation  again  during the  remainder of the Plan
Period.  The employee may  participate in any subsequent  Offering in accordance
with terms and conditions established by the Board or the Committee.

         On the Offering Commencement Date of each Plan Period, the Company will
grant to each eligible  employee who is then a participant in the Plan an Option
to purchase on the last business day of such Plan Period (the "Exercise  Date"),
at the option price,  the largest  number of whole shares of Common Stock of the
Company as does not exceed the number of shares determined by multiplying $2,083
by the number of full months in the Offering  Period and dividing the product by
the closing price (as defined above) for such Plan Period.

         Each  employee  who  continues to be a  participant  in the Plan on the
Exercise  Date shall be deemed to have  exercised his Option at the option price
on such date and shall be deemed to have  purchased  from the Company the number
of full  shares of Common  Stock  reserved  for the purpose of the Plan that his
accumulated  payroll  deductions on such date will pay for, but not in excess of
the maximum number determined in the manner set forth above.

         Any balance remaining in an employee's payroll deduction account at the
end of a Plan Period will be  automatically  refunded  to the  employee  without
interest, unless required by law.

         Certificates  representing  shares of Common Stock  purchased under the
Plan may be issued only in the name of the employee, in the name of the employee
and another person of legal age as joint tenants with rights of survivorship, or
(in the Company's  sole  discretion)  in the name of a brokerage  firm,  bank or
other nominee  holder  designated by the employee.  The Company may, in its sole
discretion and in compliance  with  applicable  laws,  authorize the use of book
entry registration of 12 shares in lieu of issuing stock certificates.

Federal Income Tax Consequences

         The  Company  believes  that under  present law the  following  federal
income  tax  consequences  would  generally  result  under the  Plan.  Rights to
purchase  shares  under the Plan are  intended to  constitute  "options"  issued
pursuant to an "employee stock option plan" within the meaning of Section 423 of
the Code:  1. No taxable  income  results to the  participant  upon the grant of
right to  purchase or upon the  purchase of shares for his or her account  under
the Plan (although the amount of a participant's payroll contributions under the
Plan  will  be  taxable  as  ordinary  income  to the  participant).  2.  If the
participant  disposes  of shares  less than two years  after the first day of an
offering  period with respect to which he or she purchased such shares,  then at
the time of disposition  the  participant  will recognize as ordinary  income an
amount equal to the excess of the fair market value of the shares on the date of
purchase  over the amount of the  participant's  payroll  contributions  used to
purchase  the shares.  3. If the  participant  holds the shares for at least two
years after the first day of an offering  period with respect to which he or she
purchased such shares,  then at the time of the disposition the participant will
recognize as ordinary  income an amount equal to the lesser of (i) the excess of
the fair market value of the shares on the first day of the offering period over
the option  price on that date,  and (ii) the excess of the fair market value of
the  shares on the date of  disposition  over the  amount  of the  participant's
payroll  contributions  used  to  purchase  such  shares.  4. In  addition,  the
participant  will  recognize a long-term or short-term  capital gain or loss, as
the  case may be,  in an  amount  equal to the  difference  between  the  amount
realized  upon any sale of the Common  Stock minus the cost (i.e.,  the purchase
price plus the amount,  if any, taxed to the participant as ordinary income,  as
<PAGE>
noted in (3) above).  5. If the statutory  holding period described in (3) above
is satisfied,  the Company will not receive any deduction for federal income tax
purposes  with  respect to any  discount  in the sale  price of Common  Stock or
matching contribution applicable to such participant.  If such statutory holding
period is not satisfied,  the Company  generally should be entitled to deduction
in an amount equal to the amount taxed to the participant as ordinary income.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of September 21, 2000, 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.

  Name of Beneficial Owner           Amount and Nature of            Percent of
                                     Beneficial Ownership                Class

  James Ciocia                        1,073,616(1)                         14%
  1311 Mamaroneck Avenue
  White Plains, NY 10605

  Thomas Povinelli                    1,128,616(2)                         14%
  1311 Mamaroneck Avenue
  White Plains, NY 10605

  Kathryn  Travis                      385,481(3)                          5%
  1311 Mamaroneck Avenue
  White Plains, NY 10605

  Seth  Akabas                          9,066(4)                           *
  488 Madison Avenue - 11th Floor
  New York, NY 10022

  Louis  Karol                           3,180                             *
  600 Old Country Road
  Garden City, NY 11530

  Michael P. Ryan                      769,804(5)                          *
  11 Raymond Avenue
  Poughkeepsie, NY 12603

  Steven  Gilbert                      859,000(6)                          10%
  2420 Enterprise Road, Suite 100
  Clearwater, FL 33763

  Stephen Sacher                       52,000(7)                           *
  1311 Mamaroneck Avenue
  White Plains, NY 10605
<PAGE>
  Arlington Financial Services, Inc.   762,204(5)                          10%
  11 Raymond Avenue
  Poughkeepsie, NY 12603

  All directors and officers           3,421,763 (1) (2) (3)               34%
  as a group (6 persons)                          (4) (5) (7)

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

(1)      Includes  20,000  shares of Common Stock  issuable upon the exercise of
         currently  exercisable  options at a price of $2.75 per share. Does not
         include 52,508 shares issuable upon the exercise of options that do not
         vest until 2001.

(2)      Includes  20,000  shares of Common Stock  issuable upon the exercise of
         currently  exercisable  options at a price of $2.75 per share. Does not
         include 51,521 shares issuable upon the exercise of the options that do
         not vest until 2001.

(3)      Includes  20,000  shares of Common Stock  issuable upon the exercise of
         currently  exercisable  options at a price of $2.75 per share. Does not
         include 20,000 shares issuable upon the exercise of options that do not
         vest until 2001.

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

(5)      7,600 shares are owned by Mr. Ryan  personally  and the 762,204  shares
         are owned by  Arlington  Financial Services, Inc.  Mr. Ryan owns 50% of
         the capital stock of Arlington Financial Services, Inc.

(6)      Includes 169,000 shares owned by 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.  Does not include
         14,968 shares and 37,500  shares  issuable upon the exercise of options
         that do not vest until 2001 and 2002, respectively.

(7)      Includes 40,000 shares issuable upon exercise of currently  exercisable
         options:  20,000 at $7.50 per share and 20,000 at $8.60 per share. Does
         not include 15,000 shares issuable upon the exercise of options that do
         not vest until  2001,  or 160,000  shares  issuable  upon  exercise  of
         options vesting yearly after 2000.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The three principal stockholders,  Messrs. Ciocia and Povinelli and Ms.
Travis  personally  guaranteed the repayment of the Company's loans from Merrill
Lynch, each with an individual limit of $1,750,000.  Such stockholders  received
no  consideration  for such  guarantees  other  than  their  salaries  and other
compensation.

         The Company loaned the following amounts to the following  individuals:
$100,000 in fiscal June 1997 and  $240,000 in fiscal June 1998 to James  Ciocia,
$100,000  in fiscal June 1997 and  $240,000 in fiscal 1998 to Thomas  Povinelli,
$50,000 in fiscal June 1997 and  $72,000 in fiscal June 1998 to Kathryn  Travis,
<PAGE>
and $50,000 in fiscal June 1998 to Steven Gilbert.  Each of such  individuals is
an officer and director of the Company,  except Mr. Gilbert,  who is an employee
and stockholder.  These loans were 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 Ms.  Travis,  which  have a maturity  date of August 1, 2001.  Since the
beginning of the Company's fiscal year 2000, the maximum amounts outstanding for
these loans were as follows:  $53,515 and $61,294 for the fiscal 1997 and fiscal
1998 loans,  respectively,  made to Mr.  Ciocia;  $51,786 and  $259,300  for the
fiscal 1997 and fiscal 1998 loans, respectively,  made to Mr. Povinelli; $39,642
and $78,388 for the fiscal 1997 and fiscal 1998 loans, respectively, made to Ms.
Travis; and $45,368 for the fiscal 1998 loan made to Mr. Gilbert.  During Fiscal
2000,  the  Company as a  one-time  bonus  increased  the salary of each of such
individuals  by  the  aggregate  amount  outstanding  on  these  loans  to  such
individual  and  applied  such  bonus  to  discharge  in full  such  loans  (See
"Executive Compensation").

