GILMAN + CIOCIA, INC.
1311 Mamaroneck Avenue
White Plains, NY 10605

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 14, 2001

To the Stockholders
of Gilman + Ciocia, Inc.:

NOTICE IS GIVEN that the 2000 and 2001 Annual Meeting of Stockholders
of Gilman + Ciocia, Inc., a Delaware corporation (the "Company"), will be held
at 10:30 a.m. local time, on December 14, 2001 at the Company's offices located
at 1311 Mamaroneck Avenue, White Plains, NY 10605 for the following purposes:

1. To elect two Class C members and one Class A member of the Company's
Board of Directors;

2. To ratify the 2001 Joint Incentive and Non Qualified Stock Option Plan
of the Company;

3. To ratify the reappointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the Fiscal Year ending
June 30, 2002; and

4. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on November 2, 2001 as
the record date for determining those stockholders entitled to notice of, and to
vote at, the Annual Meeting. You, as a stockholder of the Company, may examine a
list of stockholders entitled to vote at the Annual Meeting at the offices of
the Company situated at 1311 Mamaroneck Avenue, White Plains, NY 10605 during
the ten-day period preceding the Annual Meeting.

By order of the Board of Directors,

Kathryn Travis
Secretary

White Plains, New York
November 15, 2001
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THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY FORM AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY FORM MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY, AND VOTE THEIR SHARES IN PERSON. YOUR BOARD RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE NOMINEES FOR DIRECTORS AND FOR THE OTHER PROPOSALS TO
BE CONSIDERED AT THE ANNUAL MEETING.
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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.)

Filed by the Registrant x
-----
Filed by a Party other than the Registrant ___

Check the appropriate box:
___ Preliminary Proxy Statement ___ Confidential, For Use of the Commission Only
(as permitted by rule 14a-6(e)(2))
x Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Under Rule 14a-12

Gilman + Ciocia, Inc.
_________________________________
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
- ----
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1)
Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
___ Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
___ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
________________________________________________________________________________
(4)Date Filed:
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GILMAN + CIOCIA, INC.
1311 Mamaroneck Avenue
White Plains, NY 10605

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 14, 2001

Gilman + Ciocia, Inc., a Delaware corporation (the "Company") is
furnishing to you this Proxy Statement in connection with the solicitation by
the Board of Directors of proxies from the holders of the Company's Common
Stock, $.01 par value per share (the "Common Stock"), for use at the 2000 and
2001 Annual Meeting of Stockholders of the Company to be held at 10:30 a.m.
local time, December 14, 2001 at the Company's offices located at 1311
Mamaroneck Avenue, White Plains, NY 10605 or at any adjournment(s) or
postponement(s) of such meeting (the "Meeting"). Notice of the Meeting is
enclosed with this Proxy Statement. The approximate date that the Company is
first mailing this Proxy Statement and the enclosed form of Proxy to holders of
Common Stock is November 19, 2001. You, as a stockholder, should review the
information provided herein in conjunction with the Company's 2001 Annual Report
to Stockholders for the fiscal year ended June 30, 2001, which accompanies this
Proxy Statement.

INFORMATION CONCERNING PROXY

The Company's Board of Directors is soliciting your proxy. The giving
of a proxy does not preclude your right to vote in person should you desire. If
you execute and deliver a proxy, you may revoke it at any time prior to its use
by (1) giving written notice of such revocation to the Company, care of the
Secretary, Kathryn Travis, 1311 Mamaroneck Avenue, White Plains, NY 10605; (2)
executing and delivering a proxy bearing a later date to the Secretary of the
Company; or (3) appearing at the Meeting and voting in person.

The Company will bear the cost of preparing, assembling and mailing
this Proxy Statement, the Notice of Annual Meeting of Stockholders and the
enclosed proxy. In addition to the use of mail, employees of the Company may
solicit proxies by telephone, telegram or personal interview. The Company's
employees will receive no compensation for soliciting proxies other than their
regular salaries. The Company has also engaged the services of Corporate Stock
Transfer, Inc. to assist in the tabulation of proxies.

PURPOSES OF THE MEETING

At the Meeting, the Company's stockholders will consider and vote upon the
following matters:

1. Election of two Class C members and one Class A member of the Company's
Board of Directors;

2. Ratification of the 2001 Joint Incentive and Non-Qualified Stock Option
Plan of the Company;

3. Ratification of the reappointment of Arthur Andersen LLP as the Company's
independent certified public accountants for the Fiscal Year ending
June 30, 2002; and

4. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements.

Unless you indicate contrary instructions on the enclosed proxy, the
officers designated on the enclosed proxy will vote all shares represented by
valid proxies that have not been revoked (in accordance with the procedures set
forth above) (a) for the election of the three nominees for director named
below, and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event that you specify a different choice by means of the
enclosed proxy, the designated proxies will vote your shares in accordance with
the specification you make.

OUTSTANDING SHARES AND VOTING RIGHTS

The Board of Directors has set the close of business on November 2,
2001 as the record date (the "Record Date") for determining the stockholders of
the Company entitled to notice of and to vote at the Meeting. As of the Record
Date, 8,382,646 shares of Common Stock were issued and outstanding, all of which
are entitled to be voted at the Meeting. Each share of Common Stock is entitled
to one vote on all matters at the Meeting, and neither the Company's Certificate
of Incorporation nor its Bylaws provides for cumulative voting rights.

The attendance, in person or by proxy, of the holders of a majority of
the Common Stock shares entitled to vote at the Meeting is necessary to
constitute a quorum. The affirmative vote of a plurality of Common Stock shares
present and voting at the Meeting is required for the election of Directors. The
affirmative vote of a majority of the outstanding shares of Common Stock present
and voting at the Meeting is required to pass upon the proposal to approve the
2001 Joint Incentive and Non Qualified Stock Option Plan, and to ratify and
approve the reappointment of Arthur Andersen LLP as independent certified public
accountants. Abstentions and broker non-votes (defined in this paragraph) will
be counted as present for determining the presence of a quorum. For the purpose
of determining the vote required for approval of matters at the Meeting, shares
held by stockholders who abstain from voting will be treated as being "present"
and "entitled to vote" on the matter, and, therefore, an abstention has the same
legal effect as a vote against the matter. However, in the case of a broker
non-vote or where a stockholder withholds authority from his proxy to vote the
proxy as to a particular matter, such shares will not be treated as "present" or
"entitled to vote" on the matter, and, therefore, a broker non-vote or the
withholding of a proxy's authority will have no effect on the outcome of the
vote on the matter. A "broker non-vote" refers to Common Stock shares
represented at the Meeting in person or by proxy by a broker or nominee where
such broker or nominee (1) has not received voting instructions on a particular
matter from the beneficial owners or persons entitled to vote and (2) the broker
or nominee does not have discretionary voting power on such matter.

As of the Record Date, the Company's Directors owned in the aggregate
2,624,909 shares of Common Stock constituting approximately 30.1% of the
outstanding shares of Common Stock entitled to vote at the Meeting. The
directors have advised the Company that they intend to vote all of their shares
in favor of each of the proposals to be presented at the Meeting.

If you wish to vote shares beneficially owned by you in person at the
Meeting, and such shares are held in a brokerage account, then you must obtain a
proxy from your broker and your broker must obtain a proxy from the trust
company or other registered holder of your shares. You must make sure that both
of such proxies are delivered to the Company at or prior to the Meeting.

Security Ownership of Certain Beneficial Owners

The following table sets forth, as of October 1, 2001, to the extent
known to the Company, certain information regarding the ownership of the
Company's Common Stock by (i) each person who is known by the Company to own of
record or beneficially more than five percent of the Company's Common Stock,
(ii) each of the Company's directors and executive officers and (iii) all
directors and executive officers as a group.

Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock. For each
individual or group included in the table, percentage ownership is calculated by
dividing the number of shares beneficially owned by such person or group as
described above by the sum of the 8,382,646 shares of Common Stock outstanding
on October 1, 2001 and the number of shares of Common Stock that such person or
group had the right to acquire on October 1, 2001, including, but not limited
to, upon the exercise of options.

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

Thomas Povinelli 1,119,446 (1) 13%
1311 Mamaroneck Avenue
White Plains, NY 10605

James Ciocia 996,156 (2) 11%
1311 Mamaroneck Avenue
White Plains, NY 10605

Michael P. Ryan
11 Raymond Avenue
Poughkeepsie, NY 12603 800,704 (3) 9%

Prime Financial Services, Inc. (New York)
11 Raymond Avenue
Poughkeepsie, NY 12603 794,304 (3) 9%

Steven Gilbert
1311 Mamaroneck Avenue
White Plains, NY 10605 706,220 (4) 8%

Kathryn Travis
1311 Mamaroneck Avenue
White Plains, NY 10605 413,411 (5) 5%

Seth A. Akabas
488 Madison Avenue
New York, NY 10022 9,065 (6) *

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

Doreen M. Biebusch
31 Milk Street
Boston, MA 02109 2,907 *

All directors and officers
as a group (7 persons) 3,344,869 (1) (2) (3) (5) (6) 38%

* Less than 1%

(1) Includes 10,000, 60,000 and 830 shares issuable upon the
exercise of currently exercisable options at a price
of $2.75, $9.50 and $10.124, respectively. Does not include
691 shares issuable upon the exercise of the
options that do not vest until 2002.

(2) Includes 10,000, 60,000 and 1,470 shares issuable upon or
currently exercisable options at a price of $2.75, $9.50 and
$10.125 per share, respectively. Does not include 1,038 shares
issuable upon the exercise of options that do not vest until
2002.

(3) 6,000 shares are owned by Mr. Ryan personally, 400 shares
owned jointly with his wife and 794,304 shares are owned
by Prime Financial Services, Inc. (New York) and affiliates.
Mr. Ryan owns fifty (50%) percent of the capital stock of
Prime Financial Services, Inc. (New York).

(4) 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, 75,000
shares, 12,310 shares and 9,910 shares issuable upon exercise
of options at $3.50, $4.75, $13.75, $10.125 and $9.8125,
respectively. Does not include 50,839 shares and 70,000 shares
issuable upon the exercise of options that do not vest until
2002 and 2003, respectively.

(5) Includes 10,000, 30,000 and 340 shares issuable upon the
exercise of currently exercisable options at a price of $2.75,
$9.50 and $10.125, respectively.

(6) Includes 8,061 shares owned by the law firm of Akabas & Cohen
of which Mr. Akabas is a partner.

ITEM I.

ELECTION OF DIRECTORS

Nominees

The Company's Bylaws provide that the number of directors constituting
the Company's Board of Directors shall be fixed by the Board of Directors,
provided that the number of directors shall not be fewer than one nor more than
ten. Each director elected at the Meeting will serve until his or her term
expires and until his or her successor has been duly elected and qualified. The
Board of Directors of the Company has nominated Thomas Povinelli, Kathryn
Travis, and Doreen M. Biebusch for election as directors, and your proxy will be
voted for them absent contrary instructions.

The Board of Directors is divided into three classes: Class A, Class B
and Class C. Each class comprises a number of directors as equal in number as
possible as the other classes. Each class generally serves three years with
terms of office of the respective classes expiring in successive years. The
Board of Directors has nominated Thomas Povinelli and Kathryn Travis to stand as
Class C directors. Class C directors elected in 2001 will serve terms of three
years, and, in each case, until his or her successor shall be duly elected and
qualified or until his or her earlier death, resignation or removal. The Board
of Directors has nominated Doreen M. Biebusch to stand as a Class A director.
The term of Class A directors expires in 2002.

Vacancies on the Board of Directors which occur during the year may be
filled by the Board of Directors for the remainder of the full term.

The Board of Directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for director is unable to accept election or if any other unforeseen
contingency arises, proxies will be voted for the remaining nominees, if any,
and for such other person as may be designated by the Board of Directors, unless
a proxy directs otherwise.

Information concerning the nominees for election as directors is as
follows:

Thomas Povinelli
Mr. Povinelli began his tenure with the Company as an accountant in
1983, and he served as Chief Operating Officer from November 1984 to November 6,
2000. On November 6, 2000, Mr. Povinelli was appointed as the Company's Chief
Executive Officer. Mr. Povinelli is also a registered representative of Prime.
Mr. Povinelli holds a B.S. in Accounting from Iona College.

Kathryn Travis
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 supervises all e1040.com tax preparation personnel, and she
is a registered representative of Prime. Ms. Travis holds a B.A. in Mathematics
from the College of New Rochelle.

Doreen M. Biebusch
Ms. Biebusch has twenty years of financial and managerial experience.
From 1997 to 2000, Ms. Biebusch served as the Chief Financial Officer for AEGIS,
an international real estate and private equity investment advisor. Prior to
joining AEGIS, Ms. Biebusch worked at Aldrich Eastman Waltch ("AEW"), an
institutional investment management firm, from 1986 to 1997 and as the Chief
Financial Officer for that organization from 1992 to 1996. In her tenure at AEW,
Ms. Biebusch was the Portfolio Controller for a $1 billion real estate
partnership, developing a solid foundation in asset management, performance
measurement and client service. From 1981 to 1988, Ms. Biebusch was a senior
audit manager at KPMG. Ms. Biebusch is a CPA, and her professional affiliations
include being a member of the American Institute of Certified Public Accountants
and the Financial Executive Institute. Ms. Biebusch holds a Master of Business
Administration degree from Babson College and a Bachelor of Arts degree in
English from Skidmore College.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR ALL NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS.

Meetings and Committees of the Board of Directors

During the Fiscal Year ended June 30, 2001, the Company's Board of
Directors met one time and acted 33 times by a unanimous written consent in lieu
of a meeting.

AUDIT FEES. The Company incurred professional fees of $260,770 from
Arthur Andersen LLP, its principal auditors, related to the audit of the
Company's financial statements as of and for the year ended June 30, 2001 and
the review of the Company's quarterly financial statements for the Fiscal Year
2001.

ALL OTHER FEES. The Company incurred professional fees of $53,250 from
Arthur Andersen LLP, its principal auditors, related to other services during
Fiscal Year 2001. The Company did not incur any fees from Arthur Anderson, LLP
relating to computer software and hardware consulting for information
technology.

There are three Committees of the Board of Directors of the Company.
They are as follows:

1) The Audit Committee:
AUDIT MATTERS

Gilman + Ciocia, Inc. Audit Committee Report

The Company's Audit Committee has determined that the non-audit
services provided by the Company's auditors in the Fiscal Year ended June 30,
2001 were compatible with the auditors' independence.

The Audit Committee is composed of Doreen M. Biebusch, Louis P. Karol
and Seth A. Akabas. The Audit Committee, which met four times during the Fiscal
Year ended June 30, 2001, reviews and acts or reports to the Board with respect
to various auditing and accounting matters, including the selection of the
Company's independent auditors, the accounting and financial practices and
controls of the Company, audit procedures and findings, and the nature of
services performed for the Company by, and the fees paid to, the independent
auditors. For a further description on the role of the Audit Committee, see the
Audit Committee Charter annexed hereto as Exhibit A.

The Company's Audit Committee reviewed the Company's consolidated
financial statements with management and the Company's independent accountants.
The Audit Committee received management's representation and the opinion of the
independent accountants that the Company's consolidated financial statements
were prepared in accordance with generally accepted accounting principles. The
Company's Audit Committee also discussed with the Company's independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees).

The Company's independent accountants provided the Company's Audit
Committee with the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Company's Audit Committee discussed with the independent accountants the
independence of their firm.

Based upon such review and discussions, the Audit Committee recommended
that the Board include the audited consolidated financial statements in the
Company's Annual Report on the Form 10-K for the year ended June 30, 2001 filed
with the Securities and Exchange Commission.

THE GILMAN + CIOCIA, INC. AUDIT COMMITTEE

Doreen M. Biebusch
Louis P. Karol
Seth A. Akabas

2) The Compensation Committee is composed of Doreen M. Biebusch, Louis
P. Karol and Seth A. Akabas, and determines appropriate compensation for senior
executives of the Company. It was recently formed and did not meet during the
fiscal year ended June 30, 2001. The Committee is formalizing a program for
Fiscal 2002.

3) The Executive Committee is composed of Thomas Povinelli, Michael P.
Ryan, and Doreen M. Biebusch. The Company's Chief Financial Officer, David D.
Puyear, attends its meetings ex officio. This Committee was recently formed and
did not meet during Fiscal 2001.
Executive Officers and Directors

The executive officers and directors of the Company are as follows:

Executive
Officer or
Director
Name Age Position Since
- ----- --- --------- ----------

James Ciocia 44 Chairman of the Board 11/81
and Director

Thomas Povinelli 41 Chief Executive Officer, 11/84
President and Director

Michael P. Ryan 43 Chief Operating Officer, Director and
President of Prime Capital Services, Inc. 7/99

Kathryn Travis 52 Secretary, Vice President
and Director 11/89

David D. Puyear 37 Chief Financial Officer 7/00

Seth A. Akabas 45 Director 4/95

Louis P. Karol 42 Director 4/95

Doreen M. Biebusch 44 Director 10/00

For further information about the nominees for Director of the Company,
see "Nominees" above.

