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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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



For the Fiscal Year
Ended December 31, 2004



OR

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



Commission File
Number 000-27945



ASCENDANT SOLUTIONS, INC.

(Exact name of Registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 75-2900905                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|16250 Dallas Parkway, Suite 102, Dallas, TX                    |  | 75248                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code: 972-250-0945



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Securities registered pursuant to Section 12(b) of the Act:None



Securities registered pursuant to Section 12(g) of the Act:Common Stock,
par value $0.0001



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Indicate by check mark whether the registrant (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.    Yes ̈Nox



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes ̈No x



The aggregate market value of the voting stock held by nonaffiliates on March 21, 2005 based on the closing price for the
registrants common stock on such date as reported on the National Quotation Bureaus Pink Sheets was approximately $14,659,000.



At March 21, 2005, 21,933,400 shares of common stock were outstanding.



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DOCUMENTS INCORPORATED BY REFERENCE



Portions
of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held May 9, 2005 are incorporated by reference into Part III.



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ASCENDANT SOLUTIONS, INC.



FORM 10-K



For the Fiscal Year Ended December 31, 2004



Table of Contents



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | Page
|           |  | PART I.                                                                                                      |  |     
|           |  |                                                                                                             
|Item 1.    |  | Business                                                                                                     |  | 1   
|           |  |                                                                                                             
|Item 2.    |  | Properties                                                                                                   |  | 12  
|           |  |                                                                                                             
|Item 3.    |  | Legal Proceedings                                                                                            |  | 13  
|           |  |                                                                                                             
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 14  
|           |  |                                                                                                             
|           |  | PART II.                                                                                                     |  |     
|           |  |                                                                                                             
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 15  
|           |  |                                                                                                             
|Item 6.    |  | Selected Consolidated Financial Data                                                                         |  | 16  
|           |  |                                                                                                             
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 17  
|           |  |                                                                                                             
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 36  
|           |  |                                                                                                             
|Item 8.    |  | Consolidated Financial Statements and Supplementary Data                                                     |  | 37  
|           |  |                                                                                                             
|Item 9.    |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 101 
|           |  |                                                                                                             
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 101 
|           |  |                                                                                                             
|Item 9B    |  | Other Information                                                                                            |  | 101 
|           |  |                                                                                                             
|           |  | PART III.                                                                                                    |  |     
|           |  |                                                                                                             
|Item 10.   |  | Directors and Executive Officers of the Registrant                                                           |  | 102 
|           |  |                                                                                                             
|Item 11.   |  | Executive Compensation                                                                                       |  | 102 
|           |  |                                                                                                             
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 102 
|           |  |                                                                                                             
|Item 13.   |  | Certain Relationships and Related Transactions                                                               |  | 102 
|           |  |                                                                                                             
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 102 
|           |  |                                                                                                             
|           |  | PART IV.                                                                                                     |  |     
|           |  |                                                                                                             
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 103 
|           | 
|Signatures |  | 104                                                                                                         



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PART I.



ITEM 1.    BUSINESS



The following discussion of our business contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth below under Managements Discussion and Analysis of Financial Condition and Results of OperationsRisks Related to Our Business, and Other Risks,
as well as elsewhere in this Annual Report on Form 10-K.



Background



Ascendant Solutions, Inc. (Ascendant, we also
refer to Ascendant as we, us, or the Company) is a diversified financial services company which is seeking to, or has invested in or acquired healthcare, manufacturing, distribution or service companies. We also
conduct various real estate activities, performing real estate advisory services for corporate clients, and, through an affiliate, purchase real estate assets, as a principal investor.



The following is a summary of our identifiable business segments, consolidated subsidiaries and their related business
activities:



|                              |  |                                                                                                       |  |                                                                                                                                                    
|----------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|Business Segment              |  | Subsidiaries                                                                                          |  | Principal Business Activity                                                                                                                        
|Healthcare                    |  | Doughertys Holdings, Inc. and Subsidiaries                                                           |  | Healthcare products and services provided through retail pharmacies and infusion therapy centers, including specialty compounding pharmacy services
|                              |  |                                                                                                      
|Real estate advisory services |  | CRESA Partners of Orange County, L.P., 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, Fairways Frisco, L.P., VTE, L.P.              |  | Corporate administration, principal real estate and investments not included in other segments                                                     



Through early 2001,
the Company had been engaged in providing call center, order management and fulfillment services, portions of which were sold or otherwise wound down by July 1, 2001. From July 1, 2001 and continuing through December 31, 2002, the Company had no
revenue producing contracts or operations. In December 2001, the Company revised its strategic direction to seek acquisition possibilities throughout the United States or enter into other business endeavors.



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During 2002, we made our first investments, and we have continued to make additional investments and
acquisitions throughout 2003 and 2004. A summary of our investment and acquisition activity is shown in the table below:



|              |  |                                                                    |  |                               |  |                                                                                          |  |            |  
|------------- |  | ------------------------------------------------------------------ |  | ----------------------------- |  | ---------------------------------------------------------------------------------------- |  | ---------- | -
|Date          |  | Entity                                                             |  | Business Segment              |  | Transaction Description                                                                  |  | %Ownership |  
|April 2002    |  | Ampco Partners, Ltd                                                |  | Corporate & other             |  | Investment in a non-sparking, non-magnetic safety tool manufacturing company             |  | 10         | %
|              |  |                                                                    |  |                              
|August 2002   |  | VTE, L.P.                                                          |  | Corporate & other             |  | Investment to acquire early stage online electronic ticket exchange company              |  | 23         | %
|              |  |                                                                    |  |                              
|October 2002  |  | CRESA Capital Markets Group, L.P., ASE Investments Corporation     |  | Real estate advisory services |  | Investment to form real estate capital markets and strategic advisory services companies |  | 80         | %
|              |  |                                                                    |  |                              
|November 2003 |  | Fairways 03 New Jersey, L.P.                                       |  | Corporate & other             |  | Investment in a single tenant office building                                            |  | 20         | %
|              |  |                                                                    |  |                              
|March 2004    |  | Doughertys Holdings, Inc. andSubsidiaries                         |  | Healthcare                    |  | Acquisition of specialty pharmacies and infusion therapy centers                         |  | 100        | %
|              |  |                                                                    |  |                              
|April 2004    |  | Fairways 36864, L.P.                                               |  | Corporate & other             |  | Investment in commercial real estate properties                                          |  | 20         | %
|              |  |                                                                    |  |                              
|May 2004      |  | CRESA Partners of Orange County, L.P., ASDS of Orange County, Inc. |  | Real estate advisory services |  | Acquisition of tenant representation and other real estate advisory services company     |  | 99         | %
|              |  |                                                                    |  |                              
|December 2004 |  | Fairways Frisco, L.P.                                              |  | Corporate & other             |  | Investment in a mixed-use real estate development                                        |  | 50         | %



These transactions and
the business activity of our business segments are discussed in more detail below under Description of Business Segments. Also, certain of these transactions involved related parties or affiliates as more fully described in Note 18 of
the Ascendant Consolidated Financial Statements.



Our future
acquisition criteria may include, but not necessarily be limited to the following criteria:



| |  |  | Annual revenues of $5-50 million
| | - |  | --------------------------------



| |  |  | Stable history of profitability and positive cash flow with minimum EBITDA of $1 million
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | Strong management team committed to the business
| | - |  | ------------------------------------------------



| |  |  | Leadership or proprietary position in either product line, technology, manufacturing, service offering or distribution
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Opportunity to grow internally and/or through strategic add-on acquisitions
| | - |  | ---------------------------------------------------------------------------



| |  |  | Diversified customer base and product line
| | - |  | ------------------------------------------



| |  |  | Businesses, or situations, where we can most effectively deploy our net operating loss carryforwards
| | - |  | ----------------------------------------------------------------------------------------------------



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



We face
all of the risks of a new business with limited capital, the special risks inherent in the acquisition, or involvement in each of our particular new business opportunities and the added risks associated with the management of diverse businesses.



In our continued acquisition efforts, we will not limit
ourselves to a particular industry. Most likely, the target business will be primarily located in the United States, although we may acquire a target business with operations and/or locations outside the United States. In seeking a target business,
we will consider, without limitation, businesses (i) that offer or provide services or develop, manufacture or distribute products in the United States or abroad; or (ii) that are engaged in wholesale or retail distribution among other potential
target business opportunities and/or where our tax loss carryforwards can be utilized effectively. We may also co-invest in certain real estate transactions along with Fairways Equities, LLC or its principals.



We have acquired, and may acquire in the future, minority or other
non-controlling investments in other companies or businesses. However, we do not intend to engage primarily in acquiring minority investments, as we prefer to control the businesses in which we invest. Specifically, we intend to conduct our
activities so as to avoid being classified as an investment company under the Investment Company Act of 1940, and therefore avoid application of the costly and restrictive registration and other provisions of that Act. We do not believe
we are an investment company. However, if in the future more than 40% of our assets are comprised of investment securities (which are basically, non-government securities other than securities of majority-owned and certain
other controlled companies) we would, subject to certain transitional relief, be required to register as an investment company, which would involve our incurring significant registration and compliance costs under the Investment Company Act. We have
obtained no formal determination nor have requested any ruling or interpretation from the Securities and Exchange Commission as to our status or potential status under the Investment Company Act of 1940. Any violation by us of the Investment Company
Act, whether intentional or inadvertent, could subject us to material adverse consequences.



Description of Business Segments



Healthcare Segment



Doughertys
Holdings, Inc.



Description of Acquisition



On March 24, 2004, we acquired, through a newly formed,
wholly-owned subsidiary Doughertys Holdings, Inc. (DHI), substantially all of the assets of Park Pharmacy Corporation (the Park Assets) pursuant to the Joint Plan and the Asset Purchase Agreement (the
Agreement) entered into December 9, 2003 between Park Pharmacy and DHI. Park Pharmacy had been operating as a debtor in possession since December 2, 2002. The purchased assets included all of the cash and certain other assets of Park
Pharmacy and all equity interests of the following entities (each directly or indirectly wholly-owned by Park Pharmacy): (i) Doughertys Pharmacy, Inc., (ii) Park Operating GP, LLC, (iii) Park LP Holdings, Inc., (iv) Park-Medicine Man GP LLC
(v) Park Infusion Services, L.P., and (vi) Park-Medicine Man, L.P.



We acquired the Park Assets by investing, through DHI, an aggregate of approximately $1.5 million in cash, funded out of our working capital, and the assumption by DHI of approximately $6.3 million in debt associated with the Park Assets.



In connection with the acquisition of the Park Assets, DHI
also entered into a new credit facility with Bank of Texas, the prior lender to Park Pharmacy Corporation. This new facility provides for three notes, aggregating approximately $5.5 million. Each note bears interest at six percent and matures in
three years. Although DHI has



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committed to use commercially reasonable efforts to locate a replacement lender as soon as possible, DHI is obligated to make monthly payments (consisting of
both interest and principal payments, as applicable) to the bank of approximately $56,000. The new credit facility is secured by substantially all of the assets of DHI, including the stock of its operating subsidiaries.



In connection with the acquisition of the Park Assets, DHI entered into a
three year supply agreement with AmerisourceBergen Drug Corporation (AmerisourceBergen) pursuant to which DHI and our newly acquired indirect subsidiaries agreed to purchase prescription and over-the-counter pharmaceuticals from
AmerisourceBergen through March 2007. This supply agreement will also provide us with pricing and payment terms that are improved from those previously provided by AmerisourceBergen to Park Pharmacy. In exchange for these improved terms, DHI has
agreed to acquire 85% of its prescription pharmaceuticals and substantially all of its generic pharmaceutical products from AmerisourceBergen and agreed to minimum monthly purchases of $900,000 of all products in order to obtain new favorable
pricing terms. AmerisourceBergen was a creditor of the operating non-debtor subsidiaries and, in connection with the Chapter 11 bankruptcy proceeding, AmerisourceBergen agreed to accept a cash payment of approximately $1.1 million and a promissory
note in the amount of approximately $750,000 payable by DHI over a period of five years, using a 15-year amortization schedule and an interest rate of six percent with the last payment being a balloon payment of the outstanding principal and accrued
but unpaid interest.



Both the new credit facility with
the Bank of Texas and the note with AmerisourceBergen provide for prepayment discounts in the event that these loans are retired prior to maturity.



Description of Business



The map below shows the physical locations of the DHI operating locations in the State of Texas:



LOGO



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Doughertys Pharmacy



Doughertys Pharmacy is a turn-key multi-service pharmacy located in a highly prestigious area of Dallas. Centrally
located, Doughertys continues to provide a level of service not provided by national pharmacy chain stores. We fulfill 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 customers pharmacy needs. The companys long history began in 1929 and continues today as one of Dallass oldest, largest and best-known
full-service pharmacies, which also include durable medical equipment and its home healthcare and other pharmacy services. 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.



Park Infusion
Care



Park Infusion Care is a specialty pharmacy
company which specializes in full service home infusion therapy. Park Infusion Care offers full nursing and pharmacy services for home infusion therapies. Park Infusion Care has three offices located in Dallas, Houston and San Antonio. Park Infusion
Cares business territory includes most of South, Central and East Texas. All three offices have infusion suites located in each office for the convenience of our clientele. The Dallas and San Antonio offices have been in business for over 10
years whereas the Houston office began operations in January 2003.



Park Infusion Care has contracts with most of the major insurance carriers in the Texas area including Aetna, Blue Cross Blue Shield, Humana, Medicare, Medicaid, Tricare and United Health Care. Park Infusion Care does primarily In-Network
Care. The infusion therapies include antibiotics, total parenteral nutrition, intravenous immunoglobulin and other intravenous therapies. The primary business referral sources include case managers from hospitals, insurance carriers as well as
doctors, home health agencies and nursing homes.



Medicine Man Pharmacies



Medicine Man
Pharmacies operates three community pharmacies in a market south of Houston, Texas. Medicine Man Pharmacies started business in 1966, and it focuses on offering patient pharmacy care on a very personalized and individual basis. In addition to
filling prescriptions, the Medicine Man Pharmacies also offer specialized Diabetic care departments; services in nutritional and homeopathic treatment, and carry an extensive line of vitamins. Two of the Medicine Man Pharmacies stores contain
compounding labs to provide specialization in prescriptions for patients that have needs other than those readily available in manufactured versions. Like Doughertys Pharmacy, Medicine Man Pharmacies provide a high level of customer service
and solutions for customers pharmacy needs that are typically absent in national pharmacy chain stores.



Real Estate Advisory Services Segment



CRESA Capital Markets Group, L.P.



In 2002, the Company formed a capital markets subsidiary, CRESA Capital Markets Group, L.P., (Capital Markets) and entered into a licensing and co-marketing agreement with CRESA Partners LLC, a national
real estate services firm. We own 80% of Capital Markets through our 80% ownership of ASE Investments Corporation (ASE Investments) and our 100 % ownership of Ascendant CRESA LLC, which is the 0.1% general partner in Capital Markets. ASE
Investments owns 99.9% of Capital Markets. The remaining 20% of Capital Markets and ASE Investments is owned, directly or indirectly, by Brant Bryan, Cathy Sweeney and David Stringfield, who are principals in Capital Markets and shareholders in the
Company. In connection with its formation, Capital Markets received approximately $200,000 from the issuance of limited partnership interests to CRESA Partners LLC. During the third quarter of 2003, Capital Markets received additional funding of
$80,000 ($64,000 from us and $16,000 from the other limited partners) in the form of partner loans. These loans were repaid with interest during the fourth quarter of 2003 from the proceeds of approximately $425,000 in real estate advisory services
earned by Capital Markets from the purchase and sale of a commercial office building.



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Capital Markets provides real estate financial advisory services and strategic real estate advisory
services to corporate clients on a fee basis. These services include, but are not limited to, analysis, consulting, acquisition and/or disposition of property, capital placement and acquisition, contract negotiation, and other matters related to
real estate finance. Capital Markets is accounted for as a consolidated entity in our consolidated financial statements. Jim Leslie, our Chairman, also serves as an advisor to the Board of Directors of CRESA Partners, LLC. Capital Markets currently
employs seven people, including Jim Leslie and the three principals named above.



CRESA Partners of Orange County, L.P.



Description of Acquisition



Effective May 1, 2004, we acquired through ASDS of Orange County, Inc. (ASDS) all of the issued and outstanding stock of CRESA Partners of Orange County, Inc., a California corporation f/k/a The Staubach CompanyWest, Inc.
(CPOC), pursuant to the Stock Purchase Agreement dated March 23, 2004 between Kevin Hayes, the sole stockholder of CPOC (the Seller), and ASDS for $6.9 million, plus closing costs. CPOC is located in Newport Beach, California
and provides tenant representation services to commercial and industrial users of real estate, which include strategic real estate advisory services, lease management services, facility and site acquisition and disposition advice; design,
construction and development consulting; and move coordination.



Pursuant to the terms of the Stock Purchase Agreement, the purchase price was paid pursuant to the terms of a $6.9 million promissory note (the Acquisition Note) payable to the Seller. The Acquisition Note is secured by a pledge
of all of the personal property of CPOC which is subordinate to CPOCs $800,000 bank credit line with Northern Trust Bank, bears interest payable monthly at the prime rate of Northern Trust Bank plus 0.50% per annum, with principal generally
payable quarterly in arrears over a three year period from the excess cash flow of ASDS, as defined, and is guaranteed by the Company. The then outstanding principal balance of the Acquisition Note is payable in full on May 1, 2007. The purchase
price is subject to adjustment downward (by an amount not to exceed $1.9 million) to reflect the operating results of CPOC during the four year period ending December 31, 2007 if CPOCs revenues are less than an aggregate of $34.0 million
during such period. The revenues through December 31, 2004 are described below.



Following the acquisition of CPOC, ASDS contributed the assets and liabilities of CPOC to CRESA Partners of Orange County, LP (the Operating LP) that is owned jointly by (i) CRESA Partners-Hayes, Inc., a
California corporation f/k/a The Staubach Company of California, Inc. that is the general partner of the Operating LP (the General Partner), (ii) ASDS, a limited partner of the Operating LP, (iii) the Seller, a limited partner of the
Operating LP, and (iv) a Delaware limited liability company controlled by the management and key employees of CPOC that is a limited partner of the Operating LP (the MGMT LLC). The General Partner is controlled by the management and key
employees of CPOC. ASDS is entitled to receive 99% of the profits of the Operating LP until such time as ASDS has received cumulative distributions from the Operating LP equal to the Purchase Price plus a preferential return of approximately $1.7
million (total distributions equal to $8.6 million), at which time the allocation of the profits of the Operating LP shall become: 79.9% to MGMT LLC, 10% to ASDS, 10% to the Seller and 0.1% to the General Partner. During the period from the
acquisition date through December 31, 2004, ASDS received distributions of $211,000 from the Operating LP, which were used to pay interest on the Acquisition Note.



In connection with the acquisition of CPOC, the Company is entitled to receive a structuring fee of $690,000, plus interest
thereon, of which $230,000 was paid at closing. The remainder will be paid in two equal annual installments of $230,000, plus interest thereon (payable, respectively, on May 12, 2005 and May 12, 2006). The structuring fee has been eliminated in the
consolidation of the Company with CPOC and the Operating LP in the consolidated financial statements of the Company.



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##### Index to Financial Statements

The results of operations of the Operating LP will be consolidated with ASDS and ultimately the Company,
in accordance with FIN 46R Consolidation of Variable Interest Entities, until such time that ASDS has received cumulative distributions equal to the Purchase Price plus a preferential return of approximately $1.7 million (total
distributions of $8.6 million) . When and if the total distributions equal to $8.6 million are fully paid, our residual interest will become 10% and the principles of consolidation for financial reporting purposes will no longer be satisfied under
FIN 46R or APB 18, Equity Method for Investments in Common Stock. Accordingly, we would no longer consolidate the results of operations of the Operating LP and we would instead record our share of income from the Operating LP as
Investment Income in our consolidated statement of operations.



Description of Business



CPOC provides performance based corporate real estate advisory services to corporate clients around the United States. CPOC specializes in reducing corporate costs through deployment of seasoned professionals with proven expertise in a
broad range of integrated real estate services. CPOC provides real estate services such as:



Strategic Planningincludes defining corporate goals, analysis of market and trends, demographic and labor studies,
operating expense audits and formulation of strategic options



Tenant Representationmanagement of tenant lease acquisitions and renewals, building purchases, and negotiations on behalf of tenant clients



Business and Economic Incentivesincludes
identification of incentive opportunities, cost/benefit analysis, negotiation of incentives, documentation and implementation of incentive strategies and ongoing administration of incentive packages



Compliance Auditsoperating expense and
lease compliance audits designed to minimize tenant costs that are not in compliance with negotiated lease terms



Project Managementmanagement of various projects including building evaluation, space use plans, architect selection,
development management and cost forecasts



Financing & Capital Marketsadvisory services related to sale/leaseback transactions, purchase financing, real estate debt restructuring and real estate debt sourcing



Lease Portfolio Management provides
systems to manage client lease transactions and real estate portfolios including information tracking, workflow management, document management and portfolio reporting



CPOC competes on a local and national level with other real estate services firms that provide similar services, including
Trammell Crow, Cushman & Wakefield, CB Richard Ellis, Voit Commercial, Grubb & Ellis and Lee & Associates.



The table below summarizes CPOCs transaction activity for the period from the date of acquisition to December 31, 2004, from which we generated
revenues of approximately $8,858,000:



|                                |  |                    |  |                              |            
|------------------------------- |  | ------------------ |  | ---------------------------- | -----------
|                                |  | No. ofTransactions |  | ApproximateTransaction Value
|Lease transactions              |  | 200                |  | $                            | 335 million
|Real estate sales transactions  |  | 7                  |  | $                            | 25 million 
|Project management transactions |  | 60                 |  | $                            | 45 million 



Corporate and Other Segment



Our Corporate and Other Segment includes our
corporate and administrative activities as well as other investments that are not included in the Healthcare or Real estate advisory services segments. Our corporate and



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##### Index to Financial Statements

administrative activities include finance and accounting, insurance and risk management, review of investment opportunities, legal and other advisory
services to our subsidiaries and affiliates. We receive a management fee from certain of our subsidiaries in exchange for these services. During the year ended December 31, 2004, we received approximately $75,000 of management fees, which have been
eliminated in the consolidated financial statements contained herein. We also receive periodic dividends from one of our subsidiaries, which amounted to $86,000 in 2004 and which have also been eliminated in consolidation.



Other investments which are not included in the Healthcare or Real estate
advisory services segments are described below.



Ampco
Partners, Ltd.



In 2002, we invested $400,000 for a 10%
limited partnership interest in Ampco Partners, Ltd. (Ampco), a newly formed entity, which acquired the assets and intellectual property of the Ampco Safety Tools division of Ampco Metals Incorporated of Milwaukee, Wisconsin in a Chapter
11 bankruptcy proceeding. Ampco Safety Tools, founded in 1922, is a leading manufacturer of non-sparking, non-magnetic and corrosion resistant safety tools. These tools are designed to meet Occupational Safety and Health Administration and National
Fire Protection Association requirements for use in locations where flammable vapors of combustible residues are present. Safety tools are used in industrial applications, primarily in manufacturing and maintenance operations. We receive quarterly
distributions based upon 10% of Ampcos reported quarterly earnings before interest, taxes, depreciation and amortization expense, or EBITDA. Our investment in Ampco is accounted for under the equity method. We recognize our proportionate share
of Ampcos net income, as investment income in the consolidated statements of operations. Distributions received that exceed our 10% interest in Ampcos net income are accounted for as return of capital and reduction in our
investment in Ampco. Our distributions from Ampco for the years ending December 31 are as follows, and management is not aware of any factors that would materially change such distributions going forward:



|                    |  |      |         |      |   |         |  |   |       
|------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------
|                    |  | 2004 |         | 2003 |   | 2002   
|Investment Income   |  | $    | 82,000  |      | $ | 66,000  |  | $ | 19,000
|Return of capital   |  |      | 29,000  |      |   | 46,000  |  |   | 69,000
|                    |  |      |         |      |   |         |  |   |       
|Total distributions |  | $    | 111,000 |      | $ | 112,000 |  | $ | 88,000
|                    |  |      |         |      |   |         |  |   |       



VTE, L.P.



On August 1, 2002, we formed a wholly owned subsidiary,
which serves as the corporate general partner of VTE, L.P. (VTE), a partnership which acquired the assets (primarily software) of Venue Ticket Exchange, Inc. During 2002 and 2003, we made an investment of $150,000 representing an
ownership interest of 23.3% in VTE. VTE generated no revenues during 2002 and 2003, and is accounted for as a consolidated entity in our consolidated financial statements. At year-end 2003, management evaluated, and completely wrote off, the
carrying value of VTEs investment in its computer software and hardware. VTE is no longer in business and management has no plans to further pursue this investment. Please see Notes 1 and 2 in the Ascendant Consolidated Financial Statements
contained herein.



Fairways Equities, LLC



During the fourth quarter of 2003, we entered into a participation agreement
(the Participation Agreement) with Fairways Equities LLC (Fairways), an entity controlled by Jim Leslie, our Chairman, and Brant Bryan, Cathy Sweeney and David Stringfield who are principals of Capital Markets and
shareholders of the Company (Fairways Members), pursuant to which we will receive up to 20% of the profits realized by Fairways in connection with all real estate acquisitions made by Fairways. Additionally, we will have an opportunity,
but not the obligation, to invest in the transactions undertaken by Fairways, through our 80% owned subsidiary, ASE Investments. Our profit participation with Fairways is subject to modification or termination by Fairways at the end of 2005 in the
event that the aggregate level of cash flow (as defined in the Participation



8



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##### Index to Financial Statements

Agreement) generated by our acquired operating entities has not reached $2 million for the twelve months ended December 31, 2005. We are unable to determine
what real estate Fairways, may acquire or the cost, type, location, or other specifics about such real estate. There can be no assurances that we will be able to generate the required cash flow to continue in the Participation Agreement after 2005,
or that Fairways will be able to acquire additional real estate assets, that we will choose to invest in such real estate acquisitions or that there will be profits realized by such real estate investments. We do not have an investment in Fairways,
but rather a profits interest through our Participation Agreement.



During December 2003, we made a capital contribution of $145,000 to Fairways 03 New Jersey, LP which, through a partnership with an institutional investor, acquired the stock of a company whose sole asset was a single tenant office building
and entered into a long-term credit tenant lease with the former owner of the building. In December 2003, subsequent to the closing of this transaction, our capital contribution of $145,000 was distributed back to us. Based upon the terms of the
current lease which expires in 2015 and the secured loans incurred by the partnership to fund the acquisition, which bear interest at LIBOR plus 1.75% to 2.25% and mature in 12 to 24 months, we expect to receive approximately $210,000 per year from
our share of the net rental payments, after debt service, from the partnership. These proceeds will vary if the lease is modified or terminated, if the terms of the loans are modified or if there is a default by the tenant. As further discussed in
Note 20 of the Ascendant Consolidated Financial Statements contained herein, the Company agreed to indemnify the other partners of Fairways 03 New Jersey, LP (who are also the Fairways Members) for our 20% pro rata partnership interest of a
guarantee of bank indebtedness which the partners provided to a bank. The limit of our indemnification under this agreement is $520,000.



In April 2004, we invested approximately $97,000 through ASE Investments for a 24.75% interest in Fairways 36864, LP, (whose other partners also included
the Fairways Members) that participated in the development of and leaseback of single tenant commercial properties. In August and October 2004 these properties were sold and we recognized investment income of $84,000 in addition to the return of our
original investment of $97,000.



Fairways Frisco
Partnerships



On December 31, 2004, we acquired certain
indirect interests in various partnerships (the Frisco Square Partnerships) that own properties (the Properties) in the 150 acre Frisco Square mixed-use real estate development in Frisco, Texas, pursuant to a Master Agreement
Regarding Frisco Square Partnerships, dated December 31, 2004 (the Master Agreement). Frisco Square is planned to include approximately 4.4 million developed square feet, including retail, offices, multi-family and municipal space. The
development was designed by an architect, David M. Schwarz, whose work includes the American Airlines Center in Dallas, The Ballpark in Arlington, and the Bass Performance Hall in Ft. Worth. The table below summarizes the indirect interests acquired
by the Company on December 31, 2004:



|                               |  |                                   |  |                                                               
|------------------------------ |  | --------------------------------- |  | --------------------------------------------------------------
|Frisco Square Partnerships     |  | Effective Indirect Interest
Owned |  | Property Description                                          
|Frisco Square B1-6 F1-11, Ltd. |  | 50% Partner (1)                   |  | Approximately 171,000 Sq Ft residential/retail space          
|Frisco Square B1-7 F1-10, Ltd. |  | 50% Partner (1)                   |  | Approximately 65,000 Sq Ft commercial/residential/retail space
|Frisco Square Properties, Ltd. |  | 50% Partner (1)                   |  | Approximately 2.3 acres of land                               
|Frisco Square, Ltd.            |  | Option to become 50% Partner (2)  |  | Approximately 52 acres of land                                

---

|(1) |  | Represents a 49.5% limited partner interest in such partnership held by Fairways Frisco L.P., an entity of which Ascendant is a limited partner, and a 0.5% indirect general partner
interest held by Fairways Frisco as the owner of 100% of the membership interests of one of such partnerships general partners.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Represents the right to acquire a 50% partnership interest, sharing ratio and interest in Frisco Square, Ltd.
|--- |  | -------------------------------------------------------------------------------------------------------------



9



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##### Index to Financial Statements

The parties to the Master Agreement are the Fairways Group, the Frisco Square Partnerships, Cole and Mary
Pat McDowell, and the remainder of the Five Star Group which is Five Star Development Co., Inc., a Texas corporation, CMP Management, LLC, a Texas limited liability company, and CMP Family Limited Partnership, a Texas limited partnership.
Frisco Square Partnerships is a group of entities comprised of Frisco Square, Ltd. (FSLTD), Frisco Square B1-6 F1-11, Ltd., a Texas limited partnership, Frisco Square B1-7 F1-10, Ltd., a Texas limited partnership, and Frisco
Square Properties, Ltd., a Texas limited partnership. Fairways Group is a group of entities comprised of Fairways Frisco, Fairways B1-6 F1-11, LLC, a Texas limited liability company, Fairways B1-7 F1-10, LLC, a Texas limited liability
company, and Fairways FS Properties, LLC, a Texas limited liability company.



The Company made its investment of $154,000 at December 31, 2004, as a limited partner of Fairways Frisco L.P. (Fairways Frisco), which is a 49.5% limited partner in each of the Frisco Square Partnerships
other than FSLTD. Fairways Frisco holds the remaining 0.5% interest through its ownership of 100% of the membership interests of other entities in the Fairways Group that are co-general partners of the Frisco Square Partnerships. Fairways Equities,
LLC, an entity controlled by the Fairways Members, is the sole general partner of Fairways Frisco and holds a 0.1% general partner interest in Fairways Frisco. The Frisco Square Partnerships were all originally formed and owned 100% by Cole McDowell
and Mary Pat McDowell or their affiliates (collectively, the Five Star Group).



The following is a chart of the legal entities in the transactions described herein:



LOGO



Pursuant to the Master Agreement,
Fairways Frisco has agreed to make capital contributions to the various Frisco Square Partnerships in the aggregate amount of up to $6,280,000. Such amounts are to be used to pay the expenses of the development of the Properties, together with
repayments of portions of loans and the payment of fees to the Five Star Group. The members of the Five Star Group will not be required to make additional capital contributions to the Frisco Square Partnerships, provided, the liabilities of the
Frisco Square Partnerships disclosed to the Company by the Five Star Group are not exceeded by more than $200,000. Pursuant to the terms of the Master Agreement, Fairways Frisco has the right to notify the Five Star Group of these liabilities and
request that Five Star Group satisfy or otherwise extinguish the liabilities. If Five Star Group is unable to do so, Fairways Frisco has the ability to exercise its right to purchase the remaining 50% of the partnership interests in the Frisco
Square Partnerships for $ 100, as provided for in the Master Agreement. As of March 21, 2005, the Fairways Group believes that such unrecorded liabilities do exist, but it has not determined the final amount of such liabilities. Upon determination
of the amount of these liabilities, the Fairways Group intends to notify the Five Star Group for payment of the liabilities as outlined above.



10



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##### Index to Financial Statements

Under the Master Agreement, if the Frisco Square Partnerships generate distributable cash flow, the first
$1 million in aggregate shall be distributed to the Fairways Group and the second $2.5 million in aggregate shall be distributed to the Five Star Group. Thereafter, the distributions of cash flow are to be made according to the respective
partnership interests. There can be no assurances that the Frisco Square Partnerships will be able to generate the required cash flow to make the distributions described above.



Certain members of the Five Star Group are the managing partners of the Frisco Square Partnerships, provided, however,
certain members of the Fairways Group have been added as co-general partners (Co-General Partner), each of which shall have approval rights with respect to designated partnership activities for the Frisco Square Partnerships. The
Co-General Partners are primarily responsible, with no obligation to expend any of their own funds, to determine and negotiate alternative sources of financing for the Frisco Square Partnerships.



If at any time after December 31, 2005, any entity that is in the Five Star
Group or the Fairways Group desires to sell its partnership interests in the Frisco Square Partnerships, a buy/sell agreement is set forth in the Master Agreement which could require the other partners to buy such interests or sell their own.
Notwithstanding the above, Fairways Frisco may transfer its interest in the Frisco Square Partnerships to any person controlled or managed by Mr. Leslie.



The Master Agreement provides Fairways Frisco an option to acquire a 50% partnership interest, sharing ratio and interest in FSLTD. Fairways Frisco paid
$273,152 to FSLTD for this option in January 2005. The Option held by Fairways Frisco shall only be exercisable if the outstanding debt of FSLTD to CoServe Denton Realty Partners is refinanced before June 30, 2005 on reasonable and market terms.
Fairways Frisco is currently negotiating with a lender to refinance the FSLTD debt, however, there can be no assurances that the refinancing will be successful or that it will be on reasonable and market terms. The outstanding amount of this debt on
December 31, 2004 was $21.8 Million. Fairways Frisco is authorized to negotiate with the existing lender and other potential lenders with respect to such financing subject to FSLTDs consent which consent must be given if the specified
parameters for such refinancing are met. Fairways Frisco has also been granted approval rights with respect to designated partnership activities for FSLTD.



The interests in the Frisco Square Partnerships were acquired by the Company or the Fairways Group from the Frisco Square Partnerships and the Five Star
Group. The Company has no other material relationship with the Partnerships or the members of the Five Star Group.



Subsequent to December 31, 2004, Fairways Equities, LLC, as the general partner of Fairways Frisco, sold additional limited partnership interests in
Fairways Frisco. The proceeds from the sale of these limited partnership interests are intended to be used for the purpose of making additional capital contributions to the Frisco Square Partnerships (as required by the Master Agreement further
described herein). The following is a summary of the partnership interests in Fairways Frisco based on actual cash investments and subscriptions received as of March 21, 2005:



|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  
|----------------------------------------- |  | -------------- | --------- | ------------------ | ----- | - | ---------------------- | - | ------------------ |  | ----- | -
|                                          |  | CashInvestment |           | Partnership% Owned |       |   | InvestmentSubscription |   | Partnership% Owned | 
|Ascendant Solutions, Inc.                 |  | $              | 750,000   |                    | 16.4  | % |                        | $ | 1,000,000          |  | 16.3  | %
|Fairways Equities, LLC (1)                |  |                | 1,136,000 |                    | 24.8  | % |                        |   | 1,325,000          |  | 21.5  | %
|CLB Partners (2)                          |  |                | 250,000   |                    | 5.5   | % |                        |   | 500,000            |  | 8.1   | %
|Other non-affiliated accredited investors |  |                | 2,448,000 |                    | 53.4  | % |                        |   | 3,325,000          |  | 54.1  | %
|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  
|Total capital contributions               |  | $              | 4,584,000 |                    | 100.0 | % |                        | $ | 6,150,000          |  | 100.0 | %
|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  

---

(1)Fairways
Equities, LLC is the general partner of Fairways Frisco and the members of Fairways Equities, LLC, individually or through their affiliates, are limited partners

(2)CLB Partners is a shareholder of the Company and one of its partners and co-founders, Mr. Will Cureton is a member of the
Companys Board of Directors.



11



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##### Index to Financial Statements

The remaining unfunded subscription amount of $1,566,000 is due to Fairways Frisco on or before April 22,
2005.



Employees



We had the following full time and part-time employees as of December 31,
2004:



|                              |  |          
|----------------------------- |  | ---------
|Business Segment              |  | Employees
|Healthcare                    |  | 160      
|Real estate advisory services |  | 33       
|Corporate and other           |  | 3        
|                              |  |          
|Total Employees               |  | 196      
|                              |  |          



In addition to our own
employees, we use from time to time, and are dependent upon, various outside consultants or contractors to perform various support services including, legal and accounting.



Available Information



We are a reporting company and file annual, quarterly and special reports, proxy statements and other information with the United States Securities and
Exchange Commission. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports available on our website (www.ascendantsolutions.com), free of charge, as soon as reasonably
practicable after we have electronically filed or furnished such materials to the Securities and Exchange Commission. These filings are also available on the Securities and Exchange Commissions web site at www.sec.gov. In addition, you may
read and copy any documents we file at the Securities and Exchange Commissions public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Securities and Exchange Commission located at 233
Broadway, New York, New York 10279, and at 175 West Jackson Blvd., Suite 900, Chicago, Illinois 60604. You may obtain information on the operation of the Securities and Exchange Commissions public reference room in Washington, D.C. by calling
the Securities and Exchange Commission at 1-800-SEC-0330.



ITEM 2.    PROPERTIES



The physical properties used by the Company and its significant business segments are summarized below:



|                              |  |                                                                  |  |              |  |                   
|----------------------------- |  | ---------------------------------------------------------------- |  | ------------ |  | ------------------
|Business Segment              |  | Property Type                                                    |  | Owned/Leased |  | Approximate Sq Ft.
|Healthcare                    |  | Corporate offices, retail pharmaciesand infusion therapy centers |  | Leased       |  | 41,095            
|Real estate advisory services |  | Corporate offices                                                |  | Leased       |  | 25,660            
|Corporate and other           |  | Corporate offices                                                |  | Leased       |  | 1,350             



We sublet our office
space from JamJen, Inc., an entity controlled by Jim Leslie, our Chairman. Jim Leslie controls, and Will Cureton, one of our directors, is indirectly a limited partner in the entity that owns the building in which the office space is leased by
JamJen. We currently pay monthly rent of approximately $1,800. Capital Markets also shares the space and pays monthly rent to JamJen and another entity controlled by two of the Fairways Members of approximately $3,100. In connection with our sharing
of office space with JamJen, we incur certain shared costs with JamJen, which gives rise to reimbursements from us to JamJen. These costs were approximately $22,800 and $3,400 in 2004 and 2003, respectively. During the years ended December 31, 2004
and 2003, we paid approximately $26,100 and $21,400 in rent, respectively, and Capital Markets paid approximately $41,100 and $23,600 in rent, respectively. We have not entered into a lease with JamJen, but



12



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##### Table of Contents

##### Index to Financial Statements

rather are renting our office space on a month-to-month basis. We believe that such arrangement has been on terms no less favorable to us than could have
been obtained in a transaction with an independent third party.



