Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,

WASHINGTON, D.C. 20549


FORM 10-Q


(Mark one)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended Septemberquarterly period ended June 30, 2007

2017

OR

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                        

Commission File Number:file number: 000-27945



ASCENDANT SOLUTIONS,

DOUGHERTY’S PHARMACY, INC.

(Exact name of registrant as specified in its charter)



Delaware
 
75-2900905
(State or other jurisdiction
(I.R.S. Employer
of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)


16250 Dallas Parkway, Suite 111, Dallas, Texas
75248

5924 ROYAL LANE SUITE 250

DALLAS, TEXAS 75230

(Address of principal executive offices) (Zip code)

972-250-0945

(Address of principal executive offices)

(Zip Code)
Registrant’s telephone number, including area code: 972-250-0945

16250 Dallas Parkway, Suite 100, Dallas, Texas
 (Former Name or Former Address, if Changed Since Last Report)

code)

Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yesx Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx


Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (as definedfiler, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act Rule 12b-2).LargeAct. (Check one)

Large accelerated fileroAccelerated filero

Non-accelerated filero (Do not check if a smaller reporting company)

Smaller reporting companyx
Emerging growth companyo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.oAccelerated filer  oNon-Accelerated filer  x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o No x

At November 12, 2007 there were approximately 22,783,560

Number of shares of Ascendant Solutions, Inc. common stock, outstanding.$0.0001 par value, of registrant outstanding at August 7, 2017: 22,476,821

5
   
6
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations12
Item 3.Quantitative and Qualitative Disclosures About Market Risk16
Item 4.Controls and Procedures16
PART II.OTHER INFORMATION17
Item 1.Legal Proceedings17
Item 6.Exhibits17
SIGNATURES18

2





ASCENDANT SOLUTIONS, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(000's omitted, except par value and share amounts)
 
       
  
September 30,
  
December 31,
 
  
2007
  
2006
 
  
(Unaudited)
    
ASSETS
      
       
Cash and cash equivalents $1,303  $2,686 
Trade accounts receivable, net  5,346   5,339 
Other receivables  228   387 
Receivable from affiliates  76   66 
Inventories, net  3,333   2,832 
Prepaid expenses  705   637 
Total current assets  10,991   11,947 
Property and equipment, net  985   1,019 
Goodwill  7,299   7,299 
Other intangible assets  -   95 
Equity method investments  415   419 
Other assets  254   260 
Total assets
 $
19,944
  $
21,039
 
         
LIABILITIES AND STOCKHOLDERS' EQUITY
        
         
Accounts payable $2,333  $2,293 
Accrued liabilities  3,377   3,634 
Notes payable, current  2,835   6,106 
Total current liabilities  8,545   12,033 
Notes payable, long-term  4,575   3,824 
Minority interests  968   947 
Total liabilities
  
14,088
   
16,804
 
Commitments and contingencies (Note 8)        
         
Stockholders' equity:        
Common stock, $0.0001 par value; 50,000,000 shares authorized; 22,752,308 and 22,508,170 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively  2   2 
Additional paid-in capital  60,313   60,176 
Deferred compensation  (85)  (25)
Accumulated deficit  (54,374)  (55,918)
Total stockholders' equity
  
5,856
   
4,235
 
Total liabilities and stockholders' equity
 $
19,944
  $
21,039
 
         
See accompanying notes to the Condensed Consolidated Financial Statements 



-2-

PART I – FINANCIAL INFORMATION

Table of Contents



ASCENDANT SOLUTIONS, INC.
    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    
(000's omitted, except share and per share amounts)
    
(Unaudited)
    
             
  
Three Months Ended
  
Nine Months Ended
 
  
September 30,
  
September 30,
 
  
2007
  
2006
  
2007
  
2006
 
     
(Restated)
     
(Restated)
 
Revenue:            
Healthcare $10,894  $10,313  $32,809  $30,273 
Real estate advisory services  4,244   1,971   11,171   8,504 
   15,138   12,284   43,980   38,777 
Cost of sales:                
Healthcare  7,376   6,929   21,917   21,061 
Real estate advisory services  2,427   1,130   6,951   5,071 
   9,803   8,059   28,868   26,132 
Gross profit  5,335   4,225   15,112   12,645 
                 
Operating expenses:                
Selling, general and administrative expenses  4,251   3,739   12,602   11,835 
Non-cash stock compensation  11   33   21   51 
Depreciation and amortization  93   183   357   534 
Total operating expenses  4,355   3,955   12,980   12,420 
Operating income  980   270   2,132   225 
Equity in earnings (losses) of equity method investees  214   (84)  75   (300)
Other income  74   18   152   222 
Interest expense, net  (184)  (199)  (519)  (579)
Income (loss) before minority interest and income tax provision  1,084   5   1,840   (432)
Minority interest  (11)  -   (22)  (31)
Income tax provision  (181)  (13)  (274)  (98)
Income (loss) from continuing operations  892   (8)  1,544   (561)
                 
Income (loss) from discontinued operations  -   -   -   230 
Net income (loss) $892  $(8) $1,544  $(331)
                 
Basic net income (loss) per share                
Continuing operations $0.04   *  $0.07  $(0.02)
Discontinued operations  -   -   -   0.01 
  $0.04   *  $0.07  $(0.01)
Diluted net income (loss) per share                
Continuing operations $0.04   *  $0.07  $(0.02)
Discontinued operations  -   -   -   0.01 
  $0.04   *  $0.07  $(0.01)
*Less than $0.01 per share                
Average common shares outstanding, basic  22,752,308   22,454,628   22,639,218   22,436,456 
Average common shares outstanding, diluted  23,024,533   22,454,628   22,855,238   22,436,456 
                 

-3-

Item 1. Financial Statements

Dougherty’s Pharmacy, Inc.

Table of Contents



See accompanying notes to the Condensed Consolidated Financial Statements. 
ASCENDANT SOLUTIONS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
(000's omitted)
 
(Unaudited)
 
  
Nine Months Ended September 30,
 
  
2007
  
2006
 
Operating Activities
    
Restated
 
Net income (loss) $1,544  $(331)
Adjustments to reconcile net income (loss) to net cash        
  provided by (used in) operating activities:        
Provision for doubtful accounts  266   397 
Depreciation and amortization  357   534 
Deferred compensation amortization  21   51 
Issuance of stock in lieu of directors fees  56   32 
Non-cash equity in (income) losses of equity method investees        
Fairways Frisco, LP  4   373 
Ampco Partners, Ltd.  (79)  (73)
Income from early extinguishment of debt  -   (100)
Loss on sale of property and equipment  -   7 
Minority interest  22   31 
Discontinued operations  -   (230)
Changes in operating assets and liabilities:        
Accounts receivable  (273)  360 
Inventories  (501)  (11)
Prepaid expenses and other assets  81   (375)
Accounts payable  40   (91)
Accrued liabilities  (257)  (547)
Net cash provided by continuing operations  1,281   27 
Net cash provided by discontinued operations  -   230 
Net cash provided by operating activities  1,281   257 
Investing Activities
        
Distributions from limited partnerships  37   85 
Proceeds from sale of property and equipment  -   6 
Purchases of property and equipment  (223)  (161)
Distributions to limited partners  -   (33)
Net cash used in investing activities  (186)  (103)
Financing Activities
        
Proceeds from exercise of common stock options  -   48 
Proceeds from sale of limited partnership interests  -   230 
Payments on notes payable  (11,262)  (2,360)
Proceeds from notes payable  8,784   985 
Net cash used in financing activities  (2,478)  (1,097)
         
Net decrease in cash and cash equivalents  (1,383)  (943)
Cash and cash equivalents at beginning of year  2,686   3,221 
         
Cash and cash equivalents at end of period $1,303  $2,278 
Supplemental Cash Flow Information
        
Cash paid for income taxes $215  $137 
Cash paid for interest on notes payable $530  $565 
Noncash financing activities:
        
Partnership distributions applied to note payable $42  $38 

-4-

ASCENDANT SOLUTIONS, INC.
Consolidated Balance Sheets

(000’s omitted, except par value and share amounts)

  June 30,  December 31, 
  2017  2016 
  (Unaudited)  (Audited) 
ASSETS      
       
Current Assets        
Cash $448  $58 
Restricted cash  303   303 
Trade accounts receivable, net  1,749   1,901 
Other receivables  313   113 
Receivable from affiliates  11   12 
Inventories, net  3,443   3,340 
Prepaid expenses  209   286 
Total current assets  6,476   6,013 
Long term receivable  608    
Property and equipment, net  1,168   1,386 
Intangible assets, net  3,227   3,681 
Investments carried at cost     1,295 
Deferred tax asset  3,000   3,000 
Total assets $14,479  $15,375 
         
LIABILITIES        
         
Current Liabilities        
Accounts payable $3,029  $2,643 
Accrued liabilities  369   293 
Notes payable, current portion  783   1,129 
Total current liabilities  4,181   4,065 
Notes payable, long-term portion  7,053   7,607 
Total liabilities  11,234   11,672 
         
STOCKHOLDERS' EQUITY        
         
Stockholders' equity:        
Preferred stock, $0.0001 par value; 7,500,000 shares authorized: none issued and outstanding      
Common stock, $0.0001 par value; 50,000,000 shares authorized; 23,506,821 shares issued and 22,476,821 shares outstanding at June 30, 2017; 23,447,679 shares issued and 22,417,679 shares outstanding at December 31, 2016  2   2 
Additional paid-in capital  60,159   60,144 
Accumulated deficit  (56,519)  (56,046)
Treasury stock, at cost, 1,030,000 shares  (397)  (397)
Total stockholders' equity  3,245   3,703 
Total liabilities and stockholders' equity $14,479  $15,375 

See Notes to Condensed Consolidated Financial Statements




1.
Basis of Presentation
3

Dougherty’s Pharmacy, Inc.

Consolidated Statements of Operations

(000’s omitted, except share and per share amounts)

(Unaudited)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2017  2016  2017  2016 
             
Revenue $10,211  $10,998  $20,266  $21,814 
Cost of sales  7,448  8,163  14,716  16,057 
Gross profit  2,763   2,835   5,550   5,757 
                 
Operating expenses                
Selling, general and administrative expenses  2,624  2,692  5,188  5,447 
Non-cash stock compensation  3   4   15   10 
Depreciation and amortization  254   267   520   528 
Total operating expenses  2,881   2,963   5,723   5,985 
Operating loss  (118)  (128)  (173)  (228)
                 
Other income    40    40 
Interest expense  (100)  (111)  (202)  (217)
Loss on disposal of assets  (75)  (114)  (75)  (114)
Loss before provision for income tax  (293)  (313)  (450)  (519)
Income tax provision  (12)  (10)  (23)  (20)
Net loss $(305) $(323) $(473) $(539)
                 
                 
Basic and diluted net loss per share attributable to common stockholders $(0.01) $(0.01) $(0.02) $(0.02)
Weighted-average number of shares - Basic and diluted  22,455,471   22,126,281   22,436,615   22,111,519 

See Notes to Consolidated Financial Statements

4

Dougherty’s Pharmacy, Inc.

Consolidated Statements of Cash Flows

(000’s omitted)

(Unaudited)

  Six Months Ended June 30, 
  2017  2016 
Operating Activities        
Net loss $(473) $(539)
Items not requiring (providing) cash        
Loss from disposal of assets  75   114 
Provision for doubtful accounts     28 
Depreciation and amortization  520   528 
Stock-based compensation  15   10 
Changes in operating assets and liabilities:        
Accounts receivable  87   (233)
Inventories  (140)  (174)
Prepaid expenses and other assets  (56)  112 
Accounts payable  367   1,084 
Accrued liabilities  77   28 
         
Net cash provided by operating activities  472   958 
         
Investing Activities        
Purchases of property and equipment  (73)  (461)
Cash proceeds from disposition of pharmacy  274    
Cash received upon disposition of investment  617    
         
Net provided by (used in) investing activities  818   (461)
         
Financing Activities        
Payments on notes payable  (10,326)  (14,267)
Proceeds from notes payable  9,426   13,750 
         
Net cash used in financing activities  (900)  (517)
         
Net increase (decrease) increase in cash  390   (20)
         
Cash, beginning of period  361   371 
Cash, end of period $751  $351 
         
Supplemental Cash Flow Information        
Cash paid for income taxes $40  $42 
Cash paid for interest $191  $205 
         
Reconciliation of Cash to the Consolidated Balance Sheets        
Cash $448  $49 
Restricted cash  303   302 
Total cash $751  $351 

See Notes to Consolidated Financial Statements

5

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

1.       Organization and Significant Accounting Policies

Description of Business

Dougherty’s Pharmacy, Inc. (“Dougherty’s” or the “Company”) is a value oriented investment firm focused on successfully acquiring, managing and growing community based pharmacies in the Southwest Region.

A summary of the Company’s investments at June 30, 2017, is shown in the table below:

DateEntityTransaction Description%
Ownership
March 2004Dougherty’s Holdings, Inc. and subsidiaries (“DHI” or the “Borrowers”)Acquisition of retail pharmacy100%
September 2010ASDS of Orange County, Inc. (“ASDS”)Holding company for Investment in CRESA Partners of Orange County, L.P. (“CPOC”)100%

On February 7, 2017, CRESA Partners of Orange County, L.P., an affiliate of Cresa Partners-West, Inc. was acquired by Savills Studley, Inc. liquidating the partnership interest in its entirety held by ASDS of Orange County, Inc. As of December 31, 2016, the estimated value of this investment was recorded at $1,295,000, which represents the estimated future cash payments for this transaction. The unaudited condensedCompany has received payments of $617,000 and recorded $70,000 included in short term other receivables with the remainder as a long term receivable due in three increments over 49 months, contingent on certain milestones expected to be achieved.

On May 6, 2017, the Company sold its pharmacy in Humble, Texas, acquired in September 2014, and received total cash proceeds of $274,000 related to this transaction. The revenues and earnings of the pharmacy are not significant to the consolidated financial statements included herein reflecttaken as a whole.

Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Dougherty’s and all adjustments, consisting onlysubsidiaries for which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements of normal recurring adjustments, whichthe Company and its wholly owned subsidiaries have been prepared by the Company, in accordance with accounting principles generally accepted in the opinionUnited States (“GAAP”) for interim financial information and are presented in accordance with the requirements of management are necessary to fairly state Ascendant Solutions, Inc.’s (“Ascendant Solutions” or the “Company”)Form 10-Q and Rule 10-01 of Regulation S-X, and have not been audited. Accordingly, these unaudited consolidated financial position, consolidated resultsstatements do not include all of operationsthe information and consolidated cash flowsnotes required by GAAP for the periods presented.  These condensed consolidatedcomplete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016 included in the Company’s Form 10-K10. In the opinion of management, the interim unaudited consolidated financial statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the Company’s financial position, the results of operations and cash flows for the year ended December 31, 2006 as filed withperiods presented. Due to seasonality, the Securities and Exchange Commission.  The consolidated results of operations for the quarterthree and six months ended SeptemberJune 30, 20072017, are not necessarily indicative of the results to be expected for any subsequent quarter orfuture interim period for the entire fiscal year ending December 31, 2007.  The December 31, 2006 consolidated balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  Terms not otherwise defined herein shall have the meaning given to them in the Company’s Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.