Executive Compensation:

Summary Compensation Table

Other Other
Annual Underlying
Name and Principal Position Year Salary Loans* Compensation Options
- --------------------------- ---- -------- ------ -------------- -----------
James Ciocia 1999 $190,000 $0 $15,266 (1) 60,000
Chairman of the Board 2000 $367,754 $314,809 $16,455 (3) 0
2001 $436,712 $0 $6,694 (1) 0

Thomas Povinelli 1999 $190,000 $0 $0 60,000
Chief Executive Officer, 2000 $365,384 $311,066 $4,596 0
President and Director 2001 $358,366 $0 $7,200 (1) 0

Kathryn Travis 1999 $135,000 $0 $10,758 (1) 30,000
Secretary, Vice President 2000 $154,230 $118,030 $10,758 (1) 0
and Director 2001 $313,712 $0 $9,269 (1) 0

Michael P. Ryan (4)
Chief Operating Officer, 1999 $60,000 $0 $2,400 (1) 0
President and Director of 2000 $240,000 $0 $226,197 (5) 0
Prime Capital Services, Inc. 2001 $350,000 $0 $9,600 (1) 250,000

David D. Puyear
Chief Financial Officer 2001 $209,100 $0 $0 200,000

Stephen B. Sacher 1999 $80,000 $0 $120,000(2) 15,000 (6)
Former Chief Financial 2000 $250,741 $0 $34,930 (2) 0
Officer and Treasurer 2001 $142,999 $0 $137,654 (2) 0

* Represents loans taken in previous years that were being applied to the
individual's W-2 statement for Fiscal Year 2000.

(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, 2001.
(5) Includes $216,597 paid as bonus compensation and $9,600 paid
as auto expense.
(6) Cancelled upon termination of employment from the firm in
2001.

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 currently receive no compensation for
serving as a director of the Company. In the future, directors will be paid
compensation.

Option Grants

The following table sets forth information regarding options
to purchase shares of Common Stock granted to the named executive officers
during Fiscal 2001.

OPTION GRANTS IN FISCAL 2001

Individual Grants

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

Number of Percent of Total Base
Securities Options/SARSs Granted Price Expiration (1) (2) (1) (2)
Underlying to Employees in Fiscal ($/sh) Date
Options/ Year
SARSs Granted
Name
- ---------------------------------- ---------------- ------------------------ ----------- ------------- --------- -------------
- ---------------------------------- ---------------- ------------------------ ----------- ------------- --------- -------------

Michael P. Ryan (1) 250,000 14.5% $6.00 3/31/11 (1) (1)
- ---------------------------------- ---------------- ------------------------ ----------- ------------- --------- -------------
- ---------------------------------- ---------------- ------------------------ ----------- ------------- --------- -------------

David D. Puyear (2) 200,000 11.6% $7.25 3/31/11 (2) (2)
- ---------------------------------- ---------------- ------------------------ ----------- ------------- --------- -------------

(1) The options were granted on 3/31/01 and have a present value of $718,860.
The value at the end of the ten-year term, at a 5% and 10% compounded annual
rate of increase in the market price of the Common Stock, would be $727,159 and
$1,499,015, respectively.

(2) The options were granted on 3/31/01 and have a present value of $551,896.
The value at the end of the ten-year term, at a 5% and 10% compounded annual
rate of increase in the market price of the Common Stock, would be $56,728 and
$949,212, respectively.

ITEM II.

2001 JOINT INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
OF GILMAN + CIOCIA, INC.

On October 17, 2001, the Board of Directors of the Company adopted the
Company's 2001 Joint Incentive and Non-Qualified Stock Option Plan (the "Plan").
The Plan will not become effective, however, with respect to incentive options,
unless approved by the holders of a majority of the shares of Common Stock
present or represented and voting thereon at the Meeting. Exhibit B to this
proxy statement contains the text of the Plan.

The Board of Directors believes that a stock option program would be of
material benefit to the Company and that it would enable the Company to attract
and retain key employees, directors, consultants and other individuals providing
services to the Company and its subsidiaries. The Board of Directors also
believes that the best interests of the Company and its stockholders require
that the Company be able to offer options to present and prospective personnel.

The Company has two existing stock option plans, but options to
purchase only 306,377 shares are available for the Company to grant under the
existing two plans. Under the proposed Plan, the Company may grant options to
purchase up to 1,250,000 shares of Common Stock, $.01 par value, 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"). Under the proposed Plan, the Company
will re-grant to Michael P. Ryan, a director and the Chief Operating Officer of
the Company, and David D. Puyear, the Company's Chief Financial Officer, as
incentive options previously granted non-qualified options as follows. Michael
P. Ryan has options to acquire 250,000 shares of Common Stock at a price of
$6.00/share, however 250,000 are not currently exercisable. The options were
granted on March 31, 2001 and expire on March 31, 2011. David D. Puyear has
options to acquire 200,000 shares of Common Stock at a price of $7.25/share,
however, 100,000 are not currently exercisable. The options were granted on
March 31, 2001 and expire on March 31, 2011. The options to be re-granted under
the Plan will be identical to existing options and the existing options will be
cancelled. Therefore, the Plan will enable the Company to grant additional
options (other than those previously granted) to purchase 800,000 shares.

The Compensation Committee ("the Committee") of the Board of Directors
will administer the Plan, unless the Board of Directors specifies otherwise. The
Committee is made up of at least two non-employee directors, 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 Committee will select the persons who are to receive options and the number
of shares to be subject to each option. In selecting individuals for options and
determining the terms, the Committee 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 Committee, which may not exceed ten years from the date of grant. Options
may be made exercisable immediately or in installments, as determined by the
Committee.

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

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

Shares under the Plan may be granted to any person, including but not
limited to employees, directors, independent agents and consultants who, the
Committee believes, has contributed, or will contribute to the success of the
Company. In determining the persons to whom Shares shall be granted and the
number of shares issued to such person, the Committee may take into account the
nature of the services rendered by the respective persons, his or her present
and potential contribution to the success of the Company and such other factors
as the Committee, in its sole discretion, shall deem relevant.

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

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

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

THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR APPROVAL OF THE 2001 JOINT INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN.

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

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

Value of Unexercised
In-The-Money Options
Number of Securities Fiscal Year June 30,
Underlying Unexercised 2001 (1)
Shares Acquired on Exercise Value Options at Fiscal-Year Exercisable/Unexer-
Name (#) Realized ($) June 30, 2001 cisable
Exercisable/Unexercisable
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

James Ciocia 71,470/1,038 $1,700/--
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

Thomas Povinelli 70,830/1,231 $1,700/--
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

Kathryn Travis 40,340/-- $1,700/--
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

Michael P. Ryan --/250,000 $--/--
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

David D. Puyear --/200,000 $--/--
- --------------------- ----------------------------- -------------- ---------------------------- -------------------------

(1) At the Company's Fiscal year-end, 6/30/01, the fair market value of the
underlying securities was $2.92 per share.

Indemnification

The Company's Certificate of Incorporation eliminates or limits the
personal financial liability of the Company's directors, except where there has
been a breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or knowing violation of the law. In addition, the Company's By-laws
include provisions to indemnify its officers and directors and other persons
against expenses, judgments, fines and amounts paid in settlement in connection
with threatened, pending or completed suits or proceedings against such persons
by reason of serving or having served as officers, directors or in other
capacities, except when they have acted not in good faith, unlawfully or not in
the best interest of the Company.

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

FIVE YEAR STOCKHOLDER RETURN COMPARISON

PERFORMANCE GRAPH

The graph on this page sets forth for the five-year period ended June
30, 2001, the cumulative total stockholder return to the Company's stockholders,
as well as the cumulative total return of the Standard & Poor's 500 Stock Index
and the cumulative total return of the Standard & Poor's Companies in Service
(Commercial & Consumer) Index, the published industry index to which the Company
is currently assigned by Standard & Poor's. The performance graph assumes that
$100 was invested at the market close on June 30, 1996. The data for the graph
was furnished by Standard & Poor's Compustat Custom Business Unit, a division of
The McGraw-Hill Companies. The Company has been advised that the Standard &
Poor's Service (Commercial & Consumer) Group consists of five corporations,
including the Company.

TOTAL RETURN TO STOCKHOLDERS
INDEXED RETURNS
Years Ending

BASE PERIOD
COMPANY / INDEX 6/30/96 06/30/97 06/30/98 6/30/99 6/30/00 6/30/01

GILMAN + CIOCIA, INC. 100.00 33.67 295.92 150.00 75.51 47.67
SERVICE (COMMERCIAL&CONSUMER) 100.00 103.60 107.86 96.12 65.37 86.77
S&P 500 INDEX 100.00 134.70 175.33 215.22 230.83 196.59

[OBJECT OMITTED]

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
the Company's Common Stock, to file with the SEC initial reports of ownership
and reports of changes in ownership of Common Stock. The SEC requires such
officers, directors and greater than 10% stockholders to furnish to the Company
copies of all forms that they file under Section 16(a).

To the Company's knowledge, based solely on review of the copies of
such forms furnished to the Company and representations that no other reports
were required, during the fiscal year ended June 30, 2001, the Company's
officers, directors and greater than 10% stockholders complied with all Section
16(a) filing requirements.

Certain Relationships and Related Transactions

a) Transactions With Management

The four principal stockholders, Messrs, Ciocia, Povinelli and Ryan and
Ms. Travis personally guaranteed the repayment of the Company's loan from EAB.
Additionally, Messrs. Ciocia, Povinelli and Ryan have personally guaranteed the
repayment of the Company's loan from Travelers. Such stockholders received no
consideration for such guarantees other than their salaries and other
compensation.

Seth A. Akabas is a partner in the law firm of Akabas & Cohen and also
a director of the Company. Akabas & Cohen charged the Company $217,325 and was
paid $104,007 in Fiscal 2001 for legal services. Akabas & Cohen continues to
provide legal services in Fiscal 2002.

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

In January 2001, the Company borrowed $250,000 from Doreen M. Biebusch
and has repaid $100,000 as of June 30, 2001. Interest is accrued at a rate of
18% through April 15, 2001 and was increased to 22% after April 15, 2001. In
addition, Ms. Biebusch charged the Company $28,563 in Fiscal 2001 for consulting
fees.

In October 1995, the Company loaned to Steven Gilbert, a stockholder of
the Company, $100,000, with interest charged at 9% per annum. The Company
received payments in Fiscal 2000 of $94,062 with a remaining balance at June 30,
2000 of $35,927. During Fiscal 2001, the remaining balance was paid in full,
therefore, leaving a zero balance at June 30, 2001.

In addition, the Company advanced funds to Dominic Ciocia, the brother
of the Company's Chairman. The note receivable including accrued interest was at
a maximum of $118,000 with interest charged at 6% per annum. During Fiscal 2001,
the remaining balance was paid in full, therefore, leaving a zero balance at
June 30, 2001.

(b) Certain Business Relationships

From time to time the Company employed the professional services of
Sacher & Co. P.C. The President of Sacher & Co. P.C. is the former Chief
Financial Officer of the Company. The amounts paid to Mr. Sacher in this
capacity are set forth above in "Executive Compensation." Mr. Sacher no longer
works as an employee or officer of the Company.

During Fiscal 1999, the Company made loans of $302,066 to Mr.
Povinelli, $339,877 to Mr. Ciocia and $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. 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"). As of
June 30, 2000 the Company had advanced further funds, and the balances were
$101,544 for Mr. Povinelli, $198,237 for Mr. Ciocia and $0 for Ms. Travis.
During Fiscal 2001, Mr. Povinelli reduced his loan balance by $100,144 to $1,400
as of June 30, 2001. Mr. Ciocia reduced his loan balance by $106,283 to $91,954
as of June 30, 2001. Each of such individuals has pledged certain shares of his
or her stock in the Company as collateral for these loans.

ITEM III.

PROPOSAL TO RATIFY THE REAPPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors of the Company has selected Arthur Andersen LLP
to serve as independent certified public accountants for the Company for the
Fiscal Year ending June 30, 2002. The firm of Arthur Andersen LLP, independent
certified public accountants, has been the Company's auditors since 1997.
Although the Board of Directors is not required to submit its selection of
auditors for ratification at the Meeting, the Board of Directors is submitting
such selection to ascertain the views of stockholders. If the selection is not
ratified, the Board of Directors will reconsider its selection. The Board also
reserves the right to make any change in the auditors at any time that it deems
advisable or necessary. One or more representatives of Arthur Andersen LLP are
expected to attend the Meeting and will be given an opportunity to make a
statement and are expected to be available to answer questions from
stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
FOR RATIFICATION OF THE REAPPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30,
2002.

ITEM IV.

OTHER BUSINESS

The Board of Directors of the Company does not know of any other
matters that may be brought before the Meeting. However, if any such other
matters are properly presented for action, it is the intention of the persons
named in the accompanying form of Proxy to vote the shares represented thereby
in accordance with their judgment on such matters.

FORM 10-K

THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30,
2001, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES AND LIST OF EXHIBITS.
REQUESTS SHOULD BE SENT TO GILMAN + CIOCIA, INC., 1311 MAMARONECK AVENUE, SUITE
160, WHITE PLAINS, NEW YORK 10605, ATTN: CAROLYN DECICCO.

INFORMATION CONCERNING STOCKHOLDER PROPOSALS

Pursuant to Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, a stockholder intending to submit a proposal to be presented
at the 2002 Annual Meeting of Stockholders must deliver a proposal in writing to
the Company's principal executive offices on or before September 1, 2002.

By order of the Board of Directors

/s/ Kathryn Travis

Kathryn Travis
Secretary

EXHIBIT A

Gilman + Ciocia, Inc.
Audit Committee Charter

A. Purpose and Scope

The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibilities by (i)
reviewing the financial reports provided by the Company to the Securities and
Exchange Commission ("SEC"), the Company's shareholders or to the general
public, (ii) overseeing the Company's internal financial and accounting
controls, (iii) ensuring that management has maintained the reliability and
integrity of accounting policies and financial reporting and disclosure
practices and (iv) reviewing processes to ensure compliance by the Company with
all applicable laws, regulations and Company policy.

B. Membership

The Committee shall be composed of a minimum of three directors as appointed by
the Board, who shall meet the independence and audit committee composition
requirements under the rules and regulations of The Nasdaq National Market
("Nasdaq"), as in effect from time to time, and each director shall be free from
any relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.

All members of the Committee shall:

o Comply with the standard of independence as defined by the Nasdaq and SEC.
o Possess adequate knowledge of accounting and reporting to be able to
understand and read financial statements.

At least one member of the Committee shall have the employment experience in
finance or accounting, requisite professional certification in accounting, or
other comparable experience or background which results in the individual's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities.

A chairperson will be appointed based upon who of the independent Board members
possess the most appropriate background. Each member of the Committee will serve
until his/her successor shall be duly elected and qualified or until his/her
earlier resignation or removal.

C. Responsibilities and Duties

The Committee's members will have the following responsibilities and duties:

o The Chairperson's responsibilities include:
Setting agendas for quarterly meetings with the assistance of
management.
Reporting to the Board regarding the fulfillment of its obligations as
defined by the SEC and the Committee Charter (the "Charter").
Interpreting the Charter when there is a question regarding whether a
transaction falls under the purview of the Committee.
Having candid discussions with members of the Committee regarding their
qualifications, independence and effectiveness on the Committee.
Being available to discuss issues with the external auditors which
should be brought to the attention of the Committee.

o The members of the Committee have the following responsibilities: To
come to each meeting fully prepared and ready to participate.
To remain independent or immediately disclose issues of independence.
To stay abreast of accounting pronouncements to the extent necessary to
ensure their ability to review financial information with appropriate
understanding.

To fulfill its responsibilities of oversight of financial reporting and
controls, the Committee shall:

Financial Reports

o Review with representatives of management and of the independent accounting
firm the Company's audited annual financial statements prior to their
inclusion in Form 10-K.

o Recommend to the Board whether the financial statements presented should be
published in the Form 10-K. o Review the Company's quarterly financial
statements prior to their inclusion in the Form 10-Q.

Independent Accounting Firm

o Recommend to the Board the external auditors for the Company and evaluate
their performance. o Review and approve fees and other compensation to be
paid to the independent accounting firm. o Meet independently with the
external auditors to receive feedback on management and the systems of
internal controls.

o Review and approve the audit plan annually, including insuring that the
independent accounting firm reviews interim financial statements prior to
inclusion in Form 10-Q.

o Receive a statement of independence from the external auditors and discuss
areas of issue.
o Evaluate the performance of the independent accounting firm and recommend
to the Board any proposed discharge when circumstances warrant. The
independent accounting firm shall be ultimately accountable to the Board
and the Committee.
o Review annually the internal controls of the Company including the need for
an internal audit department and Compliance Officer.
o If an Internal Audit Department exists, ensure that its personnel
understand their responsibility to the Committee and meet with them
regularly to discuss their findings independent of management.

Financial Reporting Process and Internal Controls

o In consultation with the independent accounting firm and management, review
annually the adequacy of the Company's internal financial and accounting
controls and review Management Letters issued by the independent accounting
firm.
o Assess overall Risk Management environment including
Business Risk Environment

o Management Performance

o Industry Trends and Background
Long-term debt and overall capital structure
Succession Planning

o Internal controls over executive compensation and benefits:
In conjunction with the Compensation Committee, review annually overall and
individual performance of senior management with regards to the meeting of
business plan objectives.
Review and approve annually compensation and performance targets.
Review transactions with affiliates.

o Other areas of review include:
Code of Conduct
Hiring Practices
Insurance requirements

o Conduct and authorize investigations if necessary.