In addition, we have other relationships or transactions with other related parties or affiliates of ours. Please see Note 18 to the Ascendant Consolidated Financial Statements contained herein.



ITEM 3.    LEGAL PROCEEDINGS



Between January 23, 2001 and February 21, 2001, five putative class action lawsuits were filed in the United States District Court for the Northern District of Texas against us, certain of our directors, and a limited
partnership of which a director is a partner. The five lawsuits assert causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, for an unspecified amount of damages on behalf of a putative class of
individuals who purchased our common stock between various periods ranging from November 11, 1999 to January 24, 2000. The lawsuits claim that we and the individual defendants made misstatements and omissions concerning our products and customers.



In April 2001, the Court consolidated the lawsuits, and on
July 26, 2002, plaintiffs filed a Consolidated Amended Complaint (CAC). We filed a motion to dismiss the CAC on or about September 9, 2002. On July 22, 2003, the Court granted in part and denied in part defendants motion to
dismiss. On September 2, 2003, defendants filed an answer to the CAC. Plaintiffs then commenced discovery. On September 12, 2003, plaintiffs filed a motion for class certification, and on February 17, 2004, we filed our opposition. On July 1, 2004,
the Court denied plaintiffs motion for certification. On September 8, 2004, the Fifth Circuit granted plaintiffs petition for permission to appeal the denial of class certification. Briefing on the appeal is complete but the Fifth
Circuit has not yet ruled on plaintiffs appeal.



We
continue to deny plaintiffs allegations and intend to vigorously defend ourselves. It is not possible at this time to predict whether we will incur any liability or to estimate the damages, or the range of damages, if any, that we might incur
in connection with this lawsuit. Our insurance carriers are continuing to provide for the payment of our defense costs in connection with this case and intend to vigorously defend against the lawsuits.



On May 5, 2003, Hometown Wholesale Furniture Club, Inc. and Jeff Cordes, its
founder, filed a lawsuit in the 191stJudicial District Court of Dallas County, Texas against ADA Wholesale
Furniture Club, Inc. and other defendants claiming breach of contract, conversion of trade secrets, breach of covenant not to compete, conspiracy and fraud in connection with failed negotiations for the sale of a business. On June 27, 2003, they
added us to the lawsuit. On June 6, 2003, J.D. Davis, individually and d/b/a ADA Wholesale Furniture Club filed a lawsuit in the District Court of Gregg County, Texas against us, David Bowe and other defendants claiming breach of contract,
conversion of trade secrets, breach of covenant not to compete, conspiracy and fraud in connection with failed negotiations for the sale of a business. The Gregg County case was dismissed with prejudice on October 7, 2004 and the Dallas County case
was dismissed with prejudice on October 11, 2004. In connection with the dismissals, a settlement agreement was reached among the parties pursuant to which we were released from all claims.



On January 29, 2004, Bishopsgate Corp. and T.E. Millard filed a lawsuit in
the 192ndDistrict Court of Dallas County, Texas against us, our officers and directors, and Park Pharmacys
officers and directors claiming that we breached obligations to fund Bishopsgates proposed purchase of the Park Assets. The plaintiffs seek unspecified damages. We deny the plaintiffs claims, have filed various counterclaims and intend
to vigorously defend against the lawsuits. In October 2004, the parties mediated the case but were unable to resolve it.



Mr. Millard filed a Chapter 13 bankruptcy case in Dallas, Texas on August 15, 2003. Millards Chapter 13 bankruptcy case was converted to a Chapter 7
liquidation bankruptcy case on December 20, 2004. Upon the conversion of the bankruptcy case, Daniel J. Sherman was appointed Chapter 7 Trustee. The Trustee now owns and controls the claims asserted in the Millard Action. We have been negotiating
with the Trustee concerning a possible settlement of the case. As of the date of this report, no resolution has yet been reached.



13



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##### Table of Contents

##### Index to Financial Statements

We are also occasionally involved in other claims and proceedings, which are incidental to our business.
We cannot determine what, if any, material affect these matters will have on our future financial position and results of operations.



ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None.



14



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##### Index to Financial Statements

PART II.



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



Market Prices; Record Holders and Dividends



Our stock is quoted and traded on the OTC Bulletin Board
(OTCBB). The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter (OTC) securities. An OTC security is not listed or traded on NASDAQ or a
national securities exchange, and NASDAQ has no business relationship with the issuers quoted in the OTCBB. Issuers of all securities quoted on the OTCBB are subject to periodic filing requirements with the Securities and Exchange Commission or
other regulatory authority. OTCBB requirements include, among other things, a broker-dealer acting as a market maker willing to enter a quote for the securities and requires us to remain current in our periodic filings under the Securities Exchange
Act of 1934, as amended. Even with OTCBB eligibility and trading, delisting adversely affects the ability or willingness of investors to purchase our common stock, which, in turn, severely affects the market liquidity of our securities.



Effective June 25, 2003, our stock was delisted from the OTCBB for failure
to comply with NASD Rule 6530, as a result of our failure to timely file our Form 10-Q for the period ended March 31, 2003. Effective June 25, 2003, our stock became eligible for trading on the National Quotation Bureaus Pink
Sheets, under the symbol ASDS. Because trading of our common stock was conducted solely in the Pink Sheets, there was a reduction in the liquidity and trading volume of our common stock. After applying for reinstatement, we were
reinstated on September 18, 2003 to the OTCBB. We are currently dually quoted on the OTCBB and on the Pink sheets. See Other Risks in Managements Discussion and Analysis of Financial Condition and Results of Operations
discussed below.



Following is a summary of our stocks
quarterly market price ranges for the two most recent fiscal years. The price quotations noted herein represent prices between dealers, without retail mark-ups, mark-downs or commissions and may not represent actual transactions.



|                  |  |      |      |     |   |     
|----------------- |  | ---- | ---- | --- | - | ----
|                  |  | High |      | Low
|Fiscal year 2003: |  |      |      |     |   |     
|First quarter*    |  | $    | 0.45 |     | $ | 0.32
|Second quarter*   |  |      | 0.42 |     |   | 0.26
|Third quarter*    |  |      | 0.51 |     |   | 0.23
|Fourth quarter*   |  |      | 0.45 |     |   | 0.22
|Fiscal year 2004: |  |      |      |     |   |     
|First quarter*    |  | $    | 1.95 |     | $ | 0.30
|Second quarter*   |  |      | 1.70 |     |   | 0.71
|Third quarter*    |  |      | 1.65 |     |   | 0.85
|Fourth quarter*   |  |      | 1.35 |     |   | 0.75

| | 
| | 



| | * |  | These quotations represent high and low bid prices for our stock as reported by the OTCBB and Pink Sheets.
| | - |  | ----------------------------------------------------------------------------------------------------------



On March 21, 2005, the last reported sale price of our common stock on the
OTCBB was $1.39 per share.



At March 21, 2005, there were
approximately 3,100 registered and beneficial holders of record of our common stock.



We have not paid any cash dividends on our common stock and do not anticipate declaring dividends in the foreseeable future. Our current policy is to retain earnings, if any, to finance potential acquisitions and fund



15



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##### Table of Contents

##### Index to Financial Statements

operations. The future payment of dividends will depend on the results of operations, financial condition, capital expenditure plans and other factors that
we deem relevant and will be at the sole discretion of our Board of Directors.



|I
TEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA
|-------- | ------------------------------------



The following selected consolidated financial data should be read in conjunction with the consolidated financial statements, the notes to such statements
and the information under Managements Discussion and Analysis of Financial Condition and Results of Operations beginning on page 17 of this Annual Report on Form 10-K, including the discussion therein of changes in
our business under Overview. The consolidated statements of operations data and the consolidated balance sheet data are derived from our audited consolidated financial statements.



|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | --------------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                            |  | Years Ended December 31, (in thousands) |       
|                                                                            |  | 2004                                    |        |   | 2003 |   |        | 2002 |  |   | 2001   |   |  | 2000 |        
|Statements of Operations Data:                                              |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Revenues                                                                    |  | $                                       | 39,291 |   |      | $ | 505    |      |  | $ |       |   |  | $    | 2,284   |   |  | $ | 8,405   |  
|Cost of revenues                                                            |  |                                         | 25,055 |   |      |   |       |      |  |   |       |   |  |      | 2,242   |   |  |   | 5,279   |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Gross profit                                                                |  |                                         | 14,236 |   |      |   | 505    |      |  |   |       |   |  |      | 42      |   |  |   | 3,126   |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Operating expenses:                                                         |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Selling, general and administrative expenses                                |  |                                         | 13,112 |   |      |   | 1,540  |      |  |   | 998    |   |  |      | 10,068  |   |  |   | 18,835  |  
|Restructuring costs                                                         |  |                                         |       |   |      |   | 112    |      |  |   |       |   |  |      | 5,892   |   |  |   | 2,460   |  
|Depreciation and amortization                                               |  |                                         | 494    |   |      |   | 63     |      |  |   | 18     |   |  |      | 2,158   |   |  |   | 2,473   |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Total operating expenses                                                    |  |                                         | 13,606 |   |      |   | 1,715  |      |  |   | 1,016  |   |  |      | 18,118  |   |  |   | 23,768  |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Operating income (loss)                                                     |  |                                         | 630    |   |      |   | (1,210 | )    |  |   | (1,016 | ) |  |      | (18,076 | ) |  |   | (20,642 | )
|Gain (loss) on disposal of assets                                           |  |                                         | (32    | ) |      |   |       |      |  |   | 1      |   |  |      | 95      |   |  |   | (481    | )
|Investment income                                                           |  |                                         | 393    |   |      |   | 85     |      |  |   | 19     |   |  |      |        |   |  |   |        |  
|Interest income (expense), net                                              |  |                                         | (520   | ) |      |   | 30     |      |  |   | 59     |   |  |      | 364     |   |  |   | 1,589   |  
|Limited partner interest in net (income) losses                             |  |                                         | (56    | ) |      |   | 277    |      |  |   | 209    |   |  |      |        |   |  |   |        |  
|State income tax provision                                                  |  |                                         | (166   | ) |      |   |       |      |  |   |       |   |  |      |        |   |  |   |        |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Net income (loss)                                                           |  | $                                       | 249    |   |      | $ | (818   | )    |  | $ | (728   | ) |  | $    | (17,617 | ) |  | $ | (19,534 | )
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Net income (loss) attributable to common shareholders                       |  | $                                       | 249    |   |      | $ | (818   | )    |  | $ | (728   | ) |  | $    | (17,617 | ) |  | $ | (19,534 | )
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Basic net income (loss) per share                                           |  | $                                       | 0.01   |   |      | $ | (0.04  | )    |  | $ | (0.03  | ) |  | $    | (0.83   | ) |  | $ | (0.92   | )
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Diluted net income (loss) per share                                         |  | $                                       | 0.01   |   |      | $ | (0.04  | )    |  | $ | (0.03  | ) |  | $    | (0.83   | ) |  | $ | (0.92   | )
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Weighted average shareshares used in computing net income (loss) per share: |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Basic                                                                       |  |                                         | 21,804 |   |      |   | 21,557 |      |  |   | 21,231 |   |  |      | 21,231  |   |  |   | 21,173  |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Diluted                                                                     |  |                                         | 22,389 |   |      |   | 21,557 |      |  |   | 21,231 |   |  |      | 21,231  |   |  |   | 21,173  |  
|                                                                            |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|                                                                            | 
|                                                                            |  |                                         |        |  
|                                                                            |  |                                         | 2004   |   |      |   | 2003   |      |  |   | 2002   |   |  |      | 2001    |   |  |   | 2000    |  
|Balance Sheet Data:                                                         |  |                                         |        |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Cash and cash equivalents                                                   |  | $                                       | 1,868  |   |      | $ | 2,006  |      |  | $ | 2,950  |   |  | $    | 4,204   |   |  | $ | 16,837  |  
|Working capital                                                             |  |                                         | 6,196  |   |      |   | 2,120  |      |  |   | 3,063  |   |  |      | 4,000   |   |  |   | 15,139  |  
|Total assets                                                                |  |                                         | 20,753 |   |      |   | 2,841  |      |  |   | 3,673  |   |  |      | 4,361   |   |  |   | 25,482  |  
|Long-term debt (including current maturities)                               |  |                                         | 12,616 |   |      |   |       |      |  |   |       |   |  |      |        |   |  |   | 680     |  
|Stockholders equity                                                        |  |                                         | 2,879  |   |      |   | 2,523  |      |  |   | 3,306  |   |  |      | 4,011   |   |  |   | 21,628  |  



16



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##### Index to Financial Statements

|ITEM 7. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



The following discussion and analysis should be read in conjunction with Selected Consolidated Financial Data
and our consolidated financial statements and notes thereto included elsewhere in this report. Except for the historical information contained herein, certain statements used in this Form 10-K are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements about our financial condition, prospects, operations and business are generally accompanied
by words such as anticipates, expects, estimates, believes, intends, plans or similar expressions. These forward-looking statements are subject to numerous risks, uncertainties
and other factors, some of which are beyond our control that could cause actual results to differ materially from those forecasted or anticipated in such forward-looking statements.



Factors that could cause or contribute to such differences include, but are not limited to, those discussed below under
Risks Related to Our Business, Risks Specific to Operating Subsidiaries, and Other Risks. These risks, uncertainties and other factors include, but are not limited to: limited funding and the difficulty of finding
additional financing, if necessary; dependence on management; the limited size of our staff; the potential for a subsidiary to account for a significant percentage of our revenue; unforeseen acquisition costs; potential asset impairment charges;
pending litigation; potential for future leveraged transactions; restrictions on use of net operating loss carryforwards; highly leveraged subsidiaries; inability to integrate and manage operating subsidiaries; pharmacy regulations; competition in
the pharmacy industry; concentration of ownership and control; related party transactions; and our stock has been delisted from The Nasdaq National Market.



Because such forward-looking statements are subject to risks, uncertainties and assumptions, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements view only as of the date the forward-looking statement is made. Our forward-looking statements are based on the current expectations of management, and we undertake no obligation to update
publicly any forward-looking statement for any reason, even if new information becomes available or other events occur in the future. 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.



Overview



Our company has undergone a series of fundamental changes
in the past 3 years, and as a result, our management believes that year-to-year comparisons of our past results are not meaningful as a basis for evaluating our future prospects.



Through early 2001, we had been engaged in providing call center, order management and fulfillment services, portions of
which were sold or wound down by July 2001. From July 1, 2001 and continuing through December 31, 2002, we had no revenue producing contracts or operations. We reevaluated our business model, and starting in 2002, we began to seek acquisition
opportunities throughout the United States or other business investment opportunities. During 2002  2004, we made investments and/or acquisitions, which are more fully described herein in Item 1, Business of Part 1 and in the Notes to the
Ascendant Consolidated Financial Statements also included herein.



There is no assurance that we will be able to successfully operate these acquired businesses or that we will be able to successfully acquire or develop continue to add one or more additional business enterprises in the future.



We expect our future operating results to fluctuate. Factors that are
likely to cause these fluctuations include:



| |  |  | the matters discussed under the section titled Risks Related to our Business and Risks Specific to Operating Subsidiaries below;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



17



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##### Table of Contents

##### Index to Financial Statements

| |  |  | our ability to profitably operate our recent acquisitions of the Park Assets and CPOC and to pay the principal and interest on the significant debt incurred to make these
acquisitions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our success with the investments in, and operations of, Ampco, Capital Markets, Frisco Square Partnerships and our participation in other Fairways transactions;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to successfully defend outstanding litigation;
| | - |  | ----------------------------------------------------------



| |  |  | 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 additional business enterprises.
| | - |  | ------------------------------------------------------------------------------------------------------



Key measures used by the Companys management to evaluate business segment performance include revenue, cost of sales,
gross profit, investment income and EBITDA. EBITDA is calculated as net income before deducting interest, taxes, depreciation and amortization. Although EBITDA 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.



18



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##### Table of Contents

##### Index to Financial Statements

Results of Operations



Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003 (000s omitted except percent change amounts).



|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|--------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ------------ |  | - | ------------- | - |  | -------- | -
|                                                                                  |  | 2004 |        |   | 2003 |   |       | DollarChange |  |   | PercentChange |  
|Revenue                                                                           |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 29,532 |   |      | $ |      |              |  | $ | 29,532        |   |  | n/a      |  
|Real estate advisory services                                                     |  |      | 9,759  |   |      |   | 505   |              |  |   | 9,254         |   |  | 1832.5   | %
|Corporate and other                                                               |  |      |       |   |      |   |      |              |  |   |              |   |  | n/a      |  
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 39,291 |   |      | $ | 505   |              |  | $ | 38,786        |   |  | 7680.4   | %
|Cost of Sales                                                                     |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 19,667 |   |      | $ |      |              |  | $ | 19,667        |   |  | n/a      |  
|Real estate advisory services                                                     |  |      | 5,388  |   |      |   |      |              |  |   | 5,388         |   |  | n/a      |  
|Corporate and other                                                               |  |      |       |   |      |   |      |              |  |   |              |   |  | n/a      |  
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 25,055 |   |      | $ |      |              |  | $ | 25,055        |   |  | n/a      |  
|Operating Expenses                                                                |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 9,869  |   |      | $ |      |              |  | $ | 9,869         |   |  | n/a      |  
|Real estate advisory services                                                     |  |      | 2,479  |   |      |   | 506   |              |  |   | 1,973         |   |  | 389.9    | %
|Corporate and other                                                               |  |      | 1,258  |   |      |   | 1,209 |              |  |   | 49            |   |  | 4.1      | %
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 13,606 |   |      | $ | 1,715 |              |  | $ | 11,891        |   |  | 693.4    | %
|Depreciation and Amortization                                                     |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 272    |   |      | $ |      |              |  | $ | 272           |   |  | n/a      |  
|Real estate advisory services                                                     |  |      | 215    |   |      |   | 2     |              |  |   | 213           |   |  | 10650.0  | %
|Corporate and other                                                               |  |      | 7      |   |      |   | 61    |              |  |   | (54           | ) |  | -88.5    | %
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 494    |   |      | $ | 63    |              |  | $ | 431           |   |  | 684.1    | %
|Investment Income                                                                 |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 19     |   |      | $ |      |              |  | $ | 19            |   |  | n/a      |  
|Real estate advisory services                                                     |  |      |       |   |      |   |      |              |  |   |              |   |  | n/a      |  
|Corporate and other                                                               |  |      | 374    |   |      |   | 85    |              |  |   | 289           |   |  | 340.0    | %
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 393    |   |      | $ | 85    |              |  | $ | 308           |   |  | 362.4    | %
|Interest Income (Expense), Net                                                    |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | (297   | ) |      | $ |      |              |  | $ | (297          | ) |  | n/a      |  
|Real estate advisory services                                                     |  |      | (247   | ) |      |   | (3    | )            |  |   | (244          | ) |  | 8133.3   | %
|Corporate and other                                                               |  |      | 24     |   |      |   | 33    |              |  |   | (9            | ) |  | -27.3    | %
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | (520   | ) |      | $ | 30    |              |  | $ | (550          | ) |  | -1833.3  | %
|Earnings Before Interest, Taxes,Depreciation and Amortization                     |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 270    |   |      | $ |      |              |  | $ | 270           |   |  | n/a      |  
|Real estate advisory services                                                     |  |      | 2,063  |   |      |   | 2     |              |  |   | 2,061         |   |  | 103050.0 | %
|Corporate and other                                                               |  |      | (904   | ) |      |   | (787  | )            |  |   | (117          | ) |  | 14.9     | %
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 1,429  |   |      | $ | (785  | )            |  | $ | 2,214         |   |  | -282.0   | %
|A reconciliation of our segments EBITDAto consolidated net income is as follows: |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Segment EBITDA:                                                                   |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Healthcare                                                                        |  | $    | 270    |   |      | $ |      |              |  |   |               |   |  |          |  
|Real estate advisory services                                                     |  |      | 2,063  |   |      |   | 2     |              |  |   |               |   |  |          |  
|Corporate and other                                                               |  |      | (904   | ) |      |   | (787  | )            |  |   |               |   |  |          |  
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|                                                                                  |  | $    | 1,429  |   |      | $ | (785  | )            |  |   |               |   |  |          |  
|Less:                                                                             |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Interest expense                                                                  |  |      | 520    |   |      |   | (30   | )            |  |   |               |   |  |          |  
|Taxes                                                                             |  |      | 166    |   |      |   |      |              |  |   |               |   |  |          |  
|Depreciation & amortization                                                       |  |      | 494    |   |      |   | 63    |              |  |   |               |   |  |          |  
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  
|Net Income                                                                        |  | $    | 249    |   |      | $ | (818  | )            |  |   |               |   |  |          |  
|                                                                                  |  |      |        |   |      |   |       |              |  |   |               |   |  |          |  





19



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##### Index to Financial Statements

Healthcare



Revenue



Revenue increased $29,532,000 during the year ended December 31, 2004. The increase over 2003 revenue is due primarily to the inclusion of DHIs
revenue since March 25, 2004.



Cost of Sales



Cost of sales was $19,667,000 for the year ended December 31, 2004,
representing 66.6% of revenue. Cost of sales includes all direct costs related to the sale of products in pharmacies and the personnel and drug costs related to infusion therapy services provided to patients. The increase of $19,667,000 in cost of
sales for the year ended December 31, 2004 is due primarily to the inclusion of DHIs cost of sales since March 25, 2004.



Operating Expenses



Operating Expenses increased $9,869,000 for the year ended December 31, 2004. This increase is comprised of an increase of $9,597,000 in selling, general
and administrative expenses and an increase of $272,000 in depreciation and amortization. Depreciation and amortization includes $136,000 of amortization for intangible assets recorded in connection with the acquisition of the Park Assets (See Note
7 of the Ascendant Consolidated Financial Statements). The increase in operating expenses is due primarily to the inclusion of DHIs operating expenses, including amortization of Patient Prescriptions, since March 25, 2004.



Investment Income



Investment income increased $19,000 for the year ended December 31, 2004 due
to the inclusion of DHIs results since March 25, 2004.



Interest Income (Expense), Net



Interest
expense, net is comprised of interest expense related to the debt assumed as part of the acquisition of the Park Assets by DHI. Interest expense, net was $297,000 for the year ended December 31, 2004. For the year ended December 31, 2004, interest
expense, net increased $297,000 due to inclusion of the DHI results since March 25,2004.



Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)



EBITDA was $270,000 for the year ended December 31, 2004, representing an increase of $270,000 over 2003 results. This increase is due to inclusion of the
results of operations of DHI since March 25, 2004. See Note 21 of the Ascendant Consolidated Financial Statements for a reconciliation of EBITDA to consolidated net income.



Real estate advisory services



Revenue



Revenue increased $9,254,000 from $ 505,000 to $9,759,000 during the year ended December 31, 2004. The following are included in real estate advisory
services revenue (i) fee revenue earned by CPOC of $8,858,000 and (ii) fee revenue earned by CRESA Capital Markets of $901,000. The increase over 2003 revenue is due primarily to the inclusion of CPOCs revenue since May 1, 2004.



Cost of Revenue



Cost of revenue was $5,388,000 for the year ended December 31, 2004,
representing 55.2% of revenue. Cost of revenue includes all direct costs, including broker commissions, incurred in connection with a real estate advisory transaction. The increase of $5,388,000 in cost of revenue for the year ended December 31,
2004 is due primarily to the inclusion of CPOCs cost of revenue since May 1, 2004.



20



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##### Table of Contents

##### Index to Financial Statements

Operating Expenses



Operating Expenses increased $1,973,000 from $506,000 to $2,479,000 for the year ended December 31, 2004. This increase
includes an increase of $118,000 in selling, general and administrative expenses at Capital Markets due to increased payroll expenses from the addition of professional staff. The increase also includes an increase of $111,000 for depreciation
expense at CPOC. The remaining increase in operating expenses is due to the inclusion of CPOCs selling, general and administrative expenses since May 1, 2004 and increases in staff payroll for CRESA Capital Markets.



Interest Income (Expense), Net



Interest expense, net is comprised of interest expense related to the debt
assumed as part of the CPOC acquisition. Interest expense, net was $247,000 for the year ended December 31, 2004. For the year ended December 31, 2004, interest expense, net increased $244,000 due to interest expense of $211,000 on the acquisition
note payable to Kevin Hayes and interest expense of $33,000 on other debt assumed in the acquisition of CPOC.



Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)



EBITDA was $2, 063,000 for the year ended December 31, 2004, representing an increase of $2,061,000 over 2003 results. This
increase is due to an increase in EBITDA of $2,011,000 from the acquisition of CPOC from May 1, 2004, and an increase in EBITDA of $50,000 from CRESA Capital Markets and ASE Investments resulting from increased capital markets advisory services and
gain on sale of investments. See Note 21 of the Ascendant Consolidated Financial Statements for a reconciliation of EBITDA to consolidated net income.



Corporate and other



Operating Expenses



Operating expenses for the year ended December 31, 2004 were $1,258,000, or an increase of $49,000 over the year ended December 31, 2003. The increase is
primarily a result of increased costs for legal, accounting, insurance and salaries due to the additional business activity generated by our acquisitions of the Park Assets and CPOC. Operating expenses of $1,258,000 includes payroll and benefits of
$327,000; legal expense of $241,000; insurance expense of $ 182,000; audit and accounting expense of $170,000; SEC, transfer agent and other professional fees of $120,000; non-cash stock compensation expense of $40,000; and other selling, general
and administrative expenses of $178,000.



Investment Income



Investment income increased $289,000 to $374,000 during
the year ended December 31, 2004. The increase is a result of income received from our investment in Fairways 03 New Jersey LP of $208,000 during the year ended December 31, 2004. Investment income also includes $82,000 of income recorded from our
pro rata share of Ampcos earnings for the year ended December 31, 2004.Investment income also increased $84,000 for the year ended December 31, 2004 due to a gain on the sale of two single tenant commercial properties in which we had
an investment through ASE Investments. See Item I, Business of Part I for more information.



Interest Income (Expense), Net



Interest income (expense), net decreased from $33,000 to $24,000 during the year ended December 31, 2004 due to decreased interest earned on lower excess
cash balances as compared to the year ended December 31, 2003.



Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)



EBITDA decreased from a loss of $787,000 for the year ended December 31, 2003 to a loss of $904,000 for the year ended December 31, 2004. This decrease is a result of the increase in operating expenses discussed
above. See Note 21 of the Ascendant Consolidated Financial Statements for a reconciliation of EBITDA to consolidated net income.



21



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##### Table of Contents

##### Index to Financial Statements

Comparison of the Year Ended December 31, 2003 to the Year Ended December 31, 2002 (000s omitted except percent
change amounts).



|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|---------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ---- | ------------ |  | - | ------------- | - |  | ----- | -
|                                                                                   |  | 2003 |       |   | 2002 |   |      | DollarChange |  |   | PercentChange |  
|Revenue                                                                            |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      | 505   |   |      |   |     |              |  |   | 505           |   |  | n/a   |  
|Corporate and other                                                                |  |      |      |   |      |   |     |              |  |   |              |   |  | n/a   |  
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | 505   |   |      | $ |     |              |  | $ | 505           |   |  | n/a   |  
|Cost of Sales                                                                      |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      |      |   |      |   |     |              |  |   |              |   |  | n/a   |  
|Corporate and other                                                                |  |      |      |   |      |   |     |              |  |   |              |   |  | n/a   |  
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Operating Expenses                                                                 |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      | 506   |   |      |   | 59   |              |  |   | 448           |   |  | 759.3 | %
|Corporate and other                                                                |  |      | 1,209 |   |      |   | 939  |              |  |   | 269           |   |  | 28.6  | %
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | 1,715 |   |      | $ | 998  |              |  | $ | 717           |   |  | 71.8  | %
|Depreciation and Amortization                                                      |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      | 2     |   |      |   |     |              |  |   | 2             |   |  | n/a   |  
|Corporate and other                                                                |  |      | 61    |   |      |   | 18   |              |  |   | 43            |   |  | 238.9 | %
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | 63    |   |      | $ | 18   |              |  | $ | 45            |   |  | 250.0 | %
|Investment Income                                                                  |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      |      |   |      |   |     |              |  |   |              |   |  | n/a   |  
|Corporate and other                                                                |  |      | 85    |   |      |   | 19   |              |  |   | 66            |   |  | 347.4 | %
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | 85    |   |      | $ | 19   |              |  | $ | 66            |   |  | 347.4 | %
|Interest Income (Expense), Net                                                     |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      | (3    | ) |      |   |     |              |  |   | (3            | ) |  | n/a   |  
|Corporate and other                                                                |  |      | 33    |   |      |   | 59   |              |  |   | (26           | ) |  | -44.1 | %
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | 30    |   |      | $ | 59   |              |  | $ | (29           | ) |  | -49.2 | %
|                                                                                   |  |      |       |  
|Limited Partner Interest in Net Losses of Partnerships                             |  | $    | 277   |   |      | $ | 209  |              |  | $ | 68            |   |  | 32.5  | %
|                                                                                   |  |      |       |  
|Earnings Before Interest, Taxes, Depreciation and Amortization                     |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  | $ |              |   |  | n/a   |  
|Real estate advisory services                                                      |  |      | 2     |   |      |   |     |              |  |   | (11           | ) |  | n/a   |  
|Corporate and other                                                                |  |      | (787  | ) |      |   | (769 | )            |  |   | (5            | ) |  | 0.7   | %
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | (785  | ) |      | $ | (769 | )            |  | $ | (16           | ) |  | 2.1   | %
|A reconciliation of our segments EBITDA to consolidated net income is as follows: |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Segment EBITDA:                                                                    |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Healthcare                                                                         |  | $    |      |   |      | $ |     |              |  |   |               |   |  |       |  
|Real estate advisory services                                                      |  |      | 2     |   |      |   |     |              |  |   |               |   |  |       |  
|Corporate and other                                                                |  |      | (787  | ) |      |   | (769 | )            |  |   |               |   |  |       |  
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|                                                                                   |  | $    | (785  | ) |      | $ | (769 | )            |  |   |               |   |  |       |  
|Less:                                                                              |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Interest income                                                                    |  |      | (30   | ) |      |   | (59  | )            |  |   |               |   |  |       |  
|Taxes                                                                              |  |      |      |   |      |   |     |              |  |   |               |   |  |       |  
|Depreciation & amortization                                                        |  |      | 63    |   |      |   | 18   |              |  |   |               |   |  |       |  
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  
|Net Income                                                                         |  | $    | (818  | ) |      | $ | (728 | )            |  |   |               |   |  |       |  
|                                                                                   |  |      |       |   |      |   |      |              |  |   |               |   |  |       |  



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##### Index to Financial Statements

Revenue



Capital Markets earned net real estate advisory service fees of approximately $505,000 in 2003 compared with no comparable service fees in 2002. Of the
approximate $505,000 earned in 2003, approximately $425,000 (or approximately 84% of revenues) came from one advisory fee related to the sale/leaseback of an office building. We did not recognize revenues from any of our other businesses during 2002
or 2003. Because Capital Markets revenues depend in large part on transaction-related fees and VTE was in the early stages of attempting to roll out its product, we were not able to predict the level of our revenues from these businesses
during 2004. Regardless of the results of these and our other businesses, the acquisition of Park Assets and CPOC in 2004 resulted in a significant increase in our total revenues during 2004.



Cost of Sales



The direct costs associated with the $505,000 earned in 2003 were determined
by the Company to be inconsequential and as such no direct costs are provided for in the consolidated statements of operations.



Operating Expenses



Selling, General and Administrative Expenses



Our consolidated selling, general and administrative expenses increased approximately $542,000 or 54% to approximately $1.5 million for the year ended
December 31, 2003 from approximately $998,000 for the year ended December 31, 2002. Capital Markets selling, general and administrative expenses increased approximately $446,000 from approximately $58,000 in 2002 to approximately $506,000 in 2003
reflecting the first full year of real estate advisory service operations. VTEs selling, general and administrative expenses decreased approximately $36,000 from approximately $245,000 in 2002 to approximately $209,000, reflecting primarily a
reduced level of expensed software development costs in 2003. Other selling, general and administrative expenses increased approximately $130,000 from approximately $695,000 in 2002 to approximately $825,000 in 2003 reflecting increased expenses
associated with potential acquisition and business development efforts. One of our largest expense categories has been, and will continue to be, costs associated with being a public company, which include, but are not limited to, increased
insurance, legal and accounting expenses. In addition, we continue to incur expenses in connection with investigating potential acquisitions and meeting general corporate overhead expenses, including the payment of salaries. The acquisition of the
Park Assets and CPOC in 2004 resulted in a significant increase in our consolidated selling, general and administrative expenses in 2004.



Impairment Charges



At year-end 2003, management evaluated, and wrote down, the carrying value of VTEs investment in its computer software and hardware, resulting in an
impairment charge of $112,000. Please see Note 2 in the consolidated financial statements contained herein.



Depreciation and Amortization



Consolidated depreciation and amortization expense, which reflects amortization of VTEs capitalized software costs, increased approximately $45,000
for the year ended December 31, 2003 from approximately $18,000 in 2002 to approximately $63,000 in 2003 reflecting a full year of VTEs operations. The acquisition of the Park Assets in March 2004 and the CPOC acquisition in April 2004
resulted in a significant increase in our consolidated depreciation and amortization expense in 2004.



Investment income



Investment income, which principally comprises our pro rata share of Ampcos earnings increased $66,000 from approximately $19,000 in 2002 to
approximately $85,000 in 2003 reflecting primarily a full year holding period in 2003 compared with a partial year holding period in 2002.



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##### Index to Financial Statements

Interest income (expense), net



Interest income, net decreased approximately $29,000 from approximately $59,000 in 2002 to approximately $30,000 in 2003
reflecting an overall reduction in idle cash investments combined with the overall reduction in interest rates. In March 2004, we used approximately $1.5 million of our cash and assumed approximately $6.3 million of debt in order to acquire the Park
Assets. In April 2004, we incurred approximately $6.9 million in debt to acquire CPOC. Thus, we experienced a significant increase in net interest expense during 2004.



Limited partner interest in net losses of partnerships



Limited partner interest in net losses of partnerships increased $68,000 to approximately $277,000 in the year ended
December 31, 2003 from approximately $209,000 for the year ended December 31, 2002. This increase was primarily due to experiencing a full year of losses at VTE during 2003 versus a partial year during 2002.



Liquidity and Capital Resources



As of December 31, 2004, we had working capital of approximately $6.2
million as compared to approximately $2.1 million at December 31, 2003. The increase primarily reflected, in part, the acquisitions of the Park Assets and CPOC offset by the costs necessary to be a public company, including, but not limited to,
increased insurance, legal and accounting expenses.



As of
December 31, 2004, we had cash and cash equivalents of approximately $1.9 million. During 2004, we closed the acquisition of the Park Assets which was funded with approximately $1.5 million in cash and approximately $6.3 million of debt assumed by a
subsidiary, and we acquired CPOC, which was funded with approximately $6.9 million in subsidiary borrowings.



Our future capital needs are uncertain. Although management projects positive cash flow after debt service based on anticipated operations of our recently
acquired, or to be acquired businesses, there can be no assurances that this will occur. If the Company does not generate the necessary cash flow, the Company will need additional financing in the future to fund operations. We do not know whether
additional financing will be available when needed, or that, if available, we will obtain financing on terms favorable to stockholders.



Cash from Financing Activities



Doughertys Holdings, Inc.



In connection with the acquisition of the Park Assets, DHI entered into a new credit facility with Bank of Texas, the prior lender to Park Pharmacy
Corporation. This new facility provides for three notes, aggregating approximately $5.5 million, each note bears interest at six percent and matures in three years. Although DHI has committed to use commercially reasonable efforts to locate a
replacement lender as soon as possible, DHI is obligated to make monthly payments (consisting of both interest and principal payments, as applicable) to the bank of approximately $56,000. The new credit facility is secured by substantially all of
the assets of DHI, including the stock of its operating subsidiaries.



As part of the acquisition of the Park Assets, DHI also issued AmerisourceBergen a promissory note in the amount of $750,000. The note is payable over a period of five years, using a 15-year amortization schedule and an interest rate of six
percent with the last payment being a balloon payment of the outstanding principal and accrued but unpaid interest.



Both the new credit facility with the Bank of Texas and the note with AmerisourceBergen provide for prepayment discounts in the event that these loans are
retired prior to maturity.



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##### Index to Financial Statements

ASDS of Orange County, Inc.



As more fully described in Item 1 of this Annual Report on Form 10-K and in Note 2 of the Ascendant Consolidated Financial
Statements contained herein, effective May 1, 2004, we acquired through ASDS all of the issued and outstanding stock of CPOC, pursuant to the Stock Purchase Agreement dated March 23, 2004 between the Seller and ASDS for $6.9 million, plus closing
costs. The purchase price was paid pursuant to the terms of the Acquisition Note. The Acquisition Note is secured by a pledge of all of the assets of CPOC, bears interest at the prime rate plus 0.50% per annum, payable over a three year period from
the excess cash flow of ASDS, as defined, and is guaranteed by the Company. The then outstanding principal balance of the Acquisition Note is payable in full on May 1, 2007. The purchase price and the Acquisition Note are subject to adjustment
downward (by an amount not to exceed $1.9 million) to reflect the operating results of CPOC during the four year period ending December 31, 2007 (if CPOCs revenues are less than an aggregate of $34.0 million during such period.



In connection with the acquisition of CPOC, the Company is entitled to
receive a structuring fee of $690,000, plus interest thereon, of which $230,000 was paid at closing. The remainder will be paid in two equal annual installments of $230,000, plus interest thereon (payable on May 12, 2005 and May 12, 2006). The
structuring fee has been eliminated in the consolidation of the Company with CPOC and the Operating LP in the consolidated financial statements of the Company.



Cash Flow



During the year ended December 31, 2004 we had negative cash flow of approximately $(138,000) (net of cash acquired). We incurred secured debt of
approximately $5.5 million and unsecured debt of approximately $750,000 related to the DHI acquisition. In May 2004, as part of our acquisition of CPOC, we incurred secured debt of approximately $6.9 million. Cash flow provided from operating
activities for the year ended December 31, 2004 was $1,958,000, while cash used in investing activities and financing activities was $(646,000) and $(1,450,000) respectively.



Through March 17, 2005, we have invested approximately $750,000 in Fairways Frisco, and we have committed to invest up to
$1,000,000, or an additional $250,000. The Frisco Square Partnerships may require additional funding in excess of the $6.28 million committed by Fairways Frisco (as further described herein). We are not obligated to invest any additional funds if
Fairways Frisco makes a capital call for additional cash, although we may choose to do so depending on our available funds. However, if we do not participate in additional capital calls, our limited partnership interest will be diluted.



Our future capital needs are uncertain. Although management projects
positive cash flow after debt service based on anticipated operations of our recently acquired, or to be acquired businesses, there can be no assurances that this will occur. If the Company does not generate the necessary cash flow, the Company will
need additional financing in the future to fund operations. We do not know whether additional financing will be available when needed, or that, if available, we will obtain financing on terms favorable to stockholders.



Tax Loss Carryforwards



At December 31, 2004, we had approximately $49.3 million of federal net operating loss carryforwards and approximately $39.4
million of state net operating loss carryforwards available to offset future taxable income, which, if not utilized, will fully expire from 2018 to 2023. 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 loss 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, no tax benefit has been
recognized in the periods presented.



