**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-K**




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





**For
      the Fiscal Year Ended December 31, 2006**


OR


o RANSITION
      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 100, Dallas, Texas**
            
            **75248****(Address
                of principal executive offices)**
            
            **(Zip
                Code)**





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




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**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yeso No
x


Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


Yeso No
x


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
x No o


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. o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer (as defined in Exchange Act Rule
      12b-2).





Large
      accelerated filer o    Accelerated
      filer o    Non-Accelerated
      filer x





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


Yes
o  No
x


The
      aggregate market value of the voting stock held by nonaffiliates of the
      registrant, based upon the closing price for the registrant’s common stock on
      the OTC Bulletin Board on June 30, 2006, the last trading date of registrant's
      most recently completed second fiscal quarter, was approximately
      $6,239,000.





At
      April
      9, 2007, 22,558,844 shares of registrant’s common stock were
      outstanding.




**DOCUMENTS
        INCORPORATED BY REFERENCE**


Portions
      of the definitive Proxy Statement to be filed within 120 days of December 31,
      2006 and delivered to stockholders in connection with the Annual Meeting of
      Stockholders to be held June 14, 2007 are incorporated by reference into Part
      III.










**ASCENDANT
      SOLUTIONS, INC.**





**FORM
      10-K**


**For
      the Fiscal Year Ended December 31, 2006**





**Table
      of Contents**





**PART
                I.**
            
            **Page**Item
                1.
            Business
            
            **2**Item
                1A.
            Risk
                Factors
            
            **15**Item
                1B.
            Unresolved
                Staff
                Comments
            
            **22**Item
                2.
            Properties
            
            **23**Item
                3.
            Legal
                Proceedings
            
            **23**Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            
            **24****PART
                II.**Item
                5.
            Market
                for Registrant’s Common Equity,
                Related Stockholder Matters and Issuer Purchases of Equity
                Securities
            
            **25**Item
                6.
            Selected
                Consolidated Financial
                Data
            
            **26**Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            
            **27**Item
                7A.
            Quantitative
                and Qualitative Disclosures
                About Market Risk
            
            **40**Item
                8.
            Consolidated
                Financial Statements
                and Supplementary Data
            
            **42**Item
                9.
            Changes
                in and Disagreements With Accountants on
                Accounting and Financial Disclosure
            
            **75**Item
                9A.
            Controls
                and
                Procedures
            
            **75**Item
                9B.
            Other
                Information
            
            **76****PART
                III.**Item
                10.
            Directors,
                Executive Officers and Corporate
                Governance
            
            **77**Item
                11.
            Executive
                Compensation
            
            **77**Item
                12.
            Security
                Ownership of Certain Beneficial
                Owners and Managementand
                Related Stockholder
                Matters
            
            **78**Item
                13.
            Certain
                Relationships and Related
                Transactions, and Director Independence
            
            **78**Item
                14.
            Principal
                Accounting Fees and
                Services
            
            **78****PART
                IV.**Item
                15.
            Exhibits
                and Financial Statement
                Schedules
            
            **79**Signatures
            
            **80**




**-1-**
 **Table
            of Contents**








**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,” Risk Factors,” 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, perform 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, including
                specialty compounding pharmacy services and home infusion therapy
                centersReal
                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 servicesCorporate
                & other
            Ascendant
                Solutions, Inc. and
              ASE
                Investments Corporation
            Corporate
                administration, investments in Ampco Partners, Ltd., Fairways Frisco,
                L.P.
                and Fairways 03 New Jersey, L.P.












**-2-**
 **Table
            of
            Contents**














During
      2002, we made our first investments, and we have continued to make additional
      investments and acquisitions throughout 2003, 2004 and 2005. 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. and Subsidiaries
            Healthcare
            Acquisition
                of specialty pharmacies and infusion therapy centers
            100%April
                2004
            Fairways
                36864, L.P.
            Corporate
                & other
            Investment
                in commercial real estate properties
            24.75%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
            8.87%





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 16 of the Ascendant Consolidated Financial Statements.





**-3-**
 **Table
            of
            Contents**








Below
      is
      a summary of our investment portfolio performance by segment on a cash basis
      through December 31, 2006:





**Cumulative**
            
            **Cumulative**
            
            **Cumulative****Cash**
            
            **Realized
                Cash**
            
            **Realized
                Cash****Segment**
            
            **Investments**
            
            **Returns**
            
            **Returns
                %**Healthcare
            
            $
            1,500,000
            
            $
            812,000
            
            
            54
            %Real
                Estate Advisory Services
            
            
            64,000
            
            
            1,434,000
            
            
            2,241
            %Corporate
                & Other
            
            
            1,992,000
            
            
            2,310,000
            
            
            116
            %$
            3,556,000
            
            $
            4,556,000
            
            
            128
            %





We
      face
      all of the risks of a 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. There can be no assurances that our current or future investments
      or
      acquisitions will produce cash results similar to those shown in the table
      above.





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





·Annual
                revenues of $5-100 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





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 acquired businesses. We will continue
      seeking to (1) most effectively deploy our remaining cash and debt capacity
      (if
      any), (2) capitalize on the experience and contacts of our officers and
      directors, and (3) explore other acquisition and investing opportunities.





In
      our
      continued acquisition efforts, we will not limit ourselves to a particular
      industry. At this time, all of our business is conducted within the United
      States. Most likely, the target business will continue to 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 (“Fairways Equities”) 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 currently an “investment company.”





**-4-**
 **Table
            of
            Contents**





However,
      if in the future more than 40% of our assets are comprised of “investment
      securities” (which are generally, 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 we 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**





Information
      regarding the financial condition of each of the Company’s business segments can
      be found in the Company’s Consolidated Financial Statements in Item
      8.





***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 First Amended Plan of
      Reorganization under Chapter 11 of the United States Bankruptcy Code Proposed
      by
      Park Pharmacy Corporation Inc. and the Company (“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 facility provided for three notes, aggregating approximately
      $5.5 million. Each note bears interest at six percent and matures in three
      years. DHI is obligated to make monthly payments (consisting of both interest and principal payments, as applicable) to the
      bank of approximately $56,000. This credit facility was secured by substantially
      all of the assets of DHI, including the stock of its operating
      subsidiaries. This
      credit facility was paid in full in February 2007.





On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP, each a wholly-owned subsidiary
      of DHI, entered into a loan agreement with Amegy Bank National Association
      (“Amegy Bank”) for a $2,000,000 revolving line of credit and a $2,200,000 term
      loan. Substantially all of the proceeds from the revolving line of credit and
      the term loan were used to retire the outstanding balance owed to Bank of Texas,
      N.A. under an existing credit facility. Please see Note 10 of the Ascendant
      Consolidated Financial Statements contained herein.





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
      provided us with pricing and payment terms that were improved from those
      previously provided by AmerisourceBergen to Park Pharmacy.





**-5-**
 **Table
            of
            Contents**








In
      exchange for these improved terms, DHI 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.





As
      of
      November 30, 2006, DHI entered into Amendment No. 1 (“Amendment”) to the supply
      agreement. The Amendment extends the supply agreement from March 24, 2007 to
      March 24, 2009. In addition, the Amendment (1) improves the pricing of goods
      purchased, (2) changes the minimum order volume from $30,000,000 to $50,000,000
      over the life of the Agreement and (3) the percentage of generic drug purchases
      was changed from 2.50% to 6.0%. The Amendment also allows for the return of
      goods, in a saleable condition, within 180 days of the invoice date without
      a
      restocking fee and provides for a termination fee if DHI terminates the supply
      agreement before the expiration of the term of the agreement. The termination
      fee is a maximum of $50,000 but is reduced for each full month from December
      1,
      2006 until the date of termination. However, there is no termination fee if
      the
      minimum order volume has been satisfied. At December 31, 2006, DHI believes
      it
      has satisfied the minimum order volume.





The
      Amendment also provides for a rebate in the amount of $150,000 representing
      a
      15.0% volume discount off the price of goods for the first $1,000,000 of net
      purchases purchased in the period after November 1, 2006 providing that DHI
      makes net purchases in excess of $1 million after November 1, 2006. In December
      2006, DHI satisfied the net purchase requirement and received the $150,000
      rebate.





The
      table
      below shows the balances of the debt assumed at the time of acquisition and
      as
      of December 31, 2006:





**Balance
                at****Balance
                at**
            
            **Principal**
            
            **December
                31,****Acquisition**
            
            **Payments**
            
            **2006**Bank
                of Texas Credit Facility *
            
            $
            5,579,000
            
            $
            (1,364,000
            )
            $
            4,215,000AmerisourceBergen
                Note
            
            
            750,000
            
            
            (92,000
            )
            
            658,000Total
                debt assumed
            
            $
            6,329,000
            
            $
            (1,456,000
            )
            $
            4,873,000





*
      This
      facility has been replaced as of February 20, 2007 with a $2,000,000 revolving
      line of credit and a $2,200,000 term loan from Amegy Bank.





*Description
      of Business*





*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. Dougherty’s long history began in 1929 and continues today as
      one of Dallas’s oldest, largest and best-known full-service pharmacies, which
      also 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.





**-6-**
 **Table
            of
            Contents**








*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.




*Park
      InfusionCare*





Park
      InfusionCare is a specialty pharmacy company which specializes in full service
      home infusion therapy offering full nursing and pharmacy services for home
      infusion therapies. 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.
      Park InfusionCare has three offices located in Dallas, Houston and San Antonio.
      Park InfusionCare’s business territory includes most of 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.





As
      disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board
      of
      directors decided to retain the operations of Park InfusionCare, which had
      previously been reported as a discontinued operation while the Company was
      pursuing a potential disposition or strategic transaction for its infusion
      therapy business. In connection with the decision to retain the operations
      of
      Park InfusionCare, DHI entered into an employment agreement on May 18, 2006
      with
      Scott R. Holtmyer to be the Vice President of its Park InfusionCare infusion
      therapy business. As a result of the board of director’s decision to retain the
      operations of Park InfusionCare, the Company has reported the operating results
      of Park InfusionCare as part of continuing operations.





***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. Jim
      Leslie, our Chairman, also serves as an advisor to the Board of Directors of
      CRESA Partners, LLC. Kevin Hayes, Chairman of our consolidated subsidiary CRESA
      Partners of Orange County, LP, also served as the Chief Executive Officer of
      CRESA Partners, LLC from October 2005 to September 2006.





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.





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 the 99.9% limited
      partnership interest 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.





**-7-**
 **Table
            of
            Contents**








Effective
      September 1, 2005, Capital Markets entered into an advisory services agreement
      with Fairways Equities (see below for more details on Fairways Equities) whereby
      Fairways Equities will provide all of the professional and administrative
      services required by Capital Markets. In exchange, Capital Markets will pay
      Fairways Equities an administrative fee of 25% of gross revenues and a
      compensation fee of 40% of gross revenues, as compensation to the principals
      working on the transaction that generated the corresponding revenues. Under
      the
      terms of the agreement, Fairways Equities assumed all of the administrative
      expenses, including payroll, of CRESA Capital Markets. Fairways Equities will
      only receive payments under the agreement if its principals close a real estate
      capital markets advisory transaction that generates revenue for Capital Markets.
      The impact of this agreement on Capital Markets is that it will have no
      administrative expenses or cash requirements unless it closes a revenue
      generating transaction. The principals in Capital Markets are also the four
      members of Fairways Equities. During the years ended December 31, 2006 and
      2005,
      Capital Markets paid approximately $262,000 and $233,000, respectively of
      compensation fees to Fairways Equities under the advisory services
      agreement.





**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 was secured by a pledge of all
      of
      the personal property of CPOC, 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 was guaranteed by the Company. The then outstanding principal
      balance of the Acquisition Note was payable in full on May 1, 2006.





In June
      2006, ASDS entered into a credit agreement with First Republic Bank for a $5.3
      million term note and CPOC entered into a $500,000 revolving line of credit.
      The
      term note is being guaranteed by CPOC. The term note and revolving line of
      credit are also being personally guaranteed, subject to certain limits, by
      certain officers and minority limited partners of CPOC. The proceeds from the
      term note were used to retire the outstanding balance owed to Kevin Hayes under
      the Acquisition Note. The Acquisition Note was retired at a discount of
      approximately $100,000 to its outstanding principal balance of $ 5,400,000.
      Please see Note 10 of the Ascendant Consolidated Financial Statements contained
      herein.





The
      purchase price was 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. From the date of acquisition on May 1, 2004
      through December 31, 2006, CPOC’s cumulative revenues were $35,565,000. As a
      result, there will be no adjustment to the purchase price.





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”).





**-8-**
 **Table
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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.





The
      following is a summary of distributions received by ASDS from the Operating
      LP
      and the use of those distributions:





**Acquisition****Year
                Ended**
            
            **Year
                Ended**
            
            **Date
                to****December
                31,**
            
            **December
                31,**
            
            **December
                31,**
            
            **Total****2006**
            
            **2005**
            
            **2004**
            
            **Distributions**Interest
                payments on Acquisition Note
            
            $
            201,000
            
            $
            480,000
            
            $
            211,000
            
            $
            892,000Principal
                payments on Acquisition Note
            
            
            6,082,000
            
            
            718,000
            
            
            -
            
            
            6,800,000Proceeds
                from First Republic Bank note
            
            
            (5,300,000
            )
            
            -
            
            
            -
            
            
            (5,300,000
            )Interest
                payments on First Republic Bank note
            
            
            223,000
            
            
            -
            
            
            -
            
            
            223,000Principal
                payments on First Republic Bank note
            
            
            900,000
            
            
            -
            
            
            -
            
            
            900,000Total
                distributions received
            
            $
            2,106,000
            
            $
            1,198,000
            
            $
            211,000
            
            $
            3,515,000





The
      table
      below shows the balances of the debt assumed at the time of acquisition and
      as
      of December 31, 2006:





**Balance
                at**
            
            **Proceeds
                from**
            
            **Principal**
            
            **Principal**
            
            **December
                31,****Acquisition**
            
            **Notes
                Payable**
            
            **Payments**
            
            **Discount**
            
            **2006**Acquisition
                Note
            
            $
            6,900,000
            
            $
            -
            
            $
            (6,800,000
            )
            $
            (100,000
            )
            $
            -First
                Republic Bank term note
            
            
            -
            
            
            5,300,000
            
            
            (900,000
            )
            
            -
            
            
            4,400,000Line
                of credit & note payable to related party
            
            
            1,000,000
            
            
            -
            
            
            (1,000,000
            )
            
            -
            
            
            -Total
                debt assumed
            
            $
            7,900,000
            
            $
            5,300,000
            
            $
            (8,700,000
            )
            $
            (100,000
            )
            $
            4,400,000





In
      connection with the acquisition of CPOC, the Company was entitled to receive
      a
      structuring fee of $690,000, plus interest thereon, of which $230,000 was paid
      at closing and $230,000 was paid on May 1, 2005. The remainder of $230,000,
      plus
      interest thereon was paid on May 1, 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, 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 statements of income.





*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.





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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 years ended December 31,
      2006, December 31, 2005 and for the period from the date of acquisition on
      May
      1, 2004 to December 31, 2004:





**Year
                Ended**
            
            **Year
                Ended**
            
            **Acquisition
                Date****December
                31, 2006**
            
            **December
                31, 2005**
            
            **to
                December 31, 2004****Approximate**
            
            
            
            **Approximate**
            
            
            
            **Approximate****No.
                of**
            
            **Transaction**
            
            **No.
                of**
            
            **Transaction**
            
            **No.
                of**
            
            **Transaction****Transactions**
            
            **Value**
            
            **Transactions**
            
            **Value**
            
            **Transactions**
            
            **Value**Revenue
            
            
            
            
            $
            13,531,000
            
            
            
            
            $
            13,176,000
            
            
            
            
            $
            8,858,000Lease
                transactions
            
            
            229
            
            $
            333
                million
            
            
            229
            
            $
            432
                million
            
            
            200
            
            $
            335
                millionReal
                estate sales transactions
            
            
            7
            
            $
            10
                million
            
            
            10
            
            $
            44
                million
            
            
            7
            
            $
            25
                millionProject
                management transactions
            
            
            71
            
            $
            85
                million
            
            
            50
            
            $
            79
                million
            
            
            60
            
            $
            45
                million





In
      March
      2006, CPOC purchased a minority interest of approximately 2.7% in CRESA
      Partners, LLC, a national real estate services firm. The amount paid for this
      investment was $160,000 and is accounted for under the cost method of accounting
      for investments. CPOC is a licensee of CRESA Partners, LLC. Jim Leslie, the
      Company’s Chairman, serves as an advisor to the Board of Directors of CRESA
      Partners, LLC and Kevin Hayes, Chairman of CPOC, served as the Chief Executive
      Officer of CRESA Partners, LLC from October 2005 to September 2006.




***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 administrative activities
      include finance and accounting, insurance and risk management, review of
      investment opportunities and other advisory services to our subsidiaries and
      affiliates. We receive a management fee from certain of our subsidiaries in
      exchange for these services.





**-10-**
 **Table
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During
      the years ended December 31, 2006 and 2005, we received approximately $343,000
      and $315,000, respectively, of management fees which have been eliminated in
      the
      consolidated financial statements contained herein. We also receive periodic
      dividends or interest payments from one of our subsidiaries, which amounted
      to
      $112,000 in each of the years ended December 31, 2006 and 2005, respectively
      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 “Equity in income (losses) of
      equity method investees” in the consolidated statements of income. If we receive
      distributions in excess of our equity in earnings, they are accounted for as
      a
      reduction of our investment in Ampco.





In
      June
      2006, the Company entered into a term loan agreement with Ampco for a $500,000
      demand note. The proceeds from the demand note were used for general working
      capital purposes. The demand note bears interest at the prime rate plus 4.00%
      per annum.  The Company’s quarterly partnership cash distributions from
      Ampco are being, and will continue to be, applied to the interest and principal
      balances owed on the demand note. The remaining outstanding balance of the
      demand note is due on the earlier of demand or June 13, 2009. The demand
      note is secured by the Company’s limited partnership interest in
      Ampco





Our
      distributions from Ampco for the years ending December 31 are as follows:





**2006**
            
            **2005**
            
            **2004**Equity
                in income (losses) of equity method investees
            
            $
            96,000
            
            $
            100,000
            
            $
            82,000Return
                of capital
            
            
            48,000
            
            
            14,000
            
            
            29,000Payments
                on demand note
            
            
            (60,000
            )
            
            -
            
            
            -Total
                distributions received
            
            $
            84,000
            
            $
            114,000
            
            $
            111,000





**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 certain 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
      was 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 our acquired operating entities did not reach $2 million
      for the twelve months ended December 31, 2005. For the twelve months ended
      December 31, 2005, the Company did not meet this cash flow requirement: however,
      there has been no action taken by the Fairways Members to terminate the
      Participation Agreement.





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 **Table
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The
      Company is currently negotiating with the Fairways Members to modify the
      Participation Agreement, however, there can be no assurances that a mutually
      acceptable modification can be reached. 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
      2006, 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.





**Fairways
      03 New Jersey, LP**





During
      December 2003, we made a capital contribution of $145,000 to Fairways 03 New
      Jersey, LP (“Fairways NJ”) 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. The Company received a
      distribution of approximately $680,000 on December 30, 2005 from Fairways NJ,
      which represented the Company’s share in the profit from the sale of a single
      tenant commercial real estate property interest, the sole asset held by Fairways
      NJ. In addition to the distribution, cash of $162,000, representing the
      Company’s share of the total escrow, was being held in escrow to fund any
      amounts owed by Fairways NJ to the purchaser, including any amounts owed for
      the
      representations and warranties made under the sale agreement. The balance of
      the
      escrow account was released in December 2006. Since the date of the property
      interest acquisition, the Company has received cumulative cash distributions
      of
      approximately $1,448,000 on its initial investment of $145,000 in Fairways
      NJ.





**Fairways
      36864, LP**





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, LP**





On
      December 31, 2004, Fairways Frisco, L.P. (“Fairways Frisco”) acquired certain
      indirect interests in various partnerships (the “Frisco Square Partnerships”)
      that own properties (the “Properties”) in the Frisco Square mixed-use real
      estate development in Frisco, Texas. Frisco Square is planned to include
      approximately 4 million developed square feet, including retail, offices, hotel,
      multi-family residences and municipal space.





Under
      the
      terms of the amended Frisco Square Partnerships agreements, Fairways Equities
      is
      the sole general partner of the Frisco Square Partnerships and controls all
      operating activities, financing activities and development activities for the
      Frisco Square Partnerships.





As
      further described herein, the Company holds a limited partnership interest
      in
      Fairways Frisco. The Company is not involved in the development or management
      of
      Frisco Square; rather it is solely a limited partner. The Company has invested
      $1,219,000 of cash into Fairways Frisco as of December 31, 2006. The Company
      has
      made no additional capital contributions subsequent to December 31, 2005.
      Fairways Frisco made two capital calls in 2006, which were not funded by the
      Company and thus diluted the Company’s limited partnership interest from 14% at
      December 31, 2005 to approximately 8.87% as of December 31, 2006. As of April
      7,
      2007, the general partner of the Frisco Square Partnerships indicated that
      they
      would be making a capital call of the limited partners in the amount of $4
      million, the exact terms of which are currently being negotiated. The Company
      will not participate in this capital call. If this capital call is fully funded,
      the Company‘s limited partnership interest will be reduced.





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Fairways
      Frisco is expected to request additional capital contributions from the limited
      partners. At present, the Company does not intend to fund any additional capital
      requested from Fairways Frisco. The Company expects its limited partnership
      interest will be reduced further as additional limited partner contributions
      are
      received and the Company does not fund its limited partnership share of such
      capital contributions into Fairways Frisco. As of December 31, 2006, Fairways
      Frisco owned, either directly or indirectly, 60% of the Frisco Square
      Partnerships and the remaining 40% is owned by CMP Family Limited Partnership
      (“CMP”), which is controlled by Cole McDowell. Under the terms of the amended
      Frisco Square Partnerships, Fairways Frisco also has a first priority
      distribution preference of $5.5 million, and it will receive its pro-rata
      partnership interest of the next $9.5 million of distributions from the Frisco
      Square Partnerships.





The
      table
      below summarizes the Frisco Square property partnerships as of December 31,
      2006
      and their respective appraised values and bank debt outstanding (the appraisals
      were performed by an independent third-party appraiser):





(In
                millions)**Frisco
                Square Partnerships**
            
            **Property**
            
            **Appraised
                Value**
            
            **Bank
                Debt**
            
            **Net
                Appraised Value**Frisco
                Square B1-6 F1-11, Ltd.
            
            155,000
                sf apartments/retail
            $
            22.0
            
            $
            17.3
            
            $4.7Frisco
                Square B1-7 F1-10, Ltd.
            