Reporting

o Board of Directors - The Committee will present to the Board the annual
audit plan for their approval, will recommend the engagement of an
independent accounting firm to conduct annual audits and quarterly reviews
and will report that it has carried out its responsibilities as required by
the SEC and Nasdaq.

o Compensation Committee - The Committee will bring to the attention of the
Compensation Committee issues that impact compensation decisions and
management succession plans.

o The Committee will prepare, in accordance with the rules of the SEC, a
written report of the Committee to be included in the Company's annual
proxy statement for each annual meeting of stockholders.

D. Authorities

The Audit Committee will have the following authorities:

o Internal Audit Department formation and hiring. o Consider Other areas
appropriate for specific grants of authority.

E. Meetings

The Audit Committee will meet:

o At least one week prior to the required filing of each 10-Q in February, May
and November.

o Audit Planning meeting in June (latest July) to review the Audit plan for
the current fiscal year. o Annual Meeting in September at least two
weeks prior to the filing deadline for the 10-K to review audit findings.

o Other special meeting as required by management to execute Charter.

The Committee shall maintain minutes of meetings and other activities as support
for the execution of its responsibilities.

EXHIBIT B

2001 JOINT INCENTIVE AND NON QUALIFIED STOCK OPTION PLAN
OF GILMAN + CIOCIA, INC.

1. PURPOSE

The purpose of this Plan, which shall be known as the "2001 Joint
Incentive and Non Qualified Stock Option Plan" (the "Plan"), is to permit GILMAN
+ CIOCIA, INC. (the "Company") and its subsidiary corporations, as defined
herein, to attract, retain and reward the best available talent and encourage
the highest level of performance in order to continue to serve the best
interests of the Company and its stockholders. By affording all personnel the
opportunity to acquire proprietary interests in the Company and by providing
them incentives to put forth maximum efforts for the success of the business,
the Plan is expected to contribute to the attainment of those objectives. Shares
of common stock ("Shares") may be directly granted under the Plan. Options under
the Plan may be granted in the form of incentive stock options ("Incentive
Options") as provided in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or in the form of nonqualified stock options
("Non-Qualified Options"). Unless otherwise indicated, references in the Plan to
"Options" include Incentive Options and Non-Qualified Options.

2. ADMINISTRATION

The Plan shall be administered by the Compensation Committee ("the
Committee") of the Board of Directors, unless the Board of Directors, by
resolution, shall specifically direct otherwise.

The Committee, is authorized, subject to the provisions of the Plan,
from time to time, to establish such rules and regulations and to appoint such
agents as they deem appropriate for carrying out the provisions and purposes of
the Plan. The interpretation and construction by the Committee of any provisions
of, and the determination of any questions arising under, the Plan, any such
rule or regulation, or any stock option agreement granting shares or options
under the Plan, shall be final and conclusive and binding on all persons
interested in the Plan.

A majority of the Committee shall constitute a quorum, and the acts of
a majority of the Committee present at a meeting at which a quorum is present,
or acts approved in writing by all of its members, shall be acts of the
Committee.

3. SHARES SUBJECT TO THE PLAN

Subject to the Plan, Shares of the Company's common stock, $.0l par
value ("Common Stock"), may be issued, and such Shares may be made available
from either authorized and unissued shares or issued shares held in the treasury
of the Company. The total amount of shares of Common Stock together with all
options which may be granted under the Plan shall not exceed 1,250,000 shares.
Such number of shares which may be granted under the Plan is subject to
adjustment in accordance with the provisions of Paragraph 11 hereof.

4. OPTIONS SUBJECT TO THE PLAN

Subject to the Plan, options may be granted under the Plan for shares
of the Company's Common Stock, $.0l par value, and such shares underlying such
options may be made available from either authorized and unissued shares or
issued shares held in the treasury of the Company. The total amount of shares
underlying such options together with all Shares which may be granted under the
Plan shall not exceed 1,250,000 shares. Such number of shares underlying such
options which may be granted under the Plan is subject to adjustment in
accordance with the provisions of Paragraph 11 hereof. In the event that any
Option granted under the Plan shall terminate, expire or, with the consent of
the grantee, be canceled as to any shares of Common Stock, without having been
exercised in full, new options may be granted covering such shares.

5. AWARD OF SHARES AND OPTIONS

Incentive Options and/or Non-Qualified Options under the Plan may be
granted to any person, including but not limited to employees, directors,
independent agents and consultants who, the Committee believes, has contributed,
or will contribute to the success of the Company. Incentive Options under the
Plan may be awarded only to persons who, at the time such Incentive Options are
granted, are employees of the Company or a subsidiary corporation, as defined
herein, including any such employees who may be directors and stockholders
thereof. In determining the persons to whom options shall be granted and the
number of shares covered by each option, the Committee may take into account the
nature of the services rendered by the respective persons, his or her present
and potential contribution to the success of the Company and such other factors
as the Committee, in its sole discretion, shall deem relevant.

Any Option granted hereunder shall be evidenced by a stock option
agreement authorized by the Committee and executed by a duly authorized officer
of the Company (the "Stock Option Agreement"). Each Stock Option Agreement shall
specify the number of shares covered by such Option and the purchase price per
share and shall contain such terms and conditions not inconsistent with the Plan
as the Committee shall deem appropriate (which terms and conditions need not be
the same in each Stock Option Agreement and may be changed from time to time).
The date on which an Option shall be granted shall be the date of the Board's or
the Committee's authorization of such grant or such later date as may be
determined by the Committee at the time such grant is authorized, or with
respect to Incentive Options, the date of approval by the stockholders (the
"Date of Grant"). Each Stock Option Agreement may require as conditions of
exercise that the grantee provide such investment representations with respect
to, and enter into such agreements concerning the sale and transfer of, the
shares receivable by the grantee upon exercise, as the Committee deems
appropriate. Each Stock Option Agreement shall provide for the withholding of
income taxes and employment taxes that the Company determines it is required to
withhold upon the exercise of an Option.

Anything herein to the contrary notwithstanding:

(i) The Company may not, in the aggregate, grant
Incentive Options that are first exercisable by any grantee,
during any calendar year, to the extent that the aggregate
Fair Market Value (within the meaning of Section 422 of the
Code and the treasury regulations promulgated thereunder) of
the underlying stock (determined at the time the Incentive
Option is granted) of all of the Incentive Options first
exercisable by such grantee during such calendar year (under
all such plans of the grantee's employer corporation and its
"parent" and "subsidiary" corporations, as those terms are
defined in Section 424 of the Code) exceeds $100,000.

(ii) The purchase price of each share for which an
Incentive Option is granted and the number of shares covered
by such Option shall 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 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 Option is issued or
granted, constitutes 100% of the then Fair Market Value of a
Share of Common Stock. In the case of an Incentive Option
granted to an individual who, at the time the Option is
granted, owns shares comprising more than 10% of the total
combined voting power of all classes of stock of the Company,
the purchase price of each share underlying each Incentive
Option shall not be less than 110% of the Fair Market Value of
a Share of Common Stock, and the term of such Incentive Option
shall not be greater than five years.

6. TERM OF PLAN

The Plan shall terminate ten years from the earlier of the date of
adoption of the Plan or the date the Plan is approved by the Board, or with
respect to Incentive Options, approved by the stockholders of the Company. No
Share or Option may be granted after such termination. Termination of the Plan,
however, shall not affect the rights of grantees under shares issued or options
theretofore granted to them, and all unexpired options shall continue in force
and operation after termination of the Plan except as they may lapse or
terminate by their own terms and conditions.

7. TERM OF OPTIONS

The period during which any option granted hereunder may be exercised
shall be determined in each case by the Board or the Committee, as the case may
be; however, anything herein to the contrary notwithstanding, options granted
hereunder shall only be exercisable during a period not to exceed ten years from
the Date of Grant. Each Option shall be subject to such other conditions
regarding its exercise or non-exercise as the Committee may determine.

8. PURCHASE OF OPTION BY COMPANY

The Stock Option Agreement with respect to any Option at any time
granted under the Plan may contain a provision to the effect that the grantee
(or any persons entitled to act under Paragraph 8 hereof) may, at any time at
which the Fair Market Value of the Company's Common Stock is in excess of the
purchase price of the Option and prior to exercising the Option, in whole or in
part, request that the Company purchase all or any portion of the Option as
shall then be exercisable at a price equal to the difference between (i) an
amount equal to such number of shares multiplied by the Fair Market Value of the
Company's Common Stock on the date of purchase and (ii) an amount equal to the
purchase price multiplied by the number of shares subject to that portion of the
Option in respect of which such request shall be made. The Company shall have no
obligation to make any purchase pursuant to such request, but if it elects to do
so, such portion of the Option as to which the request is made shall be
surrendered to the Company. The purchase price for the portion of the Option to
be so surrendered shall be paid by the Company, at the election of the
Committee, either in cash or in shares of Common Stock (valued as of the date
and in the manner provided above), or in any combination of cash and Common
Stock, which may consist, in whole or in part, of shares of authorized but
unissued Common Stock or shares of Common Stock held in the Company's treasury.
No fractional share of Common Stock shall be issued or transferred and any
fractional share shall be disregarded. Shares covered by that portion of any
Option purchased by the Company pursuant hereto and surrendered to the Company
shall not be available for the granting of further options under the Plan. All
determinations to be made by the Company hereunder shall be made by the
Committee.

9. TERMINATION OF EMPLOYMENT

No Share or Option or any portion thereof granted to an employee under
the Plan shall be exercisable by such grantee at any time following the
termination of employment, except that the Stock Option Agreement with respect
to options granted by the Board or the Committee may permit an Option to be
exercised by such grantee (or his or her legal representative if the grantee
dies or becomes incompetent) within three months after termination, but only to
the extent the Option was exercisable at the date of termination, and may also
provide that in the event of the death or disability (which, in the case of
Incentive Options, shall mean permanent and total disability as defined in
Section 22(e)(3) of the Code) of the grantee, that the Option may be exercised
by such grantee's legal representative, executor or administrator or by his or
her distributees to whom the Option may have been transferred by will or by the
laws of descent and distribution within a period of not more than one year after
such death or disability, but only to the extent that it was exercisable at the
date of the termination of such grantee's employment. Whether any leave of
absence shall constitute termination of employment for the purposes of any
Option granted under the Plan shall be determined in each case by the Committee
in its sole discretion.

10. PAYMENT FOR SHARES

Payment for Shares of Common Stock issued or Common Stock purchased
upon the exercise of an Option (or any portion thereto granted hereunder) shall
be made in full in cash, or in shares of Common Stock if so provided in the
Option at the time of the issuance of such Share or the exercise of such an
Option.

It shall be a condition to the obligation of the Company to issue or
transfer shares of Common Stock upon the issuance of Shares or the exercise of
an option, that the grantee pay to the Company, upon its demand, such amount as
may be requested by the Company for the purposes of satisfying its liability to
withhold federal, state or local income or other taxes incurred by reason of the
issuance of Shares or the exercise of such Option or the transfer of such shares
pursuant to Paragraph 9 hereof.

11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

The total number of shares of Common Stock which may be purchased upon
the issuance of Shares or the exercise of options granted under the Plan shall
be appropriately adjusted by the Committee 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 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. In the event of the dissolution or liquidation of
the Company or upon any merger or consolidation thereof, the Committee may make
such adjustment with respect to options or take such other action 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, except in
the case of disability of a grantee with an Option resulting in termination of
employment, in which case the Option may be exercised by such grantee's legal
representative as set forth in Paragraph 9 hereof.

12. NON-TRANSFERABILITY OF SHARES OR OPTIONS

No Option granted to any grantee under the Plan shall be transferred by
such grantee 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
the terms of such Option or by the grantee, by will, or by the laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have 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, the Option may only be exercised by the grantee, unless transferred
as permitted by this Plan and the Option, 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 as set forth in Paragraph 9
hereof.

13. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN

The Committee may terminate, and at any time and from time to time, in
any respect, amend or modify the Plan, including the designation of a formula
that determines the amount, price and timing for the granting of options in
accordance with Rule 16b-3(d)(1), (d)(2) and (e); provided, however, that no
such action of the Committee without approval of the Board, or with respect to
Incentive Options, without approval by the stockholders of the Company, may: (A)
materially increase the benefits accruing to participants under the Plan; (B)
materially increase the amount of Common Stock which may be issued under the
Plan; or (C) materially modify the requirements as to eligibility for
participation in the Plan. No amendment, modification or termination of the Plan
shall in any manner adversely affect any Share or Option theretofore granted
under the Plan without the consent of the grantee; but it shall be conclusively
presumed that any adjustment for changes as provided in Paragraph 11 does not
adversely affect any such Share or Option. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Options shall be
interpreted, amended, or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify either the Plan or any Option
under Section 422 of the Code.

14. FINALITY OF DETERMINATIONS

Each termination, interpretation, or other action made or taken by the
Committee pursuant to the provisions of the Plan, shall be final and shall be
binding and conclusive for all purposes and upon all persons.

15. EMPLOYMENT

Nothing in the Plan or in any Stock Option Agreement under the Plan,
shall confer on any person the right to become an employee of the Company or on
any employee any right to continue in the employ of the Company or affect in any
way the right of the Company to terminate his or her employment at any time.

16. ADDITIONAL PROVISIONS

It is the intent of the Company that this Plan comply in all respects
with the applicable provisions of Rule 16(b)-3 under the Exchange Act in
connection with the granting of options to, or other transaction by, any grantee
under the Plan who is subject to Section 16 of the Exchange Act (except for
transactions exempted under alternative Exchange Act Rules or acknowledged in
writing to be non-exempt by such grantee). Accordingly, if any provision of this
Plan or any Stock Option Agreement does not comply with the requirements of Rule
16b-3, as then applicable to any transaction, such provision will be construed
or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such grantee shall avoid liability under
Section 16(b). In addition, the per share price of any Share or Option shall be
not less than 50% of the Fair Market Value of the Company's Common Stock at the
date of the issuance of the Share or the granting of the option, if such pricing
limitation is required in order to comply with Rule 16b-3 at the time of the
issuance of a Share or the granting of the option.

Anything herein to the contrary notwithstanding, the Committee may, in
its sole discretion, impose more restrictive conditions on the issuance of the
Shares or the exercise of options granted pursuant to the Plan; however, any and
all such conditions shall be specified in the Stock Option Agreement limiting
and defining such option.

17. EFFECTIVE DATE OF PLAN

The Plan shall become effective with respect to Incentive Options on
the date it is approved by the stockholders of the Company, and otherwise, on
the date approved by the Board.

2001
Annual Report

GILMAN + CIOCIA
CONTINUING TO
MOVE FORWARD
ON THE ROAD
TO PROSPERITY.
GTAX

CORPORATE PROFILE

Gilman + Ciocia, Inc. organized in 1981 and reorganized in 1993, 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 140 offices operating in 16 states. To complement its tax
preparation services, the Company also provides financial planning services
including brokerage services, insurance and mortgage agency services to its tax
preparation clients and others.

CORPORATE INFORMATION

Board of Directors Annual Meeting

James Ciocia The Annual Meeting of Shareholders
Chairman of the Board of the Company will be held at
10:30a.m.
Thomas Povinelli on December 14, 2001 at:
President and Chief Executive Officer 1311 Mamaroneck Avenue, Suite 160
White Plains, NY 10605
Michael P. Ryan
Chief Operating Officer Independent Accountants
Founder and President of Prime Capital
Services, Inc. Arthur Andersen LLP

Kathryn Travis
Vice President and Secretary Legal Counsel

Seth A. Akabas Akabas & Cohen
Partner, Akabas & Cohen New York, NY

Louis P. Karol Transfer Agent and Registrar
Partner, Karol, Hausman & Sosnick
Corporate Stock Transfer
Doreen M. Biebusch 3200 Cherry Creek Drive South
Founder and President JDJ Resources, Inc. Denver, CO 80209

Corporate Officers Forward-looking statements in this Annual Report
and letter are made pursuant to the "safe harbor"
Thomas Povinelli provisions of the Private Securities Litigation
Chief Executive Officer and President Reform Act of 1995. Forward-looking statements
are based on current management expectations
Michael P. Ryan that involve risks and uncertainties that may
Chief Operating Officer result in such expectations not being realized.
President-Broker Dealer Services Potential risks and uncertainties include, but
are not limited to, the risks described in this Annual
David D. Puyear Report and filings with the Securities and Exchange
Chief Financial Officer Commission.