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##### Table of Contents

##### Index to Financial Statements

Off Balance Sheet Arrangements



As discussed in Cash from Financing Activities-ASDS of Orange County, Inc., the Company has guaranteed the
Acquisition Note in the amount of $6.9 million. The Acquisition Note is payable from the excess cash flows of ASDS over a three year period. During the period from May 1, 2004 until December 31, 2004, there were no principal payments on the
Acquisition Note and there were no payments required under the terms of the Companys guarantee.



In January 2005, the Company agreed to provide a limited indemnification to its partners in the Fairways 03 New Jersey LP investment for any losses those
partners may incur under their personal guaranties of the partnerships bank indebtedness. The Companys partners in this investment are the Fairways Members. The Companys indemnification to these 4 partners is limited to $520,000 in
the aggregate, which is its 20% pro rata partnership interest of the $2.6 million in bank debt that was guaranteed by the individuals.



Disclosures About Contractual Obligations and Commercial Commitments



In connection with the acquisition of the Park Assets, DHI entered into a three year supply agreement with AmerisourceBergen Drug Corporation pursuant to
which DHI and our newly acquired indirect subsidiaries agreed to purchase prescription and over-the-counter pharmaceuticals from AmerisourceBergen through March 2007. This supply agreement will also provide us with pricing and payment terms that are
improved from those previously provided by AmerisourceBergen to Park Pharmacy. In exchange for these improved terms, DHI has agreed to acquire 85% of its prescription pharmaceuticals and substantially all of its generic pharmaceutical products from
AmerisourceBergen and agreed to minimum monthly purchases of $900,000 of all products in order to obtain new favorable pricing terms.



In March 2005, Ascendant committed to invest up to $1.0 million in the Fairways Frisco Partnerships, as more fully described in Part I, Item 1 of this
Annual Report on Form 10-K and in Note 18 of the Ascendant Consolidated Financial Statements.



A summary of our contractual commitments under debt and lease agreements and other contractual obligations at December 31, 2004 and the effect such obligations are expected to have on 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 7.



|                                                |  |                                          |       |          |   |          |  |                  |       |       |   |     |  |   |       
|----------------------------------------------- |  | ---------------------------------------- | ----- | -------- | - | -------- |  | ---------------- | ----- | ----- | - | --- |  | - | ------
|Contractual Obligations As of December 31, 2004 |  | Payments due by Period ($-000s omitted)
|                                                |  | Less than1 year                          |       | 1-3Years |   | 3-5Years |  | More than5 years |       | Total
|Lease Obligations                               |  | $                                        | 1,457 |          | $ | 2,454    |  | $                | 1,599 |       | $ | 519 |  | $ | 6,029 
|Investment in Limited Partnerships              |  |                                          | 846   |          |   |         |  |                  |      |       |   |    |  |   | 846   
|Notes Payable                                   |  |                                          | 461   |          |   | 11,695   |  |                  | 460   |       |   |    |  |   | 12,616
|                                                |  |                                          |       |          |   |          |  |                  |       |       |   |     |  |   |       
|Total                                           |  | $                                        | 2,764 |          | $ | 14,149   |  | $                | 2,059 |       | $ | 519 |  | $ | 19,491
|                                                |  |                                          |       |          |   |          |  |                  |       |       |   |     |  |   |       



Critical Accounting Policies



The discussion and analysis of our financial condition
and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate 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 reasonable 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



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##### Table of Contents

##### Index to Financial Statements

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.



Revenue Recognition



Healthcare revenues are reported at the estimated net realizable amounts expected to be received from individuals, third-party payors, institutional
healthcare providers and others. We recognize 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.



CPOCs primary revenue is from brokerage commissions earned from project leasing and tenant representation transactions. Brokerage commission revenue is generally recorded upon execution of a lease contract, unless additional
activities are required to earn the commission pursuant to a specific brokerage commission agreement. Participation interests in rental income are recognized over the life of the lease. Other revenue is recognized as the following consulting
services are provided: facility and site acquisition 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.



Long-Term
Investments



Our long-term investments are accounted
for using the equity method of accounting for investments and none represent investments in publicly traded companies. The equity method is used as we do not have a majority interest and do not have significant influence over the operations of the
respective companies. Distributions received by us are recorded as investment income on the statement of operations to the extent the distribution does not exceed our proportionate share of the companys earnings. Distributions in excess of our
proportionate share would reduce our 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 January 2003, the Financial Accounting Standards Board issued FASB interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements to certain entities in which the equity investors do not have either a controlling interest or sufficient equity at risk
for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for variable interest entities in which we hold a variable interest. FIN 46 will not have an impact on our financial
condition or results of operations. The Company has applied the provisions of FIN 46 to its acquisition of CPOC, as further discussed in Note 2 of the



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##### Table of Contents

##### Index to Financial Statements

Ascendant Consolidated Financial Statements. As a result, CPOC is treated as a consolidated subsidiary in the Companys consolidated financial
statements.



In December 2004, the Financial Accounting
Standards Board issued FASB Statement No. 123R (Revised 2004), Share-Based Payment., which requires that the compensation cost relating to share-based payment transactions such as options, restricted share plans, performance based awards, share
appreciation rights and employee share purchase plans be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The Company will be required to apply Statement 123R
beginning in the 3rd quarter of 2005.



Statement 123R replaces
FASB Statement No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of
accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to the financial statements disclosed what net income
would have been had the preferable fair-value-based method been used.



The Company currently expenses the cost of restricted shares issued to employees and directors over the service vesting period associated with the restricted shares. The Company currently has 21,667 options outstanding which are not vested.
The unrecognized compensation cost related to these options is not material and as a result, management does not believe the implementation of Statement 123R will have a material impact on its results of operations.



In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.5, 57, and 107 and Rescission of
FASB Interpretation No. 34. FIN 45 clarifies the requirements of SFAS No. 5 relating to the guarantors accounting for and disclosure of the issuance of certain types of guarantees. This Interpretation clarifies that a guarantor is required to
recognize at the inception of certain types of guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee, and requires disclosures on existing guarantees even if the likelihood of future liability under the
guarantees is deemed remote. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis for all guarantees issued after December 31, 2002. The Companys limited indemnification to its partners in
the Fairways 03 New Jersey LP investment for any losses those partners may incur under their personal guaranties of the partnerships bank indebtedness is subject to the provisions of FIN 45. The Company is currently evaluating the impact of
FIN 45 and will implement its provisions in the first quarter of 2005. The Companys maximum liability, if any, under this limited indemnification is $ 520,000.



Risks Related to Our Business



We have limited funds and may require additional financing.



We have very limited funds, and such funds may not be adequate to take advantage of available business opportunities or fund
the ones that we have acquired. Our ultimate success may depend upon our ability to raise additional capital. We have not investigated the availability, source, or terms that might govern the acquisition of additional capital and will not do so
until we determine a more definitive and specific need for additional financing. Our access to capital is more limited since our stock was delisted from the Nasdaq National Market, since certain 1934 Act filings related to our investment in the
Frisco Square Partnerships have not been filed timely and as a result of the liabilities we recently acquired, and expect to acquire, as part of our acquisitions. In addition, one of our subsidiaries has committed to use commercially reasonable
efforts to replace the loan facilities associated with the acquisition of the Park Assets, which could impair our ability to locate capital for other needs. If additional capital is needed, there is no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to us. If not available, our operations will be limited to those that can be financed with our existing capital.



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##### Index to Financial Statements

We own subsidiaries that are highly leveraged.



Our subsidiaries are highly leveraged and, as a holding company, we depend
on our subsidiaries revenues and cash flows to meet our obligations. Due to the high leverage, the availability of funds from these subsidiaries may be limited by contractual restrictions. Additionally, the degree to which our subsidiaries are
leveraged has important consequences, including, but not limited to, the reduction in cash flow available to us for our operations and for future acquisitions, increased vulnerability to changes in economic conditions and the impairment of our
ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.



We may not be able to effectively integrate and manage our operating subsidiaries.



Our failure to effectively manage our recent and anticipated future growth could strain our management infrastructure and
other resources and adversely affect our results of operations. We expect our recent and anticipated future growth to present management, infrastructure, systems, and other operating issues and challenges. These issues include controlling expenses,
retention of employees, the diversion of management attention, the development and application of consistent internal controls and reporting processes, the integration and management of a geographically diverse group of employees, and the monitoring
of third parties. Any change in management may make it more difficult to integrate an acquired business with our existing operations. Any failure to address these issues at a pace consistent with our business could cause inefficiencies, additional
operating expenses and inherent risks and financial reporting difficulties.



We are dependent upon management.



We currently have two individuals who are serving as management, including our President and CEO, and our Chief Financial Officer. We are heavily dependent upon our managements skills, talents and abilities to
implement our business plan. Because investors will not be able to evaluate the merits of possible business acquisitions by us, they should critically assess the information concerning our management and Board of Directors. As of December 31, 2004,
Capital Markets employed seven people, including Jim Leslie and certain of our other affiliates and shareholders. We are dependent on these individuals serving Capital Markets. In addition to our own employees, we use from time to time and are
dependent upon, various consultants or contractors to perform various support services including, legal and accounting.



We are dependent on a small staff to execute our business plan.



Because of the limited size of our staff, each acquisition becomes more difficult to integrate. Furthermore, it is difficult
to maintain a complete segregation of duties related to the authorization, recording, processing and reporting of all transactions. In October 2004, we added Gary Boyd as our new Chief Financial Officer which will allow us to implement additional
controls related, but not limited to segregation of duties. However, we still do not have the size of staff necessary to maintain segregation of duties in all transactions. In addition, our strategy of acquiring operating businesses will require our
management and other personnel to devote significant amounts of time to integrating the acquired businesses with our existing operations. These efforts may temporarily distract their attention from day-to-day business and other business
opportunities.



Certain of our subsidiaries account for a
significant percentage of our revenues.



In 2004,
Doughertys accounted for approximately 75% of our revenue and, in 2003, Capital Markets accounted for all of our revenue. In the future, one or more of our subsidiaries may continue to account for a significant percentage of our revenue. The
reliance on any of these subsidiaries for a significant percentage of our revenue and their subsequent failure could negatively affect our results of operations.



29



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##### Index to Financial Statements

Unforeseen costs associated with the acquisition of new businesses could reduce our profitability.



We have implemented our business strategy and made
acquisitions of new businesses that may not prove to be successful. We now own an interest in six businesses, operating in different industries and we do not have experience in some of these areas. It is likely that we will encounter unanticipated
difficulties and expenditures relating to our acquired businesses, including contingent liabilities, or needs for significant management attention that would otherwise be devoted to our other businesses. These costs may negatively affect our results
of operations. Unforeseen costs at our recently acquired and to be acquired businesses, which have significant liabilities and commitments, could result in the inability to make required payments on indebtedness, which could result in a loss of our
investments in these companies and, in the case of CPOC, require us to make payments under our guaranty.



We may enter into additional leveraged transactions in connection with an acquisition opportunity.



Based on our current cash position, it is likely that if we enter into any
additional acquisitions, such acquisitions will be leveraged, i.e., we may finance the acquisition of the business opportunity by borrowing against the assets of the business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This could increase our exposure to larger losses. A business opportunity acquired through a leveraged transaction is profitable only if it generates enough revenues to cover the related debt and expenses.
Failure to make payments on the debt incurred to purchase the business opportunity could result in the loss of a portion or all of the assets acquired. There is no assurance that any business opportunity acquired through a leveraged transaction will
generate sufficient revenues to cover the related debt and expenses.



We are restricted on our use of net operating loss carryforwards.



At December 31, 2004, we had accumulated approximately $49.3 million of federal net operating loss carryforwards and approximately $39.4 million of state
net operating loss carryforwards, which may be used to offset taxable income and reduce income taxes in future years. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the
expiration of the net operating loss carryforwards. The carryforwards, if not fully utilized, will expire from 2018 to 2023. Section 382 of the Internal Revenue Code of 1986, as amended (the Code) imposes an annual limitation on the
portion of our net operating loss carryforwards that may be used to offset taxable income. We believe that the issuance of shares of common stock pursuant to the initial public offering on November 15, 1999 caused an ownership change for
purposes of Section 382 of the Code on such date. Consequently, we believe that utilization of the portion of our net operating loss carryforwards attributable to the period prior to November 16, 1999 is limited by Section 382 of the Code. The date
of an ownership change is based upon a factual determination of the value of our stock on such date. If the ownership change was determined to have occurred at a date after November 15, 1999, additional net operating loss
carryforwards would be limited by Section 382 of the Code. In addition, a second ownership change may occur in the future as a result of future changes in the ownership of our stock, including our issuance of stock in connection with our
acquisition of a business. A second ownership change would result in Code Section 382 limiting our deduction of our future net operating loss carryforwards.



Our results of operations are difficult to predict.



Although we generated net income of $249,000 for the year ended December 31, 2004, we have historically incurred net
operating losses. The Company experienced net losses of approximately $818,000 and $728,000 for the years ended December 31, 2003 and 2002, respectively. There can be no assurance that we will continue to achieve profitability in the future.



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##### Index to Financial Statements

Risks Specific to Our Operating Subsidiaries



Doughertys Holdings, Inc.



Our pharmacy subsidiary is subject to extensive regulation.



Our pharmacists and pharmacies are required to be licensed by the Texas
State Board of Pharmacy. The pharmacies are also registered with the federal Drug Enforcement Administration. By virtue of these license and registration requirements, the entities owned by DHI are obligated to observe certain rules and regulations,
and a violation of such rules and regulations could result in fines and/or in a suspension or revocation of a license or registration. We believe that the operating entities owned by DHI currently have all the regulatory approvals necessary to
conduct its business. However, we can give no assurance that they will be able to maintain compliance with existing regulations.



In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would
effect major changes in the health care system, either nationally or at the state level. We cannot predict whether any federal or state health care reform legislation will eventually be passed, and if so, the impact thereof on DHIs financial
position or results of operations. Health care reform, if implemented, could adversely affect the pricing of prescription drugs or the amount of reimbursement from governmental agencies and managed care payors, and consequently could be adverse to
DHI and therefore, to us. However, to the extent health care reform expands the number of persons receiving health care benefits covering the purchase of prescription drugs, it may also result in increased purchases of such drugs and could thereby
have a favorable impact on both DHI and the drug industry in general. Nevertheless, there can be no assurance that any future federal or state health care reform legislation will not adversely affect us, including our subsidiary DHI, or the retail
drugstore industry generally.



In addition, a portion of DHI
revenue is derived from high-end, technical pharmacy services, such as compounded prescriptions, intravenous infusion, injectables and pain management products that are not typically offered by chain drug stores, grocery pharmacies or mass
merchandise pharmacies. Recently, there has been some controversy about the lack of federal regulation of these services. Additional federal and/or state regulations could also affect our business by putting additional burdens on us.



If we do not adequately respond to competitive pressures, demand for our
products and services could decrease.



Our retail
pharmacies operate in a highly competitive industry. The markets we serve are subject to relatively few barriers to entry. These pharmacies compete primarily on the basis of customer service, convenience of location and store design, price and
product mix and selection. Some of our competitors have greater financial, technical, marketing and managerial resources than we have. Local, regional and national companies are currently competing in many of the health care markets we serve and
others may do so in the future. In addition to traditional competition from independent pharmacies and other pharmacy chains, our pharmacies face competition from discount stores, supermarkets, combination food and drugstores, mail order
distributors, hospitals and HMOs. These other formats have experienced significant growth in their market share of the prescription and over-the-counter drug business. Consolidation among our competitors, such as pharmacy benefit managers
(PBMs) and regional and national infusion pharmacy or specialty pharmacy providers could result in price competition and other competitive factors that could cause a decline in our revenue and profitability. We expect to continue to encounter
competition in the future that could limit our ability to grow revenue and/or maintain acceptable pricing levels.



Risk related to third party payors.



DHIs revenues and profitability are affected by the continuing efforts of all third-party payors to contain or reduce the costs of health care by
lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services and negotiating reduced contract pricing. Any changes in



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##### Index to Financial Statements

reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on
DHIs revenues and profitability. Changes in the mix of patients among Medicare, Medicaid and other payor sources may also impact DHIs revenues and profitability. There can be no assurance that DHI will continue to maintain the current
payor or revenue mix.



Collectibility of accounts
receivable.



DHIs failure to maintain its controls
and processes over billing and collecting or the deterioration of the financial condition of its payors could have a significant negative impact on its results of operations and financial condition.



The collection of accounts receivable is one of DHIs most significant
challenges and requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures. Further some of DHIs payors and/or patients may experience financial difficulties, or
may otherwise not pay accounts receivable when due, resulting in increased write-offs. There can be no assurance that DHI will be able to maintain its current levels of collectibility and days sales outstanding in future periods. If DHI is unable to
properly bill and collect its accounts receivable, its results will be adversely affected.



We are substantially dependent on a single supplier of pharmaceutical products to sell products to us on satisfactory terms. A disruption in our relationship with this supplier could have a material adverse effect
on our business.



We obtain a majority of our total
merchandise, including over 90% of our pharmaceuticals, from a single supplier, AmerisourceBergen, with whom we have a long-term supply contract. Any significant disruptions in our relationship with AmerisourceBergen, or deterioration in
AmerisourceBergens financial condition, could have a material adverse effect on us.



Failure to maintain sufficient sales to qualify for favorable pricing under our long term supply contract could increase the costs of our products.



Our long term supply agreement with AmerisourceBergen provides us with pricing and credit terms that are improved from those
previously provided by AmerisourceBergen to Park Pharmacy Corporation. In exchange for these improved terms, DHI has agreed to acquire 85% of its prescription pharmaceuticals and substantially all of its generic pharmaceutical products from
AmerisourceBergen and to maintain certain minimum dollar monthly purchases. If we are unable to satisfy minimum monthly purchase requirements of $900,000, we may be required to purchase our pharmaceutical products on less favorable pricing and
credit terms. From the date of acquisition through December 31, 2004, we purchased over $17,250,000 of our pharmaceutical products from Amerisource Bergen.



The current or future shortage in licensed pharmacists, nurses and other clinicians could adversely affect our business.



The health care industry is currently experiencing a
shortage of licensed pharmacists, nurses and other health care professionals. Consequently, hiring and retaining qualified personnel will be difficult due to intense competition for their services and employment. Any failure to hire or retain
pharmacists, nurses or other health care professionals could impair our ability to expand or maintain our operations.



Certain risks are inherent in providing pharmacy services, and our insurance may not be adequate to cover any claims against us.



Pharmacies are exposed to risks inherent in the packaging and distribution
of pharmaceuticals and other health care products. Although we maintain professional liability and errors and omissions liability insurance, we cannot assure you that the coverage limits under our insurance programs will be adequate to protect us
against future claims, or that we will maintain this insurance on acceptable terms in the future.



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##### Index to Financial Statements

CRESA Partners of Orange County, L.P.



We have numerous significant competitors, some of which may have greater
financial resources than we do.



We compete across a
variety of business disciplines within the commercial real estate industry, including investment management, tenant representation, corporate services, construction and development management, property management, agency leasing, valuation and
mortgage banking. In general, with respect to each of our business disciplines, we cannot assure you that we will be able to continue to compete effectively or maintain our current fee arrangements or margin levels or that we will not encounter
increased competition. Each of the business disciplines in which we compete is highly competitive on an international, national, regional and local level. Depending on the product or service, we face competition from other real estate service
providers, institutional lenders, insurance companies, investment banking firms, investment managers and accounting firms, many of which may have greater financial resources than we do. Many of our competitors are local or regional firms. We are
also subject to competition from other large national and multi-national firms.



A significant portion of our operations are concentrated in southern California and our business could be harmed if the economic downturn continues in the southern California real estate markets.



During 2004, a significant amount of our real estate advisory services
segment revenue was generated from transactions originating in California. As a result of the geographic concentrations in California, the continuation of the economic downturn in the California commercial real estate markets and in the local
economies in Orange County area could further harm our results of operations.



Our results of operations vary significantly among quarters, which makes comparison of our quarterly results difficult.



The nature of our business does not allow for ready comparison of operating results from quarter to quarter. Our transaction fees are highly dependent
on transactions that do not occur ratably over the course of a year.



Our success depends upon the retention of our senior management, as well as our ability to attract and retain qualified and experienced employees.



Our continued success is highly dependent upon the efforts of our executive officers and CPOCs existing management
team. The loss of one or more of our members of the senior management team could have a material adverse effect on CPOC.



If we fail to comply with laws and regulations applicable to real estate brokerage, we may incur significant financial penalties.



Due to the nature of our operations, we are subject to numerous federal,
state and local laws and regulations specific to the services performed. For example, the brokerage of real estate sales and leasing transactions requires us to maintain brokerage licenses in each state in which we operate. If we fail to maintain
our licenses or conduct brokerage activities without a license, we may be required to pay fines or return commissions received or have licenses suspended. Furthermore, the laws and regulations applicable to our business also may change in ways that
materially increase the cost of compliance.



We may have
liabilities in connection with real estate brokerage activities.



As a licensed real estate broker, we and our licensed employees are subject to statutory due diligence, disclosure and standard-of-care obligations. Failure to fulfill these obligations could subject us or our employees to litigation from
parties who purchased, sold or leased properties we or they brokered or managed. We could become subject to claims by participants in real estate transactions claiming that we did not fulfill our statutory obligations as a broker.



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##### Index to Financial Statements

Risks Related to Our Investments in Real Estate



The success of real estate developments is dependant on tenants to generate lease revenues.



Real estate developments are subject to the risk that, upon the expiration
of leases for space located in the properties, leases may not be renewed by existing tenants, the space may not be re-leased to new tenants or the terms of renewal or releasing (including the cost of required renovations or concessions to tenants)
may be less favorable than current lease terms. A tenant may experience a down-turn in its business which may cause the loss of the tenant or may weaken its financial condition, and result in the tenants failure to make rental payments when
due, result in a reduction in percentage rent receivable with respect to retail tenants or require a restructuring that might reduce cash flow from the lease. In addition, a tenant of any of the properties may seek the protection of bankruptcy,
insolvency, or similar laws, which could result in the rejection and termination of such tenants lease and thereby cause a reduction in our available cash flow. Although we have not experienced material losses from tenant bankruptcies, no
assurance can be given that tenants will not file for bankruptcy or similar protection in the future or, if any tenants file, that they will affirm their leases or continue to make rental payments in a timely manner.



Real estate development strategies entail certain risks.



Real estate development activities entail certain risks, including:



| |  |  | the expenditure of funds on and devotion of managements time to projects which may not come to fruition;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | the risk that development or redevelopment costs of a project may exceed original estimates, possibly making the project uneconomic or causing the project to raise additional cash
to fund such costs
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risk that occupancy rates and rents at a completed project will be less than anticipated or that there will be vacant space at the project;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risk that expenses at a completed development will be higher than anticipated; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | the risk that permits and other governmental approvals will not be obtained. Because of the discretionary nature of these approvals and concerns which may be raised by various
governmental officials, public interest groups and other interested parties during the approval and development process, our ability to develop properties and realize income from our projects could be delayed, reduced or eliminated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



General economic conditions in the areas in
which our properties are geographically concentrated may impact financial results.



Our real estate development investments are exposed to changes in the real estate market or in general economic conditions in Texas. Any changes may result in higher vacancy rates for commercial property and lower
prevailing rents, lower sales prices or slower sales, lower absorption rates, and more tenant defaults and bankruptcies, which would negatively impact our financial performance. To the extent that weak economic conditions or other factors affect
these regions more severely than other areas of the country, our financial performance could be negatively impacted.



Exposure of our assets to damage from natural occurrences such as earthquakes, and weather conditions that affect the progress of construction may
impact financial results.



Natural disasters, such as
earthquakes, floods or fires, or unexpected climactic conditions, such as unusually heavy or prolonged rain, may have an adverse impact on our ability to develop our properties and realize income from our projects.



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##### Index to Financial Statements

Illiquidity of real estate and reinvestment risk may reduce economic returns to investors.



Real estate investments are relatively illiquid and,
therefore, our ability to vary our portfolio quickly in response to changes in economic or other conditions is limited. Further, certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and
related charges must be made throughout the period of ownership of real property regardless of whether the real property is producing any income.



Other Risks



We are controlled by our principal stockholders, officers and directors.



Our principal stockholders, officers and directors, and affiliates beneficially own approximately 52% of our Common Stock.
As a result, such persons may have the ability to control and direct our affairs and business. Such concentration of ownership may also have the effect of delaying, deferring or preventing a change in control.



We have certain transactions with related parties.



We have relationships or transactions with related parties or affiliates of
ours. Please see Note 18 of the Ascendant Consolidated Financial Statements contained herein.



Our stock is not listed on The NASDAQ National Market.



Our stock is quoted and traded on the OTCBB. The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in OTC securities. An OTC security is not listed or
traded on NASDAQ or a national securities exchange, and NASDAQ has no business relationship with the issuers quoted in the OTCBB. Issuers of all securities quoted on the OTCBB are subject to periodic filing requirements with the Securities and
Exchange Commission or other regulatory authority. Even with OTCBB eligibility and trading, fewer investors have access to trade our common stock, which will limit our ability to raise capital through the sale of our securities.



In addition, our common stock is subject to penny stock regulations, which
could cause fewer brokers and market makers to execute trades in our common stock. This is likely to hamper our common stock trading with sufficient volume to provide liquidity and could cause our stock price to further decrease. The penny stock
regulations require that broker-dealers who recommend penny stocks to persons other than institutional accredited investors must make a special suitability determination for the purchaser, receive the purchasers written consent to the
transaction prior to the sale and provide the purchaser with risk disclosure documents which identify risks associated with investing in penny stocks. These requirements have historically resulted in reducing the level of trading activity in
securities that become subject to the penny stock rules. Holders of our common stock may find it more difficult to sell their shares of common stock, which is expected to have an adverse effect on the market price of the common stock.



We are currently in litigation and may be subject to additional litigation
in the future. See Part I. (Item 3Legal Proceedings) for a discussion of current pending litigation.



Our current litigation, plus any future claims, with or without merit, may result in substantial costs and divert managements attention and
resources, which may seriously harm our business, prospects, financial condition and results of operations and may also harm our reputation, all of which may have a material adverse effect on our ability to pursue various strategic and financial
alternatives as well as have a material adverse effect on our stock price. We may be unable to pay expenses or liabilities that may arise out of any possible legal claims. We cannot predict the outcome of any potential legal claims.



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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



We currently do not engage 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 from 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 primarily as the guarantor of ASDSs Acquisition Note, which bears interest payable monthly at the prime rate of Northern Trust
Bank plus 0.50% per annum. If the effective interest rate under the Acquisition Note were to increase by 100 basis points (1.00%), our annual financing expense would increase by approximately $69,000, based on the average balance outstanding under
the Acquisition Note during the period ended December 31, 2004. A 100 basis points (1.00%) increase in market interest rates would decrease the fair value of our fixed rate debt by approximately $119,000. We did not experience a material impact from
interest rate risk during the year ended December 31, 2004.



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 December 31, 2004, which are sensitive to changes in interest rates. At December
31, 2004, approximately 55% of our debt was subject to changes in market interest rates and was sensitive to those changes. At December 31, 2003, there was no debt outstanding subject to variable interest rates. Scheduled principal cash flows for
debt outstanding at December 31, 2004 for the twelve months ending December 31 are as follows:



|                |  |      |         |      |   |         |  |      |           |      |   |            |  |       |         |            |   |   |  |   |           |  |   |          
|--------------- |  | ---- | ------- | ---- | - | ------- |  | ---- | --------- | ---- | - | ---------- |  | ----- | ------- | ---------- | - | - |  | - | --------- |  | - | ---------
|                |  | 2005 |         | 2006 |   | 2007    |  | 2008 |           | 2009 |   | Thereafter |  | Total |         | Fair Value
|Long-Term Debt: |  |      |         |      |   |         |  |      |           |      |   |            |  |       |         |            |   |   |  |   |           |  |   |          
|Fixed Rate      |  | $    | 461,000 |      | $ | 479,000 |  | $    | 4,276,000 |      | $ | 40,000     |  | $     | 460,000 |            | $ |  |  | $ | 5,716,000 |  | $ | 5,716,000
|Variable Rate   |  | $    |        |      | $ |        |  | $    | 6,900,000 |      | $ |           |  | $     |        |            | $ |  |  | $ | 6,900,000 |  | $ | 6,900,000



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##### Index to Financial Statements

ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



|                                                                                                                                                   |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|ASCENDANT SOLUTIONS, INC.                                                                                                                          |  | Page
|                                                                                                                                                   | 
|Reports of Independent Registered Public Accounting Firms                                                                                          |  | 38  
|                                                                                                                                                   | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                                                       |  | 41  
|                                                                                                                                                   | 
|Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002                                                         |  | 42  
|                                                                                                                                                   | 
|Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2004, 2003 and 2002                                               |  | 43  
|                                                                                                                                                   | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002                                                         |  | 44  
|                                                                                                                                                   | 
|Notes to Consolidated Financial Statements                                                                                                         |  | 45  
|                                                                                                                                                   | 
|PARK PHARMACY CORPORATION                                                                                                                          |  |     
|                                                                                                                                                   | 
|Report of Independent Registered Public Accounting Firm                                                                                            |  | 69  
|                                                                                                                                                   | 
|Consolidated Balance Sheets as of March 24, 2004 and June 30, 2003                                                                                 |  | 70  
|                                                                                                                                                   | 
|Consolidated Statements of Operations for the period from July 1, 2003 to March 24, 2004 and for the years ended June 30, 2003 and 2002            |  | 71  
|                                                                                                                                                   | 
|Consolidated Statements of Stockholders Deficit for the period from July 1, 2003 to March 24, 2004 and for the years ended June 30, 2003 and 2002 |  | 72  
|                                                                                                                                                   | 
|Consolidated Statements of Cash Flows for the period from July 1, 2003 to March 24, 2004 and for the years ended June 30, 2003 and 2002            |  | 73  
|                                                                                                                                                   | 
|Notes to Consolidated Financial Statements                                                                                                         |  | 74  
|                                                                                                                                                   | 
|THE STAUBACH COMPANY-WEST, INC.                                                                                                                    |  |     
|                                                                                                                                                   | 
|Report of Independent Registered Public Accounting Firm                                                                                            |  | 91  
|                                                                                                                                                   | 
|Balance Sheets as of December 31, 2003 and 2002                                                                                                    |  | 92  
|                                                                                                                                                   | 
|Statements of Operations for the years ended December 31, 2003 and 2002                                                                            |  | 93  
|                                                                                                                                                   | 
|Statements of Stockholders Deficit for the years ended December 31, 2003 and 2002                                                                 |  | 94  
|                                                                                                                                                   | 
|Statements of Cash Flows the years ended December 31, 2003 and 2002                                                                                |  | 95  
|                                                                                                                                                   | 
|Notes to Financial Statements                                                                                                                      |  | 96  





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders

Ascendant Solutions, Inc.



We have audited the accompanying consolidated balance sheet of Ascendant Solutions, Inc. and subsidiaries as of December 31,
2004, and the related consolidated statements of operations, stockholders equity and cash flows for the year then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.



We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company has determined it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we
express no such opinion.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Ascendant
Solutions, Inc. and subsidiaries as of December 31, 2004, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with United States generally accepted accounting principles.



/s/HEIN &
ASSOCIATES LLP



Dallas, Texas

March 11, 2005





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors and Stockholders

Ascendant Solutions, Inc.

Dallas, Texas



We have audited the accompanying consolidated balance sheet of Ascendant
Solutions, Inc. (the Company) as of December 31, 2003, and the related consolidated statements of operations, stockholders equity and cash flows for the year then ended. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for
our opinion.



In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Ascendant Solutions, Inc. as of December 31, 2003, and the consolidated results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of America.



/s/ BDO Seidman, LLP



Dallas, Texas

March 26, 2004





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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Stockholders and Board of Directors

Ascendant Solutions, Inc.

Dallas, Texas



We have audited the accompanying consolidated statements of operations,
stockholders equity and cash flows of Ascendant Solutions, Inc. (the Company) as of December 31, 2002, for the year ended December 31, 2002. These consolidated financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe our audit
provides a reasonable basis for our opinion.



In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Ascendant Solutions, Inc. for the year ended December 31, 2002, in conformity with U.S. generally accepted
accounting principles.



/s/ Ernst & Young
LLP



Dallas, Texas

March 27, 2003



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



CONSOLIDATED BALANCE SHEETS



(000s
omitted, except share & per share amounts)

|                                                                                                     |  |                  |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                     |  | December 31,2004 |         |   | December 31,2003 |  
|ASSETS                                                                                               |  |                  |         |   |                  |   |         |  
|Current assets:                                                                                      |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents                                                                            |  | $                | 1,868   |   |                  | $ | 2,006   |  
|Trade accounts receivable, net of allowance for doubtful accounts of $ 380 at December 31, 2004      |  |                  | 6,350   |   |                  |   |        |  
|Other receivables                                                                                    |  |                  | 161     |   |                  |   | 46      |  
|Receivable from affiliates                                                                           |  |                  | 71      |   |                  |   | 52      |  
|Inventories                                                                                          |  |                  | 2,498   |   |                  |   |        |  
|Prepaid expenses                                                                                     |  |                  | 503     |   |                  |   | 125     |  
|                                                                                                     |  |                  |         |   |                  |   |         |  
|Total current assets                                                                                 |  |                  | 11,451  |   |                  |   | 2,229   |  
|Property and equipment, net                                                                          |  |                  | 716     |   |                  |   | 17      |  
|Deferred acquisition costs                                                                           |  |                  |        |   |                  |   | 310     |  
|Goodwill                                                                                             |  |                  | 7,299   |   |                  |   |        |  
|Other intangible assets                                                                              |  |                  | 758     |   |                  |   |        |  
|Investments in limited partnerships, net                                                             |  |                  | 411     |   |                  |   | 285     |  
|Other assets                                                                                         |  |                  | 118     |   |                  |   |        |  
|                                                                                                     |  |                  |         |   |                  |   |         |  
|Total assets                                                                                         |  | $                | 20,753  |   |                  | $ | 2,841   |  
|                                                                                                     |  |                  |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                 |  |                  |         |   |                  |   |         |  
|Current liabilities:                                                                                 |  |                  |         |   |                  |   |         |  
|Accounts payable                                                                                     |  | $                | 1,633   |   |                  | $ | 60      |  
|Accounts payable to affiliates                                                                       |  |                  |        |   |                  |   | 1       |  
|Accrued liabilities                                                                                  |  |                  | 3,161   |   |                  |   | 48      |  
|Notes payable, current                                                                               |  |                  | 461     |   |                  |   |        |  
|                                                                                                     |  |                  |         |   |                  |   |         |  
|Total current liabilities                                                                            |  |                  | 5,255   |   |                  |   | 109     |  
|Notes payable, long-term                                                                             |  |                  | 12,155  |   |                  |   |        |  
|Limited partnership and minority interests                                                           |  |                  | 464     |   |                  |   | 209     |  
|Commitments and contingencies                                                                        |  |                  |         |   |                  |   |         |  
|Stockholders equity:                                                                                |  |                  |         |   |                  |   |         |  
|Preferred stock, $0.0001 par value:                                                                  |  |                  |         |   |                  |   |         |  
|Authorized shares7,500,000                                                                          |  |                  |         |   |                  |   |         |  
|Issued and outstandingnone                                                                          |  |                  |        |   |                  |   |        |  
|Common stock, $0.0001 par value:                                                                     |  |                  |         |   |                  |   |         |  
|Authorized shares50,000,000                                                                         |  |                  |         |   |                  |   |         |  
|Issued and outstanding shares21,933,400 and 21,665,900 at December 31, 2004 and 2003, respectively. |  |                  | 2       |   |                  |   | 2       |  
|Additional paid-in capital                                                                           |  |                  | 59,961  |   |                  |   | 59,822  |  
|Deferred compensation                                                                                |  |                  | (78     | ) |                  |   | (46     | )
|Accumulated deficit                                                                                  |  |                  | (57,006 | ) |                  |   | (57,255 | )
|                                                                                                     |  |                  |         |   |                  |   |         |  
|Total stockholders equity                                                                           |  |                  | 2,879   |   |                  |   | 2,523   |  
|                                                                                                     |  |                  |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                           |  | $                | 20,753  |   |                  | $ | 2,841   |  
|                                                                                                     |  |                  |         |   |                  |   |         |  



See accompanying notes
to the Consolidated Financial Statements



41



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS



(000s omitted, except share & per share amounts)

|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                        |  | Years Ended December 31, |           
|                                                                                        |  | 2004                     |            |   | 2003 |   |            | 2002 | 
|Revenue:                                                                                |  |                          |            |   |      |   |            |      |  |   |            |  
|Healthcare                                                                              |  | $                        | 29,532     |   |      | $ |           |      |  | $ |           |  
|Real estate advisory services                                                           |  |                          | 9,759      |   |      |   | 505        |      |  |   |           |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|                                                                                        |  |                          | 39,291     |   |      |   | 505        |      |  |   |           |  
|Cost of Sales:                                                                          |  |                          |            |   |      |   |            |      |  |   |            |  
|Healthcare                                                                              |  |                          | 19,668     |   |      |   |           |      |  |   |           |  
|Real estate advisory services                                                           |  |                          | 5,387      |   |      |   |           |      |  |   |           |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|                                                                                        |  |                          | 25,055     |   |      |   |           |      |  |   |           |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Gross profit                                                                            |  |                          | 14,236     |   |      |   | 505        |      |  |   |           |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Operating expenses:                                                                     |  |                          |            |   |      |   |            |      |  |   |            |  
|Selling, general and administrative expenses                                            |  |                          | 13,054     |   |      |   | 1,540      |      |  |   | 998        |  
|Non-cash stock compensation                                                             |  |                          | 58         |   |      |   |           |      |  |   |           |  
|Impairment charges                                                                      |  |                          |           |   |      |   | 112        |      |  |   |           |  
|Depreciation and amortization                                                           |  |                          | 494        |   |      |   | 63         |      |  |   | 18         |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Total operating expenses                                                                |  |                          | 13,606     |   |      |   | 1,715      |      |  |   | 1,016      |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Operating income (loss)                                                                 |  |                          | 630        |   |      |   | (1,210     | )    |  |   | (1,016     | )
|Investment income                                                                       |  |                          | 393        |   |      |   | 85         |      |  |   | 19         |  
|Interest income (expense), net                                                          |  |                          | (520       | ) |      |   | 30         |      |  |   | 59         |  
|Gain (Loss) on sale of property and equipment                                           |  |                          | (32        | ) |      |   |           |      |  |   | 1          |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Income (loss) before limited partnership and minority interest and income tax provision |  |                          | 471        |   |      |   | (1,095     | )    |  |   | (937       | )
|Limited partnership and minority interest                                               |  |                          | 56         |   |      |   | (277       | )    |  |   | (209       | )
|State income tax provision                                                              |  |                          | 166        |   |      |   |           |      |  |   |           |  
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Net income (loss)                                                                       |  | $                        | 249        |   |      | $ | (818       | )    |  | $ | (728       | )
|                                                                                        |  |                          |            |   |      |   |            |      |  |   |            |  
|Basic net income (loss) per share                                                       |  | $                        | 0.01       |   |      | $ | (0.04      | )    |  | $ | (0.03      | )
|Diluted net income (loss) per share                                                     |  | $                        | 0.01       |   |      | $ | (0.04      | )    |  | $ | (0.03      | )
|Shares used in computing basic net income (loss) per share                              |  |                          | 21,803,817 |   |      |   | 21,557,150 |      |  |   | 21,230,900 |  
|Shares used in computing diluted net income (loss) per share                            |  |                          | 22,389,267 |   |      |   | 21,557,150 |      |  |   | 21,230,900 |  