2.
Description of Business

Ascendant Solutions is a diversified financial services company which is seeking to or has invested in or acquired, healthcare, manufacturing, distribution or service companies.  The Company also conducts various real estate activities, performing real estate advisory services for corporate clients, and, through an affiliate, purchases real estate assets, as a principal investor.

The following is a summary of the Company’s identifiable business segments, consolidated subsidiaries and their related business activities:

Business Segment
Subsidiaries
Principal Business Activity
HealthcareDougherty’s Holdings, Inc. and Subsidiaries (“DHI”)Healthcare products and services provided through retail pharmacies, including specialty compounding pharmacy services and home infusion therapy centers
Real estate advisory services
CRESA Partners of Orange County, L.P. (“CPOC”),
ASDS of Orange County, Inc.,
CRESA Capital Markets Group, L.P.
Tenant representation, lease management services, capital markets advisory services and strategic real estate advisory services
Corporate & other
Ascendant Solutions, Inc.,
ASE Investments Corporation
Corporate administration, investments in Ampco Partners, Ltd., Fairways Frisco, L.P. and Fairways 03 New Jersey, L.P.

During 2002, the Company made its first investments, and it has continued to make additional investments and acquisitions throughout 2003, 2004 and 2005.

-5-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



A summary of the Company’s investment and acquisition activity is shown in the table below:

Date
Entity
Business Segment
Transaction Description
%
Ownership
April 2002Ampco Partners, LtdCorporate & otherInvestment in a non-sparking, non-magnetic safety tool manufacturing company10%
August 2002VTE, L.P.Corporate & otherInvestment to acquire early stage online electronic ticket exchange company23%
October 2002CRESA Capital Markets Group, L.P., ASE Investments CorporationReal estate advisory servicesInvestment to form real estate capital markets and strategic advisory services companies80%
November 2003Fairways 03  New Jersey, L.P.Corporate & otherInvestment in a single tenant office building20%
March 2004Dougherty’s Holdings, Inc. and SubsidiariesHealthcareAcquisition of specialty pharmacies and therapy infusion centers100%
April 2004Fairways 36864, L.P.Corporate & otherInvestment in commercial real estate properties24.75%
May 2004CRESA Partners of Orange County, L.P., ASDS of Orange County, Inc.Real estate advisory servicesAcquisition of tenant representation and other real estate advisory services company99%
December 2004Fairways Frisco, L.P.Corporate & otherInvestment in a mixed-use real estate development
5.8%1

1 The Company was the initial limited partner in Fairways Frisco, L.P. (“Fairways Frisco”), which obtained a 60% ownership interest in the Frisco Square Partnerships on December 31, 2004.  Fairways Frisco subsequently sold additional limited partnership interests following which the Company's interest in Fairways Frisco was diluted to approximately 8.87%.  In March 2007, Fairways Frisco acquired the 40% interest in the Frisco Square Partnerships not owned by it resulting in Fairways Frisco owning 100% of the Frisco Square Partnerships.  In April 2007, the general partner of the Frisco Square Partnerships made a capital call of the limited partners in the amount of $5 million, which the Company did not participate in.  This capital call was fully funded and as a result the Company's limited partnership interest was reduced from 8.87% to approximately 5.8%.  On August 3, 2007, the Frisco Square Partnerships transferred a significant portion of their real estate interests and related liabilities to a new limited partnership in exchange for an interest in such entity.  As part of that transaction, a third-party financial partner contributed cash into such new partnership in exchange for its limited partnership interest in the new partnership owning the real estate interest and related liabilities previously owned by the Frisco Square Partnerships. The Frisco Square Partnerships realized a gain on the sale of its land and buildings to the new partnership.

Certain of these transactions involved related parties or affiliates as more fully described in the Company’s consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2006.

-6-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



The Company will continue to look for acquisition opportunities, however, its current cash resources are limited and it will be required to expend significant executive time to assist the management of its acquired businesses.  The Company will continue seeking to (1) most effectively deploy its remaining cash and debt capacity (if any) and (2) capitalize on the experience and contacts of its officers and directors.

Please see Note 10 “Business Segment Information” in the notes hereto for additional information.

Summary of Significant Accounting Policies

Principles of Consolidation
The condensed consolidated financial statements include the accounts of Ascendant Solutions, Inc. and all subsidiaries for which the Company has significant influence over operations.  All intercompany balances and transactions have been eliminated.  The limited partnership interests for the subsidiaries and related minority interests are included on the balance sheet as Minority Interests.

2017.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires management to make estimates and assumptions that affect the reported condensed consolidatedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and accompanying notes, including allowance for doubtful accountsthe reported amounts of revenues and inventory reserves.expenses during the reporting period. Actual results could differ from those estimates.

6

Equity Method Investments
Equity method investments

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

1.       Organization and Significant Accounting Policies (Continued)

Concentration of Credit Risk

The Company’s credit risk relates primarily to its trade accounts receivables and its receivables from affiliates, along with cash deposits maintained at financial institutions in excess of federally insured limits on interest bearing accounts. Management performs continuing evaluations of debtors’ financial condition and maintains an allowance for uncollectible accounts as determined necessary.

Accounts Receivable

Receivables recorded in the financial statements represent investmentsvalid claims against debtors for services rendered or other charges arising on or before the balance sheet date. Management makes estimates of the collectability of accounts receivable. Specifically, management analyzes accounts receivable and historical bad debts, customer credit-worthiness, current economic trends, and changes in limited partnerships accountedcustomer payment terms and collections trends when evaluating the adequacy of the allowance for doubtful accounts. Any change in the assumptions used in analyzing accounts receivable may result in additional allowances for doubtful accounts being recognized in the periods in which the change in assumptions occurs.

At June 30, 2017 and 2016, 100% of the trade accounts receivable is from retail pharmacy operations.

Inventories

Inventories consist of health care product finished goods held for resale, valued at the lower of cost using the equityfirst-in, first-out method of accounting for investments, and none represent investments in publicly traded companies.  The equity method is used as the Company does not have a majority interest and does not have significant influence over the operations of the respective companies.or market. The Company also uses the equity methodmaintains an estimated reserve against inventory for investments in real estate limited partnerships where it owns more than 3% to 5% of the limited partnership interests.  Accordingly, the Company records its proportionate share of the income or losses generated by equity method investees in the condensed consolidated statements of operations.  If the Company receives distributionsexcess, slow-moving, and obsolete inventory as well as inventory for which carrying value is in excess of its equity in earnings, they are recorded as a reductionnet realizable value.

Long-Lived Assets

The Company evaluates the recoverability of the carrying value of its investment.


long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Revenue Recognition

Healthcare revenues

Revenues generated by the retail pharmacy operations are reported at the estimated net realizable amounts expected to be received from individuals, third-party payors, institutional healthcarehealth care providers and others. The Company recognizes revenue from the sale of pharmaceutical products and retail merchandise as transactions occur and product is delivered to the customer. Revenue from product sales is recognized at the point of sale and service revenue is recognized at the time services are provided.


Real estate advisory services revenue

Sales and similar taxes collected from clients are excluded from revenues. The obligation is primarily from brokerage commissionsincluded in accounts payable until the taxes are remitted to the appropriate taxing authorities.

All revenues earned during the three and six months ended June 30, 2017 and 2016, were earned from project leasingthe retail pharmacy business.

Cost of Sales

Cost of sales includes the purchase price of goods sold, prescription packaging, compounded prescription direct labor, inventory obsolescence, freight costs, cash discounts and tenant representation transactions.  Brokerage commission revenuevendor rebates. Rebates or refunds received by the Company from its suppliers are considered as an adjustment of the prices of the supplier’s products purchased by the Company.

7

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is generally recorded upon executionbased on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more-likely-than-not that some portion or all of a lease contract, unless additional activities are required to earn the commission pursuant to a specific brokerage commission agreement.  Participation interests in rental incomedeferred tax asset will not be realized.

Tax positions are recognized overif it is more-likely-than-not, based on the lifetechnical merits, that the tax position will be realized or sustained upon examination. The term more-likely-than-not means a likelihood of more than 50%; the terms examined and upon examination also include resolution of the lease.   Other revenuerelated appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is recognizedinitially and subsequently measured as the following consulting services are provided: facilitylargest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold consider the facts, circumstances and site acquisitioninformation available at the reporting date and disposition, lease management, design, construction and development consulting, move coordination and strategic real estate advisory services.  Participation interests in rental income are recognized over the life of the lease.


Net Income (Loss) Peris subject to management’s judgment.

Earnings per Share

Basic and diluted net income (loss)earnings per share is computed based on theby dividing net income (loss) applicable to common stockholders dividedloss by the weighted average number of shares of common stock outstanding during each period.  The number of dilutive shares resulting from assumed conversion of stock options and warrants are determined by using the treasury stock method.   See Note 4 for more information regarding the calculation of net income (loss) per share.


-7-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



Recent Accounting Pronouncements

In May 2006, the State of Texas replaced the current franchise tax system with a new Texas Margin Tax (“TMT”).  The TMT is a 1% gross receipts tax based on the Company’s taxable margin, as defined by the new law.  However, for taxable entities primarily engaged in retail and wholesale trade, the rate is 0.5% of taxable margin.  The Company has evaluated the impact of the TMT on its consolidated financial position, results of operations or cash flows and has concluded that the TMT does not appear it will have a material impact on its results of operations.
Upon the adoption of FIN 48, we had no unrecognized tax benefits.  During the first nine months of 2007, we recognized no adjustments for uncertain tax benefits.  We recognize interest and penalties related to uncertain tax positions in income tax expense; however, no interest and penalties related to uncertain tax positions were accrued at September 30, 2007.  The tax years 2003 through 2006 remain open to examination by the major taxing jurisdictions in which we operate.  We expect no material changes to unrecognized tax positions within the next twelve months.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, this Statement does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after December 15, 2007.  We are currently evaluating the impact, if any; the adoption of SFAS 157 will have on our consolidated financial position, results of operations or cash flows.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the guidance is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007, provided the provisions of SFAS 157 are applied. The Company is evaluating SFAS 159 and has not yet determined the impact of the adoption, if any, it will have on the Company’s consolidated financial statements.

Reclassifications
Certain prior period balances have been reclassified to conform to the current period presentation. 

Discontinued Operations

As disclosed in Note 11 below, on November 7, 2007, the Company sold its Park InfusionCare business.  Prior to May 2006, this business had been reported as a discontinued operation while the Company was pursuing a potential disposition or strategic transaction for this business.  As disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board of directors decided to retain the operations of Park InfusionCare.  All Park InfusionCare amounts in this Form 10-Q for the three and nine month periods ended September 30, 2007 and 2006 have been reported as part of continuing operations.

Critical accounting policies not otherwise included herein are included in the Company’s Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.


-8-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



3.
Trade Accounts Receivable

Trade accounts receivable consist of the following:
  
September 30,
  
December 31,
 
  
2007
  
2006
 
  
(Unaudited)
    
Healthcare:
      
Trade accounts receivable $3,912,000  $3,268,000 
Less - allowance for doubtful accounts  (379,000)  (318,000)
   3,533,000   2,950,000 
Real Estate Advisory Services:
        
Trade accounts receivable  1,813,000   2,389,000 
Less - allowance for doubtful accounts  -   - 
   1,813,000   2,389,000 
         
  $5,346,000  $5,339,000 

Healthcare trade accounts receivable consists primarily of amounts receivable from third-party payors (insurance companies and governmental agencies) under various medical reimbursement programs, institutional healthcare providers, individuals and others and are not collateralized.  Certain receivables are recorded at estimated net realizable amounts.  Amounts that may be received under medical reimbursement programs are affected by changes in payment criteria and are subject to legislative actions.  Healthcare reduces its accounts receivable by an allowance for the amounts deemed to be uncollectible.  In general, an allowance for retail pharmacy accounts aged in excess of 60 days and infusion therapy accounts aged in excess of 180 days is established.  Accounts that management has ultimately determined to be uncollectible are written off against the allowance.

Healthcare accounts receivable from Medicare and Medicaid combined were approximately 12.7% and 13.3% of total accounts receivable at September 30, 2007 and December 31, 2006, respectively.  No other single customer or third-party payor accounted for more than 10% of Healthcare’s accounts receivable at September 30, 2007 or December 31, 2006, respectively.  In addition, for the three and nine month periods ended September 30, 2007 and 2006, the Healthcare operations did not derive revenue in excess of ten percent from any single customer.

The Company’s real estate advisory services operations grant credit to customers of various sizes and provide an allowance for doubtful accounts equal to the estimated uncollectible amounts based on historical collection experience and a review of the current status of trade accounts receivable.  For the three months ended September 30, 2007, the Company’s real estate advisory services operations derived revenues in excess of ten percent from four customers totaling approximately $2,227,000 which represents 52.5% of total real estate advisory services revenue, and it derived revenues in excess of ten percent from three customer totaling $1,206,000, which represents 61.2% of total real estate advisory services revenue for the three months ended September 30, 2006.

For the nine months ended September 30, 2007, the Company’s real estate advisory services operation derived revenues in excess of ten percent from two customers totaling approximately $3,006,000 which represents 26.9% of total real estate advisory services revenue, and it derived revenues in excess of ten percent from one customer totaling approximately $3,058,000 which represents 37.5% of total real estate advisory services revenue for the nine months ended September 30, 2006.

-9-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



4.           Computation of Basic and Diluted Net Income (Loss) Per Common Share

Basic net income (loss) per common share is based on the net income (loss) divided by the weighted averageweighted-average number of common shares outstanding during the period. Diluted net income (loss)earnings per common share is based on thecomputed by dividing net income (loss) dividedloss and unrecognized stock based-based compensation by the weighted averageweighted-average number of common shares including equivalent common shares of dilutive common stock options and warrants outstanding during the period.  No effect has been given to outstanding options or warrants inperiod and the diluted computation forunvested restricted stock units. The unrecognized stock based compensation as of June 30, 2017 and 2016 is $127,000 and $46,000, respectively; the threeunvested restricted stock units are 658,500 and nine month periods ended September 30, 2006 as their effect would be anti-dilutive due233,000, respectively. Due to the net loss.losses for both years, restricted stock units for 2017 and 2016 were anti-dilutive.

Accounting Pronouncements Not Yet Adopted

ASU No. 2016-02, Leases (Topic 842)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires the lessee to recognize assets and liabilities for leases with lease terms of more than twelve months. For leases with a term of twelve months or less, the Company is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Further, the lease requires a finance lease to recognize both an interest expense and an amortization of the associated expense. Operating leases generally recognize the associated expense on a straight line basis. ASU 2016-02 requires the Company to adopt the standard using a modified retrospective approach and becomes effective on January 1, 2019. The numberCompany is currently evaluating the impact that ASU 2016-02 will have on its financial position, results of potentially dilutive stock optionsoperations and warrants excludedcash flows.

Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts with Customers (Topic 606)”

In August 2015, the computationFASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), an update to ASU 2014-09. This ASU amends ASU 2014-09 to defer the effective date by one year for annual reporting periods beginning after December 15, 2017. Subsequently, the threeFASB has also issued accounting standards updates which clarify the guidance. This ASU removes inconsistencies, complexities and nine monthallows transparency and comparability of revenue transactions across entities, industries, jurisdictions and capital markets by providing a single comprehensive principles-based model with additional disclosures regarding uncertainties. The principles-based revenue recognition model has a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Early adoption is permitted for annual reporting periods ended September 30, 2006 was approximately 308,785 and 430,699.beginning after December 15, 2016. In transition, the ASU may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is evaluating the effect of adopting this new accounting guidance including the transition method.