            61,400
                sf office/retail
            
            15.1
            
            
            8.9
            
            6.3Frisco
                Square Properties, Ltd.
            
            2.1
                acres/undeveloped lots
            
            3.3
            
            
            2.0
            
            1.3Frisco
                Square Land, Ltd.
            
            48.7
                acres/undeveloped land
            
            49.9
            
            
            26.6
            
            23.2**Total**
            
            
            **$**
            **90.3**
            
            **$**
            **54.8**
            
            **$35.5**





Fairways
      Frisco’s share of the net appraised value in the table above would be
      approximately $30.9 million based upon the distribution terms and preferences
      in
      the Frisco Square Partnerships partnership agreements. The Company’s share of
      this amount would be approximately $2.5 million based on its ownership of 8.87%
      of the limited partnership interests at December 31, 2006. The net appraised
      value in the table above is based on an appraisal performed by an independent
      third party which is provided annually to its partners by the Frisco Square
      Partnerships pursuant to their partnership agreements. There can be no assurance
      that the real property held by the Frisco Square Partnerships could be sold
      at
      the net appraised value. The marketability and value of each property will
      depend upon many factors beyond our control and beyond the control of the Frisco
      Square Partnerships. Since investments in real property are generally illiquid,
      there is no assurance that there will be a market for the Frisco Square
      Partnerships properties. Furthermore, the Company’s partnership interest in
      Fairways Frisco is illiquid and represents a minority interest in Fairways
      Frisco, which may or may not be valued according to the liquidation value of
      the
      Frisco Square Partnerships. Any
      additional financing obtained by the Frisco Square Partnerships will, in all
      likelihood, further dilute the Company’s interest in Fairways
      Frisco.


The
      Company has not guaranteed any of the debt of the Frisco Square Partnerships
      or
      Fairways Frisco, L.P. The Company is not involved with any management, financing
      or other operating activities of the Frisco Square Partnerships or Fairways
      Frisco. However, in May 2005, the Company entered into an agreement with
      Fairways Equities, pursuant to which the Company is entitled to receive 25%
      of
      the fees paid to Fairways Equities pursuant to the Fairways Frisco partnership
      agreement. These fees, including a monthly management fee, represent
      compensation to the Company for supplying resources to execute the initial
      transaction with the Frisco Square Partnerships in December 2004. During the
      years ended December 31, 2006 and 2005, the Company received fees allocated
      from
      Fairways Equities of $28,000 and $64,000, respectively under this agreement.
      Fairways Frisco is currently negotiating with lenders to modify or extend
      certain bank loans which are reflected as current liabilities at December 31,
      2006.





**-13-**
 **Table
            of
            Contents**








Please
      see Note 2 of the Ascendant Consolidated Financial Statements contained herein
      and the audited consolidated financial statements of Fairways Frisco, L.P.
      and
      Subsidiaries for the years ended December 31, 2006 and 2005 filed hereto as
      Exhibit 99.8.





**Employees**





W e
      had the
      following full time and part-time employees as of December 31,
      2006:





**Business
                Segment**
            
            **Employees**Healthcare
            
            
            130Real
                estate advisory services
            
            
            23Corporate
                and other
            
            
            2Total
                Employees
            
            
            155





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 services.





**Available
      Information**





We
      are a
      reporting company under the Exchange Act 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 or through 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 100 F Street,
      N.E., 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.





**-14-**
 **Table
            of
            Contents**








**ITEM
      1A. RISK FACTORS**





**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 is no longer traded on the NASDAQ National Market,
      since there is limited trading activity in our stock, since we incurred
      significant debt as a result of our acquisitions in 2004, and since we expect
      to
      incur additional debt in order to acquire entities in the future. 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.





**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 Interim 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. 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 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.





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





In
      2006,
      DHI accounted for approximately 74.1% 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.





**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.





**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, 2006, we had accumulated approximately $51 million of federal
      net
      operating loss carryforwards and approximately $2.9 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
      federal net operating loss carryforwards, if not fully utilized, will expire
      from 2018 to 2024 and the state net operating loss carryforwards will expire
      from 2007 to 2009. Section 382 of the Internal Revenue Code of 1986, as amended
      (the “Code”) imposes an annual limitation on the portion of our federal 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 federal 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
      federal 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
      federal net operating loss carryforwards.





**Our
      results of operations are difficult to predict.**





Although
      we generated net income of $1,023,000, $65,000 and $249,000 for the years ended
      December 31, 2006, 2005 and 2004 respectively, we have historically incurred
      net
      operating losses. There can be no assurance that we will continue to achieve
      profitability in the future.





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**RISKS
      SPECIFIC TO OUR OPERATING SUBSIDIARIES**





***Dougherty’s
      Holdings, Inc.***





**We
      may not be able to successfully operate our Park InfusionCare
      business.**




On
      November 3, 2005, we issued a press release announcing that the board of
      directors of DHI committed to a plan to explore strategic alternatives for
      its
      infusion therapy business, Park InfusionCare. On May 24, 2006, the board of
      directors decided to retain the operations of Park InfusionCare.





The
      infusion markets served by Park InfusionCare are highly competitive. Local,
      regional and national companies are currently competing in these markets and
      others may do so in the future. Some of our competitors have greater financial,
      technical, marketing and managerial resources than we have. This competition
      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. In addition, the Park InfusionCare business
      may require additional working capital. If we are unable to successfully operate
      Park InfusionCare, our working capital position will be adversely affected
      and
      we could experience a decline in our revenue and profitability.





**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





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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 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, as amended in November 2006, with AmerisourceBergen
      provides us with pricing and credit terms that are improved from those
      previously provided 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 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. For the year ended December 31, 2006, we purchased over
      $23,858,000 of our pharmaceutical products from AmerisourceBergen.





**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





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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.





***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
      2006 and 2005, 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 the 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.





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





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





**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.


·
            the
                Frisco Square Partnerships’ future growth and real estate development
                requires additional capital..


·
            the
                risk that a significant amount of debt, which is due during 2007,
                will
                require significant additional capital if it cannot be
                refinanced.





Based
      on
      the status of the Frisco Square development, the Frisco Square Partnerships
      will
      need to invest significant amounts of money over the next several years and
      currently anticipates real estate investments to be approximately $8.0 million
      for calendar 2007. The Frisco Square Partnerships could finance future
      expenditures from any of the following sources:


·
            non-recourse,
                sale-leaseback or other financing


·
            bank
                borrowings;


·
            private
                placements of debt or equity or


·
            some
                combination of the above.




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 the Frisco Square Partnerships and their partners. If not available, Frisco
      Square’s development will be limited to that which can be financed with its
      existing capital.







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Any
      additional financing obtained by the Frisco Square Partnerships will, in all
      likelihood, further dilute the Company’s interest in Fairways
      Frisco.




**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.





**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 55% 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 relationships with related parties.**





We
      have
      relationships or transactions with related parties or affiliates of ours. Please
      see Note 16 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 of
      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.





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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
      may be subject to litigation in the future.**


We
      may be
      subject to future litigation or claims in the normal course of business, with
      or
      without merit. These claims 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.





**ITEM
      1B. UNRESOLVED STAFF
      COMMENTS**





Not
      applicable





**-22-**
 **Table
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**ITEM
      2. PROPERTIES**





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





**Approximate****Business
                Segment**
            **Property
                Type**
            **Owned/Leased**
            **Square
                Feet**Healthcare
            Corporate
                offices, retail pharmacies and infusion therapy centers
            Leased
            43,698Real
                estate advisory services
            Corporate
                offices
            Leased
            22,173Corporate
                and other
            Corporate
                offices
            Leased
            -





Mr.
      James
      C. Leslie, the Company’s Chairman, controls, and Mr. Will Cureton, one of our
      directors, is indirectly a limited partner in the entity that owns the building
      located in Dallas, Texas in which the corporate office space is sub-leased
      by
      Ascendant and DHI. Also, through August 2005, Capital Markets paid rent for
      office space in the same building to an entity controlled by Mr. Leslie. We
      consider all of these leases to be at or below market terms for comparable
      space
      in the same building.





Beginning
      on March 16, 2005 and ending on October 13, 2006, Ascendant subleased space
      from
      an unrelated third party for approximately $7,000 per month. In October 2006,
      Ascendant began sharing office space with DHI. During the year ended December
      31, 2006, DHI subleased space from an unrelated third party for $6,000 per
      month. In addition, Ascendant incurred
      certain shared office costs with an entity controlled by Mr. Leslie, which
      gives
      rise to reimbursements from us to that entity. These costs were approximately
      $9,000 in 2006.





During
      the year ended December 31, 2005 and 2004, Ascendant and Capital Markets paid
      aggregate rent of approximately $26,000 and $67,200 directly to an entity
      controlled by Mr. Leslie. The remaining rent expense paid by Ascendant and
      DHI
      was paid under sublease agreements with an unrelated third party for
      approximately $13,000 monthly. We also
      incurred certain shared office costs with an entity controlled by Mr. Leslie,
      which gave rise to reimbursements from us to that entity. These costs were
      approximately $24,300 and $22,800 in 2005 and 2004, respectively.





In
      addition, we have other relationships or transactions with other related parties
      or affiliates of ours. Please see Note 16 to the Ascendant Consolidated
      Financial Statements contained herein.





**ITEM
      3. LEGAL PROCEEDINGS**





In
      January 2004, Bishopsgate Corp. and T.E. Millard filed a lawsuit in the
      192 nd District
      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. 
 In
      August
      2005, the Company, its officers and directors and Park Pharmacy’s officers and
      directors entered into a compromise and settlement agreement, which was approved
      by the bankruptcy court. Please
      see Note 15 to the Ascendant Consolidated Financial Statements contained herein
      for additional details.





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. In August 2005, the Company settled the lead
      plaintiffs’ remaining individual claims for a confidential amount, which was
      paid by the Company’s directors’ and officers’ insurance carrier.





**-23-**
 **Table
            of
            Contents**








Accordingly,
      the district court entered a final judgment dismissing the claims with prejudice
      in February 2006. Please see Note 15 to the Ascendant Consolidated Financial
      Statements contained herein for additional details.





In
      April
      2006, we were notified by the Internal Revenue Service (“IRS”) that our federal
      income tax return for the 2004 tax year had been selected for review. In
      addition, in September 2006 we were notified by the IRS that the federal
      partnership income tax return of CPOC for the 2004 tax year had been selected
      for review. The IRS is currently conducting its reviews. At this time, we can
      make no representations or give any guidance regarding the potential outcome
      of
      this review and the impact, if any, it may have on our financial position.
      However, we are not aware of any potential issues that may cause adjustment
      to
      our filed tax returns.





In
      September 2006, the Chapter 7 trustee for the bankruptcy estate of Quantum
      North
      America, Inc. sought to enforce two default judgments against us for alleged
      preferential and fraudulent transfers to the Company's predecessor, ASD Systems,
      Inc. in the aggregate amount of approximately $150,000, plus interest and
      attorneys fees. The transfers at issue occurred in 2000. The adversary
      proceedings filed in the bankruptcy case were styled: David Gottlieb
      Trustee v. ASD Systems, Inc.; Adv. Nos. 1:02-ap-02131-GM and 1:02-ap-01948.
      We took the position that the judgments were void based on defective service
      and
      neither Ascendant nor ASD were afforded the opportunity to defend the claims.
      We
      also disputed the underlying claims and were prepared to fully defend the
      Trustee's suit once the judgments were set aside. After presenting the Trustee
      with our defenses, we were able to settle the claims for a nominal payment
      of
      $5,000. We have a settlement in principle with the Trustee which is pending
      approval by the Bankruptcy Court.





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.





**-24-**
 **Table
            of
            Contents**








**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 of 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, our having been delisted
      adversely affects the ability or willingness of investors to purchase our common
      stock, which, in turn, severely affects the market liquidity of our securities.





The
      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.





**Fiscal
                year 2005:**
            
            **High**
            
            **Low**First
                quarter*
            
            $
            1.43
            
            $
            0.85Second
                quarter*
            
            
            1.77
            
            
            1.20Third
                quarter*
            
            
            1.40
            
            
            0.70Fourth
                quarter*
            
            
            0.93
            
            
            0.51**Fiscal
                year 2006:**First
                quarter*
            
            $
            0.85
            
            $
            0.47Second
                quarter*
            
            
            0.80
            
            
            0.51Third
                quarter*
            
            
            0.62
            
            
            0.33Fourth
                quarter*
            
            
            0.60
            
            
            0.25





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





On
      March
      30, 2007, the last reported sale price of our common stock on the OTCBB was
      $0.33 per share.





At
      March
      30, 2007, there were approximately 1,800 registered and beneficial holders
      of
      record of our common stock.





The
      aggregate market value of the voting stock held by nonaffiliates of the Company,
      based upon the closing price for our common stock on the OTC Bulletin Board
      on
      June 30, 2006, the last trading date of our most recently completed second
      fiscal quarter was approximately $6,239,000.





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 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.





**-25-**


**ITEM
      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* ”
      included in this *Annual
      Report on Form 10-K, including the discussion therein of changes in our business
      under “Overview* .”
The
      consolidated statements of income data and the consolidated balance sheet data
      are derived from our audited consolidated financial statements.




**(in
                thousands, except per share data)****December
                31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****Statements
                of Operations Data:**Revenues
            
            $
            55,417
            
            $
            52,967
            
            $
            39,291
            
            $
            505
            
            $
            -Cost
                of revenues
            
            
            36,452
            
            
            34,722
            
            
            25,055
            
            
            -
            
            
            -Gross
                profit
            
            
            18,965
            
            
            18,245
            
            
            14,236
            
            
            505
            
            
            -Operating
                expenses:Selling,
                general and administrative expenses
            
            
            16,230
            
            
            16,991
            
            
            13,112
            
            
            1,540
            
            
            998Impairment
                charges
            
            
            -
            
            
            -
            
            
            -
            
            
            112
            
            
            -Depreciation
                and amortization
            
            
            713
            
            
            652
            
            
            494
            
            
            63
            
            
            18Total
                operating expenses
            
            
            16,943
            
            
            17,643
            
            
            13,606
            
            
            1,715
            
            
            1,016Operating
                income (loss)
            
            
            2,022
            
            
            602
            
            
            630
            
            
            (1,210
            )
            
            (1,016
            )Loss
                on disposal of assets
            
            
            -
            
            
            (1
            )
            
            (32
            )
            
            -
            
            
            1Equity
                in income (losses) of equity method investees
            
            
            (356
            )
            
            675
            
            
            374
            
            
            85
            
            
            19Other
                income
            
            
            155
            
            
            73
            
            
            19
            
            
            -
            
            
            -Interest
                income (expense), net
            
            
            (758
            )
            
            (763
            )
            
            (520
            )
            
            30
            
            
            59Minority
                interest
            
            
            (65
            )
            
            (50
            )
            
            (56
            )
            
            277
            
            
            209Income
                tax provision
            
            
            (205
            )
            
            (241
            )
            
            (166
            )
            
            -
            
            
            -Income
                (loss) from continuing operations
            
            
            793
            
            
            295
            
            
            249
            
            
            (818
            )
            
            (728
            )Income
                (loss) from discontinued operations
            
            
            230
            
            
            (230
            )
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            1,023
            
            $
            65
            
            $
            249
            
            $
            (818
            )
            $
            (728
            )Net
                income (loss) attributable to common shareholders
            
            $
            1,023
            
            $
            65
            
            $
            249
            
            $
            (818
            )
            $
            (728
            )Basic
                net income (loss) per share from:Continuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01
            
            $
            (0.04
            )
            $
            (0.03
            )Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -
            
            $
            -
            
            $
            -$
            0.05
            
            
            *
            
            $
            0.01
            
            $
            (0.04
            )
            $
            (0.03
            )Diluted
                net income (loss) per shareContinuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01
            
            $
            (0.04
            )
            $
            0.03Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -
            
            $
            -
            
            $
            -$
            0.05
            
            
            *
            
            $
            0.01
            
            $
            (0.04
            )
            $
            (0.03
            )*
                Less than $0.01 per shareAverage
                common shares outstanding, basic
            
            
            22,410
            
            
            22,007
            
            
            21,804
            
            
            21,557
            
            
            21,231Average
                common shares outstanding, diluted
            
            
            22,676
            
            
            22,878
            
            
            22,389
            
            
            21,557
            
            
            21,231**December
                31,**
            
            
            **2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002****Balance
                Sheet Data**Cash
                and cash equivalents
            
            $
            2,686
            
            $
            3,221
            
            $
            1,868
            
            $
            2,006
            
            $
            2,950Working
                capital
            
            
            (86
            )
            
            4,508
            
            
            6,196
            
            
            2,120
            
            
            3,063Total
                assets
            
            
            21,039
            
            
            21,998
            
            
            20,753
            
            
            2,841
            
            
            3,673Long-term
                debt (including current maturities)
            
            
            9,930
            
            
            11,924
            
            
            12,616
            
            
            -
            
            
            -Stockholders'
                equity
            
            
            4,235
            
            
            3,073
            
            
            2,879
            
            
            2,523
            
            
            3,306




**-26-**


**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 “Risk Factors -- Risks Related to Our Business,”
“Risk Factors -- Risks Specific to Operating Subsidiaries,” and “Risk Factors --
      Other Risks.” These risks and uncertainties include, but are not limited to, (a)
      the following general risks: our limited funds and risks of not obtaining
      additional funds, certain of our subsidiaries are highly leveraged, potential
      difficulties in integrating and managing our subsidiaries, our dependence upon
      management, our dependence upon a small staff, certain subsidiaries accounting
      for a significant percentage of revenue, unforeseen acquisition costs, the
      potential for future leveraged acquisitions, restrictions on the use of net
      operating loss carryforwards, and the difficulty in predicting operations;
      (b)
      the following risks to Dougherty’s Holdings, Inc.: potential problems that may
      arise in operating the Park InfusionCare business, extensive regulation of
      the
      pharmacy business, the competitive nature of the retail pharmacy industry,
      third
      party payor attempts to reduce reimbursement rates, difficulty in collecting
      accounts receivable, dependence upon a single pharmaceutical products supplier,
      price increases as a result of our potential failure to maintain sufficient
      pharmaceutical sales, shortages in qualified employees, and liability risks
      inherent in the pharmaceutical industry; (c) the following risks to CRESA
      Partners of Orange County, L.P.: the size of our competitors, our concentration
      on the southern California real estate market, the variance of financial results
      among quarters, the inability to retain senior management and/or attract and
      retain qualified employees, the regulatory and compliance requirements of the
      real estate brokerage industry and the risks of failing to comply with such
      requirements, and the potential liabilities that arise from our real estate
      brokerage activities; (d) the following risks to our investments in real estate:
      our dependence on tenants for lease revenues, the risks inherent in real estate
      development activities, the ability of the Frisco Square Partnerships to
      obtain financing on acceptable terms, the general economic conditions of areas
      in which we focus our real estate development activities, the risks of natural
      disasters, and the illiquidity of real estate investment; and (e) the following
      other risks: a majority of our common stock is beneficially owned by our
      principal stockholders, officers and directors, relationships and transactions
      with related parties, our stock is not traded on NASDAQ or a national securities
      exchange, effect of penny stock regulations, and litigation.*





*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 four 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.





Between
      2002 and 2005, 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 additional
      business enterprises in the future.





**-27-**
 **Table
            of
            Contents**








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;


·
            our
                ability to profitably operate the businesses we acquired and to pay
                the
                principal and interest on the debt incurred to make these
                acquisitions;


·
            our
                ability to successfully operate the Park InfusionCare
                business;


·
            our
                success with the investments in, and operations of, Ampco, Capital
                Markets, Fairways Frisco and our participation in other Fairways
                transactions, if any;


·
            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.




**Discontinued
      Operations**





As
      disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board
      of
      directors decided to retain the operations of Park InfusionCare, which had
      previously been reported as a discontinued operation while the Company was
      pursuing a potential disposition or strategic transaction for its infusion
      therapy business. In connection with the decision to retain the operations
      of
      Park InfusionCare, DHI entered into an employment agreement on May 18, 2006
      with
      Scott R. Holtmyer to be the Vice President of its Park InfusionCare infusion
      therapy business. As a result of the board of director’s decision to retain the
      operations of Park InfusionCare, the Company has reported the operating results
      of Park InfusionCare as part of continuing operations. The Company had
      previously recorded an estimated charge of $230,000 for employee retention
      costs
      directly related to any potential disposition or strategic transaction for
      Park
      InfusionCare.