See accompanying notes
to the Consolidated Financial Statements



42



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



(000s omitted, except share amounts)



|                                                     |  |                                   |        |                     |            |                          |   |                      |  |   |                    |  |   |                                   |   |  |   |         |   |  |   |       |  
|---------------------------------------------------- |  | --------------------------------- | ------ | ------------------- | ---------- | ------------------------ | - | -------------------- |  | - | ------------------ |  | - | --------------------------------- | - |  | - | ------- | - |  | - | ----- | -
|                                                     |  | Series AConvertiblePreferredStock |        | Common StockClass A |            | AdditionalPaid-inCapital |   | DeferredCompensation |  |   | AccumulatedDeficit |  |   | TotalStockholdersEquity(Deficit) |  
|                                                     |  |                                   | Shares |                     | Amount     |                          |   |                      | 
|Balance at January 1, 2002                           |  |                                   |       |                     | 21,230,900 |                          | $ | 2                    |  | $ | 59,718             |  | $ |                                  |   |  | $ | (55,709 | ) |  | $ | 4,011 |  
|Issuance of restricted stock to officers             |  |                                   |       |                     |           |                          |   |                     |  |   | 104                |  |   | (104                              | ) |  |   |        |   |  |   |      |  
|Amortization of deferred compensation                |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   | 23                                |   |  |   |        |   |  |   | 23    |  
|Net loss                                             |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   |                                  |   |  |   | (728    | ) |  |   | (728  | )
|                                                     |  |                                   |        |                     |            |                          |   |                      |  |   |                    |  |   |                                   |   |  |   |         |   |  |   |       |  
|Balance at December 31, 2002                         |  |                                   |       |                     | 21,230,900 |                          |   | 2                    |  |   | 59,822             |  |   | (81                               | ) |  |   | (56,437 | ) |  |   | 3,306 |  
|Issuance of restricted stock to officers             |  |                                   |       |                     | 435,000    |                          |   |                     |  |   |                   |  |   |                                  |   |  |   |        |   |  |   |      |  
|Amortization of deferred compensation                |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   | 35                                |   |  |   |        |   |  |   | 35    |  
|Net loss                                             |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   |                                  |   |  |   | (818    | ) |  |   | (818  | )
|                                                     |  |                                   |        |                     |            |                          |   |                      |  |   |                    |  |   |                                   |   |  |   |         |   |  |   |       |  
|Balance at December 31, 2003                         |  | $                                 |       |                     | 21,665,900 |                          |   | 2                    |  |   | 59,822             |  |   | (46                               | ) |  |   | (57,255 | ) |  |   | 2,523 |  
|Exercise of stock options                            |  |                                   |        |                     | 200,000    |                          |   |                     |  |   | 49                 |  |   |                                  |   |  |   |        |   |  |   | 49    |  
|Non-cash stock option compensation                   |  |                                   |       |                     |           |                          |   |                     |  |   | 18                 |  |   |                                  |   |  |   |        |   |  |   | 18    |  
|Issuance of restricted stock to officers & directors |  |                                   |       |                     | 67,500     |                          |   |                     |  |   | 72                 |  |   | (72                               | ) |  |   |        |   |  |   |      |  
|Amortization of deferred compensation                |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   | 40                                |   |  |   |        |   |  |   | 40    |  
|Net income                                           |  |                                   |       |                     |           |                          |   |                     |  |   |                   |  |   |                                  |   |  |   | 249     |   |  |   | 249   |  
|                                                     |  |                                   |        |                     |            |                          |   |                      |  |   |                    |  |   |                                   |   |  |   |         |   |  |   |       |  
|Balance at December 31, 2004                         |  | $                                 |       |                     | 21,933,400 |                          | $ | 2                    |  | $ | 59,961             |  | $ | (78                               | ) |  | $ | (57,006 | ) |  | $ | 2,879 |  
|                                                     |  |                                   |        |                     |            |                          |   |                      |  |   |                    |  |   |                                   |   |  |   |         |   |  |   |       |  



See accompanying notes
to the Consolidated Financial Statements



43



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS



(000s omitted)



|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                                                   |  | Years Ended December 31, |       
|                                                                                                   |  | 2004                     |        |   | 2003 |   |       | 2002 | 
|Operating Activities                                                                               |  |                          |        |   |      |   |       |      |  |   |        |  
|Net income (loss)                                                                                  |  | $                        | 249    |   |      | $ | (818  | )    |  | $ | (728   | )
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                          |        |   |      |   |       |      |  |   |        |  
|Provision for doubtful accounts                                                                    |  |                          | 260    |   |      |   |      |      |  |   |       |  
|Depreciation and amortization                                                                      |  |                          | 494    |   |      |   | 63    |      |  |   | 18     |  
|Deferred compensation amortization                                                                 |  |                          | 40     |   |      |   | 35    |      |  |   | 23     |  
|Non-cash stock option compensation                                                                 |  |                          | 18     |   |      |   |      |      |  |   |       |  
|(Gain) Loss on sale of property and equipment                                                      |  |                          | 32     |   |      |   |      |      |  |   | (1     | )
|Impairment charges                                                                                 |  |                          |       |   |      |   | 112   |      |  |   |       |  
|Limited partnership and minority interest                                                          |  |                          | 56     |   |      |   | (277  | )    |  |   | (209   | )
|Changes in operating assets and liabilities, net of effects from acquisitions:                     |  |                          |        |   |      |   |       |      |  |   |        |  
|Accounts receivable                                                                                |  |                          | 922    |   |      |   | (3    | )    |  |   | (69    | )
|Inventories                                                                                        |  |                          | (165   | ) |      |   |      |      |  |   |       |  
|Prepaid expenses and other assets                                                                  |  |                          | (103   | ) |      |   | 13    |      |  |   | (17    | )
|Accounts payable                                                                                   |  |                          | 16     |   |      |   | (21   | )    |  |   | (152   | )
|Accrued liabilities                                                                                |  |                          | 140    |   |      |   | 10    |      |  |   | (80    | )
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Net cash provided by (used in) operating activities                                                |  |                          | 1,959  |   |      |   | (886  | )    |  |   | (1,215 | )
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Investing Activities                                                                               |  |                          |        |   |      |   |       |      |  |   |        |  
|Return of capital distributions                                                                    |  |                          | 29     |   |      |   | 46    |      |  |   | 69     |  
|Proceeds from sale of property and equipment                                                       |  |                          | 42     |   |      |   |      |      |  |   | 8      |  
|Deferred acquisition costs                                                                         |  |                          | 310    |   |      |   | (310  | )    |  |   |       |  
|Net cash acquired in acquisitions                                                                  |  |                          | 1,537  |   |      |   |      |      |  |   |       |  
|Purchases of property and equipment                                                                |  |                          | (172   | ) |      |   | (32   | )    |  |   | (172   | )
|Distributions to limited partners                                                                  |  |                          | (31    | ) |      |   |      |      |  |   |       |  
|Investment in limited partnerships                                                                 |  |                          | (155   | ) |      |   | (146  | )    |  |   | (400   | )
|Return of investment in limited partnerships                                                       |  |                          |       |   |      |   | 145   |      |  |   |       |  
|Payment of acquisition liabilities                                                                 |  |                          | (1,350 | ) |      |   |      |      |  |   |       |  
|Purchase cost of acquisitions, net of cash acquired                                                |  |                          | (857   | ) |      |   |      |      |  |   |       |  
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Net cash used in investing activities                                                              |  |                          | (647   | ) |      |   | (297  | )    |  |   | (495   | )
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Financing Activities                                                                               |  |                          |        |   |      |   |       |      |  |   |        |  
|Proceeds from exercise of common stock purchase options                                            |  |                          | 49     |   |      |   |      |      |  |   |       |  
|Proceeds from sale of limited partnership interests                                                |  |                          | 230    |   |      |   | 239   |      |  |   | 456    |  
|Payments on notes payable                                                                          |  |                          | (1,729 | ) |      |   |      |      |  |   |       |  
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Net cash (used in) provided by financing activities                                                |  |                          | (1,450 | ) |      |   | 239   |      |  |   | 456    |  
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Net decrease in cash and cash equivalents                                                          |  |                          | (138   | ) |      |   | (944  | )    |  |   | (1,254 | )
|Cash and cash equivalents at beginning of year                                                     |  |                          | 2,006  |   |      |   | 2,950 |      |  |   | 4,204  |  
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Cash and cash equivalents at end of year                                                           |  | $                        | 1,868  |   |      | $ | 2,006 |      |  | $ | 2,950  |  
|                                                                                                   |  |                          |        |   |      |   |       |      |  |   |        |  
|Supplemental Cash Flow Information                                                                 |  |                          |        |   |      |   |       |      |  |   |        |  
|Cash paid for state income taxes                                                                   |  | $                        |       |   |      | $ |      |      |  | $ |       |  
|Cash paid for interest on notes payable                                                            |  | $                        | 497    |   |      | $ |      |      |  | $ |       |  



See accompanying notes
to the Consolidated Financial Statements



44



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



1.    Organization and Significant Accounting Policies



Description of Business



Ascendant Solutions, Inc. (Ascendant or the Company) 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, purchase 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                                                                                                                        
|Healthcare                    |  | Doughertys Holdings, Inc. and Subsidiaries                                                           |  | Healthcare products and services provided through retail pharmacies and infusion therapy centers, including specialty compounding pharmacy services
|                              |  |                                                                                                      
|Real estate advisory services |  | CRESA Partners of Orange County, L.P., 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, Fairways Frisco, L.P., VTE, L.P.              |  | Corporate administration, investments not included in other segments                                                                               



Through early 2001,
the Company had been engaged in providing call center, order management and fulfillment services, portions of which were sold or otherwise wound down by July 1, 2001. From July 1, 2001 and continuing through December 31, 2002, the Company had no
revenue producing contracts or operations. In December 2001, the Company revised its strategic direction to seek acquisition possibilities throughout the United States or enter into other business endeavors.



During 2002, the Company made its first investments, and it has continued to
make additional investments and acquisitions throughout 2003 and 2004. A summary of the Companys investment and acquisition activity is shown in the table below:



|             |  |                                                               |  |                              |  |                                                                                          |  |           
|------------ |  | ------------------------------------------------------------- |  | ---------------------------- |  | ---------------------------------------------------------------------------------------- |  | ----------
|Date         |  | Entity                                                        |  | Business Segment             |  | Transaction Description                                                                  |  | %Ownership
|April 2002   |  | Ampco Partners, Ltd                                           |  | Corporate & other            |  | Investment in a non-sparking, non-magnetic safety tool manufacturing company             |  | 10%       
|             |  |                                                               |  |                             
|August 2002  |  | VTE, L.P.                                                     |  | Corporate & other            |  | Investment to acquire early stage online electronic ticket exchange company              |  | 23%       
|             |  |                                                               |  |                             
|October 2002 |  | CRESA Capital Markets Group, L.P.,ASE Investments Corporation |  | Real estate advisoryservices |  | Investment to form real estate capital markets and strategic advisory services companies |  | 80%       



45



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|              |  |                                                                    |  |                               |  |                                                                                      |  |           
|------------- |  | ------------------------------------------------------------------ |  | ----------------------------- |  | ------------------------------------------------------------------------------------ |  | ----------
|Date          |  | Entity                                                             |  | Business Segment              |  | Transaction Description                                                              |  | %Ownership
|              |  |                                                                    |  |                              
|November 2003 |  | Fairways 03 New Jersey, L.P.                                       |  | Corporate & other             |  | Investment in a single tenant office building                                        |  | 20%       
|              |  |                                                                    |  |                              
|March 2004    |  | Doughertys Holdings, Inc. andSubsidiaries                         |  | Healthcare                    |  | Acquisition of specialty pharmacies and therapy infusion centers                     |  | 100%      
|              |  |                                                                    |  |                              
|April 2004    |  | Fairways 36864, L.P.                                               |  | Corporate & other             |  | Investment in commercial real estate properties                                      |  | 20%       
|              |  |                                                                    |  |                              
|May 2004      |  | CRESA Partners of Orange County, L.P., ASDS of Orange
County, Inc. |  | Real estate advisory services |  | Acquisition of tenant representation and other real estate advisory services company |  | 99%       
|              |  |                                                                    |  |                              
|December 2004 |  | Fairways Frisco, L.P.                                              |  | Corporate & other             |  | Investment in a mixed-use real estate development                                    |  | 50%       



Certain of these
transactions involved related parties or affiliates as more fully described in Notes 2 and 18 of these 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 recently acquired businesses. The Company will continue seeking to (1) most effectively deploy its remaining cash, debt capacity (if any) and (2) capitalize on the experience and contacts of its
officers and directors.



Significant Accounting Policies



Basis of Presentation



The 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 Limited Partnership and Minority Interests.



Use of Estimates



The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported consolidated financial
statements and accompanying notes, including allowance for doubtful accounts and inventory reserves. Actual results could differ from those estimates.



Cash and Cash Equivalents



The Company classifies all highly liquid investments with original maturities of three months or less as cash equivalents. Cash equivalents are stated at
cost, which approximates fair value.



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. Management performs continuing evaluations of debtors
financial condition and provides an allowance for



46



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



uncollectible accounts as determined necessary. See Note 3 for additional information regarding the Companys trade accounts receivable, allowance for
doubtful accounts and significant customer relationships.



Property and Equipment



Property and equipment
is carried at cost. Depreciation and amortization are provided over the estimated useful lives of the assets (generally three to seven years) using the straight-line method. Leasehold improvements are amortized on a straight-line basis over the
lesser of the respective lease term or estimated useful life of the asset. See Note 6 for additional information regarding property and equipment.



Inventories



Inventories consists of healthcare product finished goods held for resale, valued at the lower of cost, using the first-in, first-out method, or market.
The Company provides an estimated reserve against inventory for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of its net realizable value. See Note 4 for additional information regarding
inventories.



Long-Lived Assets



The Company evaluates the carrying value of its long-lived assets by
comparing the undiscounted cash flows over the remaining useful life of the long-lived assets with the assets carrying value. If this comparison indicates that the carrying value will not be recoverable, the carrying value of the long-lived
assets will be reduced accordingly based on a discounted cash flow analysis. During the year ended December 31, 2003, the Company recorded an impairment provision of approximately $112,000 related to VTEs investment of certain computer
software and hardware. No impairment was recorded in 2004.



Investments in Limited Partnerships



Investments in limited partnerships, including the Companys investments in Ampco and the Frisco Square Partnerships are 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. Distributions received by the Company are recorded as investment
income on the consolidated statement of operations to the extent the distribution does not exceed the Companys proportionate share of the investees earnings. Distributions in excess of the Companys proportionate share are recorded
as a reduction of the Companys investment.



Revenue
Recognition



Healthcare revenues are reported at the
estimated net realizable amounts expected to be received from individuals, third-party payors, institutional healthcare 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.



CPOCs primary revenue is from brokerage commissions earned from project
leasing and tenant representation transactions. Brokerage commission revenue is generally recorded upon execution of a lease contract, unless additional activities are required to earn the commission pursuant to a specific brokerage commission
agreement. Participation interests in rental income are recognized over the life of the lease. Other revenue is recognized as the following consulting services are provided: facility and site acquisition and disposition, lease management, design,
construction and development consulting, move coordination and



47



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



strategic real estate advisory services. Participation interests in rental income are recognized over the life of the lease.



Income Taxes



The Companys income taxes are presented utilizing an asset and
liability approach, and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of the enacted tax laws. Valuation allowances
are established for deferred tax assets where management believes it is more likely than not that the deferred tax asset will not be realized.



Net Income (Loss) Per Share



Basic and diluted net income (loss) per share is computed based on the loss applicable to common stockholders divided by the weighted average number of
shares of common stock outstanding during each period. Potentially dilutive securities consisting of warrants and stock options were not included in the calculation for the years ended December 31, 2003 and 2002 as their effect is anti-dilutive. The
number of potentially dilutive securities excluded from the computation of diluted net loss per share was approximately 270,000 and 0 for the years ended December 31, 2003 and 2002, respectively. The number of dilutive shares resulting from assumed
conversion of stock options and warrants are determined by using the treasury stock method. See Note 16 for more information regarding the calculation of net income (loss) per share.



Impairment of goodwill and other intangible assets



The Company has adopted a policy of recording an impairment loss on goodwill and other intangible assets when indicators of
impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets carrying amount. Goodwill and other intangible assets are assessed for impairment on at least an annual basis by
management.



Recent Accounting Pronouncements



In December 2003, the FASB revised FASB interpretation
No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements to certain entities in which the equity investors do
not have either a controlling interest or sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for variable interest entities in which we hold a
variable interest. FIN 46 will not have an impact on our financial condition or results of operations. The Company has applied the provisions of FIN 46 to its acquisition of CPOC, as further discussed in Note 2. As a result, CPOC is treated as a
consolidated subsidiary in the Companys consolidated financial statements.



In December 2004, the Financial Accounting Standards Board issued FASB Statement No. 123R (Revised 2004), Share-Based Payment., which requires that the compensation cost relating to share-based payment transactions
such as options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability
instruments issued. The Company will be required to apply Statement 123R beginning in the 3rd quarter of 2005.



Statement 123R replaces FASB Statement No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions



48



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to the
financial statements disclosed what net income would have been had the preferable fair-value-based method been used.



The Company currently expenses the cost of restricted shares issued to employees and directors over the service vesting period associated with the
restricted shares. The Company currently has 21,667 options outstanding which are not vested. The unrecognized compensation cost related to these options is not material and as a result, management does not believe the implementation of Statement
123R will have a material impact on its results of operations.



In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,
an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34. FIN 45 clarifies the requirements of SFAS No. 5 relating to the guarantors accounting for and disclosure of the issuance of certain types of
guarantees. This Interpretation clarifies that a guarantor is required to recognize at the inception of certain types of guarantees, a liability for the fair value of the obligation undertaken in issuing the guarantee, and requires disclosures on
existing guarantees even if the likelihood of future liability under the guarantees is deemed remote. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis for all guarantees issued after December
31, 2002. The Companys limited indemnification to its partners in the Fairways 03 New Jersey LP investment for any losses those partners may incur under their personal guaranties of the partnerships bank indebtedness is subject to the
provisions of FIN 45. The Company is currently evaluating the impact of FIN 45 and will implement its provisions in the first quarter of 2005. The Companys maximum liability, if any, under this limited indemnification is $520,000.



Stock Based Compensation



The Company accounts for its employee stock options and stock based awards
utilizing the intrinsic value method, whereby, if the exercise price of an employees stock option equals or exceeds the market price of the underlying stock on the date of the grant, no compensation expense is recognized. The Company currently
applies APB Opinion No. 25 and related interpretations in accounting for its Long-Term Incentive Plan (the Plan). Had compensation cost been recognized consistent with SFAS No. 123, the Companys net income (loss) attributable to
common stockholders and net income (loss) per share would have been adjusted to the pro forma amounts indicated below for the years ended December 31, 2004, 2003 and 2002:



|                                                                                                                                    |  |      |         |   |      |   |          |      |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                                                    |  | 2004 |         |   | 2003 |   |          | 2002 | 
|Net income (loss) attributable to common stockholders as reported                                                                   |  | $    | 249,000 |   |      | $ | (818,000 | )    |  | $ | (728,000 | )
|Total stock-based employee compensation included in reported net income (loss), net of related tax effects                          |  |      | 58,900  |   |      |   | 34,800   |      |  |   | 23,200   |  
|Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |      | (88,000 | ) |      |   | (34,604  | )    |  |   | (25,952  | )
|                                                                                                                                    |  |      |         |   |      |   |          |      |  |   |          |  
|Pro forma net income (loss)                                                                                                         |  | $    | 219,900 |   |      | $ | (817,804 | )    |  | $ | (730,752 | )
|                                                                                                                                    |  |      |         |   |      |   |          |      |  |   |          |  
|Net income (loss) per share:                                                                                                        |  |      |         |   |      |   |          |      |  |   |          |  
|Basicas reported                                                                                                                   |  | $    | 0.01    |   |      | $ | (0.04    | )    |  | $ | (0.03    | )
|Basicpro forma                                                                                                                     |  | $    | 0.01    |   |      | $ | (0.04    | )    |  | $ | (0.03    | )
|Dilutedas reported                                                                                                                 |  | $    | 0.01    |   |      | $ | (0.04    | )    |  | $ | (0.03    | )
|Dilutedpro forma                                                                                                                   |  | $    | 0.01    |   |      | $ | (0.04    | )    |  | $ | (0.03    | )





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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%. See Note 14 for additional information on stock options.



Fair Value of Financial Instruments



The Companys financial instruments include cash, accounts receivable and accounts payable that are carried at cost, which approximates fair value because of the short maturity of these instruments. The fair
value of notes payable approximates carrying value as interest rates approximate market rates. The fair value of investments in limited partnerships is not readily determinable without undo cost.



Reclassifications



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



2.    Acquisitions and Significant
Equity Investments



Ampco Partners, Ltd.



During the second quarter of 2002, the Company invested $400,000 for a 10%
limited partnership interest in Ampco Partners, Ltd. (Ampco), a newly formed entity, which acquired the assets and intellectual property of the Ampco Safety Tools division of Ampco Metals Incorporated of Milwaukee, Wisconsin in a Chapter
11 bankruptcy proceeding. Ampco Safety Tools, founded in 1922, is a leading manufacturer of non-sparking, non-magnetic and corrosion resistant safety tools. These tools are designed to meet Occupational Safety and Health Administration and National
Fire Protection Association requirements for use in locations where flammable vapors of combustible residues are present. Safety tools are used in industrial applications, primarily in manufacturing and maintenance operations. The Company receives
quarterly distributions based upon 10% of Ampcos reported quarterly earnings before interest, taxes, depreciation and amortization expense, or EBITDA. The Companys investment in Ampco is accounted for under the equity method. The Company
recognizes its proportionate share of Ampcos net income, as investment income in the consolidated statements of operations. Distributions received that exceed the Companys 10% interest in Ampcos net income are accounted
for as return of capital and reduction in the investment in Ampco. The Companys distributions from Ampco for the years ending December 31, are as follows:



|                    |  |      |         |      |   |         |  |   |       
|------------------- |  | ---- | ------- | ---- | - | ------- |  | - | ------
|                    |  | 2004 |         | 2003 |   | 2002   
|Investment Income   |  | $    | 82,000  |      | $ | 66,000  |  | $ | 19,000
|Return of capital   |  |      | 29,000  |      |   | 46,000  |  |   | 69,000
|                    |  |      |         |      |   |         |  |   |       
|Total distributions |  | $    | 111,000 |      | $ | 112,000 |  | $ | 88,000
|                    |  |      |         |      |   |         |  |   |       



VTE, L.P.



On August 1, 2002, the Company formed a wholly owned subsidiary, which
serves as the corporate general partner of VTE, L.P. (VTE), a partnership which acquired the assets (primarily software) of Venue Ticket Exchange, Inc. During 2002 and 2003, the Company made an investment of $150,000 representing an
ownership interest of 23.3% in VTE. VTE generated no revenues during 2002 and 2003, and is accounted for as a consolidated entity in the Companys consolidated financial statements. At year-end 2003, management evaluated, and completely wrote
off, the carrying value of VTEs investment in its computer software and hardware. VTE is no longer in business and management has no plans to further pursue this investment.



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



CRESA Capital Markets Group, L.P.



In late October 2002, the Company formed a capital markets subsidiary, CRESA Capital Markets Group, L.P., (Capital
Markets) and entered into a licensing and co-marketing agreement with CRESA Partners LLC, a national real estate services firm. The Company owns 80% of Capital Markets through its 80% ownership of ASE Investments Corporation (ASE
Investments) and its 100% ownership of Ascendant CRESA LLC, which is the 0.1% general partner in Capital Markets. ASE Investments owns 99.9% of Capital Markets. The remaining 20% of Capital Markets and ASE Investments is owned, directly or
indirectly, by Brant Bryan, Cathy Sweeney and David Stringfield, three of its principals, who are also shareholders of the Company. In connection with its formation, Capital Markets received approximately $200,000 from the issuance of limited
partnership interests to CRESA Partners LLC. During the third quarter of 2003, Capital Markets received additional funding of $80,000 ($64,000 from the Company and $16,000 from the other limited partners) in the form of partner loans. These loans
were repaid with interest during the fourth quarter of 2003, from the proceeds of approximately $425,000 in real estate advisory services earned by Capital Markets from the purchase and sale of a commercial office building.



Capital Markets provides real estate financial advisory services to corporate
clients on a fee basis which could provide the Company with a future source of revenue. These services include, but are not limited to, analysis, consulting, acquisition and/or disposition of property, capital placement and acquisition, contract
negotiation, and other matters related to real estate finance. Operating expenses were mostly salaries and travel in the process of doing business. Capital Markets is accounted for as a consolidated entity in the consolidated financial statements.
Mr. Leslie, the Chairman of the Board of Directors of the Company, also serves as an advisor to the Board of Directors of CRESA Partners, LLC. Capital Markets currently employs seven people, including Mr. Leslie and the three principals of Capital
Markets named above.



Fairways Equities LLC



During the fourth quarter of 2003, the Company entered into a participation
agreement (the Participation Agreement) with Fairways Equities LLC (Fairways), an entity controlled by Jim Leslie, the Companys Chairman, and Brant Bryan, Cathy Sweeney and David Stringfield who are principals of
Capital Markets and shareholders of the Company (Fairways Members), pursuant to which the Company will receive up to 20% of the profits realized by Fairways in connection with all real estate acquisitions made by Fairways. Additionally,
the Company will have an opportunity, but not the obligation, to invest in the transactions undertaken by Fairways. The Companys profit participation with Fairways is subject to modification or termination by Fairways at the end of 2005 in the
event that the aggregate level of cash flow (as defined in the Participation Agreement) generated by the acquired operating entities has not reached $2 million for the twelve months ended December 31, 2005. The Company is unable to determine what
real estate Fairways may acquire or the cost, type, location, or other specifics about such real estate. There can be no assurances that the Company will be able to generate the required cash flow to continue in the Fairways Participation Agreement
after 2005, or that Fairways will be able to acquire additional real estate assets, that the Company will choose to invest in such real estate acquisitions or that there will be profits realized by such real estate investments. The Company does not
have an investment in Fairways, but rather a profits interest through its Participation Agreement.



During December 2003, the Company made a capital contribution of $145,000 to Fairways 03 New Jersey, LP which, through a partnership with an institutional
investor, acquired the stock of a company whose sole asset was a single tenant office building and entered into a long-term credit tenant lease with the former owner of the building. In December 2003, subsequent to the closing of this transaction,
the Companys capital contribution of $145,000 was distributed back to it in full. The current lease expires in 2015, and the secured loans incurred by the partnership to fund the acquisition, which bear interest at LIBOR plus 1.75% to 2.25%,
mature in 12 to 24



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



months. The Company received distributions of approximately $208,000 representing its share of the net rental payments, after debt service, during the year
ended December 31, 2004. These distributions will vary in the future if the lease is modified or terminated, or if the terms of the loans are modified or if there is a default by the tenant.



Doughertys Holdings, Inc.



On March 24, 2004, the Company acquired, through a newly formed,
wholly-owned subsidiary Doughertys Holdings, Inc. (DHI), substantially all of the assets of Park Pharmacy Corporation (the Park Assets) pursuant to the Joint Plan and the Asset Purchase Agreement (the
Agreement) entered into December 9, 2003 between Park Pharmacy and DHI. Park Pharmacy had been operating as a debtor in possession since December 2, 2002. The purchased assets include all of the cash and certain other assets of Park
Pharmacy and all equity interests of the following entities (each directly or indirectly wholly-owned by Park Pharmacy): (i) Doughertys Pharmacy, Inc., (ii) Park Operating GP, LLC, (iii) Park LP Holdings, Inc., (iv) Park-Medicine Man GP LLC
(v) Park Infusion Services, L.P., and (vi) Park-Medicine Man, L.P.



The Company acquired the Park Assets by investing, through DHI, an aggregate of approximately $1.5 million in cash, funded out of its working capital, and the assumption by DHI of approximately $6.3 million in debt associated with the Park
Assets.



In connection with the acquisition of the Park Assets,
DHI also entered into a new credit facility with Bank of Texas, the prior lender to Park Pharmacy Corporation. This new facility provides for three notes, aggregating approximately $5.5 million. Each note bears interest at six percent and matures in
March 2007. Although DHI has committed to use commercially reasonable efforts to locate a replacement lender as soon as possible, DHI is obligated to make monthly payments (consisting of both interest and principal payments, as applicable) to the
bank of approximately $56,000. The new credit facility is secured by substantially all of the assets of DHI, including the stock of its operating subsidiaries.



In connection with the acquisition of the Park Assets, DHI entered into a three year supply agreement with AmerisourceBergen Drug Corporation
(AmerisourceBergen) pursuant to which DHI and its newly acquired indirect subsidiaries agreed to purchase prescription and over-the-counter pharmaceuticals from AmerisourceBergen through March 2007. This supply agreement will also
provide DHI with pricing and payment terms that are improved from those previously provided by AmerisourceBergen to Park Pharmacy. In exchange for these improved terms, DHI has agreed to acquire 85% of its prescription pharmaceuticals and
substantially all of its generic pharmaceutical products from AmerisourceBergen and agreed to minimum monthly purchases of $900,000 of all products in order to obtain new favorable pricing terms. AmerisourceBergen was a creditor of the operating
non-debtor subsidiaries and, in connection with the Chapter 11 bankruptcy proceeding, AmerisourceBergen agreed to accept a cash payment of approximately $1.1 million and a promissory note in the amount of approximately $750,000 payable by DHI over a
five year period ending in March 2009, using a 15-year amortization schedule and an interest rate of six percent with the last payment being a balloon payment of the outstanding principal and accrued but unpaid interest.



Both the new credit facility with the Bank of Texas and the note with
AmerisourceBergen provide for prepayment discounts in the event that these loans are retired prior to maturity.



CRESA Partners of Orange County, L.P.



Effective May 1, 2004, the Company acquired through ASDS of Orange County, Inc. (ASDS), all of the issued and outstanding stock of CRESA
Partners of Orange County, Inc., a California corporation f/k/a The



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Staubach Company  West, Inc. (CPOC), pursuant to the Stock Purchase Agreement dated March 23, 2004 between Kevin Hayes, the sole
stockholder of CPOC (the Seller), and ASDS for $6.9 million, plus closing costs. CPOC is located in Newport Beach, California and provides tenant representation services to commercial and industrial users of real estate, which include
strategic real estate advisory services, lease management services, facility and site acquisition and disposition advice; design, construction and development consulting; and move coordination.



Pursuant to the terms of the Stock Purchase Agreement, the purchase price was
paid pursuant to the terms of a $6.9 million promissory note (the Acquisition Note) payable to the Seller. The Acquisition Note is secured by a pledge of all of the personal property of CPOC which is subordinate to CPOCs $800,000
bank credit line with Northern Trust Bank, bears interest payable monthly at the prime rate of Northern Trust Bank plus 0.50% per annum, with principal generally payable quarterly in arrears over a three year period from the excess cash flow of
ASDS, as defined, and is guaranteed by the Company. The then outstanding principal balance of the Acquisition Note is payable in full on May 1, 2007. The purchase price is subject to adjustment downward (by an amount not to exceed $1.9 million) to
reflect the operating results of CPOC during the four year period ending December 31, 2007 if CPOCs revenues are less than an aggregate of $34.0 million during such period. The revenue generated by CPOC from the date of acquisition through
December 31, 2004 were approximately $8,858,000.



Following the
acquisition of CPOC, ASDS contributed the assets and liabilities of CPOC to CRESA Partners of Orange County, LP (the Operating LP) that is owned jointly by (i) CRESA Partners-Hayes, Inc., a California corporation f/k/a The Staubach
Company of California, Inc. that is the general partner of the Operating LP (the General Partner), (ii) ASDS, a limited partner of the Operating LP, (iii) the Seller, a limited partner of the Operating LP, and (iv) a Delaware limited
liability company controlled by the management and key employees of CPOC that is a limited partner of the Operating LP (the MGMT LLC). The General Partner is controlled by the management and key employees of CPOC. ASDS is entitled to
receive 99% of the profits of the Operating LP until such time as ASDS has received cumulative distributions from the Operating LP equal to the Purchase Price plus a preferential return of approximately $1.7 million (total distributions equal to
$8.6 million), at which time the allocation of the profits of the Operating LP shall become: 79.9% to MGMT LLC, 10% to ASDS, 10% to the Seller and 0.1% to the General Partner. During the period from the acquisition date through December 31, 2004,
ASDS received distributions of $211,000 from the Operating LP, which were used to pay interest on the Acquisition Note.



In connection with the acquisition of CPOC, the Company is entitled to receive a structuring fee of $690,000, plus interest thereon, of which $230,000 was
paid at closing. The remainder will be paid in two equal annual installments of $230,000, plus interest thereon (payable, respectively, on May 12, 2005 and May 12, 2006). The structuring fee has been eliminated in the consolidation of the Company
with CPOC and the Operating LP in the consolidated financial statements of the Company.



The results of operations of the Operating LP will be consolidated with ASDS and ultimately the Company, in accordance with FIN 46R Consolidation of Variable Interest Entities, until such time that ASDS
has received cumulative distributions equal to the Purchase Price plus a preferential return of approximately $1.7 million (total distributions of $8.6 million). When and if the total distributions equal to $8.6 million are fully paid, the
Companys residual interest will become 10% (through ASDS) and the principles of consolidation for financial reporting purposes will no longer be satisfied under FIN 46R or APB 18, Equity Method for Investments in Common Stock.
Accordingly, the Company would no longer consolidate the results of operations of the Operating LP and would instead record its share of income from the Operating LP as Investment Income in the consolidated statement of operations.





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Fairways Frisco Partnerships



On December 31, 2004, the Company acquired certain indirect interests in various partnerships (the Frisco Square
Partnerships) that own properties (the Properties) in the 150 acre Frisco Square mixed-use real estate development in Frisco, Texas, pursuant to a Master Agreement Regarding Frisco Square Partnerships, dated December 31, 2004 (the
Master Agreement). The table below summarizes the indirect interests acquired by the Company on December 31, 2004:



|                               |  |                                   |  |                                                               
|------------------------------ |  | --------------------------------- |  | --------------------------------------------------------------
|Frisco Square Partnerships     |  | Effective Indirect Interest Owned |  | Property Description                                          
|Frisco Square B1-6 F1-11, Ltd. |  | 50% Partner (1)                   |  | Approximately 171,000 Sq Ft residential/retail space          
|                               |  |                                  
|Frisco Square B1-7 F1-10, Ltd. |  | 50% Partner (1)                   |  | Approximately 65,000 Sq Ft commercial/residential/retail space
|                               |  |                                  
|Frisco Square Properties, Ltd. |  | 50% Partner (1)                   |  | Approximately 2.3 acres of land                               
|                               |  |                                  
|Frisco Square, Ltd.            |  | Option to become 50% Partner (2)  |  | Approximately 52 acres of land                                

---

|(1) |  | Represents a 49.5% limited partner interest in such partnership held by Fairways Frisco L.P., an entity of which Ascendant is a limited partner, and a 0.5% indirect general partner
interest held by Fairways Frisco as the owner of 100% of the membership interests of one of such partnerships general partners.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Represents the right to acquire a 50% partnership interest, sharing ratio and interest in Frisco Square, Ltd.
|--- |  | -------------------------------------------------------------------------------------------------------------



The parties to the Master Agreement are the Fairways Group, the Frisco Square
Partnerships, Cole and Mary Pat McDowell, and the remainder of the Five Star Group which is Five Star Development Co., Inc., a Texas corporation, CMP Management, LLC, a Texas limited liability company, and CMP Family Limited Partnership, a Texas
limited partnership. Frisco Square Partnerships is a group of entities comprised of Frisco Square, Ltd. (FSLTD), Frisco Square B1-6 F1-11, Ltd., a Texas limited partnership, Frisco Square B1-7 F1-10, Ltd., a Texas limited
partnership, and Frisco Square Properties, Ltd., a Texas limited partnership. Fairways Group is a group of entities comprised of Fairways Frisco, Fairways B1-6 F1-11, LLC, a Texas limited liability company, Fairways B1-7 F1-10, LLC, a
Texas limited liability company, and Fairways FS Properties, LLC, a Texas limited liability company.



The Company made its investment of $154,000 at December 31, 2004, as a limited partner of Fairways Frisco L.P. (Fairways Frisco), which is a
49.5% limited partner in each of the Frisco Square Partnerships other than FSLTD. Fairways Frisco holds the remaining 0.5% interest through its ownership of 100% of the membership interests of other entities in the Fairways Group that are co-general
partners of the Frisco Square Partnerships. Fairways Equities, LLC, an entity controlled by the Fairways Members, is the sole general partner of Fairways Frisco and holds a 0.1% general partner interest in Fairways Frisco. The Frisco Square
Partnerships were all originally formed and owned 100% by Cole McDowell and Mary Pat McDowell or their affiliates (collectively, the Five Star Group).





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following is a chart of the legal entities in the transactions described herein:



LOGO



Pursuant to the Master Agreement,
Fairways Frisco has agreed to make capital contributions to the various Frisco Square Partnerships in the aggregate amount of up to $6,280,000. Such amounts are to be used to pay the expenses of the development of the Properties, together with
repayments of portions of loans and the payment of fees to the Five Star Group. The members of the Five Star Group will not be required to make additional capital contributions to the Frisco Square Partnerships, provided, the liabilities of the
Frisco Square Partnerships disclosed to the Company by the Five Star Group are not exceeded by more than $200,000. Pursuant to the terms of the Master Agreement, Fairways Frisco has the right to notify the Five Star Group of these liabilities and
request that Five Star Group satisfy or otherwise extinguish the liabilities. If Five Star Group is unable to do so, Fairways Frisco has the ability to exercise its right to purchase the remaining 50% of the partnership interests in the Frisco
Square Partnerships for $ 100, as provided for in the Master Agreement. As of March 21, 2005, the Fairways Group believes that such unrecorded liabilities do exist, but it has not determined the final amount of such liabilities. Upon determination
of the amount of these liabilities, the Fairways Group intends to notify the Five Star Group for payment of the liabilities as outlined above.



Under the Master Agreement, if the Frisco Square Partnerships generate distributable cash flow, the first $1 million in aggregate shall be distributed to
the Fairways Group and the second $2.5 million in aggregate shall be distributed to the Five Star Group. Thereafter, the distributions of cash flow are to be made according to the respective partnership interests. There can be no assurances that the
Frisco Square Partnerships will be able to generate the required cash flow to make the distributions described above.