        During Fiscal 1999, the Company made additional loans for $302,066 to
Mr.Povinelli, for $339,877 to Mr.Ciocia and for $228,589 to Ms. Travis. These
loans are payable on demand and are interest-free. Since the beginning of Fiscal
2000, the maximum amounts outstanding on such loans were $116,046 for Mr.
Povinelli, $339,877 for Mr. Ciocia, and $228,588 for Ms. Travis. As of June 30,
2000 the balances are $101,544 for Mr. Povinelli, $198,237 for Mr. Ciocia and $0
for Ms.Travis. Each of such individuals has pledged certain shares of his or her
stock in the Company as collateral for these loans.

         From time to time the Company  employs the  professional  services of
Sacher & Co. P.C.  The  President of Sacher & Co. P.C.  was the Chief  Financial
Officer of the  Company  until July 6, 2000.  The amounts  paid to Mr. Sacher in
this capacity are set forth above in "Executive Compensation."

         Seth Akabas,  is a partner in the law firm of Akabas & Cohen and also a
director  of the  Company.  Akabas & Cohen was paid  $116,731 in Fiscal 2000 for
legal  services.  Akabas & Cohen  continues to provide legal  services in Fiscal
2001.

         In July 2000,  the  Company  borrowed  $250,000  at 12%  interest  from
Mysemia, a general  partnership in which Seth Akabas is a general partner with a
1/3 interest. No interest or principal has been paid on such loan to date.

         The Company has made a loan to Steven  Gilbert,  a  stockholder  of the
Company.  The loan is for $100,000,  with interest  charged at 9% per annum, has
received  payments in Fiscal  2000 with a remaining  balance at June 30, 2000 of
$35,927.

         In addition,  the Company holds a note  receivable from Dominic Ciocia,
the  brother of the  Company's  Chief  Executive  Officer.  The note  receivable
including  accrued  interest is for  $118,000  with  interest  charged at 6% per
annum.  Subsequent  to year-end,  this note has been paid down by  approximately
$92,000.

Item 14. EXHIBITS LIST AND REPORTS ON FORM 8-K

(a)      Exhibits

        3.1      Registrant's    Articles   of   Incorporation,    as   amended,
                 incorporated  by reference to the like numbered  exhibit in the
                 Registrant's  Registration  Statement  on Form  SB-2  under the
                 Securities Act of 1933, as amended, File No. 33-70640-NY.
<PAGE>
        3.2.     Registrant's Amended Articles of Incorporation, incorporated by
                 reference to Exhibit A in the  Registrant's  Proxy Statement on
                 Form14-A under the Securities Exchange Act of 1934, as amended,
                 filed for the annual meeting held on June 22, 1999.

        3.3      Registrant's  By-Laws,  incorporated  by  reference to the like
                 numbered exhibit in the Registrant's  Registration Statement on
                 Form SB-2 under the  Securities  Act of 1933, as amended,  File
                 No. 33-70640 -NY.

        10.1     1993 Joint Incentive and Non-Qualified Stock Option Plan of the
                 Registrant,  incorporated  by  reference  to the like  numbered
                 exhibit in the Registrant's Registration Statement on Form SB-2
                 under  the  Securities  Act  of  1933,  as  amended,  File  No.
                 33-70640-NY.

        10.2     1999 Joint Incentive and Non-Qualified Stock Option Plan of the
                 Registrant,  incorporated  by  reference  to  Exhibit  B in the
                 Registrant's  Proxy Statement on Form 14-A under the Securities
                 Exchange Act of 1934, as amended,  filed for the annual meeting
                 held on June 22, 1999.

        10.3     2000  Employee   Stock   Purchase   Plan  of  the   Registrant,
                 incorporated  by  reference  to  Exhibit B in the  Registrant's
                 Proxy  Statement on Form14-A under the Securities  Exchange Act
                 of 1934, as amended,  filed for the annual  meeting held on May
                 5, 2000.

        10.4     Stock  Purchase   Agreement   dated  November  19,  1998  among
                 Registrant,  North  Shore  Capital  Management  and North Ridge
                 Securities Corp., incorporated by reference to Exhibit 1 on the
                 Registrant's  Current  Report on Form 8-K,  dated  November 19,
                 1998.

        10.5     Non-competition   Agreement   dated  November  19,  1998  among
                 Registrant,  Daniel Levy, and Joseph  Clinard,  incorporated by
                 reference to Exhibit 2 on the  Registrant's  Current  Report on
                 Form 8-K, dated November 19, 1998.

        10.6     Employment Agreement dated November 19, 1998
                 between Daniel Levy and North Shore Capital
                 Management Corp. and North Ridge Securities Corp.,
                 incorporated by reference to Exhibit 3 on the
                 Registrant's Current Report on Form 8-K, dated
                 November 19, 1998.

        10.7     Stock  Option   Agreement   dated  November  19,  1998  between
                 Registrant  and  Daniel  Levy,  incorporated  by  reference  to
                 Exhibit 4 on the Registrant's Current Report on Form 8-K, dated
                 November 19, 1998.
<PAGE>
        10.8     Consulting Agreement dated November 19, 1998
                 between Joseph Clinard and North Ridge Securities
                 Corp., incorporated by reference to Exhibit 5 on the
                 Registrant's Current Report on Form 8-K, dated
                 November 19, 1998.

        10.9     Stock and Asset Purchase Agreement dated April 5,
                 1999 among Registrant, Prime Financial Services,
                 Inc., Prime Capital Services, Inc., Asset & Financial
                 Planning, Ltd., Michael Ryan and Ralph Porpora,
                 incorporated by reference to Exhibit 1 on the
                 Registrant's Current Report on Form 8-K, dated April
                 5, 1999.

        10.11    Non-competition Agreement dated April 5, 1999 among Registrant,
                 Prime Financial Services, Inc., Michael Ryan and Ralph Porpora,
                 incorporated  by  reference  to  Exhibit 2 on the  Registrant's
                 Current Report on Form 8-K, dated April 5, 1999.

        10.12    Registration   Rights  Agreement  dated  April  5,  1999  among
                 Registrant,  Prime Financial  Services,  Inc., Michael Ryan and
                 Ralph  Porpora,  incorporated  by reference to Exhibit 3 on the
                 Registrant's Current Report on Form 8-K, dated April 5, 1999.

        10.13    Limited Liability Company Interest Option Agreement dated April
                 5, 1999 between Registrant and Prime Financial Services,  Inc.,
                 incorporated  by  reference  to  Exhibit 4 on the  Registrant's
                 Current Report on Form 8-K, dated April 5, 1999.

        21       List of  Subsidiaries.

        23       Consent of Arthur Andersen, LLP

        27       Financial Data Schedule

(b)      Reports on Form 8-K

                  None


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  has  caused  this  Annual  Report to be signed on its  behalf by the
undersigned, thereunto duly authorized.

                            GILMAN + CIOCIA, INC.


                            By: /s/ Thomas Povinelli
                             -----------------------------------------
                             Thomas Povinelli, Chief Operating Officer

         In accordance with the Exchange Act, this Annual Report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
<PAGE>
Signature                  Title                               Date
-------------------------------------------------------------------

/s/ James Ciocia           Chief Executive Officer             October 13, 2000
---------------------------and President (principal            ----------------
James Ciocia               executive officer) and Director

/s/David D. Puyear         Chief Financial Officer,            October 13, 2000
---------------------------(principal financial officer        ----------------
David D. Puyear            and principal accounting officer)

 /s/ Thomas  Povinelli     Director                            October 13, 2000
---------------------------                                    ----------------
Thomas Povinelli

/s/ Kathryn Travis         Director                            October 13, 2000
---------------------------                                    -----------------
Kathryn Travis

/s/ Michael Ryan           Director                            October 13, 2000
---------------------------                                    ----------------
Michael Ryan

/s/Louis Karol             Director                            October 13, 2000
---------------------------                                    ----------------
Louis Karol

/s/ Seth Akabas            Director                            October 13, 2000
---------------------------                                    ----------------
Seth Akabas
<PAGE>
INDEX                                                              Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                           F-2

FINANCIAL STATEMENTS:

Consolidated Balance Sheet                                         F-3

Consolidated Statements of Operations                              F-4

Consolidated Statements of Cash Flows                              F-5-6

Consolidated Statements of Stockholders' Equity                    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 sheets of Gilman + Ciocia,
Inc. and subsidiaries as of June 30, 2000 and 1999, and the related consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period ended June 30, 2000.  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 auditing standards generally accepted
in the United States. 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, 2000 and 1999 and the  results of their  operations
and their  cash flows for each of the three  years in the period  ended June 30,
2000, in conformity with accounting  principles generally accepted in the United
States.