8

A reconciliation of basic and diluted net income (loss) per common share follows:

  
Three Months Ended September 30,
  
Nine Months Ended September 30,
 
  
2007
  
2006
  
2007
  
2006
 
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
 
     
(Restated)
     
(Restated)
 
             
Income (loss) from continuing operations, net of taxes $892,000  $(8,000) $1,544,000  $(561,000)
Income from discontinued operations, net of taxes  -   -   -   230,000 
Net income (loss) $892,000  $(8,000) $1,544,000  $(331,000)
                 
Weighted average common shares outstanding-Basic  22,752,308   22,454,628   22,639,218   22,436,456 
Effect of dilutive stock options and warrants  272,225   -   216,020   - 
Weighted average common shares outstanding-Diluted  23,024,533   22,454,628   22,855,238   22,436,456 
                 
Basic earnings per share from:                
Continuing operations $0.04   *  $0.07  $(0.02)
Discontinued operations  -   -   -   0.01 
Basic net income (loss) per share  0.04   *   0.07   (0.01)
                 
Diluted earnings per share from:                
Continuing operations $0.04   *  $0.07  $(0.02)
Discontinued operations  -   -   -   0.01 
Diluted net income (loss) per share  0.04   *   0.07   (0.01)
*Less than $0.01 per share                


-10-

ASCENDANT SOLUTIONS, INC.

Dougherty’s Pharmacy, Inc.

Notes to Condensed Consolidated Financial Statements




5.
Equity Method Investments

Equity method investments

2.       Notes Payable

Notes payable consist of the following:

  June 30, 2017  December 31, 2016 
  (Unaudited)  (Audited) 
First National Bank of Omaha Credit Facility and Promissory Note secured by certain retail pharmacy assets        
Revolving line of credit in the principal amount of $4,750,000, interest at LIBOR plus 3.25% (4.31% at June 30, 2017) $3,970,000  $4,179,000 
         
Term note in the principal amount of $150,000 with interest payable at LIBOR plus 3.25% (4.31% at June 30, 2017) per annum payable in monthly installments of $10,000 plus all accrued and unpaid interest due. Paid in full February 8, 2017.     100,000 
         
Cardinal Health Term Notes, secured by certain retail pharmacy assets        
Term note in the principal amount of $1,500,000 with interest payable at prime plus 2.75 (7.0% at June 30, 2017) per annum payable in monthly installments of $17,861 plus interest, a final payment of $446,533 plus all accrued and unpaid interest due in full on February 20, 2017. Refinanced March 31, 2017.     447,000 
         
Term note in the principal amount of $432,859 at fixed interest rate of 8.11% per annum payable in 36 monthly installments of $13,641. Final payment plus accrued and unpaid interest due in full on April 10, 2020.  402,000    
         
Term note in the principal amount of $1,827,850 with interest payable at prime plus 2.6% (6.85% at June 30, 2017) per annum payable in monthly installments of $15,232 plus interest, a final payment of $929,157 plus all accrued and unpaid interest due in full on July 10, 2020.  1,462,000   1,553,000 
         
Term note in the principal amount of $1,241,350 with interest payable at prime plus 2.6% (6.85% at June 30, 2017) per annum payable in monthly installments of $10,344 plus interest, a final payment of $638,850 plus all accrued and unpaid interest due in full on January 10, 2020.  931,000   993,000 
         
Term note in the principal amount of $744,100 with interest payable at prime plus 2.38% (6.63% at June 30, 2017) per annum payable in monthly installments of $6,200 plus interest, a final payment of $378,251 plus all accrued and unpaid interest due in full on August 10, 2020.  607,000   645,000 
         
Term note in the principal amount of $305,350 with interest payable at prime plus 2.4% (6.65% at June 30, 2017) per annum payable in monthly installments of $2,545 plus interest, a final payment of $155,220 plus all accrued and unpaid interest due in full on August 10, 2019.  216,000   231,000 
         
Term note in the principal amount of $168,350 with interest payable at prime plus 2.6% (6.85% at June 30, 2017) per annum payable in monthly installments of $2,004 plus interest, a final payment of $50,356 plus all accrued and unpaid interest due in full on September 10, 2019.     112,000 
         
Acquisition Notes Payable , unsecured        
Notes payable to sellers of acquired pharmacies with varying monthly payments with interest at 5.5% due through September 2018.  203,000   309,000 
         
Insurance notes payable, secured by the respective insurance policies        
Notes payable for the Company’s insurance policy premiums with varying monthly payments due through September 2017. Interest rates vary up to 3.68%  45,000   167,000 
   7,836,000   8,736,000 
Less current portion  (783,000)  (1,129,000)
  $7,053,000  $7,607,000 

9

  
Ownership %
  
September 30,
  
December 31,
 
  
At 9/30/07
  
2007
  
2006
 
     
(Unaudited)
    
          
Ampco Partners, Ltd.  10% $194,000  $194,000 
Fairways Frisco, LP  5.80%  221,000   225,000 
      $415,000  $419,000 

The Company’s ownership percentage in Fairways Frisco, L.P. was reduced during the second quarter of 2007 from 8.87% to 5.80% as a result of a capital call made by the general partner of the Frisco Square Partnership of the limited partners in the amount of $5 million in which the Company did not participate. On August 3, 2007, the Frisco Square Partnerships transferred a significant portion of their real estate interests and related liabilities to a new limited partnership in exchange for an interest in such entity.  As part of that transaction, a third-party financial partner contributed cash into such new partnership in exchange for its limited partnership interest in the new partnership owning the real estate interest and related liabilities previously owned by the Frisco Square Partnerships. The Frisco Square Partnerships realized a gain on the sale of its land and buildings to the new partnership.

Equity in earnings (losses) of equity method investees shown in the condensed consolidated statements of operations comprised the following:

  
Three Months Ended September 30,
  
Nine Months Ended September 30,
 
  
2007
  
2006
  
2007
  
2006
 
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
 
             
Ampco Partners, Ltd. $15,000  $5,000  $79,000  $73,000 
Fairways Frisco, L.P.  199,000   (89,000)  (4,000)  (373,000)
  $214,000  $(84,000) $75,000  $(300,000)

The Company’s investment in Fairways Frisco includes its cumulative cash investment of $1,219,000 and its cumulative equity in the losses of Fairways Frisco of ($998,000).  The Company received no distributions from Fairways Frisco during the three month and nine months periods ended September 30, 2007 and 2006, respectively.  Summarized financial information for Fairways Frisco is included below:

  
September 30,
  
December 31,
 
  
2007
  
2006
 
  
(Unaudited)
    
       
Total assets $14,736,000  $58,061,000 
Notes payable  10,962,000   55,568,000 
Total partners' capital  2,464,000   1,695,000 
Total liabilities and partnership capital  14,736,000   61,837,000 



-11-

ASCENDANT SOLUTIONS, INC.

Dougherty’s Pharmacy, Inc.

Notes to Condensed Consolidated Financial Statements





  
Three Months Ended September 30,
  
Nine Months Ended September 30,
 
  
2007
  
2006
  
2007
  
2006
 
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
 
             
Total revenue $603,000  $770,000  $2,121,000  $1,972,000 
Operating expenses  1,680,000   1,825,000   4,854,000   4,897,000 
Interest expense  1,273,000   599,000   2,644,000   2,075,000 
Minority interest  -   650,000   370,000   1,521,000 
Gain on sale of assets  5,776,000   -   5,776,000   - 
Net gain (loss) $3,426,000  $(1,004,000) $769,000  $(3,479,000)


6.           Prepaid Expenses

Prepaid expenses consist of the following:

  
September 30,
  
December 31,
 
  
2007
  
2006
 
  
(Unaudited)
    
       
Prepaid insurance $71,000  $179,000 
Deferred tenant representation costs  374,000   364,000 
Prepaid marketing costs  20,000   13,000 
Other prepaid expenses  240,000   81,000 
  $705,000  $637,000 

The Company’s real estate advisory services operations defer direct costs associated with its tenant representation services until such time a lease is signed between the tenant and landlord.  Upon execution of a signed lease, the Company expenses 50% of these direct costs associated with the transactions, with the balance being paid by the individual broker through a reduction in the commission earned.  The Company regularly reviews these direct costs and expenses the costs related to canceled or unlikely to be completed transactions.


-12-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



7.

2.       Notes Payable

Notes payable consist of the following: 
September 30,
  
December 31,
 
  
2007
  
2006
 
  
(Unaudited)
    
Amegy Bank National Association Credit Facility, secured by certain healthcare assets
      
Term note in the principal amount of $2,200,000, interest at Amegy Bank National Association prime plus 0.25% (8.00% at September 30, 2007) payable monthly in installments of $45,833 plus interest, all outstanding principal plus all accrued and unpaid interest is due in full in February 2011. $1,879,000  $- 
Revolving line of credit in the principal amount of $2,250,000, interest at Amegy Bank National Association prime (7.75% at September 30, 2007) interest payable monthly, principal due in full in February 2009.  1,504,000   - 
Advance Loan in the principal amount of $250,000, interest at Amegy Bank National Association prime plus 0.25% (8.00% at September 30, 2007) interest only payable monthly until September 20, 2008, thereafter, principal and interest due monthly, all outstanding principal plus all accrued and unpaid interest is due in full in August 2012.  -   - 
Bank of Texas Credit Facility, secured by substantially all healthcare assets
        
Term note A in the principal amount of $1,000,000, interest at 6% per annum payable monthly, principal due in full in March 2007. Paid in full in February 2007.  -   659,000 
Term note B in the principal amount of $4,000,000, interest at 6% per annum, principal and interest payable in monthly installments of $44,408 over 35 months with a balloon payment of principal due in March 2007. Paid in full in February 2007.  -   3,140,000 
Term note C in the principal amount of $529,539, interest at 6% per annum, principal and interest payable in monthly installments of $5,579 over 35 months with a balloon payment of principal due in March 2007. Paid in full in February 2007.  -   416,000 
 AmerisourceBergen Drug Corporation, unsecured note payable
        
Unsecured note in the principal amount of $750,000, interest at 6% per annum, principal and interest payable in monthly installments of $6,329 over 59 months with a balloon payment of principal of $576,000 due in March 2009.  630,000   658,000 
 Presidential HealthCredit, secured by Park InfusionCare trade receivables
        
Revolving line of credit in the principal amount of $1,000,000, interest at Presidential HealthCredit prime rate plus 2% but not less than 10.25% per annum (10.25% at September 30, 2007) interest payable monthly, principal due in full in April 2010 and secured by accounts receivable and related general intangibles of Park InfusionCare.  514,000   - 
Insurance premium finance notes payable
        
Term note payable in the principal amount of $218,264, payable in 9 equal installments of $24,888 through January 2008, interest payable at the fixed rate of 6.25%, secured by DHI's property and casualty insurance policies.  74,000   - 
CPOC term note payable to First Republic Bank
        
Term note in the principal amount of $5.3 million, due June 1, 2009, interest at Bank of America prime rate minus 0.25% (7.50% at September 30, 2007) payable monthly, principal of $300,000 payable quarterly with a balloon payment of $1,700,000 due on June 1, 2009 and secured by the assets of CPOC.  2,300,000   4,400,000 
Capital lease obligations, secured by office equipment
  106,000   129,000 
Demand note payable to affiliate
        
Demand note payable to Ampco Partners, Ltd., interest at Bank of Texas prime rate plus 4.00% (11.75% at September 30, 2007), secured by the Company's distributions from and partnership interest in Ampco Partners, Ltd., principal and accrued interest due on demand.  397,000   440,000 
Comerica Bank term note payable
        
Term note payable in the principal amount of $30,000, payable in 36 equal installments of $928 through April 2008, interest payable at the fixed rate of 7.00%, secured by all property and equipment of Ascendant Solutions, Inc.  6,000   14,000 
Insurance premium finance notes payable
        
Term note payable in the principal amount of $82,875, payable in 9 equal installments of $9,450 through August 2007, interest payable at the fixed rate of 6.25%, secured by the Company's directors and officers insurance policies. Paid in full in August 2007.  -   74,000 
   7,410,000   9,930,000 
Less current portion  (2,835,000)  (6,106,000)
  $4,575,000  $3,824,000 


-13-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements




The aggregate (Continued)

Future maturities of notes payable for the 12 months ended Septemberat June 30, 2017 are as follows:


2008 $2,835,000 
2009  3,771,000 
2010  575,000 
2011  229,000 
Thereafter  - 
  $7,410,000 

On February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton Medicine Man, LP, and Santa Fe Medicine Man, LP (collectively, the “Borrowers”), each a wholly-owned subsidiary of DHI, entered into a loan agreement with Amegy Bank National Association (“Amegy Bank” or the “Lender”) for a $2,000,000

2017  $783,000 
2018   4,652,000 
2019   2,017,000 
2020   384,000 
    $7,836,000 

The revolving line of credit (the “Amegy(“the Revolver”) and a $2,200,000 term loan (the “Term Loan”).  Substantially all ofwith the proceeds from the Revolver and the Term Loan were used to retire the outstanding balance owed toFirst National Bank of Texas, N.A. under an existing credit facility.  The Term Loan and Omaha (“the Amegy Revolver are being guaranteed by the Company, DHI, Medicine Man, LP, Dougherty’s LP Holdings, Inc., Medicine Man GP, LLC, Alvin Medicine Man GP, LLC, Angleton Medicine Man GP, LLC and Santa Fe Medicine Man GP, LLC.


Outstanding advances under the Amegy Revolver will bear interest at the Lender’s prime rate.  Accrued and unpaid interest on the Amegy RevolverLender”) is due monthly beginning on March 20, 2007.  All outstanding principal under the Amegy Revolver plus all accrued and unpaid interest thereon is due and payable in full on February 20, 2009.  On a monthly basis beginning on April 1, 2007, the Borrowers paid to Lender a one-half percent per annum commitment fee on the average daily unused portion of the Revolver.

The Term Loan bears interest at the Lender’s prime rate plus 0.25%.  Principal payments of $45,833 and accrued and unpaid interest on the Term Loan are due monthly beginning on March 20, 2007.  All outstanding principal under the Term Loan plus all accrued and unpaid interest thereon is due and payable in full on February 20, 2011.

The Term Loan and the Amegy Revolver are secured by, but not limited to, the accounts receivable, inventory, and the fixed assets of the Borrowers and the stock of Dougherty’s Pharmacy, Inc.  The Term Loanincludes nonfinancial and the Amegy Revolver are cross-collateralized and cross-defaulted.

On August 29, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton Medicine Man, LP, and Santa Fe Medicine Man, LP, each an indirect wholly-owned subsidiary of Ascendant Solutions, Inc. (the “Company”), entered into an Amendment to Loan Documents (the "Amendment") with Amegy Bank National Association, amending that certain Loan Agreement, dated February 20, 2007, between the Borrowers and Lender.