Certain members of the Five Star Group are the managing partners of the Frisco Square Partnerships, provided, however, certain members of the Fairways
Group have been added as co-general partners (Co-General Partner), each of which shall have approval rights with respect to designated partnership activities for the Frisco Square Partnerships. The Co-General Partners are primarily
responsible, with no obligation to expend any of their own funds, to determine and negotiate alternative sources of financing for the Frisco Square Partnerships.





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



If at any time after December 31, 2005, any entity that is in the Five Star Group or the Fairways
Group desires to sell its partnership interests in the Frisco Square Partnerships, a buy/sell agreement is set forth in the Master Agreement which could require the other partners to buy such interests or sell their own. Notwithstanding the above,
Fairways Frisco may transfer its interest in the Frisco Square Partnerships to any person controlled or managed by Mr. Leslie.



The Master Agreement provides Fairways Frisco an option to acquire a 50% partnership interest, sharing ratio and interest in FSLTD. Fairways Frisco paid
$273,152 to FSLTD for this option in January 2005. The Option held by Fairways Frisco shall only be exercisable if the outstanding debt of FSLTD to CoServe Denton Realty Partners is refinanced before June 30, 2005 on reasonable and market terms.
Fairways Frisco is currently negotiating with a lender to refinance the FSLTD debt, however, there can be no assurances that the refinancing will be successful or that it will be on reasonable and market terms. The outstanding amount of this debt on
December 31, 2004 was $21.8 Million. Fairways Frisco is authorized to negotiate with the existing lender and other potential lenders with respect to such financing subject to FSLTDs consent which consent must be given if the specified
parameters for such refinancing are met. Fairways Frisco has also been granted approval rights with respect to designated partnership activities for FSLTD.



The interests in the Partnerships were acquired by the Company or the Fairways Group from the Partnerships and the Five Star Group. The Company has no
other material relationship with the Partnerships or the members of the Five Star Group.



Subsequent to December 31, 2004, Fairways Equities, LLC, as the general partner of Fairways Frisco, sold additional limited partnership interests in Fairways Frisco. The proceeds from the sale of these limited
partnership interests are intended to be used for the purpose of making additional capital contributions to the Frisco Square Partnerships (as required by the Master Agreement further described herein). The following is a summary of the partnership
interests in Fairways Frisco based on actual cash investments and subscriptions received as of March 21, 2005:



|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  
|----------------------------------------- |  | -------------- | --------- | ------------------ | ----- | - | ---------------------- | - | ------------------ |  | ----- | -
|                                          |  | CashInvestment |           | Partnership% Owned |       |   | InvestmentSubscription |   | Partnership% Owned | 
|Ascendant Solutions, Inc.                 |  | $              | 750,000   |                    | 16.4  | % |                        | $ | 1,000,000          |  | 16.3  | %
|Fairways Equities, LLC (1)                |  |                | 1,136,000 |                    | 24.8  | % |                        |   | 1,325,000          |  | 21.5  | %
|CLB Partners (2)                          |  |                | 250,000   |                    | 5.5   | % |                        |   | 500,000            |  | 8.1   | %
|Other non-affiliated accredited investors |  |                | 2,448,000 |                    | 53.4  | % |                        |   | 3,325,000          |  | 54.1  | %
|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  
|Total capital contributions               |  | $              | 4,584,000 |                    | 100.0 | % |                        | $ | 6,150,000          |  | 100.0 | %
|                                          |  |                |           |                    |       |   |                        |   |                    |  |       |  

---

|(1) |  | Fairways Equities, LLC is the general partner of Fairways Frisco and the members of Fairways Equities, LLC, individually or through their affiliates, are limited partners
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | CLB Partners is a shareholder of the Company and one of its partners and co-founders, Mr. Will Cureton is a member of the Companys Board of Directors. Mr. Richard Bloch, a
former director of the Company and the father of Jonathan Bloch, a member of the Companys Board of Directors, is also one of its partners and co-founders.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The remaining unfunded subscription amount of $1,566,000 is due to Fairways Frisco on or before April 22, 2005.





56



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



3.    Unaudited Pro forma Information



Below is certain unaudited pro forma information based on historical
financial information assuming the DHI and CPOC acquisitions had occurred as of January 1, 2004 and 2003:



|                                     |  |                                 |            |   |                                            |   |                                                   |  |   |           
|------------------------------------ |  | ------------------------------- | ---------- | - | ------------------------------------------ | - | ------------------------------------------------- |  | - | ----------
|                                     |  | (Audited)Year EndedDecember 31, |            |   | (Unaudited)Pro Forma Effectof Acquisitions |   | (Unaudited)Pro Forma ResultsYear EndedDecember 31
|                                     |  | 2004                           
|Revenue                              |  | $                               | 39,291,000 |   |                                            | $ | 12,413,000                                        |  | $ | 51,704,000
|Net income (loss)                    |  | $                               | 249,000    |   |                                            | $ | 392,000                                           |  | $ | 641,000   
|Net income (loss) per share, basic   |  | $                               | 0.01       |   |                                            |   |                                                   |  | $ | 0.03      
|Net income (loss) per share, diluted |  | $                               | 0.01       |   |                                            |   |                                                   |  | $ | 0.03      
|                                     |  | 2003                           
|Revenue                              |  | $                               | 505,000    |   |                                            | $ | 51,870,000                                        |  | $ | 52,375,000
|Net income (loss)                    |  | $                               | (818,000   | ) |                                            | $ | 2,494,000                                         |  | $ | 1,676,000 
|Net income (loss) per share, basic   |  | $                               | (0.04      | ) |                                            |   |                                                   |  | $ | 0.08      
|Net income (loss) per share, diluted |  | $                               | (0.04      | ) |                                            |   |                                                   |  | $ | 0.08      



These pro forma
results are not necessarily indicative of the results that would have occurred if the DHI and CPOC acquisitions had been in effect for the years ended December 31, 2004 and 2003, nor are they indicative of the results that will occur in the future.
The pro forma results include adjustments to give effect to the acquisitions as of January 1, 2004 and 2003, including interest expense on the Acquisition Note, amortization of the non-compete agreements, legal fees related to the acquisition of
CPOC, bankruptcy expenses incurred prior to the DHI acquisition and the effects of minority interest.



4.    Trade Accounts Receivable



|                                     |  |            |           |   |                     |   |           |  |   |           |  
|------------------------------------ |  | ---------- | --------- | - | ------------------- | - | --------- |  | - | --------- | -
|                                     |  | Healthcare |           |   | Real EstateAdvisory |   | Total     | 
|Trade accounts receivable            |  | $          | 4,319,000 |   |                     | $ | 2,411,000 |  | $ | 6,730,000 |  
|Lessallowance for doubtful accounts |  |            | (380,000  | ) |                     |   |          |  |   | (380,000  | )
|                                     |  |            |           |   |                     |   |           |  |   |           |  
|                                     |  | $          | 3,939,000 |   |                     | $ | 2,411,000 |  | $ | 6,350,000 |  
|                                     |  |            |           |   |                     |   |           |  |   |           |  



Healthcare trade
accounts receivable consists primarily of amounts receivable from third-party payers (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
accounts receivable are reduced 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 18.4% of total accounts receivable at December 31, 2004. No other
single customer or third-party payer accounted for more than 10% of DHIs accounts receivable at December 31, 2004.



The Companys real estate advisory services operations grants credit to customers of various sizes and provides 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 period from May 1,



57



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2004 (date of acquisition) to December 31, 2004, the Companys real estate advisory services operations derived revenues in excess of ten percent from
one customer combined totaling approximately $3,479,000 or 39% of its total revenue.



5.    Inventories



Inventories consist of the following:



|                            |  |                 |           |   |                 |   |  
|--------------------------- |  | --------------- | --------- | - | --------------- | - | -
|                            |  | December 312004 |           |   | December 312003
|Inventory-retail pharmacy   |  | $               | 1,498,000 |   |                 | $ | 
|Inventory-infusion/homecare |  |                 | 480,000   |   |                 |   | 
|Inventory-general retail    |  |                 | 578,000   |   |                 |   | 
|Less: Inventory reserves    |  |                 | (58,000   | ) |                 |   | 
|                            |  |                 |           |   |                 |   |  
|                            |  | $               | 2,498,000 |   |                 | $ | 
|                            |  |                 |           |   |                 |   |  



6.    Prepaid
Expenses



Prepaid expenses consist of the following:



|                                     |  |                  |         |                  |   |        
|------------------------------------ |  | ---------------- | ------- | ---------------- | - | -------
|                                     |  | December 31,2004 |         | December 31,2003
|Prepaid insurance                    |  | $                | 279,000 |                  | $ | 125,000
|Deferred tenant representation costs |  |                  | 200,000 |                  |   |       
|Other prepaid expenses               |  |                  | 24,000  |                  |   |       
|                                     |  |                  |         |                  |   |        
|                                     |  | $                | 503,000 |                  | $ | 125,000
|                                     |  |                  |         |                  |   |        



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 such costs related to canceled or
unlikely to be completed transactions.



7.    Property
and Equipment, Net



Property and equipment, net consist of
the following:



|                                  |  |                       |  |                  |          |   |                  |   |         |  
|--------------------------------- |  | --------------------- |  | ---------------- | -------- | - | ---------------- | - | ------- | -
|                                  |  | EstimatedUseful Lives |  | December 31,2004 |          |   | December 31,2003 |  
|Computer equipment and software   |  | 3 to 5 years          |  | $                | 317,000  |   |                  | $ | 22,000  |  
|Furniture, fixtures and equipment |  | 5 to 7 years          |  |                  | 336,000  |   |                  |   | 9,000   |  
|Leasehold improvements            |  | Life of Lease         |  |                  | 321,000  |   |                  |   |        |  
|                                  |  |                       |  |                  |          |   |                  |   |         |  
|                                  |  |                       |  |                  | 974,000  |   |                  |   | 31,000  |  
|Lessaccumulated depreciation     |  |                       |  |                  | (258,000 | ) |                  |   | (14,000 | )
|                                  |  |                       |  |                  |          |   |                  |   |         |  
|                                  |  |                       |  | $                | 716,000  |   |                  | $ | 17,000  |  
|                                  |  |                       |  |                  |          |   |                  |   |         |  



Depreciation expense
was $257,000, $63,000 and $18,000 for the years ended December 31, 2004, 2003 and 2002, respectively.





58



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8.    Goodwill and Other Intangible Assets



Goodwill and other intangible assets consist of the following:



|                              |  |                  |           |   |                  |   |  
|----------------------------- |  | ---------------- | --------- | - | ---------------- | - | -
|                              |  | December 31,2004 |           |   | December 31,2003
|Goodwill                      |  | $                | 7,299,000 |   |                  | $ | 
|                              |  |                  |           |   |                  |   |  
|Other intangible assets:      |  |                  |           |   |                  |   |  
|Patient Prescriptions         |  |                  | 544,000   |   |                  |   | 
|Non-compete Agreements        |  |                  | 450,000   |   |                  |   |  
|Lessaccumulated amortization |  |                  | (236,000  | ) |                  |   | 
|                              |  |                  |           |   |                  |   |  
|                              |  | $                | 758,000   |   |                  | $ | 
|                              |  |                  |           |   |                  |   |  



The acquisitions of
the Park Assets and CPOC have been accounted for using the purchase method of accounting and the purchase prices have been allocated as follows:



|                                                                   |  |             |            |   |      |   |            |  
|------------------------------------------------------------------ |  | ----------- | ---------- | - | ---- | - | ---------- | -
|                                                                   |  | Park Assets |            |   | CPOC |  
|Net cash acquired                                                  |  | $           | 1,396,000  |   |      | $ | 141,000    |  
|Trade accounts receivable                                          |  |             | 5,044,000  |   |      |   | 2,604,000  |  
|Inventory                                                          |  |             | 2,281,000  |   |      |   |           |  
|Furniture, fixtures and equipment                                  |  |             | 547,000    |   |      |   | 312,000    |  
|Other assets                                                       |  |             | 166,000    |   |      |   | 297,000    |  
|Patient prescriptions                                              |  |             | 544,000    |   |      |   |           |  
|Goodwill                                                           |  |             |           |   |      |   | 7,299,000  |  
|Non-compete agreements                                             |  |             |           |   |      |   | 450,000    |  
|Accounts payable and accrued liabilities                           |  |             | (2,983,000 | ) |      |   | (2,910,000 | )
|Line of credit payable under secured $800,000 bank credit facility |  |             |           |   |      |   | (500,000   | )
|Note payable to related party                                      |  |             |           |   |      |   | (500,000   | )
|Notes payable under equipment financing obligations                |  |             | (23,000    | ) |      |   | (93,000    | )
|                                                                   |  |             |            |   |      |   |            |  
|Allocated purchase price                                           |  | $           | 6,972,000  |   |      | $ | 7,100,000  |  
|                                                                   |  |             |            |   |      |   |            |  



The excess of the
purchase price over the net tangible assets acquired have been allocated to (i) patient prescriptions for the Park Assets acquisition which are being amortized over 3 years and (ii) to non-compete agreements and goodwill for the CPOC acquisition. In
connection with the CPOC acquisition, the Company obtained non-compete agreements from nine of CPOCs management and key employees, including Kevin Hayes, CPOCs Chairman. The non-compete agreements are being amortized over their
contractual life of 3 years, which amounted to $100,000 for the period from the acquisition date of May 1, 2004 through December 31, 2004.



9.    Investment in Limited Partnerships



Investment in limited partnerships consist of the following:



|                           |  |            |   |  |                  |         |                   |   |        
|-------------------------- |  | ---------- | - |  | ---------------- | ------- | ----------------- | - | -------
|                           |  | Ownership% |   |  | December 31,2004 |         | December 31, 2003
|Ampco Partners, Ltd.       |  | 10         | % |  | $                | 256,000 |                   | $ | 284,000
|Fairways Equities LLC      |  | 20         | % |  |                  | 1,000   |                   |   | 1,000  
|Frisco Square Partnerships |  | 50         | % |  |                  | 154,000 |                   |   |       
|                           |  |            |   |  |                  |         |                   |   |        
|                           |  |            |   |  | $                | 411,000 |                   | $ | 285,000
|                           |  |            |   |  |                  |         |                   |   |        





59



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



10.    Accrued Liabilities



Accrued liabilities consist of the following:



|                                            |  |                  |           |                  |   |       
|------------------------------------------- |  | ---------------- | --------- | ---------------- | - | ------
|                                            |  | December 31,2004 |           | December 31,2003
|Accrued real estate commissions & fees      |  | $                | 2,060,000 |                  | $ |      
|Accrued payroll and related                 |  |                  | 540,000   |                  |   |      
|Accrued expenses                            |  |                  | 220,000   |                  |   | 33,000
|Accrued rent                                |  |                  | 116,000   |                  |   |      
|Accrued property, franchise and sales taxes |  |                  | 44,000    |                  |   | 15,000
|Accrued state income taxes payable          |  |                  | 181,000   |                  |   |      
|                                            |  |                  |           |                  |   |       
|                                            |  | $                | 3,161,000 |                  | $ | 48,000
|                                            |  |                  |           |                  |   |       



11.    Notes
Payable



Notes payable at December 31, 2004 were as
follows:



|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- | -
|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.                                                                                                                                                                                                                                                                                                          |  | $ | 688,000    |  
|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 of $3,084,000 due in March 2007.                                                                                                                                                                                                         |  |   | 3,783,000  |  
|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 of $408,000 due in March 2007.                                                                                                                                                                                                              |  |   | 501,000    |  
|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.                                                                                                                                                                                                           |  |   | 726,000    |  
|Note payable to Kevin Hayes, prior shareholder of CRESA Partners of Orange County, Inc. (predecessor to CRESA Partners of Orange County, LP,
f/k/a The Staubach Company - West, Inc.)                                                                                                                                                                                                                                                      |  |   |            |  
|Acquisition note in the principal amount of $6,900,000 due May 1, 2007, interest at Northern Trust Bank prime rate plus 0.5% (5.75% at
December 31, 2004) payable monthly, principal payable quarterly from the Companys equity interest in the operating cash flow, as defined, of CRESA Partners of Orange County, LP., secured by a subordinated security interest in substantially all
assets of CRESA Partners of Orange County, LP. |  |   | 6,900,000  |  
|Capital lease obligations, secured by office equipment                                                                                                                                                                                                                                                                                                                                                                                     |  |   | 18,000     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   | 12,616,000 |  
|Less current portion                                                                                                                                                                                                                                                                                                                                                                                                                       |  |   | (461,000   | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   |            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $ | 12,155,000 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |   |            |  





60



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The aggregate maturities of notes payable for the 12 months ended December 31 are as follows:



|           |  |   |           
|---------- |  | - | ----------
|2005       |  | $ | 461,000   
|2006       |  |   | 479,000   
|2007       |  |   | 11,176,000
|2008       |  |   | 40,000    
|2009       |  |   | 460,000   
|Thereafter |  |   |          
|           |  |   |           
|           |  | $ | 12,616,000
|           |  |   |           



The Bank of Texas
credit facility contains a borrowing base formula with which the Company must comply. If the outstanding borrowings under the facility exceed the borrowing base, the Company is obligated to make additional principal payments to reduce the
outstanding borrowings. As of December 31, 2004, the Company was in compliance with this borrowing base requirement.



12.    Income Taxes



The provision (benefit) for income taxes is reconciled with the statutory rate for the years ended December 31, 2004, 2003 and 2002 as follows:



|                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                         |  | 2004 |          |   | 2003 |   |          | 2002 | 
|Provision (benefit) computed at federal statutory rate   |  | $    | 141,000  |   |      | $ | (278,000 | )    |  | $ | (247,000 | )
|State income taxes, net of federal tax effect            |  |      | 178,000  |   |      |   | (24,000  | )    |  |   | (32,000  | )
|Other permanent differences                              |  |      | 104,000  |   |      |   |         |      |  |   |         |  
|Expiration of state net operating loss carryover         |  |      | 267,000  |   |      |   | 60,000   |      |  |   |         |  
|Benefit of federal NOL utilization                       |  |      | (300,000 | ) |      |   |         |      |  |   |         |  
|Benefit of state NOL utilization                         |  |      | (26,000  | ) |      |   |         |      |  |   |         |  
|Other changes in deferred tax assets valuation allowance |  |      | (198,000 | ) |      |   | 191,000  |      |  |   | 389,000  |  
|Other                                                    |  |      |         |   |      |   | 51,000   |      |  |   | (110,000 | )
|                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Current provision                                        |  | $    | 166,000  |   |      | $ |         |      |  | $ |         |  
|                                                         |  |      |          |   |      |   |          |      |  |   |          |  



Significant components
of the deferred tax asset at December 31, 2004, 2003 and 2002 are as follows:



|                                   |  |      |             |   |      |   |             |      |  |   |             |  
|---------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                   |  | 2004 |             |   | 2003 |   |             | 2002 | 
|Deferred tax assets (liabilities): |  |      |             |   |      |   |             |      |  |   |             |  
|Net operating loss carryforward    |  | $    | 17,812,000  |   |      | $ | 18,370,000  |      |  | $ | 18,157,000  |  
|Allowance for doubtful accounts    |  |      | 141,000     |   |      |   |            |      |  |   |            |  
|Property and equipment             |  |      | (85,000     | ) |      |   | 12,000      |      |  |   |            |  
|Prepaid insurance                  |  |      |            |   |      |   | (6,000      | )    |  |   | 1,000       |  
|Deferred compensation              |  |      | (29,000     | ) |      |   | (17,000     | )    |  |   |            |  
|Other                              |  |      | (2,000      | ) |      |   |            |      |  |   |            |  
|                                   |  |      |             |   |      |   |             |      |  |   |             |  
|Total deferred tax assets          |  |      | 17,837,000  |   |      |   | 18,359,000  |      |  |   | 18,158,000  |  
|Less valuation allowance           |  |      | (17,837,000 | ) |      |   | (18,359,000 | )    |  |   | (18,158,000 | )
|                                   |  |      |             |   |      |   |             |      |  |   |             |  
|Net deferred tax assets            |  | $    |            |   |      | $ |            |      |  | $ |            |  
|                                   |  |      |             |   |      |   |             |      |  |   |             |  



The Companys
total deferred tax assets have been fully reserved because of the uncertainty of future taxable income. Accordingly, no tax benefit has been recognized in the accompanying financial statements.





61



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



At December 31, 2004, the Company had accumulated approximately $49 million of federal net operating
loss carryforwards and $39 million of state net operating loss carryforwards, which may be used to offset taxable income and reduce income taxes in future years. The use of these losses to reduce future income taxes will depend on the generation of
sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carryforwards, if not fully utilized, will expire from 2018 to 2023. Section 382 of the Internal Revenue Code of 1986, as amended (the Code)
imposes an annual limitation on the portion of the Companys net operating loss carryforwards that may be used to offset taxable income. The Company believes that the issuance of shares of common stock pursuant to the initial public offering on
November 15, 1999 caused an ownership change for purposes of Section 382 of the Code on such date. Consequently, the Company believes that utilization of the portion of the Companys net operating loss carryforwards attributable to
the period prior to November 16, 1999 is limited by Section 382 of the Code. If an ownership change is determined to have occurred at a date after November 15, 1999, additional net operating loss carryforwards would be limited by Section
382 of the Code. In addition, an ownership change may occur in the future as a result of future changes in the ownership of the Companys stock, including the issuance by the Company of stock in connection with the acquisition of a
business by the Company. A future ownership change would result in Code Section 382 limiting the Companys deduction of operating loss carryforwards attributable to periods before the future ownership change.



13.    Stockholders Equity



Preferred Stock



The Company has authorized preferred stock as follows:



|                                                       |  |           |  |       
|------------------------------------------------------ |  | --------- |  | ------
|Series A convertible preferred stock, $.0001 par value |  | 1,111,111 |  | shares
|Series B redeemable preferred stock, $.0001 par value  |  | 1,111,111 |  | shares
|Series C non-voting preferred stock, $.0001 par value  |  | 3,200,000 |  | shares
|Blank check preferred stock, $.0001 par value        |  | 2,077,778 |  | shares
|                                                       |  |           |  |       
|Total                                                  |  | 7,500,000 |  | shares
|                                                       |  |           |  |       



No preferred stock was
outstanding at December 31, 2004 or 2003.



Common Stock



On July 24, 2001, James C. Leslie, Chairman of the Board,
and CLB Partners, Ltd. purchased an aggregate of 5,000,000 shares of the Companys common stock at $0.08 per share from Norman Charney (former Chairman and Chief Executive Officer) and CCLP, Ltd., a Texas limited partnership, of which David
Charney (son of Norman Charney) was the sole general partner. This transaction resulted in an aggregate purchase price of $400,000. CLB Holdings LLC, a Texas limited liability company, is the general partner of CLB Partners, Ltd. Richard Bloch, a
former director of the Company, and Will Cureton, a current director of the Company, are the managers of CLB Holdings LLC and the Richard and Nancy Bloch Family Trust and Will Cureton are the members of CLB Holdings LLC. On August 29, 2003, James C.
Leslie and CLB Partners, Ltd. increased their ownership in the Company by purchasing an aggregate of 1,921,300, shares from a former shareholder of the Company in a negotiated transaction.



During the second quarter of 2002, the Company issued, pursuant to a
registration statement on Form S-8, 435,000 shares of restricted stock under the 2002 Equity Incentive Plan. Under the restricted stock agreements, the restricted shares will vest annually over a three-year period. The restricted stock certificates
were issued on April 2, 2003. In July 2004, the Company issued 17,500 shares of restricted stock under the 2002 Equity Incentive Plan to a new member of its Board of Directors. In October 2004, the Company issued 50,000 shares of restricted stock
under the 2002 Equity Incentive Plan to its new Chief Financial Officer. Under the restricted stock agreements, the restricted shares will vest annually over a three-year period.





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Deferred compensation equivalent to the market value of these restricted common shares at the date of
issuance is reflected in Stockholders Equity and is being amortized on a straight line basis to operating expense over three years. Deferred compensation amortization expense included in the accompanying consolidated statement of operations
amounted to $40,000, $35,000 and $23,000 for the years ended December 31, 2004, 2003 and 2002 respectively.



The Company has warrants outstanding to purchase an aggregate of 800,000 shares of common stock at prices ranging from $1.00 to $3.00 per share related to
the Companys private placement offering in 1999. In September 2002, the Companys Board of Directors authorized the extension of the maturity of the 800,000 warrants, which are held by Jonathan Bloch, one of its directors, from February
5, 2004 to February 5, 2006.



14.    Stock Option Plan



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 of common stock. As of December 31, 2004 and 2003 respectively, options to purchase
1,140,000 and 1,340,000 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.



Following is a summary of the activity of the Plan:



|                               |  |                  |   |  |                               |     
|------------------------------ |  | ---------------- | - |  | ----------------------------- | ----
|                               |  | Number ofOptions |   |  | WeightedAverage ExercisePrice
|Outstanding, January 1, 2002   |  | 765,000          |   |  | $                             | 2.52
|Granted in 2002                |  | 1,385,000        |   |  |                               | 0.24
|Exercised in 2002              |  |                 |   |  |                               |    
|Canceled in 2002               |  | (810,000         | ) |  |                               | 2.37
|                               |  |                  |   |  |                               |     
|Outstanding, December 31, 2002 |  | 1,340,000        |   |  | $                             | 0.26
|Granted in 2003                |  |                 |   |  |                               |    
|Exercised in 2003              |  |                 |   |  |                               |    
|Canceled in 2003               |  |                 |   |  |                               |    
|                               |  |                  |   |  |                               |     
|Outstanding, December 31, 2003 |  | 1,340,000        |   |  | $                             | 0.26
|Granted in 2004                |  |                 |   |  |                               |    
|Exercised in 2004              |  | (200,000         | ) |  |                               | 0.24
|Canceled in 2004               |  |                 |   |  |                               |    
|                               |  |                  |   |  |                               |     
|Outstanding, December 31, 2004 |  | 1,140,000        |   |  | $                             | 0.26
|                               |  |                  |   |  |                               |     



Additional information
regarding options outstanding as of December 31, 2004 is as follows:



|               |  |                     |  |                                                  |  |                   |  |                               |     
|-------------- |  | ------------------- |  | ------------------------------------------------ |  | ----------------- |  | ----------------------------- | ----
|               |  | Options Outstanding |  | Options Exercisable                             
|Exercise Price |  | NumberOutstanding   |  | WeightedAverage RemainingContractual Life (Yrs.) |  | NumberExercisable |  | WeightedAverage ExercisePrice
|$1.00          |  | 30,000              |  | 4.20                                             |  | 30,000            |  | $                             | 1.00
|$0.24          |  | 1,110,000           |  | 7.20                                             |  | 1,088,000         |  | $                             | 0.24
|               |  |                     |  |                                                  |  |                   |  |                               |     
|               |  | 1,140,000           |  |                                                  |  | 1,118,000         |  | $                             | 0.32
|               |  |                     |  |                                                  |  |                   |  |                               |     





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



On March 14, 2002, in an attempt to further align the interests of management and members of its
Board of Directors with its stockholders, the Company granted an aggregate of 375,000 options, having an exercise price of $0.24 per share, to certain of its directors. In addition, the Company granted an aggregate of 1,000,000 performance-based
options, 400,000 to its Chairman and 600,000 to its President & CEO. These management options, having an exercise price of $0.24 per share, are intended to incentivize management. The management options have a vesting period of six years which
can be accelerated upon achievement of certain performance goals. In May 2004, these performance goals were achieved and the Companys Board of Directors accelerated the vesting of the remaining 666,667 unvested options out of the 1,000,000
performance-based options issued in 2002. Additionally, in March 2002, the Company cancelled 450,000 options previously held by its President & CEO and issued 425,000 shares of restricted stock in lieu thereof. These shares of restricted stock
vest over three years. The award of performance-based options and restricted stock to the President & CEO was made, in part, in exchange for a reduction of salary paid to its President & CEO.



In February 1999, in a separate transaction outside of the Plan, an executive
of the Company was granted options exercisable for 957,000 shares of common stock. These options expired in February 2004.



15.     Employee Benefit Plan



The Companys employees (including employees of its acquired subsidiaries DHI and CPOC) participated in three 401(k) plans during 2004. Under two of
the plans, the Company made matching contributions based on the amount of employee contributions. Total contributions by the Company under all three plans were $29,000 and $2,160 in 2004 and 2003, respectively. There were no contributions in 2002 to
a 401(k) plan.



Effective January 1, 2005, the Company
established a new 401(k) plan to cover all of its employees, and it terminated the old 401(k) plans related to the acquired entities. The terms of the new plan are substantially the same as the terms of the 401(k) plans of its acquired subsidiaries,
DHI and CPOC. Under the terms of the new plan, the Company has the option to match employees contributions, in an amount and at the discretion of the Company.



16.    Computations of Basic and Diluted Net Loss Per Common Share



|                                                                                                    |  |                          |            |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                    |  | Years Ended December 31, |           
|                                                                                                    |  | 2004                     |            | 2003 |   |            | 2002 | 
|Net income (loss)                                                                                   |  | $                        | 249,000    |      | $ | (818,000   | )    |  | $ | (728,000   | )
|                                                                                                    |  |                          |            |      |   |            |      |  |   |            |  
|Weighted average number of shares outstanding used in computing basic net income (loss) per share   |  |                          | 21,803,817 |      |   | 21,557,150 |      |  |   | 21,230,900 |  
|Effect of dilutive stock options and warrants                                                       |  |                          | 585,450    |      |   |           |      |  |   |           |  
|Weighted average number of shares outstanding used in computing diluted net income (loss) per share |  |                          | 22,389,267 |      |   | 21,557,150 |      |  |   | 21,230,900 |  
|                                                                                                    |  |                          |            |      |   |            |      |  |   |            |  
|Basic net income (loss) per share                                                                   |  | $                        | 0.01       |      | $ | (0.04      | )    |  | $ | (0.03      | )
|                                                                                                    |  |                          |            |      |   |            |      |  |   |            |  
|Diluted net income (loss) per share                                                                 |  | $                        | 0.01       |      | $ | (0.04      | )    |  | $ | (0.03      | )
|                                                                                                    |  |                          |            |      |   |            |      |  |   |            |  



17.    Commitments and Contingencies



The Companys current office space is leased on a month-to-month basis from JamJen, Inc. (Landlord), an entity controlled by Mr. Leslie, the Companys Chairman (See Note 18).





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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



In connection with the acquisition of the Park Assets, DHI entered into a three year supply agreement
with AmerisourceBergen Drug Corporation pursuant to which DHI and its newly acquired indirect subsidiaries agreed to purchase prescription and over-the-counter pharmaceuticals from AmerisourceBergen through March 2007. This supply agreement will
also provide DHI with pricing and payment terms that are improved from those previously provided by AmerisourceBergen to Park Pharmacy. In exchange for these improved terms, DHI has agreed to acquire 85% of its prescription pharmaceuticals and
substantially all of its generic pharmaceutical products from AmerisourceBergen and agreed to minimum monthly purchases of $900,000 of all products in order to obtain new favorable pricing terms. From the date of acquisition through December 31,
2004, DHI purchased over $17,250,000 of its pharmaceutical products from Amerisource Bergen.



In March 2005, the Company committed to invest up to $1.0 million in the Fairways Frisco Partnerships, as more fully described in Note 2 to these consolidated financial statements.



Operating Leases



The Company and its subsidiaries leases its pharmacy, real estate advisory
service and 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. Total
rent expense for operating leases was approximately $974,000 and $45,000 for the years ended December 31, 2004 and 2003, respectively.



|                          |  |   |          
|------------------------- |  | - | ---------
|Years ending December 31, |  |  
|2005                      |  | $ | 1,457,000
|2006                      |  |   | 1,325,000
|2007                      |  |   | 1,129,000
|2008                      |  |   | 979,000  
|2009                      |  |   | 620,000  
|Thereafter                |  |   | 519,000  
|                          |  |   |          
|                          |  | $ | 6,029,000
|                          |  |   |          



Legal
Proceedings



Between January 23, 2001 and February 21,
2001, five putative class action lawsuits were filed in the United States District Court for the Northern District of Texas against the Company, certain of its directors, and a limited partnership of which a director is a partner. The five lawsuits
assert causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, for an unspecified amount of damages on behalf of a putative class of individuals who purchased its common stock between various periods
ranging from November 11, 1999 to January 24, 2000. The lawsuits claim that the Company and the individual defendants made misstatements and omissions concerning its products and customers. The Company denies the plaintiffs allegations and
intends to vigorously defend against the lawsuits.



In
April 2001, the Court consolidated the lawsuits, and on July 26, 2002, plaintiffs filed a Consolidated Amended Complaint (CAC). The Company filed a motion to dismiss the CAC on or about September 9, 2002. On July 22, 2003, the Court
granted in part and denied in part defendants motion to dismiss. On September 2, 2003, defendants filed an answer to the CAC. Plaintiffs then commenced discovery. On September 12, 2003, plaintiffs filed a motion for class certification, and on
February 17, 2004, the Company filed its opposition. On July 1, 2004, the Court denied plaintiffs motion for certification. On September 8, 2004, the Fifth Circuit granted plaintiffs petition for permission to appeal the denial of class
certification. Briefing on the appeal is complete but the Fifth Circuit has not yet ruled on plaintiffs appeal.



The Company continues to deny plaintiffs allegations and intends to vigorously defend itself. It is not possible at this time to predict whether the
Company will incur any liability or to estimate the damages, or the



65



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



range of damages, if any, that the Company might incur in connection with this lawsuit. The Companys insurance carriers are continuing to provide for
the payment of its defense costs in connection with this case and intends to vigorously defend against the lawsuits.



On May 5, 2003, Hometown Wholesale Furniture Club, Inc. and Jeff Cordes, its founder, filed a lawsuit in the 191st Judicial District Court of Dallas
County, Texas against ADA Wholesale Furniture Club, Inc. and other defendants claiming breach of contract, conversion of trade secrets, breach of covenant not to compete, conspiracy and fraud in connection with failed negotiations for the sale of a
business. On June 27, 2003, they added the Company to the lawsuit.



On June 6, 2003, J.D. Davis, individually and d/b/a ADA Wholesale Furniture Club filed a lawsuit in the District Court of Gregg County, Texas against the Company, David Bowe and other defendants claiming breach of contract, conversion of
trade secrets, breach of covenant not to compete, conspiracy and fraud in connection with failed negotiations for the sale of a business. The Gregg County case was dismissed with prejudice on October 7, 2004 and the Dallas County case was dismissed
with prejudice on October 11, 2004. In connection with the dismissals, a settlement agreement was reached among the parties pursuant to which the Company was released from all claims.



On January 29, 2004, Bishopsgate Corp. and T.E. Millard filed a lawsuit in the 192nd District Court of Dallas County, Texas
against the Company, its officers and directors, and Park Pharmacys officers and directors claiming that the Company breached obligations to fund Bishopsgates proposed purchase of the Park Assets. The plaintiffs seek unspecified damages.
The Company denies the plaintiffs claims, has filed various counterclaims and intends to vigorously defend against the lawsuits. In October 2004, the parties mediated the case but were unable to resolve it.



Mr. Millard filed a Chapter 13 bankruptcy case in Dallas, Texas on August 15,
2003. Millards Chapter 13 bankruptcy case was converted to a Chapter 7 liquidation bankruptcy case on December 20, 2004. Upon the conversion of the bankruptcy case, Daniel J. Sherman was appointed Chapter 7 Trustee. The Trustee now owns and
controls the claims asserted in the Millard Action. We have been negotiating with the Trustee concerning a possible settlement of the case. As of the date of this report, no resolution has yet been reached.



The Company is also occasionally involved in other claims and proceedings,
which are incidental to its business. The Company cannot determine what, if any, material affect these matters will have on its future financial position and results of operations.



18.    Related Party Transactions



Since May 1, 2002, the Company has sublet its office space from JamJen, Inc., an entity controlled by Mr. Leslie, our
Chairman. Mr. Leslie controls, and Mr. Will Cureton, one of our directors, is indirectly a limited partner in the entity that owns the building in which the office space is leased by JamJen. Ascendant currently pays monthly rent of approximately
$1,800. Capital Markets also shares the space and pays monthly rent to JamJen and another entity controlled by two of the Fairways Members, of approximately $41,100. In connection with our sharing of office space with JamJen, we incur certain shared
costs with JamJen, which gives rise to reimbursements from us to JamJen. These costs were approximately $22,800 and $3,400 in 2004 and 2003, respectively. During the years ended December 31, 2004 and 2003, Ascendant paid approximately $26,100 and
$21,400 and Capital Markets paid approximately $41,100 and $23,600 in rent, respectively. Ascendant has not entered into a lease with JamJen, but rather is renting the office space on a month-to-month basis. Ascendant believes that such arrangement
has been on terms no less favorable to the Company than could have been obtained in a transaction with an independent third party.



During the year ended December 31, 2004, the Company paid fees to its directors of $11,000 in exchange for their roles as members of the board of
directors and its related committees.



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As discussed in Note 2, the Company acquired CPOC on May 1, 2004 and in connection with that
acquisition, it assumed a $500,000 note payable to Kevin Hayes, who is currently the Chairman of CPOC, and it entered into the Acquisition Note with Mr. Hayes. During the period from the acquisition date through December 31, 2004, CPOC paid $508,800
to Mr. Hayes for principal and interest under the assumed note, which was paid in full during December 2004. For the same period, ASDS made interest payments of $211,000 to Mr. Hayes related to the Acquisition Note, as more fully described in Note
2.



Mr. Leslie, the Companys Chairman, also serves as an
advisor to the Board of Directors of CRESA Partners, LLC, a national real estate services firm. Capital Markets currently employs, seven people, including the Fairways Members. Mr. Leslie, the Companys Chairman, and Mr. Bowe, the
Companys President & CEO, and certain employees of Capital Markets are limited partners in VTE.



In April 2004, the Company invested approximately $97,000 through ASE Investments for a 24.75% interest in Fairways 36864, LP, (whose other partners also
included the Fairways Members) that participated in the development of and leaseback of single tenant commercial properties. In August and October 2004, respectively, these properties were sold and the Company recognized investment income of $84,000
in addition to the return of its original investment of $97,000.



As discussed in Note 2, the Company acquired the stock of CPOC, a former licensee of The Staubach Company, a national real estate services firm. Mr. Leslie, the Companys Chairman was employed by The Staubach Company from 1982 to 2001
and served as its President and Chief Operating Officer from 1996 to 2001.



As discussed in Note 2, the Company made an investment in Fairways 03 New Jersey, LP in December 2003, along with the Fairways Members and on substantially the same terms as the other limited partners in Fairways 03
New Jersey, LP.



As discussed in Note 20, the Company agreed to
indemnify the other partners of Fairways 03 New Jersey, LP (who are also the Fairways Members) for its 20% pro rata partnership interest of a guarantee of bank indebtedness which the partners provided to a bank. The limit of the Companys
indemnification under this agreement is $520,000.