                                                            ARTHUR ANDERSEN LLP




                                                        /s/ ARTHUR ANDERSEN LLP
New York, New York
October 13, 2000
<PAGE>
<TABLE>
<CAPTION>
                   Gilman + Ciocia, Inc. and Subsidiaries
                        Consolidated Balance Sheets
                               As of June 30,
                                      ASSETS                                                2000                  1999
                                                                                            --------------  --------------
<S>                                                                                          <C>             <C>
CURRENT ASSETS:

Cash and cash equivalents ................................................................   $  4,561,293    $  3,453,354
Marketable securities ....................................................................         73,044         316,937
Accounts receivable, net of allowance for doubtful accounts of
$187,500 and $87,500  as of June 30, 2000 and 1999, respectively..........................      6,355,115       3,585,518
Receivables from officers and stockholders, current portion ..............................        709,538         568,233
Prepaid expenses and other current assets ................................................      1,210,611         983,130
Income taxes receivable ..................................................................      3,134,824       1,460,259
Deferred tax assets ......................................................................        690,000         183,000
                                                                                              ------------- -------------
Total current assets .....................................................................     16,734,425      10,550,431
Property and equipment, net of accumulated depreciation of $3,397,927
and $2,420,785 as at June 30, 2000 and 1999, respectively ................................      4,423,455       2,372,174
Intangible assets, net of accumulated amortization of $3,172,897 and
$1,635,581 as of June 30, 2000 and 1999, respectively ....................................     21,260,307      17,387,317
Receivables from officers and stockholders, net of current portion .......................         17,590       1,570,964
Security deposits ........................................................................        658,818         374,348
Deferred tax asset .......................................................................            -            10,000
Other assets .............................................................................        810,583         733,746
                                                                                             ------------    -------------
                                Total assets .............................................   $ 43,905,178    $ 32,998,980
                                                                                             ------------    ------------
                                                                                             ------------    ------------
                       LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current portion of long-term debt ..........................................................  $  9,112,734    $  1,695,529
 Accounts payable and accrued expenses ..........................................................     9,233,127       3,605,386
                                                                                                     ----------- --------------
                             Total current liabilities ..........................................    18,345,861       5,300,915
     Long-term debt - net of current portion ....................................................       826,476       2,738,124
     Deferred tax liability .....................................................................        20,000            --
                                                                                                     ----------- --------------
                                 Total liabilities ..............................................    19,192,337       8,039,039
                                                                                                     ----------- --------------
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;
        8,030,834 shares and 7,508,266 shares issued and outstanding as of
        June 30, 2000 and 1999,respectively                                                              80,308          75,083
     Paid-in capital ............................................................................    23,812,621      19,890,577
     Deferred compensation ......................................................................       164,276         136,867
     Retained earnings ..........................................................................     1,772,766       5,785,858
                                                                                                     ----------- --------------
                                                                                                     25,829,971      25,888,385
     Less- treasury stock, at cost ..............................................................    (1,012,130)       (777,039)
     Note receivable for shares sold, stock subscriptions
         and accrued interest receivable ........................................................      (105,000)       (159,646)
     Unrealized gain on marketable securities, net of income taxes ..............................          --             8,241
                                                                                                     ----------- --------------
                            Total stockholders' equity ..........................................    24,712,841      24,959,941
                                                                                                     ----------- --------------
                    Total liabilities and stockholders' equity ..................................  $ 43,905,178    $ 32,998,980
                                                                                                   ------------- --------------
 The accompanying notes are an integral part of these consolidated balance sheets ...............  ------------- --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 Gilman + Ciocia, Inc. and Subsidiaries
                                 Consolidated Statements of Operations
                                     For the Years Ended June 30,

                                                                             2000                1999               1998
                                                                         ------------       --------------      -------------
Revenues:
<S>                                                                     <C>                 <C>                 <C>
     Tax preparation fees                                               $ 18,311,232        $ 14,305,544        $ 11,955,051
     Financial planning services                                          71,267,262          36,137,862          16,578,032
                                                                        -------------       --------------      -------------
          Total revenues                                                  89,578,494          50,443,406          28,533,083
                                                                        -------------       --------------      -------------
Operating expenses:
     Salaries and commissions                                             67,024,615          31,915,652          14,537,505
     General and administrative expenses                                  12,185,678           5,986,476           4,964,533
     Advertising                                                           9,156,079           3,873,580           2,732,867
     Brokerage fees & licenses                                             1,872,294             949,392               -
     Rent                                                                  3,613,146           2,480,067           2,037,117
     Depreciation and amortization                                         2,515,008           1,441,388             858,391
                                                                         ------------        ------------        ------------
          Total operating expenses                                        96,366,820         46,646,555          25,130,413
                                                                         ------------        ------------        ------------
           Operating income / (loss)                                     (6,788,326)         3,796,851           3,402,670
                                                                         ------------        ------------        ------------
Other income / (expense):

     Interest and investment income                                       1,412,990            129,041             107,953
     Interest expense                                                      (930,135)          (280,961)           (175,536)
     Other income                                                           145,379             56,212              83,068
                                                                         ------------        ------------        ------------

          Total other income (expense)                                      628,234            (95,708)             15,485
                                                                         ------------        ------------        ------------

Income / (loss) before provision (benefit) for income taxes                (6,160,092)          3,701,143           3,418,155

Provision / (benefit) for income taxes                                     (2,147,000)          1,520,000           1,406,810
                                                                         ------------        ------------        ------------

          Net  income (loss)                                             $(4,013,092)        $ 2,181,143         $ 2,011,345
                                                                         ------------        ------------        ------------
Net income / (loss) per share:                                           ------------        ------------        ------------

          Basic                                                           $  (0.53)            $    0.35          $      0.37
          Diluted                                                            (0.53)                 0.32                 0.32

Weighted average shares:
          Basic                                                           7,552,396            6,264,228            5,383,093
          Diluted                                                         7,552,396            6,917,436            6,315,345

                The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                 Gilman + Ciocia, Inc. and Subsidiaries
                                 Consolidated Statements of Cash Flows
                                     For the Years Ended June 30,
                                                               2000              1999             1998
                                                             ------------------ ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>                <C>              <C>
Net income (loss)                                            $ (4,013,092)      $ 2,181,143      $ 2,011,345
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Compensation expense recognized in connection with the
reissuance of treasury stock and the issuance of stock
options                                                            57,859           184,927           61,831
   Depreciation and amortization                                2,515,008         1,441,388          858,391
   Deferred tax benefit                                          (477,000)          (42,000)        (124,000)
   (Gain) loss on sale of marketable securities                  (979,489)             (342)          16,213
   Amortization of deferred and other compensation expense        946,984           458,332          162,477
   Provision (recovery) for doubtful accounts                     142,714          (100,000)         100,000
   Interest on stock subscriptions                                      -           (10,801)         (13,546)
   Changes in:
      Accounts receivable                                      (2,828,368)          612,662       (1,141,576)
      Prepaid expenses and other current assets                  (129,151)         (743,382)        (180,974)
      Advances to financial planners                             (122,060)          133,039          (87,500)
      Security deposits and other assets                         (315,579)          (64,965)         (53,783)
      Accounts payable and accrued expenses                     4,636,655          (284,712)          33,883
      Income taxes payable                                     (1,551,927)         (162,889)          94,689
                                                               ---------------- ----------------  -----------
           Net cash (used in) provided by operating activities (2,117,446)        3,602,400        1,737,450
                                                               ---------------- ----------------  -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                                           (1,818,944)         (751,394)        (772,930)
Cash payments for acquisitions -net of cash acquired           (1,359,288)       (6,711,608)        (145,176)
Marketable securities                                               9,025           (97,272)        (105,172)
Deferred acquisition costs                                              -                 -          (54,955)
Proceeds from sale of investments                               1,215,141                 -          236,975
Loan repayments from officers and stockholders                    716,680           385,819          273,813
Loans to officers and stockholders                               (124,002)       (1,232,180)        (631,228)
                                                                --------------- -------------     -----------
          Net cash used in investing activities                (1,361,388)       (8,406,635)      (1,198,673)
                                                                --------------- -------------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition of treasury stock                                    (257,385)         (136,116)        (179,123)
Proceeds from bank and other loans                             10,505,100         8,500,000        3,000,000
Payments of bank and other loans                               (6,209,021)       (4,786,371)      (4,401,487)
Proceeds from the sale of common stock
   and exercise of stock options and warrants                     464,876         2,974,245           54,125
Proceeds from stock subscriptions                                  83,203                 -           87,869