Form 10-K and Other Investor Information

A copy of the Company's Form 10-K filed with the
Securities and Exchange Commission and copies of
the Quarterly Reports may be obtained without charge
by contacting:

Gilman + Ciocia
Attn: Carolyn DeCicco
1311 Mamaroneck Avenue, Suite 160
White Plains, NY 10605
Telephone: 914-397-4829

FINANCIAL HIGHLIGHTS:

2001 2000 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
Revenues
Tax Preparation................................ $ 17,557,112 $ 15,808,075 $12,609,933 $10,164,550 $ 9,921,967
Financial Planning............................. 87,197,921 71,277,044 36,137,862 16,578,032 12,464,284
Other.......................................... 1,758,140 2,493,375 1,695,611 1,790,501 2,188,320
----------------------------------------------------------------------------
Total Revenues................................. $106,513,173 $ 89,578,494 $ 50,443,406 $28,533,083 $24,574,571
----------------------------------------------------------------------------

EBITDA......................................... $ 4,739,604 $ (4,279,832) $ 5,238,239 $ 4,261,061 $ 2,076,796
Net Income..................................... $ 138,261 $ (4,013,092) $ 2,181,143 $ 2,011,345 $ 875,994
EPS--Fully Dilutive $ 0.02 $ (0.53) $ 0.32 $ 0.32 $ 0.16

Offices........................................ 140 145135 127 121
Full-Time Employees............................ 819 628398 183 198

Financial Planners
Employees...................................... 325 271180 138 135
Independent.................................... 353 380400 n/a n/a
--------------------------------------------------------
Total Financial Planners....................... 678 651580 138 135
-------------------------------------------------------

LETTER TO OUR SHAREHOLDERS:

"In a period of noteworthy market decline GTAX achieved profitable results for
the year and the strongest fourth quarter in the Company's history. Our
conviction that our business model of cross-selling financial planning services
to tax preparation clients is sound has been reinforced by the results of the
trend of the last several quarters."

GREETINGS
In times marked by national tragedy and international strife, markets yearn for
certainties in order to achieve stability. Certainties like higher earnings,
dramatic growth rates, and better economies of scale can all provide needed
balance and direction to the battered averages. We at Gilman + Ciocia, ("GTAX"),
want to tell you that of which we are certain--our business model is unique and
strong, our employees are prepared to serve our clients, and the foundation upon
which this Company was built is solid.

Now more than ever, equity investors like yourselves demand profitability and
accountability from their portfolio picks. GTAX has always understood these
requisites and consistently strives to meet and exceed investor expectations. We
are happy to report that this fiscal year represents the best evidence yet of
our firm's ability to achieve its goals and increase shareholder value.

ORIGINS
Our future potential is the product of a unique business plan conceived from a
single office in Long Island, New York in the early 1980s. Methodically, over
the bulk of the next two decades that followed, GTAX developed an extensive
network of 140 offices in 16 states by marrying two very related
disciplines--tax preparation and financial planning. We assembled a team of the
most dedicated and talented professionals in the industry who deftly provided
350,000 of our clients with services ranging from simple individual income tax
preparation to the execution of complex financial plans for high net worth
families and small businesses. While the birth of the idea is a distant memory,
its legacy endures.

GROWTH
This fiscal year was marked for us by notably strong growth in revenue derived
from our financial planning arm. An increased emphasis on money management, a
highly successful recruitment campaign, and an intensive focus on cross-selling
tax preparation clients all combined to lift our top line, even in a soft
market. The year 2001 caps off half a decade of dramatic gross revenue
increases, and sensible development of a corporate infrastructure suitable to
the firm's new size and stature, an expanded management platform and vast
improvement in our operating margins quarter after quarter. We have centralized
all service and support firm-wide and have streamlined marketing efforts,
recruiting campaigns and training programs. We are revamping our internal
reporting and management systems to track business activity daily. In fiscal
2002, we have introduced office level budgets to ensure office level focus on

19 percent increase in Total Revenue during the Fiscal Year 2001. 19%

profitability and fiscal accountability. While we centrally coordinate shared
services, each office manager has to adapt to his or her own local market client
service needs operating from Seattle to Staten Island.

Specifically, in a period of noteworthy market decline, GTAX achieved profitable
results for the year and the strongest fourth quarter in the Company's history.
GTAX was able to report considerable growth in both the fourth quarter and the
full year, even as the broader brokerage industry experienced sharp declines. We
believe this performance is a testament to the Company's business model. The
Company has controlled expenses and compared to a year ago, has in percentage
terms reduced general and administrative expenses, advertising and brokerage
expenses. The combination of increased ~revenues and reduced expenses has
resulted in the Company retaining 18% and 23% of the revenue increase, pre- and
post-depreciation, respectively. We will continue to carefully control expenses
as we look to grow both Company-owned and broker/dealer operations.

We are particularly pleased that our financial planning revenues are showing
notable growth and that Company-owned offices accounted for the lion's share of
the increase. Nearly 70% of the 22% increase in financial planning revenues this
fiscal year came from Company-owned offices. Our conviction that our business
model of cross-selling financial planning services to tax preparation clients is
sound, has been reinforced by the results of the trend of the last several
quarters.

ACQUISITIONS
It is widely known that the tax preparation industry is highly fragmented and
ripe for consolidation. In pioneering the fusion of these practices with the
talents of our financial planning professionals, and in folding these entities
into our network, GTAX has become highly sensitive to the delicate nature of the
tax practice acquisition. Unlike consolidation plans in other industries where
personal relationships are not paramount, GTAX's acquisition strategy has always
been more mindful of the essence of the client relationship asset acquired--the
invaluable relationship between the tax preparer and client. Successful leverage
of these relationships has been one of the keys to our dramatic growth and forms
the basis for every sale, every repeat customer and for every new dollar under
management. The preservation of these bonds is critical to the success of the
acquisition and GTAX understands that better than its competition. Carefully
screening each candidate, GTAX targets practices where quality tax service and
trust are the pillars of the business, and size is more attributable to years
~of referrals than to clever marketing.

It is further our belief that we can drive down the cost of these acquisitions
by creating demand to join our ranks. We will define our marketplace identity
not by the sheer number of partnerships we form, but rather by the success of
each individual merger. The proof will be in our financial planning production
at the new location, which is consistently correlative to the strength of the
bond we acquire-the relationship between the tax preparer and client.

RECRUITMENT & DEVELOPMENT
Our recruitment operation is a corporate marvel. Tirelessly pounding the phones
and canvassing the country in search of opportunity-seekers, our business
development team relentlessly sells our story to the thousands of registered
representatives out there who are willing to listen. Our platform is appealing
to virtually every kind of licensed financial advisor. From the cold calling
stock jockey to the veteran insurance agent, many brokers would jump at the
opportunity to work hand-in-hand with a tax accountant who holds the key to the
tax client relationship.

STRENGTH THROUGH CLIENT RELATIONSHIPS:

"With 140 offices open year round, preparing more than 100,000 tax returns, our
offices are always in a position to serve our clients with the tax and financial
planning services they need".

With 140 offices open year round, preparing more than 100,000 tax returns, we
have the space to bring on even more financial planners. We thus have the
enviable ability to continue our recruiting effort energetically, without
increasing our expenses related to office space, utilities and support staff.
Thus in the short term, our capacity to increase our ranks of financial planners
is large and the increased profit margins will in turn allow for more physical
expansion at a later date.

Our offices are always in a position to serve our clients with the tax and
financial planning services they need. Through intensive training, sales
management and supervision, motivational seminars and product wholesaling
support from our business partners, our force of representatives has markedly
increased their cross-sell penetration rate, thereby, drastically increasing
operating margins within our existing locations.

Ever mindful of the basis of the tax preparer-client relationship, GTAX has also
endeavored to significantly improve the quality of tax product provided by our
team of tax professionals through the use of web-based communication technology,
topical internet-based continuing education and interactive role-playing.

MISSION
Gilman + Ciocia is dedicated to providing individuals with the highest quality
tax preparation and financial planning services. Information and insight gained
through the tax preparation process will then be utilized to maximize our
client's financial potential and security through the provision of investment,
insurance and other financial services.

We very much appreciate the support of our shareholders, our clients and the
entire Gilman + Ciocia family and we look forward to a year of continued growth,
opportunity and prosperity.

Sincerely,

/s/ James Ciocia /s/ Thomas Povinelli

James Ciocia Thomas Povinelli
Founder and Chairman of the Board President and Chief Executive Officer

Gilman + Ciocia, Inc.
SELECTED FINANCIAL DATA

For the Years Ended June 30,
----------------------------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------------------------
Summary of Consolidated
Statements of Operations
Total Revenue.................................. $106,513,173 $89,578,494 $50,443,406 $28,533,083 $24,574,571
Net income (loss).............................. 138,261 (4,013,092) 2,181,143 2,011,345 875,994
Per share
Basic 0.02 (0.53) 0.35 0.37 0.16
Diluted 0.02 (0.53) 0.32 0.32 0.16

As of June 30,
------------------------------------------------------------------------
2001 2000 1999 1998 1997
------------------------------------------------------------------------
Summary of Consolidated
Balance Sheets
Working capital (deficit)...................... $ 1,214,325 $(1,611,436) $ 5,249,516 $ 4,950,652 $ 3,450,102
Total assets................................... 52,430,895 43,905,178 32,998,980 9,751,187 9,025,576
Long-term debt................................. 5,425,928 826,476 2,738,124 - 552,000
Total shareholders' equity..................... 28,275,433 24,712,841 24,959,941 9,017,587 7,018,989
Cash dividends................................. - - - - -

Gilman + Ciocia, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

The following discussion and the letter from the Company's Chairman of the Board
and Chief Executive Officer above, should be read in conjunction with the
Company's financial statements and the related notes 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 or implied by
these forward-looking statements. Factors that could contribute to such
differences are discussed in this Annual Report under the heading "Risk
Factors."

Overview

The Company is a preparer of Federal, State and local income tax returns for
individuals predominantly in middle and upper income brackets. In addition,
while preparing tax returns, clients often consider other aspects of their
financial needs, such as investments, insurance, pension and estate planning.
The Company capitalizes on this situation by making financial planning services
available to its clients. 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 and/or
its broker/dealer subsidiaries earn a share of commissions (depending on what
service is provided) from the services that the financial planners provide to
the clients in transactions for securities, insurance and related products.

Almost all of the financial planners are also authorized agents of insurance
underwriters and approximately 2% of the financial planners are authorized to
act as mortgage brokers. The Company is also a licensed mortgage broker. 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 2001, approximately 16% of the Company's revenues were earned from
tax preparation services, 82% were earned from all financial planning and
related services (with 90% from mutual funds, annuities and securities
transactions and 10% from insurance, mortgage brokerage and other related
services), and 2% were earned from e1040.com and other services.

The Company's clients generally are introduced to the Company's financial
planning services through the Company's tax preparer. The Company believes that
its tax return preparation business is inextricably intertwined with and is a
necessary adjunct to its financial planning activities. Neither segment would
operate as profitably by itself and the two segments leverage off each other
improving profitability and client retention.

Plan of Operation

Tax Preparation and Financial Planning

As part of the Company's expansion strategy, it 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 to acquire tax
preparation and financial planning practices during the next year (although no
specific target has been set), to recruit successful financial planners and to
acquire existing securities broker/dealers. The Company anticipates funding this
growth through senior and subordinate debt financing, possible private
placements of equity and from 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. The Company believes that its current acquisition model ultimately
reduces the potential loss exposure to the Company. However, expansion could
reduce the Company's profits or result in losses in future years.

In late 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 profitability targets are met. In addition, the targets 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 payments.

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 delay of several
years 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.

e1040.com

In Fiscal 1999, the Company formed its subsidiary e1040.com, which acquired all
of the assets of an existing online tax preparation business. This subsidiary
prepared 34,399 Federal and State tax returns in Fiscal 2000, contributing
$1,156,640 in revenues and prepared 35,824 returns contributing $791,621 in
revenues to the Company in Fiscal 2001. The decline was associated with a
dramatic reduction in marketing costs, resulting in a significant reduction in
operating losses in Fiscal 2001. The results from operations changed
dramatically from a loss of $6,023,662 in Fiscal 2000 to a smaller loss of
$658,790 in Fiscal 2001. 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 online tax platform already in place,
future marketing initiatives are expected to be in the form of strategic
partnerships and revenue sharing arrangements with companies who are looking for
consumer oriented content and services that e1040.com has to offer.

Results of Operations

The following table sets forth for the periods indicated certain items from the
Company's consolidated statements of operations expressed as a percentage of
revenue and the percentage change in such items for Fiscal years 1999, 2000 and
2001. The trends illustrated in the following table are not necessarily
indicative of future results.

As a Percentage of Revenue Percentage
Years Ended June 30, Increase (Decrease)
2001 2000 1999 2000 to 2001 1999 to 2000
--------------------------------------------------------
Tax preparation fees............................................ 16.5% 17.6% 25.0% (6.3%) (29.6%)
Financial planning commissions.................................. 81.9% 79.6% 71.6% 2.9% 11.2%
e1040.com....................................................... 0.7% 1.3% 0.4% (46.2%) 225.0%
Third party direct mail services................................ 0.9% 1.5% 3.0% (40.0%) (50.0%)
------------------------
Total revenue................................................... 100.0% 100.0% 100.0%
--------------------------
Salaries and commissions........................................ 75.4% 76.3% 63.3% (1.1%) 20.5%
General and administrative expense.............................. 9.9% 11.6% 11.9% (14.7%) (2.5%)
Advertising..................................................... 3.7% 10.8% 7.7% (65.7%) 40.3%
Brokerage fees and licenses..................................... 1.7% 2.1% 1.9% (19.1%) 10.5%
Rent............................................................ 4.8% 4.0% 4.9% 20.0% (18.4%)
Depreciation and amortization................................... 3.0% 2.8% 2.8% 7.1% 0.0%
------------------------
Total operating expenses........................................ 98.5% 107.6% 92.5% (8.4%) 16.3%
-------------------------
Operating income (loss)......................................... 1.5% (7.6%) 7.5% 119.7% (201.3%)
------------------------
Other (expense) income.......................................... (0.5%) 0.7% (0.2%) (171.4%) 450.0%
--------------------------
Income (loss) before provision for income taxes................. 1.0% (6.9%) 7.3% 114.5% (194.5%)
Provision (benefit) for income taxes............................ 0.9% (2.4%) 3.0% 137.5% (180.0%)
------------------------
Net income (loss)............................................... 0.1% (4.5%) 4.3% 102.2% (204.7%)

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

Fiscal 2001 Compared to Fiscal 2000

The Company's revenues for Fiscal 2001 were $106,513,173 compared to $89,578,494
for Fiscal 2000, an increase of $16,934,679 or 18.9%. This increase was
primarily attributable to an increase in financial planning services and higher
tax preparation revenues.

The Company's total revenues for Fiscal 2001 for the three primary business
segments (see footnote 13 on Notes to Consolidated Financial Statements)
consisted of $60,858,261 for the Company's tax and financial planning offices,
$80,694,750 for the Company's broker/dealer subsidiaries (which includes
$35,831,459 of intercompany revenue related to Company employee financial
planning revenue which clears through the broker/dealer subsidiaries) and
$791,621 for e1040.com. The Company's tax and financial planning office segment
consists of $17,557,112 for tax preparation services, $42,334,630 for financial
planning business done at an office level and $966,519 for third party direct
mail business. The Company's broker/dealer segment consists of financial
planning business done by Prime and North Ridge, before elimination of
intercompany financial planning revenue. Prime represented 92% and North Ridge
represented 8% of the broker/dealer segment total revenues. The Company's total
revenues for Fiscal 2000 for the three primary business segments consisted of
$48,601,863 for the Company's tax and financial planning offices, $65,529,892
for the Company's broker/dealer subsidiaries (which includes $25,709,901
representing intercompany revenue related to Company employee financial planning
revenue which clears through the broker/dealer subsidiaries) and $1,156,640 for
e1040.com. The Company's tax and financial planning office segment consisted of
$15,808,075 for tax preparation services, $31,457,053 for financial planning
business done at an office level and $1,336,735 for third party direct mail
business. The Company's broker/dealer segment consists of gross business done by
Prime and North Ridge before elimination of intercompany work. Prime represented
89% and North Ridge represented 11% of the broker/dealer segment.

The $1,749,037 or 11.1% growth in the tax preparation revenue is attributed to
the acquisition of new tax practices during Fiscal 2001 and the full-year effect
of the new tax practices acquired in Fiscal 2000. The $15,920,877 or 22.3%
growth in financial planning revenue and the corresponding growth in the
broker/dealer segment is attributed to the hiring of additional Registered
Representatives as well as an increase in the same average Registered
Representatives financial planning revenue. Of this growth, $10,877,577 or 68%
was attributed to financial planning revenue within Company offices, which
contributed to a higher operating margin to ~the Company.

In Fiscal 2001, the number of Registered Representatives employed by the Company
increased by 54, who had approximately $7.0 million of annual gross revenue
commission production, prior to being hired by the Company. In Fiscal 2001, the
Company's broker/dealer subsidiaries contributed $80,694,750 of total revenues
compared to $65,529,892 in Fiscal 2000. e1040.com contributed $791,621 of
revenues in Fiscal 2001 compared to $1,156,640 in Fiscal 2000. This reduction
was attributed to a dramatically reduced advertising and media campaign budget
in Fiscal 2001 that was used to publicly launch the website and price
competition.