**-28-**
 **Table
            of
            Contents**





**RESULTS OF CONTINUING OPERATIONS** ****





**Comparison of the Year Ended December 31, 2006 to the Year Ended December 31,
      2005 (000’s omitted).**


**Twelve
                Months Ended December 31, 2006****Healthcare**
            
            **Real
                Estate Advisory Services****2006**
            
            **2005**
            
            **$
                Change**
            
            **2006**
            
            **2005**
            
            **$
                Change**Revenue
            
            $
            41,062
            
            $
            39,136
            
            $
            1,926
            
            $
            14,355
            
            $
            13,831
            
            $
            524Cost
                of Sales
            
            
            28,048
            
            
            26,517
            
            
            1,531
            
            
            8,404
            
            
            8,205
            
            
            199Gross
                Profit
            
            
            13,014
            
            
            12,619
            
            
            395
            
            
            5,951
            
            
            5,626
            
            
            325Operating
                expenses
            
            
            12,292
            
            
            13,143
            
            
            (851
            )
            
            3,448
            
            
            3,343
            
            
            105Equity
                in income (losses) of equity method investees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                income
            
            
            8
            
            
            9
            
            
            (1
            )
            
            100
            
            
            -
            
            
            100Interest
                income (expense), net
            
            
            (330
            )
            
            (330
            )
            
            -
            
            
            (400
            )
            
            (444
            )
            
            44Gain
                (loss) on sale of equipment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1
            )
            
            1Minority
                interests
            
            
            -
            
            
            -
            
            
            -
            
            
            (48
            )
            
            (37
            )
            
            (11
            )Income
                tax provision
            
            
            -
            
            
            -
            
            
            -
            
            
            (199
            )
            
            (209
            )
            
            10Discontinued
                operations
            
            
            230
            
            
            (230
            )
            
            460
            
            
            -
            
            
            -
            
            
            -**Net
                income**
            
            **$**
            **630**
            
            **$**
            **(1,075**
            **)**
            **$**
            **1,705**
            
            **$**
            **1,956**
            
            **$**
            **1,592**
            
            **$**
            **364***Plus:*Interest
                (income) expense, net
            
            $
            330
            
            $
            330
            
            $
            -
            
            $
            400
            
            $
            444
            
            $
            (44
            )Income
                tax provision
            
            
            -
            
            
            -
            
            
            -
            
            
            199
            
            
            209
            
            
            (10
            )Depreciation
                & Amortization
            
            
            391
            
            
            332
            
            
            59
            
            
            297
            
            
            304
            
            
            (7
            )Discontinued
                operations
            
            
            (230
            )
            
            230
            
            
            (460
            )
            
            -
            
            
            -
            
            
            -**EBITDA
                from continuing operations**
            
            **$**
            **1,121**
            
            **$**
            **(183**
            **)**
            **$**
            **1,304**
            
            **$**
            **2,852**
            
            **$**
            **2,549**
            
            **$**
            **303**




**Twelve
                Months Ended December 31, 2006****Corporate
                & Other**
            
            **Consolidated****2006**
            
            **2005**
            
            **$
                Change**
            
            **2006**
            
            **2005**
            
            **$
                Change**Revenue
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            55,417
            
            $
            52,967
            
            $
            2,450Cost
                of Sales
            
            
            -
            
            
            -
            
            
            -
            
            
            36,452
            
            
            34,722
            
            
            1,730Gross
                Profit
            
            
            -
            
            
            -
            
            
            -
            
            
            18,965
            
            
            18,245
            
            
            720Operating
                expenses
            
            
            1,203
            
            
            1,157
            
            
            46
            
            
            16,943
            
            
            17,643
            
            
            (700
            )Equity
                in income (losses) of equity method investees
            
            
            (356
            )
            
            675
            
            
            (1,031
            )
            
            (356
            )
            
            675
            
            
            (1,031
            )Other
                income
            
            
            47
            
            
            64
            
            
            (17
            )
            
            155
            
            
            73
            
            
            82Interest
                income (expense), net
            
            
            (28
            )
            
            11
            
            
            (39
            )
            
            (758
            )
            
            (763
            )
            
            5Gain
                (loss) on sale of equipment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1
            )
            
            1Minority
                interests
            
            
            (17
            )
            
            (13
            )
            
            (4
            )
            
            (65
            )
            
            (50
            )
            
            (15
            )Income
                tax provision
            
            
            (6
            )
            
            (32
            )
            
            26
            
            
            (205
            )
            
            (241
            )
            
            36Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            230
            
            
            (230
            )
            
            460**Net
                income**
            
            **$**
            **(1,563**
            **)**
            **$**
            **(452**
            **)**
            **$**
            **(1,111**
            **)**
            **$**
            **1,023**
            
            **$**
            **65**
            
            **$**
            **958***Plus:*Interest
                (income) expense, net
            
            $
            28
            
            $
            (11
            )
            $
            39
            
            $
            758
            
            $
            763
            
            $
            (5
            )Income
                tax provision
            
            
            6
            
            
            32
            
            
            (26
            )
            
            205
            
            
            241
            
            
            (36
            )Depreciation
                & Amortization
            
            
            25
            
            
            16
            
            
            9
            
            
            713
            
            
            652
            
            
            61Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (230
            )
            
            230
            
            
            (460
            )**EBITDA
                from continuing operations**
            
            **$**
            **(1,504**
            **)**
            **$**
            **(415**
            **)**
            **$**
            **(1,089**
            **)**
            **$**
            **2,469**
            
            **$**
            **1,951**
            
            **$**
            **518**




**-29-**
 **Table
          of Contents**


***Healthcare***




**Revenue**




Total
      revenues increased $1,926,000 during the year ended December 31, 2006 to
      $41,062,000. This represents a 4.9% increase over revenue of $39,136,000 in
      2005. The increase includes a 4.2% increase in the number of retail pharmacy
      prescriptions filled and increased sales of front end merchandise. The increase
      in revenue of $3,804,000, or 12.7% at Dougherty’s Pharmacy and Medicine Man
      pharmacies (the “Retail Pharmacies”), is offset by a decrease of $1,878,000, or
      20.5%, at Park InfusionCare. The decrease in infusion revenue is due to a
      decrease in the number of patient therapies and the lingering impact on ongoing
      business from the Company’s prior announcement in November 2005 of the plans to
      seek a strategic transaction or potential disposition.





**Cost
      of Sales**


Cost
      of
      sales increased $1,531,000 for the year ended December 31, 2006 to $28,048,000,
      or 68.3% of revenue. Cost of sales was $26,517,000 or 67.8% of sales in 2005.
      The overall increase in cost of sales is primarily due to higher retail pharmacy
      sales at lower gross margins, caused principally by lower reimbursement rates
      by
      third party insurance companies. The increased cost of sales of 13.1% at the
      retail pharmacies was offset, in part, by the 29.4% decrease in cost of sales
      at
      Park InfusionCare which is due to a change in revenue mix to higher margin
      therapies. Costs of sales includes all direct costs related to the sale of
      products.





**Operating
      Expenses**


Operating
      expenses decreased $851,000 for the year ended December 31, 2006 to $12,292,000
      from $13,143,000 in 2005. Operating expenses represented 29.9% of revenue in
      2006 as compared to 33.6% of revenue in 2005. The decrease in healthcare
      operating expenses is due primarily to a reduced headcount and other operating
      expenses at





Park
      InfusionCare of $515,000 which is a reduction of 10.4% as compared to 2005.
      In
      addition, overhead expenses at the DHI corporate office were reduced by
      $636,000, or 39.5%, as a result of reduced headcount and other cost reduction
      initiatives initiated in 2006. The overall decrease in operating expenses as
      a
      percentage of revenue is due primarily to a reduction of headcount net of
      increases attributable to increased pharmacy revenues.





**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
      $330,000 for the year ended December 31, 2006, which was unchanged from the
      year
      ended December 31, 2005. Interest expense on DHI’s revolving bank debt is fixed
      at six percent per annum.





**Earnings
      Before Interest, Taxes, Depreciation and Amortization**


EBITDA
      increased by $1,304,000 to EBITDA of $1,121,000 in for the year ended December
      31, 2006 from an EBITDA loss of ($183,000) in 2005. This overall increase is
      due
      primarily to an overall decrease in operating expense of $851,000 due to reduced
      headcount and other operating expenses. EBITDA at the Retail Pharmacies
      increased 43% in 2006 to $2,144,000 from $1,499,000 in the year ended 2005.
      During 2006, the EBITDA loss at Park InfusionCare was decreased by $25,000
      to an
      EBITDA loss of ($253,000) in 2006 from an EBITDA loss of ($278,000) in 2005,
      a
      decrease of 9%.





***Real
      estate advisory services***





**Revenue**


Revenue
      increased $524,000 from $13,831,000 in 2005 to $14,355,000 during the year
      ended
      December 31, 2006. The following are included in real estate advisory services
      revenue for the year ended December 31, 2006 (i) fee revenue earned by CPOC
      of
      $13,510,000 and (ii) fee revenue earned by Capital Markets of $815,000. The
      overall increase is due primarily to an increase of $365,000 in revenue earned
      by CPOC which is due to an increase in commissions received for tenant
      representation services during 2006.





**Cost
      of Revenue**





Cost
      of
      revenue was $8,404,000 for the year ended December 31, 2006, representing 58.5%
      of revenue. By comparison, cost of revenue was $8,205,000 or 59.3% of revenue
      in
      2005. The overall increase in cost of revenue is due to increased commission
      and
      referral fee costs. The decrease in the cost of revenue percentage is due to
      a
      decrease in broker commissions paid as a percentage of total revenue. Cost
      of
      revenue includes all direct costs, including license fees and broker
      commissions, incurred in connection with a real estate advisory transaction.
      Brokerage commissions can vary depending on the transaction terms and whether
      brokers have reached certain commission targets.





**Operating
      Expenses**


Operating
      Expenses increased $105,000 from $3,343,000 in 2005 to $3,448,000 for the year
      ended December 31, 2006. This overall increase includes an increase of $116,000
      in selling, general and administrative expenses at Capital Markets due to
      increase professional bonuses due to greater transaction revenues. Under the
      management agreement which was implemented in 2005, Capital Markets only incurs
      expenses when revenues are earned from a real estate advisory transaction
      closing.





**-30-**
 **Table
          of Contents**


**Interest
      Income (Expense), Net**


Interest
      expense, net is comprised of interest expense related to the debt related to
      the
      CPOC acquisition. Interest expense, net was $400,000 in 2006 as compared to
      $444,000 for the year ended December 31, 2005. The overall decrease of $44,000
      is primarily due to the reduction of the principal balance of $1,782,000 during
      2006. The overall decrease is reduced by an increase in the prime rate from
      7.25% at December 31, 2005 to 8.25% at December 31, 2006. The CPOC acquisition
      note payable bears inte rest
      at
      the Bank of America prime rate minus 0.25%.




**Earnings
      Before Interest, Taxes, Depreciation and Amortization**


EBITDA
      increased 11.9% to $2,852,000 in 2006 from $2,549,000 in 2005. This overall
      increase includes an increase in revenue of $524,000 and a corresponding
      increase in gross profit of $325,000. The increase also includes a $100,000
      gain
      as a result of a discount on the restructuring of the Acquisition Debt.





***Corporate
      and other***





**Operating
      Expenses**


Operating
      expenses for the year ended December 31, 2006 were $1,203,000, or an increase
      of
      $46,000 over operating expenses of $1,157,000 for the year ended December 31,
      2005. The increase is primarily a result of increased payroll and professional
      fees in the normal course of business. Operating expenses of $1,203,000 includes
      payroll and benefits of $418,000; legal expense of $78,000; insurance expense
      of
      $120,000; audit and accounting expense of $165,000; SEC, transfer agent and
      other professional fees of $128,000; director fees and stock compensation
      expense of $110,000 and other selling, general and administrative expenses
      of
      $184,000.





**Equity
      in Income (Losses) of Equity Method Investees**


Equity
      in
      income (losses) of equity method investees decreased $1,031,000 from $675,000
      during the year ended December 31, 2005 to ($356,000) for the year ended
      December 31, 2006. Equity in income (losses) of equity method investees
      represents our pro-rata portion, based on our limited partnership interests,
      of
      the income (losses) of Ampco Partners, Ltd., Fairways 03 New Jersey, L.P. and
      Fairways Frisco, LP as follows:





**December
                31,**
            
            **December
                31,****2006**
            
            **2005**Ampco
                Partners, Ltd.
            
            $
            96,000
            
            $
            100,000Fairways
                03 New Jersey, LP
            
            
            6,000
            
            
            1,112,000Fairways
                Frisco, L.P.
            
            
            (458,000
            )
            
            (537,000
            )$
            (356,000
            )
            $
            675,000





The
      equity in earnings of Fairways NJ of $1,112,000 is comprised of earnings from
      its interest in the leasing of a single tenant commercial building and a gain
      on
      the sale of that building in 2005. Of this total, $951,000 was received is
      cash
      distributions in 2005. The Company received a distribution of approximately
      $680,000 on December 30, 2005 from Fairways NJ, which represented the Company’s
      share in the profit from the sale of a single tenant commercial real estate
      property interest, the sole asset held by Fairways NJ. In addition to the
      distribution, cash of $162,000, representing the Company’s share of the total
      escrow, was held in escrow to fund any amounts owed by Fairways NJ to the
      purchaser, including any amounts owed for standard representations and
      warranties under the sale agreement. The balance of the escrow account and
      interest income of $168,000 was received in December 2006.





The
      equity in losses of Fairways Frisco of $458,000 and $537,000 represents our
      share of the net loss of Fairways Frisco for the years ended December 31, 2006
      and 2005, respectively. These amounts are non-cash adjustments to our operating
      results and we have no obligation to fund the operating losses or debts of
      Fairways Frisco.





**Other
      Income**


Other
      income was $47,000 in 2006 as compared to $64,000 in 2005. This represents
      receipts from Fairways Equities under an agreement whereby the Company receives
      25% of certain fees earned by Fairways Equities. During 2006 Fairways Equities
      earned fewer fees than in 2005.





**Income
      tax provision**


Income
      tax provision decreased $26,000 from $32,000 in 2005 to $6,000 in 2006 as a
      result of lower taxable income in 2006. The income tax provision represents
      federal alternative minimum taxes owed by the Company. The Company’s net
      operating loss carryforwards are limited to usage of 90% of alternative minimum
      taxable income, and therefore it will be required to pay alternative minimum
      tax
      on 10% of its alternative minimum taxable income at a statutory tax rate of
      20%.








**-31-**
 **Table
            of
            Contents**







**Comparison
      of the Year Ended December 31, 2005 to the Year Ended December 31, 2004 (000’s
      omitted).**




**Years
                Ended December 31,****Healthcare**
            
            **Real
                Estate Advisory Services****2005**
            
            **2004**
            
            **$
                Change**
            
            **2005**
            
            **2004**
            
            **$
                Change**Revenue
            
            $
            39,136
            
            $
            29,532
            
            $
            9,604
            
            $
            13,831
            
            $
            9,759
            
            $
            4,072Cost
                of Sales
            
            
            26,517
            
            
            19,668
            
            
            6,849
            
            
            8,205
            
            
            5,387
            
            
            2,818Gross
                Profit
            
            
            12,619
            
            
            9,864
            
            
            2,755
            
            
            5,626
            
            
            4,372
            
            
            1,254Operating
                expenses
            
            
            13,143
            
            
            9,868
            
            
            3,275
            
            
            3,343
            
            
            2,479
            
            
            864Equity
                in income (losses) of equity method investees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            -Other
                income
            
            
            9
            
            
            19
            
            
            (10
            )
            
            -
            
            
            
            
            
            -Interest
                income (expense), net
            
            
            (330
            )
            
            (297
            )
            
            (33
            )
            
            (444
            )
            
            (247
            )
            
            (197
            )Gain
                (loss) on sale of equipment
            
            
            -
            
            
            (17
            )
            
            17
            
            
            (1
            )
            
            (15
            )
            
            14Minority
                interests
            
            
            -
            
            
            -
            
            
            -
            
            
            (37
            )
            
            (29
            )
            
            (8
            )Income
                tax provision
            
            
            -
            
            
            -
            
            
            -
            
            
            (209
            )
            
            (166
            )
            
            (43
            )Discontinued
                operations
            
            
            (230
            )
            
            -
            
            
            (230
            )
            
            -
            
            
            -
            
            
            -**Net
                income**
            
            **$**
            **(1,075**
            **)**
            **$**
            **(299**
            **)**
            **$**
            **(776**
            **)**
            **$**
            **1,592**
            
            **$**
            **1,436**
            
            **$**
            **156***Plus:*Interest
                (income) expense, net
            
            $
            330
            
            $
            297
            
            $
            33
            
            $
            444
            
            $
            247
            
            $
            197Income
                tax provision
            
            
            -
            
            
            -
            
            
            -
            
            
            209
            
            
            166
            
            
            43Depreciation
                & Amortization
            
            
            332
            
            
            271
            
            
            61
            
            
            304
            
            
            216
            
            
            88Discontinued
                operations
            
            
            230
            
            
            -
            
            
            230
            
            
            -
            
            
            -
            
            
            -**EBITDA
                from continuing operations**
            
            **$**
            **(183**
            **)**
            **$**
            **269**
            
            **$**
            **(452**
            **)**
            **$**
            **2,549**
            
            **$**
            **2,065**
            
            **$**
            **484**




**Years
                Ended December 31,****Corporate
                & Other**
            
            **Consolidated****2005**
            
            **2004**
            
            **$
                Change**
            
            **2005**
            
            **2004**
            
            **$
                Change**Revenue
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            52,967
            
            $
            39,291
            
            $
            13,676Cost
                of Sales
            
            
            -
            
            
            -
            
            
            -
            
            
            34,722
            
            
            25,055
            
            
            9,667Gross
                Profit
            
            
            -
            
            
            -
            
            
            -
            
            
            18,245
            
            
            14,236
            
            
            4,009Operating
                expenses
            
            
            1,157
            
            
            1,259
            
            
            (102
            )
            
            17,643
            
            
            13,606
            
            
            4,037Equity
                in income (losses) of equity method investees
            
            
            675
            
            
            374
            
            
            301
            
            
            675
            
            
            374
            
            
            301Other
                income
            
            
            64
            
            
            -
            
            
            64
            
            
            73
            
            
            19
            
            
            54Interest
                income (expense), net
            
            
            11
            
            
            24
            
            
            (13
            )
            
            (763
            )
            
            (520
            )
            
            (243
            )Gain
                (loss) on sale of equipment
            
            
            -
            
            
            -
            
            
            -
            
            
            (1
            )
            
            (32
            )
            
            31Minority
                interests
            
            
            (13
            )
            
            (27
            )
            
            14
            
            
            (50
            )
            
            (56
            )
            
            6Income
                tax provision
            
            
            (32
            )
            
            -
            
            
            (32
            )
            
            (241
            )
            
            (166
            )
            
            (75
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            (230
            )
            
            -
            
            
            (230
            )**Net
                income**
            
            **$**
            **(452**
            **)**
            **$**
            **(888**
            **)**
            **$**
            **436**
            
            **$**
            **65**
            
            **$**
            **249**
            
            **$**
            **(184**
            **)***Plus:*Interest
                (income) expense, net
            
            $
            (11
            )
            $
            (24
            )
            $
            13
            
            $
            763
            
            $
            520
            
            $
            243Income
                tax provision
            
            
            32
            
            
            -
            
            
            32
            
            
            241
            
            
            166
            
            
            75Depreciation
                & Amortization
            
            
            16
            
            
            7
            
            
            9
            
            
            652
            
            
            494
            
            
            158Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            230
            
            
            -
            
            
            230**EBITDA
                from continuing operations**
            
            **$**
            **(415**
            **)**
            **$**
            **(905**
            **)**
            **$**
            **490**
            
            **$**
            **1,951**
            
            **$**
            **1,429**
            
            **$**
            **522**




**-32-**
 **Table
            of
            Contents**







***Healthcare***





**Revenue**


Revenue
      increased $9,604,000 during the year ended December 31, 2005 to $39,136,000
      from
      $29,532,000 in 2004. The increase is due to increased pharmacy sales at
      Dougherty’s Pharmacy in 2005 as a result of increased pricing for prescription
      drug sales as well as increased front end merchandise sales subsequent to the
      remodeling of Dougherty’s Pharmacy. The increase is also due to the fact that
      2004 results are reflected for the period from the date of acquisition on March
      24, 2004 to December 31, 2004, as compared to a full twelve months in
      2005.





**Cost
      of Sales**


Cost
      of
      sales was $26,517,000 for the year ended December 31, 2005, representing 68%
      of
      revenue. Cost of sales was $19,668,000 or 66.6% of sales in 2004. The overall
      increase is also due primarily to the inclusion of DHI’s cost of sales for the
      period from the date of acquisition on March 24, 2004 to December 31, 2004
      as
      compared to a full twelve months in 2005. The increase is cost of sales as
      a
      percentage of revenue is primarily due to an increase in infusion care wholesale
      drug prices and a change in the mix of revenue to lower margin therapies. This
      increase in infusion care cost of sales is somewhat offset by the decline in
      retail pharmacy cost of sales as a percentage of revenue in 2006 is due to
      an
      increased mix of generic prescriptions as compared to brand name drugs, along
      with improved merchandising and purchasing in the front end of the pharmacies.
      Dougherty’s Pharmacy was remodeled in 2005, which contributed to increased sales
      of front end merchandise, which carry a higher gross margin than prescription
      drug sales. Cost of sales includes all direct costs related to the sale of
      products in pharmacies.





**Operating
      Expenses**


Operating
      expenses increased $3,275,000 for the year ended December 31, 2005 to
      $13,143,000 as compared to operating expenses of $9,868,000 in 2004. Operating
      expenses represented 33.6% of revenue in 2005 as compared to 33.4% of revenue
      in
      2004. The increase in operating expenses as a percentage of revenue is due
      primarily to increased pharmacy revenues combined with smaller increases in
      fixed operating expenses. The overall dollar increase in operating expenses
      is
      due primarily to the inclusion of DHI’s operating expenses, including
      amortization of Patient Prescriptions, for the period from the date of
      acquisition on March 24, 2004 to December 31, 2004 as compared to a full twelve
      months in 2005.





**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, as compared to $330,000 for
      the
      year ended December 31, 2005. Interest expense on DHI’s revolving bank debt is
      fixed at six percent per annum. For the year ended December 31, 2005, interest
      expense, net increased due to inclusion of the DHI results for the period from
      the date of acquisition on March 24, 2004 to December 31, 2004 as compared
      to a
      full twelve months in 2005.





**Earnings
      Before Interest, Taxes, Depreciation and Amortization**


DHI
      experienced an EBITDA loss of $(183,000) during 2005 as compared to EBITDA
      of
      $269,000 during 2004. EBITDA at the Retail Pharmacies increased 36.9% in 2005
      to
      $1,499,000 from $946,000 in the year ended 2004. This EBITDA loss was primarily
      a result of an EBITDA loss of ($278,000) at Park InfusionCare as a result of
      the
      decline in revenue and a change in the mix of revenue to lower margin therapies.
      The decrease in infusion revenue is due to a decrease in the number of patient
      therapies and the lingering impact on ongoing business from the Company’s prior
      announcement in November 2005 of the plans to seek a strategic transaction
      or
      potential disposition.





***Real
      estate advisory services***





**Revenue**


Revenue
      increased $4,072,000 from $ 9,759,000 in 2004 to $13,831,000 during the year
      ended December 31, 2005. The following are included in real estate advisory
      services revenue for the year ended December 31, 2005 (i) fee revenue earned
      by
      CPOC of $13,176,000 and (ii) fee revenue earned by CRESA Capital Markets of
      $655,000. The increase over 2004 revenue is due primarily to the inclusion
      of
      CPOC’s revenue for the period from the date of acquisition on May 1, 2004 to
      December 31, 2004 as compared to a full twelve months in 2005.





**-33-**
 **Table
            of
            Contents**








**Cost
      of Revenue**


Cost
      of
      revenue was $8,205,000 for the year ended December 31, 2005, representing 59.3%
      of revenue. Cost of revenue was $5,387,000 or 55.2% of revenue in 2004. The
      overall increase in cost of revenue as a percentage of revenue is due to
      increased commission and referral fee costs. Cost of revenue includes all direct
      costs, including broker commissions, incurred in connection with a real estate
      advisory transaction. The increase of $2,818,000 in cost of revenue for the
      year
      ended December 31, 2005 is due primarily to the inclusion of CPOC’s cost of
      revenue for the period from the date of acquisition on May 1, 2004 to December
      31, 2004 as compared to a full twelve months in 2005.