Incurrence of deferred registration costs                               -                 -         (314,819)
                                                                --------------- -------------     -----------
        Net cash provided by (used in) financing activities     4,586,773         6,551,758       (1,753,435)
                                                                ---------------------------------------------
         Net increase (decrease) in cash                        1,107,939         1,747,523       (1,214,658)
CASH, and cash equivalents beginning of year                    3,453,354         1,705,831        2,920,489
                                                               ---------------- -------------     -----------
CASH, and cash equivalents end of year                        $ 4,561,293       $ 3,453,354      $ 1,705,831
                                                               ================ ================ ================
                                                               ================ ================ ================
                The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                          Gilman & Ciocia, Inc. and Subsidiaries
                                     Consolidated Statements of Cash Flows - Continued
                                           For the years ended June 30,
<S>                                                                           <C>                 <C>              <C>
                                                                                2000               1999              1998
-------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  <S>                                                                         <C>                 <C>              <C>
   Cash paid during the year for-

         Interest                                                                $ 792,859          $ 280,961        $ 188,592
         Income taxes                                                              784,962          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                                 22,294            143,859           32,897
    Issuance of common stock as consideration in business combination            3,220,018          9,420,995                -
         Exercise of stock options                                                 105,000              2,412                -
         Capital leases                                                          1,209,478                  -                -

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
    FINANCING ACTIVITIES:

    Details of business combinations:
    Fair value of assets acquired                                                5,410,306         21,424,445          145,176
    Less: Liabilities assumed                                                            -         (4,039,411)               -
               Stock issued                                                     (4,051,018)        (9,420,995)               -
                                                                                -----------        -----------         --------
    Cash paid for acquisitions                                                   1,359,288          7,964,039          145,176
    Cash acquired in acquisitions                                                        -         (1,252,431)               -
                                                                                -----------        -----------         --------

    Net cash paid for acquisitions                                             $ 1,359,288        $ 6,711,608        $ 145,176
                                                                                -----------        -----------         --------
                                                                                -----------        -----------         --------
                The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                 Gilman & Ciocia, Inc. and Subsidiaries
                                                                Consolidated Statements of Stockholders' Equity
                                                                For the years ended June 30, 2000, 1999 and 1998

                                                Common Stock
                                                ----------------------           Paid-In         Deferred         Retained
                                                Shares          Amount           Capital         Compensation     Earnings
                                             -----------------------------------------------------------------------------

<S>             <C>                           <C>             <C>             <C>               <C>          <C>
Balance at July 1,1997                        $  5,578,913    $     55,789    $  6,231,555      $      -      $  1,593,369

Payments received on stock

Purchase of treasury stock

Reissuance of treasury stock                                                        28,934

Issuance of common stock on exercise
of stock options                                    28,000             280          53,845

Accrued interest income

Amortization of deferred compensation                                                               52,993

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    $     52,993   $  3,604,715
=========================================================================================================================
<S>             <C>                              <C>          <C>             <C>             <C>            <C>
Balance at July 1, 1998                          5,606,913    $     56,069    $  6,377,334    $     52,993   $  3,604,715

Purchase of treasury stock

Reissuance of treasury stock                                                        86,067

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
business combinations                              793,774           7,938       9,413,056

Accrued interest income

Amortization of deferred compensation                                                               83,874

Shares  issued upon settlement of
litigation                                          34,500             345         138,605

Income tax benefit upon 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    $ 19,890,577    $    136,867   $ 5,785,858
=========================================================================================================================
                                The accompanying notes are an integral part of these consolidated statements.
<PAGE>
                                                           Gilman & Ciocia, Inc. and Subsidiaries
                                                    Consolidated Statements of Stockholders' Equity-Continued
                                                           For the years ended June 30, 2000, 1999 and 1998


                                                                      Stock         Accumulated       Total
                                              Treasury Stock    Subcriptions/Note    Other         Stockholders'
                                              --------------      Receivable for    Comprehensive     Equity
                                              Shares   Amount       Shares Sold      Income
                                              -----------------------------------------------------------------
<S>                                          <C>         <C>       <C>             <C>            <C>
Balance at July 1, 1997                        157,433  $(638,556)   $ (223,168)    $   -          $ 7,018,989

Payments received on stock                                               87,869                         87,869

Purchase of treasury stock                      60,700   (179,123)                                    (179,123)

Reissuance of treasury stock                    (6,818)    32,897                                       61,831

Issuance of common stock on
exercise of stock options                                                                               54,125

Accrued interest income                                                 (13,546)                       (13,546)

Amortization of deferred compensation                                                                   52,993

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                        211,315   $ (784,782) $(148,845) $ (86,903)          $9,070,581
===============================================================================================================
Balance at July 1, 1998                         211,315   $ (784,782) $(148,845) $ (86,903)          $9,070,581

Purchase of treasury stock                       16,400     (136,116)                                  (136,116)

Reissuance of treasury stock                    (28,070)     143,859                                    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
business combinations                                                                                  9,420,994

Accrued interest income                                                 (10,801)                        (10,801)

Amortization of deferred compensation                                                                    83,874

Shares  issued upon settlement of
litigation                                                                                              138,950

Income tax benefit upon 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                         199,645   $(777,039) $(159,646)  $   8,241          $24,959,941
================================================================================================================
                        The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                           Gilman & Ciocia, Inc. and Subsidiaries
                                                  Consolidated Statements of Stockholders' Equity - Continued
                                                        For the years ended June 30, 2000, 1999 and 1998


                                              Common Stock
                                              ---------------      Paid-In        Deferred        Retained
                                             Shares    Amount      Capital        Compensation    Earnings
                                         -----------------------------------------------------------------
<S>                                    <C>          <C>         <C>            <C>             <C>
Balance at July 1, 1999                   7,508,266  $ 75,083   $ 19,890,577    $  136,867     $5,785,858

Purchase of treasury stock

Re-issuance of treasury stock                                          8,156

Issuance of common stock on
exercise of stock options                   107,081     1,071        568,805

Issuance of common stock upon
business combinations                       385,487     3,854      3,216,164

Amortization of deferred compensation                                                27,409

Shares  issued upon settlement of
litigation                                   30,000       300          6,281

Income tax benefit upon exercise
of stock options                                                     122,638

Payment/write-off of stock
subscriptions receivable

Issuance of note receivable for
shares sold

Comprehensive income:

     Unrealized gain on marketable securities

Net loss                                                                                    (4,013,092)
-------------------------------------------------------------------------------------------------------
Total comprehensive income                                                                  (4,013,092)
-------------------------------------------------------------------------------------------------------
Balance at June 30, 2000                 8,030,834  $  80,308    $ 23,812,621    $  164,276 $ 1,772,766
=======================================================================================================
                The accompanying notes are an integral part of these consolidated statements.
<PAGE>
                                                       Gilman & Ciocia, Inc. and Subsidiaries
                                                Consolidated Statements of Stockholders' Equity - Continued
                                                       For the years ended June 30, 2000, 1999 and 1998

                                                                  Stock
                                                             Subscriptions/     Accumulated
                                      Treasury Stock             Note              Other           Total
                                     -----------------       Receivable for    Comprehensive    Stockholders'
                                      Shares     Amount       Shares Sold         Income            Equity
                                     ----------------------------------------------------------------------
Balance at July 1, 1999              199,645  $ (777,039)     $  (159,646)      $ 8241         $ 24,959,941

Purchase of treasury stock            52,600    (257,385)                                         (257,385)

Re-issuance of treasury stock         (4,350)     22,294                                            30,450

Issuance of common stock on
exercise of stock options                                                                          569,876

Issuance of common stock upon
business combinations                                                                            3,220,018

Amortization of deferred compensation                                                               27,409

Shares  issued upon settlement of
litigation                                                                                           6,581

Income tax benefit upon exercise
of stock options                                                                                   122,638

Payment/write-off of stock
subscriptions receivable                                          159,646                          159,646

Issuance of note receivable for
shares sold                                                      (105,000)                        (105,000)

Comprehensive income:

     Unrealized gain on marketable securities                                   (8,241)             (8,241)

Net loss                                                                                        (4,013,092)
-----------------------------------------------------------------------------------------------------------
Total comprehensive income                                                                      (4,013,092)
-----------------------------------------------------------------------------------------------------------
Balance at June 30, 2000                           247,895   $ (1,012,130)   $(105,000) $  -   $ 24,712,841
===========================================================================================================
                The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
                     Gilman + Ciocia, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements

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.  The Company has six active wholly owned
subsidiaries,  Prime Capital  Services,  Inc ("PCS") and North Ridge Securities,
Inc. ("North  Ridge")  which  are  registered  broker-dealers  pursuant  to  the
provisions of the Securities  Exchange Act of 1934;  Prime  Financial  Services,
Inc. ("PFS") and North Shore Capital  Management,  Inc.  ("North Shore"),  which
manage PCS and North Ridge,  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.