The Company's operating expenses for Fiscal 2001 were $104,930,198 or 98.5% of
revenues, an increase of $8,563,377 or 8.9%, compared to operating expenses of
$96,366,821 or 107.6% of revenues for Fiscal 2000. The increase in operating
expenses was attributed to an increase of $12,133,766 in salaries and
commissions; $152,926 in general and administrative expenses; $1,522,819 in rent
and $648,134 in depreciation and amortization, offset by a decrease of
$5,792,001 in advertising and $102,267 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 included $5,200,000 of
advertising costs along with other one time related charges. In Fiscal 2001,
various other expense categories increased associated with the general increase
in central management required to support the actual growth in new business and
acquisitions.

Salaries and commissions increased $12,133,766 or 17.8%, in Fiscal 2001 to
$80,417,361 from $68,283,595 in Fiscal 2000. 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 other salaried employees related to the acquired
tax practices.

General and administrative expense increased $152,926 or 1.5% in Fiscal 2001 to
$10,536,979 from $10,384,053 in Fiscal 2000. The slight increase in general and
administrative expense is attributed to 14 offices acquired in Fiscal 2001 and
the full-year effect of Fiscal 2000 acquisitions, offset by the continued
implementation of cost containment initiatives initiated in the third quarter of
Fiscal 2001.

Rent expense increased $1,522,819 or 42.1% in Fiscal 2001 to $5,135,965 compared
to $3,613,146 in Fiscal 2000. The increase in rent expense is primarily
attributed to the acquisition of new offices during Fiscal 2001, the full-year
inclusion of offices opened in Fiscal 2000 and the expansion of office space by
some existing offices.

Depreciation and amortization expense increased by $648,134 or 25.8% in Fiscal
2001 to $3,156,629 compared to $2,508,495 in Fiscal 2000. The increase in
depreciation and amortization is primarily attributed to amortization associated
with acquisitions in prior years and to additional purchases of computer and
other equipment. From a segment standpoint, the Company's depreciation and
amortization expense for Fiscal year 2001 comprises 58.0% from the Company's
tax and financial planning office segment, 34.3% from the Company's broker/
dealer segment and 7.7% from e1040.com. For Fiscal year 2000, the Company's
depreciation and amortization expense comprises 54.1% from the Company's tax and
financial planning office segment, 40.8% from the Company's broker/dealer
segment and 5.1% from e1040.com. The change in mix is associated with placing
more property, plant and equipment in acquired tax offices

Advertising expense decreased $5,792,001 or 59.7% in Fiscal 2001 to $3,913,237
compared to $9,705,238 in Fiscal 2000. The decrease in advertising was almost
entirely attributed to lower print, media and banner advertisements associated
with the media launch of the e1040.com website in Fiscal 2000, which were not
continued in Fiscal 2001.

Brokerage fees and license expense decreased by $102,267 or 5.5% in Fiscal 2001
to $1,770,027 compared to $1,872,294 in Fiscal 2000. The decrease in brokerage
and license fees is primarily attributed to a shift in Fiscal 2001 of our
financial planning product mix.

The decrease in other income (expenses) of $1,126,185 ~or 179.3% is attributed
to a reduction of $1,226,957 in interest and investment income recognized in
Fiscal 2000 from a $979,489 gain on the sale of marketable securities, and an
increase of $473,075 in interest expense on debt in Fiscal 2001, aggravated by
an increase in other income of $573,847 primarily due to a gain on a rescission
of an acquisition contract. Of the increase in interest expense, $166,248
represents non-cash charges related to the amortization of warrant debt
discounts.

The Company's income before taxes for Fiscal 2001 was $1,085,025 compared to a
loss of $6,160,092 for Fiscal 2000, an increase of $7,245,117. From a segment
standpoint, the Company's income (loss) before taxes for Fiscal 2001 is
comprised of a loss of $553,237 from the Company's tax and financial planning
office segment, income of $2,313,158 from the Company's broker/dealer segment
and a loss of $674,896 from e1040.com. For Fiscal 2000, the Company's income
(loss) before taxes is comprised of a loss of $1,961,778 from the Company's tax
and financial planning office segment, income of $1,840,953 from the Company's
broker/dealer segment and a loss of $6,039,267 from e1040.com. The decreased
loss at e1040.com was attributed to the reduced advertising and media campaign
in Fiscal 2001 that was spent in Fiscal 2000 to publicly launch the website. The
rise in profitability at the Company's tax and financial planning and the
broker/dealer segments is primarily attributed to higher financial planning
revenues, without a corresponding increase in fixed costs resulting in higher
profitability, which fueled the growth in profitability.

The Company's income tax provision for Fiscal 2001 was $946,764 compared to an
income tax benefit of $2,147,000 in Fiscal 2000 for an increase of $3,093,764.
The increase in income taxes is the result of the increased profitability in
Fiscal 2001 compared to a loss year in Fiscal 2000. The Company's effective
income tax rate for Fiscal 2001 was 87.3% as compared to (34.9%) for Fiscal
2000. The primary difference between these rates and the statutory Federal
income tax rate of 34% relates to the amortization of certain goodwill and other
intangible assets not deductible for income tax purposes, as well as the
inclusion of State income taxes and benefits.

The Company's income after income taxes for Fiscal 2001 was $138,261 compared to
a loss of $4,013,092 for Fiscal 2000, an increase of $4,151,353. The increase is
primarily attributed to the higher operating margins in Company owned offices
and dramatically reduced operating losses associated with e1040.com.

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

Fiscal 2000 Compared to Fiscal 1999

The Company's total revenues for Fiscal 2000 were $89,578,494 compared to
$50,443,406 for Fiscal 1999, an increase of $39,135,088 or 77.6%. This increase
was attributed to an increase in Financial Planning services as well as the full
year effect of the acquisitions of the Prime and North Ridge broker/dealer
subsidiaries, which the Company acquired during Fiscal 1999.

The Company's total revenues for Fiscal 2000 for the three primary business
segments (see footnote 13 on notes to consolidated financial statements)
consisted of $48,601,863 for the Company's tax and financial planning offices,
$65,529,892 for the Company's broker/dealer subsidiaries (which includes
$25,709,901 of intercompany revenue related to Company employee financial
planning revenue which clears through the broker/dealer subsidiaries) and
$1,156,640 for e1040.com. The Company's tax and financial planning office
segment consists of $15,808,075 for tax preparation services, $1,336,735 for
third party direct mail business and $31,457,053 for financial planning business
done at an office level. The Company's broker/dealer segment consists of gross
business done by Prime and North Ridge, before elimination of intercompany
financial planning revenue. Prime represented 89% and North Ridge represented
11% of the broker/dealer segment total revenues. The Company's total revenues
for Fiscal 1999 for the three primary business segments consisted of $32,350,035
for the Company's tax and financial planning offices, $23,969,457 for the
Company's broker/dealer subsidiaries (which includes $6,079,266 of intercompany
revenue related to employee financial planning revenue which clears through the
broker/dealer subsidiaries) and $203,180 for e1040.com.The Company's tax and
financial planning office segment consists of $12,609,933 for tax preparation
services, $1,492,431 for third party direct mail services, $1,492,431 for third
party direct mail business and $18,247,671 for financial planning business done
at an office level. The Company's broker/dealer segment consists of gross
business done by Prime and North Ridge, before elimination of intercompany work.
Prime represented 80% and North Ridge represented 20% of the broker/dealer
segment.

The growth in the tax preparation revenue is attributed to the acquisition of
new tax practices during Fiscal 2000 and the full year effect of the new tax
practices acquired in Fiscal 1999. The growth in financial planning revenue and
the corresponding growth in the broker/dealer segment is attributed to the
full-year effect of the acquisitions of Prime and North Ridge during part of
Fiscal 1999.

The Company's operating expenses for Fiscal 2000 totaled $96,366,821 or 107.6%
of revenues, an increase of $49,720,266 or 106.6%, compared to $46,646,555 or
92.5% of revenues in Fiscal 1999. The increase in operating expenses was
attributed to an increase of $36,367,943 in salaries and commissions; $4,397,577
in general and administrative expenses; $1,133,079 in rent; $1,067,107 in
depreciation and amortization, $5,831,658 in advertising and $922,902 in
brokerage fees and licenses.

Salaries and commissions increased $36,367,943 or 114.0% in Fiscal 2000 to
$68,283,595 compared to $31,915,652 in Fiscal 1999. The increase in salaries and
commission expense was 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 $4,397,577 or 73.5% in Fiscal 2000
to $10,384,053 compared to $5,986,476 in Fiscal 1999. The increase in general
and administrative expense was primarily attributed to the acquisition of new
offices in Fiscal 1999 and 2000. The additional increase in general and
administrative expense was attributable to North Ridge and Prime, which were
acquired during Fiscal 1999.

Rent expense increased $1,133,079 or 45.7% in Fiscal 2000 to $3,613,146 compared
to $2,480,067 in Fiscal 1999. The increase in rent expense was primarily
attributed to the acquisition of new offices during Fiscal years 1999 and 2000
and seven new offices during Fiscal 2000 and 1999.

Depreciation and amortization expense increased $1,067,107 or 74.0% in Fiscal
2000 to $2,508,495 compared to $1,441,388 in Fiscal 1999. The increase in
depreciation and amortization was primarily attributed to additional purchases
of computer equipment during Fiscal 1999 and also additional amortization
incurred on the purchase acquisitions, tax practices and the broker/dealer
subsidiaries. From a segment standpoint, the Company's depreciation and
amortization expense for Fiscal year 2000 is comprised of 54.1% from the
Company's tax and financial planning office segment, 40.8% from the Company's
broker/dealer segment and 5.1% from e1040.com. For Fiscal year 1999, the
Company's depreciation and amortization expense is comprised of 70.4% from the
Company's tax and financial planning office segment, 27.7% from the Company's
broker/dealer segment and 1.9% from e1040.com. The change in mix is attributed
to the full year effect in Fiscal 2000 of acquiring Prime and North Ridge during
Fiscal 1999.

Advertising expense increased $5,831,658, or 150.5% in Fiscal 2000 to $9,705,238
compared to $3,873,580 in Fiscal 1999. The increase in advertising was almost
entirely attributed to increased print, media and banner advertisements
associated with the media launch of the e1040.com website. This increase was
associated with non-recurring advertising campaigns.

Brokerage fees and license expense increased $922,902 or 97.2% in Fiscal 2000 to
$1,872,294 compared to $949,392 in Fiscal 1999. The increase in brokerage fees
and licenses was primarily attributed to the increase in financial planning
business and the addition of financial planners in Fiscal 2000.

The increase in other income of $723,943 was 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 before taxes for Fiscal 2000 was $6,160,092 compared to
income of $3,701,143 for Fiscal 1999. From a segment standpoint, the Company's
income (loss) before taxes for Fiscal 2000 is comprised of a loss of $1,961,778
from the Company's tax and financial planning office segment, income of
$1,840,953 from the Company's broker/dealer segment and a loss of $6,039,267
from e1040.com. For Fiscal 1999, the Company's income (loss) before taxes is
comprised of income of $1,483,149 from the Company's tax and financial planning
office segment, income of $2,765,284 from the Company's broker/dealer segment
and a loss of $547,290 from e1040.com. The increase in the loss at e1040.com was
attributed to the media launch of its website and other one time charges. The
loss incurred at the Company's tax and financial planning segment and the
reduction to income at the broker/dealer segment in Fiscal 2000 were attributed
to adding core central management resources to manage the additional acquired
tax offices and the additional acquired broker/dealer subsidiaries. Also adding
to the reduction in income was the increase in interest expense in Fiscal 2000.

The Company's income tax benefit for Fiscal 2000 was $2,147,000 compared to an
income tax provision in Fiscal 1999 of $1,520,000 for an increase of $3,667,000.
The increase in income tax benefit is the result of a loss year in Fiscal 2000
as compared to a profitable Fiscal 1999. The Company's effective income tax rate
for Fiscal 2000 was (34.9%) compared to 41.1% for Fiscal year 1999. The primary
difference between these rates and the statutory Federal income tax rate of 34%
relates to the amortization of certain goodwill and other intangible assets not
being deductible for income tax purposes, as well as the inclusion of State
income taxes and benefits.

The Company's net loss for Fiscal 2000 was $4,013,092 compared with net income
of $2,181,143 for Fiscal 1999. The decrease of 284.0% was primarily attributed
to losses attributed to e1040.com and other one-time charges.

The Company's business is partly 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 partly seasonal and are expected to continue to
be somewhat seasonal. As a result, the Company must generate sufficient cash
during the tax season, in addition to its available bank credit, 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 ongoing 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 substantially increased operating cash flow in the
first two quarters of the Fiscal year.

The Company's cash flows provided by operating activities totaled $792,135 for
Fiscal 2001 compared to cash flows used in operating activities of $1,995,386
for Fiscal 2000. The increase of $2,787,521 in cash provided is due primarily to
an increase in net income of $4,151,353 resulting from a decrease in net loss
from $4,013,092 in 2000 to net income of $138,261 in 2001, an increase in
depreciation and amortization of $648,134, an increase in amortization of bond
discount of $166,248, gain in sale of marketable securities of $979,489 in
Fiscal 2000, a decrease in income tax receivable of $3,948,148, an increase in
deferred tax benefit provision of $1,182,000, a decrease in other assets of
$188,129, and a decrease in prepaid expenses and other current assets of
$285,011. These increases in cash flows provided by operating activities were
offset by an increase in net accounts receivable of $1,772,530, an increase in
receivables from officers, stockholders and employees of $700,000, a decrease in
accounts payable and accrued expenses of $4,727,162, a decrease in deferred and
other compensation expense of $961,299 and a gain on rescission of an
acquisition contract of $600,000.

Net cash used in investing activities totaled $2,991,495 and $1,483,448 in
Fiscal 2001 and Fiscal 2000, respectively. The increase of $1,508,047 is
primarily attributed to proceeds from the sale of investments of $1,215,141
recorded in Fiscal 2000, a decrease in loan repayments from officers and
stockholders of $172,179 and an increase in cash payments for acquisitions of
$356,197. These increases in cash used in investing activities were partially
offset by a decrease in capital expenditures of $301,439.

Net cash provided by financing activities totaled $3,051,741 and $4,586,773 in
Fiscal 2001 and 2000, respectively. The decrease of $1,535,032 is attributable
to a decrease in the exercise of stock options and warrants of $434,671, an
increase in payments of bank and other loans of $2,571,923, an increase in the
acquisition of treasury stock of $391,118 and a decrease in proceeds from stock
subscriptions of $83,203. These amounts were offset by an increase from the
proceeds from bank and other loans of $1,768,075 and cash proceeds received from
the re-issuance of treasury stock of $177,808.

As of June 30, 2000, the Company had a $10,000,000 credit facility with Merrill
Lynch. This facility consisted of three separate loans including: a line of
credit of $4,000,000 and two revolver loans totaling $6,000,000. The outstanding
balance at June 30, 2000 under the combined credit facility was $7,255,101.

The loan agreements contained certain negative covenants that required 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 March 31,
2000, 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 obligated 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 were required to
continue to be paid in accordance with the terms of the original debt
agreements. Further, the agreement required that proceeds from specific
liquidations and collections go to Merrill Lynch to pay-down principal. In
addition, the Company paid Merrill Lynch $250,000 on October 16, 2000.

On November 1, 2000, the Company closed an $11,000,000 financing with Travelers
Insurance Company ("Travelers") and European American Bank ("EAB") and
simultaneously paid Merrill Lynch the entire balance owed it on the outstanding
credit facility, terminating its lending relationship with Merrill Lynch.

The EAB loan credit facility totals $6,000,000 and is structured as a line of
credit for a term which expires on October 30, 2001. The interest rate on the
facility is a fixed rate of interest equal to the reserve adjusted LIBOR plus a
margin of 275 basis points for periods of 30, 60 or 90 days. The effective
interest rate for Fiscal 2001 was 8.47%. The facility is secured by a pledge of
all business assets of the Company and guarantees by the four principal
officers. The outstanding balance as of June 30, 2001 was $5,973,175.

The Company has signed a commitment letter with another commercial bank for a
replacement senior credit facility, which will replace the existing EAB senior
credit facility. The new credit facility is expected to close prior to the
maturity of the EAB facility. The total new facility will be $7,000,000 and will
be structured as a $2,000,000 revolving loan with a two-year term. The balance
of $5,000,000 will be structured as a five-year fully amortizing loan.

The Travelers loan is in the amount of $5,000,000 and has a term of five years.
In the first two years, the only debt service required is interest in arrears on
the first and second anniversary dates. Beginning in November 2002, the loan
begins the repayment of principal in the amount of $138,889 per month, beginning
on the last day of each month until repaid in full. The interest due during the
amortization period will be calculated on the average loan balance outstanding
and will continue to be paid in arrears on the anniversary date of the loan. The
interest rate on this loan will range from Prime minus 2.25% to Prime plus
2.25%. The actual interest rate will be determined based upon the level of
Travelers financial products distributed by the Company. The Travelers facility
is secured subordinate to the EAB facility, by all assets of the Company and
guaranteed by three principal officers of the Company. As of June 30, 2001, the
total principal and interest due was $5,000,000 and $298,356, respectively.

New Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS 133") as amended in June 2000 and SFAS No. 138, "Accounting
for Derivative Instruments and Hedging Activities," an amendment of SFAS No.
133, effective for the Company's Fiscal year ending June 30, 2001. 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 adopted this statement in Fiscal 2001, the implementation of SFAS 133
had no impact on the consolidated financial statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets." SFAS 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed annually (or more frequently if
impairment indicators arise) for impairment. Separable intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives (but with no maximum life). The amortization provisions of SFAS 142
apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142 effective July 1, 2001. The Company is
currently evaluating the effect that adoption of the provisions of SFAS 142 that
are effective July 1, 2001 will have on its results of operations and financial
position.

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 Company implemented SAB 101 in the second quarter of Fiscal 2001. The
implementation of SAB 101 has no impact on the Company's results of operation
and financial position.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting form changes in interest rates,
foreign currency exchange rates, commodity prices and equity prices. To date the
Company's exposure to market risk has been limited and it is not currently
hedging any market risk, although it may do so in the future. The Company does
not hold or issue any derivative financial instruments for trading or other
speculative purposes.

The Company's obligations under its EAB and Travelers credit facilities bear
interest at floating rates and therefore, the Company is impacted by changes in
prevailing interest rates. A 100 basis point increase or decrease in market
interest rates on the $10,973,175 outstanding under this facility at June 30,
2001 would result in an increase or decrease in the annual interest expense of
$109,732.

Risk Factors

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 the successful integration and continued
profitability of the broker/dealers acquired and the independent financial
planners who are recruited.

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. If the acquired companies do not perform as expected or the Company
cannot 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. 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.

If the growth in the financial markets slows or reverses, the Company's
financial planning segment will suffer decreased revenues. 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 counterparts 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. From
July 1st to December 31st each year, the Company generally requires significant
working capital financing to fund operations and prepare for the tax season
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 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. If a
substantial amount of such competition occurs, the corresponding reduction of
revenue may materially adversely affect the Company's operating results.

If any of the Company's key personnel 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. 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 the 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. 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 effect to its
reputation, which could directly lead to a decrease in revenues from the loss of
clients.

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.

If the Company were to lose its trademarks or other proprietary rights, the
Company could suffer decreased revenues.

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 officers own approximately 35% of the outstanding
Company common stock and in practical effect control the Company and have the
power to elect a majority of the directors, appoint management and approve
certain actions requiring the approval or 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. 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, unable to establish a high client retention rate and unable to
continuously enhance its services to meet technology changes, or if changes to
government regulations impair the profitability of internet commerce. Moreover,
internet technology and consequently website 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.

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 almost quadrupled and
then fell to below its December 1997 range. During that period, the average
daily trading volume of the Common Stock has varied significantly. 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.

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. Approximately
3,500,000 shares of the Common Stock outstanding are "restricted securities"
under Rule 144 of the Securities Act of 1933, as amended (the "Act"). The
Company has granted 4,680,473 options to purchase shares of Common Stock to 261
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. The
sale of restricted Common Stock in the future, or even the possibility that it
may be sold, may have an adverse effect 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.
Therefore, the directors have broad discretion over actions made on behalf of
the Company and the Company generally would not have a recourse against them for
the errors that they make.

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 counterparts to meet commitments, customer,
employee or issuer fraud risk, litigation, customer claims alleging improper
sales practices, errors and misconduct by brokers, traders and other employees
and agents (including unauthorized transactions by brokers), and errors and
failure in connection with the processing of securities transactions. Many of
these risks may increase in periods of market volatility or reduced liquidity.
In addition, the amount and profitability of activities in the securities
industry are affected by many national and international factors, including
economic and political conditions, broad trends in industry and finance, level
and volatility of interest rates, legislative and regulatory changes, currency
values, inflation, and the 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 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 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, the
NASD, other U.S. governmental regulators or Self Regulating Organizations
("SROs").

The Company's broker/dealer subsidiaries are subject to periodic examination by
the SEC, the NASD, SROs and various state authorities. Examinations may result
in the issuance of letters noting perceived deficiencies and requesting
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.

If the Company were to be found liable to clients for misconduct alleged in
civil proceedings, the Company's profitability may decline and its financial
condition may be adversely affected. There has been an increase in litigation
and arbitration within the securities industry in recent years, including class
action suits seeking substantial damages. The Company's broker/dealer
subsidiaries may be liable for the unauthorized acts of their retail brokers and
independent contractors if they fail to adequately supervise their conduct. The
Company's broker/dealer subsidiaries are currently defendants/respondents in
several such proceedings. If all of such proceedings were to be resolved
unfavorably to the Company, the Company's financial condition could be adversely
affected. It should be noted, however, that the Company's broker/dealer
subsidiaries maintain securities broker/dealer's professional liability
insurance to insure against this risk. 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.

Gilman + Ciocia, Inc.
CONSOLIDATED BALANCE SHEETS

June 30,
2001 2000
---------------------------
ASSETS
Current Assets:
Cash and cash equivalents................................................................. $ 5,413,674 $ 4,561,293
Marketable securities..................................................................... 55,933 73,044
Accounts receivable, net of allowance for doubtful accounts of $291,000 and $264,800
as of June 30, 2001 and 2000, respectively............................................ 10,813,299 6,355,115
Receivables from officers, stockholders and employees, current portion.................... 1,379,378 709,538
Prepaid expenses and other current assets................................................. 1,228,359 1,210,611
Income taxes receivable................................................................... 185,338 3,134,824
Deferred tax assets, current portion...................................................... 170,275 690,000
----------------------
Total current assets.................................................................. 19,246,256 16,734,425
Property and equipment, net of accumulated depreciation of $4,700,147 and $3,397,927
as of June 30, 2001 and 2000, respectively........................................... 5,052,979 4,423,455
Intangible assets, net of accumulated amortization of $4,891,750 and $3,172,897
as of June 30, 2001 and 2000, respectively............................................ 24,617,210 21,260,307
Deferred tax asset, net of current portion................................................ 1,460,160 -
Other assets.............................................................................. 2,054,290 1,486,991
------------------------
Total assets.......................................................................... $52,430,895 $43,905,178
--------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses..................................................... $ 9,831,363 $ 9,233,127
Long-term debt, current portion........................................................... 7,786,001 9,112,734
Deferred tax liability, current portion................................................... 414,567 --
----------------------
Total current liabilities............................................................. 18,031,931 18,345,861
Long-term debt, net of current portion.................................................... 5,425,928 826,476
Deferred tax liability, net of current portion............................................ 697,603 20,000
----------------------
Total liabilities..................................................................... 24,155,462 19,192,337
-------------------------
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;
8,654,829 and 8,030,834
shares issued and outstanding as of June 30, 2001 and 2000, respectively............. 86,548 80,308
Paid-in capital........................................................................... 27,711,953 23,976,897
Retained earnings......................................................................... 1,911,027 1,772,766
------------------------
29,709,528 25,829,971
Less: Treasury stock, at cost............................................................. (1,329,095) (1,012,130)
Note receivable for shares sold........................................................... (105,000) (105,000)
------------------------
Total stockholders' equity............................................................ 28,275,433 24,712,841
-------------------------
Total liabilities and stockholders' equity.......................................... $52,430,895 $43,905,178
--------------------------

The accompanying notes are an integral part of these consolidated balance
sheets.

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30,
----------------------------
2001 2000 1999
-----------------------------------
Cash Flows from Operating Activities:
Net income (loss).......................................................... $ 138,261 $ (4,013,092) $ 2,181,143
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization.......................................... 3,156,629 2,508,495 1,441,388
Amortization of debt discount.......................................... 166,248 - -
Deferred tax provision (benefit)....................................... 705,000 (477,000) (42,000)
Gain on a rescission of an acquisition contract........................ (600,000) - -
Gain on sale of marketable securities.................................. - (979,489) (342)
Amortization of deferred and other compensation expense................ 50,057 1,011,356 643,259
Interest on stock subscriptions........................................ - - (10,801)
Changes in:
Net accounts receivable.............................................. (4,458,184) (2,685,654) 512,662
Prepaid expenses and other current assets............................ 155,860 (129,151) (743,382)
Receivables from officers, stockholders and employees................ (700,000) - -
Other assets......................................................... (127,450) (315,579) (64,965)
Accounts payable and accrued expenses................................ (90,507) 4,636,655 (284,712)
Income taxes receivable (payable).................................... 2,396,221 (1,551,927) (162,889)
-----------------------------------------
Net cash provided by (used in) operating activities................ 792,135 (1,995,386) 3,469,361
--------------------------------------
Cash Flows from Investing Activities:
Capital expenditures....................................................... (1,517,505) (1,818,944) (751,394)
Cash payments for acquisitions, net of cash acquired....................... (1,837,545) (1,481,348) (6,578,569)
Marketable securities...................................................... 17,111 9,025 (97,272)
Proceeds from sale of investments.......................................... - 1,215,141 -
Loan repayments from officers and stockholders............................. 544,501 716,680 385,819
Loans to officers, stockholders and employees.............................. (198,057) (124,002) (1,232,180)
----------------------------------------
Net cash used in investing activities.................................... (2,991,495) (1,483,448) (8,273,596)
------------------------------------------
Cash Flows from Financing Activities:
Acquisition of treasury stock.............................................. (648,503) (257,385) (136,116)
Proceeds from bank and other loans......................................... 12,273,175 10,505,100 8,500,000
Payments of bank loans and capital lease obligations....................... (8,780,944) (6,209,021) (4,786,371)
Proceeds from the sale of common stock and exercise of stock options
and warrants....................................................... 30,205 464,876 2,974,245
Proceeds from stock subscriptions.......................................... - 83,203 -
Re-issuance of treasury stock.............................................. 177,808 - -
--------------------------------------
Net cash provided by financing activities.......................... 3,051,741 4,586,773 6,551,758
----------------------------------------
Net increase in cash............................................... 852,381 1,107,939 1,747,523
Cash, and cash equivalents beginning of year................................. 4,561,293 3,453,354 1,705,831
----------------------------------------
Cash, and cash equivalents end of year....................................... $ 5,413,674 $ 4,561,293 $ 3,453,354
------------------------------------------

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

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)

For the Years Ended June 30,
----------------------------
2001 2000 1999
----------------------------------
Supplemental Disclosures of Cash Flows Information:
Cash paid during the year for:
Interest.................................................................. $ 992,896 $ 792,859 $ 280,961
Income taxes.............................................................. 309,773 784,962 2,267,011
Noncash transactions:
Re-issuance of treasury stock at fair value............................... 331,538 22,294 143,859
Issuance of common stock as consideration in business combination......... 2,927,695 3,220,018 9,420,995
Exercise of stock options................................................. - 105,000 2,412
Capital leases............................................................ 414,240 1,209,478 -
Note receivable on rescission of acquisition contract..................... 1,000,000 - -

Supplemental Schedule of Non-Cash Investing and Financing Activities:
Details of business combinations:
Fair value of assets acquired............................................. $ 5,455,552 $ 5,532,366 $21,291,406
Less: -Liabilities assumed................................................ (690,312) (831,000) (4,039,411)
Stock issued.................................................................. (2,927,695) (3,220,018) (9,420,995)
-----------------------------------------
Cash paid for acquisitions................................................ 1,837,545 1,481,348 7,831,000
Cash acquired in acquisitions............................................. - - (1,252,431)
----------------------------------------------
Net cash paid for acquisitions............................................ $ 1,837,545 $ 1,481,348 $ 6,578,569
---------------------------------------------

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

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended June 30, 2001, 2000 and 1999

Accumulate Common Stock
Balance of July 1, 1998
Purchase of treasury stock.......................................................................... - -
Re-issuance of treasury stock....................................................................... - -
Issuance of common stock on exercise of stock options
372,227........................................................................................ 3,722 361,529
Issuance of common stock on exercise of stock options.................................... 372,227 3,772
Issuance of common stock upon exercise of warrants, net............................................. 700,852 7,009
Issuance of common stock upon business combinations................................................. 793,774 7,938
Accrued interest income............................................................................. - -
Amortization of deferred compensation............................................................... - -
Shares issued upon settlement of litigation......................................................... 34,500 345
Income tax benefit upon exercise of stock options................................................... - -
Comprehensive income:
Unrealized gain on marketable securities.......................................................... - -
Net income........................................................................................ - -

Total comprehensive income...................................................................... - -

Balance at June 30, 1999............................................................................ 7,508,266 75,083
-------------------

Purchase of treasury stock.......................................................................... - -
Re-issuance of treasury stock....................................................................... - -
Issuance of common stock on exercise of stock options............................................... 107,081 1,071
Issuance of common stock upon business combinations................................................. 385,487 3,854
Amortization of deferred compensation............................................................... - -
Shares issued upon settlement of litigation......................................................... 30,000 300
Income tax benefit upon exercise of stock options................................................... - -
Payment/write-off of stock subscriptions receivable................................................. - -
Issuance of note receivable for shares sold......................................................... - -
Comprehensive income:
Unrealized gain on marketable securities.......................................................... - -
Net loss.......................................................................................... - -
-----------------------

Total comprehensive income...................................................................... - -
-----------------------

Balance at June 30, 2000............................................................................ 8,030,834 80,308
-----------------------

Purchase of treasury stock.......................................................................... - -
Re-issuance of treasury stock....................................................................... - -
Re-issuance of treasury stock--Employee Stock Purchase Plan.......................................... - -
Issuance of common stock upon business combinations................................................. 594,617 5,947
Issuance of common stock in lieu of cash payment.................................................... 5,250 52
Issuance of common stock............................................................................ 10,000 100
Stock based compensation............................................................................ 14,128 141
Warrants issued in connection with refinancing...................................................... - -
Comprehensive income:
Net income........................................................................................ - -
-----------------------

Total comprehensive income...................................................................... - -
-----------------------

Balance at June 30, 2001............................................................................ 8,654,829 $86,548

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

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)

For the Years Ended June 30, 2001, 2000 and 1999

Stock Subscriptions
Paid in Deferred Retained Treasury Stock Note Receivable
Capital Compensation Earnings Shares Amount for Shares Sold
Balance of July 1, 1998 $6,483,320 $(52,993) $3,604,715 211,315 $(784,782) $(148,845)
Purchase of treasury stock - - - 16,400 (136,116) -
Re-issuance of treasury stock 86,067 - - (28,070) 143,859 -
Issuance of common stock on
exercise of stock options 361,529 - - - - -
Issuance of common stock upon
exercise of warrants, net 2,556,986 - - - - -
Issuance of common stock upon
business combinations 9,413,056 - - - - -
Accrued interest income - - - - - (10,801)
Amortization of deferred
compensation 58,290 25,584 - - - -
Shares issued upon
settlement of litigation 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 20,054,853 (27,409) 5,785,858 199,645 (777,039) (159,646)
--------------------------------------------------------------------------------------
Purchase of treasury stock - - - 52,600 (257,385) -
Re-issuance of treasury stock 8,156 - - (4,350) 22,294 -
Issuance of common stock on
exercise of stock options 568,805 - - - - -
Issuance of common stock upon
business combinations 3,216,164 - - - - -
Amortization of deferred
compensation - 27,409 - - - -
Shares issued upon settlement
of litigation 6,281 - - - - -
Income tax benefit upon
exercise of stock options 122,638 - - - - -
Payment/write-off of stock
subscriptions receivable - - - - - 159,646
Issuance of note receivable
for shares sold - - - - - (105,000)
Comprehensive income:
Unrealized gain on
marketable securities - - - - - -
Net loss - - (4,013,092) - - -

Total comprehensive income - - (4,013,092) - - -

Balance at June 30, 2000 23,976,897 - 1,772,766 247,895 (1,012,130) (105,000)

Purchase of treasury stock - - - 160,439 (648,503) -

Re-issuance of treasury stock - - - (200) 1,025 -
Re-issuance of treasury stock-
Employee Stock Purchase Plan (122,252) - - (70,615) 330,513 -
Issuance of common stock upon
business combinations 2,921,748 - - - - -
Issuance of common stock in
lieu of cash payment 52,466 - - - - -
Issuance of common stock 30,105 - - - - -
Stock based compensation 52,989 - - - - -
Warrants issued in connection
with refinancing 800,000 - - - - -
Comprehensive income:
Net income - - 138,261 - - -
Total comprehensive income - - 138,261 - - -

Balance at June 30, 2001 $27,711,953 $ - $1,911,027 337,519 $(1,329,095) $ (105,000)

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

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended June 30, 2001, 2000 and 1999
(Continued)

Accumulated Total
Other Stockholders'
Comprehensive Equity
Income

Balance of July 1, 1998
Purchase of treasury stock.......................................................................... - (136,116)
Re-issuance of treasury stock....................................................................... - 229,926
Issuance of common stock on exercise of stock options............................................... - 365,251
Issuance of common stock upon exercise of warrants,
net - 2,563,995
Issuance of common stock upon business combinations................................................. - 9,420,994
Accrued interest income............................................................................. - (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............................................................................ 8,241 24,959,941

Purchase of treasury stock.......................................................................... - (257,385)
Re-issuance of treasury stock....................................................................... - 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
Issuance of note receivable for shares sold......................................................... - (105,000)
Comprehensive income:
Unrealized gain on marketable securities.......................................................... (8,241) (8,241)
Net loss.......................................................................................... - (4,013,092)

Total comprehensive income..................................................................... (8,241) (4,021,333)