**Operating
      Expenses**


Operating
      expenses increased $864,000 from $2,479,000 in 2004 to $3,343,000 for the year
      ended December 31, 2005. This increase includes a decrease of $151,000 in
      selling, general and administrative expenses at Capital Markets due to decreased
      professional bonuses due to lower transaction revenues. The increase also
      includes an increase of $926,000 for CPOC due to the inclusion of CPOC’s
      operating expenses for the period from the date of acquisition on May 1, 2004
      to
      December 31, 2004 as compared to a full twelve months in 2005.





**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 $444,000 in 2005 as
      compared to $247,000 for the year ended December 31, 2004. The increase is
      partially due to an increase in the prime rate from 5.25% at December 31, 2004
      to 7.25% at December 31, 2005. The CPOC acquisition note payable at the Northern
      Trust Bank was at prime rate plus 0.50%. The remainder of the increase in
      interest expense is due to the inclusion of CPOC’s interest expense for the
      period from the date of acquisition on May 1, 2004 to December 31, 2004 as
      compared to a full twelve months in 2005.





**Earnings
      Before Interest, Taxes, Depreciation and Amortization**


EBITDA
      increased 23.4% to $2,549,000 in 2005 from $2,065,000 in 2004. This increase
      is
      due principally to an increase in gross profit of $1,254,000 which is partially
      offset by an increase in operating expenses of $864,000.





***Corporate
      and other***





**Operating
      Expenses**


Operating
      expenses for the year ended December 31, 2005 were $1,157,000, or a decrease
      of
      $102,000 from operating expenses of $1,259,000 for the year ended December
      31,
      2004. The decrease is primarily a result of decreased costs for legal and
      accounting due to the additional activity generated by our acquisitions of
      the
      Park Assets and CPOC in 2004. Operating expenses of $1,157,000 includes payroll
      and benefits of $515,000; legal expense of $111,000; insurance expense of
      $178,000; audit and accounting expense of $83,000; SEC, transfer agent and
      other
      professional fees of $89,000; and other selling, general and administrative
      expenses of $181,000.





**Equity
      in Income (Losses) of Equity Method Investees**


Equity
      in
      income (losses) of equity method investees increased $301,000 from $374,000
      during the year ended December 31, 2004 to $675,000 for the year ended December
      31, 2005. Equity in income (losses) of equity method investees represents our
      pro-rata portion, based on our limited partnership interests, of the income
      (losses) of Ampco Partners, Ltd., Fairways 03 New Jersey, L.P., Fairways 36864,
      L.P. and Fairways Frisco, LP as follows:





**December
                31,**
            
            **December
                31,****2005**
            
            **2004**Ampco
                Partners, Ltd.
            
            $
            100,000
            
            $
            82,000Fairways
                03 New Jersey, LP
            
            
            1,112,000
            
            
            208,000Fairways
                36864, L.P.
            
            
            -
            
            
            84,000Fairways
                Frisco, L.P.
            
            
            (537,000
            )
            
            -$
            675,000
            
            $
            374,000








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The
      equity in earnings of Fairways NJ of $1,112,000 is comprised of earnings from
      its interest in the leasing of a single tenant commercial building and a gain
      on
      the sale of that building in 2005. Of this total, $951,000 was received is
      cash
      distributions in 2005. The remaining amount is expected to be received in cash
      as described below. The Company received a distribution of approximately
      $680,000 on December 30, 2005 from Fairways NJ, which represented the Company’s
      share in the profit from the sale of a single tenant commercial real estate
      property interest, the sole asset held by Fairways NJ. In addition to the
      distribution, cash of $162,000, representing the Company’s share of the total
      escrow, is being held in escrow to fund any amounts owed by Fairways NJ to
      the
      purchaser, including any amounts owed for standard representations &
warranties under the sale agreement. The balance of the escrow account was
      received in December 2006.





The
      equity in losses of Fairways Frisco of $537,000 represents our share of the
      net
      loss of Fairways Frisco for the year ended December 31, 2005. We made our
      initial investment in Fairways Frisco on December 31, 2004, and accordingly
      no
      equity in income (losses) of Fairways Frisco was recorded in 2004. This amount
      is a non-cash adjustment to our operating results and we have no obligation
      to
      fund the operating losses or debts of Fairways Frisco.





The
      equity in income of Fairways 36864, L.P. of $84,000 for the year ended December
      31, 2005 was due to a gain on the sale of two single tenant commercial
      properties in which we had an investment through ASE Investments. This
      investment is no longer outstanding. See Item I, “Business” of Part I for more
      information.





**Other
      Income**


Other
      income in 2005 represents the receipt of $64,000 from Fairways Equities, LLC
      under an agreement whereby the Company receives 25% of certain fees earned
      by
      Fairway Equities.





**Income
      tax provision**


Income
      tax provision of $32,000 in 2005 represents federal alternative minimum taxes
      owed by the Company. Based on the Company’s differences in income in various
      legal entities and its temporary differences between taxable income and book
      income, there was no income tax provision recorded for 2004. The Company’s net
      operating loss carryforwards are limited to usage of 90% of alternative minimum
      taxable income, and therefore it will be required to pay alternative minimum
      tax
      on 10% of its alternative minimum taxable income at a statutory tax rate of
      20%.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      December 31, 2006, we had working capital deficit of approximately $0.1 million
      as compared to working capital of approximately $4.5 million at December 31,
      2005. The $4.6 million decrease in working capital is due to an increase in
      the
      current portion of notes payable of approximately $3.8 million due to the change
      in classification of the Bank of Texas notes payable, in our Healthcare segment,
      from a long-term liability to a current liability. In addition, the First
      Republic Bank note payable, in our Real Estate segment, increased the current
      portion of notes payable by $1.2 million.





On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP, each a wholly-owned subsidiary
      of DHI, entered into a loan agreement with Amegy Bank for a $2,000,000 revolving
      line of credit and a $2,200,000 term loan. Substantially all of the proceeds
      from the revolving line of credit and the term loan were used to retire the
      outstanding balance owed to Bank of Texas, N.A. under an existing credit
      facility. As a result, under the payments terms of the Amegy Bank revolving
      line
      of credit and term loan, we improved the working capital position by
      approximately $3.7 million.





As
      of
      December 31, 2006, we had cash and cash equivalents of approximately $2.7
      million compared to approximately $3.2 million as of December 31, 2005.





Our
      future capital needs are uncertain. Although management projects positive cash
      flow after debt service based on anticipated operations of our 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.





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**Cash
      from Financing Activities**





***Dougherty’s
      Holdings, Inc.***


During
      the years ended December 31, 2006 and 2005, DHI made principal payments on
      its
      notes payable of $1,170,000 and $718,000, respectively. DHI also made $755,000
      of new borrowings under its bank credit facility and the insurance premium
      finance notes payable during the year ended December 31, 2006 whereas no new
      borrowings were made during the year ended December 31, 2005.





***ASDS
      of Orange County, Inc.***





During
      the first
      six
      months of 2006, ASDS made principal payments of $882,000 on its Acquisition
      Note
      Payable to Kevin Hayes. In June 2006, ASDS entered into a credit agreement
      with
      First Republic Bank for a $5.3 million term note. The proceeds from the term
      note were used to retire the outstanding balance owed to Kevin Hayes under
      the
      Acquisition Note. The Acquisition Note was retired at a discount of
      approximately $100,000 to its outstanding principal balance of $5,400,000.
      During the last six months of the year, ASDS paid $900,000 on the First Republic
      Bank term note. Please see Note 10 of the Ascendant Consolidated Financial
      Statements contained herein.





During
      the year ended December 31, 2005, ASDS made principal payments of $718,000
      on
      its Acquisition Note Payable to Kevin Hayes. There were no new borrowings during
      the year ended December 31, 2005 by either ASDS or CPOC.





In
      connection with the acquisition of CPOC, the Company was entitled to receive
      a
      structuring fee of $690,000, plus interest thereon, of which $230,000 was paid
      at closing and $230,000 was paid on May 1, 2005. The remainder of $230,000,
      plus
      interest thereon was paid on May 1, 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, 2006 we had a decline in cash flow of approximately
      $535,000. Cash flow provided from operating activities for the year ended
      December 31, 2006 was $1,091,000 while cash used in investing activities was
      $70,000 and cash used in financing activities was $1,556,000. The cash used
      in
      investing activities was primarily for purchases of property and equipment
      of
      $177,000 less net distributions from limited partners of $107,000 which includes
      the Fairways NJ distribution. The cash used in financing activities was
      primarily related to payments on the acquisition debt for DHI and
      CPOC.





Through
      December 31, 2006, we have invested approximately $1.22 million in Fairways
      Frisco. In September 2005, the Company borrowed $225,000 from a bank and used
      the proceeds to increase its investment in Fairways Frisco. This unsecured
      bank
      note payable was repaid in full in January 2006. The Frisco Square Partnerships
      and Fairways Frisco will require additional funding in order to complete
      development of the planned project. 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.





In
      December 2005, the Company received a cash distribution of approximately
      $680,000 from Fairways NJ, which represented the Company’s share in the profit
      from the sale of a single tenant commercial real estate property interest,
      the
      sole asset held by Fairways NJ. In addition to the distribution, cash of
      $162,000, representing the Company’s share of the total escrow, was held in
      escrow to fund any amounts owed by Fairways NJ to the purchaser, including
      any
      amounts owed for standard representations & warranties under the sale
      agreement. The balance of the escrow account, including interest income,
      totaling approximately $168,000 was received in December 2006.





Our
      future capital needs are uncertain. Although management projects positive cash
      flow after debt service based on anticipated operations of our 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.





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Additionally,
      if we were to make additional acquisitions, we would likely need additional
      capital to fund all, or a portion, of those acquisitions. 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, 2006, we had approximately $51 million of federal net operating
      loss carryforwards available to offset future taxable income, which, if not
      utilized, will fully expire from 2018 to 2024. In addition, we had approximately
      $2.9 million of state net operating loss carryforwards available to offset
      future taxable income, which, if not utilized, will fully expire from 2007
      to
      2009. 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 federal 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.





**State
      Income Taxes**





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





**Off
      Balance Sheet Arrangements**





As
      discussed in Part I of this Form 10-K, the Company guaranteed the Acquisition
      Note in the amount of $6.9 million. The Acquisition Note was payable from the
      excess cash flows of ASDS over a three year period. During the period from
      May
      1, 2004 until June 2006, principal payments we made paid on the Acquisition
      Note. In
      June
      2006, ASDS entered into a credit agreement with First Republic Bank for a $5.3
      million term note. The proceeds from the term note were used to retire the
      outstanding balance owed to Kevin Hayes under the Acquisition Note. 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 NJ 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 four 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. In December 2005, this bank debt was
      paid in full by Fairways NJ and the personal guarantees, as well as the
      Company’s indemnification, were cancelled.





**Disclosures
      About Contractual Obligations and Commercial Commitments**





In
      connection with the acquisition of the Park Assets in 2004, DHI entered into
      a
      three year supply agreement with AmerisourceBergen Drug Corporation pursuant
      to
      which DHI and its subsidiaries agreed to purchase prescription and
      over-the-counter pharmaceuticals from AmerisourceBergen through March 2007.
      This
      supply agreement provided 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 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. For the years
      ended
      December 31, 2006 and 2005 and the period from the date of acquisition through
      December 31, 2004, DHI purchased over $23,858,000, $23,159,000 and $17,250,000,
      respectively, of its pharmaceutical products from AmerisourceBergen.





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In
      December 2006, DHI entered into Amendment No. 1 (“Amendment”) to the supply
      agreement. The Amendment extends the supply agreement from March 24, 2007 to
      March 24, 2009. In addition, the Amendment (1) improves the pricing for goods
      purchased, (2) changes the minimum order volume from $30,000,000 to $50,000,000
      over the life of the agreement and (3) the percentage of generic drug purchases
      was changed from 2.50% to 6.0%. The Amendment also allows for the return of
      goods, in a saleable condition, within 180 days of the invoice date without
      a
      restocking fee and provides for a termination fee if DHI terminates the supply
      agreement before the expiration of the term of the agreement. The termination
      fee is a maximum of $50,000 but is reduced for each full month from December
      1,
      2006 until the date of termination. However, there is no termination fee if
      the
      minimum order volume has been satisfied. At December 31, 2006, DHI believes
      it
      has satisfied the minimum order volume.





The
      Amendment also provides for a rebate in the amount of $150,000 representing
      a
      15.0% volume discount off the price of goods for the first $1,000,000 of net
      purchases purchased in the period after November 1, 2006 providing that DHI
      makes net purchases in excess of $1 million after November 1, 2006. In December
      2006, DHI satisfied the net purchase requirement and received the $150,000
      rebate.





A
      summary
      of our contractual commitments under debt and lease agreements and other
      contractual obligations at December 31, 2006 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, 2006**
            
            **Payments
                due by Period ($-000's omitted)**Less
                than
            
            1-3
            
            3-5
            
            More
                than1
                year
            
            Years
            
            Years
            
            5
                years
            
            TotalLease
                Obligations
            
            $
            1,260,000
            
            $
            2,147,000
            
            $
            1,127,000
            
            $
            2,007,000
            
            $
            6,541,000Notes
                Payable
            
            
            6,106,000
            
            
            3,824,000
            
            
            -
            
            
            -
            
            
            9,930,000Total
            
            $
            7,366,000
            
            $
            5,971,000
            
            $
            1,127,000
            
            $
            2,007,000
            
            $
            16,471,000







On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP, each a wholly-owned subsidiary
      of DHI, entered into a loan agreement with Amegy Bank for a $2,000,000 revolving
      line of credit and a $2,200,000 term loan. Substantially all of the proceeds
      from the revolving line of credit and the term loan were used to retire the
      outstanding balance owed to Bank of Texas, N.A. under an existing credit
      facility. As
      a
      result of this new loan agreement, on February 20, 2007 the note payable
      payments due in less than one year decreased by approximately $3,757,000 since
      the new debt payments terms extend the maturity of the revolving line of credit
      and term loan payments into future years. Please
      see Note 10 of the Ascendant Consolidated Financial Statements contained herein.





**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 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.





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***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.





***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. We also
      use the equity method for investments in real estate limited partnerships where
      we own more than 3% to 5% of the limited partnership interests. Accordingly,
      we
      record our proportionate share of the income or losses generated by our equity
      method investees in the income statement. If we receive distributions in excess
      of our equity in earnings, they are recorded as a reduction of 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 income. 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
      December 2004, the Financial Accounting Standards Board issued FASB Statement
      No. 123R (Revised 2004), Share-Based Payment.  (“Statement
      123R”) ,
      which
      required 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.





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.





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The
      Company currently has no options outstanding which are not vested. The
      unrecognized compensation cost related to these options is not material and
      as a
      result, the implementation of Statement 123R did not have a material impact
      on
      the Company’s Stock Based Compensation.





The
      Company accounts for its employee stock options and stock based awards under
      the
      fair value provisions of Statement 123R, which was adopted effective January
      1,
      2006, whereby stock-based compensation is measured at the grant date based
      on
      the value of the awards and is recognized as expense over the requisite service
      period





(usually
      the vesting period). See Note 12 for additional information about the Company’s
      Stock Based Compensation.





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





In
      June
      2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for
      Uncertainty in Income Taxes, effective for fiscal years beginning after December
      15, 2006, with early adoption permitted. FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in accordance with FASB Statement
      No. 109, Accounting for Income Taxes, by providing a recognition threshold
      and measurement guidance for the financial statement recognition and measurement
      of a tax position taken or expected to be taken in a tax return. We have
      evaluated the impact of the adoption of this interpretation on our consolidated
      financial position, results of operations or cash flows and have concluded
      that
      it does not appear it will have a material impact on our results of operations.





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





In
      September 2006, the Securities and Exchange Commission ("SEC") staff issued
      Staff Accounting Bulletin No. 108 ("SAB 108"), "Considering the Effects of
      Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements." SAB 108 was issued to provide consistency in how registrants
      quantify financial statement misstatements. The Company is required to and
      will
      initially apply SAB
      108
      in connection with the preparation of its annual financial statements for the
      year ending December 31, 2006. The Company does not expect the application
      of SAB
      108
      to have a material effect on its financial position and results of operations.





**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.





At
      December 31, 2006, we were exposed to interest rate risk under the First
      Republic Bank note payable which bears interest payable monthly at the prime
      rate of Bank of America minus 0.25% per annum and the $440,000 demand note
      payable to Ampco Partners, Ltd., which bears interest at the Bank of Texas
      prime
      rate plus 4.00%.





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If
      the
      effective interest rate under the First Republic Bank note and the Ampco
      Partners, Ltd demand note were to increase by 100 basis points (1.00%), our
      annual financing expense would increase by approximately $44,000, based on
      the
      average balances outstanding during the year ended December 31, 2006. A 100
      basis point (1.00%) increase in market interest rates would decrease the fair
      value of our fixed rate debt by approximately $23,000. We did not experience
      a
      material impact from interest rate risk during the year ended December 31,
      2006.





On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP, each a wholly-owned subsidiary of DHI, entered into a loan agreement with Amegy Bank for a
      $2,000,000 revolving line of credit and a $2,200,000 term loan. Please see
      Note
      10 of the Ascendant Consolidated Financial Statements contained herein.
      Outstanding advances under the revolving line of credit will bear interest
      at
      the Amegy Bank prime rate and the term loan bears interest at the Amegy Bank’s
      prime rate plus 0.25%. As a result, we are now exposed to interest rate risk
      under the Amegy Bank credit facility.





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, if any. Our investment portfolio consists
      primarily of investments in high-grade commercial bank money market accounts.
      At
      December 31, 2006, we had no investing activities.





The
      following table summarizes the financial instruments held by us at December
      31,
      2006, which are sensitive to changes in interest rates. At December 31, 2006,
      approximately 49% of our debt was subject to changes in market interest rates
      and was sensitive to those changes. Scheduled principal cash flows for debt
      outstanding at December 31, 2006 for the years ending December 31 are as
      follows:





Fixed
                Rate
            
            Variable
            
            Total2007
            
            $
            4,466,000
            
            $
            1,640,000
            
            $
            6,106,0002008
            
            
            43,000
            
            
            1,200,000
            
            
            1,243,0002009
            
            
            581,000
            
            
            2,000,000
            
            
            2,581,000Thereafter
            
            
            -
            
            
            -
            
            
            -$
            5,090,000
            
            $
            4,840,000
            
            $
            9,930,000





On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP, each a wholly-owned subsidiary of DHI, entered into a loan agreement with Amegy Bank for a
      $2,000,000 revolving line of credit and a $2,200,000 term loan. Substantially
      all of the proceeds from the revolving line of credit and the term loan were
      used to retire the outstanding balance owed to Bank of Texas, N.A. under an
      existing credit facility. As a result of this new loan agreement, on February
      20, 2007 payments on fixed rate debt due in 2007 decreased by approximately
      $3,757,000 since the new debt payments terms extend the maturity of the
      revolving line of credit and term loan payments into future years. Also, due
      to
      this new loan agreement, $4,215,000 of the fixed rate debt in 2007 became
      variable rate debt. Consequently, as of February 20, 2007, approximately 91%
      of
      our debt is now subject to changes in market interest rates and is sensitive
      to
      those changes. Please see Note 10 of the Ascendant Consolidated Financial
      Statements contained herein.












**-41-**
 **Table
            of
            Contents**

















**ITEM
      8. CONSOLIDATED FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**




**Page****ASCENDANT
                SOLUTIONS, INC.**Report
                of Independent Registered Public Accounting
                Firm
            **43**Consolidated
                Balance Sheets as of December 31, 2006
                and 2005
            **44**Consolidated
                Statements of Income for the Years
                Ended December 31, 2006, 2005 and 2004
            **45**Consolidated
                Statements of Stockholders’ Equity
                for the Years Ended December 31, 2006, 2005 and 2004
            **46**Consolidated
                Statements of Cash Flows for the
                Years Ended December 31, 2006, 2005 and 2004
            **47**Notes
                to Consolidated Financial
                Statements
            **49**








**-42-**
 **Table
            of
            Contents**





**Report
      of Independent Registered Public Accounting
      Firm**

















Board
      of
      Directors and Stockholders


Ascendant
      Solutions, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Ascendant Solutions,
      Inc. and subsidiaries as of December 31, 2006 and 2005, and the related
      consolidated statements of income, stockholders’ equity and cash flows for each
      of the three the years in the period ended December 31, 2006. 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 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 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 Ascendant Solutions,
      Inc. and subsidiaries as of December 31, 2006 and 2005, and the consolidated
      results of their operations and their consolidated cash flows for each of the
      three years in the period ended December 31, 2006, in conformity with United
      States generally accepted accounting principles.