The Company has experienced,  during the year ended June 30, 2000, a net loss of
$4,013,092 and negative cash flow from operations of $2,117,446. The Company has
fallen out of compliance  with two covenants of its credit facility with Merrill
Lynch and has  accordingly  classified  this  debt  within  current  liabilities
resulting in a working  capital  deficit of $1,611,437 as of June 30, 2000.  The
Company has reached an agreement in principal  with two  financial  institutions
that will issue  replacement  credit  facilities.  These  facilities,  which are
expected  to close in the  second  quarter  of  Fiscal  2001,  total  more  than
$12,000,000,  will  mature  over 1-5  years  and will  bear  competitive  market
interest rates.  Based on several  management  disciplines  introduced to better
manage and increase  profitability,  in combination with the continued growth in
financial planning and tax preparation revenues, the Company expects to increase
income and cash flows from operations in the future.

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.

Reclassifications
-----------------

Certain prior years' numbers have been reclassified to conform with current year
presentation.

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.
<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  stockholders'  equity or earnings,  respectively.
Realized  gains and  losses  are  charged  to the  statement  of  operations  as
realized.

Other Investments
-----------------

The Company has three investments in which it exercises  significant  influence,
40% - 50%, these investments are accounted for by the equity method, whereby the
Company  recognized its  appropriate  share of such entity's net income or loss.
The Company's share of the net income (loss) of approximately  $31,000 ($6,000),
and $25,000 for June 30, 2000, 1999 and 1998 respectively,  is included in other
income.

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  $1,537,309,  $814,683 and $354,649 for the years ended
June 30, 2000, 1999 and 1998, respectively.

During fiscal 2000, 1999 and 1998, the Company acquired intangible assets valued
at approximately $5,410,300, $21,424,400 and $145,000, respectively.

Website Development Costs
-------------------------

In accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs
of  Computer  Software  Developed  or  Obtained  for  Internal  Use," as well as
Emerging Issues Task Force ("EIFT') 00-02,  "Accounting for Website  Development
Costs," the Company  capitalized  costs incurred in the application  development
stage related to the development of its website in the amount of $280,780 and $0
in fiscal year 2000 and 1999, respectively.  Amortization expense is computed on
a  straight-line  basis over a period of three years,  the expected useful life,
and amounted to $45,797 for the year ended June 30, 2000 (Note 5).

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.
<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.  Financial  planning
services include securities and other  transactions,  and the 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.

Advertising
-----------

Costs to develop  direct-mail  advertising are accumulated and expensed upon the
first mailing of such  advertising in accordance with SOP No. 93-7 "Reporting on
Advertising Costs." 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).

Net Income (Loss) Per Share
---------------------------

Net  income  (loss) per common  share  amounts  ("basic  EPS") are  computed  by
dividing net earnings  (loss) by the weighted  average  number of common  shares
outstanding  and exclude any  potential  dilution.  Net income (loss) per common
share  amounts  assuming  dilution  ("diluted  EPS") are computed by  reflecting
potential dilution from the exercise of stock options and warrants (Note 11).
<PAGE>
Fair Value of Financial Instruments
-----------------------------------

The  carrying  amounts  of  financial  instruments,   including  cash  and  cash
equivalents,  marketable  securities,  accounts  receivable,  notes  receivable,
accounts  payable and  borrowings,  approximated  fair value as of June 30, 2000
because of the relatively  short-term  maturity of these  instruments  and their
market interest rates.

Concentration of Credit Risk
----------------------------

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist of trade  receivables.  The majority of the Company's  trade
receivables are commissions  earned from providing  financial  planning services
that  include  securities/brokerage  services,  insurance  and  mortgage  agency
services.  As a result of the  diversity of services and markets as well as, the
wide variety of  customers,  the Company  does not  consider  itself to have any
significant concentration of credit risk.

Comprehensive Income (Loss)
---------------------------

The  Company  adopted  SFAS No.  130,  "Reporting  Comprehensive  Income."  This
statement requires the disclosure of comprehensive  income to reflect changes in
equity that result from transactions and economic events from non-owner sources.
Included  in  comprehensive  income is  unrealized  gain  (loss)  on  marketable
securities  of ($8,241),  $95,144,  and  ($86,903)  for the years ended June 30,
2000, 1999, and 1998, respectively.

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 March 2000, FASB Interpretation No. 44, "Accounting for Certain  Transactions
Involving  Stock  Compensation"  ("FIN 44") was issued and is effective  July 1,
2000.  FIN 44 clarifies the  application  of APB No. 25,  "Accounting  for Stock
Issued to  Employees,"  with  respect  to the  definition  of an  employee,  the
criteria for  non-compensatory  plans,  the  consequences of modifying  previous
awards and the exchange of stock compensation  awards in business  combinations.
No impact to the Company is expected under this interpretation.

In December  1999, the  Securities  and Exchange  Commission  ("SEC") issued SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting  principles to revenue recognition in financial  statements.
The effective  date of SAB 101 was delayed and SAB 101 will be effective for the
Company in the fourth  quarter of fiscal 2001.  The Company  currently  believes
that its revenue recognition policy is consistent with the guidance of SAB 101.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities," as amended in June 2000, effective for the
Company's  fiscal year ending June 30,  2001.  However,  in June 1999,  the FASB
issued  SFAS  No.  137,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS 137
delays  the  effective  date of SFAS 133,  which will now be  effective  for the
<PAGE>
Company's  fiscal year ending June 30,  2002.  SFAS 133  requires  companies  to
record derivative instruments as assets or liabilities,  measured at fair value.
The recognition of gains or losses resulting from changes in the values of those
derivative  instruments  is based on the use of each  derivative  instrument and
whether  it  qualifies  for  hedge  accounting.  The  key  criterion  for  hedge
accounting  is that  the  hedging  relationship  must  be  highly  effective  in
achieving  offsetting  changes in fair value or cash flows. The Company does not
anticipate  that the  implementation  of SFAS 133 will have a material impact on
the consolidated financial statements.

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.

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  acquired  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 this acquisition  751,004 shares of its
Common Stock (the  "Purchase  Shares'),  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.

Throughout fiscal 2000, the Company acquired five financial  planning  practices
with a valuation of $2,155,000,  and seventeen tax practices with a valuation of
$5,323,000.  The acquisitions were made in both cash and stock or all stock. The
purchase price is usually  determined on the basis of their  historical  revenue
stream;  however,  the  purchase  value may be  adjusted  downward,  if the 2000
adjusted pretax profits fail to meet certain revenue targets as set forth in the
purchase  agreements.  In fiscal 2000,  the Company  recorded  $5,410,306 as the
measurable fair value of the assets  acquired with the balance  recorded in 2001
and  2002  if  performance  targets  are met in  accordance  with  the  purchase
agreements.

The pro forma results for fiscal 2000,  assuming the  acquisitions had been made
at the  beginning of the fiscal year,  would not be  materially  different  from
reported  results.  Unaudited  pro forma results for fiscal 1999 and fiscal 1998
are as follows:
<PAGE>
<TABLE>
<CAPTION>

                                                G&C             NSR             Prime           Pro Forma
                                                ---------------------------------------------------------
                Fiscal 1999
<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          $0.18                                           $0.30
Income per share of common stock-diluted        $0.16                                           $0.28
Weighted average shares outstanding-basic       6,264,228                        751,000        7,015,228
Weighted average shares outstanding-diluted     6,917,430                        751,000        7,668,436

                Fiscal 1998

Revenues                                        $28,533,000     $6,016,000      $15,562,000     $50,511,000
Net Income                                      $2,011,000      ($324,000)        $181,000      $1,868,000
Income per share of common stock-basic          $0.37                                           $0.30
Income per share of common stock-diluted        $0.32                                           $0.26
Weighted average shares outstanding-basic       5,383,093                        751,000        6,134,093
Weighted average shares outstanding-diluted     6,315,345                        751,000        7,066,345

</TABLE>


4.  RECEIVABLES FROM OFFICERS AND STOCKHOLDERS
    ---------------------------------------------
Receivables from officers and  stockholders consist of the following as
of June 30:
<TABLE>
<CAPTION>
                                                                                     2000               1999
                                                                                     -----------------  ------------------
<S>                                                                                    <C>                <C>

Notes  receivable  from  officers of the Company that are due in  aggregate  bi-
weekly  installments  at 7%.                                                          $     -           $ 733,090 a
Demand loans to officers                                                               326,633 a          689,512 a
Notes  receivable  from  stockholders  of the  Company.  Interest is charged
with rates between 6% and 10% per annum.                                               299,299            431,574
Other                                                                                  101,196            285,021
                                                                                    ----------------  ------------------
                                                                                       727,128          2,139,197

Less-  Current portion                                                                 709,538            568,233
                                                                                    ----------------  ------------------
Long-term portion                                                                    $ 17,590          $1,570,964
                                                                                    =================  ==================
</TABLE>

(a)      The officers have pledged their stock in the Company as collateral for
         these loans.