Pursuant to the Amendment, the Borrowers amended the Loan Agreement, among other things, to increase the principal amount of the Amegy Revolver from $2,000,000 to $2,250,000 and added a new advance loan (the "Advance Loan") in the principal amount of $250,000.  Accrued and unpaid interest on the Amegy Revolver shall remain due and payable in monthly installments beginning September 20, 2007 through February 20, 2009.

Outstanding advances under the Advance Loan will bear interest at the Lender’s prime rate plus 0.25%.  Accrued interest only is due monthly on the Advance Loan until September 20, 2008.  Thereafter, principal and accrued interest on the Advance Loan is due monthly beginning on October 20, 2008 until maturity on August 29, 2012, at which time all outstanding principal and accrued and unpaid interest is due and payable in full.  The Borrowers will pay to Lender a one-time, non-refundable Advance Facility Fee in an amount equal to one-half percent of the principal amount of the Advance Loan.

The Revolving Loan and the Advance Loan are guaranteed by the Company, Dougherty’s Holdings, Inc. Medicine Man, LP, Dougherty’s LP Holdings, Inc., Medicine Man GP, LLC, Alvin Medicine Man GP, LLC, Angleton Medicine Man GP, LLC and Santa Fe Medicine Man GP, LLC.


-14-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



Both the Term Loan and the Amegy Revolver are subject to certain financial covenants including but not limited to, a cap on management fees, a limit on dividendsdebt service coverage and distributions except for dividends and distributions between Borrowers or any of the Borrowers’ subsidiaries, a limit on payments of subordinated debt to the Company and a limit on additional debt of the Borrowers.  Furthermore, the loan agreement provides that the Borrowers will maintain a maximum ratio of funded debt to earnings before interest, taxes, depreciation and amortization plus certain non-recurring charges and fees (“Adjusted EBITDA”) and a minimum ratiooperating EBITDA ratios. As of Adjusted EBITDA to current maturities of long term bank debt and interest.  The Company is currentlyJune 30, 2017 the Borrowers were in compliance with these financial covenants.

Bothcovenants via waiver letter by the First Republic BankLender. Subsequent to June 30, 2017, the Revolver was extended and renegotiated.(See Note 6, Subsequent Events) Accordingly, the Revolver has been excluded from current liabilities in the accompanying 2017 and 2016 consolidated balance sheets.

The Company refinanced the Cardinal Health Term Note due February 20, 2017 to a term noteof 36 months at 8.11% fixed rate interest.

3.       Stock and revolving lineShare-Based Compensation

Restricted Share Unit Incentive Plan

On November 13, 2013, the Board of credit are subjectDirectors approved and adopted the Restricted Share Unit (“RSU”) Incentive Plan. Under the plan the Company can award RSUs to certain financial covenants includingemployees and non-employee directors and consultants pursuant to restricted stock agreements contingent upon continuous service. Under the restricted stock agreements, the restricted shares will vest annually over a minimum ratio of earnings before interest, taxes, depreciationfour-year period and amortization to debt service and a limitwill be payable in stock, valued at the fair market value on annual capital expenditures.  the grant date.

As of SeptemberJune 30, 2007, CPOC was in compliance with these financial covenants. The Term Note is being guaranteed by CPOC.  The term note and2017, the revolver are also being personally guaranteed, subject to certain limits, by certain officers and minority limited partners of CPOC.  The Company is not paying any compensation to the individuals providing these guaranties.


On April 17, 2007, Park InfusionCare, LP, Park InfusionCare of Dallas, LP, Park InfusionCare of Houston, LP and Park InfusionCare of San Antonio, LP (collectively, the “Park InfusionCare Borrowers”), each an indirect wholly-owned subsidiary of the Company, entered into a loan agreement with Presidential Healthcare Credit Corporation (the “Lender”) for a $1,000,000 revolving line of credit (the “Presidential Revolver”).  The Park InfusionCare Borrowers may request advancesfollowing shares had been issued under the Presidential Revolver up2013 RSU Plan:

Year of Issuance:  Number of
Shares
  Fair Value
at Date of
Grant
  Shares
Vested
  Non-Vested  Cancelled 
 2013   120,000  $26,400   90,000   25,000   5,000 
 2014   122,100  $30,946   86,300   25,650   10,150 
 2015   150,000  $39,000   70,000   65,000   15,000 
 2016                
 2017   563,000  $118,230      543,000   20,000 
     955,100  $214,576   246,300   658,650   50,150 

10

Dougherty’s Pharmacy, Inc.

Notes to and including 85% of the net value of eligible receivables minus certain reserves.

The Presidential Revolver is being guaranteed by the Company, Dougherty’s Holdings, Inc., Dougherty’s LP Holdings, Inc., Dougherty’s Operating GP, LLC, Park InfusionCare of Dallas GP, LLC, Park InfusionCare of Houston GP, LLC, and Park InfusionCare of San Antonio GP, LLC.  The Presidential Revolver is secured by the accounts receivable and related general intangibles of the Park InfusionCare Borrowers.
Outstanding advances under the Presidential Revolver will bear interest at the Lender’s prime rate plus 2% per annum but not less than the initial rate of 10.25% per annum.  Accrued and unpaid interest on the Presidential Revolver is due monthly beginning on May 1, 2007.  All outstanding principal under the Presidential Revolver plus all accrued and unpaid interest thereon is due and payable in full on April 17, 2010.
At closing, the Park InfusionCare Borrowers paid to Lender an initial commitment fee equal to $10,000.  If the Presidential Revolver is terminated by the Park InfusionCare Borrowers on or before its first anniversary, the Park InfusionCare Borrowers will pay to Lender an early termination fee of $20,000.  If the Presidential Revolver is terminated after the first anniversary and before April 17, 2010, the Park InfusionCare Borrowers will pay to Lender an early termination fee of $10,000.
Effective as of  May 1, 2007, the Park InfusionCare Borrowers will pay to Lender a collateral management fee equal to one-half percent of the net realizable value of monthly receivables generated.  The Presidential Revolver is subject to certain covenants including, but not limited to, a limit on additional debt of the Park InfusionCare Borrowers.
On November 7, 2007, the Company sold all of its equity interests in Park InfusionCare, LP, the direct and indirect parent of the Park InfusionCare Borrowers (see Note 11 below).  Pursuant to that sale, the Presidential Revolver was repaid in full and all guarantees of such indebtedness and liens on assets of the Company securing such indebtedness were terminated and released.

8.Consolidated Financial Statements

4.       Commitments and Contingencies


Operating Leases

The Company and its subsidiaries lease itsleases their pharmacy, real estate advisory servicescorporate offices and certain pharmacy equipment under non-cancelable operating lease agreements. Certain leases contain renewal options and provide that the Company pay taxes, insurance, maintenance and other operating expenses. Total rent expense for operating leasesEffective January 1, 2017, the Company extended the lease for the three months ended September 30, 2007flagship pharmacy located at the intersection of Preston and 2006 was approximately $402,000 and $386,000, respectively.  Total rent expense for operating leases for the nine months ended September 30, 2007 and 2006 was approximately $1,103,000 and $1,089,000, respectively.



-15-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements




Future minimumRoyal in Dallas, Texas, that would have expired in December 2018, until December 2028.

Minimum lease payments under all non-cancelable operating leaseslease agreements for the twelve months ending Septemberended June 30, 2017 are as follows:


Years ending September 30,
   
2007 $1,246,000 
2008  1,200,000 
2009  1,098,000 
2010  443,000 
2011  351,000 
Thereafter  1,790,000 
  $6,128,000 

In September 2006, the Chapter 7 trustee for the bankruptcy estate of Quantum North America, Inc. sought to enforce two default judgments against the Company for alleged preferential and fraudulent transfers to the Company's predecessor, ASD Systems, Inc. in the aggregate amount of approximately $150,000, plus interest and attorneys fees.  The transfers at issue occurred in 2000.  The adversary proceedings filed in the bankruptcy case were styled: David Gottlieb Trustee v. ASD Systems, Inc.; Adv. Nos. 1:02-ap-02131-GM and 1:02-ap-01948.  The Company took the position that the judgments were void based on defective service and neither Ascendant nor ASD were afforded the opportunity to defend the claims.  The Company also disputed the underlying claims and was prepared to fully defend the Trustee's suit once the judgments were set aside.

After presenting the Trustee with our defenses, the Company was able to settle the claims for a nominal payment of $5,000.  The Company has a settlement in principle with the Trustee which is pending approval by the Bankruptcy Court.

9.
Stock Based Compensation

Under the Company’s 2002 Equity Incentive Plan, it can issue up to 2,000,000 shares of restricted stock to employees and non-employee directors pursuant to restricted stock agreements.  Under the restricted stock agreements, the restricted shares will vest annually over a three-year period, or such other restriction period as the Company’s Board of Directors may approve.

As of September 30, 2007, the following shares had been issued under the 2002 Equity Incentive Plan:

  
Number of
       
Year of Issuance:
 
Shares
  
Shares Vested
  
Non-Vested
 
2002  435,000   435,000   - 
2003  -   -   - 
2004  67,500   67,500   - 
2005  47,500   44,723   2,777 
2006  127,270   119,978   7,292 
2007  244,138   132,471   111,667 
   921,408   799,672   121,736 

Deferred compensation equivalent to the market value of restricted common shares at date of issuance is reflected in stockholders’ equity and is being amortized to operating expense over three years.  Deferred compensation expense included in the accompanying condensed consolidated statements of operations amounted to $11,000 and $33,000 for the three month periods ended September 30, 2007 and 2006, respectively, and $21,000 and $51,000 for the nine month periods ended September 30, 2007 and 2006, respectively. The Company has not recognized any tax benefit related to this deferred compensation expense due to the existence of its federal tax net operating loss carryforward.  During the three month period ended September 30, 2007, the Company issued 129,298 shares of restricted common stock. The Company issued 29,298 shares to non-employee directors in lieu of paying cash for quarterly directors’ fees.  The fair value of these shares was $18,750 based on the share price of the shares on the date of grant.  This amount is also equal to the cash amount that would have been paid for the director’s fees, and is included in selling,

-16-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements


general and administrative expense for the three months ended September 30, 2007. The Company issued 100,000 shares to an employee upon employment. The fair value of these shares was $65,000 based on the share price of the shares on the date of grant. The Company has deferred compensation expense of approximately $85,000 at September 30, 2007 which will be recognized over the weighted average remaining life of the unvested restricted shares of approximately 25 months.

The Company’s Long-Term Incentive Plan (the “Plan”), approved in May 1999 and last amended in October 2000, provides for the issuance to qualified participants options to purchase up to 2,500,000 shares of common stock.  As of September 30, 2007 and December 31, 2006 options to purchase 460,000 shares of common stock were outstanding under the Plan.

The exercise price of the options is determined by the administrators of the Plan, but cannot be less than the fair market value of the Company’s common stock on the date of the grant. Options vest ratably over periods of one to six years from the date of the grant. The options have a maximum life of ten years.  The exercise price and the market price of the options were the same on the date of grant and thus there is no intrinsic value related to the outstanding options.

Following is a summary of the activity of the Plan:
     
Weighted
 
  
Number of
  
Average Exercise
 
  
Options
  
Price
 
       
Outstanding, December 31, 2006  460,000  $0.24 
Granted in 2007  -   - 
Exercised in 2007  -   - 
Canceled in 2007  -   - 
Outstanding, September 30, 2007  460,000   0.24 


Additional information regarding options outstanding as of September 30, 2007 is as follows:

  
 Options Outstanding
 
 Options Exercisable
  
    
 Weighted
      
    
 Avg.
      
    
 Remaining
  
 Weighted
  
    
Contractual
  
Avg. Exercise
 
Intrinsic
Exercise Price
 
# Outstanding
 
Life (Yrs)
 
# Exercisable
 
Price
 
Value
           
 $0.24            460,000  4.46            460,000  $0.24  $     170,200

The Company used the Black-Scholes option-pricing model to determine the fair value of grants made during 2002.  The following weighted average assumptions were applied in determining the pro forma compensation cost:  risk free interest rate – 4.69%, expected option life in years – 6.00, expected stock price volatility – 1.837 and expected dividend yield – 0.00%.


10.           Business Segment Information

2017  $760,000 
2018   782,000 
2019   800,000 
2020   678,000 
2021   671,000 
Thereafter   4,191,000 
    $7,882,000 

Legal Proceedings

The Company is organized in three segments: (i) healthcare, (ii) real estate advisory services and (iii) corporate and other businesses.  The healthcare segment consists of the operations of DHI and the real estate advisory services segment consists of the operations of the CRESA Partners of Orange County LP and CRESA Capital Markets Group LP.  Key measures used by the Company’s management to evaluate business segment performance include revenue, cost of sales, gross profit and investment income.


-17-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



Condensed statements of operations and balance sheet data for the Company’s principal business segments for the three and nine month periods ended September 30, 2007 and 2006 are as follows:

  
Three Months Ended September 30,
 
  
Healthcare
  
Real Estate Services
 
  
2007
  
2006
  
2007
  
2006
 
     
(Restated)
       
             
Revenue $10,894,000  $10,313,000  $4,244,000  $1,971,000 
Cost of sales  7,376,000   6,929,000   2,427,000   1,130,000 
Gross profit  3,518,000   3,384,000   1,817,000   841,000 
Other income  6,000   (1,000)  -   - 
Equity in income (losses) of equity method  investees  -   -   -   - 
Discontinued operations  -   -   -   - 
Net income (loss) $(11,000) $330,000  $994,000  $47,000 


  
Three Months Ended September 30,
 
  
Corporate & Other
  
Consolidated
 
  
2007
  
2006
  
2007
  
2006
 
           
(Restated)
 
             
Revenue $-  $-  $15,138,000  $12,284,000 
Cost of sales  -   -   9,803,000   8,059,000 
Gross profit  -   -   5,335,000   4,225,000 
Other income  68,000   19,000   74,000   18,000 
Equity in income (losses) of equity method  investees  214,000   (84,000)  214,000   (84,000)
Discontinued operations  -   -   -   - 
Net income (loss) $(91,000) $(385,000) $892,000  $(8,000)



-18-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements



  
Nine Months Ended September 30,
 
  
Healthcare
  
Real Estate Services
 
  
2007
  
2006
  
2007
  
2006
 
     
(Restated)
       
             
Revenue $32,809,000  $30,273,000  $11,171,000  $8,504,000 
Cost of sales  21,917,000   21,061,000   6,951,000   5,071,000 
Gross profit  10,892,000   9,212,000   4,220,000   3,433,000 
Other income  83,000   90,000   -   100,000 
Equity in income (losses) of equity method  investees  -   -   -   - 
Discontinued operations  -   230,000   -   - 
Net income (loss) $908,000  $89,000  $1,705,000  $758,000 



  
Nine Months Ended September 30,
 
  
Corporate & Other
  
Consolidated
 
  
2007
  
2006
  
2007
  
2006
 
           
(Restated)
 
             
Revenue $-  $-  $43,980,000  $38,777,000 
Cost of sales  -   -   28,868,000   26,132,000 
Gross profit  -   -   15,112,000   12,645,000 
Other income  69,000   32,000   152,000   222,000 
Equity in income (losses) of equity method  investees  75,000   (300,000)  75,000   (300,000)
Discontinued operations  -   -   -   230,000 
Net income (loss) $(1,069,000) $(1,178,000) $1,544,000  $(331,000)




  
September 30, 2007 and December 31, 2006
 
  
Healthcare
  
Real Estate Services
 
  
2007
  
2006
  
2007
  
2006
 
             
Total assets $8,054,000  $7,483,000  $11,323,000  $12,363,000 
                 
  
Corporate and Other
  
Consolidated
 
  
2007
  
2006
  
2007
  
2006
 
                 
Total assets $567,000  $1,193,000  $19,944,000  $21,039,000 


-19-

ASCENDANT SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements




11.   ��       Subsequent Events


On November 7, 2007, the Company sold its ownership interests in Park InfusionCare, L.P., the Company’s infusion therapy subsidiary (the “Park Business”) to Maverick Healthcare Group, LLC., a Phoenix-based provider of comprehensive home healthcare products and services in the southwestern U.S.

