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  2. 2. To Our Shareholders: The theme for this year is Believe It to Achieve It. And as you should be able to tell, WE BELIEVE IT! Fiscal Year 2006 has been an amazing journey for Liberty Tax Service. It is hard to find words to describe the abundance of Photo above: CEO Founder John great events that have Hewitt received Entrepreneur of the Year taken place over the recognition by the International last twelve months. Franchise Association. Our pace of growth and expansion has been nothing short of remarkable. All of us at Liberty feel blessed to be a part of a phenomenon that continues to rapidly expand throughout the United States and Canada. We are working hard to use this unprecedented expansion and attention that we have received to do good for others and continue to expand our core business. We remain an unconventional company. We are committed to serving our customers with the “Show me a good and gracious loser, and I’ll show you a best experience inside failure.” and outside our brick Knute Rockne and mortar locations. We have expanded our presence on the internet to include several interactive programs. This year 2005 return during tax season. marketplace most concepts will fail. Our we launched our on-line filing program We are managing Liberty Tax strategic advantage is our franchisees. It is that allows customers to complete and Service with long term focus. We are our belief that franchisees will out hustle file their tax return on-line. We also convinced that this is the only way to and outperform a company employee any introduced a casualty loss calculator that run our Company. We have watched day of the week. Our competition has allowed people affected by Hurricane our competition stumble and fall as a mostly employees running their locations. Katrina to compute the casualty loss result of not keeping their eye on the The point is that in order to maintain benefits they might qualify for by ball. We remain focused on the tax our strategic advantage and continue amending last year’s tax return. By doing preparation industry and developing to grow Liberty Tax Service we need to this, Katrina victims were able to receive “happy, successful franchisees.” Great make sure that our franchisees are happy the amount of the casualty loss benefit franchise concepts are plentiful, but and successful. The bottom line must sooner than if they had to wait to file a without a strategic advantage in the equal profit. The individual franchise
  3. 3. owner’s unit economics drive the system. Our business philosophy involves the measurement and sharing of key business metrics and best practices in a way that leads to healthy internal competition and growth within the system. Here are a few examples of how we accomplish this task. · Top Performance Rankings Our intranet (Zee Net) provides daily reporting of individual office and franchisee performance. We provide up to the minute reports of performance in many areas such as Top 50 offices, Top 10 new offices, most improved offices, highest gross dollar volume for offices and Franchise entities and many more. Franchisees can see how they stack up in these key areas and discern whether they are in the top, bottom or middle of the system. These reports spur competition, friendly wagering and, most importantly, the drive and desire for each franchisee to grow their business and ultimately the company. · Conference Calls During tax season I am on a Conference Call over fifty times. These Conference Calls are a way for us to share with all of our franchisees the best practices that are taking place across the country. We invite our best performing franchisees to share their activities and experiences in real time. This way these best practices can be implemented almost immediately by other franchisees. · Individual Performance Metrics Each time a franchisee logs on to our intranet they see a performance grid that is specific to their operation. This grid allows the franchisee to see in a “snapshot” where they stand in terms of number of tax returns, fees, discounts and other key metrics that are vital to the operation of their business. By providing this information in a quick view format we are allowing the franchisees to see where they are excelling and what areas may need attention. · Daily Communications Each morning our franchisees receive an e-mail that details upcoming events, material changes in software, new marketing ideas and important operational information. This communication was developed as a means to deliver “breaking news” in an encapsulated format. Since our business is extremely seasonal, sometimes hours can make a difference. This Daily Communication is just another example of how we strive to deliver critical information to our Happy Successful Franchisees.