Interest  Income from  officers  and  stockholders  was  approximately  $60,000,
$82,000  and  $21,000  for the  years  ended  June  30,  2000,  1999  and  1998,
respectively.
<PAGE>
5.       PROPERTY AND EQUIPMENT, NET
------------------------------------

        Major classes of property and  equipment  consist of the following as of
        June 30:
<TABLE>
<CAPTION>

                                                                             2000               1999
                                                                             -----------------  ------------------
        <S>                                                                 <C>                 <C>
        Buildings                                                            $ 405,867           $ 626,864
        Equipment                                                            4,589,851           3,330,151
        Furniture and fixtures                                               574,148             495,175
        Leasehold improvements                                               793,040             340,769
        Software                                                             280,780                   -
        Capital Leases                                                       1,177,696                 -
                                                                             -----------------  ------------------
                                                                             7,821,382           4,792,959
        Less- Accumulated depreciation and amortization                      3,397,927           2,420,785
                                                                             -----------------  -------------------
                                                                             $4,423,455          $2,372,174
                                                                             =================  ==================
</TABLE>

Depreciation  expense for property and equipment  was  $977,141,  $604,724 and
$503,655 for the years ended June 30, 2000, 1999 and 1998, respectively.

6.       INTANGIBLE ASSETS
        -------------------
        Intangible assets consist of the following as of June 30:
<TABLE>
<CAPTION>

                                                                           2000               1999
                                                                           -----------------  ------------------
<S>                                                                       <C>                  <C>
        Customer Lists                                                       $10,063,224          $4,652,918
        Broker-Dealer Registration                                            200,000             200,000
        Non-Compete Contracts                                                 800,000             800,000
        House Accounts                                                        900,000             900,000
        Administrative Infrastructure                                         700,000             700,000
        Independent Contractor Agreements                                   5,700,000           5,700,000
        Goodwill                                                            6,069,980           6,069,980
                                                                            -----------------  ------------------
                                                                            24,433,204          19,022,898
        Less- Accumulated amortization                                       3,172,897           1,635,581
                                                                            -----------------  ------------------
                                                                           $21,260,307         $17,387,317
                                                                            =================  ==================
</TABLE>
Amortization  expense is computed on a straight-line  basis over periods of five
to twenty years, and amounted to $1,537,316, $814,683 and $354,649 for the years
ended June 30, 2000, 1999 and 1998, respectively.

7.       DEBT
       --------
<TABLE>
<CAPTION>

Debt consists of the following as of June 30:
                                                                           2000               1999
                                                                           -----------------  ------------------
<S>                                                                      <C>                <C>
Merrill Lynch facility (a)                                                 $7,208,052         $    -
Bank line of credit (b)                                                           -             4,000,000
Unsecured promissory notes (c)                                              1,250,000             -
Notes payable for client settlements, payable over periods of 3-5
  years at varying interest rates between 9% to 10%                           271,680           304,141
Capitalized lease obligations (note 8)                                      1,209,478           129,512
                                                                           -----------------  ------------------
                                                                            9,939,210           4,433,653
        Less:  Current portion                                              9,112,734           1,695,529
                                                                           -----------------  ------------------

                                                                            $ 826,476          $2,738,124
                                                                           =================  ==================
</TABLE>
<PAGE>
(a)  The Company has a  $10,000,000  credit  facility with Merrill  Lynch.  This
     facility  consists of three separate loans as follows:  a line of credit of
     $4,000,000 and two revolver loans that total $6,000,000.  The interest rate
     on the line of credit is  30-day  commercial  paper  rate  plus  2.9%.  The
     interest rate on the two revolver loans is the 30-day commercial paper rate
     plus 3.15%.  The terms of the two revolving  loans are sixty months,  while
     the line of credit expired on June 30, 2000. Both facilities are secured by
     a pledge of all of the  business  assets of the Company and  guaranteed  by
     each of the three principal  officers of the Company up to $1,750,000.  The
     outstanding  principal  and  interest  balance at June 30,  2000 under the
     credit facility is $7,255,101. The loan agreements contain certain negative
     covenants  that  require  the  Company to  maintain,  among  other  things,
     specific minimum net tangible worth and maximum debt to tangible net worth.
     The  Company  has  fallen  out  of  compliance  with  two  covenants,  and,
     accordingly,  has  classified  all debt due to  Merrill  Lynch as a current
     liability.  As a result of the  default,  on June 15, 2000,  Merrill  Lynch
     elected to forbear from  exercising  its remedies  under the loan documents
     until November 30, 2000 in order to allow the Company to seek a replacement
     credit  facility.  The Forbearance  agreement  entered into between Merrill
     Lynch  and the  Company  obligates  the  Company  to pay  every two weeks a
     minimum  of  $30,000  together  with a monthly  payment  equal to 5% of the
     Company's monthly collections. Principal and interest payments are required
     to continue to be paid in  accordance  with the terms of the original  debt
     agreements.  The  agreement  further  requires  that proceeds from specific
     liquidations and collections go to Merrill Lynch to pay-down principal.  In
     addition,  the Company will pay Merrill Lynch  $250,000 on October 16, 2000
     and November  15, 2000.  The Company has reached an agreement in terms with
     two institutions that will issue replacement  facilities.  These facilities
     are expected to close in the second  quarter of Fiscal 2001,  totaling more
     than  $12,000,000.
(b)  The line of credit facility provided for borrowings up to $8,000,000;  with
     $4,500,000 of the facility to support the Company's  working capital needs,
     with a rate of interest at prime plus 1.5% and a maturity  date of November
     30, 1999; and the $3,500,000 balance, to fund new acquisitions, with a rate
     of interest  charged at prime plus 1.5% and a maturity  date of October 31,
     2001. This line of credit was fully repaid and expired during fiscal 2000.
(c)  Represent  non-negotiable  unsecured  promissory  note of $1,000,000 and an
     unsecured  demand note of $250,000;  both bearing interest rates of 12% per
     year.  The promissory note is due June 30, 2000 and the demand note is
     callable after September 15, 2000.

8. CAPITAL LEASE OBLIGATIONS
   -------------------------

The Company is the lessee of certain  equipment  under capital  leases  expiring
through 2005. The assets and liabilities under capital leases are carried at the
lower of the present value of minimum lease payments or the fair market value of
the asset. The assets are depreciated over the shorter of their estimated useful
lives or their  respective  lease terms.  Depreciation  of assets under  capital
leases is included in depreciation expense for the year ended June 30, 2000.

Minimum future lease payments under capital leases as of June 30 are as follows:
<PAGE>
                2001                            $       436,418
                2002                                    389,231
                2003                                    324,719
                2004                                    183,519
                2005                                    128,452
                                                   ------------
                                                      1,462,339
Less: Amount representing finance charges               252,861
                                                   ------------
Present Value of net minimum lease payments      $    1,209,478

Capital equipment leases have the lease rate factor (finance charge) built in to
the monthly installment and range between 8.25% to 11.7%.

9.  COMMITMENTS AND CONTINGENCIES
    -----------------------------

Leases
------

The Company is obligated under various  non-cancelable  lease agreements for the
rental of office  space  through  2009.  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,
2000:
                        2001            $       3,645,028
                        2002                    2,874,986
                        2003                    2,094,022
                        2004                    1,566,756
                        2005                      968,585
                   Thereafter                   1,381,051

                                        $      12,530,428
                                        -----------------
                                        -----------------

Rent  expense  for the  fiscal  years  ended  June 30,  2000,  1999 and 1998 was
$3,613,146, $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, 2000,  approximately $100,000 of cash is held as a
deposit requirement by the correspondent brokers.