19.    Unaudited Quarterly Financial Data for 2004 and 2003:



CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)

(In thousands except per
share amounts)



|                                 |  |          |        |   |         |   |        |          |  |   |             |   |  |                 |        |   |  |   |        |  
|-------------------------------- |  | -------- | ------ | - | ------- | - | ------ | -------- |  | - | ----------- | - |  | --------------- | ------ | - |  | - | ------ | -
|                                 |  | March 31 |        |   | June 30 |   |        | Sept. 30 |  |   | Dec. 31 (1) |   |  | Year Ended 2004 |       
|2004                             |  |          |        |   |         |   |        |          |  |   |             |   |  |                 |        |   |  |   |        |  
|Revenue                          |  | $        | 1,452  |   |         | $ | 12,285 |          |  | $ | 12,084      |   |  | $               | 13,470 |   |  | $ | 39,291 |  
|Gross profit                     |  |          | 738    |   |         |   | 4,536  |          |  |   | 4,243       |   |  |                 | 4,719  |   |  |   | 14,236 |  
|Net income (loss)                |  |          | (106   | ) |         |   | 214    |          |  |   | 3           |   |  |                 | 138    |   |  |   | 249    |  
|Net income per share, basic      |  |          |       |   |         |   | 0.01   |          |  |   |            |   |  |                 | 0.01   |   |  |   | 0.01   |  
|Net income per share, diluted    |  |          |       |   |         |   | 0.01   |          |  |   |            |   |  |                 | 0.01   |   |  |   | 0.01   |  
|Weighted average shares, basic   |  |          | 21,666 |   |         |   | 21,733 |          |  |   | 21,883      |   |  |                 | 21,933 |   |  |   | 21,804 |  
|Weighted average shares, diluted |  |          | 21,666 |   |         |   | 21,925 |          |  |   | 22,419      |   |  |                 | 22,600 |   |  |   | 22,389 |  
|                                 |  |          |        |   |        
|2003(2)                          |  |          |        |   |         |   |        |          |  |   |             |   |  |                 |        |   |  |   |        |  
|Revenue                          |  | $        | 40     |   |         | $ | 40     |          |  | $ |            |   |  | $               | 425    |   |  | $ | 505    |  
|Gross profit                     |  |          | 40     |   |         |   | 40     |          |  |   |            |   |  |                 | 425    |   |  |   | 505    |  
|Net loss                         |  |          | (217   | ) |         |   | (282   | )        |  |   | (260        | ) |  |                 | (59    | ) |  |   | (818   | )
|Net loss per share, basic        |  |          | (0.01  | ) |         |   | (0.01  | )        |  |   | (0.01       | ) |  |                 |       |   |  |   | (0.04  | )
|Net loss per share, diluted      |  |          | (0.01  | ) |         |   | (0.01  | )        |  |   | (0.01       | ) |  |                 |       |   |  |   | (0.04  | )
|Weighted average shares          |  |          | 21,231 |   |         |   | 21,666 |          |  |   | 21,666      |   |  |                 | 21,666 |   |  |   | 21,557 |  





67



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##### Index to Financial Statements

ASCENDANT SOLUTIONS, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|(1) |  | Subsequent to December 31, 2004, the Company completed its analysis of the intangible assets created in the CPOC acquisition, which resulted in the Company allocating $450,000 of
the intangible asset to non- compete agreements which are being amortized over 36 months. This resulted in a $100,000 non-cash charge recorded in the December 31, 2004 quarter for amortization of the non-compete agreements for the period from the
acquisition date on May 1, 2004 through December 31, 2004.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | The 2003 quarterly information will not tie across due to the different number of weighted average shares.
|--- |  | ----------------------------------------------------------------------------------------------------------



|20. |  | Subsequent Events
|--- |  | -----------------



In January 2005, the Company agreed to provide a limited indemnification to its partners in the Fairways 03 New Jersey LP investment for any losses those
partners may incur under their personal guaranties of the partnerships bank indebtedness. The Companys partners in this investment are the Fairways Members. The Companys indemnification to the Fairways Members is limited to its 20%
pro rata partnership interest of the $2.6 million in bank debt that was guaranteed by the individuals.



In March 2005, the Company committed to invest up to $1 million in the Fairways Frisco Partnerships, as more fully described in Note 2 to these
consolidated financial statements.



|21. |  | Segment Information
|--- |  | -------------------



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, while 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, investment income and EBITDA. EBITDA is calculated as net income before deducting interest, taxes, depreciation and amortization. Although EBITDA 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.



Statements of operations and balance sheet data for the Companys
principal business segments for the years ended December 31, 2004 and 2003 are as follows (000s omitted):



|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|--------------------------- |  | ----------------------- | ------ | ---------------------------- | ---- | - | ------------------ |  | ---- | ------------ |  | ---- | --- | - | ---- | - | ---- | ---- |  | ---- | ----- | - |  | - | ------ |  | - | ----- | -
|                            |  | Years Ended December 31 |       
|                            |  | Healthcare              |        | Real EstateAdvisory Services |      |   | Corporate andOther |  |      | Consolidated | 
|                            |  | 2004                    |        |                              | 2003 |   | 2004               |  | 2003 |              |  | 2004 |     |   | 2003 |   |      | 2004 |  | 2003 |      
|Revenue                     |  | $                       | 29,532 |                              |      | $ |                   |  | $    | 9,759        |  | $    | 505 |   |      | $ |     |      |  | $    |      |   |  | $ | 39,291 |  | $ | 505   |  
|Cost of sales               |  |                         | 19,667 |                              |      |   |                   |  |      | 5,388        |  |      |    |   |      |   |     |      |  |      |      |   |  |   | 25,055 |  |   |      |  
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|Gross profit                |  |                         | 9,865  |                              |      |   |                   |  |      | 4,371        |  |      | 505 |   |      |   |     |      |  |      |      |   |  |   | 14,236 |  |   | 505   |  
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|EBITDA                      |  |                         | 270    |                              |      |   |                   |  |      | 2,063        |  |      | 2   |   |      |   | (904 | )    |  |      | (787  | ) |  |   | 1,429  |  |   | (785  | )
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|Less:                       |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|Interest Expense            |  |                         | 297    |                              |      |   |                   |  |      | 247          |  |      | 3   |   |      |   | (24  | )    |  |      | (33   | ) |  |   | 520    |  |   | (30   | )
|Taxes                       |  |                         |       |                              |      |   |                   |  |      | 166          |  |      |    |   |      |   |     |      |  |      |      |   |  |   | 166    |  |   |      |  
|Depreciation & Amortization |  |                         | 272    |                              |      |   |                   |  |      | 215          |  |      | 2   |   |      |   | 7    |      |  |      | 61    |   |  |   | 494    |  |   | 63    |  
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|Net Income                  |  | $                       | (299   | )                            |      | $ |                   |  | $    | 1,435        |  | $    | (3  | ) |      | $ | (887 | )    |  | $    | (815  | ) |  | $ | 249    |  | $ | (818  | )
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  
|                            | 
|                            |  | December 31,            |       
|                            |  | Healthcare              |        | Real EstateAdvisory Services |      |   | Corporate andOther |  |      | Consolidated | 
|                            |  | 2004                    |        |                              | 2003 |   | 2004               |  | 2003 |              |  | 2004 |     |   | 2003 |   |      | 2004 |  | 2003 |      
|Total assets                |  | $                       | 8,811  |                              |      | $ |                   |  | $    | 10,971       |  | $    | 75  |   |      | $ | 971  |      |  | $    | 2,766 |   |  | $ | 20,753 |  | $ | 2,841 |  
|                            |  |                         |        |                              |      |   |                    |  |      |              |  |      |     |   |      |   |      |      |  |      |       |   |  |   |        |  |   |       |  



68



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGIST
ERED PUBLIC ACCOUNTING FIRM



Board of Directors and
Stockholders

Park Pharmacy Corporation

Dallas, Texas



We have audited the accompanying consolidated balance sheets
of Park Pharmacy Corporation (the Company) as of March 24, 2004 and June 30, 2003 and the related consolidated statements of operations, stockholders deficit and cash flows for the period from July 1, 2003 to March 24, 2004 and for
the years ended June 30, 2003 and 2002. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined it is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Park Pharmacy Corporation as of March 24, 2004 and June 30, 2003, and the
results of its operations and cash flows for the period from July 1, 2003 to March 24, 2004 and for the years ended June 30, 2003 and 2002, in conformity with accounting principles generally accepted in the United States of America.



As discussed in Note 1 to the consolidated financial statements, on December
2, 2002, Park Pharmacy Corporation filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. The Company continued to operate as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in
accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As further discussed in Note 14 to the consolidated financial statements, on March 4, 2004 the Bankruptcy Court confirmed the Companys First
Amended Joint Plan of Reorganization and the sale of substantially all the Companys assets and assumption of its liabilities as of March 24, 2004 pursuant to an Asset Purchase Agreement entered into with Ascendant Solutions, Inc
(Ascendant). The accompanying March 24, 2004 balance sheet presents The Companys financial position immediately prior to the closing of the transaction with Ascendant. Subsequent to the sale of its assets, Park Pharmacy Corporation
had no remaining assets or liabilities. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.



/s/HEIN & ASSOCIATES LLP



Dallas, Texas

August 27, 2004



69



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##### Index to Financial Statements

PARK PHA
RMACY CORPORATION



CONSOLIDATED
BALANCE SHEETS



|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                                                                               |  | March 24, 2004 |             |   | June 30, 2003 |  
|                                                                                                                                                                               |  |               
|ASSETS                                                                                                                                                                         |  |                |             |   |               |   |             |  
|                                                                                                                                                                               |  |               
|CURRENT ASSETS:                                                                                                                                                                |  |                |             |   |               |   |             |  
|Cash and cash equivalents                                                                                                                                                      |  | $              | 1,413,961   |   |               | $ | 1,045,691   |  
|Trade accounts receivable, net of allowance for doubtful accounts of $2,743,000 and $2,622,000, respectively                                                                   |  |                | 5,044,374   |   |               |   | 5,098,838   |  
|Inventories                                                                                                                                                                    |  |                | 2,356,223   |   |               |   | 2,119,342   |  
|Prepaid expenses and other                                                                                                                                                     |  |                | 149,070     |   |               |   | 409,035     |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total current assets                                                                                                                                                           |  |                | 8,963,628   |   |               |   | 8,672,906   |  
|                                                                                                                                                                               |  |               
|PROPERTY AND EQUIPMENT, net                                                                                                                                                    |  |                | 895,451     |   |               |   | 1,031,210   |  
|                                                                                                                                                                               |  |               
|OTHER ASSETS                                                                                                                                                                   |  |                | 145,758     |   |               |   | 153,171     |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total assets                                                                                                                                                                   |  | $              | 10,004,837  |   |               | $ | 9,857,287   |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|                                                                                                                                                                               |  |               
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                          |  |                |             |   |               |   |             |  
|                                                                                                                                                                               |  |               
|LIABILITIES NOT SUBJECT TO COMPROMISE:                                                                                                                                         |  |                |             |   |               |   |             |  
|Current liabilities:                                                                                                                                                           |  |                |             |   |               |   |             |  
|Accounts payable                                                                                                                                                               |  | $              | 5,134,825   |   |               | $ | 4,671,795   |  
|Accrued liabilities                                                                                                                                                            |  |                | 846,525     |   |               |   | 934,006     |  
|Income taxes payable                                                                                                                                                           |  |                |            |   |               |   | 16,239      |  
|Current portion of long-term obligations                                                                                                                                       |  |                | 23,374      |   |               |   | 14,042      |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total current liabilities                                                                                                                                                      |  |                | 6,004,724   |   |               |   | 5,636,082   |  
|                                                                                                                                                                               |  |               
|LIABILITIES SUBJECT TO COMPROMISE                                                                                                                                              |  |                | 7,142,100   |   |               |   | 7,602,647   |  
|                                                                                                                                                                               |  |               
|LONG-TERM OBLIGATIONS, net of current portion                                                                                                                                  |  |                |            |   |               |   | 26,507      |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total liabilities                                                                                                                                                              |  |                | 13,146,824  |   |               |   | 13,265,236  |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|COMMITMENTS AND CONTINGENCIES (Notes 3 and 9)                                                                                                                                  |  |                |             |   |               |   |             |  
|                                                                                                                                                                               |  |               
|STOCKHOLDERS DEFICIT:                                                                                                                                                         |  |                |             |   |               |   |             |  
|Preferred stock; $.001 par value; 250,000,000 shares authorized; 2,613,498 shares issued and outstanding (liquidation preference of $10 per
share, aggregating to $26,134,980) |  |                | 2,614       |   |               |   | 2,614       |  
|Common stock; $.0001 par value; 750,000,000 shares authorized; 10,105,381 shares issued and outstanding                                                                        |  |                | 1,011       |   |               |   | 1,011       |  
|Additional paid-in capital                                                                                                                                                     |  |                | 7,889,126   |   |               |   | 7,889,126   |  
|Accumulated deficit                                                                                                                                                            |  |                | (11,034,738 | ) |               |   | (11,288,003 | )
|Deferred compensation                                                                                                                                                          |  |                |            |   |               |   | (12,697     | )
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total stockholders deficit                                                                                                                                                    |  |                | (3,141,987  | ) |               |   | (3,407,949  | )
|                                                                                                                                                                               |  |                |             |   |               |   |             |  
|Total liabilities and stockholders deficit                                                                                                                                    |  | $              | 10,004,837  |   |               | $ | 9,857,287   |  
|                                                                                                                                                                               |  |                |             |   |               |   |             |  



See accompanying notes
to these consolidated financial statements.



70



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##### Index to Financial Statements

PARK PHARMACY
 CORPORATION



CONSOLIDATED
STATEMENTS OF OPERATIONS



For the Periods Ended March
24, 2004, June 30, 2003 and 2002



|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|------------------------------------------------------------------------------------ |  | ---------------------------------------- | ---------- | - | ----------------------- | - | ---------- | ----------------------- |  | - | ---------- | -
|                                                                                     |  | Period FromJuly 1, 2003 ToMarch 24, 2004 |            |   | Year EndedJune 30, 2003 |   |            | Year EndedJune 30, 2002 | 
|REVENUES                                                                             |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Product sales and other, net                                                         |  | $                                        | 29,485,743 |   |                         | $ | 39,368,169 |                         |  | $ | 43,786,161 |  
|OPERATING EXPENSES                                                                   |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Cost of goods sold                                                                   |  |                                          | 19,052,182 |   |                         |   | 25,363,480 |                         |  |   | 28,462,781 |  
|Salaries, wages and related taxes                                                    |  |                                          | 5,349,983  |   |                         |   | 7,363,813  |                         |  |   | 8,941,119  |  
|Selling, general and administrative expenses                                         |  |                                          | 3,975,587  |   |                         |   | 5,719,993  |                         |  |   | 8,886,174  |  
|Depreciation and amortization                                                        |  |                                          | 140,786    |   |                         |   | 195,036    |                         |  |   | 237,891    |  
|Impairment of goodwill                                                               |  |                                          |           |   |                         |   | 1,031,994  |                         |  |   | 124,415    |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Total operating expenses                                                             |  |                                          | 28,518,538 |   |                         |   | 39,674,316 |                         |  |   | 46,652,380 |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Income (loss) from operations                                                        |  |                                          | 967,205    |   |                         |   | (306,147   | )                       |  |   | (2,866,219 | )
|OTHER INCOME (EXPENSE)                                                               |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Other income, net                                                                    |  |                                          | 125,441    |   |                         |   | 121,726    |                         |  |   | 126,474    |  
|Interest expense, net                                                                |  |                                          | (323,814   | ) |                         |   | (708,733   | )                       |  |   | (426,354   | )
|Financing expenses                                                                   |  |                                          |           |   |                         |   | (25,000    | )                       |  |   | (141,677   | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Total other income (expense)                                                         |  |                                          | (198,373   | ) |                         |   | (612,007   | )                       |  |   | (441,557   | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE REORGANIZATION ITEM AND INCOME TAXES |  |                                          | 768,832    |   |                         |   | (918,154   | )                       |  |   | (3,307,776 | )
|REORGANIZATION ITEMPROFESSIONAL FEES                                                |  |                                          | (515,567   | ) |                         |   | (49,000    | )                       |  |   |           |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                         |  |                                          | 253,265    |   |                         |   | (967,154   | )                       |  |   | (3,307,776 | )
|INCOME TAX BENEFIT                                                                   |  |                                          |           |   |                         |   |           |                         |  |   | 94,644     |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                             |  |                                          | 253,265    |   |                         |   | (967,154   | )                       |  |   | (3,213,132 | )
|DISCONTINUED OPERATIONS (NET OF TAXES)                                               |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Loss from discontinued operations                                                    |  |                                          |           |   |                         |   | (759,160   | )                       |  |   | (6,946,470 | )
|Loss on disposals                                                                    |  |                                          |           |   |                         |   | (5,744     | )                       |  |   | 214,574    |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Loss from discontinued operations, net                                               |  |                                          |           |   |                         |   | (764,904   | )                       |  |   | (6,731,896 | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|NET INCOME (LOSS)                                                                    |  | $                                        | 253,265    |   |                         | $ | (1,732,058 | )                       |  | $ | (9,945,028 | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|NET INCOME (LOSS) PER COMMON SHAREbasic and diluted:                                |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Continuing operations                                                                |  | $                                        | 0.01       |   |                         | $ | (0.03      | )                       |  | $ | (0.09      | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Discontinued operations                                                              |  | $                                        |           |   |                         | $ | (0.02      | )                       |  | $ | (0.19      | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Net income (loss)                                                                    |  | $                                        | 0.01       |   |                         | $ | (0.05      | )                       |  | $ | (0.28      | )
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Weighted Average Common SharesBasic:                                                |  |                                          | 36,035,430 |   |                         |   | 36,035,430 |                         |  |   | 36,035,430 |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  
|Weighted Average Common SharesDiluted:                                              |  |                                          | 36,035,430 |   |                         |   | 36,035,430 |                         |  |   | 36,035,430 |  
|                                                                                     |  |                                          |            |   |                         |   |            |                         |  |   |            |  



See accompanying notes
to these consolidated financial statements.



71



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##### Index to Financial Statements

PARK PHARMACY COR
PORATION



CONSOLIDATED
STATEMENTS OF STOCKHOLDERS DEFICIT



For the
Periods Ended March 24, 2004, June 30, 2003 and 2002



|                                                                                     |  |                 |   |  |              |       |                            |        |            |                                         |   |       |                       |   |           |                                      |  |   |             |   |  |   |          |   |  |   |            |  
|------------------------------------------------------------------------------------ |  | --------------- | - |  | ------------ | ----- | -------------------------- | ------ | ---------- | --------------------------------------- | - | ----- | --------------------- | - | --------- | ------------------------------------ |  | - | ----------- | - |  | - | -------- | - |  | - | ---------- | -
|                                                                                     |  | Preferred Stock |   |  | Common Stock |       | Additional Paid-in Capital |        |            | Retained Earnings (Accumulated Deficit) |   |       | Deferred Compensation |   |           | Total Stockholders Equity (Deficit) | 
|                                                                                     |  | Shares          |   |  | Amount       |       |                            | Shares |            | Amount                                  |   |       |                       |  
|BALANCES, June 30, 2001                                                              |  | 3,024,581       |   |  | $            | 3,025 |                            |        | 5,719,551  |                                         | $ | 572   |                       | $ | 7,942,054 |                                      |  | $ | 389,083     |   |  | $ | (141,286 | ) |  | $ | 8,193,448  |  
|Conversions of preferred stock                                                       |  | (411,083        | ) |  |              | (411  | )                          |        | 4,110,830  |                                         |   | 411   |                       |   |          |                                      |  |   |            |   |  |   |         |   |  |   |            |  
|Issuance of common stock in connection with business acquired                        |  |                |   |  |              |      |                            |        | 260,000    |                                         |   | 26    |                       |   | (26       | )                                    |  |   |            |   |  |   |         |   |  |   |           |  
|Deferred compensation in connection with restricted stock awards, net of forfeitures |  |                |   |  |              |      |                            |        | 15,000     |                                         |   | 2     |                       |   | 7,198     |                                      |  |   |            |   |  |   | (7,200   | ) |  |   |           |  
|Amortization of deferred compensation, net of forfeitures                            |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   | (60,100   | )                                    |  |   |            |   |  |   | 131,558  |   |  |   | 71,458     |  
|Net loss                                                                             |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   |          |                                      |  |   | (9,945,028  | ) |  |   |         |   |  |   | (9,945,028 | )
|                                                                                     |  |                 |   |  |              |       |                            |        |            |                                         |   |       |                       |   |           |                                      |  |   |             |   |  |   |          |   |  |   |            |  
|BALANCES, June 30, 2002                                                              |  | 2,613,498       |   |  |              | 2,614 |                            |        | 10,105,381 |                                         |   | 1,011 |                       |   | 7,889,126 |                                      |  |   | (9,555,945  | ) |  |   | (16,928  | ) |  |   | (1,680,122 | )
|Amortization of deferred compensation, net of forfeitures                            |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   |          |                                      |  |   |            |   |  |   | 4,231    |   |  |   | 4,231      |  
|Net loss                                                                             |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   |          |                                      |  |   | (1,732,058  | ) |  |   |         |   |  |   | (1,732,058 | )
|                                                                                     |  |                 |   |  |              |       |                            |        |            |                                         |   |       |                       |   |           |                                      |  |   |             |   |  |   |          |   |  |   |            |  
|BALANCES, June 30, 2003                                                              |  | 2,613,498       |   |  |              | 2,614 |                            |        | 10,105,381 |                                         |   | 1,011 |                       |   | 7,889,126 |                                      |  |   | (11,288,003 | ) |  |   | (12,697  | ) |  |   | (3,407,949 | )
|Amortization of deferred compensation, net of forfeitures                            |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   |          |                                      |  |   |            |   |  |   | 12,697   |   |  |   | 12,697     |  
|Net income                                                                           |  |                |   |  |              |      |                            |        |           |                                         |   |      |                       |   |          |                                      |  |   | 253,265     |   |  |   |         |   |  |   | 253,265    |  
|                                                                                     |  |                 |   |  |              |       |                            |        |            |                                         |   |       |                       |   |           |                                      |  |   |             |   |  |   |          |   |  |   |            |  
|BALANCES, March 24, 2004                                                             |  | 2,613,498       |   |  | $            | 2,614 |                            |        | 10,105,381 |                                         | $ | 1,011 |                       | $ | 7,889,126 |                                      |  | $ | (11,034,738 | ) |  | $ |         |   |  | $ | (3,141,987 | )
|                                                                                     |  |                 |   |  |              |       |                            |        |            |                                         |   |       |                       |   |           |                                      |  |   |             |   |  |   |          |   |  |   |            |  



See accompanying notes
to these consolidated financial statements.





72



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##### Table of Contents

##### Index to Financial Statements

PA
RK PHARMACY CORPORATION



CONSOLIDATED STATEMENTS OF CASH FLOWS



For
the Periods Ended March 24, 2004, June 30, 2003 and 2002



|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|---------------------------------------------------------------------------------------- |  | ----------------------------------------- | --------- | - | -------------------- | ---- | ---------- | - |  | - | ----------- | -
|                                                                                         |  | Period FromJuly 1, 2003 To March 24, 2004 |           |   | Years Ended June 30, |     
|                                                                                         |  |                                           | 2003      |   |                      | 2002 |           
|                                                                                         |  |                                           |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Net income (loss)                                                                        |  | $                                         | 253,265   |   |                      | $    | (1,732,058 | ) |  | $ | (9,945,028  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Depreciation and amortization                                                            |  |                                           | 140,785   |   |                      |      | 216,222    |   |  |   | 473,555     |  
|Amortization and write off of debt issuance costs                                        |  |                                           |          |   |                      |      |           |   |  |   | 141,677     |  
|Amortization of deferred compensation                                                    |  |                                           | 12,697    |   |                      |      | 4,231      |   |  |   | 71,458      |  
|Impairment of property and equipment                                                     |  |                                           | 5,883     |   |                      |      |           |   |  |   | 84,160      |  
|Write-down of capitalized software costs                                                 |  |                                           |          |   |                      |      |           |   |  |   | 2,595,740   |  
|Impairment and write-off of goodwill                                                     |  |                                           |          |   |                      |      | 2,035,784  |   |  |   | 2,600,488   |  
|Gain on sale of business                                                                 |  |                                           | (126,000  | ) |                      |      |           |   |  |   |            |  
|(Gain) loss on disposal of discontinued operations                                       |  |                                           |          |   |                      |      | 5,744      |   |  |   | (214,574    | )
|Deferred income taxes                                                                    |  |                                           |          |   |                      |      |           |   |  |   | 331,756     |  
|Other                                                                                    |  |                                           |          |   |                      |      | 4,473      |   |  |   |            |  
|Changes in operating assets and liabilities, net of effect of businesses acquired:       |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Trade accounts receivable                                                                |  |                                           | 54,464    |   |                      |      | 976,300    |   |  |   | 2,741,529   |  
|Refundable income taxes                                                                  |  |                                           |          |   |                      |      | 296,547    |   |  |   | (296,547    | )
|Inventories                                                                              |  |                                           | (236,881  | ) |                      |      | 231,433    |   |  |   | 1,385,793   |  
|Prepaid expenses and other                                                               |  |                                           | 259,965   |   |                      |      | (30,287    | ) |  |   | (187,995    | )
|Other assets                                                                             |  |                                           | 7,413     |   |                      |      | (116,384   | ) |  |   | (10,874     | )
|Trade accounts payable                                                                   |  |                                           | 463,030   |   |                      |      | (1,189,576 | ) |  |   | 1,699,230   |  
|Accrued liabilities                                                                      |  |                                           | (120,901  | ) |                      |      | (486,178   | ) |  |   | 227,483     |  
|Income taxes payable                                                                     |  |                                           |          |   |                      |      | (98,800    | ) |  |   | (400,408    | )
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Net cash provided by operating activities                                                |  |                                           | 713,720   |   |                      |      | 117,451    |   |  |   | 1,297,443   |  
|                                                                                         |  |                                           |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Purchases of property and equipment                                                      |  |                                           | (23,910   | ) |                      |      | (58,883    | ) |  |   | (324,635    | )
|Proceeds from sale of property and equipment                                             |  |                                           | 13,000    |   |                      |      | 210,000    |   |  |   |            |  
|Increase in software costs                                                               |  |                                           |          |   |                      |      |           |   |  |   | (136,216    | )
|Proceeds from sale of businesses                                                         |  |                                           |          |   |                      |      | 334,864    |   |  |   | 845,000     |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Net cash provided by (used in) investing activities                                      |  |                                           | (10,910   | ) |                      |      | 485,981    |   |  |   | 384,149     |  
|                                                                                         |  |                                           |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Proceeds from notes payable and long-term debt                                           |  |                                           |          |   |                      |      | 1,637,131  |   |  |   | 19,039,874  |  
|Repayments of notes payable and long-term debt                                           |  |                                           | (334,540  | ) |                      |      | (1,361,448 | ) |  |   | (21,854,451 | )
|Repayments of other long-term obligations                                                |  |                                           |          |   |                      |      | (18,202    | ) |  |   | (24,453     | )
|Repayment of capital lease obligation                                                    |  |                                           |          |   |                      |      | (269,707   | ) |  |   |            |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Net cash provided by (used in) financing activities                                      |  |                                           | (334,540  | ) |                      |      | (12,226    | ) |  |   | (2,839,030  | )
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|CHANGE IN CASH AND CASH EQUIVALENTS                                                      |  |                                           | 368,270   |   |                      |      | 591,206    |   |  |   | (1,157,438  | )
|CASH AND CASH EQUIVALENTS, beginning of period                                           |  |                                           | 1,045,691 |   |                      |      | 454,485    |   |  |   | 1,611,923   |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|CASH AND CASH EQUIVALENTS, end of period                                                 |  | $                                         | 1,413,961 |   |                      | $    | 1,045,691  |   |  | $ | 454,485     |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|                                                                                         |  |                                           |          
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                      |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Cash paid (received) for:                                                                |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Interest                                                                                 |  | $                                         | 323,814   |   |                      | $    | 409,626    |   |  | $ | 410,200     |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Income taxes                                                                             |  | $                                         |          |   |                      | $    | (296,547   | ) |  | $ | 289,200     |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Reorganization itemprofessional fees                                                    |  | $                                         | 541,427   |   |                      | $    | 110,500    |   |  | $ |            |  
|                                                                                         |  |                                           |           |   |                      |      |            |   |  |   |             |  
|                                                                                         |  |                                           |          
|NON-CASH INVESTING AND FINANCING TRANSACTIONS:                                           |  |                                           |           |   |                      |      |            |   |  |   |             |  
|Capital lease obligations incurred in connection with equipment purchases                |  | $                                         |          |   |                      | $    |           |   |  | $ | 330,868     |  
|Write-off of fully depreciated property and equipment                                    |  | $                                         |          |   |                      | $    |           |   |  | $ | 226,026     |  
|Deferred compensation in connection with restricted stock awards                         |  | $                                         |          |   |                      | $    |           |   |  | $ | 7,200       |  
|Deferred compensation in connection with stock options                                   |  | $                                         |          |   |                      | $    |           |   |  | $ | (60,100     | )



See accompanying notes
to these consolidated financial statements.



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.Nature of Operations and Basis of Presentation



Park Pharmacy Corporation (the Company), a Colorado corporation, is primarily engaged in the sale of prescription and over-the-counter
medications, healthcare products and related services. The Company sells its products and services to a variety of customers including individuals, hospices, assisted-living facilities and other institutional healthcare providers. The Company was
also involved in the wholesale distribution of pharmacy-related products and supplies, which were sold primarily to independent pharmacies and national retail chains.



On December 2, 2002, Park Pharmacy Corporation filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code (the Bankruptcy Code), in the United States Bankruptcy Court for the Northern District of Texas (the Bankruptcy Court) (Case No. 02-80896-SAF-11). On March 3, 2003, the Companys wholly owned subsidiaries
MJN Enterprises, Inc. and Ravens Pharmacy, Inc. also filed voluntary Chapter 11 petitions. The Company continued to operate as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy Court.



As described in Note 14, on March 24, 2004, substantially all of the Companys assets were acquired and liabilities assumed by Doughertys Holdings, Inc, a newly formed subsidiary of Ascendant Solutions, Inc. The accompanying
financial statements reflect the financial position of the Company immediately prior to that transaction.



2.Summary of Significant Accounting Policies



(a)  Principles of Consolidation and Basis of Presentation



The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.
Significant intercompany balances and transactions have been eliminated in consolidation.



As more fully described in Note 5, during the years ended June 30, 2003 and 2002, the Company sold its wholesale distribution subsidiary, closed some of its pharmacy operations and suspended the development of its
Internet-based pharmaceutical care information system (the Rx-Pro software). The operating results related to these activities have been reported as discontinued operations in the accompanying consolidated financial statements.



Under the Bankruptcy Code, certain claims against the Company
in existence prior to the filing of the Chapter 11 Petitions are stayed while the Company continues its business operations as a Debtor-In-Possession. The claims are reflected in the accompanying consolidated balance sheets as Liabilities
Subject to Compromise.



(b)  Accounting for
Reorganization



The accompanying consolidated financial
statements of the Company has been prepared in accordance with the Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, and on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.



Condensed combined financial statements of the Companys Debtors and Non-Debtors are set forth below. The Companys Debtors include all entities that filed for protection from creditors in fiscal 2003.
Non-Debtors include the Companys wholly owned subsidiaries Park Infusion Services LP, Park Medicine Man, LP and Doughertys Pharmacy, Inc., which were generally not affected by the bankruptcy filings. These statements reflect the
Companys financial condition and results of operations on a combined basis, including certain amounts and transactions between the Companys Debtors and Non-Debtors which are eliminated in the consolidated financial statements.



74



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Combined Statement of Operations

Year Ended June 30, 2004

(in thousands)

|                           |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|-------------------------- |  | ------- | ------ | - | ----------- | - | --------------------------------- |  | ------------ | - |  | - | ------ | -
|                           |  | Debtors |        |   | Non-Debtors |   | Consolidation/ EliminationEntries |  | Consolidated |  
|Operating revenues         |  | $       |       |   |             | $ | 29,486                            |  | $            |  |  | $ | 29,486 |  
|Cost of goods sold         |  |         |       |   |             |   | 19,052                            |  |              |  |  |   | 19,052 |  
|Operating expenses         |  |         | 1,512  |   |             |   | 7,954                             |  |              |  |  |   | 9,466  |  
|                           |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Operating (loss) income    |  | $       | (1,512 | ) |             | $ | 2,480                             |  | $            |  |  | $ | 968    |  
|                           |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Other (expense) income net |  |         | (323   | ) |             |   | 125                               |  |              |  |  |   | (198   | )
|Reorganization items, net  |  |         | (516   | ) |             |   |                                  |  |              |  |  |   | (516   | )
|                           |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Net (loss) income          |  | $       | (2,351 | ) |             | $ | 2,605                             |  | $            |  |  | $ | 254    |  
|                           |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  



Condensed Combined Balance Sheet

June 30, 2004

(in thousands)

|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  
|----------------------------------------- |  | ------- | ------ | - | ----------- | - | --------------------------------- |  | - | ------------ | - |  | - | ------ | -
|                                          |  | Debtors |        |   | Non-Debtors |   | Consolidation/ EliminationEntries |  |   | Consolidated |  
|Current Assets                            |  | $       | 1,071  |   |             | $ | 7,893                             |  | $ |             |   |  | $ | 8,964  |  
|Non-Current Assets                        |  |         | 2,860  |   |             |   | 989                               |  |   | (2,808       | ) |  |   | 1,041  |  
|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  
|Total Assets                              |  | $       | 3,931  |   |             | $ | 8,882                             |  | $ | (2,808       | ) |  | $ | 10,005 |  
|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  
|Current Liabilities                       |  | $       | 729    |   |             | $ | 5,276                             |  | $ |             |   |  | $ | 6,005  |  
|Liabilities Subject to Compromise         |  |         | 7,142  |   |             |   |                                  |  |   |             |   |  |   | 7,142  |  
|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  
|Total Liabilities                         |  | $       | 7,871  |   |             | $ | 5,276                             |  | $ |             |   |  | $ | 13,147 |  
|Stockholders Deficit                     |  |         | (3,940 | ) |             |   | 3,606                             |  |   | (2,808       | ) |  |   | (3,142 | )
|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  
|Total Liabilities & Stockholders Deficit |  | $       | 3,931  |   |             | $ | 8,882                             |  | $ | (2,808       | ) |  | $ | 10,005 |  
|                                          |  |         |        |   |             |   |                                   |  |   |              |   |  |   |        |  



Condensed Combined Statement of
Operations

Year Ended June 30, 2003

(in
thousands)

|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|--------------------------------------------- |  | ------- | ------ | - | ----------- | - | --------------------------------- |  | ------------ | - |  | - | ------ | -
|                                              |  | Debtors |        |   | Non-Debtors |   | Consolidation/ EliminationEntries |  | Consolidated |  
|Operating revenues                            |  | $       |       |   |             | $ | 39,368                            |  | $            |  |  | $ | 39,368 |  
|Cost of goods sold                            |  |         |       |   |             |   | 25,363                            |  |              |  |  |   | 25,363 |  
|Operating expenses                            |  |         | 1,552  |   |             |   | 12,759                            |  |              |  |  |   | 14,311 |  
|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Operating (loss) income                       |  | $       | (1,552 | ) |             | $ | 1,246                             |  | $            |  |  | $ | (306   | )
|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Other (expense) income net                    |  |         | (623   | ) |             |   | 11                                |  |              |  |  |   | (612   | )
|Reorganization items, net                     |  |         | (49    | ) |             |   |                                  |  |              |  |  |   | (49    | )
|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|(Loss) income from continuing operations      |  |         | (2,224 | ) |             |   | 1,257                             |  |              |  |  |   | (967   | )
|Loss from discontinued operations, net of tax |  |         | (765   | ) |             |   |                                  |  |              |  |  |   | (765   | )
|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  
|Net (loss) income                             |  | $       | (2,989 | ) |             | $ | 1,257                             |  | $            |  |  | $ | (1,732 | )
|                                              |  |         |        |   |             |   |                                   |  |              |   |  |   |        |  



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Condensed Combined Balance Sheet

June 30, 2003

(in thousands)

|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  
|----------------------------------------- |  | ------- | ------ | - | ----------- | - | -------------------------------- |  | - | ------------ | - |  | - | ------ | -
|                                          |  | Debtors |        |   | Non-Debtors |   | Consolidation/EliminationEntries |  |   | Consolidated |  
|Current Assets                            |  | $       | 1,082  |   |             | $ | 7,591                            |  | $ |             |   |  | $ | 8,673  |  
|Non-Current Assets                        |  |         | 3,045  |   |             |   | 952                              |  |   | (2,813       | ) |  |   | 1,184  |  
|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  
|Total Assets                              |  | $       | 4,127  |   |             | $ | 8,543                            |  | $ | (2,813       | ) |  | $ | 9,857  |  
|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  
|Current Liabilities                       |  | $       | 649    |   |             | $ | 4,987                            |  | $ |             |   |  | $ | 5,636  |  
|Liabilities Subject to Compromise         |  |         | 7,602  |   |             |   |                                 |  |   |             |   |  |   | 7,602  |  
|Non-Current Liabilities                   |  |         | 27     |   |             |   |                                 |  |   |             |   |  |   | 27     |  
|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  
|Total Liabilities                         |  | $       | 8,278  |   |             | $ | 4,987                            |  | $ |             |   |  | $ | 13,265 |  
|Stockholders Deficit                     |  |         | (4,151 | ) |             |   | 3,556                            |  |   | (2,813       | ) |  |   | (3,408 | )
|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  
|Total Liabilities & Stockholders Deficit |  | $       | 4,127  |   |             | $ | 8,543                            |  | $ | (2,813       | ) |  | $ | 9,857  |  
|                                          |  |         |        |   |             |   |                                  |  |   |              |   |  |   |        |  



(c)  Use of
Estimates



The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates and those differences could be material. The most significant estimates made by the Company include the net realizable value of third-party receivables.



(d)  Financial Instruments



The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the
short-term maturities of these items.



(e)  Cash and Cash
Equivalents



The Company considers short-term highly
liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.



(f)  Revenue Recognition



Product sales and other revenue are reported at the estimated net realizable amounts expected to be received from third-party payers, institutional healthcare providers, individuals 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 healthcare services is recognized at the time services are provided. Revenue from wholesale product
sales was recognized at the time of shipment.



A portion of
the Companys revenue is derived from governmental assistance programs, such as Medicare and Medicaid. Governmental programs pay for healthcare costs based on fee schedules and rates that are determined by the related governmental agency.
Medicare and Medicaid combined accounted for approximately 11%, 11% and 12% of consolidated revenue for the period from July 1, 2003 to March 24, 2004, and for the years ended June 30, 2003 and 2002, respectively. No other single customer or
third-party payer accounted for more than 10% of the Companys consolidated revenue during the periods presented.





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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(g)  Accounts Receivable



Accounts receivable consists primarily of amounts receivable from third-party payers (insurance companies and governmental
agencies) under various medical reimbursement programs, institutional healthcare providers, individuals and others. 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. The Company reduces its accounts receivable by an allowance for the amounts deemed to be uncollectible. In general, the Company provides an allowance for
retail pharmacy accounts aged in excess of 60 days and infusion pharmacy accounts aged in excess of 180 days. Accounts that management has ultimately determined to be uncollectible are written off against the allowance. The Company does not
generally require collateral in connection with credit sales to its customers.



