See Notes to Consolidated Financial Statements

Dougherty’s Pharmacy, Inc.

Consolidated Statements of Cash Flows

(000’s omitted)

(Unaudited)

See Notes to Consolidated Financial Statements

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 firmcompany focused on successfully acquiring, managing and growing community based pharmacies in the Southwest Region. Dougherty’s was incorporated in Delaware on August 8, 2000.

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

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. 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 Company has received payments of $617,000 and recorded $70,000 included in short term other receivables with the remainderremains active as a long term receivable due in three increments over 49 months, contingent on certain milestones expected to be achieved.holding company for the remaining payouts.

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 taken as a whole.

On February 6, 2018, the Company opened a new retail pharmacy location at The Campus at Legacy West in Plano, Texas (“Legacy”). This new location will offer pharmacy services and retail products to the approximately 3,000 JCPenney Home Office employees and is open to all other future tenants and visitors of The Campus at Legacy West. Dougherty’s is initially filling prescriptions via concierge service from its pharmacy on Campbell Road until the new location receives its pharmacy license, which is expected to occur within the standard 90-day waiting period or soon thereafter. Dougherty’s anticipates first year revenues from the new location of less than $1.0 million as the pharmacy establishes itself at the new location.

Our business requires us to rely on cash flow from operations and the revolving credit facility as our primary sources of funding to operate and meet our financial obligations in the foreseeable future. Historically, much of our debt has been renewed or refinanced in the ordinary course of business. We maintain a level of liquidity sufficient to allow us to cover our cash needs in the short-term. Over the long-term, we manage our cash and capital structure to maintain our financial position and maintain flexibility for future strategic initiatives. We continuously assess our working capital needs, debt and leverage levels, capital expenditure requirements, and future investments or acquisitions. As of March 31, 2018 we had cash and restricted cash of approximately $363,000, working capital of approximately negative $2.2 million and total outstanding debt of $7.3 million, including $4.0 million for the revolving credit facility. Negative working capital is due to the reclassification of the revolving credit facility to current liabilities to present the consolidated financial statements in conformity with GAAP. The reclassification does not affect the representation of the Company’s overall performance. Cash provided from operating activities for the three months ended March 31, 2018 was $150,000. Management believes it will have adequate cash to operate the Company and renew, extend, or refinance the revolving credit facility in the next twelve months.

Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Dougherty’s and all subsidiaries for which the Company has a controlling financial interest. Dougherty’s uses the cost method of accounting to recognize investments in and income from entities where Dougherty’s does not have a significant influence. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements of the Company and its wholly owned subsidiaries have been prepared by the Company, in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q and Rule 10-01 of Regulation S-X, and have not been audited. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 20162017 included in the Company’s Registration Statement on Form 10. 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 periods presented. Due to seasonality, the results of operations for the three and six months ended June 30, 2017,March 31, 2018, are not necessarily indicative of the results to be expected for any future interim period for the year ending December 31, 2017.2018.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAPaccounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 valid claims against debtors for services rendered or other charges arising on or before the balance sheet date. Management makes estimates of the collectabilitycollectibility of accounts receivable. Specifically, management analyzes accounts receivable and historical bad debts, customer credit-worthiness, current economic trends, and changes in customer 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,March 31, 2018 and 2017, and 2016, 100%all of the trade accounts receivable iswere from retail pharmacy operations.

Inventories

Inventories consist of health care product finished goods held for resale, valued at the lower of cost using the first-in, first-out method or market.net realizable value. The Company maintains an estimated reserve against inventory for excess, slow-moving, and obsolete inventory as well as inventory for which carrying value is in excess of its net realizable value.

Long-Lived Assets

The Company evaluates the recoverability of the carrying value of its 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

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 health 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.

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

AllSubstantially all revenues earned during the three and six months ended June 30,March 31, 2018 and 2017, and 2016, were earned from the retail pharmacy business.operations.

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 vendor 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.

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 based 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 deferred tax asset will not be realized.