*/s/
                HEIN & ASSOCIATES LLP***





Dallas,
      Texas


April
      11,
      2007





**-43-**
 **Table
            of
            Contents**








**ASCENDANT
                SOLUTIONS, INC.****CONSOLIDATED
                BALANCE SHEETS****(000's
                omitted, except par value and share amounts)****December
                31,**
            
            **December
                31,****2006**
            
            **2005****ASSETS**Cash
                and cash equivalents
            
            $
            2,686
            
            $
            3,221Trade
                accounts receivable, net
            
            
            5,339
            
            
            5,108Other
                receivables
            
            
            387
            
            
            171Receivable
                from affiliates
            
            
            66
            
            
            85Inventories,
                net
            
            
            2,832
            
            
            2,827Prepaid
                expenses
            
            
            637
            
            
            452Total
                current assets
            
            
            11,947
            
            
            11,864Property
                and equipment, net
            
            
            1,019
            
            
            1,222Goodwill
            
            
            7,299
            
            
            7,299Other
                intangible assets
            
            
            95
            
            
            426Equity
                method investments
            
            
            419
            
            
            1,086Other
                assets
            
            
            260
            
            
            101**Total
                assets**
            
            **$**
            **21,039**
            
            **$**
            **21,998****LIABILITIES
                AND STOCKHOLDERS' EQUITY**Accounts
                payable
            
            $
            2,293
            
            $
            3,455Accrued
                liabilities
            
            
            3,634
            
            
            2,852Notes
                payable, current
            
            
            6,106
            
            
            1,049Total
                current liabilities
            
            
            12,033
            
            
            7,356Notes
                payable, long-term
            
            
            3,824
            
            
            10,875Minority
                interests
            
            
            947
            
            
            694**Total
                liabilities**
            
            
            **16,804**
            
            
            **18,925**Commitments
                and contingencies (Notes 10 and 15)Stockholders'
                equity:Common
                stock, $0.0001 par value; 50,000,000 shares authorized; 22,508,170
                and
                22,180,900 shares issued and outstanding at December 31, 2006 and
                2005,
                respectively
            
            
            2
            
            
            2Additional
                paid-in capital
            
            
            60,176
            
            
            60,078Deferred
                compensation
            
            
            (25
            )
            
            (66
            )Accumulated
                deficit
            
            
            (55,918
            )
            
            (56,941
            )**Total
                stockholders' equity**
            
            
            **4,235**
            
            
            **3,073****Total
                liabilities and stockholders' equity**
            
            **$**
            **21,039**
            
            **$**
            **21,998**See
                accompanying notes to the Consolidated Financial
                Statements










**-44-**
 **Table
            of
            Contents**










**ASCENDANT
                SOLUTIONS,
                INC.****CONSOLIDATED
                STATEMENTS OF INCOME****(000's
                omitted, except share and per share amounts)****Years
                Ended December 31,****2006**
            
            **2005**
            
            **2004**Revenue:Healthcare
            
            $
            41,062
            
            $
            39,136
            
            $
            29,532Real
                estate advisory services
            
            
            14,355
            
            
            13,831
            
            
            9,75955,417
            
            
            52,967
            
            
            39,291Cost
                of sales:Healthcare
            
            
            28,048
            
            
            26,517
            
            
            19,668Real
                estate advisory services
            
            
            8,404
            
            
            8,205
            
            
            5,38736,452
            
            
            34,722
            
            
            25,055Gross
                profit
            
            
            18,965
            
            
            18,245
            
            
            14,236Operating
                expenses:Selling,
                general and administrative expenses
            
            
            16,190
            
            
            16,910
            
            
            13,054Non-cash
                stock compensation
            
            
            40
            
            
            81
            
            
            58Depreciation
                and amortization
            
            
            713
            
            
            652
            
            
            494Total
                operating expenses
            
            
            16,943
            
            
            17,643
            
            
            13,606Operating
                income
            
            
            2,022
            
            
            602
            
            
            630Equity
                in income of equity method investees
            
            
            (356
            )
            
            675
            
            
            374Other
                income
            
            
            155
            
            
            73
            
            
            19Interest
                income (expense), net
            
            
            (758
            )
            
            (763
            )
            
            (520
            )Loss
                on sale of property and equipment
            
            
            -
            
            
            (1
            )
            
            (32
            )Income
                before minority interest and income tax provision
            
            
            1,063
            
            
            586
            
            
            471Minority
                interest
            
            
            65
            
            
            50
            
            
            56Income
                tax provision
            
            
            205
            
            
            241
            
            
            166Income
                from continuing operations
            
            
            793
            
            
            295
            
            
            249Income
                (loss) from discontinued operations
            
            
            230
            
            
            (230
            )
            
            -Net
                income
            
            $
            1,023
            
            $
            65
            
            $
            249Basic
                net income (loss) per shareContinuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -$
            0.05
            
            
            *
            
            $
            0.01Diluted
                net income (loss) per shareContinuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -$
            0.05
            
            
            *
            
            $
            0.01*
                Less than $0.01 per shareAverage
                common shares outstanding, basic
            
            
            22,409,814
            
            
            22,006,733
            
            
            21,803,817Average
                common shares outstanding, diluted
            
            
            22,675,722
            
            
            22,877,704
            
            
            22,389,267See
                accompanying notes to the Consolidated Financial
                Statements.





**-45-**
 **Table
            of
            Contents**










**ASCENDANT
                SOLUTIONS,
                INC.****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY****(000's
                omitted, except share amounts)****Common
                Stock**
            
            **Additional**
            
            
            
            
            
            **Total****Class
                A**
            
            **Paid-in**
            
            **Deferred**
            
            **Accumulated**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Capital**
            
            **Compensation**
            
            **Deficit**
            
            **Equity****Balance
                at December 31, 2003**
            
            
            **21,665,900**
            
            **$**
            **2**
            
            **$**
            **59,822**
            
            **$**
            **(46**
            **)**
            **$**
            **(57,255**
            **)**
            **$**
            **2,523**Exercise
                of stock options
            
            
            200,000
            
            
            -
            
            
            49
            
            
            -
            
            
            -
            
            
            49Non-cash
                stock option compensation
            
            
            -
            
            
            -
            
            
            18
            
            
            -
            
            
            -
            
            
            18Issuance
                of restricted stock to officers & directors
            
            
            67,500
            
            
            -
            
            
            72
            
            
            (72
            )
            
            -
            
            
            -Amortization
                of deferred compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            40
            
            
            -
            
            
            40Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            249
            
            
            249**Balance
                at December 31, 2004**
            
            
            **21,933,400**
            
            **$**
            **2**
            
            **$**
            **59,961**
            
            **$**
            **(78**
            **)**
            **$**
            **(57,006**
            **)**
            **$**
            **2,879**Exercise
                of stock options
            
            
            200,000
            
            
            -
            
            
            48
            
            
            -
            
            
            -
            
            
            48Issuance
                of restricted stock to directors
            
            
            47,500
            
            
            -
            
            
            69
            
            
            (69
            )
            
            -
            
            
            -Amortization
                of deferred compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            81
            
            
            -
            
            
            81Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            65
            
            
            65**Balance
                at December 31, 2005**
            
            
            **22,180,900**
            
            **$**
            **2**
            
            **$**
            **60,078**
            
            **$**
            **(66**
            **)**
            **$**
            **(56,941**
            **)**
            **$**
            **3,073**Exercise
                of stock options
            
            
            200,000
            
            
            -
            
            
            48
            
            
            -
            
            
            -
            
            
            48Issuance
                of restricted stock to directors
            
            
            127,270
            
            
            -
            
            
            50
            
            
            (15
            )
            
            -
            
            
            35Amortization
                of deferred compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            56
            
            
            -
            
            
            56Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,023
            
            
            1,023**Balance
                at December 31, 2006**
            
            
            **22,508,170**
            
            **$**
            **2**
            
            **$**
            **60,176**
            
            **$**
            **(25**
            **)**
            **$**
            **(55,918**
            **)**
            **$**
            **4,235**See
                accompanying notes to the Consolidated Financial
                Statements.










**-46-**
 **Table
            of
            Contents**










**ASCENDANT
                SOLUTIONS,
                INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(000's
                omitted)****Years
                Ended December 31,****2006**
            
            **2005**
            
            **2004****Operating
                Activities**Net
                income
            
            $
            1,023
            
            $
            65
            
            $
            249Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Provision
                for doubtful accounts
            
            
            451
            
            
            374
            
            
            260Depreciation
                and amortization
            
            
            713
            
            
            652
            
            
            494Deferred
                compensation amortization
            
            
            56
            
            
            81
            
            
            40Issuance
                of stock in lieu of directors fees
            
            
            35
            
            
            -
            
            
            18Non-cash
                equity in losses (income) of equity method investeesFairways
                Frisco, LP
            
            
            458
            
            
            537
            
            
            -Fairways
                03 New Jersey, LP
            
            
            -
            
            
            (162
            )
            
            -Income
                from early extinguishment of debt
            
            
            (100
            )
            
            -
            
            
            -Loss
                on sale of property and equipment
            
            
            -
            
            
            1
            
            
            32Minority
                interest
            
            
            65
            
            
            50
            
            
            56Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -Changes
                in operating assets and liabilities, net of effects from
                acquisitions:Accounts
                receivable
            
            
            (682
            )
            
            868
            
            
            922Inventories
            
            
            (5
            )
            
            (329
            )
            
            (165
            )Prepaid
                expenses and other assets
            
            
            (543
            )
            
            46
            
            
            (103
            )Accounts
                payable
            
            
            (1,162
            )
            
            1,822
            
            
            16Accrued
                liabilities
            
            
            782
            
            
            (309
            )
            
            140Net
                cash provided by operating activities
            
            
            1,091
            
            
            3,696
            
            
            1,959**Investing
                Activities**Distributions
                from limited partnerships
            
            
            149
            
            
            13
            
            
            29Proceeds
                from sale of property and equipment
            
            
            -
            
            
            -
            
            
            42Deferred
                acquisition costs
            
            
            -
            
            
            -
            
            
            310Net
                cash acquired in acquisitions
            
            
            -
            
            
            -
            
            
            1,537Purchases
                of property and equipment
            
            
            (177
            )
            
            (569
            )
            
            (172
            )Distributions
                to limited partners
            
            
            (42
            )
            
            (50
            )
            
            (31
            )Investment
                in limited partnerships
            
            
            -
            
            
            (1,065
            )
            
            (155
            )Payment
                of acquisition liabilities
            
            
            -
            
            
            -
            
            
            (1,350
            )Purchase
                cost of acquisitions, net of cash acquired
            
            
            -
            
            
            -
            
            
            (857
            )Net
                cash used in investing activities
            
            
            (70
            )
            
            (1,671
            )
            
            (647
            )










**-47-**
 **Table
            of
            Contents**










**ASCENDANT
                SOLUTIONS, INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(000's
                omitted)****Years
                Ended December 31,****2006**
            
            **2005**
            
            **2004****Financing
                Activities**Proceeds
                from exercise of common stock options
            
            
            48
            
            
            48
            
            
            49Proceeds
                from sale of limited partnership interests
            
            
            230
            
            
            230
            
            
            230Payments
                on notes payable
            
            
            (8,472
            )
            
            (1,291
            )
            
            (1,729
            )Proceeds
                from notes payable
            
            
            6,638
            
            
            341
            
            
            -Net
                cash used in financing activities
            
            
            (1,556
            )
            
            (672
            )
            
            (1,450
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            (535
            )
            
            1,353
            
            
            (138
            )Cash
                and cash equivalents at beginning of year
            
            
            3,221
            
            
            1,868
            
            
            2,006Cash
                and cash equivalents at end of year
            
            $
            2,686
            
            $
            3,221
            
            $
            1,868**Supplemental
                Cash Flow Information**Cash
                paid for income taxes
            
            $
            205
            
            $
            502
            
            $
            -Cash
                paid for interest on notes payable
            
            $
            740
            
            $
            728
            
            $
            497**Noncash
                financing activities:**Partnership
                distributions applied to note payable
            
            $
            60
            
            $
            -
            
            $
            -Property
                and equipment acquired under capital leases
            
            $
            -
            
            $
            258
            
            $
            -See
                accompanying notes to the Consolidated Financial
                Statements.




















**-48-**
 **Table
            of
            Contents**


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 , including
                specialty compounding pharmacy services and home infusion therapy
                centersReal
                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 servicesCorporate
                & other
            Ascendant
                Solutions, Inc. and
              ASE
                Investments Corporation
            Corporate
                administration, investments in Ampco Partners, Ltd., Fairways Frisco,
                L.P.
                and Fairways 03 New Jersey, L.P.





**-49-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








During
      2002, the Company made its first investments, and it has continued to make
      additional investments and acquisitions throughout 2003, 2004 and 2005. 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 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. and Subsidiaries
            Healthcare
            Acquisition
                of specialty pharmacies and therapy infusion centers
            100%April
                2004
            Fairways
                36864, L.P.
            Corporate
                & other
            Investment
                in commercial real estate properties
            24.75%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
            8.87%1





1 The
      Company was the initial limited partner in Fairways Frisco, L.P. (“Fairways
      Frisco”), which obtained a 50% ownership interest in the Frisco Square
      Partnerships on December 31, 2004. Fairways Frisco L.P. subsequently sold
      additional limited partnership interests and the Company as of September 2006
      now owns approximately 8.87% of Fairways Frisco, L.P.





Certain
      of these transactions involved related parties or affiliates as more fully
      described in Notes 2 and 16 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 its acquired businesses. The Company
      will continue seeking to (1) most effectively deploy its remaining cash and
      debt
      capacity (if any) (2) capitalize on the experience and contacts of its officers
      and directors and (3) explore other acquisition and investing
      opportunities.





**-50-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**Significant
      Accounting Policies**





***Basis
      of Presentation*** **


The
      consolidated financial statements include the accounts of Ascendant and all
      subsidiaries for which the Company owns greater than 50% of the voting equity
      interests or has significant influence over operations. All intercompany
      balances and transactions have been eliminated. The limited partnership
      interests for the consolidated subsidiaries and related minority interests
      are
      included on the balance sheet as Minority Interests.





The
      results of operations of CRESA Partners of Orange County, LP (“CPOC”) have been
      consolidated with ASDS of Orange County, Inc. (“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 $6.9 million (the Purchase Price) plus a preferential return of approximately
      $1.7 million (total distributions of $8.6 million). As of December 31, 2006,
      the
      Company has received distributions totaling approximately $3,515,000. 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 CPOC and
      would instead record its share of income from CPOC as “Equity in income of
      equity method investees” in the consolidated statements of income.





***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, inventory reserves and recoverability and valuation
      of
      equity method investments. 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 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.





**-51-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








***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. No impairment
      provision was recorded in 2006 or 2005.





***Equity
      Method Investments*** **


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





Real
      estate advisory services 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.





***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 net income (loss)
      applicable to common stockholders divided by the weighted average number of
      shares of common stock outstanding during each period. The number of dilutive
      shares resulting from assumed conversion of stock options and warrants are
      determined by using the treasury stock method.  See Note 14 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.





**-52-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**





***Recent
      Accounting Pronouncements***


In
      December 2004, the Financial Accounting Standards Board issued FASB Statement
      No. 123R (Revised 2004), Share-Based Payment. (“Statement 123R”), 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 at fair value in
      financial statements.





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 no options outstanding which are not vested. The
      unrecognized compensation cost related to these options is not material and
      as a
      result, the implementation of Statement 123R did not have a material impact
      on
      its results of operations.





The
      Company accounts for its employee stock options and stock based awards under
      the
      fair value provisions of Statement 123R, which was adopted effective January
      1,
      2006, whereby stock-based compensation is measured at the grant date based
      on
      the value of the awards and is recognized as expense over the requisite service
      period (usually the vesting period). See Note 12 for additional information
      about the Company’s Stock Based Compensation.





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





In
      June
      2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for
      Uncertainty in Income Taxes, effective for fiscal years beginning after December
      15, 2006, with early adoption permitted. FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in accordance with FASB Statement
      No. 109, Accounting for Income Taxes, by providing a recognition threshold
      and measurement guidance for the financial statement recognition and measurement
      of a tax position taken or expected to be taken in a tax return. The Company
      has
      evaluated the impact of the adoption of this interpretation on its consolidated
      financial position, results of operations or cash flows and has concluded that
      it does not appear that FIN 48 will have a material impact on its results of
      operations.





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





In
      September 2006, the Securities and Exchange Commission ("SEC") staff issued
      Staff Accounting Bulletin No. 108 ("SAB 108"), "Considering the Effects of
      Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements." SAB 108 was issued to provide consistency in how registrants
      quantify financial statement misstatements. The Company is required to and
      will
      initially apply SAB 108 in connection with the preparation of its annual
      financial statements for the year ending December 31, 2006.





**-53-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**





The
      Company does not expect the application of SAB 108 to have a material effect
      on
      its financial position and results of operations.





***Stock
      Based Compensation*** **


The
      Company accounts for its employee stock options and stock based awards for
      its
      Long-Term Incentive Plan (the “Plan”) under the fair value provisions of
      Statement 123R, which was adopted effective January 1, 2006, whereby stock
      based
      compensation is measured at the grant date based on the value of awards and
      is
      recognized as expense over the requisite service period (usually the vesting
      period). See Note 12 for additional information on stock based
      compensation.





***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 equity method investments is not readily determinable without undo
      cost.





***Reclassifications***


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


***Discontinued
                Operations***





As
      disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board
      of
      directors decided to retain the operations of Park InfusionCare, which had
      previously been reported as a discontinued operation while the Company was
      pursuing a potential disposition or strategic transaction for its infusion
      therapy business. As a result of the board of director’s decision to retain the
      operations of Park InfusionCare, the Company has reported the operating results
      of Park InfusionCare as part of continuing operations. The Company had
      previously recorded an estimated charge of $230,000 for employee retention
      costs
      directly related to any potential disposition or strategic transaction for
      Park
      InfusionCare. As
      no
      such transaction was consummated, none of these retention costs were paid and
      the Company has recorded a reversal of this accrual as part of results from
      discontinued operations in the accompanying consolidated statements of income
      for the year ended December 31, 2006. All other Park InfusionCare amounts in
      this Form 10-K for the years ended December 31, 2006 and 2005 have been reported
      as part of continuing operations.





**2.**  **Significant
      Equity Investments**





**Fairways
      03 New Jersey, LP**





During
      December 2003, the Company made a capital contribution of $145,000 to Fairways
      03 New Jersey, LP (“Fairways NJ”) 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. The Company received a distribution of approximately $680,000
      on December 30, 2005 from Fairways NJ, which represented the Company’s share in
      the profit from the sale of a single tenant commercial real estate property
      interest, the sole asset held by Fairways NJ. In addition to the distribution,
      cash of $162,000, representing the Company’s share of the total escrow, was
      being held in escrow to fund any amounts owed by Fairways NJ to the purchaser,
      including any amounts owed for standard representations and warranties under
      the
      sale agreement. The balance of the escrow account, including interest income,
      totaling approximately $168,000 was received in December 2006. Since the date
      of
      the property interest acquisition, the Company has received cumulative cash
      distributions of approximately $1,448,000 on its initial investment of $145,000
      in Fairways NJ.





**-54-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**Fairways
      Frisco Partnerships**





On
      December 31, 2004, Fairways Frisco, L.P. (“Fairways Frisco”) acquired certain
      indirect interests in various partnerships (the “Frisco Square Partnerships”)
      that own properties (the “Properties”) in the Frisco Square mixed-use real
      estate development in Frisco, Texas. Frisco Square is planned to include
      approximately 4 million developed square feet, including retail, offices, hotel,
      multi-family residences and municipal space.





Under
      the
      terms of the amended Frisco Square Partnerships agreements, Fairways Equities
      is
      the sole general partner of the Frisco Square Partnerships and controls all
      operating activities, financing activities and development activities for the
      Frisco Square Partnerships.





As
      further described herein, the Company holds a limited partnership interest
      in
      Fairways Frisco. The Company is not involved in the development or management
      of
      Frisco Square; rather it is solely a limited partner. The Company has invested
      $1,219,000 of cash into Fairways Frisco as of December 31, 2006. The Company
      has
      made no additional capital contributions subsequent to December 31, 2005.
      Fairways Frisco made two capital calls in 2006, which were not funded by the
      Company and thus diluted the Company’s limited partnership interest from 14% at
      December 31, 2005 to approximately 8.87% as of December 31, 2006. As of April
      7,
      2007, the general partner of the Frisco Square Partnerships indicated that
      they
      would be making a capital call of the limited partners in the amount of $4
      million, the exact terms of which are currently being negotiated. The Company
      will not participate in this capital call. If this capital call is fully funded,
      the Company‘s limited partnership interest will be reduced.





Fairways
      Frisco is expected to request additional capital contributions from the limited
      partners. At present, the Company does not intend to fund any additional capital
      requested from Fairways Frisco. The Company expects its limited partnership
      interest will be reduced further as additional limited partner contributions
      are
      received and the Company does not fund its limited partnership share of such
      capital contributions into Fairways Frisco.





As
      of
      December 31, 2006, Fairways Frisco owned, either directly or indirectly, 60%
      of
      the Frisco Square Partnerships and the remaining 40% is owned by CMP Family
      Limited Partnership (“CMP”), which is controlled by Cole McDowell. CMP’s
      partnership interest was subject to further reduction and dilution as discussed
      below. Under the terms of the amended Frisco Square Partnerships, Fairways
      Frisco also has a first priority distribution preference of $5.5 million, and
      it
      will receive its pro-rata partnership interest of the next $9.5 million of
      distributions from the Frisco Square Partnerships. After $15 million of
      distributions have been made, Fairways Frisco’s interest in the Cash Flow of the
      Frisco Square Partnerships, as defined in the partnership agreements, will
      become 80% and CMP’s interest will become 20%.





Furthermore,
      Fairways Frisco’s partnership interest in the Frisco Square Partnerships may be
      increased up to 85% if certain capital call and limited partner capital loan
      provisions are not met by CMP. If Fairways Frisco’s partnership interest in the
      Frisco Square Partnerships is increased in the future, the Company’s indirect
      interest in the Frisco Square Partnerships would also increase on a pro-rata
      basis with its investment in Fairways Frisco. No further capital loan provisions
      are provided in the partnership agreements, and CMP’s interest is dependent upon
      it ability to fund future capital calls. In the event CMP does not fund a
      capital call requested by the general partner, and provided the Partnership
      funds CMP’s unfunded amounts, CMP’s interest will be diluted according to the
      partnership agreements.





The
      Company has not guaranteed any of the debt of the Frisco Square Partnerships
      or
      Fairways Frisco, L.P. The Company is not involved with any management, financing
      or other operating activities of the Frisco Square Partnerships or Fairways
      Frisco. However, in May 2005, the Company entered into an agreement with
      Fairways Equities, pursuant to which the Company is entitled to receive 25%
      of
      the fees paid to Fairways Equities pursuant to the Fairways Frisco partnership
      agreement. These fees, including a monthly management fee, represent
      compensation to the Company for supplying resources to execute the initial
      transaction with the Frisco Square Partnerships in December 2004. During the
      years ended December 31, 2006 and 2005, the Company received fees allocated
      from
      Fairways Equities of $28,000 and $64,000, respectively under this
      agreement.





**-55-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Fairways
      Frisco is currently negotiating with lenders to modify or extend certain bank
      loans which are reflected as current liabilities at December 31, 2006.





**3.**
            **Trade
                Accounts Receivable**





Trade
      accounts receivable consist of the following:





**December
                31,**
            
            **December
                31,****2006**
            
            **2005****Healthcare:**Trade
                accounts receivable
            
            $
            3,268,000
            
            $
            3,878,000Less
                - allowance for doubtful accounts
            
            
            (318,000
            )
            
            (596,000
            )2,950,000
            
            
            3,282,000**Real
                Estate Advisory Services:**Trade
                accounts receivable
            
            
            2,389,000
            
            
            1,826,000Less
                - allowance for doubtful accounts
            
            
            -
            
            
            -2,389,000
            
            
            1,826,000$
            5,339,000
            
            $
            5,108,000





Healthcare
      trade accounts receivable consists primarily of amounts receivable from
      third-party payors (insurance companies and governmental agencies) under various
      medical reimbursement programs, institutional healthcare providers, individuals
      and others and are not collateralized. Certain receivables are recorded at
      estimated net realizable amounts. Amounts that may be received under medical
      reimbursement programs are affected by changes in payment criteria and are
      subject to legislative actions. Healthcare reduces its accounts receivable
      by an
      allowance for the amounts deemed to be uncollectible. An allowance is
      established for all retail pharmacy accounts aged in excess of 60 days. In
      general, an allowance of 4% of all infusion therapy accounts is established
      when
      the receivable is recorded and it is increased to 80% for all accounts aged
      in
      excess of 180 days. 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
      13.3%
      and 16.1% of total accounts receivable at December 31, 2006 and 2005,
      respectively. Additionally, at December 31, 2005, Healthcare had accounts
      receivable outstanding from one insurance company of approximately 13.1% of
      total Healthcare accounts receivable. No other single customer or third-party
      payer accounted for more than 10% of Healthcare’s accounts receivable at
      December 31, 2006 or 2005, respectively. In addition, during the years ended
      December 31, 2006 and 2005 and for the period from May 1, 2004 (date of
      acquisition) to December 31, 2004, the Healthcare operations did not derive
      revenue in excess of ten percent from any single customer.





