UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-27945
ASCENDANT SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 75-2900905 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 16250 Dallas Parkway, Suite 205, Dallas, Texas | 75248 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: 972-250-0945
16250 Dallas Parkway, Suite 102, Dallas, Texas 75248
(Former Name or Former Address, if Changed Since Last Report)
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
At May 9, 2005 there were approximately 21,933,400 shares of Ascendant Solutions, Inc. common stock outstanding.
FORM 10-Q
For the Quarterly Period Ended March 31, 2005
CONDENSED CONSOLIDATED BALANCE SHEETS
(000’s omitted, except share amounts)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,968 | $ | 1,868 | ||||
| Trade accounts receivable, net of allowance for doubtful accounts of $484 and $380 at March 31, 2005 and December 31, 2004. |
5,223 | 6,350 | ||||||
| Other receivables |
273 | 161 | ||||||
| Receivable from affiliates |
56 | 71 | ||||||
| Inventories |
2,462 | 2,498 | ||||||
| Prepaid expenses |
453 | 503 | ||||||
| Total current assets |
10,435 | 11,451 | ||||||
| Property and equipment, net |
930 | 716 | ||||||
| Goodwill |
7,299 | 7,299 | ||||||
| Other intangible assets |
675 | 758 | ||||||
| Investments in limited partnerships, net |
1,218 | 411 | ||||||
| Other assets |
106 | 118 | ||||||
| Total assets |
$ | 20,663 | $ | 20,753 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,812 | $ | 1,633 | ||||
| Accrued expenses |
2,692 | 3,161 | ||||||
| Notes payable, current |
466 | 461 | ||||||
| Total current liabilities |
4,970 | 5,255 | ||||||
| Notes payable, long-term |
12,051 | 12,155 | ||||||
| Limited partnership and minority interests |
452 | 464 | ||||||
| Contingent indemnification liability |
220 | — | ||||||
| Total liabilities |
17,693 | 17,874 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.0001 par value: |
||||||||
| Authorized shares—7,500,000 |
||||||||
| Issued and outstanding—none |
— | — | ||||||
| Common stock, $0.0001 par value: |
||||||||
| Authorized shares—50,000,000 |
||||||||
| Issued and outstanding shares—21,933,400 at March 31, 2005 and December 31, 2004. |
2 | 2 | ||||||
| Additional paid-in capital |
59,961 | 59,961 | ||||||
| Deferred compensation |
(63 | ) | (78 | ) | ||||
| Accumulated deficit |
(56,930 | ) | (57,006 | ) | ||||
| Total stockholders’ equity |
2,970 | 2,879 | ||||||
| Total liabilities and stockholders’ equity |
$ | 20,663 | $ | 20,753 | ||||
See accompanying notes to the Condensed Consolidated Financial Statements
1
ASCENDANT SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000’s omitted, except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Revenue: |
||||||||
| Healthcare |
$ | 9,825 | $ | 775 | ||||
| Real estate advisory services |
3,444 | 677 | ||||||
| 13,269 | 1,452 | |||||||
| Cost of sales: |
||||||||
| Healthcare |
6,652 | 507 | ||||||
| Real estate advisory services |
2,049 | 207 | ||||||
| 8,701 | 714 | |||||||
| Gross profit |
4,568 | 738 | ||||||
| Operating expenses: |
||||||||
| Selling, general and administrative expenses |
4,170 | 838 | ||||||
| Non-cash stock compensation |
15 | 27 | ||||||
| Depreciation and amortization |
157 | 6 | ||||||
| Total operating expenses |
4,342 | 871 | ||||||
| Operating income (loss) |
226 | (133 | ) | |||||
| Investment income |
77 | 70 | ||||||
| Interest expense, net |
(178 | ) | (3 | ) | ||||
| Loss on sale of equipment |
(1 | ) | — | |||||
| Income (loss) before limited partnership and minority interest and income tax expense |
124 | (66 | ) | |||||
| Limited partnership and minority interest loss (income) |
12 | (40 | ) | |||||
| State income tax expense |
60 | — | ||||||
| Net income (loss) |
$ | 76 | $ | (106 | ) | |||
| Basic net income (loss) per share |
$ | 0.00 | $ | (0.00 | ) | |||
| Diluted net income (loss) per share |
$ | 0.00 | $ | (0.00 | ) | |||
| Shares used in computing basic net income (loss) per share |
21,933,400 | 21,665,900 | ||||||
| Shares used in computing diluted net income (loss) per share |
22,512,447 | 21,665,900 | ||||||
See accompanying notes to the Condensed Consolidated Financial Statements.