  4. 4. We have devoted extraordinary resources to finding the most creative and innovative people and give them the tools they need to change the complexion of this industry. Liberty Tax people know that they are expected to invest time and energy on bring to the organization a bird’s eye view of what is needed from a franchisee’s perspective. It is strategies like these that help our system grow and flourish. From my experience, I feel that most franchise companies do not value the franchisee’s input. I, on the other hand, view input cutting edge projects that create new as an asset and consider it critical to opportunities to serve our customers achieving our goals. better and build market share. Another The Mission Statement remains unique strategy we use is to hire, on a fundamental to our culture. We believe short term basis in most cases, some more than ever before that setting the of our franchisees who have exhibited standard, improving each day and having unique skills in the areas of marketing, some fun will make the world a better operations, technology, tax research and place. We are changing people’s lives software development. These individuals and it is beyond gratifying for all of us to work for us during the off–season to help experience. develop and enhance our programs and “Becoming number one is easier than remaining number one.” Bill Bradley Photos left: Liberty received a tremendous amount of free advertising and accolades in 006. Above: Lady Liberty makes special appearances at events throughout the country. Revenue (in $ millions) $66.1 $51.0 $42.2 $28.5 $17.9 $10.7 RANKED #10 OVE RALL 2006 2001 2004 2005 2002 2003
  5. 5. Finally, I would like to address the reporter. Liberty Tax Service came out on phenomenal year we have experienced top. Again we were recognized as one of from our public relations efforts. This has the three branded tax companies by the been by far the best year for publicity we national media. · Entrepreneur magazine ranked have ever had. Of course my expectations are even greater for the future, but here is Liberty Tax Service in the top 10 of the a short list of the highlights for 2006. best 500 U.S. franchises. I am the only · I was named Entrepreneur of the person to have founded two of the top Year by the International Franchise ten opportunities on the list. · Our media exposure count Association. Needless to say I was honored to receive this award from such nationwide culminated in over 1,700 hits an influential and prestigious organization. in newspaper, radio and television - over I was also humbled, realizing that I did 40% more than last year. not get here alone. I continue to thank After seeing this all in writing I am my family, the franchisees, employees and thrilled at what we have accomplished stockholders of Liberty Tax Service for and excited by everything that is left joining me on this fantastic journey. to do. The trust that you, our investors, · In conjunction with winning have placed in us is something we take the award, I appeared on the cover of extremely seriously. I thank you yet again for your continued support as we head Franchising World Magazine, published by the IFA. (It’s not Rolling Stone, but we towards our tenth anniversary. It should were happy with the results!) be some kind of celebration. · Liberty Tax Service was featured on the front page of the Wall Street Journal Sincerely, on April 17th with a full column story and a four color picture, touting our guerrilla marketing tactics. I would venture to say that none of our competition has ever John T. Hewitt garnered that much ink on the front page Founder, Chairman of the Board of theWSJ, especially for a non-financial and President. related story. · CNN made mention of Liberty Tax Service on the morning news April 17th. One anchor told the other, “You need to invest in that guy” (meaning me!). · ABC News sent a camera crew to Virginia Beach to interview me, as the tax preparation industry spokesman, about tax preparer competency. I appeared on World News Tonight. · NBC News sent hidden cameras into offices of Jackson Hewitt, HR Block and Liberty Tax. Each company was given the same tax scenario. In both cases Block and Jackson Hewitt were caught on tape (National News) giving bad advice to the Photos above and left: New fran- chisees are trained in proper guerrilla marketing tactics. All dress in Liberty costumes and hit the streets to get a feel for the job. Next page above right: Liberty marketers hand out free giveaways, like these fireworks glasses, at sporting events to get our name out. 6