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 year ended
      December 31, 2006 the Company’s real estate advisory services operations derived
      revenues in excess of ten percent from one customer totaling approximately
      $4,739,000 or 33% of revenues. For the year ended December 31, 2005 the
      Company’s real estate advisory services operations derived revenues in excess of
      ten percent from two customers totaling approximately $5,264,000 or 39.9% of
      revenues and $1,592,000 or 12.1% of revenues, respectively. For the period
      from
      May 1, 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 totaling approximately $3,479,000 or 39% of its total revenue.





**-56-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**4.
      Inventories**





Inventories
      consist of the following:


**December
                31**
            
            **December
                31****2006**
            
            **2005**Inventory-retail
                pharmacy
            
            $
            1,650,000
            
            $
            1,849,000Inventory-infusion/homecare
            
            
            537,000
            
            
            448,000Inventory-general
                retail
            
            
            665,000
            
            
            568,000Less:
                Inventory reserves
            
            
            (20,000
            )
            
            (38,000
            )$
            2,832,000
            
            $
            2,827,000





**5.**
            **Prepaid
                Expenses**





Prepaid
      expenses consist of the following:





**December
                31,**
            
            **December
                31,****2006**
            
            **2005**Prepaid
                insurance
            
            $
            179,000
            
            $
            168,000Deferred
                tenant representation costs
            
            
            364,000
            
            
            94,000Prepaid
                marketing costs
            
            
            13,000
            
            
            13,000Prepaid
                rent
            
            
            -
            
            
            62,000Other
                prepaid expenses
            
            
            81,000
            
            
            115,000$
            637,000
            
            $
            452,000





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.





**6.**
            **Property
                and Equipment, Net**





Property
      and equipment, net consist of the following:





**Estimated**
            
            **December
                31,**
            
            **December
                31,****Useful
                Lives**
            
            **2006**
            
            **2005**Computer
                equipment and software
            
            
            3
                to 5 years
            
            $
            657,000
            
            $
            539,000Furniture,
                fixtures and equipment
            
            
            5
                to 7 years
            
            
            684,000
            
            
            652,000Leasehold
                improvements
            
            
            Life
                of Lease
            
            
            609,000
            
            
            607,000Automotive
                equipment
            
            
            5
                years
            
            
            12,000
            
            
            -1,962,000
            
            
            1,798,000Less
                accumulated depreciation and amortization
            
            
            
            
            
            (943,000
            )
            
            (576,000
            )$
            1,019,000
            
            $
            1,222,000








**-57-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Depreciation
      expense was $382,000, $320,000 and $257,000 for the years ended December 31,
      2006, 2005 and 2004, respectively.





**7.**
            **Goodwill
                and Other Intangible
                Assets**





Goodwill
      and other intangible assets consist of the following:





**December
                31,**
            
            **December
                31,****2006**
            
            **2005**Goodwill
            
            $
            7,299,000
            
            $
            7,299,000Other
                intangible assets:Patient
                Prescriptions
            
            
            544,000
            
            
            544,000Non-compete
                Agreements
            
            
            450,000
            
            
            450,000Less
                - accumulated amortization
            
            
            (899,000
            )
            
            (568,000
            )$
            95,000
            
            $
            426,000





The
      acquisitions of the Park Assets and CPOC in 2004 were accounted for using the
      purchase method of accounting and the purchase prices were allocated as to
      identifiable assets, including intangible assets, and liabilities at their
      fair
      market value at the date of acquisition. As a result of the purchase price
      allocation, the acquisition of CPOC resulted in goodwill totaling $7,299,000.





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
      $150,000 for the years ended December 31, 2006 and 2005. In addition,
      amortization expense on the non-compete agreements for the period from the
      acquisition date of May 1, 2004 through December 31, 2004 was $100,000. The
      Company made these acquisitions in 2004 for investment purposes.





The
      estimated scheduled amortization of other intangible assets for the twelve
      months ending December 31 is as follows:


**Patient**
            
            **Non-compete****Prescriptions**
            
            **Agreements**
            
            **Total**2007
            
            $
            45,000
            
            $
            50,000
            
            $
            95,000Thereafter
            
            
            -
            
            
            -
            
            
            -$
            45,000
            
            $
            50,000
            
            $
            95,000








**-58-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**8.**
            **Equity
                Method Investments**





Equity
      method investments consist of the following:





**Ownership**
            
            **Original**
            
            **December
                31,**
            
            **December
                31,**%
            
            **Investment**
            
            **2006**
            
            **2005**Ampco
                Partners, Ltd.
            
            
            10
            %
            $
            400,000
            
            $
            194,000
            
            $
            242,000Fairways
                03 New Jersey, LP
            
            
            20
            %
            
            145,000
            
            
            -
            
            
            162,000Fairways
                Frisco, LP
            
            
            8.87
            %
            
            1,219,000
            
            
            225,000
            
            
            682,000$
            1,764,000
            
            $
            419,000
            
            $
            1,086,000





The
      Company’s investment in Fairways Frisco includes its cumulative cash investment
      of $1,219,000 and its equity in the losses of Fairways Frisco for the year
      ended
      December 31, 2006 and 2005 of ($458,000) and ($537,000) respectively. The
      Company received no distributions from Fairways Frisco during the years ended
      December 31, 2006 and 2005, respectively.





The
      Company received a distribution of approximately $680,000 on December 30, 2005
      from Fairways NJ, which represented the Company’s share in the profit from the
      sale of a single tenant commercial real estate property interest, the sole
      asset
      held by Fairways NJ. In addition to the distribution, cash of approximately
      $162,000, representing the Company’s share of the total escrow, is being held in
      escrow to fund any amounts owed by Fairways NJ to the purchaser, including
      any
      amounts owed for standard representations and warranties under the sale
      agreement. The balance of the escrow account, including interest income, of
      approximately $168,000 was received in December 2006.





Equity
      in
      earnings (losses) of equity method investees included in the consolidated
      statements of income consists of the following:


**December
                31,**
            
            **December
                31,**
            
            **December
                31,****2006**
            
            **2005**
            
            **2004**Ampco
                Partners, Ltd.
            
            $
            96,000
            
            $
            100,000
            
            $
            82,000Fairways
                03 New Jersey, LP
            
            
            6,000
            
            
            1,112,000
            
            
            208,000Fairways
                36864, L.P.
            
            
            -
            
            
            -
            
            
            84,000Fairways
                Frisco, L.P.
            
            
            (458,000
            )
            
            (537,000
            )
            
            -$
            (356,000
            )
            $
            675,000
            
            $
            374,000





**9.**
            **Accrued
                Liabilities**





Accrued
      liabilities consist of the following:


**December
                31,**
            
            **December
                31,****2006**
            
            **2005**Accrued
                real estate commissions and fees
            
            $
            2,802,000
            
            $
            1,790,000Accrued
                payroll and related costs
            
            
            395,000
            
            
            651,000Accrued
                expenses - other
            
            
            174,000
            
            
            204,000Accrued
                rent
            
            
            174,000
            
            
            169,000Accrued
                property, state and sales taxes
            
            
            89,000
            
            
            38,000$
            3,634,000
            
            $
            2,852,000








**-59-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**




**10.**
            **Notes
                Payable**


Notes
      payable consist of the following:


**December
                31,**
            
            **December
                31,****2006**
            
            **2005****Bank
                of Texas Credit Facility, secured by substantially all healthcare
                assets**Term
                note A in the principal amount of $1,000,000, interest at 6% per
                annum
                payable monthly, principal due in full in March 2007. Paid in full
                in
                February 2007.
            
            $
            659,000
            
            $
            528,000Term
                note B in the principal amount of $4,000,000, interest at 6% per
                annum,
                principal and interest payable in monthly installments of $44,408
                over 35
                months with a balloon payment of principal due in March 2007. Paid
                in full
                in February 2007.
            
            
            3,140,000
            
            
            3,472,000Term
                note C in the principal amount of $529,539, interest at 6% per annum,
                principal and interest payable in monthly installments of $5,579
                over 35
                months with a balloon payment of principal due in March 2007. Paid
                in full
                in February 2007.
            
            
            416,000
            
            
            459,000**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.
            
            
            658,000
            
            
            693,000**CPOC
                Acquisition Note payable to Kevin Hayes**Acquisition
                note in the principal amount of $6,900,000 due May 1, 2007, interest
                at
                Northern Trust Bank prime rate plus 0.5% payable monthly, principal
                payable quarterly from the Company's equity interest in the operating
                cash
                flow of CPOC and secured by the assets of CPOC. Paid in full in May
                2006.
            
            
            -
            
            
            6,182,000**CPOC
                term note payable to First Republic Bank**Term
                note in the principal amount of $5.3 million, due June 1, 2009, interest
                at Bank of America prime rate minus 0.25% (8.50% at December 31,
                2006)
                payable monthly, principal of $300,000 payable quarterly with a balloon
                payment of $1,700,000 due on June 1, 2009 and secured by the assets
                of
                CPOC.
            
            
            4,400,000
            
            
            -**Capital
                lease obligations, secured by office equipment**
            
            
            129,000
            
            
            266,000**Demand
                note payable to affiliate**Demand
                note payable to Ampco Partners, Ltd., interest at Bank of Texas prime
                rate
                plus 4.00% (12.25% at December 31, 2006), secured by the Company's
                distributions from and partnership interest in Ampco Partners, Ltd.,
                principal and accrued interest due on demand.
            
            
            440,000
            
            
            -**Comerica
                Bank term note payable**Term
                note payable in the principal amount of $30,000, payable in 36 equal
                installments of $928 through April 2008, interest payable at the
                fixed
                rate of 7.00%, secured by all property and equipment of Ascendant
                Solutions, Inc.
            
            
            14,000
            
            
            23,000Unsecured
                term note payable in the principal amount of $225,000, interest only
                payable monthly at the Comerica Bank prime rate plus 1.00% (8.25%
                at
                December 31, 2005), principal due on February 1, 2006. Paid in full
                January 2006
            
            
            -
            
            
            225,000


**Insurance
                premium finance notes payable**Term
                note payable in the principal amount of $86,250, payable in 9 equal
                installments of $9,804 through August 2006, interest payable at the
                fixed
                rate of 5.50%, secured by the Company's directors and officers insurance
                policies.
            
            -
            
            76,000Term
                note payable in the principal amount of $82,875, payable in 9 equal
                installments of $9,450 through August 2007, interest payable at the
                fixed
                rate of 6.25%, secured by the Company's directors and officers insurance
                policies.
            
            74,000
            
            -9,930,000
            
            11,924,000Less
                current portion
            
            (6,106,000)
            
            (1,049,000)$3,824,000
            
            $10,875,000





**-60-**
 **Table
          of
          Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**


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





2007
            
            $
            6,106,0002008
            
            
            1,243,0002009
            
            
            2,581,0002010
            
            
            -Thereafter
            
            
            -$
            9,930,000





The
      Bank
      of Texas credit facility contained a borrowing base formula with which the
      Company must comply. If the outstanding borrowings under the facility exceeded
      the borrowing base, the Company was obligated to make additional principal
      payments to reduce the outstanding borrowings. As of December 31, 2006, the
      Company was in compliance with this borrowing base requirement. During 2005,
      DHI
      failed to notify Bank of Texas, as required under its credit agreement, that
      it
      was changing the names of certain legal entities. This failure to notify Bank
      of
      Texas of the legal entity name changes constituted a technical breach of the
      credit agreement. This breach of the terms of the credit agreement was waived
      by
      Bank of Texas.





In June
      2006, ASDS entered into a credit agreement with First Republic Bank for a $5.3
      million term note and CPOC entered into a $500,000 revolving line of credit.
      The
      proceeds from the term note were used to retire the outstanding balance owed
      to
      Kevin Hayes under the Acquisition Note pursuant to the acquisition of CPOC
      in
      2004 by the Company (through ASDS). The Acquisition Note was retired at a
      discount of approximately $100,000 to its outstanding principal balance of
      $
      5,400,000.





Outstanding
      advances under the revolving line of credit will bear interest at the First
      Republic Bank prime rate minus 0.50% and is payable monthly. The revolving
      line
      of credit is secured by substantially all assets of CPOC and is
      cross-collateralized with the term note. Both the term note and the revolving
      line of credit are subject to certain financial covenants including a minimum
      ratio of earnings before interest, taxes, depreciation and amortization to
      debt
      service and a limit on annual capital expenditures. As of December 31, 2006,
      CPOC was in compliance with these covenants. The term note is being guaranteed
      by CPOC. The term note and the revolving line of credit are also being
      personally guaranteed, subject to certain limits, by certain officers and
      minority limited partners of CPOC. The Company is not paying any compensation
      to
      the individuals providing these guaranties. At December 31, 2006, there were
      no
      borrowings under the revolving line of credit.





In
      June
      2006, the Company entered into a term loan agreement with Ampco for a $500,000
      demand note. The proceeds from the demand note were used for general working
      capital purposes. The demand note bears interest at the prime rate plus 4.00%
      per annum.  The Company’s quarterly partnership cash distributions from
      Ampco are being applied to the interest and principal balances owed on the
      demand note. The remaining outstanding balance of the demand note is due on
      the
      earlier of demand or June 13, 2009. The demand note is secured by the
      Company’s limited partnership interest in Ampco.





**-61-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Subsequent
      Event





Subsequent
      to December 31, 2006, on February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin
      Medicine Man, LP, Angleton Medicine Man, LP, and Santa Fe Medicine Man, LP
      (collectively, the “Borrowers”), each a wholly-owned
      subsidiary of DHI, entered into a loan agreement with Amegy Bank National
      Association (the “Lender”) for a $2,000,000 revolving line of credit (the
“Revolver”) and a $2,200,000 term loan (the “Term Loan”). Substantially all of
      the proceeds from the Revolver and the Term Loan were used to retire the
      outstanding balance owed to Bank of Texas, N.A. under an existing credit
      facility. The Term Loan and the Revolver are being guaranteed by the Company,
      DHI, Medicine Man, LP, Dougherty’s LP Holdings, Inc., Medicine Man GP, LLC,
      Alvin Medicine Man GP, LLC, Angleton Medicine Man GP, LLC and Santa Fe Medicine
      Man GP, LLC.





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





The
      Term
      Loan bears interest at the Lender’s prime rate plus 0.25%. Principal payments of
      $45,833.33 and accrued and unpaid interest on the Term Loan is due monthly
      beginning on March 20, 2007. All outstanding principal under the Term Loan
      plus
      all accrued and unpaid interest thereon is due and payable in full on February
      20, 2011.





The
      Term
      Loan and the Revolver are secured by the accounts receivable, inventory and
      fixed assets of the Borrowers and the stock of Dougherty’s Pharmacy, Inc. The
      Term Loan and the Revolver are cross-collateralized and
      cross-defaulted.





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





**11.**
            **Income
                Taxes**





The
      provision for income taxes is reconciled with the statutory rate for the years
      ended December 31, 2006, 2005 and 2004 as follows:





**2006**
            
            **2005**
            
            **2004**Provision
                computed at federal statutory rate
            
            $
            418,000
            
            $
            104,000
            
            $
            141,000State
                income taxes, net of federal tax effect
            
            
            131,000
            
            
            150,000
            
            
            178,000Other
                permanent differences
            
            
            55,000
            
            
            32,000
            
            
            104,000Expiration
                of state net operating loss carryover
            
            
            552,000
            
            
            557,000
            
            
            267,000Other
                changes in deferred tax assets valuation allowance
            
            
            (940,000
            )
            
            (606,000
            )
            
            (524,000
            )Other
            
            
            (11,000
            )
            
            4,000
            
            
            -Current
                provision
            
            $
            205,000
            
            $
            241,000
            
            $
            166,000








**-62-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Significant
      components of the deferred tax asset at December 31, 2006 and 2005 are as
      follows:





**December
                31,**
            
            **December
                31,****2006**
            
            **2005****Current
                deferred income tax assets:**Allowance
                for doubtful accounts
            
            $
            108,000
            
            $
            203,000Inventory
                reserves
            
            
            7,000
            
            
            13,000115,000
            
            
            216,000**Current
                deferred income tax liabilities:**Equity
                in earnings of equity method investee
            
            
            -
            
            
            (61,000
            )Net
                current deferred income tax assets
            
            
            115,000
            
            
            155,000Valuation
                allowance
            
            
            (115,000
            )
            
            (155,000
            )-
            
            $
            -**Non-current
                deferred income tax assets:**Net
                operating loss carryforward
            
            $
            17,043,000
            
            $
            17,366,000State
                temporary differences
            
            
            64,000
            
            
            617,000Property
                and equipment
            
            
            26,000
            
            
            22,000Deferred
                rent
            
            
            39,000
            
            
            57,000Equity
                in earnings of equity method investee
            
            
            35,000
            
            
            -Other
            
            
            28,000
            
            
            32,00017,235,000
            
            
            18,094,000**Non-current
                deferred income tax liabilities:**Equity
                in earnings of equity method investee
            
            
            (143,000
            )
            
            -Intangible
                assets
            
            
            (63,000
            )
            
            (179,000
            )Property
                and equipment
            
            
            (17,000
            )
            
            -Other
            
            
            -
            
            
            (3,000
            )(223,000
            )
            
            (182,000
            )Net
                non-current deferred income tax assets
            
            
            17,012,000
            
            
            17,912,000Valuation
                allowance
            
            
            (17,012,000
            )
            
            (17,912,000
            )$
            -
            
            $
            -





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.





At
      December 31, 2006, the Company had approximately $51 million of federal net
      operating loss carryforwards available to offset future taxable income, which,
      if not utilized, will fully expire from 2018 to 2024. T he
      Company anticipates utilization of approximately $940,000 of federal net
      operating losses during the year ended December 31, 2006. In
      addition, the Company had approximately $2.9 million of state net operating
      loss
      carryforwards available to offset future taxable income, which, if not utilized,
      will fully expire from 2007 to 2009. T he
      Company does not anticipate utilizing any significant portion of the state
      net
      operating losses during the year ended December 31, 2006. 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. Section 382 of the Internal Revenue Code of 1986, as amended
      (the
“Code”) imposes an annual limitation on the portion of the Company’s federal net
      operating loss carryforwards that may be used to offset taxable income.





**-63-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








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 federal 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 federal 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 federal operating loss carryforwards attributable to
      periods before the future ownership change.





**12.**
            **Stockholders’
                Equity**





*Preferred
      Stock*





The
      Company has authorized preferred stock as follows:


**Number
                of****Shares**Series
                A convertible preferred stock, $.0001 par value
            
            
            1,111,111Series
                B redeemable preferred stock, $.0001 par value
            
            
            1,111,111Series
                C non-voting preferred stock, $.0001 par value
            
            
            3,200,000"Blank
                Check" preferred stock, $.0001 par value
            
            
            2,077,778Total
            
            
            7,500,000





No
      preferred stock was outstanding at December 31, 2006 or 2005.





*Stock
      Based Compensation*





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





As
      of
      December 31, 2006, the following shares had been issued under the 2002 Equity
      Incentive Plan:





**Number
                of****Year
                of Issuance:**
            
            **Shares**
            
            **Shares
                Vested**
            
            **Non-Vested**2002
            
            
            435,000
            
            
            435,000
            
            
            -2003
            
            
            -
            
            
            -
            
            
            -2004
            
            
            67,500
            
            
            65,069
            
            
            2,4312005
            
            
            47,500
            
            
            36,389
            
            
            11,1112006
            
            
            127,270
            
            
            115,603
            
            
            11,667677,270
            
            
            652,061
            
            
            25,209





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
      to operating expense over three years or the vesting period if approved to
      be
      less than three years by the Company’s Board of Directors. Deferred compensation
      expense included in the accompanying consolidated statements of income amounted
      to $56,000, $81,000 and $40,000 for the years ended December 31, 2006, 2005
      and
      2004, respectively. The Company has not recognized any tax benefit related
      to
      this deferred compensation expense due to the existence of its federal tax
      net
      operating loss carryforward.





**-64-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








During
      the year ended December 31, 2006, the Company issued 99,770 shares of restricted
      common stock to non-employee directors in lieu of paying cash for directors’
fees. The fair value of these shares was approximately $51,000 based on the
      share price of the shares on the date of grant. This amount is also equal to
      the
      cash amount that would have been paid for the director’s fees, and is included
      in selling, general and administrative expense for the year ended December
      31,
      2006. The Company has not deferred any of the compensation expense since the
      3
      month vesting period fully amortized these shares during 2006.





In
      September 2006, the Board of Directors of the Company elected to vest 43,334
      of
      previously unvested shares of its former Chief Financial Officer in
      consideration for consulting services to be provided over the next year to
      advise on financial and accounting matters.





At
      December 31, 2005, the Company had 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 were held by Jonathan Bloch, one of its
      directors, from February 5, 2004 to February 5, 2006. These warrants expired
      unexercised on February 5, 2006.





The
      Company’s Long-Term Incentive Plan (the “Plan”), approved in May 1999 and last
      amended in October 2000, provides for the issuance to qualified participants
      options to purchase up to 2,500,000 shares of common stock. As of December
      31,
      2006 and 2005 respectively, options to purchase 460,000 and 915,000 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:


**Weighted****Number
                of**
            
            **Average
                Exercise****Options**
            
            **Price**Outstanding,
                January 1, 2003
            
            
            1,340,000
            
            $
            0.26Granted
                in 2004
            
            
            -
            
            
            -Exercised
                in 2004
            
            
            (200,000
            )
            
            0.24Canceled
                in 2004
            
            
            -
            
            
            -Outstanding,
                December 31, 2004
            
            
            1,140,000
            
            $
            0.26Granted
                in 2005
            
            
            -
            
            
            -Exercised
                in 2005
            
            
            (200,000
            )
            
            0.24Canceled
                in 2005
            
            
            (25,000
            )
            
            0.24Outstanding,
                December 31, 2005
            
            
            915,000
            
            $
            0.26Granted
                in 2006
            
            
            -
            
            
            -Exercised
                in 2006
            
            
            (200,000
            )
            
            0.24Canceled
                in 2006
            
            
            (255,000
            )
            
            0.33Outstanding,
                December 31, 2006
            
            
            460,000
            
            $
            0.24








**-65-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Additional
      information regarding options outstanding as of December 31, 2006 is as
      follows:





**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted****Avg.****Remaining**
            
            
            
            **Weighted****Contractual**
            
            
            
            **Avg.
                Exercise**
            
            **Intrinsic****Exercise
                Price**
            
            **#
                Outstanding**
            
            **Life
                (Yrs)**
            
            **#
                Exercisable**
            
            **Price**
            
            **Value**$0.24
            
            
            460,000
            
            
            5.20
            
            
            460,000
            
            $
            0.24
            
            $
            59,800





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 and Chief Executive Officer. 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.