The purchase price of the Park Business was approximately $4.0 million, of which $3.5 million (subject to certain working capital and other adjustments) was paid in cash at closing and $0.5 million is payable based on the performance of the Park Business for the year ending December 31, 2007. The Company expects to realize a gain on the sale of the Park Business of approximately $1.3 million (based on the $3.5 million paid in cash). During the year ended December 31, 2006, the Park Business generated revenues of $7.3 million and an operating loss of approximately $250,000, which was reported as part of the Company’s healthcare segment results.



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes thereto included elsewhere in this report together with the consolidated financial statements, notes and management’s discussion contained in our Form 10-K for the year ended December 31, 2006.
Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions.  When used in this report, the words “expects,” “intends,” “plans,” and “anticipates” and similar terms are intended to identify forward-looking statements that relate to the Company’s future performance.  Our forward-looking statements are based on the current expectations of management, and we assume no obligation to update this information; additionally, the Company’s actual results may differ materially from the results discussed here. The cautionary statements made in this report should be read as being applicable to all related forward-looking statements, wherever they appear in this report.  Furthermore, see the Company’s most recent Form 10-K for the year ended December 31, 2006, including the section titled “Risks Related to Our Business,” “Risks Specific to Operating Subsidiaries,” “Risks Related to Our Investments in Real Estate,” and “Other Risks.”  These risks and uncertainties include, but are not limited to, (a) the following general risks:  our limited funds and risks of not obtaining additional funds, certain of our subsidiaries are highly leveraged, potential difficulties in integrating and managing our subsidiaries, our dependence upon management, our dependence upon a small staff, certain subsidiaries accounting for a significant percentage of revenue, unforeseen acquisition costs, the potential for future leveraged acquisitions, restrictions on the use of net operating loss carryforwards, and the difficulty in predicting operations; (b) the following risks to Dougherty’s Holdings, Inc.:  extensive regulation of the pharmacy business, the competitive nature of the retail pharmacy industry, third party payor attempts to reduce reimbursement rates, difficulty in collecting accounts receivable, dependence upon a single pharmaceutical products supplier, price increases as a result of our potential failure to maintain sufficient pharmaceutical sales, shortages in qualified employees, and liability risks inherent in the pharmaceutical industry; (c) the following risks to CRESA Partners of Orange County, L.P.:  the size of our competitors, our concentration on the southern California real estate market, the variance of financial results among quarters, the inability to retain senior management and/or attract and retain qualified employees, the regulatory and compliance requirements of the real estate brokerage industry and the risks of failing to comply with such requirements, and the potential liabilities that arise from our real estate brokerage activities; (d) the following risks to our investments in real estate including Fairways Frisco, L.P.:  our dependence on tenants for lease revenues, the risks inherent in real estate development activities, the general economic conditions of areas in which we focus our real estate development activities, the risks of natural disasters, the illiquidity of real estate investments; and (e) the following other risks:  a majority of our common stock is beneficially owned by our principal stockholders, officers and directors, relationships and transactions with related parties, our stock is not traded on NASDAQ or a national securities exchange, effect of penny stock regulations, and litigation.
In addition to the aforementioned risk factors, our future operating results are difficult to predict.  Factors that are likely to cause varying results include our ability to profitably operate DHI and CPOC and to pay the principal and interest on the significant debt incurred to make these acquisition; our success with the investments in, and operations of Ampco, Capital Markets and our participation in Fairways transactions; the results of our investments in real estate; fluctuations in general interest rates; the availability and cost of capital to us; the existence and amount of unforeseen acquisition costs; and our ability to locate and successfully acquire or develop one or more business enterprises.



The Company

Ascendant Solutions, Inc. (“We,” “Us,” or the “Company”) is a Delaware corporation with principal executive offices located at 16250 Dallas Parkway, Suite 111, Dallas, Texas 75248 (telephone number 972-250-0945). We are a diversified financial services company which is seeking to, or has invested in, or acquired, healthcare, manufacturing, distribution or service companies.  We are organized in three segments: (i) healthcare, (ii) real estate advisory services and (iii) corporate and other businesses.  A detailed discussion of our business segments is included in our Form 10-K for the year ended December 31, 2006.

Healthcare

Our healthcare segment consists of Dougherty’s Holdings, Inc. (“DHI”), which operates specialty retail pharmacies.  Based in Dallas, Texas, DHI operates (i) Dougherty’s Pharmacy Inc. in Dallas, a specialty compounding pharmacy, and (ii) three specialty pharmacies in the area between Houston and the Gulf of Mexico coast under the name “Medicine Man.” On November 7, 2007, DHI sold its interest in three infusion therapy facilities in Dallas, San Antonio and Houston, Texas operating under the name “Park InfusionCare.”

Real Estate Advisory Services

Our real estate advisory services segment consists of (i) CRESA Capital Markets Group, L.P. (“Capital Markets”) a subsidiary in which the Company owns 80% of the issued and outstanding limited partnership interests (ii) our wholly owned subsidiary ASDS of Orange County, Inc., a Delaware corporation f/k/a Orange County Acquisition Corp. (“ASDS”) and (iii) CRESA Partners of Orange County, LP. (“CPOC”), a subsidiary in which the Company owns 99% of the issued and outstanding limited partnership interests.

Corporate & Other Businesses

Our corporate & other businesses segment includes investments in and results from investments in unconsolidated subsidiaries.  The investments and investment results included in this segment are from the following entities: Ampco Partners, Ltd., Fairways Frisco, LP and Fairways 03 New Jersey, LP.

Discontinued Operations

On November 7, 2007, the Company sold its infusion therapy business operating under the name Park InfusionCare.  Prior to May 2006, this business had been reported as a discontinued operation while the Company was pursuing a potential disposition or strategic transaction for this business. As disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board of directors decided to retain the operations of Park InfusionCare.  All Park InfusionCare amounts in this Form 10-Q for the three and nine month periods ended September 30, 2007 and 2006 have been reported as part of continuing operations.

We are also occasionally involved in other claims and proceedings, which are incidental to its business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

5.       Related Party Transactions

During the three and six months ended June 30, 2017 and 2016, the Company paid fees to its directors of $14,000 and $28,000 respectively for their roles as members of the Board of Directors and its related committees; fees paid to the Company’s Chairman totaled $30,000 and $60,000 for management and other services provided.

6.       Subsequent Events

On July 1, 2017, the Company obtained an extension of the Revolver, discussed in Note 2, through September 1, 2017. On August 9, 2017, the Company obtained an additional term for the Revolver in the amount of $4,450,000 effective September 1, 2017, and then effective February 1, 2018, in the amount of $4,000,000. Outstanding advances under the Revolver will bear interest at LIBOR plus 3.25% (4.49% at August 9 2017). Accrued and unpaid interest on the Revolver is due monthly beginning on September 1, 2017. All outstanding principal under the Revolver plus all accrued and unpaid interest thereon is due and payable in full on August 1, 2018. The Revolver is secured by certain retail pharmacy assets, specifically but not limited to, inventory, equipment, software, accounts receivable, intangibles and deposit accounts of the Company. The Revolver is subject to certain financial restrictions, subject to the Lender’s prior written approval, including, but not limited to, capital expenditures not to exceed $200,000, additional indebtedness, acquisitions of entities and payment of dividends and distributions. Furthermore, the loan agreement provides that the Borrowers will maintain a minimum debt service coverage ratio of not less than 1.00 to 1.00, as defined.

11

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Should one or more of these risks or uncertainties materialize, or should any of our business.assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.  We cannot determine what, ifundertake no obligation to update or revise any material effect these matters will haveforward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

The forward-looking statements contained in this Form 10-Q and other documents that we file or furnish with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. In addition, we, or others on our behalf, may make forward-looking statements in press releases or written statements, on the Company’s website or in our communications and discussions with investors and analysts in the normal course of business through meetings, webcasts, phone calls, conference calls and other communications.

Statements that are not historical facts are forward-looking statements, including, without limitation, those regarding estimates of and goals for future financial position and operating performance as well as forward-looking statements concerning the expected execution and effect of our business strategies. Words such as “expect,” “likely,” “outlook,” “forecast,” “preliminary,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “goal,” “guidance,” “continue,” “sustain,” “synergy,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated, including, but not limited to the following:

·We have limited funds and may require additional financing;
·We may not be able to effectively integrate and manage our current and anticipated growth strategies;
·We could be subject to unforeseen costs associated with our Pharmacy Acquisitions which could reduce our profitability;
·We may enter into additional leveraged transactions in connection with future Pharmacy Acquisitions;
·We may be negatively affected by restrictive terms and covenants in our existing credit facility;
·We may be required to perform as a co-guarantor on certain indebtedness obligations, and if such event were to occur, we do not anticipate that we would have sufficient cash resources to meet such obligations;
·We are substantially dependent on a single supplier of pharmaceutical products;
·We must maintain sufficient sales to qualify for favorable pricing under our long term supply contract;
·We may be affected by the introduction of new brand name and generic prescription drugs, the conversion rate and mix of prescriptions filled, the reimbursement rate by third party payors of prescriptions and increases in the cost to procure those drugs;
·We are subject to considerable uncertainty as to how current Health Reform Laws will affect our business and operations;
·We could be negatively affected by future legislative or regulator policies designed to manage healthcare costs or alter healthcare financing practices; and
·We handle confidential healthcare information for our customers and are subject to the risk in securing such confidential information and protecting it from cyber-attacks.

These and other risks, assumptions and uncertainties are described in Item 1A. “Risk Factors” These risks and uncertainties include, but are not limited to, those factors described in the “Risk Factors” sections of operations.




Results of Operations:  Comparisonthese risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the Three Months Ended September 30, 2007date they are made. Except to the Three Months Ended September 30, 2006

The Company is organized in three segments: (i) healthcare, (ii) real estate advisory servicesextent required by law, we do not undertake, and (iii) corporate and other businesses.  The healthcare segment consists ofexpressly disclaim, any duty or obligation to update publicly any forward-looking statement after the operations of DHI anddate the real estate advisory services segment consists of the operations of the CRESA Partners of Orange County LP and CRESA Capital Markets Group LP.  statement.

OVERVIEW

Key measures used by the Company’s management to evaluate business segment performance include revenue, cost of sales, gross profit, investment incomeselling, general and administrative expense (“SG&A”) and EBITDA. EBITDA is calculated as net income before deducting interest, taxes, depreciation and amortization. EBITDA is a non-GAAP measure that Company’s management considers to best present the results of ongoing operations and is useful when comparing the performance between different reporting periods. In certain instances, we have presented EBITDA (Adjusted) which also excludes certain one-time, non-recurring, non-operating losses or impairments, as the Company considers excluding these adjustments necessary to derive the results of ongoing operations. In those instances, we have identified when the Company is presenting adjusted EBITDA. Although EBITDA or EBITDA (Adjusted) is not a measure of actual cash flow because it does not consider changes in assets and liabilities that may impact cash balances, the Company believes it is a useful metric to evaluate operating performance and has therefore included such measures in the discussion of operating results below.

The Company also tracks prescriptions sold to assess operational performance.

12


  
Three Months Ended September 30,
 
  
Healthcare
  
Real Estate Advisory Services
 
  
2007
  
2006
  
$ Change
  
2007
  
2006
  
$ Change
 
     
(Restated)
             
Revenue $10,894,000  $10,313,000  $581,000  $4,244,000  $1,971,000  $2,273,000 
Cost of Sales  7,376,000   6,929,000   447,000   2,427,000   1,130,000   1,297,000 
Gross Profit  3,518,000   3,384,000   134,000   1,817,000   841,000   976,000 
Operating expenses  3,374,000   2,970,000   404,000   656,000   681,000   (25,000)
Equity in income (losses) of equity method  investees  -   -   -   -   -   - 
Other income  6,000   (1,000)  7,000   -   -   - 
Interest income (expense), net  (123,000)  (83,000)  (40,000)  (48,000)  (100,000)  52,000 
Minority interests  -   -   -   (11,000)  -   (11,000)
Income tax provision  (38,000)  -   (38,000)  (108,000)  (13,000)  (95,000)
Discontinued operations  -   -   -   -   -   - 
Net income (loss)
 $(11,000) $
330,000
  $(341,000) $
994,000
  $
47,000
  $
947,000
 
Plus:
                        
Interest (income) expense, net $123,000  $83,000  $40,000  $48,000  $100,000  $(52,000)
Income tax provision  38,000   -   38,000   108,000   13,000   95,000 
Depreciation and amortization  49,000   99,000   (50,000)  38,000   78,000   (40,000)
Discontinued operations  -   -   -   -   -   - 
EBITDA
 $
199,000
  $
512,000
  $(313,000) $
1,188,000
  $
238,000
  $
950,000
 

  
Three Months Ended September 30,
 
  
Corporate & Other
  
Consolidated
 
  
2007
  
2006
  
$ Change
  
2007
  
2006
  
$ Change
 
              
(Restated)
    
Revenue $-  $-  $-  $15,138,000  $12,284,000  $2,854,000 
Cost of Sales  -   -   -   9,803,000   8,059,000   1,744,000 
Gross Profit  -   -   -   5,335,000   4,225,000   1,110,000 
Operating expenses  325,000   304,000   21,000   4,355,000   3,955,000   400,000 
Equity in income (losses) of equity method  investees  214,000   (84,000)  298,000   214,000   (84,000)  298,000 
Other income  68,000   19,000   49,000   74,000   18,000   56,000 
Interest income (expense), net  (13,000)  (16,000)  3,000   (184,000)  (199,000)  15,000 
Minority interests  -   -   -   (11,000)  -   (11,000)
Income tax provision  (35,000)  -   (35,000)  (181,000)  (13,000)  (168,000)
Discontinued operations  -   -   -   -   -   - 
Net income (loss)
 $(91,000) $(385,000) $
294,000
  $
892,000
  $(8,000) $
900,000
 
Plus:
                        
Interest (income) expense, net $13,000  $16,000  $(3,000) $184,000  $199,000  $(15,000)
Income tax provision  35,000   -   35,000   181,000   13,000   168,000 
Depreciation and amortization  6,000   6,000   -   93,000   183,000   (90,000)
Discontinued operations  -   -   -   -   -   - 
EBITDA
 $(37,000) $(363,000) $
326,000
  $
1,350,000
  $
387,000
  $
963,000
 


Consolidated Overview

Revenues
Total revenuesOur Business

Dougherty’s Pharmacy, Inc. (“Dougherty’s,” which is also referred to in this Quarterly Report on Form 10-Q as “we,” “us,” or “the Company”) is a value oriented company focused on successfully acquiring, managing and growing community based pharmacies in the Southwest Region. Our wholly owned subsidiary, Dougherty’s Holdings, Inc., owns and operates multiple Dougherty’s Pharmacies, which we operate as a single segment in our financial reporting. The flagship store, Dougherty’s Pharmacy, is a turn-key multi-service pharmacy located in a highly prestigious area of Dallas, Texas. Centrally located, we believe that Dougherty’s Pharmacy continues to provide a level of service not typically provided by national pharmacy chain stores. We fulfill virtually any prescription need, from the simplest to the most complex compounding prescriptions. Most national pharmacy chains do not provide complex pharmacy prescription services. We specialize in providing solutions for our retail customers’ pharmacy needs and also for our customers residing in assisted living facilities. Dougherty’s long history began in 1929 and continues today as one of Dallas’s oldest, largest and best-known full-service pharmacies, which also includes durable medical equipment, home healthcare products services, and health and wellness supplements. We have a customer service oriented philosophy and typically do not attempt to compete solely based on price, as is the case with most of the Company increased $2,854,000 duringnational pharmacy chains.

