Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Nov. 03, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | Dougherty's Pharmacy, Inc. | |
Entity Central Index Key | 1,080,029 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 22,476,821 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current Assets | ||
Cash | $ 147 | $ 58 |
Restricted cash | 303 | 303 |
Trade accounts receivable, net | 1,740 | 1,901 |
Other receivables | 226 | 113 |
Receivable from affiliates | 7 | 12 |
Inventories, net | 3,497 | 3,340 |
Prepaid expenses | 158 | 286 |
Total current assets | 6,078 | 6,013 |
Long term receivable | 608 | 0 |
Property and equipment, net | 1,098 | 1,386 |
Intangible assets, net | 3,059 | 3,681 |
Investments carried at cost | 0 | 1,295 |
Deferred tax asset | 3,000 | 3,000 |
Total assets | 13,843 | 15,375 |
Current Liabilities | ||
Accounts payable | 3,050 | 2,643 |
Accrued liabilities | 627 | 293 |
Notes payable, current portion | 702 | 1,129 |
Revolving credit facility | 3,712 | 0 |
Total current liabilities | 8,091 | 4,065 |
Revolving credit facility | 0 | 4,179 |
Notes payable, long-term portion | 2,932 | 3,428 |
Total liabilities | 11,023 | 11,672 |
Stockholders' equity: | ||
Preferred stock, $0.0001 par value; 7,500,000 shares authorized: none issued and outstanding | 0 | 0 |
Common stock, $0.0001 par value; 50,000,000 shares authorized; 23,506,821 shares issued and 22,476,821 shares outstanding at September 30, 2017; 23,447,679 shares issued and 22,417,679 shares outstanding at December 31, 2016 | 2 | 2 |
Additional paid-in capital | 60,170 | 60,144 |
Accumulated deficit | (56,955) | (56,046) |
Treasury stock, at cost, 1,030,000 shares | (397) | (397) |
Total stockholders' equity | 2,820 | 3,703 |
Total liabilities and stockholders' equity | $ 13,843 | $ 15,375 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .0001 | $ 0.0001 |
Preferred stock, shares authorized | 7,500,000 | 7,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 23,506,821 | 23,447,679 |
Common stock, shares outstanding | 22,476,821 | 22,417,679 |
Treasury stock, at cost | 1,030,000 | 1,030,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Statement [Abstract] | ||||
Revenue | $ 9,947 | $ 10,494 | $ 30,213 | $ 32,308 |
Cost of sales (exclusive of depreciation and amortization shown separately down below) | 7,367 | 7,900 | 22,083 | 23,957 |
Gross profit | 2,580 | 2,594 | 8,130 | 8,351 |
Operating expenses | ||||
Selling, general and administrative expenses | 2,632 | 2,471 | 7,820 | 7,918 |
Non-cash stock compensation | 11 | 5 | 26 | 15 |
Depreciation and amortization | 249 | 261 | 769 | 789 |
Total operating expenses | 2,892 | 2,737 | 8,615 | 8,722 |
Operating loss | (312) | (143) | (485) | (371) |
Other income | 0 | 44 | 0 | 84 |
Interest expense | (115) | (112) | (317) | (329) |
Loss on disposal of assets | 0 | 0 | (75) | (114) |
Loss before provision for income tax | (427) | (211) | (877) | (730) |
Income tax provision | (9) | (10) | (32) | (30) |
Net loss | $ (436) | $ (221) | $ (909) | $ (760) |
Basic and diluted net loss per share attributable to common stockholders | $ (0.02) | $ (0.01) | $ (0.04) | $ (0.03) |
Weighted-average number of shares - Basic and diluted | 22,476,821 | 22,165,131 | 22,450,017 | 22,129,389 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating Activities | ||
Net loss | $ (909) | $ (760) |
Items not requiring (providing) cash | ||
Loss from disposal of assets | 75 | 114 |
Provision for doubtful accounts | 6 | 43 |
Depreciation and amortization | 769 | 789 |
Stock-based compensation | 26 | 15 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 94 | (55) |
Inventories | (193) | 113 |
Prepaid expenses and other assets | 12 | 171 |
Accounts payable | 388 | 447 |
Accrued liabilities | 334 | 207 |
Net cash provided by operating activities | 602 | 1,084 |
Investing Activities | ||
Purchases of property and equipment | (85) | (398) |
Cash proceeds from disposition of pharmacy | 274 | 0 |
Cash received upon disposition of investment | 688 | 0 |
Net provided by (used in) investing activities | 877 | (398) |
Financing Activities | ||
Payments on notes payable | (15,735) | (19,188) |
Proceeds from notes payable | 14,345 | 18,486 |
Net cash used in financing activities | (1,390) | (702) |
Net increase (decrease) increase in cash | 89 | (16) |
Cash, beginning of period | 361 | 371 |
Cash, end of period | 450 | 355 |
Supplemental Cash Flow Information | ||
Cash paid for income taxes | 42 | 42 |
Cash paid for interest | $ 315 | $ 328 |
Reconciliation of Cash to the C
Reconciliation of Cash to the Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Cash Flows [Abstract] | ||||