Had
      compensation cost been recognized consistent with Statement 123R, the Company’s
      net income attributable to common stockholders and net income per share would
      have been adjusted to the pro forma amounts indicated below for the years ended
      December 31, 2005 and 2004:





**2005**
            
            **2004**Net
                income attributable to common stockholders as reported
            
            $
            65,000
            
            $
            249,000Total
                stock-based employee compensation included in reported net income,
                net of
                related tax effects
            
            
            -
            
            
            18,000Total
                stock-based employee compensation expense determined under fair value
                based method for all awards, net of related tax effects
            
            
            (10,000
            )
            
            (88,000
            )Pro
                forma net income
            
            $
            55,000
            
            $
            179,000Net
                income per share:Basic
                - as reported
            
            
            *
            
            $
            0.01Basic
                - pro forma
            
            
            *
            
            $
            0.01Diluted
                - as reported
            
            
            *
            
            $
            0.01Diluted
                - pro forma
            
            
            *
            
            $
            0.01*
                Less than $0.01 per share





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%.





**-66-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**13.**
            **Employee
                Benefit 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. During the year ended December
      31, 2006 and 2005, the Company made matching contributions of $25,000 and
      $19,000 to the new 401(k) 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 in 2004.





**14.**
            **Computations
                of Basic and Diluted Net Income Per Common
                Share**





Basic
      loss per common share is based on the net incomes divided by the weighted
      average number of common shares outstanding during the year. Diluted income
      per
      common share is based on the net income divided by the weighted average number
      of common shares including equivalent common shares of dilutive common stock
      options and warrants outstanding during the year. No effect has been given
      to
      outstanding options or warrants in the diluted computation for the years ended
      December 31, 2006 and 2005, respectively, as their effect would be anti-dilutive
      due to net income. The number of potentially dilutive stock options and warrants
      excluded from the computation for the years ended December 31, was approximately
      265,909 in 2006 and 822,870 in 2005 and 296,989 in 2004, respectively.





A
      reconciliation of basic and diluted loss per common share follows:





**December
                31,**
            
            **December
                31,**
            
            **December
                31,****2006**
            
            **2005**
            
            **2004**Income
                from continuing operations, net of taxes
            
            $
            793,000
            
            $
            295,000
            
            $
            249,000Income
                (loss) from discontinued operations, net of taxes
            
            
            230,000
            
            
            (230,000
            )
            
            -Net
                income
            
            $
            1,023,000
            
            $
            65,000
            
            $
            249,000Weighted
                average common shares outstanding-Basic
            
            
            22,409,814
            
            
            22,006,733
            
            
            21,803,817Effect
                of dilutive stock options and warrants
            
            
            265,908
            
            
            870,971
            
            
            585,450Weighted
                average common shares outstanding-Diluted
            
            
            22,675,722
            
            
            22,877,704
            
            
            22,389,267Basic
                earnings per share from:Continuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -Basic
                net income per share
            
            $
            0.05
            
            
            *
            
            $
            0.01Diluted
                earnings per share from:Continuing
                operations
            
            $
            0.04
            
            $
            0.01
            
            $
            0.01Discontinued
                operations
            
            $
            0.01
            
            $
            (0.01
            )
            $
            -Diluted
                net income per share
            
            $
            0.05
            
            
            *
            
            $
            0.01*
                Less than $0.01 per share








**-67-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








**15.**
            **Commitments
                and Contingencies******





In
      connection with the acquisition of the Park Assets in 2004, 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 provided 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 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. For
      the
      years ended December 31, 2006 and 2005 and the period from the date of
      acquisition through December 31, 2004, DHI purchased over $23,858,000,
      $23,159,000 and $17,250,000, respectively, of its pharmaceutical products from
      AmerisourceBergen.





As
      of
      November 30, 2006, DHI entered into Amendment No. 1 (“Amendment”) to the supply
      agreement. The Amendment extends the supply agreement from March 24, 2007 to
      March 24, 2009. In addition, the Amendment (1) improves the pricing of goods
      purchased (2) changes the minimum order volume from $30,000,000 to $50,000,000
      over the life of the agreement and (3) the percentage of generic drug purchases
      was changed from 2.50% to 6.0%. The Amendment also allows for the return of
      goods, in a saleable condition, within 180 days of the invoice date without
      a
      restocking fee and provides for a termination fee if DHI terminates the supply
      agreement before the expiration of the term of the agreement. The termination
      fee is a maximum of $50,000 but is reduced for each full month from December
      1,
      2006 until the date of termination. However, there is no termination fee if
      the
      minimum order volume has been satisfied. At December 31, 2006, DHI believes
      it
      has satisfied the minimum order volume.





The
      Amendment also provides for a rebate in the amount of $150,000 representing
      a
      15.0% volume discount off the price of goods for the first $1,000,000 of net
      purchases purchased in the period after November 1, 2006 providing that DHI
      makes net purchases in excess of $1 million after November 1, 2006. In December
      2006, DHI satisfied the net purchase requirement and received the $150,000
      rebate.





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 December 2005, this bank debt was paid in
      full
      by Fairways 03 New Jersey LP and the Company’s limited indemnification agreement
      was cancelled.





***Operating
      Leases***


The
      Company and its subsidiaries lease 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 $1,431,000, $1,375,000
      and $974,000 for the years ended December 31, 2006, 2005 and 2004,
      respectively.





**-68-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Minimum
      lease payments under all non-cancelable operating lease agreements for the
      years
      ended December 31, are as follows:





**Years
                ending December 31,**2007
            
            $
            1,260,0002008
            
            
            1,108,0002009
            
            
            1,039,0002010
            
            
            836,0002011
            
            
            291,000Thereafter
            
            
            2,007,000$
            6,541,000





***Legal
      Proceedings***


On
      January 29, 2004, Bishopsgate Corp. and T.E. Millard filed a lawsuit in the
      192 nd 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. 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. In August 2005, the
      Company, its officers and directors and Park Pharmacy’s officers and directors
      entered into a compromise and settlement agreement, which was approved by the
      bankruptcy court, whereby the defendants collectively paid $80,000 to the
      bankruptcy Trustee in settlement of all claims. The Company’s insurance carrier
      provided the funds for the Company’s portion of the settlement amount, which was
      $55,000. In exchange for the settlement, and in satisfaction of the
      counterclaims filed against Millard and Bishopsgate Corp, the Company received
      all of the stock of Bishopsgate Corp. The stock has not been assigned any value
      in the Company’s financial statements and it is held by a newly-formed entity,
      DM-ASD Holding, Co.





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 the Company and the individual
      defendants made misstatements and omissions concerning the Company’s products
      and customers.





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. On August 23, 2005, the Fifth
      Circuit affirmed the district court’s denial of class certification. The Company
      settled the lead plaintiffs’ remaining individual claims for a confidential
      amount, which was paid by the Company’s directors and officer’s insurance
      carrier. Accordingly, the district court entered a final judgment dismissing
      the
      claims with prejudice on February 24, 2006.





In
      April
      2006, the Company was notified by the Internal Revenue Service (“IRS”) that its
      federal income tax return for the 2004 tax year had been selected for review.
      In
      addition, in September 2006 the Company was notified by the IRS that the federal
      partnership income tax return of CPOC for the 2004 tax year had been selected
      for review. The IRS is currently conducting its reviews. At this time, the
      Company can make no representations or give any guidance regarding the potential
      outcome of this review and the impact, if any, on its financial position.
      However, the Company is not aware of any potential issues that may cause
      adjustment to its filed tax returns.





**-69-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








In
      September 2006, the Chapter 7 trustee for the bankruptcy estate of Quantum
      North
      America, Inc. sought to enforce two default judgments against the Company for
      alleged preferential and fraudulent transfers to the Company's predecessor,
      ASD
      Systems, Inc. in the aggregate amount of approximately $150,000, plus interest
      and attorneys fees. The transfers at issue occurred in 2000. The adversary
      proceedings filed in the bankruptcy case were styled: David Gottlieb Trustee
      v.
      ASD Systems, Inc.; Adv. Nos. 1:02-ap-02131-GM and 1:02-ap-01948. The Company
      took the position that the judgments were void based on defective service and
      neither Ascendant nor ASD were afforded the opportunity to defend the claims.
      The Company also disputed the underlying claims and was prepared to fully defend
      the Trustee's suit once the judgments were set aside. After presenting the
      Trustee with our defenses, the Company was able to settle the claims for a
      nominal payment of $5,000.00. The Company has a settlement in principle with
      the
      Trustee which is pending approval by the Bankruptcy Court.





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.





**16.**  **Related
      Party Transactions**





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. For the twelve months
      ended December 31, 2005, the Company did not meet this cash flow requirement
      and
      there has been no action taken by the Fairways Members to terminate the
      Participation Agreement. The Company is currently negotiating with the Fairways
      Members to modify the Participation Agreement, however, there can be no
      assurances that a mutually acceptable modification can be reached. 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. As of
      December 31, 2005, the Company held a profits interest in one real estate
      development transaction pursuant to the Participation Agreement. The Company
      has
      no investment in the transaction, is not a partner in the investment partnership
      and it has received no distributions.





During
      the year ended December 31, 2005, CRESA Capital Markets Group, LP, a subsidiary
      of the Company received approximately $108,000 in cash advances from the 4
      members of Fairways Equities, which were used to pay general operating expenses.
      The 4 members of Fairways Equities who each own 25% of its membership interests
      include James C. Leslie, the Chairman and principal shareholder of the Company,
      and Cathy Sweeney, Brant Bryan and David Stringfield, who are each shareholders
      of the Company as well as principals of CRESA Capital Markets Group, LP, a
      subsidiary of the Company (the “Fairways Members”). These non-interest bearing
      advances were repaid in full in December 2005 from the receipt of revenues
      from
      Capital Markets real estate advisory transactions.





Mr.
      James
      C. Leslie, the Company’s Chairman, controls, and Mr. Will Cureton, one of the
      Company’s directors, is indirectly a limited partner in the entity that owns the
      building in which the corporate office space is sub-leased by Ascendant and
      DHI.





Also,
      through August 2005, Capital Markets also paid rent for office space in the
      same
      building to an entity controlled by Mr. Leslie. The Company considers all of
      these leases to be at or below market terms for comparable space in the same
      building.





Beginning
      on March 16, 2005 and ending on October 13, 2006, Ascendant subleased space
      from
      an unrelated third party of approximately $7,000 per month. In October 2006,
      Ascendant began sharing office space with DHI. During the year ended December
      31, 2006, DHI subleased space from an unrelated third party for $6,000 per
      month. In addition, Ascendant incurred
      certain shared office costs with an entity controlled by Mr. Leslie, which
      gives
      rise to reimbursements from the Company to that entity. These costs were
      approximately $9,000 in 2006.





**-70-**
 **Table
          of
          Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**




During
      the year ended December 31, 2005 and 2004, Ascendant and Capital Markets paid
      aggregate rent of approximately $26,000 and $67,200 directly to an entity
      controlled by Mr. Leslie. The remaining rent expense paid by Ascendant and
      DHI
      is paid under sublease agreements with an unrelated third party, and
      approximates $13,000 monthly. The Company also
      incurred certain shared office costs with an entity controlled by Mr. Leslie,
      which gives rise to reimbursements from the Company to that entity. These costs
      were approximately $24,000 and $23,000 in 2005 and 2004,
      respectively.





During
      the years ended December 31, 2006, 2005 and 2004, the Company paid fees to
      its
      directors of $2,500, $8,750 and $11,000, respectively, in exchange for their
      roles as members of the board of directors and its related committees. During
      2006, the Company issued 99,770 shares of restricted stock to a director in
      lieu
      of cash fees for his role as members of the board of directors and its related
      committees for the year ended December 31, 2006. These restricted shares vested
      ratably over the three month period after the date of issuance. In July 2006,
      the Company issue 7,500 share of restricted stock to a director, for his annual
      restricted stock grant, which vests ratably over a three year period from the
      date of issuance. In July 2006, the Company issued 10,000 share of restricted
      stock to a newly elected director as his initial grant of restricted stock.
      This
      initial grant of restricted stock also vests ratably over a three year period
      from the date of issuance. Additionally, in May 2005, the Company issued 22,500
      shares of restricted stock to directors in lieu of cash fees for their roles
      as
      members of the board of directors and its related committees for the year ended
      December 31, 2005. These restricted shares vested ratably at the end of each
      quarter ending June, September and December 2005, respectively.





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 January 1, 2006 to June 2006, CPOC paid approximately $1,108,000 to Mr.
      Hayes for principal and interest under the assumed note and the Acquisition
      Note. In June 2006, ASDS entered into a credit agreement with First Republic
      Bank for a $5.3 million term note. The proceeds from the term note were used
      to
      retire the outstanding balance owed to Kevin Hayes under the Acquisition Note
      pursuant to the acquisition of CPOC in 2004 by the Company (through ASDS).
      The
      Acquisition Note was retired at a discount of approximately $100,000 to
      i ts
      outstanding principal balance of $ 5,400,000. During the year ended December
      31,
      2005 and for the period from the acquisition date through December 31, 2004,
      CPOC paid approximately $1,198,000 and $720,000, respectively to Mr. Hayes
      for
      principal and interest under the assumed note and the Acquisition Note.





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. Also,
      Kevin Hayes, the Chairman of CPOC served as the Chief Executive Officer of
      CRESA
      Partners, LLC from October 2005 to September 2006.





In
      March
      2006, CPOC purchased a minority interest of approximately 2.7% in CRESA
      Partners, LLC. The amount paid for this investment was $160,000 and is accounted
      for under the cost method of accounting for investments. CPOC is a licensee
      of
      CRESA Partners, LLC.





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.





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. 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. In
      December 2005, this bank debt was paid in full by Fairways 03 New Jersey LP
      and
      the Company’s limited indemnification agreement was cancelled.




Effective
      September 1, 2005, Capital Markets entered into an advisory services agreement
      with Fairways Equities whereby Fairways Equities will provide all of the
      professional and administrative services required by Capital Markets. In
      exchange, Capital Markets will pay Fairways Equities an administrative fee
      of
      25% of gross revenues and a compensation fee of 40% of gross revenues, as
      compensation to the principals working on the transaction that generated the
      corresponding revenues.




Under
      the
      terms of the agreement, Fairways Equities assumed all of the administrative
      expenses, including payroll, of CRESA Capital Markets. Fairways Equities will
      only receive payments under the agreement if the Fairways Members close a real
      estate capital markets advisory transaction that generates revenue for Capital
      Markets. The
      impact of this agreement on Capital Markets is that it will have no
      administrative expenses or cash requirements unless it closes a revenue
      generating transaction. The principals in Capital Markets are also the four
      members of Fairways Equities. During the years ended December 31, 2006 and
      2005,
      Capital Markets paid compensation fees to Fairways Equities under the advisory
      services agreement of approximately $262,000 and $233,000,
      respectively.




**-71-**
 **Table
          of
          Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**




**17.**  **Unaudited
      Quarterly Financial Data for 2006 and 2005:**





**CONSOLIDATED
                QUARTERLY FINANCIAL DATA (UNAUDITED)****(In
                thousands except per share amounts)****Quarters
                Ended 2006**
            
            **2006****March
                31**
            
            **June
                30**
            
            **Sept.
                30**
            
            **Dec.
                31**
            
            **YTD****(Restated)**Revenue
            
            $
            13,604
            
            $
            12,889
            
            $
            12,284
            
            $
            16,640
            
            $
            55,417Gross
                Profit
            
            
            4,549
            
            
            3,870
            
            
            4,225
            
            
            6,321
            
            
            18,965Income
                (loss) from continuing operations
            
            
            (142
            )
            
            (410
            )
            
            (8
            )
            
            1,353
            
            
            793Discontinued
                operations
            
            
            -
            
            
            230
            
            
            -
            
            
            -
            
            
            230Net
                income (loss)
            
            
            (142
            )
            
            (180
            )
            
            (8
            )
            
            1,353
            
            
            1,023**Basic
                income (loss) per share:**Continuing
                operations
            
            $
            (0.01
            )
            $
            (0.02
            )
            
            *
            
            $
            0.06
            
            $
            0.04Discontinued
                operations
            
            $
            -
            
            $
            0.01
            
            $
            -
            
            $
            -
            
            $
            0.01Net
                income (loss) per share, basic
            
            $
            (0.01
            )
            $
            (0.01
            )
            
            *
            
            $
            0.06
            
            $
            0.05**Diluted
                income (loss) per share:**Continuing
                operations
            
            $
            (0.01
            )
            $
            (0.02
            )
            
            *
            
            $
            0.06
            
            $
            0.04Discontinued
                operations
            
            $
            -
            
            $
            0.01
            
            
            -
            
            $
            -
            
            $
            0.01Net
                income (loss) per share, diluted
            
            $
            (0.01
            )
            $
            (0.01
            )
            
            *
            
            $
            0.06
            
            $
            0.05Weighted
                average shares, basic
            
            
            22,258
            
            
            22,418
            
            
            22,455
            
            
            22,508
            
            
            22,410Weighted
                average shares, diluted
            
            
            22,783
            
            
            22,418
            
            
            22,455
            
            
            22,707
            
            
            22,676




**Quarters
                Ended 2005**
            
            **2005****March
                31**
            
            **June
                30**
            
            **Sept.
                30**
            
            **Dec.
                31**
            
            **YTD**Revenue
            
            $
            13,269
            
            $
            12,576
            
            $
            12,023
            
            $
            15,099
            
            $
            52,967Gross
                Profit
            
            
            4,568
            
            
            4,119
            
            
            4,132
            
            
            5,426
            
            
            18,245Income
                (loss) from continuing operations
            
            
            1
            
            
            (439
            )
            
            (452
            )
            
            1,185
            
            
            295Discontinued
                operations
            
            
            -
            
            
            -
            
            
            (230
            )
            
            -
            
            
            (230
            )Net
                income (loss)
            
            
            1
            
            
            (439
            )
            
            (682
            )
            
            1,185
            
            
            65**Basic
                income (loss) per share:**Continuing
                operations
            
            
            *
            
            $
            (0.02
            )
            $
            (0.02
            )
            $
            0.05
            
            $
            0.01Discontinued
                operations
            
            $
            -
            
            
            -
            
            
            (0.01
            )
            
            -
            
            $
            (0.01
            )Net
                income (loss) per share, basic
            
            
            *
            
            $
            (0.02
            )
            $
            (0.03
            )
            $
            0.05
            
            
            ***Diluted
                income (loss) per share:**Continuing
                operations
            
            
            *
            
            $
            (0.02
            )
            $
            (0.02
            )
            $
            0.05
            
            $
            0.01Discontinued
                operations
            
            $
            -
            
            $
            -
            
            $
            (0.01
            )
            $
            -
            
            $
            (0.01
            )Net
                income (loss) per share, diluted
            
            
            *
            
            $
            (0.02
            )
            $
            (0.03
            )
            $
            0.05
            
            
            *Weighted
                average shares, basic
            
            
            21,933
            
            
            21,965
            
            
            22,014
            
            
            22,114
            
            
            22,007Weighted
                average shares, diluted
            
            
            22,512
            
            
            21,965
            
            
            22,014
            
            
            22,719
            
            
            22,878*
                Less than $0.01 per share


The
      quarterly earnings per share information will not tie across due to the
      different number of weighted average shares.





**-72-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








As
      disclosed in a Current Report on Form 8-K filed on April 3,
      2007, the Company identified an
      accounting error at our Park InfusionCare subsidiary where certain payments
      received from insurance companies during the year ended December 31, 2006 were
      incorrectly recorded as a liability. As a result, t he
      Company will amend the previously filed Form 10-Q for the 3rd Quarter
      Financials with an aggregate impact of an increase to its previously reported
      revenue by $301,000 and will decrease its previously reported net loss by
      $179,000. As a result, the
      quarterly financial data for the quarter ended September 30, 2006 has been
      restated to reflect these adjustments.





As
      disclosed in a Current Report on Form 8-K filed on May 24, 2006, the board
      of
      directors decided to retain the operations of Park InfusionCare, which had
      previously been reported as a discontinued operation while the Company was
      pursuing a potential disposition or strategic transaction for its infusion
      therapy business. As a result of the board of director’s decision to retain the
      operations of Park InfusionCare, the Company has reported the operating results
      of Park InfusionCare as part of continuing operations. Consequently,
      t he
      quarterly financial data for each quarter in 2005 have been adjusted to reflect
      Park InfusionCare as a part of continuing operations.





For
      the
      quarter ended March 31, 2005, these adjustments increased revenue by $2,388,000
      and gross profit by $1,195,000. In addition, for the quarter ended June 30,
      2005
      these adjustments increased revenue by $2,461,000 and gross profit by
      $1,288,000. For the quarter ended September 30, 2005, these adjustments
      increased revenue by $2,261,000 and gross profit by $1,075,000. In addition,
      for
      the quarter ended December 31, 2005 these adjustments increased revenue by
      $1,961,000 and gross profit by $955,000. The Company also reclassified $108,000
      in the quarter ended December 31, 2005 from other income to revenue as a result
      of the accounting error at Park InfusionCare. This reclassification entry was
      recorded to conform to the 2006 presentation. None of these adjustments had
      any
      effect on net income (loss) for any of the quarters.




**18.**  **Subsequent
      Events**





On
      February 20, 2007, Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton
      Medicine Man, LP, and Santa Fe Medicine Man, LP), each a wholly-owned subsidiary
      of DHI, entered into a loan agreement with Amegy Bank National Association
      for a
      $2,000,000 revolving line of credit and a $2,200,000 term loan. Substantially
      all of the proceeds from the Revolver and the Term Loan were used to retire
      the
      outstanding balance owed to Bank of Texas, N.A. under an existing credit
      facility. See Note 10 for further information regarding the new credit facility.