Additional community pharmacies are located in Dallas, El Paso, and Springtown, Texas and in McAlester, Oklahoma.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS 

The following discussion explains the third quartermaterial changes in our results of 2007operations for the three and six months ended June 30, 2017 and 2016, and the significant developments affecting our financial condition since the Form 10-12G and Form 10-12G/A filed June 2, 2017 and July 21, 2017, respectively. We strongly recommend that you read our audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2016 and 2015 and the three months ended March 31, 2017 and 2016 filed in those reports, along with this report.

Comparison of the Three and Six Months Ended June 30, 2017 to $15,138,000.  This represents a 23.2% increase over revenue of $12,284,000the Three and Six Months Ended June 30, 2016 (000’s Omitted)

  Three Months ended June 30,  Six Months Ended June 30, 
  2017  2016  2017  2016 
             
Revenue $10,211  $10,998  $20,266  $21,814 
Cost of sales  7,448   8,163   14,716   16,057 
Gross profit  2,763   2,835   5,550   5,757 
Operating expenses                
Selling, General and Administrative  2,627   2,696   5,203   5,457 
Depreciation and amortization  254   267   520   528 
Other income     40      40 
Interest expense  100   111   202   217 
Loss of disposal of assets  75   114   75   114 
Income tax provision  12   10   23   20 
Net loss $(305) $(323) $(473) $(539)
plus:                
Interest expense $100  $111  $202  $217 
Depreciation and amortization  254   267   520   528 
Loss on disposal of assets  75   114   75   114 
Income tax provision  12   10   23   20 
EBITDA (Adjusted) $136  $179  $347  $340 
                 
Prescription count  109,376   110,454   221,221   221,525 

Revenues

Net revenues decreased approximately $787,000 or 7.2%, and $1.6 million, or 7.1% in the third quarter of 2006.  The increase is primarily attributable to increased volume of retail pharmacy prescriptionsthree and other merchandise at the retail pharmacies and increased revenue at Park InfusionCare in the healthcare segment of our business and an increase in the commissions earned for tenant representation services in the real estate advisory services segment of our business.


Cost of sales
The cost of sales of the Company increased $1,744,000 during the third quarter of 2007 to $9,803,000 or 64.8% of revenues.  Cost of sales in the third quarter of 2006 was $8,059,000 or 65.6% of revenues.  The overall increase in cost of sales is primarily due to increased volume of retail pharmacy prescriptions filled and increased volume of infusion therapy drugs dispensed in the healthcare segment of our business and an increase in the amount of broker commissions earned for tenant representation services in the real estate advisory services segment of our business.

Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA increased by $963,000 to EBITDA of $1,350,000 in the third quarter of 2007 from EBITDA of $387,000 in the third quarter of 2006. This overall increase is due primarily to increases in EBITDA in the real estate advisory services and the corporate and other segments offset by decreases in EBITDA in the healthcare segment.


Healthcare

Revenues
Total revenues increased $581,000 during the third quarter of 2007 to $10,894,000.  This represents a 5.6% increase over revenue of $10,313,000 in the third quarter of 2006.  The increasesix months ended June 30, 2017.The decrease includes a 3% increaseless than 1% decrease in the number of retail pharmacy prescriptions filled and increased volume of infusion therapy drugs dispensed.sold. The increasedecline in revenue of $379,000, or 4.5% at the retail pharmacies was combined with an increase of $202,000, or 10.9%, at Park InfusionCare.

Cost of sales
The cost of sales increased $447,000revenues per prescription sold during the third quarter of 2007 to $7,376,000 or 67.7% of revenues.  Cost of sales in the third quarter of 2006 was $6,929,000 or 67.2% of revenues.  The overall increase in cost of sales is primarily due to increased volume of retail pharmacy prescriptions filledthree and sales of other merchandise along with increased volume of infusion therapy drugs dispensed at Park InfusionCare.  In addition, the increase in the cost of sales includes a 1.5% increase in the cost of sales at the retail pharmacies versus a 4.5% increase in revenue at the retail pharmacies due to improved purchasing, an increased mix of generic prescriptionssix months ended June 30, 2017 as compared to the same periods for 2016 are due to lower revenues per prescription filled due to the brand name drugsto generic conversion and lower generic selling prices as well as salesexperienced during the first three months of higher margin products.  The increase2017. Management expects this trend will continue for the remainder of 2017, resulting in cost of sales also includes a 54.4% increaselower revenues filled due to brand to generic conversion and lower generic selling prices in 2017. Prescriptions sold are expected to continue to remain consistent, with prior years.

13

Gross profit

Gross profit dollars decreased $72,000, or 2.5%, and $207,000, or 3.6% in the costthree and six months ended June 30, 2017, as compared to prior year. Gross profit as a percent of sales at Park InfusionCare versusrevenues increased approximately 130 basis points for the three months ended June 30, 2017, to 27.1%, as compared to prior year. Gross profit as a 10.9% increase in revenue at Park InfusionCare due to a changepercentage of net revenues increased approximately 100 basis points in the mix of revenuesix months ended June 30, 2017 to lower margin therapies.


Gross profit
Gross profit increased $134,00027.4%, as compared to prior year. as a result of the factors discussed in Revenues and Cost of Sales above.  Gross profit was 32.3% of revenueimproved pricing secured in the November 2016 pricing agreement with Cardinal Health, offset by an increase in third party payor fees, as experienced during the first three months of 2017 and expected to continue to occur during the remainder of 2017. Direct and Indirect Remuneration (“DIR”) fees charged to pharmacies that relate to Medicare Part D plans, that commenced during the first quarter, continued to increase in the second quarter, to $83,000 for the three months ended June 30, 2017, up from $50,000 in the first three months, to a total of 2007$133,000 for the six months ended June 30, 2017. Total adjudicated fees were $100,000 and $169,000 for the three and six months ended June 30, 2017, respectively, compared to $17,000 and $36,000 for the same periods of 2016, or a 588% and 369% increase, respectively, because of the DIR fees. DIR fees were 1.01% and 1.39% of total third party payor revenues for the three and six months ended June 30, 2017. DIR fees at 1.39% of total third party payor revenues should stabilize at this rate and Management expects the improved pricing from Cardinal Health to continue to offset the fees for an improved gross margin as a percent of revenues for the remainder of 2017 as compared to 32.8% of revenue2016.

SG&A expenses

SG&A expenses decreased $69,000, or 2.6%, and $254,000, or 4.7% in the third quarterthree and six months ended June 30, 2017, as compared to prior year. SG&A expenses as a percentage of 2006. Gross profitrevenues for the three months ended June 30, 2017, increased by $287,000 or 13.2% atto 25.7%, up 120 basis points from 24.5% for the retail pharmaciessame period prior year and decreased by $153,000, or 12.6% at Park InfusionCare.


Operatingfor the six months ended June 30, 2017, increased to 25.7%, up 70 basis points from 25.0% for the same period prior year. The decrease in SG&A expenses
Operating expenses increased $405,000 from $2,969,000 in the third quarter of 2006 is due primarily to $3,374,000 in the third quarter of 2007.cost reduction initiatives that were implemented during 2016. The increase in healthcare operating expenses as a percentage of revenues is due to increases at the retail pharmacies and at Park InfusionCare relatedlower revenue as compared to increased payroll and payroll related expenses.

prior year. Management continues to implement cost reduction initiatives during 2017 to decrease SG&A expenses as a percentage of revenues.

Earnings Before Interest, Taxes, Depreciation and Amortization

(Adjusted)

EBITDA (Adjusted) decreased by $313,000 to EBITDA of $199,000$43,000, or 24.0%, and increased $7,000, or 2.1% in the third quarter of 2007 from EBITDA of $512,000 in the third quarter of 2006.  This overall decrease is due primarily to an increase in operating expenses at the retail pharmaciesthree and Park InfusionCare. EBITDA at the retail pharmacies decreased 8.8% in the third quarter of 2007 to $488,000 from $534,000 in the third quarter of 2006.  During the third quarter of 2007, Park InfusionCare had an EBITDA loss of ($118,000) in the third quarter of 2007six months ended June 30, 2017 as compared to prior year. EBITDA of $123,000 in the third quarter of 2006, a decrease of $241,000.



Real Estate Advisory Services

Revenue
Revenue increased $2,273,000 from $1,971,000 in the third quarter of 2006 to $4,244,000 during the third quarter of 2007.  This increase is due to increases at CPOC commissions earned for tenant representation services in the third quarter of 2007.

Cost of Sales
Cost of sales was $2,427,000 for the third quarter of 2007, representing 57.2% of revenue.  By comparison, cost of sales was $1,130,000 or 57.3% of revenue in the third quarter of 2006.  The increase in the cost of sales percentage is due to an increase in broker commissions earned(Adjusted ) as a percentage of total revenue.  Brokerage commissions can vary depending on the transaction termsrevenues decreased approximately 30 basis points to 1.3% and whether brokers have reached certain commission targets.  Cost of sales includes all direct costs, including license fees and broker commissions, incurred in connection with a real estate advisory transaction.

Operating Expenses
Operating expenses decreased $25,000 from $681,000 in the third quarter of 2006increased 10 basis points to $656,0001.7% for the third quarter of 2007.three and six months ended June 30, 2017, respectively, as compared to 1.6% for the three and six months ended in June 30, 2016. The decrease in operating expenses is due primarily to decreases in depreciation and amortization expense at CPOC.

Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA increased 398.0% to $1,188,000 in the third quarter of 2007 from $238,000 in the third quarter of 2006.  This overall increase is primarily due to a $927,000 increase in EBITDA from CPOC due to increased revenues.

Corporate & Other

Operating expenses
Operating expenses increased $21,000 from $304,000 in the third quarter of 2006 to $325,000 in the third quarter of 2007 and is primarily comprised of increased expenses for professional fees in the normal course of business.

Equity in income (losses) of equity method investees
Equity in income (losses) of equity method investees increased $298,000 from ($84,000) during the third quarter of 2006 to $214,000 for the third quarter of 2007.  Equity in income (losses) of equity method investees represents our pro-rata portion, based on our limited partnership interests, of the gains (losses) of Ampco Partners, Ltd. and Fairways Frisco, LP as follows:

  
Three Months Ended September 30,
 
  
2007
  
2006
 
  
(Unaudited)
  
(Unaudited)
 
       
Ampco Partners, Ltd. $15,000  $5,000 
Fairways Frisco, L.P.  199,000   (89,000)
  $214,000  $(84,000)

The equity in income of Fairways Frisco represents our share of the net gain (losses) of Fairways Frisco(Adjusted) for the three months ended SeptemberJune 30, 2007 and 2006, respectively.  These amounts are a non-cash adjustment2017 compared to our operating results and we have no obligation to fund the operating losses or debts of Fairways Frisco. On August 3, 2007, the Frisco Square Partnerships transferred a significant portion of their real estate interests and related liabilities to a new limited partnership in exchange for an interest in such entity.  As part of that transaction, a third-party financial partner contributed cash into such new partnership in exchange for its limited partnership interest in the new partnership owning the real estate interest and related liabilities previously owned by the Frisco Square Partnerships. The Frisco Square Partnerships realized a gain on the sale of its land and buildings to the new partnership.




Results of Operations:  Comparison of the Nine Months Ended September 30, 2007 to the Nine Months Ended September 30, 2006


  
Nine Months Ended September 30,
 
  
Healthcare
  
Real Estate Advisory Services
 
  
2007
  
2006
  
$ Change
  
2007
  
2006
  
$ Change
 
     
(Restated)
             
Revenue $32,809,000  $30,273,000  $2,536,000  $11,171,000  $8,504,000  $2,667,000 
Cost of Sales  21,917,000   21,061,000   856,000   6,951,000   5,071,000   1,880,000 
Gross Profit  10,892,000   9,212,000   1,680,000   4,220,000   3,433,000   787,000 
Operating expenses  9,716,000   9,191,000   525,000   2,136,000   2,353,000   (217,000)
Equity in income (losses) of equity method  investees  -   -   -   -   -   - 
Other income  83,000   90,000   (7,000)  -   100,000   (100,000)
Interest income (expense), net  (313,000)  (252,000)  (61,000)  (165,000)  (313,000)  148,000 
Minority interests  -   -   -   (21,000)  (23,000)  2,000 
Income tax provision  (38,000)  -   (38,000)  (193,000)  (86,000)  (107,000)
Discontinued operations  -   230,000   (230,000)  -   -   - 
Net income (loss)
 $
908,000
  $
89,000
  $
819,000
  $
1,705,000
  $
758,000
  $
947,000
 
Plus:
                        
Interest (income) expense, net $313,000  $252,000  $61,000  $165,000  $313,000  $(148,000)
Income tax provision  38,000   -   38,000   193,000   86,000   107,000 
Depreciation and amortization  198,000   293,000   (95,000)  140,000   223,000   (83,000)
Discontinued operations  -   (230,000)  230,000   -   -   - 
EBITDA
 $
1,457,000
  $
404,000
  $
1,053,000
  $
2,203,000
  $
1,380,000
  $
823,000
 


  
Nine Months Ended September 30,
 
  
Corporate & Other
  
Consolidated
 
  
2007
  
2006
  
$ Change
  
2007
  
2006
  
$ Change
 
              
(Restated)
    
Revenue $-  $-  $-  $43,980,000  $38,777,000  $5,203,000 
Cost of Sales  -   -   -   28,868,000   26,132,000   2,736,000 
Gross Profit  -   -   -   15,112,000   12,645,000   2,467,000 
Operating expenses  1,128,000   876,000   252,000   12,980,000   12,420,000   560,000 
Equity in income (losses) of equity method  investees  75,000   (300,000)  375,000   75,000   (300,000)  375,000 
Other income  69,000   32,000   37,000   152,000   222,000   (70,000)
Interest income (expense), net  (41,000)  (14,000)  (27,000)  (519,000)  (579,000)  60,000 
Minority interests  (1,000)  (8,000)  7,000   (22,000)  (31,000)  9,000 
Income tax provision  (43,000)  (12,000)  (31,000)  (274,000)  (98,000)  (176,000)
Discontinued operations  -   -   -   -   230,000   (230,000)
Net income (loss)
 $(1,069,000) $(1,178,000) $
109,000
  $
1,544,000
  $(331,000) $
1,875,000
 
Plus:
                        
Interest (income) expense, net $41,000  $14,000  $27,000  $519,000  $579,000  $(60,000)
Income tax provision  43,000   12,000   31,000   274,000   98,000   176,000 
Depreciation and amortization  19,000   18,000   1,000   357,000   534,000   (177,000)
Discontinued operations  -   -   -   -   (230,000)  230,000 
EBITDA
 $(966,000) $(1,134,000) $
168,000
  $
2,694,000
  $
650,000
  $
2,044,000
 




Consolidated Overview

Revenues
Total revenues of the Company increased $5,203,000 during the nine month period ended September 30, 2007 to $43,980,000.  This represents a 13.4% increase over revenue of $38,777,000 in the nine month period ended September 30, 2006.  The increase is primarily attributable to increased volume of retail pharmacy prescriptions and other merchandise at the retail pharmacies and increased revenue at Park InfusionCare in the healthcare segment of our business and an increase in the commissions earned for tenant representation services in the real estate advisory services segment of our business.