  6. 6. 62% of the 134,000,000 individual returns processed by the Internal Revenue The Game Plan Service were completed by a paid Growth and Expansion preparer compared to 60% in 2004. This year our network of offices completed Liberty Tax Service continues to be approximately 1.2 million tax returns the fastest growing retail tax preparation in the US and Canada. In 2006, Liberty company EVER. In Fiscal Year 2006 Tax Service has over 1,300 franchisees the Company operated 1,946 offices operating, on average, 1.48 locations each. in the United States and Canada. For It is our goal to cap the total number of next tax season we anticipate operating franchisees at about 1,600 and increase approximately 2,500 offices. The tax the average number of locations operated industry also continues to grow. This year, by each to approximately 5-7. These “When you win, nothing hurts.” Joe namath Number of Offices 1946 1735 1409 919 611 551 2001 2004 2002 2003 2005 2006
  7. 7. The Offensive Line Technology and Development A most exciting project is the development of our state of the art tax preparation software “Libtax”. In 2004 we purchased a Microsoft platform from a tax software company in Washington state with the intent of using the basis to develop our own software. We expect metrics will allow us to reach our goal support for the franchisees. of being the biggest tax preparation Each Area Developer has company in the world. It is also a key purchased the rights to develop strategy that is vital to the successful a large geographical area and support of our franchisees which will to share in the profits. These allow them to develop and maintain a individuals are responsible for healthy bottom line. the unit sales and development Another key metric of our growth is of these areas. As a result, the the average net fee. This year we grew AD has a vested interest in the our average net fee in the U.S. to $155 success and profitability of which is a 20% increase from last year. the unit franchisee. They are This is an important statistic to monitor therefore motivated to ensure because a healthy net fee increase helps that each franchisee under grow our company-wide bottom line in their tutelage is achieving their an economically sound fashion. Also, as goals. the system matures, the need for deep Secondly, the Area discounting starts to dissipate and allows Developer provides a more Liberty franchisees to collect fees that are immediate and intimate commensurate with the superior level of connection to the franchisee. service they provide. Currently the program includes In FY 2006 we added 341 new 85 Area Developers and franchisees to our system and awarded covers better than 75% of the the rights to 491 territories. Same store geography of the United States. sales increased over 25% from 2005 and We plan to expand the program second year offices grew by 54%. It took to Canada next year. 22% more returns for a franchisee to make it on to the List of Top 50 offices, which is Here we grow again! a highly coveted place to be. A major factor in the growth and expansion of the Liberty system is the Photos above and left: Liberty Area Development (AD) program. This joined forces with Cell Phones concept has been in place since 2003. It for Soldiers again in 006. Our has been an overwhelming success in a customers are thrilled to drop number of ways. First and foremost an off their old cell phones and Area Developer adds an extra layer of help our troops overseas. Next page above right: Cell Phones for Soldiers founders Brit- tany and Robbie Bergquist met with Defense Secretary Donald Rumsfeld during a visit to Washington DC.