Net Capital Requirements
------------------------

PCS and North  Ridge are subject to the SEC's  Uniform Net Capital  Rule 15c 3-1
[PCS] and 15c 3-3  [North  Ridge],  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
<PAGE>
and $25,000, respectively. At June 30, 2000, PCS and North Ridge had net capital
of  $934,720  and  $122,486,  which was  $643,168  and  $97,486 in excess of its
required net capital of $291,552 and $25,000, respectively.

Financial Instruments with Off-Balance Sheet Risk
-------------------------------------------------

In the  normal  course of  business,  PCS and North  Ridge  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  North  Ridge  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  North  Ridge  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 North Ridge 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  complainants.  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.

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
twelve years ago. The complainant (an insurance  company) 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 complainant  (former defendant to a suit
with another  insurance  company)  plus an additional  $1.8 million  payment for
which  complainant  ultimately may be held liable for payments made by the other
insurance  company.  On January 29,  1999,  the  complainant  filed a motion for
summary  judgment and on February 19, 1999, the Company filed a cross-motion for
summary judgment.  The court has not yet made a ruling on either of the motions.
However,  in October 2000,  in an action to determine  the liability  allocation
between the two insurance companies that made payments related to the automobile
accident,  the other  insurance  company  was  ordered  to pay the  complaintant
$857,000  plus  interest.  This payment  should reduce the  complainant's  total
indemnification claim against the Company to an amount less than $900,000.

In July  1999,  a lawsuit  was  initiated  against  the  Company  by  Euromarket
Advisory,  Inc.,  demanding  the  issuance of 150,000  warrants to purchase  the
Company's common stock at $5.13 per share (alleged to have been issuable under a
consulting  agreement  pursuant  to which the  consultant  was to have  provided
consulting services to the Company).  This action was settled in April 2000 in a
settlement  agreement  under which the  Company  issued an  aggregate  of 30,000
shares of the newly issued common stock of the Company.  The expense  associated
with this  settlement  had been accrued  during Fiscal 1999.

The Company is also engaged in other lawsuits in the ordinary course of business
that it believes will not have a material effect on its financial position.

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,
<PAGE>
employment taxes and other amounts might be assessed.  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,  outstanding warrants, in connection with the Initial Public
Offering in 1994, of 558,709 were registered and the  corresponding  shares sold
resulting in net proceeds of $2,563,995 to the Company.

Stock Option Agreements and Stock Option Plans
----------------------------------------------

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

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.
During Fiscal 2000, options totaling 395,998 were granted under this Option Plan
and of these options 87,833 were exercised. At June 30, 2000, all of the 816,000
options have been granted, 432,612 have been exercised and 75,223 have expired.

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"),  pursuant to which the  Company may grant  options to purchase up to an
aggregate of 300,000 shares. The Plan was approved by the Company's stockholders
on June 22, 1999,  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").

In Fiscal 2000, the Company granted options to purchase 229,877 shares under the
Plan,  with 70,123 options  remaining to be granted under this program.  None of
the shares granted are exercised or expired at June 30, 2000.

The Company charged  earnings for compensation  expense of $27,409,  $83,874 and
$52,993  for the years  ended  June 30,  2000,  1999 and 1998  respectively,  in
connection with the issuance of stock options.

The table below summarizes plan and nonplan stock option activity:
<PAGE>
                                                              Weighted
                                                              Average
                                Number of                     Exercise
                                Shares                        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

Granted                           941,205                         8.64
Exercised                         (87,833)                        4.78
Cancelled                         (85,000)                        5.13
                                -----------------
Outstanding, June 30, 2000       3,493,872                      $ 8.36
                                -----------------
                                -----------------
Exercisable, June 30, 1998         845,000                      $ 3.54
Exercisable, June 30, 1999         522,000                      $ 3.82
Exercisable, June 30, 2000       1,952,167                      $ 7.40


The weighted  average fair value of options  granted during the years ended June
30, 2000, 1999 and 1998 are $4.61, $5.72 and $5.41 per option, respectively.

Options  outstanding  and  exercisable  at June 30,  2000 and  related  weighted
average exercise price and life information follows:


                    Options Outstanding              Options Exercisable
                    ----------------------------------------------------

Fiscal Year  Shares           Price      Shares         Price   Remaining Life
Grant Date                                                         Life (Years)
-------------------------------------------------------------------------------
 1995       340,000          $ 3.50      340,000        $ 3.50        6

 1996         -                 -           -             -          -

 1997       135,500            2.75      135,500         2.75         3

 1998     1,636,667            9.43      1,476,667       8.73         7

 1999       440,500            9.26      -                -           4

 2000       941,205            8.64      -                -           4
          -----------                   -----------
 Total     3,493,872                     1,952,167
 ------===============------------------==================----------------------


The  Company  has  adopted  the  disclosure-only  provision  of  SFAS  No.  123.
<PAGE>
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:
<TABLE>
<CAPTION>
                                                                 Years ended June 30,
                                                  2000                  1999                  1998
                                                  ----                  ----                  ----
<S>                                           <C>              <C>                 <C>
Net (loss) income , as reported               $  (4,013,092)   $   2,181,143          $  2,011,345

Net loss, pro forma                              (8,217,792)      (3,506,734)             (46,191)

Net income/(loss)  per share, as reported
       Basic                                             (0.53)            0.35             0.37
       Diluted                                           (0.53)            0.32             0.32

Loss per share, pro forma (Basic & Diluted)              (1.09)           (0.51)           (0.01)

</TABLE>

The pro forma effect on net income or loss for fiscal years 2000,  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                                            6.20%

Volatility:
30-Jun-00                                               71.00%
30-Jun-99                                               74.50%
30-Jun-98                                               73.60%

Dividend yield                                              0%


Treasury Stock
--------------

During fiscal 2000, the Company  acquired  52,600 shares of its common stock for
an aggregate  cost of $257,385 and reissued  4,350 of these shares to employees.
The  re-issuance  gave rise to the  recognition of  compensation  expense in the
amount of $30,450  representing  the excess of the fair value of these shares at
re-issuance over proceeds received.

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.
<PAGE>


Stock Subscriptions Receivable and Note Receivable for Shares Sold
------------------------------------------------------------------

In fiscal 2000,  the  Company's  proceeds on stock  subscriptions  received were
$83,203.  Also,  the Company  elected to write-off the balance or $76,443 of the
remaining  outstanding  stock  subscription  receivable in fiscal 2000.  For the
years ended June 30, 2000, 1999 and 1998, the Company recognized interest income
on stock subscriptions receivable of $3,406, $10,801 and $13,546, respectively.

In fiscal 2000, an employee  exercised options for 21,000 shares at $5 per share
and  simultaneously  signed a note for  $105,000,  equal to the  total  exercise
price. The promissory note bears interest at a fixed rate of 9% per annum and is
not secured by the shares. The Company has classified the note as a reduction of
stockholders' equity while the note remains outstanding at June 30, 2000.

11.  EARNINGS (LOSS) PER SHARE
     -------------------------

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


<TABLE>
                                                        Year Ended June 30, 2000
                                                Net (Loss)          Shares          Per
                                                Income                              Share
                                                -----------------------------------------
<S>                                              <C>              <C>         <C>
Basic & Diluted EPS                              $(4,013,092)     7,552,396   $  (0.53)

                                                         Year Ended June 30, 1999
                                                 ----------------------------------------
Basic EPS                                        $ 2,181,143      6,264,228   $   0.35
Dilutive Stock options
& warrants                                                 -        653,208
                                                 ------------     ----------
Dilutive EPS                                     $ 2,181,143      6,917,436   $   0.32

                                                         Year Ended June 30, 1998
                                                 ----------------------------------------

Basic EPS                                        $ 2,011,345      5,383,093   $   0.37
Dilutive Stock options
& warrants                                                 -        932,252
                                                 ------------    -----------
Dilutive EPS                                     $ 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, 2000                         1,952,167
        Year Ended June 30, 1999                           520,000
        Year Ended June 30, 1998                           675,000

12. RELATED PARTY TRANSACTIONS
    --------------------------

Refer to Receivables from Officers (note 4) for more related party transactions.
<PAGE>
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.

Professional Fees
-----------------

During Fiscal 2000,  1999 and 1998,  professional  firms related to officers and
directors  of the  Company  charged  the  Company  fees  totaling  approximately
$166,000, $440,000 and $200,000, respectively.

13. SEGMENTS OF BUSINESS
    --------------------

The  Company's  reportable  segments  are  strategic  business  units that offer
different  product and services or are managed  separately  because the business
requires different  technology and marketing  strategies.  The Company has three
reportable  segments:  income tax preparation,  financial  planning services and
e1040.com.