Cost of sales
The cost of sales of the Company increased $2,736,000 during the nine month period ended September 30, 2007 to $28,868,000 or 65.6% of revenues.  Cost of sales in the nine month period ended September 30, 2006 was $26,132,000 or 67.4% of revenues.  The overall increase in cost of salesprior year is primarily due to increased volume of retail pharmacy prescriptions filled and increased volume of infusion therapy drugs dispensed inadditional SG&A expense incurred by the healthcare segment of our business and an increase incompany related to the amount of broker commissions earned for tenant representation services in the real estate advisory services segment of our business.

Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA increased by $2,044,000decision to EBITDA of $2,694,000 in the third quarter of 2007 from EBITDA of $650,000 in the third quarter of 2006.file its Form 10. This overall increase is due to increases in EBITDA in all of(Adjusted) for the company’s segments, including healthcare, real estate advisory services and corporate and other.


Healthcare

Revenues
Total revenues increased $2,536,000 during the nine month periodsix months ended SeptemberJune 30, 2007 to $32,809,000.  This represents an 8.4% increase over revenue of $30,273,000 in the first nine months of 2006.  The increase includes a 3% increase in the number of retail pharmacy prescriptions filled and increased volume of infusion therapy drugs dispensed.  The increase in revenue of $1,728,000, or 6.9% at the retail pharmacies, is combined with an increase of $808,000, or 15%, at Park InfusionCare.

Cost of sales
The cost of sales increased $856,000 during the first nine months of 2007 to $21,917,000 or 66.8% of revenues.  Cost of sales in the first nine months of 2006 was $21,061,000 or 69.6% of revenues.  The overall increase in cost of sales is primarily due to increased volume of retail pharmacy prescriptions filled and sales of other merchandise along with increased volume of infusion therapy drugs dispensed at Park InfusionCare.  In addition, the increase in the cost of sales includes a 3.3% increase in the cost of sales at the retail pharmacies versus a 6.9% increase in revenue at the retail pharmacies due to improved purchasing, an increased mix of generic prescriptions as2017, compared to brand name drugs as well as sales of higher margin products and a 9.6% increase in the cost of sales at Park InfusionCare versus a 15% increase in revenue at Park InfusionCare due to a change in the mix of revenue to higher margin therapies.

Gross profit
Gross profit increased $1,680,000 as a result of the factors discussed in Revenues and Cost of Sales above.  Gross profit was 33.2% of revenue in the first nine months of 2007 as compared to 30.4% of revenue in the first nine months of 2006. Gross profit increased by $1,115,000, or 17.6% at the retail pharmacies and $565,000, or 19.7% at Park InfusionCare.

Operating expenses
Operating expenses increased $525,000 from $9,191,000 in the first nine months of 2006 to $9,716,000 in the first nine months of 2007.  The increase in healthcare operating expensesprior year is due primarily to the cost improvements realized over prior year.

LIQUIDITY AND CAPITAL RESOURCES

We maintain a $305,000 increase at Park InfusionCare and a $220,000 increase at the retail pharmacies due primarilylevel of liquidity sufficient to increased payroll and payroll related expenses.


Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA increased by $1,053,000allow us to EBITDA of $1,457,000cover our cash needs in the first nine months of 2007 from EBITDA of 404,000 inshort-term. Over the first nine months of 2006.  This overall increase is due primarilylong-term, we manage our cash and capital structure to an increase in revenue at the retail pharmaciesmaintain our financial position and lower costs. EBITDA at the retail pharmacies increased 55.3% in the first nine months of 2007 to $2,028,000 from $1,306,000 in the first nine months of 2006.  During the first nine months of 2007, Park InfusionCare had an EBITDA loss of ($100,000) in the first nine months of 2007 from an EBITDA loss of ($275,000) in the first nine months of 2006, a decrease of $175,000.


Real Estate Advisory Services

Revenue
Revenue increased $2,667,000 from $8,504,000 in the first nine months of 2006 to $11,171,000 during the first nine months of 2007.  The increase is due to an increase of $3,019,000 in revenue generated by CPOC which is offset by a decrease of $352,000 in revenue generated by Capital Markets.  The revenue increase at CPOC is due to an increase in commissions earnedmaintain flexibility for tenant representation services in the first nine months of 2007. The decrease in revenue at Capital Markets is due to fewer fees earned from the closing of advisory transactions as compared to transactions fees earned in the first nine months of 2006.

Cost of Sales
Cost of sales was $6,951,000 for the first nine months of 2007, representing 62.2% of revenue.  By comparison, cost of sales was $5,071,000future strategic initiatives. We continuously assess our working capital needs, debt and leverage levels, capital expenditure requirements, and future investments or 59.6% of revenue in the first nine months of 2006.  The increase in the cost of sales percentage is due to an increase in broker commissions earned as a percentage of total revenue.  Brokerage commissions can vary depending on the transaction terms and whether brokers have reached certain commission targets.  Cost of sales includes all direct costs, including license fees and broker commissions, incurred in connection with a real estate advisory transaction.

Operating Expenses
Operating expenses decreased $217,000 from $2,353,000 in the first nine months of 2006 to $2,136,000 for the first nine months of 2007.  The decrease in operating expenses is due primarily to a $255,000 decrease in expenses for Capital Markets as a result of a decrease in professional bonus and management fee expenses which are recorded based on a percentage of revenue earned by Capital Markets.

Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA increased 59.6% to $2,203,000 in the first nine months of 2007 from $1,380,000 in the first nine months of 2006.  This overall increase includes a decrease in EBITDA of $50,000 from Capital Markets plus a decrease in EBITDA of $100,000 from ASDS due to a decrease in other income partially offset by an increase in EBITDA of $973,000 from CPOC due to increases in revenues.

Corporate & Other

Operating expenses
Operating expenses increased $252,000 from $876,000 in the first nine months of 2006 to $1,128,000 in the first nine months of 2007 and is primarily comprised of increased expenses for professional fees in the normal course of business.

Equity in losses of equity method investees
Equity in income (losses) of equity method investees increased $375,000 from ($300,000) during the first nine months of 2006 to $75,000 for the first nine months of 2007.  Equity in income (losses) of equity method investees represents our pro-rata portion, based on our limited partnership interests, of the gains (losses) of Ampco Partners, Ltd. and Fairways Frisco, LP as follows:

  
Nine Months Ended September 30,
 
  
2007
  
2006
 
  
(Unaudited)
  
(Unaudited)
 
       
Ampco Partners, Ltd. $79,000  $73,000 
Fairways Frisco, L.P.  (4,000)  (373,000)
  $75,000  $(300,000)

The equity in income of Fairways Frisco represents our share of the net gain (losses) of Fairways Frisco for the nine months ended September 30, 2007 and 2006, respectively.  These amounts are a non-cash adjustment toacquisitions. We believe our operating results and we have no obligationcash flows, as well as any potential future borrowings, will be sufficient to fund the operating losses or debts of Fairways Frisco. On August 3, 2007, the Frisco Square Partnerships transferred a significant portion of their real estate intereststhese future payments and related liabilities to a new limited partnership in exchange for an interest in such entity.  As part of that transaction, a third-party financial partner contributed cash into such new partnership in exchange for its limited partnership interest in the new partnership owning the real estate interest and related liabilities previously owned by the Frisco Square Partnerships. The Frisco Square Partnerships realized a gain on the sale of its land and buildings to the new partnership.

Liquidity and Capital Resources
long-term initiatives.

As of SeptemberJune 30, 2007,2017, we had working capital of approximately $2.4$2.3 million as compared to a working capital deficit of approximately $0.1$1.9 million at December 31, 2006.2016. This net increase is primarily due primarily to $3.7 millioncash proceeds received upon the disposition of notes payable included as a current liability at December 31, 2006, which were refinanced and thus classified as long term at September 30, 2007.  These notes payable related to the Healthcare segment which was refinanced with a new credit facility with Amegy Bank in February 2007.


CPOC of $0.6 million.

As of SeptemberJune 30, 2007,2017, we had cash and restricted cash equivalents of approximately $1.3 million$751,000, of which $303,000 was restricted, as compared to approximately $2.7 million$361,000, of which $303,000 was restricted, at December 31, 2006.  Cash flows2016. The increase in cash for the three months ended June 30, 2017, of $390,000 was primarily the result of cash proceeds received upon the disposition of the CPOC investment of $617,000.

As of June 30, 2017, the Company had total current assets of $6,476,000 and total current liabilities of $4,181,000 creating working capital of approximately $2,295,000 as compared to total current assets of $6,013,000 and total current liabilities of $4,065,000 creating working capital of approximately $1,948,000 at December 31, 2016. The increase in total cash of $390,000 and working capital of $347,000 is primarily due to cash proceeds received upon the disposition of the Humble pharmacy of $274,000 and disposition of CPOC of $617,000 during the first quarter of 2017, of which $100,000 of the proceeds were used to pay off a term note with our bank and the remainder was held in cash. The change in total cash as of June 30, 2017, without the proceeds of $617,000 from operating activities were $1.3 million which is offset bythe sale of CPOC would have been a decrease of cash and working capital of $544,000.

14

The change in cash and cash equivalents is as follows:

  Six Months Ended June 30, 
  2017  2016 
       
Net cash provided by operating activities $472  $958 
Net provided by (used in) investing activities  818   (461)
Net cash used in financing activities  (900)  (517)
Net increase (decrease) increase in cash $390  $(20)

Net cash provided by operating activities was approximately $472,000 in the six months ended June 30, 2017, compared to $959,000 in the six months ended June 30, 2016. The decrease of $486,000 was primarily due to changes in accounts receivable of an increase of $320,000 due to a reduction in accounts receivable related to the decline in revenues discussed above, a decrease of $717,000 due to an increase in accounts payable related to timing of payment of invoices and a decrease of $89,000 due to other net changes.

Net cash used in investing activities was approximately $818,000 in the six months ended June 30, 2017, compared to a negative $461,000 in the six months ended June 30, 2016. Cash used to purchase property and equipment was $73,000 for the six months ended June 30, 2017 compared to $461,000 for the prior year. The decrease of $388,000 was primarily due to capital expenditures incurred during the six months ended June 31, 2016 related to the relocation of a pharmacy. For the six months ended June 30, 2017, cash proceeds from the disposition of the Humble pharmacy were $274,000, and cash provided by the proceeds of the disposition of CPOC was $617,000.

Net cash used in financing activities was $900,000 in the six months ended June 30, 2017, compared to net cash used in financing activities of $2.5 million$517,000 in the six months ended June 30, 2016. For the six months ended June 30, 2017, borrowings of $9,426,000 and payments of $9,631,000 were made on the revolving credit facility; payments of $695,000 were made on notes payable. For the six months ended June 30, 2016, borrowings of $13,750,000 and payments of $13,662,000 were made on the revolving credit facility; payments of $605,000 were made on notes payable.

Our principal indebtedness at June 30, 2017, consists of the following:

·A number of term notes in favor of Cardinal Health in the aggregate amount of $3,618,000, secured by certain retail pharmacy assets, and maturing between August 2019 and August 2020;
·A revolving credit facility in the principal amount of $4,750,000, of which the Company has currently borrowed $3,970,000 on the revolving credit facility, leaving $780,000 available for future borrowings;
·A number of notes payable to sellers of acquired pharmacies in the aggregate amount of $203,000, unsecured, and maturing on or before September 18, 2018.

The material terms under these agreements include, without limitation, notice requirements for certain material events, the provision of periodic financial statements, the maintenance of certain financial ratios, maintaining certain minimum insurance requirements, as well as restrictions on our ability to incur additional indebtedness, incur future capital expenditures, as well as restrictions on our ability purchase, create or acquire any interest in any other pharmacy store or distributing company, or loan, invest in or advance money or assets to any other person, enterprise or entity for the acquisition of a pharmacy store or distributing company without the prior written consent of the First National Bank of Omaha.

In addition, the Company may be required to make payment as a resultco-guarantor on a promissory note issued by a bank in favor of an individual who was previously, through August of 2008, a related party of the Company. The total principal amount due and owing under the promissory note as of July 15, 2017, of $1,887,884 (the “Guarantee Payment”), and as the co-guarantor, of which $136,000 payments on notes payablehave been made during 2017. The Company has received written assurance that the primary obligors are current in their payment obligations under the promissory note as of $11.3 million offsetAugust 1, 2017. The promissory note is collateralized by a property that is currently held for sale, is expected to sell before the end of the calendar year and for which the proceeds will be sufficient and are expected to be used to pay off the balance of the promissory note. Upon payment of the promissory note in full, the restricted cash borrowed on notes payablebalance of $8.8 million.


$303,000, for which the Company was required to provide as escrow, and for which there are no additional escrow provisions, will be released and unrestricted for use in operations, financing or investing as determined Management. As the co-guarantor, the Company could be liable for the entire amount of the Guarantee Payment in the event of default, which management deems to be highly unlikely

Our future capital needs are uncertain. TheManagement anticipates funding our capital needs through a combination of projected positive cash flow after debt service and available borrowings under our revolving line of credit; however, cash flow projections are based on anticipated operations of our business, for which we can provide no assurance. Additionally, if we were to make additional acquisitions, we would likely need additional capital to fund all, or a portion, of those acquisitions. If the company does not generate the necessary cash flow, the Company may or may notwill need additional financing in the futureexcess of our current revolving line of credit to fund operations.operations in the future. We do not know whether additional financing will be available when needed, or that, if available, we will be able to obtain financing on terms favorable, or even acceptable, to stockholders.the Company. 