  8. 8. this software to revolutionize the industry and change the competitive landscape forever. So far we have not been disappointed. Libtax was tested in a beta version this season in 13 offices in Hampton Roads, VA. The federal portion of the program received rave reviews. Over 8,000 returns were filed in the beta test with very positive input from the to roll the next version of the program franchisees who tested. State software out to approximately 400 offices in 2007. development is currently taking place. Our technology team has dedicated a Because we are developing the program significant amount of time and resources almost from scratch, we have been able to creating a state of the art web to add a significant number of bells and based support function for use by the whistles that will make the program a franchisees and staff. Ultimately the goal tax preparer’s dream come true. The is to shift the majority of the support to information that can be gathered and then an interactive web based incident system extracted for analysis will give us greater and knowledge base. As a result of these insight into our customers. We have plans “Swifter, higher, stronger” motto of the olympic games Number of Franchisees 1314 1097 804 551 376 376 248 2001 2004 2005 2006 2002 2003
  9. 9. fondly referred to as “Libby” was deployed on optimizing our public web site to to over 300 offices last year. More are make search engine marketing more on the way for 2007 as our franchisees effective for our customers. We continue clamor to generate even bigger and better to explore ways to use the internet to publicity hits. increase brand awareness and promote In keeping with our commitment to our products and services economically social responsibility Liberty Tax Service through pay per click advertising. remains involved with the Cell Phones for Soldiers campaign. It has been a cornerstone for our public service pledge. In FY 2006 our franchises collected over 50,000 retired cell phones which translated into over 500,000 minutes of telephone time given via phone cards to soldiers serving overseas. Our franchisees use every public relations opportunity they have to help promote this cause. It is an excellent way of doing good. And the accolades just keep on coming. In addition to being ranked in efforts there has been a significant shift the top ten of Entrepreneur magazine’s in support incidents communicated list of top franchise opportunities, over the web vs. telephone. Knowledge several other publications recognized base utilization increased 94% and web Liberty Tax Service. Black Enterprise support utilization increased from 35% Magazine ranked us as one of the “Top last year to 61% in 2006. These two 20 Franchises that will make you rich;” efforts resulted in a 60% decrease in long Hispanic Trends Magazine ranked Liberty distance phone charges. This is another as a top rated technology based franchise; example of how Liberty Tax Service Accounting Today ranked Liberty as employees are challenging each other to one of the top tax and accounting firms discover creative ways to do things faster, and named John one of the 100 most cheaper and better. influential people in the accounting profession for the fifth straight year; Franchise Times named Liberty to the list of up and coming franchisors; and John The Fans was awarded the IFA Entrepreneur of the Promotion and Publicity Year Award and featured on the cover of their magazine, Franchising World. Creative license isn’t just a buzz We also continue to step up our phrase at Liberty Tax Service. Our commitment to serving the Hispanic franchisees and employees are community by offering training classes continuously looking for ingenious ways in cultural and tax related topics to to promote the brand. Last tax season educate the franchisees on working with we had over 3000 costumed characters Latinos. A certification program has been working to bring in new customers. Our developed to give training and guidance marketing efforts can only be described as to franchisees in an effort to more OUTRAGEOUS. And it pays. In FY 2006 adequately serve the non-English speaking our marketing antics generated over 1,700 sector of our business. media exposures As the for the company. proliferation Our front page of the internet article in the Wall continues to Street Journal is dominate the but one example marketing of how our army arena, Liberty of Lady Liberty’s Tax Service is generating has taken hundreds of major strides thousands of to increase our dollars worth of presence on free advertising for the web. We us. are currently Our mascot, working 0