Balance at June 30, 2000............................................................................ - 24,712,841

Purchase of treasury stock.......................................................................... - (648,503)
Re-issuance of treasury stock....................................................................... - 1,025
Re-issuance of treasury stock--Employee Stock Purchase Plan.......................................... - 208,261
Issuance of common stock upon business combinations................................................. - 2,927,695
Issuance of common stock in lieu of cash payment.................................................... - 52,518
Issuance of common stock............................................................................ - 30,205
Stock based compensation............................................................................ - 53,130
Warrants issued in connection with refinancing...................................................... - 800,000
Comprehensive income:
Net income
------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - 138,261

Balance at June 30, 2001............................................................................ $ - $28,275,433

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

Gilman + Ciocia, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended June 30,
----------------------------
2001 2000 1999
-----------------------------------

Revenues:
Financial planning services............................................... $ 87,197,921 $71,277,044 $36,137,862
Tax preparation fees...................................................... 17,557,112 15,808,075 12,609,933
e1040.com................................................................. 791,621 1,156,640 203,180
Direct mail services...................................................... 966,519 1,336,735 1,492,431
--------------------------------------

Total revenue........................................................... 106,513,173 89,578,494 50,443,406
------------------------------------------

Operating expenses:
Salaries and commissions.................................................. 80,417,361 68,283,595 31,915,652
General and administrative expenses....................................... 10,536,979 10,384,053 5,986,476
Advertising............................................................... 3,913,237 9,705,238 3,873,580
Brokerage fees and licenses............................................... 1,770,027 1,872,294 949,392
Rent...................................................................... 5,135,965 3,613,146 2,480,067
Depreciation and amortization............................................. 3,156,629 2,508,495 1,441,388
----------------------------------------

Total operating expenses................................................ 104,930,198 96,366,821 46,646,555
------------------------------------------

Operating income/(loss)................................................. 1,582,975 (6,788,327) 3,796,851
----------------------------------------

Other income/(expense):
Interest and investment income............................................ 186,034 1,412,991 129,041
Interest expense.......................................................... (1,403,210) (930,135) (280,961)
Other income.............................................................. 719,226 145,379 56,212
--------------------------------------

Total other income (expense)............................................ (497,950) 628,235 (95,708)
----------------------------------------

Income/(loss) before provision (benefit) for income taxes................... 1,085,025 (6,160,092) 3,701,143
Provision/(benefit) for income taxes........................................ 946,764 (2,147,000) 1,520,000
--------------------------------------

Net income (loss)....................................................... $ 138,261 $ (4,013,092) $ 2,181,143
-----------------------------------------

Net income/(loss) per share:
Basic
$ 0.02 $ (0.53) $ 0.35
- --------------------------------------------------------

Diluted
$ 0.02 $ (0.53) $ 0.32
- -------------------------------------------------------

Weighted average shares:
Basic..................................................................... 8,082,674 7,552,396 6,264,228
----------------------------------------

Diluted................................................................... 8,113,590 7,552,396 6,917,436
----------------------------------------

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

Gilman + Ciocia, Inc.
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.

2. Summary of Significant Accounting Policies

Principles of Consolidation

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

Reclassifications

Certain prior years' information 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.

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. Realized gains and losses are
charged to the statement of operations as realized.

Accounts Receivable

The Company's accounts receivable consist primarily of accounts due related to
financial planning commissions and tax/accounting services performed. The
allowance for doubtful accounts represents an amount considered by management to
be adequate to cover potential losses, if any.

Other Investments

The Company has two investments in which it exercises significant influence,
equaling approximately 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 ($29,000), $31,000 and ($6,000) for June 30, 2001, 2000 and 1999,
respectively, is included in interest and investment income.

Property and Equipment

Property and equipment are carried at cost. Depreciation and amortization are
determined using the straight-line method 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 $1,718,853, $1,537,309 and $814,683 for the years ended
June 30, 2001, 2000 and 1999, respectively.

During Fiscal 2001, 2000 and 1999, the Company acquired intangible assets valued
at approximately $5,455,552, $5,532,366 and $21,291,406, respectively.

The Company assesses long-lived assets, including intangibles, for impairment in
accordance with 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," by comparing the carrying value to future undiscounted cash
flows. To the extent that there is an impairment, analysis is performed based on
several criteria, including, but not limited to, management's plan for future
operations, recent operational results and discounted operational cash flows to
determine the impairment amount. In addition, the Company performs an analysis
in an operating business unit basis to determine if the goodwill is not
impaired. During Fiscal years 2001, 2000 and 1999, the Company determined that
no material impairment adjustment was required.

Website Development and Internal Use Software 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 and its internal use software in
the amount of $670,309 and $280,780 in Fiscal year 2001 and 2000, respectively.
Amortization expense is computed on a straight-line basis over a period of three
to five years, the expected useful life, and amounted to $162,977 and $45,797
for the years ended June 30, 2001 and 2000 (Note 5).

Revenue Recognition

The Company recognizes all revenues associated with income tax preparation,
accounting services and direct mail services upon completion of the services.
Financial planning services include securities and other transactions. 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

The 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." The 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
advertisements in the advertising programs.

Income Taxes

Income taxes have been provided using the liability method. 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, the compensation cost for stock options awarded to employees and
directors is measured as 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, the 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).

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, 2001
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, markets and the wide variety
of customers, the Company does not consider itself to have any significant
concentration of credit risk.

Comprehensive Income (Loss)

The Company's comprehensive income (loss) included unrealized gains (losses) on
marketable securities of $0, ($8,241) and $95,144 for the years ended June 30,
2001, 2000 and 1999, respectively.

Segment Disclosure

The Company discloses financial and detailed information about its 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

The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended in
June 2000 and SFAS No. 138, "Accounting for Derivative Instruments and Hedging
Activities, an amendment of SFAS No. 133," effective for the Company's Fiscal
year ending June 30, 2001. 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 adopted this statement in
Fiscal year 2001, the implementation of SFAS 133 had no impact on the
consolidated financial statements.

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. Under SFAS 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed annually (or more frequently if
impairment indicators arise) for impairment. Separable intangible assets that
are not deemed to have indefinite lives will continue to be amortized over their
useful lives (but with no maximum life). The amortization provisions of SFAS 142
apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, the
Company is required to adopt SFAS 142 effective July 1, 2001. The Company is
currently evaluating the effect that adoption of the provisions of SFAS 142 will
have on its results of operations and financial position.

3. Business Combinations

In November 1998, the Company acquired all of the outstanding stock of North
Ridge and North Shore (collectively "NSR") for $5,250,000. The acquired business
is a full-service financial organization, which provides its clients with a wide
range of financial investment services.

On April 5, 1999 the Company consummated the acquisition of all of the issued
and outstanding capital stock of PCS and AFP. In addition, 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.

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
steam; 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 $5,532,366 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. In Fiscal 2001, no purchase price adjustments were made.

Throughout Fiscal 2001, the Company acquired four financial planning practices
with a valuation of $3,350,000, and thirteen tax practices with a valuation of
$3,325,100. The acquisitions were made with an initial purchase payment of
approximately 50% at closing with a combination of cash and stock or all stock.
The remaining 50% of the purchase payment will be paid if the acquired practice
meets or exceeds the agreed upon profitability targets post closing for a period
of generally five years. In Fiscal 2001, the Company recorded $5,455,552 as the
measurable fair value of the assets acquired with ~the balance recorded in 2002
through 2006 if performance targets are met in accordance with the purchase
agreements. In Fiscal 2001, the Company rescinded one acquisition contract
resulting in a gain of approximately $600,000 with a total recovery of
$1,000,000, including the return of the initial acquisition capital. The
$1,000,000 note receivable has a term of 3 years and bears interest of 6% per
year. This note will be repaid through the withholding of future financial
planning production of the debtor, cleared by the Company.

All of the above acquisitions have been accounted for by the purchase method.

The pro forma results for Fiscal 2001 and 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 are as
follows:

G+C NSR Prime Pro Forma
----------------------------------------------
Fiscal 1999
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

4. Receivables from Officers, Stockholders and Employees

Receivables from officers, stockholders and employees consist of the following
as of June 30:

2001 2000
---------- ---------

Demand loans to officers (a)....... $ 146,853 $326,633
Notes receivable from stockholders
of the Company. Interest is charged
with rates between 6% and 10%
per annum, due in 1-5 years..... 218,154 299,299
Demand loans from employees and
advances to financial planners (b)1,240,050 101,196
1,605,057 727,128
Less: Current portion.............. 1,379,378 709,538
Long-term portion.................. $ 225,679 $ 17,590

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

(b)The balance at June 30, 2001 includes $700,000 of draws to financial planners
expected to be recovered through production in Fiscal 2002, and $524,000 of
advances to financial planners expected to be recovered through future
production.

Interest Income from officers and stockholders was approximately $10,750,
$60,000 and $82,000 for the years ended June 30, 2001, 2000 and 1999,
respectively.

5. Property and Equipment, Net

Major classes of property and equipment consist of the following as of June 30:

2001 2000
---------- -----------
Buildings......................... $ 405,867 $ 405,867
Equipment......................... 6,159,885 5,288,901
Furniture and fixtures............ 1,017,326 789,648
Leasehold improvements............ 971,806 793,040
Software.......................... 1,198,242 543,926
9,753,126 7,821,382
Less: Accumulated depreciation
and amortization.................. 4,700,147 3,397,927
$5,052,979 $4,423,455

Depreciation expense for property and equipment was $1,302,220, $977,141 and
$604,724 for the years ended June 30, 2001, 2000 and 1999, respectively.

6. Intangible Assets

Intangible assets consist of the following as of June 30:

2001 2000
----------- ------------
Customer lists................. $14,848,980 $10,063,224
Broker/dealer registration..... 200,000 200,000
Non-compete contracts.......... 1,090,000 800,000
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
29,508,960 24,433,204
Less: Accumulated amortization 4,891,750 3,172,897
----------- -----------
$24,617,210 $21,260,307

Amortization expense is computed on a straight-line basis over periods of five
to twenty years, and it amounted to $1,718,853, $1,537,316 and $814,683 for the
years ended June 30, 2001, 2000 and 1999, respectively.

7. Debt

Debt consists of the following as of June 30:

2001 2000
----------- -----------
Merrill Lynch facility (a)..... $ - $ 7,208,052
European American Bank
Facility (b)................. 5,973,175 -
Traveler's Insurance
Company Facility (b)......... 4,366,248 -
($5,000,000 less unamortized
debt discount of $663,752)
Unsecured promissory notes (c) 1,250,000 1,250,000
Notes payable for client settlements,
payable over periods of 3-5 years
at varying interest rates between
9% to 10%...................... 283,988 271,680
Capitalized lease obligations
(note 8)..................... 1,338,518 1,209,478
13,211,929 9,939,210
Less: Current portion.......... 7,786,001 9,112,734
$ 5,425,928 $ 826,476

(a) As of June 30, 2000, the Company had a $10,000,000 credit facility with
Merrill Lynch. This facility consisted of three separate loans as follows: a
line of credit of $4,000,000 and two revolving loans that total $6,000,000. The
outstanding principal and interest balance at June 30th was $7,255,101 and $0,
as of 2000 and 2001, respectively. This loan facility was replaced in November
2000 with the Traveler's Insurance Company and European American Bank
facilities.

(b) On November 1, 2000 ("effective date"), the Company closed an $11,000,000
financing, which consists of a $5,000,000 debt financing ("debt facility") with
Travelers Insurance Company and a $6,000,000 senior credit facility ("senior
credit facility") with European American Bank ("EAB"). The interest rate on the
senior credit facility is either LIBOR plus 275 basic points or Prime plus .75%.
The effective interest rate for Fiscal 2001 was 8.47%. The term of the senior
credit facility is twelve months and requires a 30-day clean-up period on the
loan prior to maturity. The outstanding principal and interest balance at June
30, 2001 under the senior credit facility was $6,008,789. The interest rate on
the debt facility will range from Prime plus or minus 2.25% and has a term of
five years. The effective interest rate for Fiscal 2001 was 9.00%. The
outstanding principal and interest at June 30, 2001 under the debt facility was
$5,298,356. As part of the debt facility financing with Travelers Insurance
Company, the Company issued warrants to purchase 725,000 shares of the Company's
common stock. Of this amount, 425,000 warrants were issued to purchase at $4.23
per share, representing the average closing price for 20 days before the
effective date. The 425,000 warrants are exercisable between November 1, 2000
and May 2, 2003. The remaining warrants to purchase 300,000 shares of the
Company's common stock will be awarded based on a factor of the 20-day average
trading price on the first anniversary of the shares, and will have a term of
thirty months from the date of grant. The value as determined by an external
appraisal of these warrants at the date issued, was set at $800,000. The warrant
valuation was treated as a debt discount and amortized over the five-year term
of the debt facility under the interest rate method. The Fiscal 2001
amortization is $166,248.

(c) Represents non-negotiable unsecured promissory notes totaling $1,000,000
bearing interest rates from 12% to 22% per year, and an unsecured demand note of
$250,000 bearing an interest rate of 12% per year. $850,000 of the unsecured
promissory notes are payable to related parties and the entire amount becomes
due and payable in Fiscal 2002.

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.

Minimum future lease payments under capital leases as of June 30, 2001 are as
follows:

2002.......................................... $ 704,108
2003.......................................... 445,594
2004.......................................... 251,444
2005.......................................... 112,515
-------
1,513,661
Less: Amount representing finance charges..... 175,143
-------
Present value of net minimum lease payments... $1,338,518
----------

Capital equipment leases have the lease rate factor (finance charge) built in to
the monthly installment and range between 9% 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,
2001:

2002......................................... $ 4,397,916
2003......................................... 3,570,664
2004......................................... 2,825,143
2005......................................... 2,131,546
2006......................................... 1,118,286
Thereafter................................... 1,112,011
---------
$15,155,566

Rent expense for the Fiscal years ended June 30, 2001, 2000 and 1999 was
$5,135,965, $3,613,146, and $2,480,067, 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 in relevant part states that the Company will assume customer
obligations in the event of a default. At June 30, 2001, approximately $550,000
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
and $25,000, respectively. At June 30, 2001, PCS and North Ridge had net capital
of $2,234,831 and $115,505, which was $1,947,905 and $90,505 in excess of its
required net capital of $286,926 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

On August 21, 1998, Mercedes Benz Credit Corporation, Allianz Insurance Company,
and Allianz Underwriters, Inc. filed a complaint against the Company in New York
Supreme Court, Nassau County. The complaint seeks indemnification in the amount
of up to approximately $3.5 million from Gilman + Ciocia, Inc. The allegations
in the complaint are based upon a $1.7 million payment made by the plaintiffs in
a settlement reached on October 3, 1996 with the estate of Thomas Gilman in a
wrongful death action, upon an additional approximately $1.8 million payment
made to the estate in the settlement for which plaintiffs ultimately may be held
liable. (An action is currently pending in New York Supreme Court, Nassau County
to determine the liability allocation between the settlors with the estate).
Gilman + Ciocia, Inc. served its answer on September 18, 1998 asserting numerous
defenses, which it believes, are meritorious. On January 29, 1999, the
plaintiffs filed a motion for summary judgment and on February 19, 1999, the
court granted the Company's cross motion for summary judgment. However, the
plaintiffs have appealed the lower court's decision. In June 2001, settlement
negotiations are pending and the Company believes that a settlement will be
entered into with the plaintiffs at nominal expense to the Company.

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.

10. Stockholders' Equity

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 Non-Qualified Stock Option Plan (the "Option
Plan"). The Option Plan provides for the granting, at the discretion of the
Board of Directors, of: (i) options that are intended to qualify as incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, to employees and (ii) options not intended to so qualify to
employees, officers and directors. The total number of shares of common stock
for which options may be granted under the Option Plan is 816,000 shares. The
number of shares granted, prices, terms of exercise, and expiration dates are
determined by the Board 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. During Fiscal
2001, options to purchase 220,000 shares were canceled under this Option Plan
and 24,621 of these options were subsequently granted. At June 30, 2001, 195,379
options are available to be granted under this option plan and 432,612 have been
exercised.

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").

Under the plan, the Company granted options to purchase 136,064 and 229,877
shares in Fiscal 2001 and 2000, respectively. During Fiscal 2001, 65,941 options
to purchase shares were canceled. None of the shares granted in Fiscal 2001 and
2000 were exercised and zero options are available to be granted under this
Plan.

The Company charged earnings for compensation expense of $0, $27,409 and $83,874
for the years ended June 30, 2001, 2000 and 1999, respectively, in connection
with the issuance of stock options.

The table below summarizes plan and nonplan stock option activity:

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

Outstanding, June 30, 1998... 2,836,002 $6.92
---------
Granted.................... 525,500 8.59
Exercised.................. (560,779) 3.16
Canceled................... (75,223) 3.07
--------
Outstanding, June 30, 1999... 2,725,500 $8.12
---------
Granted.................... 941,205 $8.64
Exercised.................. (87,833) 4.78
Canceled................... (85,000) 5.13
--------
Outstanding, June 30, 2000... 3,493,872 $8.36
---------
Granted.................... 1,728,428 $6.47
Exercised.................. -- --
Canceled................... (541,827) 9.59
---------
Outstanding, June 30, 2001... 4,680,473 $7.58
---------

Exercisable June 30, 1999.... 522,000 $3.82
Exercisable June 30, 2000.... 1,952,167 $7.40
Exercisable June 30, 2001.... 1,450,031 $8.04

The weighted average fair value of options granted during the years ended June
30, 2001, 2000 and 1999 are $2.47, $4.61 and $5.72 per option, respectively.