Cash | $ 147 | $ 58 | $ 53 | |
Restricted cash | 303 | 303 | 302 | |
Total cash | $ 450 | $ 361 | $ 355 | $ 371 |
1. Organization and Significant
1. Organization and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
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 September 30, 2017, is shown in the table below: Date Entity Transaction Description % Ownership March 2004 Dougherty’s Holdings, Inc. and subsidiaries (“DHI” or the “Borrowers”) Acquisition of retail pharmacy 100% September 2010 ASDS 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 Company has received payments of $688,000 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 divested pharmacy are not significant to the consolidated financial statements taken as a whole. 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. 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, 2016 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 nine months ended September 30, 2017, are not necessarily indicative of the results to be expected for any future interim period for the year ending December 31, 2017. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP 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. Reclassification The revolving credit facility (See Note 2) was reclassified as a current liability. The purpose of the reclassification is to present the consolidated financial statements in conformity with GAAP. The reclassification does not affect the representation of the Company’s overall performance. 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 collectability 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 September 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 first-in, first-out method or market. 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. All revenues earned during the three and nine months ended September 30, 2017 and 2016, were earned from the 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 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. 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 consider the facts, circumstances and information available at the reporting date and is subject to management’s judgment. 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 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 September 30, 2017 and 2016 is $116,000 and $41,000, respectively; the unvested restricted stock units are 658,500 and 233,000, respectively. Due to the net 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 Company is currently evaluating the impact that ASU 2016-02 will have on its financial position, results of operations and cash flows. Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts with Customers (Topic 606)” In August 2015, the FASB 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 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 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 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, but we do not currently believe this change will materially impact our financial statements. |
2. Notes Payable
2. Notes Payable | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes payable consist of the following: September 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 $4,450,000, interest at LIBOR plus 3.25% (4.49% at Sept 30, 2017) $ 3,712,000 $ 4,179,000 Term note in the principal amount of $150,000 with interest payable at LIBOR plus 3.25% (4.04% at March 31, 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 Sept 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. 368,000 – Term note in the principal amount of $1,827,850 with interest payable at prime plus 2.6% (6.85% at Sept 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. 1,417,000 1,553,000 Term note in the principal amount of $1,241,350 with interest payable at prime plus 2.6% (6.85% at Sept 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. 900,000 993,000 Term note in the principal amount of $744,100 with interest payable at prime plus 2.38% (6.63% at Sept 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. 589,000 645,000 Term note in the principal amount of $305,350 with interest payable at prime plus 2.4% (6.65% at Sept 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. 208,000 231,000 Term note in the principal amount of $168,350 with interest payable at prime plus 2.6% (6.85% at Sept 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. 149,000 309,000 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% 3,000 167,000 7,346,000 8,736,000 Less current portion (4,414,000 ) (1,129,000 ) $ 2,932,000 $ 7,607,000 Future maturities of notes payable at September 30, 2017, are as follows: 2017 $ 4,414,000 2018 702,000 2019 2,230,000 $ 7,346,000 The revolving 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% (4.49% at September 30, 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 does not provide for financial covenants until, effective December 31, 2017, the Borrowers will maintain a minimum debt service coverage ratio of not less than 1.00 to 1.00, as defined. |