2
ASCENDANT SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000’s omitted)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Operating Activities |
||||||||
| Net income (loss) |
$ | 76 | $ | (106 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Provision for doubtful accounts |
128 | — | ||||||
| Depreciation and amortization |
157 | 6 | ||||||
| Deferred compensation amortization |
15 | 9 | ||||||
| Non-cash stock option compensation |
— | 18 | ||||||
| Loss on sale of property and equipment |
1 | — | ||||||
| Limited partnership and minority interest |
(12 | ) | 40 | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: |
||||||||
| Accounts receivable |
999 | 55 | ||||||
| Inventories |
36 | — | ||||||
| Prepaid expenses and other assets |
(35 | ) | 34 | |||||
| Accounts payable |
179 | 477 | ||||||
| Accrued expenses |
(469 | ) | — | |||||
| Net cash provided by operating activities |
1,075 | 533 | ||||||
| Investing Activities |
||||||||
| Return of capital distributions |
9 | 11 | ||||||
| Deferred acquisition costs |
— | (314 | ) | |||||
| Net cash acquired in acquisitions |
— | 1,396 | ||||||
| Purchases of property and equipment |
(289 | ) | (1 | ) | ||||
| Investment in limited partnerships |
(596 | ) | — | |||||
| Payment of acquistion liabilities |
— | (1,350 | ) | |||||
| Net cash used in investing activities |
(876 | ) | (258 | ) | ||||
| Financing Activities |
||||||||
| Payments on notes payable |
(99 | ) | — | |||||
| Net cash used in financing activities |
(99 | ) | — | |||||
| Net increase in cash and cash equivalents |
100 | 275 | ||||||
| Cash and cash equivalents at beginning of period |
1,868 | 2,006 | ||||||
| Cash and cash equivalents at end of period |
$ | 1,968 | $ | 2,281 | ||||
| Supplemental Cash Flow Information |
||||||||
| Cash paid for state income taxes |
$ | 211 | $ | — | ||||
| Cash paid for interest on notes payable |
$ | 207 | $ | — | ||||
| Noncash investing activities |
||||||||
| Indemnification liability recorded |
$ | 220 | $ | — | ||||
See accompanying notes to the Condensed Consolidated Financial Statements.
3
ASCENDANT SOLUTIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited condensed consolidated financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary to fairly state Ascendant Solutions, Inc.’s (“Ascendant Solutions” or the “Company”) consolidated financial position, consolidated results of operations and consolidated cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission. The consolidated results of operations for the quarter ended March 31, 2005 are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire fiscal year ending December 31, 2005. The December 31, 2004 consolidated balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Terms not otherwise defined herein shall have the meaning given to them in the Company’s Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission.
2. Description of Business
Ascendant Solutions is a diversified financial services company which is seeking to, or has invested in or acquired, healthcare, manufacturing, distribution or service companies. The Company also conducts various real estate activities, performing real estate advisory services for corporate clients, and, through an affiliate, purchase real estate assets, as a principal investor. The Company is organized in three segments: (i) healthcare, (ii) real estate services and (iii) corporate and other businesses.
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 (“DHI”) | Healthcare products and services provided through retail pharmacies and infusion therapy centers, including specialty compounding pharmacy services | ||
| Real estate advisory services |
CRESA Partners of Orange County, L.P., ASDS of Orange County, Inc., CRESA Capital Markets Group, L.P. |
Tenant representation, lease management services, capital markets advisory services and strategic real estate advisory services | ||
| Corporate & other |
Ascendant Solutions, Inc., ASE Investments Corporation, VTE, L.P. |
Corporate administration, investments in Ampco Partners, Ltd., Fairways Frisco, L.P. and Fairways 03 New Jersey, L.P. | ||
Through early 2001, the Company had been engaged in providing call center, order management and fulfillment services, portions of which were sold or otherwise wound down by July 1, 2001. From July 1, 2001 and continuing through December 31, 2002, the Company had no revenue producing contracts or operations. In December 2001, the Company revised its strategic direction to seek acquisition possibilities throughout the United States or enter into other business endeavors.
4
During 2002, the Company made its first investments, and it has continued to make additional investments and acquisitions throughout 2003 and 2004. A summary of the Company’s investment and acquisition activity is shown in the table below:
| Date |
Entity |
Business Segment |
Transaction Description |
% Ownership | ||||
| April 2002 |
Ampco Partners, Ltd | Corporate & other | Investment in a non-sparking, non-magnetic safety tool manufacturing company | 10% | ||||
| August 2002 |
VTE, L.P. | Corporate & other | Investment to acquire early stage online electronic ticket exchange company | 23% | ||||
| October 2002 |
CRESA Capital Markets Group, L.P., ASE Investments Corporation |
Real estate 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 | 20% | ||||