Options outstanding and exercisable at June 30, 2001 and related weighted
average exercise price and life information are as follows:

Option Price Ranges

Number of
Number of Weighted Average Exercisable
Range of Options Remaining Weighted Average Options Weighted Average
Exercise Price Outstanding Contractual Life Exercise Price Outstanding Exercise Price
- ---------------------------------------------------------------------------------------------------------------------------
Above $10.00............................. 569,863 7 $13.10 316,945 $13.30
$7.51-$10.00............................. 1,846,394 5 8.69 476,694 8.78
$5.01-$ 7.50............................. 1,318,167 7 6.34 284,092 6.46
$2.51-$ 5.00............................. 946,049 5 3.82 372,300 3.84
- -----------------------------------------------------------------------------------------------------------------------
4,680,473 5 $ 7.58 1,450,031 $ 8.04
- -----------------------------------------------------------------------------------------------------------------------

The Company applies APB 25 in accounting for its stock ~compensation plans,
under which no compensation cost has been recognized. Had compensation cost for
the stock compensation plans been determined in accordance with the ~fair value
accounting method prescribed under SFAS 123, the Company's net loss and net loss
per share would have been as follows:

Year Ended June 30,

2001 2000 1999
- ------------------------------------------------------------------------------------
Net income (loss):
As reported....... $ 138,261 $(4,013,092) $ 2,181,143
Pro forma......... (2,671,786) (8,217,792) (3,506,734)
Basic net income (loss) per share:
As reported....... 0.02 (0.53) (0.35)
Pro forma......... (0.33) (1.09) (0.51)
Diluted net loss (income) per share:
As reported....... $ 0.02 $ (0.53) $ 0.32
Pro forma......... $ (0.33) $ (1.09) $ (0.51)

The pro forma effect on net income or loss for Fiscal years 2001, 2000 and 1999
does not take into consideration the pro forma compensation expense related to
the grants made prior to Fiscal year 1997.

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

2001 2000 1999
-------------------------
Expected life (years)......... 5 3 3
Free interest rate............ 5.82% 6.20% 7.00%
Volatility.................... 90.01% 71.00% 74.50%
Dividend yield................ 0% 0% 0%

Treasury Stock

During Fiscal 2001, the Company acquired 160,439 shares of its common stock for
an aggregate cost of $648,503 and reissued 70,815 of these shares to employees.
The re-issuance gave rise to the recognition of compensation expense in the
amount of $31,478 representing the excess of the fair value of these shares at
re-issuance over proceeds received.

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.

Stock Subscriptions Receivable and Note Receivable ~for Shares Sold

In Fiscal 2000, the Company's proceeds on stock subscriptions received were
$83,203. The Company wrote-off the balance or $76,443 of the remaining
outstanding stock subscription receivable in Fiscal 2000. For the years ended
June 30, 2001, 2000 and 1999, the Company recognized interest income on stock
subscriptions receivable of $0, $3,406 and $10,801, 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, 2001.

Employee Stock Purchase Plan

In 1999, the Company established a qualified employee stock purchase plan
("ESPP") where certain eligible employees had the right to participate in the
purchase of designated shares of the Company's common stock at a price equal to
the lower ~of 85% of the closing price at the beginning or end of the offering
period. The offering period commenced on July 1, 2000 and closed on December 31,
2000. In Fiscal 2001, the Company issued 70,615 shares of common stock pursuant
to this plan at a price of $2.44 per share. In September 2001, for the offering
period commencing on January 1, 2001 and ~closing on June 30, 2001, the Company
issued 54,368 shares of common stock pursuant to this plan at a price of $2.39
per share.

11. Earnings (Loss) Per Share

Basic net earnings (loss) per share is computed using the weighted average
number of common stock outstanding. The dilutive effect of potential common
share outstanding is included in the diluted net earnings per share. The
computations of basic and diluted net earnings per share are as follows:

Year Ended June 30,
-------------------
2001 2000 1999
------------------------------------------
Net earnings (loss)...... $ 138,261 $(4,013,092) $2,181,143
Basic weighted
average shares 8,082,674 7,552,396 6,624,228
Effect of dilutive securities 30,916 - 653,208
Dilutive potential
common shares 8,113,590 7,552,396 6,917,436
Net earnings (loss)
per share:
Basic................ $ 0.02 $ (0.53) $ 0.35
Diluted.............. $ 0.02 $ (0.53) $ 0.32

Diluted net earnings per share exclude the impact of weighted average shares
issuable upon the exercise of stock options of 4,174,631, 1,952,107, and 520,000
shares for Fiscal years 2001, 2000 and 1999, respectively, because the options'
exercise prices were greater than the average market price of common share and
therefore, the effect would be antidilutive.

12. Related Party Transactions

Refer to Receivables from Officers (note 4) for related party balances and
transactions.

Refer to Debt (note 7) for related party balances and transactions.

Professional Fees

During Fiscal 2001, 2000 and 1999, professional firms related to officers and
directors of the Company charged the Company fees totaling $376,353, $166,000
and $440,000, respectively.

13. Segments of Business

The Company's reportable segments are strategic business units that offer
different products and services or are managed separately because the business
requires different technology and marketing strategies. The Company has three
reportable segments including Company Tax Preparation and Financial Planning
Offices, Broker/Dealer Operations and e1040.com.

Company Tax Preparation and Financial Planning Offices provide integrated tax
and financial services through Company managed offices. The Company's
Broker/Dealer Operations represents the financial planning and securities
business that clears through either PCS or North Ridge. All Company employed
Registered Representatives are licensed with either of these broker/dealers.
e1040.com is an online tax preparation service that provides tax customers tax
return preparation under a fully automated option or with live tax preparer
assistance.

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.

The following table sets forth information covering the Company's operations by
reportable segment as of and for the years ended June 30, 2001, 2000 and 1999.
The intercompany revenue relates to Company employee financial planning revenue
which clears through the broker/dealer segment.

2001 2000 1999
---------------------------------------
Revenues:
Company Tax and Financial Planning Offices:
Tax preparation business and third party direct mail services................ $ 18,523,631 $ 17,144,810 $ 14,102,364
Financial planning business.................................................. 42,334,630 31,457,053 18,247,671
Total Company Tax and Financial Planning Offices............................... 60,858,261 48,601,863 32,350,035
Broker/Dealer Operations....................................................... 80,694,750 65,529,892 23,969,457
e1040.com...................................................................... 791,621 1,156,640 203,180
Intercompany revenue........................................................... (35,831,459) (25,709,901) (6,079,266)
Total revenue.............................................................. $106,513,173 $ 89,578,494 $ 50,443,406
Income (loss) before taxes:
Income (loss) from operations:
Company Tax and Financial Planning Offices................................... $ (375,931) $ (2,774,737) $ 1,438,973
Broker/Dealer Operations..................................................... 2,617,696 2,010,072 2,902,413
e1040.com.................................................................... (658,790) (6,023,662) (544,535)
Total income (loss) from operations........................................ $ 1,582,975 $ (6,788,327) $ 3,796,851

Interest expense:
Company Tax and Financial Planning Offices................................... $ (831,009) $ (439,245) $ (100,312)
Broker/Dealer Operations..................................................... (552,332) (475,284) (177,893)
e1040.com.................................................................... (19,869) (15,606) (2,756)
Total interest expense..................................................... $ (1,403,210) $ (930,135) $ (280,961)

2001 2000 1999
--------------------------------------------
Interest income:
Company Tax and Financial Planning Offices................................... $ 12,802 $ 92,692 $ 121,141
Broker/Dealer Operations..................................................... 210,544 138,853 7,900
e1040.com.................................................................... -- -- --
Total interest income...................................................... $ 223,346 $ 231,545 $ 129,041

Other income (expenses):
Company Tax and Financial Planning Offices................................... $ 640,900 $ 1,159,512 $ 23,348
Broker/Dealer Operations..................................................... 37,250 167,313 32,864
e1040.com.................................................................... 3,764 -- --
Total other income (expenses).............................................. $ 681,914 $ 1,326,825 $ 56,212

Income (loss) before taxes:
Company Tax and Financial Planning Offices................................... $ (553,237) $ (1,961,778) $ 1,483,149
Broker/Dealer Operations..................................................... 2,313,158 1,840,953 2,765,284
e1040.com.................................................................... (674,896) (6,039,267) (547,290)
Total Income (loss) before taxes........................................... $ 1,085,025 $ (6,160,092) $ 3,701,143

Depreciation and amortization:
Company Tax and Financial Planning Offices..................................... $ 1,831,026 $ 1,356,476 $ 1,014,324
Broker/Dealer Operations....................................................... 1,082,397 1,023,457 399,976
e1040.com...................................................................... 243,206 128,562 27,088
Total depreciation and amortization........................................ $ 3,156,629 $ 2,508,495 $ 1,441,388

Identifiable assets:
Company Tax and Financial Planning Offices..................................... $ 45,523,431 $ 41,319,358 $ 32,863,991
Broker/Dealer Operations....................................................... 23,787,300 22,826,533 20,893,702
e1040.com...................................................................... 821,864 736,613 323,726
Intercompany elimination....................................................... (17,701,700) (20,977,326) (21,082,439)
Total identifiable assets.................................................. $ 52,430,895 $ 43,905,178 $ 32,998,980

Capital expenditures:
Company Tax and Financial Planning Offices..................................... $ 1,234,618 $ 2,211,389 $ 699,498
Broker/Dealer Operations....................................................... 397,006 574,136 51,896
e1040.com...................................................................... 300,121 517,130 --
Total capital expenditures................................................. $ 1,931,745 $ 3,302,655 $ 751,394

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:

2001 2000 1999
----------- ------------- -------------
Current:
Federal...................................................................... $ (11,000) $ (1,945,000) $ 1,292,165
State and local.............................................................. 253,000 275,000 269,835
Total current tax (benefit) provision...................................... $ 242,000 $ (1,670,000) $ 1,562,000
Deferred:
Federal...................................................................... $ 686,000 $ 11,000 $ (34,734)
State and local.............................................................. 19,000 (488,000) (7,266)
Total deferred tax (benefit) provision..................................... 705,000 (477,000) (42,000)
Total income tax (benefit) provision....................................... $ 947,000 $ (2,147,000) $ 1,520,000

Deferred tax assets as of June 30, consist of the following:
2001 2000 1999
-----------------------------------------
Compensation expense recognized for financial reporting
purposes in connection with common stock option grants............................ $ 46,000 $ 163,000 $ 152,000
Book amortization of intangibles in excess of tax................................. 422,000 274,000 225,000
Provision for bad debts........................................................... 125,000 36,000 36,000
Employees advances................................................................ (385,000) - -
Installment gain.................................................................. (140,000) - -
Deferred rent..................................................................... (28,000) - (15,000)
Tax depreciation in excess of book................................................ (178,000) (175,000) (157,000)
Marketable securities............................................................. (2,000) - 10,000
Software developments costs....................................................... (292,000) (96,000) -
Investments accounted for under equity method..................................... (74,000) (23,000) (58,000)
Net operating loss carry-forwards for Federal and State tax purposes.............. 1,024,000 491,000 -
Total deferred tax assets--net................................................ $ 518,000 $ 670,000 $ 193,000

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

The Company has Federal and State net operating loss carryforwards as of June
30, 2001 of $1,133,139 and $8,522,459, respectively, which will be carried
forward and utilized in subsequent periods. If the Company experiences a change
of ownership as defined by Internal Revenue Code section 382, use of the net
operating loss may be limited.

The income tax receivable of $185,338 as of June 30, 2001 consists of
approximately $69,000 of 2000 State refunds and $116,000 of overpayments. In the
year ended June 30, 2000, there was an income tax receivable of $1,945,000
relating to Federal income tax refunds expected on net operating loss
carrybacks. Some of the losses were not eligible to be carried back to earlier
years, and $553,000 of the income tax receivable was reclassed as a deferred tax
asset. An IRS examination of the Fiscal periods ended June 30, 1997 through June
30, 1999 was completed during the current year, which resulted in a net tax
liability of approximately $172,000.

A reconciliation of the Federal statutory rate to the provision for income taxes
is as follows:

Year Ended June 30,

2001 2000 1999
------------------------------------------------------------
Federal income taxes (benefit) computed at statutory rates. $368,000 34.0% $(2,094,000) (34.0%) $1,257,000 34.0%
State and local taxes (benefit), net of Federal tax benefit 99,000 9.1% (141,000) (2.2%) 241,000 6.5%
Amortization of intangible assets with no benefit.......... 378,000 34.9% 254,000 4.1% 145,000 3.9%
AMT credit disallowed per IRS exam and
previously benefited....................................... 172,000 15.8% (172,000) (2.8%) - -
Income tax receivable not previously recognized............ (99,000) (9.1%) - - - -
Other...................................................... 29,000 2.6% 6,000 0.0% (123,000) (3.3)%
Total income tax (benefit)/provision..................... $947,000 87.3% $(2,147,000) (34.9%) $1,520,000 41.1%

15. Quarterly Financial Data (Unaudited)

Per Share
Weighted
Average Earnings
Income (Loss) Tax Provision Net (Loss) -----------------
Fiscal Year: Revenue Before Taxes (Benefit) Income Basic Diluted
- ---------------------------------------------------------------------------------------------------------------------------------
2001
Q1............................................... $ 21,339,780 $(2,178,774) $ (769,107) $(1,409,667) $(0.18) $(0.12)
Q2............................................... 19,449,289 (2,156,397) (1,229,146) (927,251) (0.12) (0.12)
Q3............................................... 32,901,173 3,528,346 1,902,441 1,625,905 0.20 0.20
Q4 (a)........................................... 32,822,931 1,891,850 1,042,576 849,274 0.10 0.10
----------------------------------------------------------------------------
Total.......................................... $106,513,173 $ 1,085,025 $ 946,764 $ 138,261 - -
----------------------------------------------------------------------------

2000
Q1............................................... $ 12,736,729 $(2,854,804) $(1,226,852) $(1,627,952) $(0.22) $(0.22)
Q2............................................... 14,337,566 (2,629,952) (1,124,176) (1,505,776) (0.20) (0.20)
Q3............................................... 36,552,830 76,811 33,029 43,782 0.01 0.01
Q4............................................... 25,951,369 (752,147) 170,999 (923,146) (0.12) (0.12)
-----------------------------------------------------------------------------
Total.......................................... $ 89,578,494 $(6,160,092) $(2,147,000) $(4,013,092) - -
-----------------------------------------------------------------------------

1999
Q1............................................... $ 5,764,434 $ (207,571) $ (85,104) $ (122,467) $(0.02) $(0.02)
Q2............................................... 6,092,917 (127,891) (52,435) (75,456) (0.01) (0.01)
Q3............................................... 20,137,326 5,830,175 2,387,945 3,442,230 0.54 0.48
Q4............................................... 18,448,729 (1,793,570) (730,406) (1,063,164) (0.15) (0.15)
----------------------------------------------------------------------------
Total.......................................... $ 50,443,406 $ 3,701,143 $ 1,520,000 $ 2,181,143 - -
----------------------------------------------------------------------------

(a)During the fourth quarter of Fiscal year 2001, the Company rescinded an
acquisition resulting in approximately $600,000 of other income, (see Note 3).

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors and Shareholders of Gilman + Ciocia, Inc.:

We have audited the accompanying consolidated balance sheets of Gilman + Ciocia,
Inc. and subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of operations, cash flows and stockholders' equity for each of ~the
three years in the period ended June 30, 2001. 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 in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gilman + Ciocia, Inc. and
subsidiaries as of June 30, 2001 and 2000 and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2001, 2000 and 1999 in conformity with accounting principles generally accepted
in the United States.

Dated: September 28, 2001
New York, New York

Gilman + Ciocia, Inc.
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 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 periods indicated:

Sales Prices
------------
Quarter Ended High Low
- ------------------------------------------------------------
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........................ $13 $10 1/4
December 31, 1999......................... $11 28/64 $ 7 3/4
March 31, 2000............................ $ 9 3/4 $ 5 3/4
June 30, 2000............................. $ 7 3/8 $ 3 1/2
September 30, 2000........................ $ 4 3/4 $ 3 9/16
December 31, 2000......................... $ 6 7/16 $ 2 1/2
March 31, 2001............................ $ 5 7/16 $ 2 1/2
June 30, 2001............................. $ 4 13/20 $ 2 3/4

The Company does not know the causes 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.

As of September 25, 2001, there were approximately 275 registered holders of
common stock. On the closing of trading on September 25, 2001, the price of the
common stock was $2.35 per share. During Fiscal 2001, 10,000 shares of common
stock were sold for a total proceeds of $30,205.

GTAX
GILMAN + CIOCIA
1311 Mamaroneck Avenue, Suite 160
White Plains, NY 10605
914.397.4829
www.gtax.com