3. Stock and Share-Based Compen
3. Stock and Share-Based Compensation | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
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 September 30, 2017, the following shares had been issued under the 2013 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 |
4. Commitments and Contingencie
4. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
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. Minimum lease payments under all non-cancelable operating lease agreements for the twelve months ended September 30, 2017, are as follows: 2017 $ 774,000 2018 787,000 2019 782,000 2020 663,000 2021 674,000 Thereafter 4,022,000 $ 7,702,000 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
5. Related Party Transactions | 9 Months Ended |
Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | During the three and nine months ended September 30, 2017 and 2016, the Company paid fees to its directors of $14,000 and $9,000 and $37,000 and 42,000, 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 $90,000 for management and other services provided. |
1. Organization and Significa12
1. Organization and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | 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 September 30, 2017, is shown in the table below: Date Entity Transaction Description % Ownership March 2004 Dougherty’s Holdings, Inc. and subsidiaries (“DHI” or the “Borrowers”) Acquisition of retail pharmacy 100% September 2010 ASDS 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 Company has received payments of $688,000 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 divested pharmacy are not significant to the consolidated financial statements taken as a whole. |
Basis of Presentation | 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. 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, 2016 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 nine months ended September 30, 2017, are not necessarily indicative of the results to be expected for any future interim period for the year ending December 31, 2017. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP 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. |
Reclassification | Reclassification The revolving credit facility (See Note 2) was reclassified as a current liability. The purpose of the reclassification is to present the consolidated financial statements in conformity with GAAP. The reclassification does not affect the representation of the Company’s overall performance. |
Concentration of Credit Risk | 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 | 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 collectability 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 September 30, 2017 and 2016, 100% of the trade accounts receivable is from retail pharmacy operations. |
Inventories | 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. 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 | 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 | 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. All revenues earned during the three and nine months ended September 30, 2017 and 2016, were earned from the retail pharmacy business. |
Cost of Sales | 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. |
Income Taxes | 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 consider the facts, circumstances and information available at the reporting date and is subject to management’s judgment. |
Earnings per Share | 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 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 September 30, 2017 and 2016 is $116,000 and $41,000, respectively; the unvested restricted stock units are 658,500 and 233,000, respectively. Due to the net losses for both years, restricted stock units for 2017 and 2016 were anti-dilutive. |
Accounting Pronouncements Not Yet Adopted | 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. Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts with Customers (Topic 606)” In August 2015, the FASB 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 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 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 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, but we do not currently believe this change will materially impact our financial statements. |