15

Cash Flow

Since December 31, 2006, we have decreased our cash balances by approximately $1,383,000. Cash flow from operating activities totaled $1,281,000.  We used cash in investing activities of $186,000 due primarily to purchases of property and equipment.  We also used cash in financing activities of approximately $2,478,000 primarily for payments on notes payable of $11.3 million offset by cash borrowed on notes payable of $8.8 million

Tax Loss Carryforwards


At December 31, 2006, the Company2016, we had approximately $51$48 million of federal net operating loss carryforwards available to offset future taxable income, which, if not utilized, will fully expire from 20182020 to 2024.  In addition, the Company had approximately $2.9 million of state net operating loss carryforwards available to offset future taxable income, which, if not utilized, will fully expire from 2007 to 2009.2035. We believe that the issuance of shares of our common stock pursuant to our initial public offering on November 15, 1999 caused an “ownership change” for purposes of Section 382 of the Internal Revenue Code of 1986, as amended. Consequently, we believe that the portion of our net operating lossfederal NOL carryforwards attributable to the period prior to November 16, 1999 is subject to an annual limitation pursuant to Section 382. Our total deferred tax assets have been fully reserved as a result of the uncertainty of future taxable income.  Accordingly,income, except for $3 million that is estimated to offset future taxable income from pharmacy operations and or the sale of pharmacy businesses. The estimated deferred tax asset is consistent with the prior year, accordingly, no tax benefit has been recognized in the periods presented.





Contractual Obligations

Off Balance Sheet Arrangements

We do not have any unconsolidated special purpose entities and, Commercial Commitments


A summary of our contractual commitments under debt and lease agreements andexcept as described herein, we do not have significant exposure to any off-balance sheet arrangements. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual obligations at September 30, 2007 and the effectarrangement to which an entity unconsolidated with us is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such obligations are expected to have onentity or similar arrangement that serves as credit, liquidity and cash flow in future periods appears below.  This is all forward-looking information and is subject to the risks and qualifications set forth at the beginning of Item 2.

Contractual Obligations
   
As of September 30, 2007
 
Payments due by Period
 
  Less than   1-3   3-5  More than    
  1 year  Years  Years  5 years  Total 
                  
Lease Obligations $1,246,000  $2,298,000  $794,000  $1,790,000  $6,128,000 
Notes Payable  2,835,000   4,346,000   229,000   -   7,410,000 
                     
          Total $4,081,000  $6,644,000  $1,023,000  $1,790,000  $13,538,000 

or market risk support for such assets.

Critical Accounting Policies


The discussion and analysis of our financial condition and results of operations are based upon

We prepare our consolidated financial statements in conformity with GAAP, which have been preparedrequires management to make certain estimates and apply judgment. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the condensed consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed consolidated financial statements.

While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

For a full description of our significant accounting policies, please refer to the Notes to Consolidated Financial Statements in Item 1.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a–15(e) under the Exchange Act) as of June 30, 2017.  Based upon that evaluation, our chief financial officer concluded that as of June 30, 2017, our disclosure controls and procedures were effective.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in rule 13a-15(f) under the Securities and Exchange Act of 1934 as amended.  Under the supervision and with the participation of senior and executive management, we conducted an evaluation of our internal controls over financial reporting based upon the framework Internal Control – Integrated Framework (2013) as outlined by COSO, the Committee of Sponsoring Organizations of the Treadway Commission.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.  The preparationBecause of these condensed consolidatedits inherent limitations, internal control over financial statements requires managementreporting may not prevent or detect misstatements.  Also, projections of an evaluation of effectiveness to make estimates and assumptionsfuture periods are subject to the risk that affectcontrols may become inadequate because of changes in conditions or that the reported amountsdegree of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluatecompliance with the policies or procedures may deteriorate.

Based on our estimates, including those related to long-term investments.


We base our estimates on historical experience and on various other assumptions that are believed to be reasonableevaluation under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

We believe the following accounting policies and the related judgments and estimates affect the preparation of our consolidated financial statements.  Critical accounting policies not otherwise included herein are included in the Company’s Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.

Long-Term Investments  

Equity method investments represent investments in limited partnerships accounted for using the equity method of accounting for investments, and none represent investments in publicly traded companies.  The equity method is used as the Company does not have a majority interest and does not have significant influence over the operations of the respective companies.  The Company also uses the equity method for investments in real estate limited partnerships where it owns more than 3% to 5% of the limited partnership interests.  Accordingly, the Company records its proportionate share of the income or losses generated by equity method investees in the condensed consolidated statements of operations.  If the Company receives distributions in excess of its equity in earnings, they are recorded as a reduction of its investment.

The fair value of our long-term investments is dependent upon the performance of the companies in which we have invested, as well as volatility inherent in the external markets for these investments.  The fair value of our ownership interests in, and advances to, privately held companies is generally determined based on overall market conditions, availability of capital as well as the value at which independent third parties have invested in similar private equity transactions.  We evaluate, on an on-going basis, the carrying value of our ownership interests in and advances to the companies in which we have invested for possible impairment based on achievement of business plan objectives, the financial condition and prospects of the company and other relevant factors, including overall market conditions.  Such factors may be financial or non-financial in nature.
If as a result of the review of this information, we believe our investment should be reduced to a fair value below its cost, the reduction would be charged to “loss on investments” on the statements of operations.  Although we believe our estimates reasonably reflect the fair value of our investments, our key assumptions regarding future results of operations and other factors may not reflect those of an active market, in which case the carrying values may have been materially different than the amounts reported.
Recent Accounting Pronouncements.

In May 2006, the State of Texas replaced the current franchise tax system with a new Texas Margin Tax (“TMT”).  The TMT is a 1% gross receipts tax based on the Company’s taxable margin, as defined by the new law.  However, for taxable entities primarily engaged in retail and wholesale trade, the rate is 0.5% of taxable margin.  The Company has evaluated the impact of the TMT on its consolidated financial position, results of operations or cash flows and hasframework Internal Control – Integrated Framework (2013), management concluded that the TMT does not appear it will have a material impact on its results of operations.

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109.  FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, for a tax position taken or expected to be taken in a tax return.  Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods.

Upon the adoption of FIN 48, we had no unrecognized tax benefits.  During the first nine months of 2007, we recognized no adjustments for uncertain tax benefits.  We recognize interest and penalties related to uncertain tax positions in income tax expense; however, no interest and penalties related to uncertain tax positions were accrued at September 30, 2007.  The tax years 2003 through 2006 remain open to examination by the major taxing jurisdictions in which we operate.  We expect no material changes to unrecognized tax positions within the next twelve months.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements.  This Statement applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute.  Accordingly, this Statement does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after December 15, 2007.  We are currently evaluating the impact, if any; the adoption of SFAS 157 will have on our consolidated financial position, results of operations or cash flows.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of the guidance is to improveinternal control over financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 iswas effective as of the beginning of the first fiscal year that begins after November 15, 2007, provided the provisions of SFAS 157 are applied. The Company is evaluating SFAS 159 and has not yet determined the impact of the adoption, if any, it will have on the Company’s consolidated financial statements.




QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We currently do not engageJune 30, 2017.

Changes in commodity futures trading or hedging activities and do not enter into derivative financial instrument transactions for trading or other speculative purposes.  We also do not currently engage in transactions in foreign currencies or in interest rate swap transactions that could expose us to market risk.  


We are exposed to market risk fromInternal Control over Financial Reporting

There were no changes in interest rates with respect to the credit agreements entered into by our subsidiaries to the extent that the pricing of these agreements is floating.


We are exposed to interest rate risk as a result of CPOC’s term note payable to First Republic Bank, which bears interest payable monthly at the prime rate minus 0.25% per annum. We are also exposed to interest rate risk under our term note payable to Ampco Partners, Ltd, which bears interest at the prime rate plus 4.00%.  In addition, we are now exposed to interest rate risk under DHI’s Amegy Bank revolving line of credit which bears interest at the prime rate and term note which bears interest at the prime rate plus 0.25% along with exposure to interest rate risk under DHI’s Presidential Health Credit revolving line of credit which bears interest at the prime rate plus 2.00% but not less than 10.25%.  If the effective interest rate under these term notes were to increase by 100 basis points (1.00%), our annual financing expense would increase by approximately $59,000, based on the average balance outstanding under the term note during the nine month period ended September 30, 2007.  A 100 basis points (1.00%) increase in market interest rates would decrease the fair value of our fixed rate debt by approximately $9,000.  We did not experience a material impact from interest rate risk during the nine month period ended September 30, 2007.

In addition, our ability to finance future acquisitions through debt transactions may be impacted if we are unable to obtain appropriate debt financing at acceptable rates.  We are exposed to market risk from changes in interest rates through our investing activities.  Our investment portfolio consists primarily of investments in high-grade commercial bank money market accounts.

The following table summarizes the financial instruments held by us at September 30, 2007, which are sensitive to changes in interest rates.  At September 30, 2007, approximately 89% of our debt was subject to changes in market interest rates and was sensitive to those changes.  Scheduled debt principal payments for the twelve months ending September 30, are as follows:

  Fixed Rate  Variable  Total 
          
2008 $174,000  $2,661,000  $2,835,000 
2009  617,000   3,154,000   3,771,000 
2010  25,000   550,000   575,000 
2011  -   229,000   229,000 
Thereafter  -   -   - 
  $816,000  $6,594,000  $7,410,000 




CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by rule 13a-15(b), the Company, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e).  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.  As required by Rule 13a-15(d), the Company’s management conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the third fiscal quarter ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

As previously disclosed in our Annual Report of Form 10-K, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of December 31, 2006, our disclosure controls and procedures were ineffective, due to the identification of a material weakness in the revenue recognition process at its Park InfusionCare subsidiary.  During 2006, variances from expected payments received from insurance companies were not investigated in a timely manner, and thus were incorrectly accounted for as liabilities rather than revenue. The Company evaluated these payments and an adjustment of approximately $482,000 was recorded in order to increase revenue and reduce the net loss of the Park InfusionCare subsidiary for the year-ended December 31, 2006.

A material weakness is a control deficiency, or combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of the consolidated annual or interim financial statements will not be prevented or detected.  In connection with the preparation of the Company’s 2006 consolidated financial statements, the Company identified the following control deficiencies, which represented a material weakness in the Company’s financial statement close and reporting process as of December 31, 2006.

In order to remediate this material weakness, the Company has reviewed and is documenting the processes relating to the recording, processing, reconciliation, recognition and reporting of revenue at our subsidiaries.  In addition, the Company has provided additional training, review and supervision of personnel responsible for the billing, collection and accounting of the Park InfusionCare revenue.  The effectiveness of these measures will be subject to ongoing management review supported by confirmation and testing by management as well as audit committee oversight.  As a result, the Company expects that additional changes will be made to its processes as time progresses.  On November 7, 2007, the Company sold its ownership interests in Park InfusionCare subsidiary.

Notwithstanding the material weakness described above, management believes the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.  The Company’s Chief Executive Officer and  Chief Financial Officer have certified that, to their knowledge, the Company’s condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present in all material respects the financial condition, results of operations and cash flows of the Company for the periods presented.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.   In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

The Company will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate. Except for the changes referenced above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II.

OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS 
16

There have been no material changes

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be subject to legal proceedings and claims in the Company’s legalordinary course of business. We are not currently aware of any such proceedings during the nine months ended September 30, 2007 as described in Item 3 of Part I of the Company’s Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission on April 16, 2007.


ITEM 1A.
RISK FACTORS

Thereor claims that we believe will have, been no material changes to the Company’s risk factors as disclosed in Item 1A, “Risk Factors”,individually or in the Company’s Annual Reportaggregate, a material adverse effect on Form 10-K for the fiscal year ended December 31, 2006.  


our business, financial condition or results of operations.

Item 6. Exhibits

ITEM 5.

Exhibit

Number

OTHER INFORMATION
Description

Available Information

Our website address is www.ascendantsolutions.com.  Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4, and 5 filed by our officers, directors, and stockholders holding 10% or more of our common stock, and all amendments to those reports are available free of charge through our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).  You also may read and copy any reports, proxy statements, or other information that we file with the SEC at the SEC’s public reference room at 450 Fifth Street N.W., Washington, D.C.  20549.  Please call the SEC at 1-800-SEC-0330 for further information about the operation and location of the public reference room.  Our SEC filings also are available to the public free of charge at the SEC’s website at www.sec.gov.



ITEM 6.

4.1
2.1Partnership Interest PurchaseBusiness Loan Agreement, dated as of November 7, 2007, between Maverick Healthcare Group,effective September 1, 2017, by and among Dougherty's Holdings, Inc.; Dougherty’s Pharmacy, Inc.; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha.(1)
4.2Commercial Guaranty, by and among Dougherty's Holdings, Inc.; Dougherty’s Pharmacy, Inc.; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha, in favor of Dougherty’s Pharmacy, Inc.(1)
4.3Commercial Security Agreement, effective September 1, 2017, by and among Dougherty's Holdings, Inc.; Dougherty’s Pharmacy, Inc.; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha.(1)
4.4Promissory Note, effective September 1, 2017, by and between Dougherty’s Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated November 9, 2007); Dougherty’s Pharmacy, Inc.; Dougherty's Pharmacy El Paso, LLC; Dougherty’s Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha. (1)


32.1Certification of Ascendant Solutions, Inc. Quarterly Report on Form 10-Q for the period ended September 30, 2007, by David E. Bowe as President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*2002 (1)

101.INSXBRL Instances Document (1)
101.SCHXBRL Taxonomy Extension Schema Document (1)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document (1)
101.LABXBRL Taxonomy Extension Label Linkbase Document (1)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document (1)

(1)Filed herewith.

17

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Company has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized on August 14, 2017.

32.2DOUGHERTY’S PHARMACY, INC.
Certification of Ascendant Solutions, Inc. Quarterly Report on Form 10-Q for the period ended September 30, 2007, by
By:/s/ Mark S. Heil as Vice President-Finance
Mark S. Heil
President and Chief Financial Officer (Duly Authorized Principal Executive Officer and Principal Financial Officer)

18

EXHIBIT INDEX

Exhibit

Number

Description
4.1Business Loan Agreement, effective September 1, 2017, by and among Dougherty's Holdings, Inc.; the Registrant; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha.(1)
4.2Commercial Guaranty, by and among Dougherty's Holdings, Inc.; the Registrant; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha, in favor of Dougherty’s Pharmacy, Inc.(1)
4.3Commercial Security Agreement, effective September 1, 2017, by and among Dougherty's Holdings, Inc.; the Registrant; Dougherty's Pharmacy El Paso, LLC; Dougherty's Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC and First National Bank of Omaha. (1)
4.4Promissory Note, effective September 1, 2017, by and between Dougherty’s Pharmacy, Inc.; Dougherty's Pharmacy El Paso, LLC; Dougherty’s Pharmacy McAlester, LLC; Dougherty's Pharmacy Forest Park Dallas, LLC; and Dougherty's Pharmacy Springtown, LLC (as the “Borrowers”) and First National Bank of Omaha (as “Lender”). (1)
31.1Certification of the President - Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act (1)
31.2Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act (1)
32Certification of the President - Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*2002(1)

101.INS
10.45Lease Agreement dated as of July 16, 2007 between Fairways 2001 Office Partners, Ltd. and Ascendant Solutions, Inc.*XBRL Instances Document (1)
101.SCHXBRL Taxonomy Extension Schema Document (1)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document (1)
101.LABXBRL Taxonomy Extension Label Linkbase Document (1)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document (1)


*Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

(1)Filed herewith.

 
ASCENDANT SOLUTIONS, INC
Date: November 14, 2007
By:
/s/ David E. Bowe
David E. Bowe
President and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
19 

Date: November 14, 2007
By:
/s/ Mark S. Heil
Mark S. Heil
 Vice President-Finance and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

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