**19.**  **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.





**-73-**
 **Table
            of
            Contents**
 **ASCENDANT
            SOLUTIONS, INC.**
 **Notes
            to Consolidated Financial Statements**








Statements
      of income and balance sheet data for the Company’s principal business segments
      for the years ended December 31, 2006 and 2005 are as follows (000’s omitted):


**Years
                Ended December 31,****Healthcare**
            
            **Real
                Estate Services****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
            
            $
            41,062
            
            $
            39,136
            
            $
            14,355
            
            $
            13,831Cost
                of sales
            
            
            28,048
            
            
            26,517
            
            
            8,404
            
            
            8,205Gross
                profit
            
            
            13,014
            
            
            12,619
            
            
            5,951
            
            
            5,626Other
                income
            
            
            8
            
            
            9
            
            
            100
            
            
            -Equity
                in income (losses) of equity method investees
            
            
            -
            
            
            -
            
            
            -
            
            
            -Discontinued
                operations
            
            
            230
            
            
            (230
            )
            
            -
            
            
            -Net
                income (loss)
            
            $
            630
            
            $
            (1,075
            )
            $
            1,956
            
            $
            1,592Plus:Interest
                Expense (Income)
            
            
            330
            
            
            330
            
            
            400
            
            
            444Income
                tax provision
            
            
            -
            
            
            -
            
            
            199
            
            
            209Depreciation
                & Amortization
            
            
            391
            
            
            332
            
            
            297
            
            
            304Discontinued
                operations
            
            
            (230
            )
            
            230
            
            
            -
            
            
            -**EBITDA
                from continuing operations**
            
            **$**
            **1,121**
            
            **$**
            **(183**
            **)**
            **$**
            **2,852**
            
            **$**
            **2,549**Total
                Assets
            
            $
            7,483
            
            $
            8,631
            
            $
            12,363
            
            $
            11,341




**Years
                Ended December 31,****Corporate
                & Other**
            
            **Consolidated****2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenue
            
            $
            -
            
            $
            -
            
            $
            55,417
            
            $
            52,967Cost
                of sales
            
            
            -
            
            
            -
            
            
            36,452
            
            
            34,722Gross
                profit
            
            
            -
            
            
            -
            
            
            18,965
            
            
            18,245Other
                income
            
            
            47
            
            
            64
            
            
            155
            
            
            73Equity
                in income (losses) of equity method investees
            
            
            (356
            )
            
            675
            
            
            (356
            )
            
            675Discontinued
                operations
            
            
            -
            
            
            -
            
            
            230
            
            
            (230
            )Net
                income (loss)
            
            $
            (1,563
            )
            $
            (452
            )
            $
            1,023
            
            $
            65Plus:Interest
                Expense (Income)
            
            
            28
            
            
            (11
            )
            
            758
            
            
            763Income
                tax provision
            
            
            6
            
            
            32
            
            
            205
            
            
            241Depreciation
                & Amortization
            
            
            25
            
            
            16
            
            
            713
            
            
            652Discontinued
                operations
            
            
            -
            
            
            -
            
            
            (230
            )
            
            230**EBITDA
                from continuing operations**
            
            **$**
            **(1,504**
            **)**
            **$**
            **(415**
            **)**
            **$**
            **2,469**
            
            **$**
            **1,951**Total
                Assets
            
            $
            1,193
            
            $
            2,026
            
            $
            21,039
            
            $
            21,998







**-74-**
 **Table
            of Contents**








**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**





We
      maintain “disclosure controls and procedures,” as such term is defined in Rules
      13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange
      Act”), designed to ensure that information required to be disclosed by us in our
      Exchange Act reports is recorded, processed, summarized, and reported within
      the
      time periods specified by the SEC and that such information is accumulated
      and
      communicated to our management, as appropriate, to allow for timely decisions
      regarding required disclosure.





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





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, the Company added a new Chief
      Financial Officer which allowed it to implement controls related, but not
      limited to segregation of duties. In September 2006, that Chief Financial
      Officer resigned and was replaced by an Interim Chief Financial Officer. The
      Company will continue to periodically assess the cost versus benefit of adding
      the resources that would improve segregation of duties. Currently, with the
      concurrence of the board of directors, the Company does 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.





Management,
      including our Chief Executive Office and Interim Chief Financial Officer,
      conducted an evaluation of the effectiveness of the design and operation of
      our
      disclosure controls and procedures, as required by the Exchange Act
      Rules 13a-15(b) and 15d-15(b). Based upon that evaluation, our Chief
      Executive Officer and Interim Chief Financial Officer concluded that, as of
      December 31, 2006, our disclosure controls and procedures were ineffective,
      due to the identification of the material weakness in the revenue recognition
      process at its Park InfusionCare subsidiary as described below.





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





**Material
      Weakness Related to Revenue Recognition**





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





**-75-**
 **Table
            of
            Contents**





The
        Company concluded that its revenue recognition process for 2006 at its Park
        InfusionCare subsidiary was ineffective as a result of an identified material
        weakness. During 2006, v ariances
        from expected payments received from insurance companies were not investigated
        in a timely manner, and thus were incorrectly accounted for as liabilities
        rather than revenue. In
        March
        2007, the Company identified an accounting error at its Park InfusionCare
        subsidiary where certain payments received from insurance companies during
        the
        year ended December 31, 2006 were incorrectly recorded as a liability. The
        Company has evaluated these payments and, as a result of this evaluation,
        has
        increased the 2006 revenue of Park InfusionCare in the amount of approximately
        $482,000. As
        a
        result, an adjustment of approximately $482,000 was recorded in order to
        increase the revenue and reduce the net loss of the Park InfusionCare subsidiary
        for the year-ended December 31, 2006.
 
 The
        efficacy of the measures the Company implements in this regard will be subject
        to ongoing management review supported by confirmation and testing by management
        as well as audit committee oversight. As a result, the Company expects that
        additional changes will be made to its processes as time progresses.





**Plan
      for Remediation of Material Weakness**





In
      order
      to remediate this material weakness, the Company will review and document the
      processes relating to the recording, processing, reconciliation, recognition
      and
      reporting of revenue at our Park InfusionCare subsidiary. In addition, the
      Company will provide additional training, review and supervision of personnel
      responsible for the billing, collection and accounting of the Park InfusionCare
      revenue.





**ITEM
      9B. OTHER INFORMATION**


None
























**-76-**
 **Table
            of Contents**





**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 to be filed within
      120
      days of December 31, 2006 and delivered to our stockholders in connection with
      our 2007 Annual Meeting of Stockholders, to be held on June 14, 2007, to be
      filed pursuant to Regulation 14A (the “Proxy Statement”).





**ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
      GOVERNANCE**





**Directors
      and Executive Officers**




Information
      regarding our directors and executive officers may be found under the captions
      “Election of Directors,” “Corporate Governance” and “Executive Officers” in the
      Proxy Statement for our 2007 Annual Meeting of Stockholders. Such information
      is
      incorporated herein by reference.




**Audit
      Committee**




The
      Company has a separately-designated standing Audit Committee established in
      accordance with Section 3(a)(58)(A) of the Exchange Act. Additional information
      regarding the Audit Committee may be found under the captions “Committees of the
      Board of Directors; Meetings” and “Report of the Audit Committee” in the Proxy
      Statement for our 2007 Annual Meeting of Stockholders. Such information is
      incorporated herein by reference.




**Audit
      Committee Financial Expert**




The
      Board
      of Directors has determined that it has at least one “Audit Committee Financial
      Expert” (as defined by Item 401(h)(2) of Regulation S-K of the Exchange Act) on
      the Audit Committee of the Board of Directors, Anthony J. LeVecchio. The Board
      of Directors has further determined that Mr. LeVecchio is “independent” from
      management within the meaning of Item 7(d)(3)(iv) of Schedule 14A under the
      Exchange Act.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Information
      regarding Section 16(a) Beneficial Ownership Reporting Compliance may be found
      under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in
      the Proxy Statement for our 2007 Annual Meeting of Stockholders. Such
      information is incorporated herein by reference.




**Code
      of Business Conduct and Ethics**




The
      Company has adopted a code of business conduct and ethics, which applies to
      all
      of its officers, directors and employees, including its principal executive
      officer, principal financial officer, principal accounting officer and
      controller, or persons performing similar functions. The Company’s code of
      business conduct and ethics is set forth on the Company’s website at
      http://www.ascendantsolutions.com/ascendant_codeofconduct.pdf.




**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 Discussion and Analysis,” and “Performance Graph.”





**-77-**
 **Table
            of
            Contents**








**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, 2006
      are
      as follows:





Plan
                category
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            Weighted
                average exercise price of outstanding options, warrants and
                rights
            Number
                of securities remaining available for future issuanceEquity
                compensation plans approved by security holders
            **460,000
                (1)**
            **$.24**
            **2,610,000
                (2)**Equity
                compensation plans not approved by security holders
            **0**
            
            **0**Total
            **460,000**
            
            **2,610,000**








(1)
            As
                of December 31, 2006, options to purchase 915,000 shares of common
                stock
                were outstanding under the 1999 Long Term Incentive
                Plan.


(2)
            As
                of December 31, 2006, 550,000 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.





Additional
      information required by this Item is incorporated by reference from the section
      of the Proxy Statement for our 2007 Annual Meeting of Stockholders captioned
      “Stock Ownership.”





**ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS, AND DIRECTOR INDEPENDENCE**





The
      information required by this Item is incorporated by reference from the section
      of the Proxy Statement for our 2007 Annual Meeting of Stockholders captioned
      “Management.”





**ITEM
      14. PRINCIPAL ACCOUNTING FEES AND
      SERVICES**





The
      information required by this Item is incorporated by reference from the section
      of the Proxy Statement for our 2007 Annual Meeting of Stockholders captioned
      “Independent Public Accountants.”




**-78-**
 **Table
          of Contents**






**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.





*Unconsolidated
                subsidiaries*





The
                audited financial statements of Fairways Frisco, L.P. and Fairways
                03 New
                Jersey, L.P. are filed hereto as Exhibits 99.8 and 99.9, respectively,
                pursuant to Rule 3-09 of Regulation S-X. The Company is not required
                to
                provide any other financial statements pursuant to Rule 3-09 of Regulation
                S-X.





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.





**-79-**
 **Table
            of
            Contents**










**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of 1934, the registrant has duly caused this report to be signed on its behalf
      by the undersigned, thereunto duly authorized on April 16, 2007.










**ASCENDANT
                SOLUTIONS, INC.**By:
            /s/
                David E. BoweDavid
                E. Bowe*President
                and Chief Executive Officer (Duly Authorized Officer and Principal
                Executive Officer)*By:
            /s/
                Michal L. GaylerMichal
                L. Gayler*Interim
                Vice President-Finance and Chief Financial Officer (Duly Authorized
                Officer and Principal Financial
                Officer)*











Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed on the 16 th day of
      April 2007, below by the following persons on behalf of the registrant and
      in
      the capacities indicated.





Signature
            
            Title/s/
                James C. Leslie
              James
                C. Leslie
            
            Chairman
                of the Board/s/
                David E. Bowe
              David
                E. Bowe
            
            Director,
                President and Chief Executive Officer,/s/
                Anthony J. LeVecchio
              Anthony
                J. LeVecchio
            
            Director,
                Audit Committee Chairman/s/
                Curt Nonomaque
              Curt
                Nonomaque
            
            Director/s/
                Will Cureton
              Will
                Cureton
            
            Director








**-80-**
 **Table
            of
            Contents**


**INDEX
      TO EXHIBITS**


ExhibitNumber
            
            Description2.1
            
            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)10.7
            
            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)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 (Exhibit 10.16) (12)10.17
            
            Restricted
                Stock Agreement dated June 25, 2004, between Ascendant Solutions,
                Inc. and
                Anthony J. LeVecchio (Exhibit 10.17) (12)10.18
            
            Amended
                and Restated Agreement of Limited Partnership of Fairways Frisco,
                L.P.
                effective December 30, 2004 (Exhibit 10.18) (12)10.19
            
            Promissory
                note payable from Ascendant Solutions, Inc. to Comerica Bank dated
                April
                11, 2005 (Exhibit 10.1) (14)10.20
            
            Fee
                allocation agreement dated May 31, 2005 between Fairways Equities,
                LLC and
                Ascendant Solutions, Inc. (Exhibit 10.2)
                (14)


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10.21
            
            Advisory
                Services Agreement between CRESA Capital Markets Group, LP, Fairways
                Equities, LLC and Ascendant Solutions, Inc. dated September 1, 2005
                (Exhibit 10.1)(15)10.22
            
            Form
                of Restricted Stock Agreement between Ascendant Solutions, Inc. and
                non-employee directors (Exhibit 1.01) (17)10.23
            
            Promissory
                note payable from Ascendant Solutions, Inc. to Comerica Bank dated
                September 13, 2005 (Exhibit 10.01) (18)10.24
            
            Outline
                of Compensation Plan for Non-Employee Directors (21)10.25
            
            Employment
                Agreement between Park InfusionCare, LP and Scott L. Holtmyer (Exhibit
                10.1) (22).10.26
            
            Loan
                Agreement (Term Loan) between ASDS of Orange County, Inc. and First
                Republic Bank dated June 8, 2006 (Exhibit 10.1) (23).10.27
            
            Promissory
                Note (Term Loan) payable from Orange County, Inc. to First Republic
                Bank
                dated June 8, 2006 (Exhibit 10.2) (23).10.28
            
            Security
                Agreement (Term Loan) between ASDS of Orange County, Inc. and First
                Republic Bank dated June 8, 2006 (Exhibit 10.3) (23).10.29
            
            Continuing
                Guarantee of Payment and Performance by CRESA Partners of Orange
                County,
                LP for the benefit of First Republic Bank dated June 8, 2006 (Exhibit
                10.4) (23).10.30
            
            Form
                of Limited Guaranty of the Obligations of ASDS of Orange County,
                Inc. for
                the benefit of First Republic Bank dated June 8, 2006(Exhibit
                10.5) (23).10.31
            
            Loan
                Agreement (Line of Credit) between CRESA Partners of Orange County,
                LP and
                First Republic Bank dated June 8, 2006 (Exhibit 10.6)
                (23).10.32
            
            Promissory
                Note (Line of Credit) payable from CRESA Partners of Orange County,
                LP to
                First Republic Bank dated June 8, 2006 (Exhibit 10.7)
                (23).10.33
            
            Security
                Agreement (Line of Credit) between CRESA Partners of Orange County,
                LP and
                First Republic Bank dated June 8, 2006 (Exhibit 10.8)
                (23).10.34
            
            Form
                  of Limited Guaranty of the Obligations of CRESA Partners of Orange
                  County,
                  LP for the benefit of First Republic Bank dated June 8,
                  2006 (Exhibit 10.9) (23).10.35
            
            Promissory
                Note payable from Ascendant Solutions, Inc. to Ampco Partners, Ltd.
                dated
                June 14, 2006 (Exhibit 10.1) (24).10.36
            
            Security
                Agreement between Ascendant Solutions, Inc. and Ampco Partners, Ltd.
                dated
                June 14, 2006 (Exhibit 10.2) (24).10.37
            
            Letter
                Agreement between Ascendant Solutions, Inc. and Gary W. Boyd dated
                September 6, 2006 (Exhibit 10.1) (25).10.38
            
            Letter
                Agreement between Ascendant Solutions, Inc. and GaylerSmith Group,
                LLC
                dated May 16, 2005 (Exhibit 10.2) (25).10.39
            
            Loan
                Agreement between Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP,
                Angleton Medicine Man, LP, Santa Fe Medicine Man, LP and Amegy Bank
                National Association dated February 20, 2007 (Exhibit 10.1)
                (26).10.40
            
            Promissory
                Note (Term) payable from Dougherty’s Pharmacy, Inc., Alvin Medicine Man,
                LP, Angleton Medicine Man, LP, and Santa Fe Medicine Man, LP to Amegy
                Bank
                National Association dated February 20, 2007 (Exhibit 10.2)
                (26).10.41
            
            Promissory
                Note (Revolving) payable from Dougherty’s Pharmacy, Inc., Alvin Medicine
                Man, LP, Angleton Medicine Man, LP, and Santa Fe Medicine Man, LP
                to Amegy
                Bank National Association dated February 20, 2007 (Exhibit 10.3)
                (26).10.42
            
            Form
                  of Security Agreement dated as of February 20, 2007 executed by
                  Dougherty’s Pharmacy, Inc., Alvin Medicine Man, LP, Angleton Medicine Man,
                  LP and Santa Fe Medicine Man, LP in favor of Amegy Bank National
                  Association (Exhibit 10.4) (26).10.43
            
            Form
                of Unlimited Guaranty Agreement dated as of February 20, 2007 executed
                by
                Ascendant Solutions, Inc., Dougherty’s Holdings, Inc. Medicine Man, LP,
                Dougherty’s LP Holdings, Inc., Medicine Man GP, LLC, Alvin Medicine Man
                GP, LLC, Angleton Medicine Man GP, LLC and Santa Fe Medicine Man
                GP, LLC
                for the benefit of Amegy Bank National Association  (Exhibit
                10.5) (26).10.44
            
            Pledge
                Agreement between Dougherty’s Pharmacy, Inc. in favor of Amegy Bank
                National Association dated February 20, 2007 (Exhibit 10.6)
                (26).21.1
            
            Subsidiaries
                of Ascendant Solutions, Inc.*








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23.1
            
            Consent
                of Hein & Associates 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 Interim 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, 2006, by David E. Bowe as President and Chief
                Executive
                Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 2002*32.2
            
            Certification
                of Ascendant Solutions, Inc. Annual Report on Form 10-K for the period
                ended December 31, 2006, by Michal L. Gayler as Interim 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)99.4
            
            Table
                reflecting certain ownership after giving effect to the termination
                of the
                Master Agreement and other changes (Exhibit 99.1) (16)99.5
            
            Office
                Building Sublease Agreement between Ascendant Solutions, Inc. and
                Holt
                Lunsford Commercial, Inc. dated March 16, 2005 (Exhibit 99.1)
                (14)99.6
            
            Press
                release dated November 3, 2005 (Exhibit 99.1) (18)99.7
            
            Press
                release dated January 3, 2006 (Exhibit 99.1) (19)99.8
            
            Audited
                consolidated financial statements of Fairways Frisco, L.P. and
                Subsidiaries for the years ended December 31, 2006 and 2005 pursuant
                to
                Rule 3-09 of Regulation S-X*99.9
            
            Audited
                financial statements of Fairways 03 New Jersey, L.P. for the year
                ended
                December 31, 2005 pursuant to Rule 3-09 of Regulation
                S-X**
            
            *
                Filed herewith








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(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.(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.(12)
            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,
                2004.(13)
            Incorporated
                herein by reference to the exhibits shown in parenthesis filed in
                our
                quarterly report on Form 10-Q for the quarterly period ended March
                31,
                2005(14)
            Incorporated
                herein by reference to the exhibits shown in parenthesis filed in
                our
                quarterly report on Form 10-Q for the quarterly period ended June
                30,
                2005.(15)
            Incorporated
                herein by reference to the exhibits shown in parenthesis filed in
                our
                quarterly report on Form 10-Q for the quarterly period ended September
                30,
                2005.(16)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed April 29, 2005.(17)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed May 24, 2005.(18)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed September 15, 2005.(19)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed November 4, 2005.(20)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed January 3, 2006.(21)
            Incorporated
                by reference to Item 1.01 in our current report on Form 8-K filed
                May 16,
                2006.(22)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed May 24, 2006.(23)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed June 13, 2006.(24)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our quarterly
                report on Form 10-Q for the quarterly period ended June 20,
                2006.(25)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed September 8, 2006.(26)
            Incorporated
                by reference to the exhibits shown in parenthesis filed in our current
                report on Form 8-K filed February 26,
                2007.











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**Executive
      Compensation Plans and Arrangements**





The
      following is a list of all executive compensation plans and arrangements
      required to be filed as an exhibit to this Form 10-K:





**1.**
            
            1999
                Long-Term Incentive Plan for ASD Systems, Inc. (filed as Exhibit
                4.2
                hereto and incorporated by reference to Exhibit 4.2 filed in our
                Registration Statement on Form S-1, File No. 333-85983)**2.**
            
            Form
                of Stock Option Agreement under 1999 Long-Term Incentive Plan (filed
                as
                Exhibit 4.3 hereto and incorporated by reference to Exhibit 4.3 filed
                in
                our Registration Statement on Form S-1, File No. 333-85983)**3.**
            
            Stock
                Option Agreement dated as of March 14, 2002 between Ascendant Solutions,
                Inc. and David E. Bowe (filed hereto as Exhibit 10.3 and incorporated
                by
                reference to Exhibit 10.6 filed in our annual report on Form 10-K
                for the
                fiscal year ended December 31, 2002)**4.**
            
            Stock
                Option Agreement dated as of March 14, 2002 between Ascendant Solutions,
                Inc. and James C. Leslie (filed hereto as Exhibit 10.4 and incorporated
                by
                reference to Exhibit 10.7 filed in our annual report on Form 10-K
                for the
                fiscal year ended December 31, 2002)**5.**
            
            Restricted
                Stock Agreement dated October 18, 2004, between Ascendant Solutions,
                Inc.
                and Gary W. Boyd (filed hereto as Exhibit 10.14 and incorporated
                by
                reference to Exhibit 1.01 filed in our current report on Form 8-K
                filed
                October 19, 2004)**6.**
            
            Restricted
                Stock Agreement dated June 25, 2004, between Ascendant Solutions,
                Inc. and
                Anthony J. LeVecchio (filed as Exhibit 10.17 hereto and Incorporated
                by
                reference to Exhibit 10.17 filed in our annual report on Form 10-K
                for the
                fiscal year ended December 31, 2004)**7.**
            
            Form
                of Restricted Stock Agreement between Ascendant Solutions, Inc. and
                non-employee directors (filed hereto as Exhibit 10.22 and incorporated
                by
                reference to Exhibit 1.01 filed in our current report on Form 8-K
                filed
                May 24, 2005)**8.**
            
            Outline
                of Compensation Plan for Non-Employee Directors (filed hereto as
                Exhibit
                10.24 and incorporated by reference to Item 1.01 in our current report
                on
                Form 8-K filed May 16, 2006)**9.**
            
            Employment
                Agreement between Park InfusionCare, LP and Scott L. Holtmyer (filed
                hereto as Exhibit 10.25 and incorporated by reference to Exhibit
                10.1
                filed in our current report on Form 8-K filed May 24,
                2006)**10.**
            
            Letter
                Agreement between Ascendant Solutions, Inc. and Gary W. Boyd dated
                September 6, 2006 (filed hereto as Exhibit 10.37 and incorporated
                by
                reference to Exhibit 10.1 filed in our current report on Form 8-K
                filed
                September 8, 2006)**11.**
            
            Letter
                Agreement between Ascendant Solutions, Inc. and GaylerSmith Group,
                LLC
                dated May 16, 2005 (filed hereto as Exhibit 10.38 and incorporated
                by
                reference to Exhibit 10.2 filed in our current report on Form 8-K
                filed
                September 8, 2006)





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