1. Organization and Significa13
1. Organization and Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Investments | Date Entity Transaction Description % Ownership March 2004 Dougherty’s Holdings, Inc. and subsidiaries (“DHI” or the “Borrowers”) Acquisition of retail pharmacy 100% September 2010 ASDS of Orange County, Inc. (“ASDS”) Holding company for Investment in CRESA Partners of Orange County, L.P. (“CPOC”) 100% |
2. Notes Payable (Tables)
2. Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of notes payable | September 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 $4,450,000, interest at LIBOR plus 3.25% (4.49% at Sept 30, 2017) $ 3,712,000 $ 4,179,000 Term note in the principal amount of $150,000 with interest payable at LIBOR plus 3.25% (4.04% at March 31, 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 Sept 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. 368,000 – Term note in the principal amount of $1,827,850 with interest payable at prime plus 2.6% (6.85% at Sept 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. 1,417,000 1,553,000 Term note in the principal amount of $1,241,350 with interest payable at prime plus 2.6% (6.85% at Sept 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. 900,000 993,000 Term note in the principal amount of $744,100 with interest payable at prime plus 2.38% (6.63% at Sept 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. 589,000 645,000 Term note in the principal amount of $305,350 with interest payable at prime plus 2.4% (6.65% at Sept 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. 208,000 231,000 Term note in the principal amount of $168,350 with interest payable at prime plus 2.6% (6.85% at Sept 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. 149,000 309,000 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% 3,000 167,000 7,346,000 8,736,000 Less current portion (4,414,000 ) (1,129,000 ) $ 2,932,000 $ 7,607,000 |
Future maturities of notes payable | 2017 $ 4,414,000 2018 702,000 2019 2,230,000 $ 7,346,000 |
3. Stock and Share-Based Comp15
3. Stock and Share-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Restricted stock activity | 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 |
4. Commitments and Contingenc16
4. Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of minimum operating lease payments | 2017 $ 774,000 2018 787,000 2019 782,000 2020 663,000 2021 674,000 Thereafter 4,022,000 $ 7,702,000 |
1. Organization and Significa17
1. Organization and Significant Accounting Policies (Details) | Sep. 30, 2017 |
Dougherty's Holdings, Inc. [Member] | |
Ownership percentage | 100.00% |
ASDS of Orange County, Inc. [Member] | |
Ownership percentage | 100.00% |
1. Organization and Significa18
1. Organization and Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Investments carried at cost | $ 0 | $ 1,295,000 | |
Cash received upon disposition of investment | 688,000 | $ 0 | |
Cash proceeds from disposition of pharmacy | 274,000 | 0 | |
Unrecognized stock based compensation | $ 116,000 | $ 41,000 | |
Antidilutive shares excluded from EPS | 658,500 | 233,000 | |
CRESA Partners [Member] | |||
Investments carried at cost | $ 1,295,000 | ||
Cash received upon disposition of investment | $ 688,000 | ||
Humble Pharmacy [Member] | |||
Cash proceeds from disposition of pharmacy | $ 274,000 |
2. Notes Payable (Details - Not
2. Notes Payable (Details - Notes payable) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Notes payable - current | $ (702,000) | $ (1,129,000) |
Notes payable - long term | 2,932,000 | 3,428,000 |
Note payable 1 [Member] | ||
Notes payable | 3,712,000 | 4,179,000 |
Note payable 2 [Member] | ||
Notes payable | 0 | 100,000 |
Note payable 3 [Member] | ||
Notes payable | 0 | 447,000 |
Note payable 4 [Member] | ||
Notes payable | 368,000 | 0 |
Note payable 5 [Member] | ||
Notes payable | 1,417,000 | 1,553,000 |
Note payable 6 [Member] | ||
Notes payable | 900,000 | 993,000 |
Note payable 7 [Member] | ||
Notes payable | 589,000 | 645,000 |
Note payable 8 [Member] | ||
Notes payable | 208,000 | 231,000 |
Note payable 9 [Member] | ||
Notes payable | 0 | 112,000 |
Note payable 10 [Member] | ||
Notes payable | 149,000 | 309,000 |
Note payable 11 [Member] | ||
Notes payable | 3,000 | 167,000 |
Total Notes [Member] | ||
Notes payable | 7,346,000 | 8,736,000 |
Notes payable - current | (4,414,000) | (1,129,000) |
Notes payable - long term | $ 2,932,000 | $ 7,607,000 |
2. Notes Payable (Details - N20