Accounts receivable from Medicare and Medicaid combined were approximately 13% and 13% of total accounts receivable at March 24, 2004 and June 30, 2003, respectively. No other single customer or third-party payer
accounted for more than 10% of the Companys consolidated accounts receivable for the periods presented. Concentrations of credit risk associated with individual customer accounts receivable are considered minimal due to the Companys
diverse customer base.



(h)  Inventories



Inventories consists principally of finished goods held for resale, valued
at the lower of cost, using the first-in, first-out method, or market.



(i)  Property and Equipment



Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives, generally five to seven years, of the underlying assets. Leasehold improvements
are depreciated over the expected terms of the underlying leases. Depreciation expense for the period from July 1, 2003 to March 24, 2004, and for the years ended June 30, 2003 and 2002 was approximately $126,300, $216,200 and $241,000,
respectively. The costs of repairs and maintenance are expensed as incurred.



The Company periodically reviews the carrying amount of property and equipment for impairment. During fiscal year 2002, the Company determined that expected future cash flows of certain pharmacy equipment did not
exceed its carrying amount and recorded a loss of approximately $84,200, which is included in other income, net.



(j)  Software Costs



The Company accounts for costs incurred in connection with internally developed software or software purchased for internal use in accordance with the
provisions of Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company capitalized eligible costs, primarily the direct cost of obtaining software and payroll-related costs,
incurred in connection with its development of an Internet-based pharmaceutical care information system (the Rx-Pro software).



In December 2001, the Company determined that a significant market for Internet-based healthcare systems may not emerge and it was necessary to suspend
the development of the Rx-Pro software. At that time, management committed to a plan for sale of the RX-Pro software and the Company wrote down the software to its estimated fair value of $100,000 (based primarily on discussions with potential
buyers). As a result, the Company recorded a loss of $2,495,740, which is included in discontinued operations for the year ended June 30, 2002. Based on the subsequent inability to complete a sale, management determined it was necessary to revise
its



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



estimate of fair value. Accordingly, the Company wrote down the carrying amount of this asset to an estimated fair value of $0 as of June 30, 2002 and
recorded an additional loss of $100,000, which is included in discontinued operations.



(k)  Goodwill



Goodwill is the
excess of cost over the fair value of net assets acquired in business combinations accounted for under the purchase method. Through June 30, 2002, goodwill was stated at historical cost and amortized on a straight-line basis over estimated lives of
five to 20 years. Prior to July 1, 2002, the Company reviewed its goodwill for impairment whenever events and changes in circumstances indicated that the carrying amount of goodwill may not be recoverable based on an evaluation of undiscounted
expected future cash flows of the acquired business. If total future cash flows were less than the carrying amount, goodwill was reduced to its estimated fair value and an impairment loss was recorded. During the year ended June 30, 2002, the
Company wrote down the carrying amount of goodwill and recorded a loss of approximately $2,600,500, which is included in discontinued operations.



Effective July 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. In accordance with SFAS No. 142, goodwill was no longer amortized, but was instead tested for impairment at least annually or whenever events and changes in circumstances indicate that the value of goodwill may be impaired. SFAS No. 142
prescribes a two-step fair value based approach for testing impairment which differs from the Companys prior policy, which was permitted under earlier accounting standards, of using future cash flows to determine if goodwill is recoverable.



Upon the Companys filing for bankruptcy in December
2002, management determined that the Company may not be able to generate sufficient cash flow to operate and expand the businesses to which goodwill had been assigned and that these businesses may have to be sold in the future. Furthermore,
management estimated that if the underlying businesses were sold, goodwill carrying amounts may not be recoverable. As a result, management determined that goodwill was impaired and the Company recorded a loss of approximately $2,035,800 ($1,003,800
of which is included in discontinued operations) in the year ended June 30, 2003.



The following table adjusts net income (loss) and earnings per share as if SFAS No. 142 had been adopted for all periods presented.



|                                |  |                                        |         |                      |   |            |   |  |   |            |  
|------------------------------- |  | -------------------------------------- | ------- | -------------------- | - | ---------- | - |  | - | ---------- | -
|                                |  | PeriodFromJuly 1, 2003toMarch 24, 2004 |         | Years Ended June 30, |  
|                                |  |                                        | 2003    |                      |   | 2002       |  
|Net income (loss):              |  |                                        |         |                      |   |            |   |  |   |            |  
|As reportednet income (loss)   |  | $                                      | 253,265 |                      | $ | (1,732,058 | ) |  | $ | (9,945,028 | )
|Add back: Goodwill amortization |  |                                        |        |                      |   |           |   |  |   | 232,560    |  
|                                |  |                                        |         |                      |   |            |   |  |   |            |  
|As adjustednet income (loss)   |  | $                                      | 253,265 |                      |   | (1,732,058 | ) |  |   | (9,712,468 | )
|                                |  |                                        |         |                      |   |            |   |  |   |            |  
|Earnings per share:             |  |                                        |         |                      |   |            |   |  |   |            |  
|As reportedbasic and diluted   |  | $                                      | 0.01    |                      | $ | (0.05      | ) |  | $ | (0.28      | )
|Add back: Goodwill amortization |  |                                        |        |                      |   |           |   |  |   | 0.01       |  
|                                |  |                                        |         |                      |   |            |   |  |   |            |  
|As adjustedbasic and diluted   |  | $                                      | 0.01    |                      | $ | (0.05      | ) |  | $ | (0.27      | )
|                                |  |                                        |         |                      |   |            |   |  |   |            |  



(l)  Advertising
Costs



Advertising costs are expensed as incurred. Total
advertising expenses were approximately $10,100, $27,300 and $190,200 for the period ended March 24, 2004, and for the fiscal years ended June 30, 2003 and 2002, respectively.



78



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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



(m)  Income Taxes



The Company accounts for income taxes using the liability method whereby deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates and laws which will be in effect for the year in which the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to amounts expected to be realized.



(n)  Per Share Data



Basic earnings per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed using the weighted average number of common
and common stock equivalent shares outstanding during the period. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive.



(o)  Stock-Based Compensation



Prior to the Company filing for bankruptcy, at which time all outstanding stock options became worthless, it applied SFAS
No. 123, Accounting for Stock-Based Compensation, which establishes financial accounting and reporting standards for stock-based employee compensation plans. The provisions of SFAS 123 allow companies to continue to follow the intrinsic-value
method prescribed by APB No. 25, Accounting for Stock Issued to Employees, and requires disclosure of the pro forma effects on net income and earnings per share had the fair value of the employee stock options granted been expensed as
prescribed by SFAS 123. The Company elected to continue to use APB 25 and related interpretations in accounting for its employee stock options. For awards that generate compensation expense as defined under APB 25, the Company recognized the expense
over the vesting period of the award (see Note 10).



3.Liquidity



In February 2002, the Companys principal supplier suspended its extension of credit and required that it pay for all inventory purchases on a cash-on-delivery basis. Also, on August 31, 2002, the Company failed
to make a scheduled payment under its bank credit facility and was placed in default under its loan agreement. In response to these adverse circumstances, the Company filed a voluntary petition for protection in bankruptcy on December 2, 2002. At
that time, the Companys liabilities included approximately $5,500,000 related to the bank credit facility and approximately $6,000,000 in past due trade payables to the supplier. During the year ended June 30, 2003, the Company divested
certain of its subsidiaries and implemented cost control measures. As more fully discussed in Note 14, on March 4, 2004, the Bankruptcy Court confirmed the Companys reorganization plan. Subsequently, on March 24, 2004 concurrent with an Asset
Purchase Agreement, whereby substantially all the Companys assets were acquired and its liabilities were assumed by Doughertys Holdings, Inc, a newly formed subsidiary of Ascendant Solutions, Inc., the Company settled its obligation to
the supplier for approximately $1,850,000 and refinanced its bank credit facility through March 2007. The Company may continue to implement a variety of measures in order to improve its overall profitability and enhance its liquidity position.



The Companys (or its successors) need to raise
additional financing and the Companys ability to generate cash flow from operations sufficient to make scheduled payments on its debts as they become due will depend on its future performance and the Companys ability to successfully
implement business and growth strategies. The Companys performance will also be affected by prevailing economic conditions. Many of these factors are beyond the Companys control. If future cash flows and capital resources are
insufficient to meet the Companys debt obligations and commitments, the Company may be forced to reduce or delay activities and capital expenditures, obtain additional equity capital or restructure or refinance its debt. In the event that the
Company is



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



unable to do so, the Company may be left without sufficient liquidity and it may not be able to meet its debt service requirements. Please see Note 14 with
respect to the Companys emergence from bankruptcy proceedings and its concurrent recapitalization in March 2004.



4.Business Combinations



Business combinations have been accounted for using the purchase method of accounting. The results of operations of the acquired businesses have been
included in the consolidated financial statements from their respective dates of acquisition. Net assets of the businesses acquired are recorded at their estimated fair value at the date of acquisition. The excess of the purchase price over the fair
value of tangible and identifiable intangible net assets acquired was accounted for as goodwill in the Companys consolidated balance sheet. As discussed in Note 2 (k), these goodwill amounts were subsequently written off in the 2002 and 2003
fiscal years.



5.Dispositions And
Discontinued Operations



Year Ended June 30, 2002



Compass



In July 2001, the Company closed the Compass pharmacy and its assets were
relocated to the Doughertys pharmacy. Accordingly, the Company recorded a loss of approximately $124,400 in connection with the write-off of unamortized goodwill, which is included in impairment of goodwill in the accompanying consolidated
statements of operations.



Pharmacy Components



In December 2001, the Company closed its Ravens and
Medicine Man  Dickinson pharmacy locations. In connection with these closures, the Company recorded a gain on disposal of approximately $214,600, representing proceeds of $465,000 received from the sale of customer prescription lists reduced
by the carrying amount of the net assets disposed and closure costs incurred of approximately $250,400. The gain on disposal of Ravens and Medicine ManDickinson and results of operations of these locations are included in discontinued
operations in the accompanying consolidated statements of operations.



Rx-Pro Software



In December 2001, the Company
suspended the development and held for sale an Internet-based pharmaceutical care information system. The Company wrote down capitalized software costs to their estimated fair value and recorded a loss of approximately $2,595,700 (see Note 2(j)).
The Company also recorded a loss of approximately $134,600 in connection with the write-off of unamortized goodwill. These losses and the results of operations of the Rx-Pro software are included in discontinued operations in the accompanying
consolidated statements of operations.



Year Ended June 30, 2003



Rx-Pro Prescription Management



In September 2002, the Company sold the prescription management services and
certain assets of Rx-Pro for cash consideration of $10,000. In connection with this sale, the Company recorded a loss on disposal of approximately $24,000. The loss on disposal of Rx-Pro and the results of its operations are included in discontinued
operations in the accompanying consolidated statement of operations.



The software development operations of Rx-Pro were previously reported as a discontinued operation during fiscal year end June 30, 2002.





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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



MJN Enterprises, Inc.



In November 2002, the Company closed Total Health Care and its assets were relocated to Doughertys Pharmacy.
Accordingly, the Company recorded a loss of approximately $26,000 in connection with the disposal of assets, which is included in loss on discontinued operations in the accompanying consolidated statements of operations.



Total Pharmacy Supply, Inc.



In April 2003, the Company sold the stock, assets and liabilities of Total
Pharmacy Supply for cash consideration of approximately $325,000. In connection with this sale, the Company recorded a gain on disposal of approximately $44,000. The gain on disposal and results of its operations are included in discontinued
operations in the accompanying consolidated statements of operations.



Summarized information of discontinued operations is as follows:



|                                                                                                 |  |                      |           |   |      |   |            |  
|------------------------------------------------------------------------------------------------ |  | -------------------- | --------- | - | ---- | - | ---------- | -
|                                                                                                 |  | Years Ended June 30, |          
|                                                                                                 |  | 2003                 |           |   | 2002 |  
|Revenues:                                                                                        |  |                      |           |   |      |   |            |  
|Pharmacy components                                                                              |  | $                    |          |   |      | $ | 3,346,003  |  
|Rx-Pro                                                                                           |  |                      | 102,528   |   |      |   | 122,789    |  
|Total Health Care                                                                                |  |                      | 1,402,259 |   |      |   | 6,678,938  |  
|Total Pharmacy Supply                                                                            |  |                      | 2,613,788 |   |      |   | 3,235,221  |  
|                                                                                                 |  |                      |           |   |      |   |            |  
|Total revenues                                                                                   |  | $                    | 4,118,575 |   |      | $ | 13,382,951 |  
|                                                                                                 |  |                      |           |   |      |   |            |  
|Income (loss) from discontinued operations:                                                      |  |                      |           |   |      |   |            |  
|Pharmacy components, net of income tax expense of $26,000 in 2002 and benefit of $26,000 in 2001 |  | $                    |          |   |      | $ | (614,068   | )
|                                                                                                 |  |                      |           |   |      |   | (3,158,511 | )
|Rx-Pro, no tax effect                                                                            |  |                      | 185,718   |   |      |   | (2,752,201 | )
|                                                                                                 |  |                      |           |   |      |   | (3,030,245 | )
|Total Health Care, no tax effect                                                                 |  |                      | (32,244   | ) |      |   | (2,752,201 | )
|                                                                                                 |  |                      |           |   |      |   | (143,646   | )
|                                                                                                 |  |                      |           |   |      |   |            |  
|Total Pharmacy Supply, no tax effect                                                             |  |                      | (912,634  | ) |      |   | (2,752,201 | )
|                                                                                                 |  |                      |           |   |      |   |            |  
|                                                                                                 |  |                      |           |   |      |   | (6,946,470 | )
|                                                                                                 |  |                      |           |   |      |   |            |  
|                                                                                                 |  |                      | (759,160  | ) |      |   | (2,752,201 | )
|                                                                                                 |  |                      |           |   |      |   |            |  
|Gain (loss) on disposals:                                                                        |  |                      |           |   |      |   |            |  
|Gain on disposal of pharmacy components, no tax effect                                           |  |                      |          |   |      |   | 214,574    |  
|Loss on disposal of Rx-Pro                                                                       |  |                      | (23,957   | ) |      |   |           |  
|Loss on disposal of Total Health Care                                                            |  |                      | (25,554   | ) |      |   |           |  
|Gain on disposal of Total Pharmacy Supply                                                        |  |                      | 43,767    |   |      |   |           |  
|                                                                                                 |  |                      |           |   |      |   |            |  
|                                                                                                 |  |                      | (5,744    | ) |      |   | 214,574    |  
|                                                                                                 |  |                      |           |   |      |   |            |  
|Income (loss) from discontinued operations, net                                                  |  | $                    | (764,904  | ) |      | $ | (6,731,896 | )
|                                                                                                 |  |                      |           |   |      |   |            |  





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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



6.Balance Sheet Information



Property and Equipment



Property and equipment consisted of the following:



|                                               |  |           |            |   |          |   |            |  
|---------------------------------------------- |  | --------- | ---------- | - | -------- | - | ---------- | -
|                                               |  | March 24, |            |   | June 30, |  
|                                               |  | 2004      |            |   | 2003     |  
|Furniture, fixture and equipment               |  | $         | 812,370    |   |          | $ | 907,753    |  
|Computer equipment                             |  |           | 350,424    |   |          |   | 383,742    |  
|Leasehold improvements                         |  |           | 792,614    |   |          |   | 792,615    |  
|Vehicles                                       |  |           | 41,093     |   |          |   | 161,473    |  
|                                               |  |           |            |   |          |   |            |  
|                                               |  |           | 1,996,501  |   |          |   | 2,245,583  |  
|Less accumulated depreciation and amortization |  |           | (1,101,050 | ) |          |   | (1,214,373 | )
|                                               |  |           |            |   |          |   |            |  
|                                               |  | $         | 895,451    |   |          | $ | 1,031,210  |  
|                                               |  |           |            |   |          |   |            |  





Accrued Liabilities



Accrued liabilities consisted of the following:



|                              |  |           |         |          |   |        
|----------------------------- |  | --------- | ------- | -------- | - | -------
|                              |  | March 24, |         | June 30,
|                              |  | 2004      |         | 2003    
|Payroll and employee benefits |  | $         | 542,491 |          | $ | 603,283
|Insurance cost                |  |           |        |          |   | 119,892
|Deferred income               |  |           |        |          |   | 126,600
|Legal fees                    |  |           | 243,400 |          |   |       
|Sales and property taxes      |  |           | 46,521  |          |   | 66,192 
|Other                         |  |           | 14,113  |          |   | 18,039 
|                              |  |           |         |          |   |        
|                              |  | $         | 846,525 |          | $ | 934,006
|                              |  |           |         |          |   |        



Liabilities Subject to Compromise



Liabilities subject to compromise consisted of the
following:



|                                     |  |           |           |          |   |          
|------------------------------------ |  | --------- | --------- | -------- | - | ---------
|                                     |  | March 24, |           | June 30,
|                                     |  | 2004      |           | 2003    
|Bank of Texas, N.A. credit facility  |  | $         | 5,629,538 |          | $ | 6,090,085
|Trade payables to AmerisourceBergen  |  |           | 1,299,010 |          |   | 1,299,010
|Trade and other miscellaneous claims |  |           | 213,552   |          |   | 213,552  
|                                     |  |           |           |          |   |          
|                                     |  | $         | 7,142,100 |          | $ | 7,602,647
|                                     |  |           |           |          |   |          



7.Credit Facility



At June 30, 2002, the Company had a revolving line of credit and term note (Credit Facility) with the Bank of Texas, N.A. (the Bank). On July 10, 2002, the Company obtained a renewal and
extension of the Credit Facility. The revised credit facility limited the Company to total borrowings of $5,778,831, incurred interest at the prime rate plus 7%, required monthly term note payments of $69,154 and was due September 30,



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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2002. The Credit Facility required the Company to maintain certain financial covenant ratios which the Company was not in compliance with at June 30, 2002.
On August 31, 2002, the Company failed to make a scheduled principal and interest payment to the Bank, as required under the revised credit facility, and was placed in default under the loan agreement. In January 2003, the Bank agreed to modify the
loan interest rate to prime plus 5% and, as authorized by the Bankruptcy Court, the Company began making monthly interest payments. In July 2003, as ordered by the Bankruptcy Court, the Company made a payment of approximately $317,000, applied to
the loan principal, out of the proceeds received from the sale of Total Pharmacy Supply (Note 5). As more fully discussed in Note 14, on March 24, 2004, the Company refinanced total borrowings and accrued interest outstanding under the Credit
Facility through March 2007.



At March 24, 2004 and June
30, 2003, outstanding principal balances of $5,459,020 and $5,776,385, respectively; and unpaid accrued interest of $170,518 and $313,700, respectively have been classified as liabilities subject to compromise in the accompanying consolidated
balance sheets.



8.Income
Taxes



Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.



The significant components of the Companys deferred tax assets and liabilities were as follows:



|                                     |  |                |            |   |              |   |            |  
|------------------------------------ |  | -------------- | ---------- | - | ------------ | - | ---------- | -
|                                     |  | March 24, 2004 |            |   | June 30 2003 |  
|Deferred tax assets:                 |  |                |            |   |              |   |            |  
|Allowance for doubtful accounts      |  | $              | 1,083,800  |   |              | $ | 1,035,900  |  
|Capitalized inventory costs          |  |                | 88,900     |   |              |   | 117,400    |  
|Accrued expenses, reserves and other |  |                | 255,700    |   |              |   | 489,500    |  
|Deferred compensation                |  |                | 11,900     |   |              |   | 28,400     |  
|Net operating loss carryforwards     |  |                | 977,500    |   |              |   | 841,200    |  
|                                     |  |                |            |   |              |   |            |  
|Total deferred tax assets            |  |                | 2,417,800  |   |              |   | 2,512,400  |  
|                                     |  |                |            |   |              |   |            |  
|Deferred tax liabilities:            |  |                |            |   |              |   |            |  
|Property and equipment depreciation  |  |                | (37,700    | ) |              |   | (47,900    | )
|                                     |  |                |            |   |              |   |            |  
|Net deferred tax asset               |  |                | 2,380,100  |   |              |   | 2,464,500  |  
|                                     |  |                |            |   |              |   |            |  
|Valuation allowance                  |  |                | (2,380,100 | ) |              |   | (2,464,500 | )
|                                     |  |                |            |   |              |   |            |  
|Net deferred taxes                   |  | $              |            |   |              | $ |            |  
|                                     |  |                |            |   |              |   |            |  



The net change in the
valuation allowance for deferred tax assets during the period ended March 24, 2004 and the year ended June 30, 2003 was $84,400 and $376,200, respectively.



At March 24, 2004, the Company had available NOL carryforward of approximately $2,500,000 which may be used to reduce future taxable income, which, if not
utilized, will fully expire in fiscal year 2016 through 2023.





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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Income tax expense (benefit) related to continuing operations for the year ended June 30, 2002
consisted of the following. There was no income tax benefit or expense in 2003 or 2004.



|                                |  |                          |          |  
|------------------------------- |  | ------------------------ | -------- | -
|                                |  | Year Ended June 30, 2002 |         
|Current tax (benefit) expense:  |  |                          |          |  
|Federal                         |  | $                        | (400,400 | )
|State                           |  |                          |         |  
|                                |  |                          |          |  
|Total current                   |  |                          | (400,400 | )
|                                |  |                          |          |  
|Deferred tax (benefit) expense: |  |                          |          |  
|Federal                         |  |                          | 277,215  |  
|State                           |  |                          | 28,541   |  
|                                |  |                          |          |  
|Total deferred                  |  |                          | 305,756  |  
|                                |  |                          |          |  
|Income tax (benefit) expense    |  | $                        | (94,644  | )
|                                |  |                          |          |  



The differences
between income tax expense (benefit) at the federal statutory rate and the Companys effective tax rate were as follows:



|                                                    |  |                             |      |  |                      |      |  |     |   
|--------------------------------------------------- |  | --------------------------- | ---- |  | -------------------- | ---- |  | --- | --
|                                                    |  | Period Ended March 24, 2004 |      |  | Years Ended June 30, |     
|                                                    |  |                             | 2003 |  |                      | 2002 | 
|Federal statutory rate                              |  | 34                          | %    |  | 34                   | %    |  | 34  | % 
|Non-deductible goodwill amortization and impairment |  |                            | %    |  | 12                   | %    |  | 12  | % 
|Net operating loss carryforwards                    |  | (34                         | %)   |  | (46                  | %)   |  | (47 | )%
|                                                    |  |                             |      |  |                      |      |  |     |   
|Effective tax rate                                  |  |                            | %    |  |                     | %    |  | (1  | )%
|                                                    |  |                             |      |  |                      |      |  |     |   



|9. |  | Commitments And Contingencies
|-- |  | -----------------------------



Operating Leases



The Companys pharmacy and corporate office facilities and certain pharmacy equipment are leased 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 leases was approximately $560,000, $978,000 and $987,000 for the period ended March
24, 2004, and the years ended June 30, 2003 and 2002, respectively.



Future minimum lease payments under non-cancelable operating leases are as follows:



|                     |  |   |          
|-------------------- |  | - | ---------
|Years ended June 30, |  |  
|2004                 |  | $ | 831,000  
|2005                 |  |   | 841,000  
|2006                 |  |   | 756,000  
|2007                 |  |   | 493,000  
|2008                 |  |   | 400,000  
|Thereafter           |  |   | 188,000  
|                     |  |   |          
|                     |  | $ | 3,509,000
|                     |  |   |          





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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



General



The Company is subject to claims and legal actions which may arise in the ordinary course of business. The Company is not
aware of any matters that may have a material impact on its consolidated financial position or results of operations, other than those items described above.



|10. |  | Stockholders Equity
|--- |  | --------------------



Preferred Stock



The Company has authorized 250,000,000 shares of preferred stock, which may be issued in series with rights and preferences as designated by the
Companys board of directors.



Series A Preferred Stock



The Company has designated 5,000,000 shares of its
preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into ten shares of the Companys common stock. The Series A Preferred Stock does not carry a dividend, and includes a preference in the event of
involuntary liquidation in the amount of $10 per share. During the year ended June 30, 2002, 411,083 shares of the Companys Series A Preferred Stock were converted into 4,110,830 shares of common stock.



Stock Option Plan



As of March 24, 2004 and June 30, 2003, the Company believes all outstanding
stock options have no value and any disclosure of stock option activity would be misleading. Therefore, the following disclosures apply only to the year ended June 30, 2002, which was prior to the Company filing for bankruptcy.



Effective September 19, 2000, the Companys Board of Directors and the
stockholders adopted the Companys 2000 Stock Option Plan (the 2000 Plan), whereby the Company may grant incentive or non-qualified stock options to purchase up to 8,659,465 shares of the Companys common stock, with a maximum
number of incentive options limited to 4,000,000 shares.



Under
the 2000 Plan, incentive stock options may be granted to employees of the Company. Non-qualified stock options may be granted to employees, consultants or directors of the Company. Terms and conditions of the Companys stock options, including
exercise price and the period in which the options are exercisable, generally are at the discretion of the Board of Directors, except that all options are exercisable for a period of no more than ten years.



Options granted during fiscal year 2002 were issued with an exercise price
equal to, or in excess of, the quoted market price of the Companys common stock on the date of grant, most options vest over a four to five year period and expire, if unexercised, twelve months following the final vesting date. 1,200,000
options granted during fiscal year 2002 vested immediately. All options granted during fiscal year 2001 were issued with an exercise price of $0.75, most options vest over a three to four year period and expire, if unexercised, twelve months
following the final vesting date. 195,000 options granted during fiscal year 2001 vested immediately.



A summary of the stock options transactions is as follows:



|                       |  |                   |   |  |                                 |     
|---------------------- |  | ----------------- | - |  | ------------------------------- | ----
|                       |  | Number of Options |   |  | Weighted Average Exercise Price
|Balance, June 30, 2001 |  | 5,836,832         |   |  | $                               | 0.75
|Granted                |  | 3,258,000         |   |  | $                               | 0.46
|Exercised              |  |                  |   |  | $                               |    
|Canceled or expired    |  | (4,717,500        | ) |  | $                               | 0.74
|                       |  |                   |   |  |                                 |     
|Balance, June 30, 2002 |  | 4,377,332         |   |  | $                               | 0.54
|                       |  |                   |   |  |                                 |     



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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table summarizes information about options outstanding as of June 30, 2002:



|                         |  |                     |  |                                         |  |                                 |      |                    |           |                                 |   |     
|------------------------ |  | ------------------- |  | --------------------------------------- |  | ------------------------------- | ---- | ------------------ | --------- | ------------------------------- | - | ----
|Options Outstanding      |  | Options Exercisable
|Range of Exercise Prices |  | Number Outstanding  |  | Weighted Average Remaining Life (Years) |  | Weighted Average Exercise Price |      | Number Exercisable |           | Weighted Average Exercise Price
|Less than $0.75          |  | 2,568,000           |  | 3.9                                     |  | $                               | 0.39 |                    | 1,563,668 |                                 |   | 0.34
|$0.75                    |  | 1,809,332           |  | 3.1                                     |  | $                               | 0.75 |                    | 983,446   |                                 |   | 0.75
|                         |  |                     |  |                                         |  |                                 |      |                    |           |                                 |   |     
|                         |  | 4,377,332           |  | 3.5                                     |  | $                               | 0.54 |                    | 2,547,114 |                                 | $ | 0.50
|                         |  |                     |  |                                         |  |                                 |      |                    |           |                                 |   |     



The weighted average
fair value at the date of grant of options granted under the Plan were as follows:



|                                                      |  |                         |     
|----------------------------------------------------- |  | ----------------------- | ----
|                                                      |  | Year Ended June 30,2002
|Options with exercise price less than market price    |  | $                       |    
|                                                      |  |                         |     
|Options with exercise price equal to market price     |  | $                       | 0.29
|                                                      |  |                         |     
|Options with exercise price greater than market price |  | $                       | 0.08
|                                                      |  |                         |     



Stock-Based
Compensation and Pro Forma Disclosures



The Company
applies APB 25 and related interpretations in accounting for employee stock options, which requires compensation expense be recognized for grants of stock options when the quoted market price of the Companys common stock on the grant dates
exceeds an options exercise prices.The Company did not grant any stock options with an exercise price less than the quoted market price of the Companys common stock on the grant date during fiscal year 2002. However, the Company
granted stock options with an exercise price less than the quoted market price of the Companys common stock on the grant date in prior years and recorded deferred compensation and recognized the remaining compensation expense over the vesting
period.



Under SFAS 123, employee stock options are valued at
the date of grant using the Black-Scholes option pricing model, and are amortized to expense over the options vesting period. Had compensation expense been determined based on the fair value at the grant dates of these options pursuant to the
employee compensation provisions of SFAS 123, the Companys net loss and loss per share, on a pro forma basis, would have been as follows:



|                              |  |                         |             |  
|----------------------------- |  | ----------------------- | ----------- | -
|                              |  | Year EndedJune 30, 2002 |            
|Net loss:                     |  |                         |             |  
|as reported                   |  | $                       | (9,945,028  | )
|                              |  |                         |             |  
|Pro forma                     |  | $                       | (10,371,873 | )
|                              |  |                         |             |  
|Net loss per share:           |  |                         |             |  
|as reportedbasic and diluted |  | $                       | (0.28       | )
|                              |  |                         |             |  
|Pro formabasic and diluted   |  | $                       | (0.29       | )
|                              |  |                         |             |  





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##### Index to Financial Statements

PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The fair values of stock options granted during fiscal year 2002 were estimated on the dates of grant
using the Black-Scholes option-pricing model with the following weighted average assumptions:



|               |  |        
|-------------- |  | -------
|Volatility     |  | 118%   
|Interest rate  |  | 2.25%  
|Dividend yield |  |   %   
|Expected life  |  | 2 years



|11. |  | Earnings Per Share
|--- |  | ------------------



The weighted average share computation includes common stock equivalents for the Companys issued and outstanding Series A Preferred Stock. The
weighted average share computation also includes the dilutive effect of employee stock options granted in connection with the 2000 Plan. Outstanding stock options as of March 24, 2004 and as of June 30, 2003 and 2002 did not have a dilutive effect
because the average market price of the Companys common stock did not exceed the exercise prices of such stock options.



The following table sets forth the computation of basic and diluted earnings per share:



|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|---------------------------------------------------- |  | ------------------------------------- | ---------- | -------------------- | - | ---------- | ---- |  | - | ---------- | -
|                                                     |  | Period From July 1, 2003 to March 24, |            | Years Ended June 30, |  
|                                                     |  | 2004                                  |            | 2003                 |   |            | 2002 | 
|Numerator:                                           |  |                                       |            |                      |   |            |      |  |   |            |  
|Income (loss) from continuing operations             |  | $                                     | 253,265    |                      | $ | (967,154   | )    |  | $ | (3,213,132 | )
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Loss from discontinued operations                    |  | $                                     |           |                      | $ | (764,904   | )    |  | $ | (6,731,896 | )
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Net income (loss)                                    |  | $                                     | 253,265    |                      | $ | (1,732,058 | )    |  | $ | (9,945,028 | )
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Denominator:                                         |  |                                       |            |                      |   |            |      |  |   |            |  
|Weighted average common shares:                      |  |                                       |            |                      |   |            |      |  |   |            |  
|Common shares outstanding                            |  |                                       | 8,784,037  |                      |   | 8,784,037  |      |  |   | 8,784,037  |  
|Common share equivalents of Series A Preferred Stock |  |                                       | 27,251,393 |                      |   | 27,251,393 |      |  |   | 27,251,393 |  
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Basic weighted average shares                        |  |                                       | 36,035,430 |                      |   | 36,035,430 |      |  |   | 36,035,430 |  
|Effect of dilutive securities:                       |  |                                       |            |                      |   |            |      |  |   |            |  
|Employee stock options                               |  |                                       |           |                      |   |           |      |  |   |           |  
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Diluted weighted average common shares               |  |                                       | 36,035,430 |                      |   | 36,035,430 |      |  |   | 36,035,430 |  
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Income (loss) per sharebasic and diluted:           |  |                                       |            |                      |   |            |      |  |   |            |  
|Continuing operations                                |  | $                                     | 0.01       |                      | $ | (0.03      | )    |  | $ | (0.09      | )
|Discontinued operations                              |  | $                                     |           |                      | $ | (0.02      | )    |  | $ | (0.19      | )
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  
|Net income (loss)                                    |  | $                                     | 0.01       |                      | $ | (0.05      | )    |  | $ | (0.28      | )
|                                                     |  |                                       |            |                      |   |            |      |  |   |            |  



|12. |  | Employee Benefit Plan
|--- |  | ---------------------



The Company has a defined contribution retirement savings plan for the benefit of employees meeting certain eligibility requirements. Under the Plan,
participating employees may contribute a portion of their salary on a pre-tax basis. The Company previously matched 25% of every dollar contributed by employees, up to a maximum of 4% of the employees annual compensation. Matching
contributions by the Company to the plans were approximately $33,800 for the year ended June 30, 2002. The Company suspended its matching contributions after June 30, 2002.





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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|13. |  | Business Segment Information
|--- |  | ----------------------------



The Companys business segments are comprised of retail pharmacy operations (Pharmacy) and infusion pharmacy products and services
(Infusion).



Through its pharmacy operations, the
Company offers prescription and over-the-counter medications, durable medical products and other general merchandise, primarily to communities in and around the cities of Dallas/Fort Worth and Houston, Texas. Through pharmacies located in Dallas,
San Antonio, and Houston, Texas, the Company provides infusion medications, products and services to home healthcare and hospice patients.



The accompanying segment information does not include the operating results and assets of the Companys former Online Services and Non-Drug segments.
The Online Services segment had been comprised entirely of the operations of the Companys Rx-Pro.com, Inc. subsidiary which was sold in September 2002. The Non-Drug segment had been comprised entirely of the operations of the Companys
Total Pharmacy Supply, Inc. subsidiary which was sold in April 2003.



Management evaluates the performance of its operating segments based on segment earnings, which is defined as income before income taxes, interest and financing expense, depreciation and amortization.



Summarized segment information is as follows:



|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|------------------------------------------- |  | ------------------------------------- | ---------- | --- | -------------------- | - | ---------- | ---- |  | - | ---------- | ----
|                                            |  | Period From July 1, 2003 to March 24, |            |     | Years Ended June 30, |  
|                                            |  | 2004                                  |            |     | 2003                 |   |            | 2002 | 
|Segment Revenues:                           |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Pharmacy                                    |  |                                       | 20,182,800 |     |                      | $ | 28,933,600 |      |  | $ | 31,166,000 |     
|Infusion                                    |  |                                       | 9,302,900  |     |                      |   | 10,434,600 |      |  |   | 12,620,200 |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Total segment revenues                      |  | $                                     | 29,485,700 |     |                      | $ | 39,368,200 |      |  | $ | 43,786,200 |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Segment Earnings (Loss):                    |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Pharmacy                                    |  | $                                     | 1,056,500  |     |                      | $ | 885,300    |      |  | $ | 354,800    |     
|Infusion                                    |  |                                       | 1,034,400  | (a) |                      |   | 670,900    | (a)  |  |   | (503,300   | )(a)
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Total segment earnings (loss)               |  | $                                     | 2,090,900  |     |                      | $ | 1,556,200  |      |  | $ | (148,500   | )   
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Corporate expenses                          |  |                                       | (1,387,500 | )   |                      |   | (1,594,400 | )    |  |   | (2,240,000 | )   
|Interest and financing expense, net         |  |                                       | (323,800   | )   |                      |   | (734,000   | )    |  |   | (568,000   | )   
|Depreciation and amortization               |  |                                       | (126,300   | )   |                      |   | (195,000   | )    |  |   | (351,300   | )   
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Net income (loss) before income taxes       |  | $                                     | 253,300    |     |                      | $ | (967,100   | )    |  | $ | (3,307,800 | )   
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Segment Depreciation and Amortization:      |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Pharmacy                                    |  | $                                     | 59,700     |     |                      | $ | 87,900     |      |  | $ | 215,900    |     
|Infusion                                    |  |                                       | 48,300     |     |                      |   | 61,600     |      |  |   | 96,400     |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Total segment depreciation and amortization |  |                                       | 108,000    |     |                      |   | 149,500    |      |  |   | 312,300    |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Corporate                                   |  |                                       | 18,300     |     |                      |   | 45,500     |      |  |   | 39,000     |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     
|Total depreciation and amortization         |  | $                                     | 126,300    |     |                      | $ | 195,000    |      |  | $ | 351,300    |     
|                                            |  |                                       |            |     |                      |   |            |      |  |   |            |     

|(a) |  | Included in the results of the Infusion segment for the years ended June 30, 2003 and 2002 is approximately $1,032,000 related to impairment of goodwill associated with the
Companys Park Infusion pharmacies.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                          |  |                |            |                      |      |           |  |   |           
|----------------------------------------- |  | -------------- | ---------- | -------------------- | ---- | --------- |  | - | ----------
|                                          |  | March 24, 2004 |            | Years Ended June 30,
|                                          |  |                | 2003       |                      | 2002
|Segment Assets                            |  |                |            |                      |      |           |  |   |           
|Pharmacy                                  |  | $              | 4,676,100  |                      | $    | 5,179,600 |  | $ | 6,017,500 
|Infusion                                  |  |                | 4,205,500  |                      |      | 3,746,500 |  |   | 3,700,700 
|                                          |  |                |            |                      |      |           |  |   |           
|Total segment assets                      |  | $              | 8,881,600  |                      | $    | 8,926,100 |  | $ | 9,718,200 
|                                          |  |                |            |                      |      |           |  |   |           
|Discontinued RX-Pro                       |  | $              |           |                      | $    |          |  | $ | 469,300   
|Discontinued non-drug segment             |  |                |           |                      |      |          |  |   | 573,700   
|Corporate                                 |  |                | 1,123,200  |                      |      | 931,200   |  |   | 863,000   
|Goodwill and other intangible assets, net |  |                |            |                      |      |           |  |   | 2,035,800 
|                                          |  |                |            |                      |      |           |  |   |           
|Total assets                              |  | $              | 10,004,800 |                      | $    | 9,857,300 |  | $ | 13,660,000
|                                          |  |                |            |                      |      |           |  |   |           



14.Subsequent Events



On March 24, 2004, the Bankruptcy Court confirmed the Companys First Amended Joint Plan of Reorganization. In connection with the Bankruptcy Courts confirmation on March, 24, 2004, through a newly formed,
wholly-owned subsidiary, Doughertys Holdings, Inc. (DHI), substantially all of the Companys assets (Park Assets) were acquired by Ascendant Solutions, Inc. (Ascendant) pursuant to a Joint Plan and
Asset Purchase Agreement (the Agreement) entered into December 9, 2003 between the Company and DHI. The sold assets included all of the cash and certain other assets of the Company and all equity interests of its subsidiaries: (i)
Doughertys Pharmacy, Inc. (ii) Park Operating GP, LLC, (iii) Park LP Holdings, Inc., (iv) Park-Medicine Man GP, LLC, (v) Park Infusion Services, L.P., and (vi) Park-Medicine Man, L.P.



Ascendant acquired the Park Assets by investing, through DHI, approximately
$1,500,000 in cash and assumption by DHI of approximately $6,300,000 of the Companys debt. In addition, and pursuant to the Agreement, approximately $1,350,000 (including $1,100,000 due AmerisourceBergen Drug Corporation described below) of
acquired liabilities were paid at closing or through the period ended March 31, 2004.