Tax positions are recognized if it is more-likely-than-not, based on the technical 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 related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest 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 considerconsiders the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

On December 22, 2017, the President signed into law the “Tax Cuts and Jobs Act” (the “TCJA”). Among numerous changes to existing tax laws, the TCJA permanently reduces the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The effects on deferred tax balances of changes in tax rates are required to be taken into consideration in the period in which the changes are enacted, regardless of when they are effective. As the result of the reduction of the corporate income tax rate under the TCJA, the Company estimated the revaluation of its net deferred tax assets and recorded a provisional noncash income tax loss of approximately $1.0 million for year ended December 31, 2017. The Company has not completed all of its processes to determine the TCJA’s final impact. The final impact may differ from this provisional amount due to, among other things, changes in interpretations and assumptions the Company has made thus far and the issuance of additional regulatory or other guidance. The accounting is expected to be completed by the time the 2017 federal income tax return is filed in 2018.

Earnings per Share

Basic earnings per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net loss and unrecognized stock based-basedbased compensation by the weighted-average number of common shares outstanding during the period and the unvested restricted stock units. The unrecognized stock based compensation as of June 30,March 31, 2018 and 2017 is $22,000 and 2016 is $127,000 and $46,000,$27,000, respectively; the unvested restricted stock units are 658,500is 170,150 and 233,000,135,300, respectively. Due to the net losses for both years, restricted stock units for 20172018 and 20162017 were anti-dilutive.

New 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 Company is currently evaluating the impact that ASU 2016-02 will have on its financial position, results of operations and cash flows. Our current minimum lease commitments are disclosed in Note 4.

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

In August 2015,May 2014, the FASB issued ASU 2015-14,Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), an update to ASU 2014-09.or Accounting Standards Codification 606 (“ASC 606”). 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 FASB has also issued accounting standards updates which clarify the guidance. This ASU removes inconsistencies, complexities and allows transparency and comparability of revenue transactions across entities, industries, jurisdictions and capital markets by providingguidance outlines a single, comprehensive principles-based model for entities to use in accounting for revenue arising from contracts with additional disclosures regarding uncertainties. The principles-basedcustomers and supersedes most current revenue recognition model hasguidance issued by the FASB, including industry specific guidance. Under the new revenue recognition standard, entities apply a five-step analysis of transactions to determine when and how revenue is recognized. The core principle ismodel that a company should recognize revenue to depictdepicts 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 beginning after December 15, 2016. In transition,Specifically, companies identify the ASU may be applied retrospectivelyperformance obligations within their contracts with customers, allocate the transaction price received from customers to each prior period presentedperformance obligation identified within their contracts, and recognize revenue as the performance obligations are satisfied. During 2015, 2016, and 2017, the FASB issued various amendments which provide additional clarification and implementation guidance on ASC 606. Specifically, these amendments clarify how an entity should identify the specified good or retrospectivelyservice for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements, clarify how an entity should identify performance obligations and licensing implementation guidance, as well as account for shipping and handling fees and freight service, assess collectability, present sales tax, treat non-cash consideration, and account for completed and modified contracts at the time of transition. The new guidance requires enhanced disclosures, including revenue recognition policies to identify performance obligations to customers and significant judgments in measurement and recognition.

The Company adopted the new revenue recognition standard as of January 1, 2018. The adoption of this standard did not result in a change in its recognition of pharmacy retail sales of prescriptions and products as no performance obligations exist within contracts with customers as discussed below. Had a change occurred, the change would have been applied using the modified retrospective approach.

The retail pharmacy operations recognize revenue for pharmaceutical products sold under prescriptions and non-pharmaceutical products at the time the customer takes possession of the merchandise through the point of sale system as transactions occur. Each prescription claim is its own arrangement with the cumulative effectcustomer and is a performance obligation that is reported at the estimated net realizable amounts expected to be received from individuals, third-party payors, institutional health care providers and others.

The Company provides retail pharmacy prescriptions and products to residents at long-term care facilities. Revenue is recognized through the billing system at the time of delivery as transactions occur. Each prescription claim is its own arrangement with the customer and is a performance obligation that is reported at the estimated net realizable amounts expected to be received from individuals, third-party payors, institutional health care providers and others. Prescription co-payments are typically not collected at the time products are delivered but are billed to the individuals as part of normal billing procedures and subject to normal accounts receivable collections procedures. The Company has contracts with certain of the datelong-term care facilities for the delivery of adoption.those prescriptions, certain computer and medication dispensing equipment and software and support services all of which are specifically outlined in the contract. The contracts provide for reimbursement of certain costs for certain of these services. As it relates to the long-term care contracts and any other support services provided to its customers, the Company has determined that no revenue is evaluatingrecognized from separate and distinct performance obligations other than the effectretail sale of adopting this new accounting guidance including the transition method.pharmacy prescriptions and products.