2. Notes Payable (Details - Notes payable details) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Mar. 31, 2017 | |
Note payable 1 [Member] | ||
Debt face amount | $ 4,450,000 | |
Interest rate description | LIBOR plus 3.25% | |
Interest rate at period end | 4.49% | |
Note payable 2 [Member] | ||
Debt face amount | $ 150,000 | |
Interest rate description | LIBOR plus 3.25% | |
Interest rate at period end | 4.04% | |
Note payable 3 [Member] | ||
Debt face amount | $ 1,500,000 | |
Interest rate description | Prime plus 2.75 | |
Interest rate at period end | 7.00% | |
Note payable 4 [Member] | ||
Debt face amount | $ 432,859 | |
Interest rate description | Fixed 8.11% | |
Debt maturity date | Apr. 10, 2020 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 13,641 | |
Note payable 5 [Member] | ||
Debt face amount | $ 1,827,850 | |
Interest rate description | Prime plus 2.6% | |
Interest rate at period end | 6.85% | |
Debt maturity date | Jul. 10, 2020 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 15,232 | |
Debt baloon payment | 929,157 | |
Note payable 6 [Member] | ||
Debt face amount | $ 1,241,350 | |
Interest rate description | Prime plus 2.6% | |
Interest rate at period end | 6.85% | |
Debt maturity date | Jan. 10, 2020 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 10,344 | |
Debt baloon payment | 638,850 | |
Note payable 7 [Member] | ||
Debt face amount | $ 744,100 | |
Interest rate description | Prime plus 2.38% | |
Interest rate at period end | 6.63% | |
Debt maturity date | Aug. 10, 2020 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 6,200 | |
Debt baloon payment | 378,251 | |
Note payable 8 [Member] | ||
Debt face amount | $ 305,350 | |
Interest rate description | Prime plus 2.4% | |
Interest rate at period end | 6.65% | |
Debt maturity date | Aug. 10, 2019 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 2,545 | |
Debt baloon payment | 155,220 | |
Note payable 9 [Member] | ||
Debt face amount | $ 168,350 | |
Interest rate description | Prime plus 2.6% | |
Interest rate at period end | 6.85% | |
Debt maturity date | Sep. 10, 2019 | |
Debt periodic frequency | monthly | |
Debt periodic payment | $ 2,004 | |
Debt baloon payment | $ 50,356 | |
Note payable 10 [Member] | ||
Interest rate at period end | 5.50% | |
Debt maturity date | Sep. 30, 2018 | |
Note payable 11 [Member] | ||
Interest rate description | Vary up to 3.68% | |
Debt maturity date | Sep. 30, 2017 |
2. Notes Payable (Details - Fut
2. Notes Payable (Details - Future debt maturities) | Sep. 30, 2017USD ($) |
Debt Disclosure [Abstract] | |
Future maturities 2017 | $ 4,414,000 |
Future maturities 2018 | 702,000 |
Future maturities 2019 | 2,230,000 |
Future maturities total | $ 7,346,000 |
3. Stock and Share-Based Comp22
3. Stock and Share-Based Compensation (Details) | 9 Months Ended |
Sep. 30, 2017USD ($)shares | |
Restricted Stock Units (RSUs) [Member] | |
Number of shares | 955,100 |
RSU 1 [Member] | |
Date of grant | 2,013 |
Number of shares | 120,000 |
Fair value at date of grant | $ | $ 26,400 |
Shares vested | 90,000 |
Shares non-vested | 25,000 |
Shares cancelled | 5,000 |
RSU 2 [Member] | |
Date of grant | 2,014 |
Number of shares | 122,100 |
Fair value at date of grant | $ | $ 30,946 |
Shares vested | 86,300 |
Shares non-vested | 25,650 |
Shares cancelled | 10,150 |
RSU 3 [Member] | |
Date of grant | 2,015 |
Number of shares | 150,000 |
Fair value at date of grant | $ | $ 39,000 |
Shares vested | 70,000 |
Shares non-vested | 65,000 |
Shares cancelled | 15,000 |
RSU 4 [Member] | |
Date of grant | 2,016 |
Number of shares | 0 |
Fair value at date of grant | $ | $ 0 |
Shares vested | 0 |
Shares non-vested | 0 |
Shares cancelled | 0 |
RSU 5 [Member] | |
Date of grant | 2,017 |
Number of shares | 563,000 |
Fair value at date of grant | $ | $ 118,230 |
Shares vested | 0 |
Shares non-vested | 543,000 |
Shares cancelled | 20,000 |
4. Commitments and Contingenc23
4. Commitments and Contingencies (Details - Minimum lease payments) | Sep. 30, 2017USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Minimum lease payment 2017 | $ 774,000 |
Minimum lease payment 2018 | 787,000 |
Minimum lease payment 2019 | 782,000 |
Minimum lease payment 2020 | 663,000 |
Minimum lease payment 2021 | 674,000 |
Minimum lease payment thereafter | 4,022,000 |
Future minimum operating lease payments | $ 7,702,000 |
5. Related Party Transactions (
5. Related Party Transactions (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Directors [Member] | ||||
Director fees | $ 14,000 | $ 9,000 | $ 37,000 | $ 42,000 |
Chairman [Member] | ||||
Management fees | $ 30,000 | $ 30,000 | $ 90,000 | $ 90,000 |