  10. 10. Our convention was attended by over 1,500 people and was held at the new convention center in Virginia Beach. The celebration has become so large that there is not a single hotel that can accommodate us in the area. The franchisees were entertained for three days with parties, meetings, dancers and a casino night. The theme of this year’s event was fittingly “Believe It to Achieve It” which sums up the culmination of the ninth year of Liberty Tax Service’s existence. Many people told us we couldn’t do it. But we did because we believed. The world of Liberty Tax Service continues to grow and flourish. 2007 promises to be bigger and better for the company. We have many plans in the Photos both pages: Liberty’s 006 works to increase our exposure and our convention was the biggest ever! Moti- brand thereby ultimately propelling us vational speaker Keith Harrell (oppo- toward the goal of being the biggest tax site above left) was a highlight of the preparer in the universe. opening ceremonies which included a special guest (this page above) - no, that’s actually comedian impersonator Steve Bridges. Believe It to achieve it
  11. 11. The Pittsburgh Steelers win the Super Bowl THE WALL STREET JOURNAL. Liberty Has Over ,00 Offices © 2006 Dow Jones Company, Inc. All Rights Reserved. MONDAY, APRIL 17, 2006 attention-getting. Children know that the In working-class neighborhoods— Upstart Tax Preparer two are often good for free Statue of Liberty says it serves the same market as Liberty crowns. Wal-Mart Stores Inc.—Uncle Sam and Uncle Sam and Lady Liberty have been Lady Liberty have become cultural icons. Surges to No. 3 Spot at it since January, and today their “They’re always out there, and they’re numbers could reach a new high. As the hilarious,” says 22-year-old Delissa Drake PROOF Riding ‘the Wavers’ midnight deadline approaches for filing of Kansas City, Kan., who says the wavers tax returns in most states, the population attracted her to Liberty this year for help of Uncle Sams and Lady Libertys on the in filing her first-ever return. i i i streets of America could hit 3,000. Mr. Hewitt doesn’t have strict require- Tomorrow, all will be gone. ments for the job. He says homeless Dancing Uncle Sams Lure “Uncle Sam gets hung up for another people are welcome. Many of the actors year,” says Willis Tyus, the most popular interviewed described themselves as Customers to Liberty; of several Uncle Sams on 39th Street here unemployed or underemployed. Mr. Tyus, in Kansas City, Kan. the star of 39th Street here, lost his job of Dodging a Tossed Hot Dog 7 7 Uncle Sam and Lady Liberty are the seven years as a window washer over the creations of a tax-preparation industry winter. From the median of 39th Street pioneer named John Hewitt. After build- one recent day, he pointed disapprovingly By KEVIN HELLIKER ing a firm called Jackson Hewitt Inc. into at streaks in some recently washed the industry’s second-largest player be- windows across the street. KANSAS CITY, Kan.—Kebba Njie was hind HR Block Inc., Mr. Hewitt orches- earning $6 an hour moving furniture and trated a sale of Jackson Hewitt, resigned In working-class cleaning up messes when the opportunity and soon afterward started a new arose to play Uncle Sam. company, Liberty Tax Service. To get John Is Named Never mind that Mr. Njie, a West neighborhoods, customers into Liberty’s doors, he started African immigrant, isn’t old, bearded or hiring costumed wavers. an American citizen. To passersby on The strategy seemed ill-advised to some Uncle Sam and State Avenue here, he became the because costumed wavers—for instance, nation’s symbol. the Chick-fil-A restaurant cows that hold Lady Liberty are signs saying Eat Mor Chikin—generally personify the promise of food and fun. By now cultural icons. contrast, Uncle Sam and Lady Liberty tout the promise of a well-prepared Form 1040. Entrepreneur Of The Year When a Florida official of HR Block took a page out of Liberty’s book by dress- Then he quickly returned to character, ing up as a big green block, HR head- dancing and bantering with drivers quarters wasn’t amused. stopped at a light. Praised by his boss as “This was off-strategy and that person the top waver at this site, the 57-year-old was reprimanded for doing it,” says an Mr. Tyus says, “I like to be the best at HR Block spokeswoman. “Americans whatever I do.” expect an experienced, highly trained tax Liberty Tax says the job pays between professional to lead them through the $8 and $10 an hour. Here in Kansas City, myriad of tax-law changes. That’s why however, some wavers report receiving By The International HR Block