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

2.       Notes Payable

Notes payable consist of the following:

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

2.       Notes Payable (Continued)

Future maturities of notes payable at June 30, 2017March 31, 2018, are as follows:

The revolving line of credit facility (“the Revolver”) with the First National Bank of Omaha (“the Lender”) is secured by, but not limited to, the accounts receivable, inventory, and the fixed assets of the Borrowers. On July 1, 2017, the Company obtained an extension of the Revolver, 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% (4.92% at March 31, 2018); accrued and unpaid interest on the Revolver is due monthly. All outstanding principal under the Revolver plus all accrued and unpaid interest thereon is due and payable in full on August 1, 2018. As of the date of this report, the Lender has indicated it does not intend to renew the Revolver on the maturity date. The Company is actively engaged negotiating the re-financing of this indebtedness, and believes that it will be able to do so prior to the maturity date; provided, however, the Company can provide no such assurances. 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. Effective December 31, 2017, the Borrowers and includes nonfinancial and financial covenants includingwill maintain a minimum debt service coverage and funded debtratio of not less than 1.00 to operating EBITDA ratios.1.00, as defined. As of June 30, 2017March 31, 2018 the Borrowers were not in compliance with thesethis financial covenants via waiver letter by the Lender. 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 of 36 months at 8.11% fixed rate interest.covenant.

3.       Stock and Share-Based Compensation

Restricted Share Unit Incentive Plan

On November 13, 2013, the Board of Directors approved and adopted the Restricted Share Unit (“RSU”) Incentive Plan. Under the plan the Company can award RSUs to employees 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 four-year period and will be payable in stock, valued at the fair market value on the grant date.

As of June 30, 2017,March 31, 2018, the following shares had been issued under the 2013 RSU Plan:

Dougherty’s Pharmacy, Inc.

Notes to Consolidated Financial Statements

4.       Commitments and Contingencies

Operating Leases

The Company leases their pharmacy, corporate 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. Effective January 1, 2017, the Company extended the lease for the flagship pharmacy located at the intersection of Preston and Royal in Dallas, Texas, that would have expired in December 2018, until December 2028.

Minimum lease payments under all non-cancelable operating lease agreements for the twelvethee months ended June 30, 2017March 31, 2018, are as follows:

Legal Proceedings

The Company is 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,March 31, 2018 and 2017, and 2016, the Company paid fees to its directors of $14,000$12,000 and $28,000 respectively$13,000 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,April 3, 2018, total principal amount due and owing under the promissory note issued by a bank in favor of an individual who was previously, through August of 2008, a related party of the Company, obtained an extension of the Revolver, discussed in Note 2, through September 1, 2017. On August 9, 2017,for which the Company obtained an additional term for the Revolver in the amountwas a co-guarantor as of $4,450,000 effective September 1, 2017, and then effective February 1,March 31, 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 payablewas satisfied in full on August 1, 2018.by the primary obligor. The Revolver is secured by certain retail pharmacy assets, specifically but not limitedrestricted cash balance of $304,000, for which the Company was required to inventory, equipment, software, accounts receivable, intangiblesprovide as escrow, was released as unrestricted 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.can be used for operations.

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 assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.  We undertake no obligation to update or revise any forward-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 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:

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 our Registration Statement on Annual Form 10-12G10-K filed on June 2, 2017.March 29, 2018. Should one or more of these 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 date they are made. Except to the extent required by law, we do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date the statement.

OVERVIEW

Key measures used by the Company’s management to evaluate business performance include revenue, gross profit, selling, 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 the 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.

Overview of Our 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 national 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 material changes in our results of operations for the three and six months ended June 30,March 31, 2018 and 2017, and 2016, and the significant developments affecting our financial condition since the Form 10-12G and Form 10-12G/A10-K filed June 2, 2017 and July 21, 2017, respectively.March 29, 2018. 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,that report, along with this report.

Comparison of the Three and Six Months Ended June 30, 2017months ended March 31, 2018, to the Three and Six Months Ended June 30, 2016months ended March 31, 2017 (000’s Omitted)