In connection with the acquisition of the Park Assets, DHI entered into a new credit facility with the Bank of Texas, N.A. This new facility provides for three notes, totaling approximately $5,500,000. Each note bears
interest at 6% and matures in March 2007. Although DHI has committed to efforts to refinance the new facility with an alternate lender, DHI is obligated to make monthly payments (consisting of both principal and interest payments, as applicable) to
the Bank of Texas, N.A. of approximately $56,000. The new credit facility is secured by substantially all of the assets of DHI, including the stock of its operating subsidiaries.



In connection with the acquisition of the Park Assets, DHI entered into a three-year supply agreement with AmerisourceBergen
Drug Corporation (AmerisourceBergen) pursuant to which DHI agreed to purchase prescription and over-the-counter pharmaceuticals from AmerisourceBergen through March 2007. This supply agreement also provided DHI with pricing and payment
terms that are improved from those previously provided to the Company by AmerisourceBergen. In exchange for these improved terms, DHI has agreed to acquire 85% of its prescription pharmaceuticals and substantially all of its generic pharmaceutical
products from AmerisourceBergen and agreed to minimum monthly purchases of $900,000. AmerisourceBergen was also a creditor of the Company and certain of its operating non-debtor subsidiaries. In connection with the Chapter 11 bankruptcy proceeding
(see Note 1), AmerisourceBergen agreed to accept a cash payment of approximately



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PARK PHARMACY CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



$1,100,000 and a promissory note in the amount of approximately $750,000 payable by DHI as complete satisfaction of approximately $5,400,000 in past-due
trade payables previously owing to AmerisourceBergen. The promissory note is payable in monthly installments of $6,329 (using a 15-year amortization schedule and 6% interest rate) with a final payment of $576,000 due in March 2009.



***************



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REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM



The Board of Directors

The Staubach Company  West, Inc.

Newport Beach, California



We have audited the accompanying balance sheets of The Staubach Company
 West, Inc. (the Company) as of December 31, 2003 and 2002 and the related statements of income, stockholders deficit and cash flows for the years then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of The Staubach Company  West, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.



/s/ BDO Seidman, LLP

Dallas, Texas

June 30, 2004



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THE STAUBACH COMPANY  WEST, INC.

BALANCE SHEETS



|                                                                            |  |              |            |   |      |   |            |  
|--------------------------------------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                                                            |  | December 31, |           
|                                                                            |  | 2003         |            |   | 2002 |  
|Assets                                                                      |  |              |            |   |      |   |            |  
|Current assets                                                              |  |              |            |   |      |   |            |  
|Cash and cash equivalents                                                   |  | $            | 362,688    |   |      | $ | 1,072,135  |  
|Accounts receivable                                                         |  |              | 2,551,116  |   |      |   | 884,917    |  
|Related party receivables                                                   |  |              | 15,534     |   |      |   | 295,909    |  
|Deferred expenses                                                           |  |              | 128,420    |   |      |   | 128 110    |  
|Prepaid expenses                                                            |  |              |           |   |      |   | 51,663     |  
|                                                                            |  |              |            |   |      |   |            |  
|Total current assets                                                        |  |              | 3,057,758  |   |      |   | 2,432,734  |  
|                                                                            |  |              |            |   |      |   |            |  
|Property, plant and equipment,at cost:                                      |  |              |            |   |      |   |            |  
|Computer equipment and software                                             |  |              | 367,347    |   |      |   | 344,860    |  
|Automobiles and trucks                                                      |  |              | 58,386     |   |      |   | 81,176     |  
|Furniture and fixtures                                                      |  |              | 447,105    |   |      |   | 404,470    |  
|Leasehold improvements                                                      |  |              | 41,122     |   |      |   | 33,929     |  
|                                                                            |  |              |            |   |      |   |            |  
|                                                                            |  |              | 913,960    |   |      |   | 864,435    |  
|Lessaccumulated depreciation                                               |  |              | (503,673   | ) |      |   | (341,452   | )
|                                                                            |  |              |            |   |      |   |            |  
|                                                                            |  |              | 410,287    |   |      |   | 522,983    |  
|Non-current assets                                                          |  |              |            |   |      |   |            |  
|Other assets                                                                |  |              | 90,810     |   |      |   | 73,468     |  
|                                                                            |  |              |            |   |      |   |            |  
|                                                                            |  | $            | 3,558,855  |   |      | $ | 3,029,185  |  
|                                                                            |  |              |            |   |      |   |            |  
|Liabilities and Stockholders Deficit                                       |  |              |            |   |      |   |            |  
|Current liabilities                                                         |  |              |            |   |      |   |            |  
|Line of credit                                                              |  | $            |           |   |      | $ | 655,000    |  
|Accounts payable                                                            |  |              | 978,009    |   |      |   | 1,222,078  |  
|Accrued expenses                                                            |  |              | 2,658,949  |   |      |   | 1,258,407  |  
|Current portion of long-term debt and capital lease obligations             |  |              | 132,234    |   |      |   | 217,136    |  
|                                                                            |  |              |            |   |      |   |            |  
|Total current liabilities                                                   |  |              | 3,769,192  |   |      |   | 3,352,621  |  
|                                                                            |  |              |            |   |      |   |            |  
|Long-term debt and capital lease obligations, net of current portion        |  |              | 34,324     |   |      |   | 177,487    |  
|                                                                            |  |              |            |   |      |   |            |  
|Stockholders deficit:                                                      |  |              |            |   |      |   |            |  
|Common stock, $1.00 par value 250 shares, authorized issued and outstanding |  |              | 250        |   |      |   | 250        |  
|Additional paid-in capital                                                  |  |              | 1,850,739  |   |      |   | 1,850,739  |  
|Accumulated deficit                                                         |  |              | (2,095,650 | ) |      |   | (2,351,912 | )
|                                                                            |  |              |            |   |      |   |            |  
|                                                                            |  |              | (244,661   | ) |      |   | (500,923   | )
|                                                                            |  |              |            |   |      |   |            |  
|                                                                            |  | $            | 3,558,855  |   |      | $ | 3,029,185  |  
|                                                                            |  |              |            |   |      |   |            |  



See accompanying notes
to financial statements.



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THE STAUBACH COMPANY  WEST, INC.

STATEMENTS OF OPERATIONS



|                                             |  |                          |            |   |      |   |            |  
|-------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | -
|                                             |  | Years Ended December 31, |           
|                                             |  | 2003                     |            |   | 2002 |  
|Net Revenues                                 |  | $                        | 14,436,202 |   |      | $ | 11,629,143 |  
|Cost of Revenues                             |  |                          | 8,710,136  |   |      |   | 7,235,779  |  
|License Fees                                 |  |                          | 1,671,041  |   |      |   | 1,330,757  |  
|                                             |  |                          |            |   |      |   |            |  
|Gross Profit                                 |  |                          | 4,055,025  |   |      |   | 3,062,607  |  
|Selling, General and Administrative Expenses |  |                          | 2,970,945  |   |      |   | 2,791,729  |  
|                                             |  |                          |            |   |      |   |            |  
|Income (Loss) from Operations                |  |                          | 1,084,080  |   |      |   | 270,878    |  
|Other Income (Expense):                      |  |                          |            |   |      |   |            |  
|Interest expense, net                        |  |                          | (35,080    | ) |      |   | (45,384    | )
|Gain (loss) on disposal                      |  |                          | (16,296    | ) |      |   | (87,920    | )
|                                             |  |                          |            |   |      |   |            |  
|                                             |  |                          | (51,376    | ) |      |   | (133,304   | )
|                                             |  |                          |            |   |      |   |            |  
|Income before Provision for Franchise Tax    |  |                          | 1,032,704  |   |      |   | 137,574    |  
|Provision for Franchise Tax                  |  |                          | 24,000     |   |      |   | 2,100      |  
|                                             |  |                          |            |   |      |   |            |  
|Net Income                                   |  | $                        | 1,008,704  |   |      | $ | 135,474    |  
|                                             |  |                          |            |   |      |   |            |  



See accompanying notes
to financial statements.



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THE STAUBACH COMPANY  WEST, INC.

STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)



|                           |  |              |  |                           |     |                     |   |           |                                    |   |            |   |  |   |           |  
|-------------------------- |  | ------------ |  | ------------------------- | --- | ------------------- | - | --------- | ---------------------------------- | - | ---------- | - |  | - | --------- | -
|                           |  | Common Stock |  | AdditionalPaid-in Capital |     | Accumulated Deficit |   |           | TotalStockholders Equity(Deficit) |  
|                           |  | Shares       |  | Amount                    |     |                     |  
|Balance, January 1, 2002   |  | 250          |  | $                         | 250 |                     | $ | 1,850,739 |                                    | $ | (2,340,667 | ) |  | $ | (489,678  | )
|Net income                 |  |             |  |                           |    |                     |   |          |                                    |   | 135,474    |   |  |   | 135,474   |  
|Dividends paid             |  |             |  |                           |    |                     |   |          |                                    |   | (146,719   | ) |  |   | (146,719  | )
|                           |  |              |  |                           |     |                     |   |           |                                    |   |            |   |  |   |           |  
|Balance, December 31, 2002 |  | 250          |  |                           | 250 |                     |   | 1,850,739 |                                    |   | (2,351,912 | ) |  |   | (500,923  | )
|Net income                 |  |             |  |                           |    |                     |   |          |                                    |   | 1,008,704  |   |  |   | 1,008,704 |  
|Dividends paid             |  |             |  |                           |    |                     |   |          |                                    |   | (752,442   | ) |  |   | (752,442  | )
|                           |  |              |  |                           |     |                     |   |           |                                    |   |            |   |  |   |           |  
|Balance, December 31, 2003 |  | 250          |  | $                         | 250 |                     | $ | 1,850,739 |                                    | $ | (2,095,650 | ) |  | $ | (244,661  | )
|                           |  |              |  |                           |     |                     |   |           |                                    |   |            |   |  |   |           |  



See accompanying notes
to financial statements.





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THE STAUBACH COMPANY  WEST, INC.

STATEMENTS OF CASH FLOWS



|                                                                                            |  |                          |            |   |      |   |           |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | --------- | -
|                                                                                            |  | Years Ended December 31, |           
|                                                                                            |  | 2003                     |            |   | 2002 |  
|Cash Flows from Operating Activities:                                                       |  |                          |            |   |      |   |           |  
|Net income                                                                                  |  | $                        | 1,008,704  |   |      | $ | 135,474   |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                          |            |   |      |   |           |  
|Depreciation                                                                                |  |                          | 167,102    |   |      |   | 137,311   |  
|(Gain) loss on disposal of property                                                         |  |                          | 16,296     |   |      |   | 87,920    |  
|Changes in assets and liabilities:                                                          |  |                          |            |   |      |   |           |  
|Accounts receivable                                                                         |  |                          | (1,666,199 | ) |      |   | 30,591    |  
|Related party receivables                                                                   |  |                          | 280,375    |   |      |   | (116,419  | )
|Deferred expenses                                                                           |  |                          | (310       | ) |      |   | 28,961    |  
|Prepaid expenses                                                                            |  |                          | 51,663     |   |      |   | (45,959   | )
|Other assets                                                                                |  |                          | (17,342    | ) |      |   | (42,880   | )
|Accounts payable                                                                            |  |                          | (244,069   | ) |      |   | 478,960   |  
|Accrued expenses                                                                            |  |                          | 1,400,542  |   |      |   | (300,279  | )
|                                                                                            |  |                          |            |   |      |   |           |  
|Net cash provided by (used in) operating activities                                         |  |                          | 996,762    |   |      |   | 393,680   |  
|                                                                                            |  |                          |            |   |      |   |           |  
|Cash Flows from Investing Activities:                                                       |  |                          |            |   |      |   |           |  
|Cash payments for the purchase of property                                                  |  |                          | (88,252    | ) |      |   | (279,176  | )
|Cash proceeds from the sale of assets, net                                                  |  |                          | 60,000     |   |      |   | 10,000    |  
|                                                                                            |  |                          |            |   |      |   |           |  
|Net cash used in investing activities                                                       |  |                          | (28,252    | ) |      |   | (269,176  | )
|                                                                                            |  |                          |            |   |      |   |           |  
|Cash Flows from Financing Activities:                                                       |  |                          |            |   |      |   |           |  
|Borrowings from line of credit                                                              |  |                          |           |   |      |   | 1,010,000 |  
|Payments on line of credit                                                                  |  |                          | (655,000   | ) |      |   | (706,982  | )
|Dividends to stockholder                                                                    |  |                          | (752,442   | ) |      |   | (146,719  | )
|Increase in long-term debt                                                                  |  |                          |           |   |      |   |          |  
|Payments on capital leases                                                                  |  |                          | (37,733    | ) |      |   | (74,290   | )
|Payments on long-term debt                                                                  |  |                          | (232,782   | ) |      |   | (185,615  | )
|                                                                                            |  |                          |            |   |      |   |           |  
|Net cash (used in) provided by financing activities                                         |  |                          | (1,677,957 | ) |      |   | (103,606  | )
|                                                                                            |  |                          |            |   |      |   |           |  
|Net increase (decrease) in cash and cash equivalents                                        |  |                          | (709,447   | ) |      |   | 20,898    |  
|Cash and Cash Equivalents, beginning of period                                              |  |                          | 1,072,135  |   |      |   | 1,051,237 |  
|                                                                                            |  |                          |            |   |      |   |           |  
|Cash and Cash Equivalents, end of period                                                    |  | $                        | 362,688    |   |      | $ | 1,072,135 |  
|                                                                                            |  |                          |            |   |      |   |           |  
|Supplemental Cash Flow Information:                                                         |  |                          |            |   |      |   |           |  
|Cash paid during the period for:                                                            |  |                          |            |   |      |   |           |  
|Interest                                                                                    |  | $                        | 35,080     |   |      | $ | 45,384    |  
|Franchise tax                                                                               |  | $                        | 24,000     |   |      | $ |          |  
|Non-cash activity:                                                                          |  |                          |            |   |      |   |           |  
|Assets under capital lease                                                                  |  | $                        |           |   |      | $ | 52,002    |  
|Purchase of automobile                                                                      |  | $                        | 42,450     |   |      | $ | 71,176    |  



See accompanying notes
to financial statements.





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##### Index to Financial Statements

THE STAUBACH COMPANYWEST, INC.



NOTES TO FINANCIAL STATEMENTS



1.    Summary of Significant Accounting Policies



Company Formation and OperationsThe Staubach Company  West, Inc. (the Company) was incorporated under the laws of California in July 1993 as a C-corporation. Subsequently, S-corporation status
was granted. The Company operates a tenant representation services business. These services include a range of consulting services for commercial and industrial users of real estate, including facility and site acquisition and disposition, lease
management, design, construction and development consulting, move coordination, and strategic real estate advisory services (collectively, Tenant Representation Services).



From July 1993 to February 2004, the Company operated as a licensee of The Staubach Company, a national real estate services
firm (TSC). In February 2004, TSC terminated the license agreement with the Company. See Notes 4 and 7.



From July 1993 to February 2004, the Company owned and operated an office in San Diego, California (the San Diego Office), which was sold in
February 2004. See Note 7.



Revenue RecognitionRevenue is
recognized when the tenant lease contract is signed by all appropriate parties and as the following consulting services are provided; facility and site acquisition and disposition, lease management, design, construction and development consulting,
move coordination and strategic real estate advisory services.



Concentration of Credit RiskFinancial instruments that potentially subject the Company to concentrations of credit risk consist primarily of temporary cash investments. The Company maintains balances in excess of the $100,000
federally insured limit. However, it restricts temporary cash investments to financial institutions with a high credit standing.



The Company grants credit to customers of various sizes throughout the United States. The majority of the Companys sales are within California.



For the years ended December 31, 2003 and 2002, the Company
derived revenues in excess of ten percent from one customer totaling approximately $2,606,000 and $1,529,000, respectively. Total receivables outstanding at December 31, 2003 and 2002 related to this customer totaled approximately $314,000 and
$42,000, respectively.



Deferred expensesThe Company
defers 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 percent of these direct costs associated with the
transaction, 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 such costs related to canceled or unlikely to be completed transactions.



Allowance for Doubtful AccountsThe Company provides an
allowance for doubtful accounts equal to the estimated uncollectible amounts. The Companys estimate is based on historical collection experience and a review of the current status of trade accounts receivable. If the financial condition of the
Companys clients were to deteriorate, resulting in an impairment of their ability to make payments an increase in the allowance might be required.



96



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##### Index to Financial Statements

THE STAUBACH COMPANY  WEST, INC.



NOTES TO FINANCIAL STATEMENTS(Continued)



Property Plant and EquipmentThe Company provides for depreciation based on the estimated useful
lives of depreciable assets using the straight-line method for financial reporting purposes and primarily accelerated methods for tax purposes. Estimated useful lives are as follows:



|                                |  |              
|------------------------------- |  | -------------
|Computer equipment and software |  | 3-5 years    
|Automobiles and trucks          |  | 3 years      
|Furniture and fixtures          |  | 5-7 years    
|Leasehold improvements          |  | Life of lease



Depreciation expense
was $167,102 and $137,311 for the years ended December 31, 2003 and 2002, respectively.



Advertising CostsAdvertising costs are expensed as incurred. Advertising expense totaled $175,596 and $205,455 for the years ended December 31, 2003 and 2002, respectively.



Income TaxesThe Company is an S Corporation under the Internal Revenue
Code and in accordance with California conformity legislation. As an S Corporation, the Companys taxable income flows to the stockholders individual federal and state income tax returns. The financial statements reflect the State of
Californias 1.5 percent S Corporation franchise tax on taxable income. Taxable income is based on financial statement income adjusted for certain differences in income and expense recognition for income tax reporting purposes versus financial
reporting purposes. Currently there are no significant differences between the Companys net income and its taxable income.



Use of EstimatesThe preparation of financial statements in conformity with accounting 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.



Statement of Cash FlowsFor purposes of the Statement of Cash Flows, the Company considers all highly liquid investment instruments with an original maturity of three months or less to be cash equivalents.



2.    Line of Credit



The Company maintains an $800,000 line of credit with Northern Trust Bank.
The bank maintains a security interest in substantially all of the Companys assets as collateral on the line. Interest accrues at the prime rate plus 0.25% (4.25% at December 31, 2003). The line of credit provides for borrowings equal to 60%
of defined accounts receivable and is personally guaranteed by the Companys sole stockholder. Borrowings on the line of credit are evidenced as a note payable and classified as current.





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##### Index to Financial Statements

THE STAUBACH COMPANY  WEST, INC.



NOTES TO FINANCIAL STATEMENTS(Continued)



3.    Long-Term Debt and Capital Lease Obligations



Long-term debt and capital lease obligations consisted of the following:



|                                                                                                                                                                                                                                                                                                                  |  |              |          |   |      |   |          |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---- | - | -------- | -
|                                                                                                                                                                                                                                                                                                                  |  | December 31, |         
|                                                                                                                                                                                                                                                                                                                  |  | 2003         |          |   | 2002 |  
|Note payable to Northern Trust Bank is due July 2004, with interest at the prime plus 0.50%, (4.50% at December 31, 2003). Principal payments
of $13,889 and interest are due monthly. The note is secured by substantially all of the assets of the Company and is guaranteed personally by the sole stockholder |  | $            | 83,333   |   |      | $ | 250,000  |  
|6.75% automobile installment note, with principal and interest payments of $1,400 due monthly through August 2007 and secured by the vehicle
itself                                                                                                                                                               |  |              |         |   |      |   | 66,115   |  
|4.5% note payable to Companys stockholder, interest calculated monthly, principal and unpaid interest due August 2004                                                                                                                                                                                            |  |              |         |   |      |   |         |  
|Automobile installment note, with principal only payments of $987 due monthly through July 2007 and secured by the vehicle
itself                                                                                                                                                                                 |  |              | 42,450   |   |      |   |         |  
|Capital lease obligations with interest rates ranging from 10.5% to 16.5%, secured by office equipment, maturing through 2005                                                                                                                                                                                     |  |              | 40,775   |   |      |   | 78,508   |  
|                                                                                                                                                                                                                                                                                                                  |  |              |          |   |      |   |          |  
|                                                                                                                                                                                                                                                                                                                  |  |              | 166,558  |   |      |   | 394,623  |  
|Less current portion                                                                                                                                                                                                                                                                                              |  |              | (132,234 | ) |      |   | (217,136 | )
|                                                                                                                                                                                                                                                                                                                  |  |              |          |   |      |   |          |  
|Long-term portion                                                                                                                                                                                                                                                                                                 |  | $            | 34,324   |   |      | $ | 177,487  |  
|                                                                                                                                                                                                                                                                                                                  |  |              |          |   |      |   |          |  



Future principal
payments on long-term debt and capital lease obligations at December 31, 2003 are as follows:



|     |  |   |        
|---- |  | - | -------
|2004 |  | $ | 132,234
|2005 |  |   | 15,566 
|2006 |  |   | 11,846 
|2007 |  |   | 6,912  
|     |  | $ | 166,558
|     |  |   |        



4.    Commitments



The
Company conducts its operations from leased facilities. The Company also leases office furniture and equipment to be used in its daily operations. The following is a schedule of future minimum rentals under capital and non-cancelable operating
leases as of December 31, 2003:



|                                                   |  |                 |           |               |   |       
|-------------------------------------------------- |  | --------------- | --------- | ------------- | - | ------
|                                                   |  | OperatingLeases |           | CapitalLeases
|2004                                               |  | $               | 517,264   |               | $ | 40,274
|2005                                               |  |                 | 535,765   |               |   | 3,809 
|2006                                               |  |                 | 554,212   |               |   |      
|2007                                               |  |                 | 574,065   |               |   |      
|2008                                               |  |                 | 594,892   |               |   |      
|Thereafter                                         |  |                 | 1,069,754 |               |   |      
|                                                   |  |                 |           |               |   |       
|                                                   |  | $               | 3,845,952 |               |   | 44,083
|Less amount representing interest                  |  |                 |           |               |   | 3,308 
|                                                   |  |                 |           |               |   |       
|Net present value of future minimum lease payments |  |                 |           |               | $ | 40,775
|                                                   |  |                 |           |               |   |       



98



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##### Index to Financial Statements

THE STAUBACH COMPANY  WEST, INC.



NOTES TO FINANCIAL STATEMENTS(Continued)



For the years ended December 31, 2003 and 2002, rent expense totaled approximately, $735,000 and
$814,000, respectively.



Effective July 1993, the Company
entered into a License and Administration Services Agreement (the Agreement) with TSC. Pursuant to the Agreement, the Company has the exclusive right to provide Tenant Representation Services and to utilize certain trade names,
trademarks and servicemarks and to conduct its business under an established business format and model. The monthly fee for these entitlements is 12% of gross revenues. In addition, the Company is subject to certain financial covenants. Failure to
meet these covenants can be grounds to terminate the Agreement. Otherwise, either party can voluntarily terminate the Agreement with 90 days notice. As discussed in Note 7, the Agreement was terminated by TSC without cause effective February 2004.



5.    Related-Party Transactions



At December 31, 2003 and 2002, the Company was owed approximately $11,000
and $239,000, respectively, related to advances by the Company to support the operations of the Los Angeles office of TSC. At December 31, 2002, the Los Angeles office was 51% owned by the Companys stockholder. During May 2003, the
Companys stockholder sold his interest in the Los Angeles office.



At December 31, 2003 and 2002, the Company owes approximately $203,000 and $93,000 to other offices of TSC for commissions received for transactions in their territories.



At March 31, 2004, the Company was obligated under a 4.5% promissory note to its stockholder totaling $500,000 (see Note 3).



6.    Employee Benefit Plan



The Company has a 401(k) plan for qualified employees. There were no
matching contributions or other contributions made by the Company to the plan.



7.    Subsequent Events



From July 1993 to February 2004, the Company operated as a licensee of TSC. Effective February 2004, TSC terminated the license agreement with the Company without cause. As a result, after February 2004, the Company no longer incurred
license fees to TSC.



From July 1993 to February 2004, the
Company owned and operated the San Diego Office, which was sold in February 2004 for $1,600,000. The Company did not enter into any non-compete agreements in the sale of the San Diego office and thus will be able to service contacts in the San Diego
area, either directly or through CRESA Partners LLC (see below), which has a San Diego operation. For this reason, the Company does not feel the sale of the San Diego office should be accounted for as discontinued operations. However, because the
Company is not able to predict the amount of revenues that will continue to be generated out of the San Diego market, it has provided the following summary of historical operations:



|                              |  |                          |           |      |   |          
|----------------------------- |  | ------------------------ | --------- | ---- | - | ---------
|                              |  | Years Ended December 31,
|                              |  | 2003                     |           | 2002
|Revenues                      |  | $                        | 2,977,166 |      | $ | 2,478,454
|Gross Profit                  |  |                          | 993,594   |      |   | 727,298  
|Income (loss) from operations |  |                          | 292,556   |      |   | 204,182  
|                              |  |                          |           |      |   |          
|Total assets                  |  |                          | 397,080   |      |   | 544,768  
|                              |  |                          |           |      |   |          
|Total liabilities             |  |                          | 290,914   |      |   | 401,388  
|                              |  |                          |           |      |   |          



99



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THE STAUBACH COMPANY  WEST, INC.



NOTES TO FINANCIAL STATEMENTS(Continued)



In March 2004, the Company entered into a license agreement with CRESA Partners LLC, a national real
estate services firm. Accordingly, in March 2004, the Company changed its name to CRESA Partners of Orange County, Inc.



During May 2004, all of the Companys issued and outstanding stock was acquired by ASDS of Orange County, Inc., a wholly owned special purpose
subsidiary of Ascendant Solutions, Inc. In connection with this acquisition and concurrent recapitalization, the Company changed its name to CRESA Partners of Orange County, LP in May 2004.





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ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND    FINANCIAL DISCLOSURE



None



ITEM 9A.    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, including the Chief Executive Officer also conducted an evaluation of the Companys internal control over financial
reporting to determine whether changes occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Based on that evaluation,
there has been no such change during the fourth fiscal quarter.



It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is
based in part upon certain assumptions about the likelihood of future events.



However, due to the limited size of the Companys staff, there is inherently a lack of segregation of duties related to the authorization, recording, processing and reporting of transactions. In October 2004, we
added Gary Boyd as our new Chief Financial Officer which will allow us to implement additional controls related, but not limited to segregation of duties. We will continue to periodically assess the cost versus benefit of adding the resources that
would improve segregation of duties and currently, with the concurrence of the board of directors, do not consider the benefits to outweigh the costs of adding additional staff in light of the limited number of transactions related to the
companys operations.



Changes in Internal Controls



In March 2004 and May 2004, we acquired the Park Assets
and all of the stock of CPOC, respectively and, accordingly, assumed the internal controls and systems of such entities in connection with the acquisitions. We believe that the controls and procedures of the DHI operations, CPOC and the Operating LP
are effective as of the end of the period covered by this report. However, we continue to evaluate the policies and procedures of DHI, CPOC and the Operating LP and we will implement changes in controls where we identify opportunities for
improvement.



There were no significant changes in the
Companys internal controls that occurred during the last quarter of 2004 that materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.



ITEM 9B.    OTHER INFORMATION



None



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PART III.



Certain information
required by Part III is incorporated by reference in this Annual Report on Form 10-K from our definitive Proxy Statement for our 2005 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A (the Proxy Statement).



ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



The information required by this Item is incorporated by reference from the sections of the Proxy Statement captioned Election of Directors,
and ManagementExecutive Officers and Section 16(a) Beneficial Ownership Reporting Compliance.



ITEM 11.    EXECUTIVE COMPENSATION



The information required by this Item is incorporated by reference from the sections of the Proxy Statement captioned Election of Directors, Management, Compensation Committee
Report and Performance Graph.



ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



Securities authorized for issuance under equity compensation plans at December 31, 2004 are as follows:



|                                                           |  |                                                                                          |         |  |                                                                          |  |                                                            |    
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | ------- |  | ------------------------------------------------------------------------ |  | ---------------------------------------------------------- | ---
|Plan category                                              |  | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights |         |  | Weighted average exerciseprice of outstandingoptions, warrants andrights |  | Number of securitiesremaining availablefor future issuance |    
|Equity compensation plans approved by security holders     |  | 1,140,000                                                                                | (1)     |  | $0.26                                                                    |  | 2,675,500                                                  | (2)
|Equity compensation plans not approved by security holders |  | 800,000                                                                                  | (3) (4) |  | $1.70                                                                    |  | 0                                                          |    
|Total                                                      |  | 1,940,000                                                                                |         |  |                                                                          |  | 2,675,500                                                  |    

---

|(1) |  | As of December 31, 2004, options to purchase 1,140,000 shares of common stock were outstanding under the 1999 Long Term Incentive Plan.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | As of December 31, 2004, 502,500 shares of restricted stock were issued under the 2002 Equity Incentive Plan. These shares are not included in the number of securities remaining
available for future issuance.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | This includes 800,000 warrants issued in February 1999, which were approved by the Board of Directors (we were not a public company at the time).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | In September 2002, our Board of Directors authorized the extension of the maturity of the remaining 800,000 warrants, which are held by Jonathan Bloch, one of our directors, from
February 5, 2004 to February 5, 2006. The warrants have an exercise price ranging from $1.00-$3.00 per share.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Additional information required by this Item is incorporated by reference from the section of the Proxy Statement captioned Stock Ownership.



ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



The information required by this Item is incorporated by reference from the section of the Proxy Statement captioned Management.



ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES



The information required by this Item is incorporated by reference from the section of the Proxy Statement captioned Independent Auditors.





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##### Index to Financial Statements

PART IV.



ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



| | 1. |  | Financial Statements: See Index to Consolidated Financial Statements and Supplementary Data under Part II, Item 8 of this Annual Report on Form 10-K.
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | All other schedules are omitted because they are not applicable or the required information is included in the Companys Consolidated Financial Statements or Notes thereto
included in this Annual Report on Form 10-K.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Exhibits: The exhibits listed on the accompanying Index to Exhibits immediately following the certifications are filed as part of, or incorporated by reference into, this
Annual Report on Form 10-K.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) 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 on March 29th, 2005.



ASCENDANT SOLUTIONS, INC.By:

/s/    DAVID E.
BOWEDavid E. BowePresident and Chief Executive Officer(Duly Authorized Officer and Principal Executive Officer)By:

/s/    GARY W. BOYDGary W. BoydVice President-Finance and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)




Pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, this report has been signed on the 29thday of
March 2005, below by the following persons on behalf of the registrant and in the capacities indicated.



|                                                |  |                                                 
|----------------------------------------------- |  | ------------------------------------------------
|Signature                                       |  | Title                                           
|                                                | 
|/s/    JAMES C.
LESLIEJames C.
Leslie           |  | Chairman of the Board                           
|                                                | 
|/s/    DAVID E.
BOWEDavid E. Bowe               |  | Director, President and Chief Executive Officer,
|                                                | 
|/s/    ANTHONY J.
LEVECCHIOAnthony J.
LeVecchio |  | Director, Audit Committee Chairman              
|                                                | 
|/s/    JONATHAN R.
BLOCHJonathan R.
Bloch       |  | Director                                        
|                                                | 
|/s/    WILL
CURETONWill
Cureton                 |  | Director                                        



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##### Index to Financial Statements

INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                
|              | 
|2.1           |  | Agreement and Plan of Merger by and between ASD Systems, Inc. d/b/a Ascendant Solutions, a Texas corporation, and Ascendant Solutions,
Inc., a Delaware corporation (Exhibit 2.1) (1)                                                                                                                                      
|              | 
|2.2           |  | Stock Purchase Agreement by and between ASDS of Orange County, Inc., a Delaware corporation f/k/a Orange County Acquisition Corp. and Kevin
Hayes dated March 23, 2004 (Exhibit 2.1) (2)                                                                                                                                   
|              | 
|2.3           |  | ASDS of Orange County, Inc. Promissory Note due May 1, 2007 (Exhibit 2.2) (2)                                                                                                                                                                                                                                              
|              | 
|3.1           |  | Certificate of Incorporation of Ascendant Solutions, Inc. (Exhibit 3.1) (1)                                                                                                                                                                                                                                                
|              | 
|3.2           |  | Bylaws of Ascendant Solutions, Inc. (Exhibit 3.2) (1)                                                                                                                                                                                                                                                                      
|              | 
|4.1           |  | Specimen of Ascendant Solutions, Inc. Common Stock Certificate (Exhibit 4.1) (1)                                                                                                                                                                                                                                           
|              | 
|4.2           |  | 1999 Long-Term Incentive Plan for ASD Systems, Inc. (Exhibit 4.2) (3)                                                                                                                                                                                                                                                      
|              | 
|4.3           |  | Form of Stock Option Agreement under 1999 Long-Term Incentive Plan (Exhibit 4.3) (3)                                                                                                                                                                                                                                       
|              | 
|10.1          |  | Form of Indemnification Agreement with directors (Exhibit 10.10) (3)                                                                                                                                                                                                                                                       
|              | 
|10.2          |  | Form of Warrant granted to affiliates of CKM Capital LLC (Exhibit 10.15) (3)                                                                                                                                                                                                                                               
|              | 
|10.3          |  | Stock Option Agreement dated as of March 14, 2002 between Ascendant Solutions, Inc. and David E. Bowe (Exhibit 10.6)
(4)                                                                                                                                                                                                   
|              | 
|10.4          |  | Stock Option Agreement dated as of March 14, 2002 between Ascendant Solutions, Inc. and James C. Leslie (Exhibit 10.7)
(4)                                                                                                                                                                                                 
|              | 
|10.5          |  | Restricted Stock Agreement dated as of April 2, 2002 between Ascendant Solutions, Inc. and David E. Bowe (Exhibit 10.8)
(4)                                                                                                                                                                                                
|              | 
|10.6          |  | Licensing and Co-Marketing Agreement, dated October 23, 2002 among CRESA Capital Markets Group, L.P. and CRESA Partners LLC (Exhibit 10.9)
(4)                                                                                                                                                                             
|              | 
|10.7          |  | Asset Purchase Agreement between Doughertys Holdings, Inc. and Park Pharmacy Corporation dated December 9, 2003 (Exhibit 2.1)
(5)                                                                                                                                                                                         
|              | 
|10.8          |  | First Amendment to the Asset Purchase Agreement between Doughertys Holdings, Inc. and Park Pharmacy Corporation dated February 27,
2004 (Exhibit 2.2) (6)                                                                                                                                                                 
|              | 
|10.9          |  | Amended Warrant Agreement dated as of July 21, 2003 between Ascendant Solutions, Inc. and affiliates of CKM Capital LLC (Exhibit 10.10)
(7)                                                                                                                                                                                
|              | 
|10.10         |  | Parent Guaranty dated as of May 1, 2004, by and among Ascendant Solutions, Inc., ASDS Orange County, Inc., a Delaware corporation, and the
successor corporation of the merger of Orange County Acquisition Corp. and CRESA Partners of Orange County, Inc. (Exhibit 10.1) (8)                                             
|              | 
|10.11         |  | Parent Pledge Agreement dated May 1, 2004, by and between Ascendant Solutions, Inc. and Kevin J. Hayes. (Exhibit 10.2)
(8)                                                                                                                                                                                                 
|              | 
|10.12         |  | Subsidiary Guaranty dated as of May 1, 2004 by and among CRESA Partners of Orange County, LP, a Delaware limited partnership, ASDS Orange
County, Inc., a Delaware corporation, and the successor corporation of the merger of Orange County Acquisition Corp. and CRESA Partners of Orange County, Inc. (Exhibit 10.3) (8)
|              | 
|10.13         |  | Amended Promissory Note of CRESA Partners of Orange County, Inc. dated August 12, 2004, payable to the order of Kevin J. Hayes (Exhibit
10.1) (9)                                                                                                                                                                          



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##### Index to Financial Statements

|              |  |                                                                                                                                                                                                                                                                                             
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                 
|              | 
|10.14         |  | Restricted Stock Agreement dated October 18, 2004, between Ascendant Solutions, Inc. and Gary W. Boyd (Exhibit 1.01)
(10)                                                                                                                                                                   
|              | 
|10.15         |  | Master Agreement Regarding Frisco Square Partnerships dated December 31, 2004 (Exhibit 10.1) (11)                                                                                                                                                                                           
|              | 
|10.16         |  | Participation Agreement between Ascendant Solutions, Inc. and Fairways Partners, LLC dated August 2003 *                                                                                                                                                                                    
|              | 
|10.17         |  | Restricted Stock Agreement dated June 25, 2004, between Ascendant Solutions, Inc. and Anthony J. LeVecchio *                                                                                                                                                                                
|              | 
|10.18         |  | Amended and Restated Agreement of Limited Partnership of Fairways Frisco, L.P. effective December 30, 2004 *                                                                                                                                                                                
|              | 
|21.1          |  | Subsidiaries of Ascendant Solutions, Inc. *                                                                                                                                                                                                                                                 
|              | 
|23.1          |  | Consent of Hein & Associates, LLP*                                                                                                                                                                                                                                                          
|              | 
|23.2          |  | Consent of BDO Seidman, LLP *                                                                                                                                                                                                                                                               
|              | 
|23.3          |  | Consent of Ernst and Young, LLP *                                                                                                                                                                                                                                                           
|              | 
|31.1          |  | Written Statement of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*                                                                                                                                                                     
|              | 
|31.2          |  | Written Statement of Vice PresidentFinance and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*                                                                                                                                                        
|              | 
|32.1          |  | Certification of Ascendant Solutions, Inc. Annual Report on Form 10-K for the period ended December 31, 2004, by David 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. *            
|              | 
|32.2          |  | Certification of Ascendant Solutions, Inc. Annual Report on Form 10-K for the period ended December 31, 2004, by Gary Boyd as Vice
PresidentFinance and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
|              | 
|99.1          |  | Certificate of Incorporation for Orange County Acquisition Corp. (Exhibit 99.1) (8)                                                                                                                                                                                                         
|              | 
|99.2          |  | Certificate of Ownership and Merger of Staubach Company  West, Inc. into Orange Co. (Exhibit 99.2) (8)                                                                                                                                                                                     
|              | 
|99.3          |  | Table reflecting certain ownership after giving effect to the transactions contemplated by the Master Agreement. (Exhibit 99.1)
(11)                                                                                                                                                        

---

|(1) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K filed October 23, 2000.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K/A filed July 21, 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------



|(3) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our Registration Statement on Form S-1, File No. 333-85983.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our annual report on Form 10-K for the fiscal year ended December 31, 2002.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(5) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K filed December 11, 2003.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



106



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##### Table of Contents

##### Index to Financial Statements

|(6) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K filed March 29, 2004.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------



|(7) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our annual report on Form 10-K for the fiscal year ended December 31, 2003.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(8) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our quarterly report on Form 10-Q for the period ended June 30, 2004.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



|(9) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our quarterly report on Form 10-Q for the period ended September 30, 2004.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|(10) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K filed October 19, 2004.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------



|(11) |  | Incorporated by reference to the exhibits shown in parenthesis filed in our current report on Form 8-K filed January 7, 2005.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------



|* |  | Filed herewith
|- |  | --------------



107