is serious about the image it only $7 an hour, including Mr. Njie, the projects.” West African immigrant. The wavers work in shifts of only four hours so as not Yet Liberty and its franchisees have to lose their enthusiasm and energy. opened nearly 2,000 offices in nine years. Kalid Baste Anyone who asks a question about the That makes Liberty the industry’s third- service is told to visit the office. largest player after HR Block and Those new to the job must watch a Jackson Hewitt, and its fastest-growing. Waver Jerron Dennis and Lady Liberty training video that shows wavers dancing Mr. Hewitt gives much of the credit to his outside Liberty Tax Service in Chicago. and doing cartwheels to get attention. The costumed characters. “A lot of people Liberty Reaches video recommends that wavers salute carry their W-2 in their wallet, and when RANKED Franchise Association police cars and fire trucks, give truckers they see our wavers they pull right in,” he On street corners across America, the “honk-the-horn gesture” and tip their says. Chicago franchisee Kalid Baste says Uncle Sam waves, dances, shouts, sings headgear toward senior citizens. Young he considered wavers “foolish” until #10 OVERALL and plays air guitar on behalf of a tax- people should be given the peace sign, heavy losses at his Liberty stores forced preparation service. A regular companion although some wavers have found that him to give them a try. Soon, he says, is Lady Liberty. Her antics are similarly this can be misinterpreted. “The police revenue doubled. (over please) The Top 0 On THE PUBLISHER’S SALE OF THIS REPRINT DOES NOT CONSTITUTE OR IMPLY ANY ENDORSEMENT OR SPONSORSHIP OF ANY PRODUCT, SERVICE, COMPANY OR ORGANIZATION. Custom Reprints (609)520-4331 P.O. Box 300 Princeton, N.J. 08543-0300. DO NOT EDIT OR ALTER REPRINT••/REPRODUCTIONS NOT PERMITTED #30633 ! Entrepreneur’s Liberty Makes The Front Page List of Best Of The Wall Street Journal Franchises 006 00 00 Syracuse University wins the NCAA Men’s Basketball John Hewitt is named Championship Virginia Entrepreneur of the Year by Ernst Young. Here, John’s son Danny accepts the award. Liberty is ranked #06 on Inc. magazine’s Inc. 00 list of privately-held companies The New York Yankees win the World Series Andre Agassi wins the U.S. Open Liberty moves its John Hewitt world headquar- is named one ters to Bonney John’s of the top 00 Road in Virginia non-compete most influential Beach, VA clause ends people in accounting by 000 Accounting Today
  12. 12. Tax Wars heated The Tampa Bay up when HR Lightning wins Block tried to the Stanley Cup compete with Liberty is ranked # on Liberty in Entrepreneur’s Franchise guerrilla 00; # on their list of Top marketing Low-Cost Franchises and # on the list of Fastest Growing Franchise Opportunities Liberty is ranked # on Entrepreneur’s Liberty franchisees and Franchise 00; #6 on staff visit New York their list of Top City on the day of the Low-Cost Franchises reopening of the Statue and # on the list of Liberty in August of Fastest Growing Franchise Opportunities 00 00 Tony Stewart wins Nascar’s Nextel Cup Championship 00 0 War Emblem wins the Kentucky Derby Liberty wins a lawsuit against Liberty makes HR Block, forcing Block to NBC Today Show debut stop misrepresenting tax loans appearance as refunds or refund amounts The LA Lakers win the NBA Championship for the rd consecu- tive year France wins the World Cup Tiger Woods wins the Masters Golf Tournament UR name changes to Liberty Tax Service. Pictured- Liberty officially the statue in Las begins operations Vegas that gave John in Canada Hewitt the idea for the name. Five Liberty offices open in U.S. in Columbus, Ohio.
  13. 13. Liberty Directors, Officers and Culture Committee Directors John Hewitt Chairman John Garel Steven Ibbotson Gary Golding Ross Longfield George Robson Officers John Hewitt President and Chief Executive Officer Charles Kirkpatrick Mark Baumgartner Chief Information Officer Chief Financial Officer Steven Lepkowski Kathleen Curry Vice President of Sales and Marketing Vice President of Legal Martha O’Gorman Mark Johnson Vice President of Marketing Vice President of Area Development Rufe Vanderpool Vice President of Operations Culture Committee Oscar Aujero Cory Hughes Stacey Barnes Dave Miller Chris Bushey Mike Piper Danny Hewitt Nathalie Sauvaire John Hewitt Kelly Wyatt