Income tax preparation is  predominantly  a seasonal  business that focuses on a
broad marketing program in a face to face fashion.  Financial  planning services
is a year-round  business with a targeted marketing strategy that is serviced by
registered representatives dealing in a highly regulated environment.  e1040.com
is an online tax  preparation  service  that  resides  in an on-line  technology
platform and requires consistent monitoring of software, systems and strategies,
however, provides the service to the clients in an on-line fashion.

The accounting  policies of the segments are the same as those  described in the
summary of  accounting  policies.  The Company  evaluates  performance  based on
operating earnings of the respective business segments.


<PAGE>

<TABLE>
<CAPTION>
 SEGMENT REPORTING:
                                                Financial
                                Tax Preparation Planning        e1040.com  Elimination's   Consolidation
                                --------------- ------------  ------------ -------------   ----------------
<S>                             <C>            <C>             <C>                            <C>
 Year ended June 30, 2000
         Revenues               $ 17,154,592   $ 71,267,262    $ 1,156,640                    $ 89,578,494
                                -------------  -------------  -------------                 ---------------
 Direct Costs                     10,175,668     54,166,134      5,916,434                      70,258,236
 Depreciation and Amortization       491,830      1,894,616        128,562                       2,515,008
 General Corporate Expenses        5,390,603     15,875,904      1,135,308                      22,401,815
                                -------------  -------------  ------------- -------------   ---------------
         Operating Income (loss)   1,096,491       (669,392)    (6,023,664)                     (5,596,565)
                                -------------  -------------  ------------- -------------   ---------------
 Interest Expense                    241,155        494,207        194,773                         930,135
 Identifiable assets              18,475,738     52,744,783     (6,338,016)  (20,977,327)       43,905,178
 Capital expenditures                990,034        299,903        248,227                       1,538,164

 Direct costs consist of the following:
         Advertising               1,910,429      2,538,953      5,177,934                       9,627,316
         Rent                      1,203,240      2,357,180         52,726                       3,613,146
         Salaries and commissions  7,062,000     49,270,000        685,774                      57,017,774
                                -------------  -------------  ------------- -------------   ---------------
         Total Direct Costs       10,175,668     54,166,134      5,916,434                      70,258,236
                                -------------  -------------  ------------- -------------   ---------------


 Year ended June 30, 1999
         Revenues               $ 14,102,364   $ 36,137,861      $ 203,180                    $ 50,443,405
                                -------------  -------------  -------------                 ---------------
 Direct Costs                      6,929,524     25,550,995        472,559                      32,953,078
 Depreciation and Amortization       293,386      1,148,002         27,088                       1,468,476
 General Corporate Expenses        2,487,227     10,237,422        248,067                      12,972,716
                                -------------  -------------  ------------- -------------   ---------------
         Operating Income (loss)   4,392,227       (798,558)      (544,534)                      3,049,135
                                -------------  -------------  ------------- -------------   ---------------
 Interest Expense                     73,050        207,911              -                         280,961
 Identifiable assets              13,708,608     40,653,346       (280,535)  (21,082,439)       32,998,980
 Capital expenditures                686,433         29,915         13,064                         729,412

 Direct costs consist of the following:
         Advertising               1,001,804      2,861,776        100,060                       3,963,640
         Rent                        652,631      1,827,435         15,836                       2,495,902
         Salaries and commissions  4,673,436     20,861,784        356,663                      25,891,883
                                -------------  -------------  ------------- -------------   ---------------
         Total Direct Costs        6,327,871     25,550,995        472,559                      32,351,425
                                -------------  -------------  ------------- -------------   ---------------

 Year ended June 30, 1998
         Revenues               $ 11,955,051   $ 16,578,032                                   $ 28,533,083
                                -------------  -------------                                ---------------
 Direct Costs                      7,792,130      9,868,394                                     17,660,524
 Depreciation and Amortization       350,289        508,102                                        858,391
 General Corporate Expenses        2,650,936      3,960,564                                      6,611,500
                                -------------  -------------  ------------- -------------   ---------------
         Operating Income (loss)   1,161,696      2,240,972                                      3,402,668
                                -------------  -------------  ------------- -------------   ---------------
 Interest Expense                     89,207         86,329                                        175,536
 Identifiable assets               6,838,548      6,043,903                   (3,131,264)        9,751,187
 Capital expenditures                852,797              -                                        852,797

 Direct costs consist of the following:
         Advertising               2,171,311      1,332,030                                      3,503,341
         Rent                        818,481      1,218,636                                      2,037,117
         Salaries and commissions  4,802,338      7,317,728                                     12,120,066
                                -------------  -------------  ------------- -------------   ---------------
         Total Direct Costs        7,792,130      9,868,394                                     17,660,524
                                -------------  -------------  ------------- -------------   ---------------
</TABLE>
<PAGE>
14. TAXES ON INCOME
    ---------------
The  provisions  for income  taxes and income tax  benefits in the  consolidated
financial statements for the June, 30 fiscal years consist of the following:
<TABLE>
<CAPTION>

                                                                  2000                    1999                   1998
                                                             ----------------        ---------------        ---------------
<S>                                                       <C>                     <C>                    <C>
Federal                                                         $ (1,945,000)           $ 1,292,165            $ 1,247,828
State and local                                                      275,000                269,835                282,982
                                                             ----------------        ---------------        ---------------
           Total current tax (benefit) provision                  (1,670,000)             1,562,000              1,530,810
                                                             ----------------        ---------------        ---------------

Deferred:
Federal                                                               11,000                (34,734)               (90,304)
State and local                                                     (488,000)                (7,266)               (33,696)
                                                             ----------------        ---------------        ---------------
           Total deferred tax (benefit) provision                   (477,000)               (42,000)              (124,000)
                                                             ----------------        ---------------        ---------------
Total income tax (benefit) provision                            $ (2,147,000)           $ 1,520,000            $ 1,406,810
                                                             ================        ===============        ===============

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

                                                                  2000                    1999                   1998
                                                             ----------------        ---------------        ---------------
Compensation expense recognized for financial reporting
purposes in connection with common stock option grants             $ 163,000             $  152,000              $ 114,400
Book amortization of intangibles in excess of tax                    274,000                225,000                144,400
Provision for bad debts                                               36,000                 36,000                 75,200
Provision for deferred rent liability                                             -         (15,000)                27,600
Tax depreciation in excess of book                                  (175,000)              (157,000)              (146,717)
Investments in marketable securities                                        -                10,000                      -
Software development costs                                           (96,000)                     -                      -
Investments accounted for under equity method                        (23,000)               (58,000)               (62,984)
Net operating loss carryforwards for state tax purposes              491,000
                                                             ----------------        ---------------        ---------------
Total deferred tax assets-net                                      $ 670,000              $ 193,000              $ 151,899
                                                             ================        ===============        ===============
</TABLE>



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

The net operating  loss is being carried back for federal income tax purposes to
the two preceding tax years to offset taxable income for those years. The timing
of the  utilization of state net operating  losses being carried  forward may be
impacted  if there has been a change in  ownership  of the  company  pursuant to
Internal  Revenue  Code section 382.  The income tax  receivable  of  $3,134,824
consist of approximately $1,945,000 of federal refunds due to the NOL carryback,
$571,000 of 1998 federal and state refunds and $619,000 of overpayments.

The  reconciliations  of the federal  statutory rate to the provision for income
taxes and income tax benefits are as follows:

<TABLE>
<CAPTION>

Year ended June 30:                                               2000                    1999                   1998
                                                             ----------------        ---------------        ---------------

<S>                                                             <C>           <C>       <C>          <C>       <C>          <C>
Federal income taxes (benefit) computed at statutory rates      $ (2,094,000) -34.0%   $ 1,257,000   34.0%     $ 1,162,173   34.0%
State and local taxes (benefit), net of federal tax benefit         (141,000)  -2.2%       241,000     6.5%        205,089    6.0%
Amortization of intangible assets with no benefit                    254,000    4.1%       145,000     3.9%              -    0.0%
AMT credit utilized and not previously benefitted                    (172,000) -2.8%
Other                                                                   6,000   0.0%      (123,000)   -3.3%          39,548   1.2%
                                                             ----------------        ---------------        ---------------
Total income tax (benefit)/provision                            $ (2,147,000) -34.9%     $ 1,520,000  41.1%     $ 1,406,810  41.2%
                                                             ================        ===============        ===============

</TABLE>