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  15. 15. JTH TAX, INC. AND SUBSIDIARIES (d/b/a Liberty Tax Service) Consolidated Statement of Stockholders’ Equity and Comprehensive Income Year ended April 30, 2006 Special voting Common stock, Class A Common stock, Class B Preferred stock, Class A Preferred stock, Class B preferred stock Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at May 1, 2005 5,500,853 $ 5,500,853 450,000 $ 450,000 190,000 $ 2,375,000 25,000 $ 497,742 10 $ 10 Issuance of common stock in connection with purchase of customer lists 2,000 2,000 — — — — — — — — Exercise of warrants (note 10) 121,320 121,320 — — — — — — — — Exercise of stock options (note 11) 155,090 155,090 — — — — — — — — Balance at April 30, 2006 5,779,263 $ 5,779,263 450,000 $ 450,000 190,000 $ 2,375,000 $ 25,000 $ 497,742 10 $ 10 Accumulated Exchangeable Common stock Additional other shares committed to be issued Put paid-in Treasury stock comprehensive Retained Shares Amount Shares Amount warrants capital Shares Amount income earnings Total Balance at May 1, 2005 100,000 $ 100,000 4,000 $ 32,000 1,679,578 9,595,083 323,000 $ (1,288,000) 205,144 13,723,749 32,871,159 Issuance of common stock and common stock committed to be issued in connection with purchase of customer lists (2,000) (16,000) — 78,342 — — — — 64,342 — — Adoption of FASB statement No. 150 (note 10) — — — — (1,679,578) 1,679,578 — — — — — Exercise of warrants (note 10) — — — — — 181,980 — — — — 303,300 Exercise of stock options, including income tax benefit of $469,420 (note 11) — — — — — 926,798 — — — — 1,081,888 Repurchase of outstanding stock — — — — — — 17,500 (140,000) — — (140,000) Net income — — — — — — — — — 8,271,700 8,271,700 Foreign currency translation adjustment — — — — — — — — 133,680 — 133,680 Comprehensive income 8,405,380 Balance at April 30, 2006 100,000 $ 100,000 2,000 $ 16,000 — 12,461,781 340,500 $ (1,428,000) 338,824 21,995,449 42,586,069 See accompanying notes to consolidated financial statements.
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  17. 17. JTH TAX, INC. AND SUBSIDIARIES (d/b/a Liberty Tax Service) Notes to Consolidated Financial Statements April 30, 2006, 2005 and 2004 to the existence of financing provided to purchase the franchise and/or for working capital and equipment needs. An entity that will absorb a majority of the VIE’s expected losses or expected residual returns, as defined in FIN 46R, is considered the primary beneficiary of the VIE. The primary beneficiary should include the VIE’s assets, liabilities and results of operations in its consolidated financial statements. During 2006, the Company was deemed to be the primary beneficiary of 16 of its franchise entities due to the relatively significant financial support provided to these entities. The Company does not hold an ownership interest in any of these entities. The summarized effect of these entities in the consolidated balance sheet at April 30, 2006, and the consolidated statement of income for the year then ended, is as follows: JTH Tax, Inc. Consolidating and adjustments subsidiaries VIEs and eliminations Consolidated Assets Current assets $ 64,703,149 343,513 (2,711,879) 62,334,783 Non-current assets 37,069,590 1,577,970 (1,278,127) 37,369,433 Total assets $ 101,772,739 1,921,483 (3,990,006) 99,704,216 Liabilities, Minority Interest and Stockholders’ Equity Current liabilities $ 38,124,875 3,258,759 (3,008,486) 38,375,148 Non-current liabilities 18,722,547 1,140,140 (1,140,140) 18,722,547 Total liabilities 56,847,422 4,398,899 (4,148,626) 57,097,695 Minority interest — — 20,452 20,452 Stockholders’ equity (deficit) 44,925,317 (2,477,416) 138,168 42,586,069 Total liabilities, minority interest and stockholders’ equity $ 101,772,739 1,921,483 (3,990,006) 99,704,216 Revenue $ 64,281,546 2,773,060 (902,060) 66,152,546 Operating expenses 46,101,962 3,844,685 (1,237,210) 48,709,437 Other, net (457,670) — 52,929 (404,741) Income (loss) before income taxes and cumulative effect of accounting change 17,721,914 (1,071,625) 388,079 17,038,368 Income tax expense 7,110,966 — — 7,110,966 Income (loss) before cumulative effect of accounting change 10,610,948 (1,071,625) 388,079 9,927,402 Cumulative effect of accounting change — — (1,655,702) (1,655,702) Net income (loss) $ 10,610,948 (1,071,625) (1,267,623) 8,271,700 (Continued)
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