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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the fiscal year ended March 31, 2011
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the Transition period from  to .
 Commission file number 001-32935
 Arcadia Resources, Inc.
  NEVADA
    
    88-0331369(State or other jurisdiction of
    
    (I.R.S. Employer I.D. Number)incorporation or organization)9320 PRIORITY WAY WEST DRIVEINDIANAPOLIS, INDIANA
    
    46240(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number: (317) 569-8234
    o þ
 Yes o No þ
 þ o
 o
 o o
  Large Accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller Reporting Company o
 o þ




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##### 



TABLE OF CONTENTS
 Page No.Part IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    19Item 2. Properties
    
    
    19Item 3. Legal Proceedings
    
    
    19Item 4. Reserved
    
    
    19Part IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    20Item 6. Selected Financial Data
    
    
    22Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    48Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    48Item 9A. Controls and Procedures
    
    
    48Item 9B. Other Information
    
    
    49Part IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    50Item 11. Executive Compensation
    
    
    50Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    50Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    50Item 14. Principal Accountant Fees and Services
    
    
    50Part IVItem 15. Exhibits and Financial Statement Schedules
    
    
    51Signatures
    
    
    53EX-10.18EX-10.27EX-10.29EX-10.45EX-10.46EX-10.47EX-21.1Exhibit 23.1EX-31.1EX-31.2EX-32.1EX-32.2
   2




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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
        3




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Part I
 
 ITEM 1.
    
    BUSINESS
 Overview
  Recent Events
  Business Strategy
   Business line focus.
 TM
 Organic growth and potential acquisitions.
 Pharmacy growth plan
  4




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Reduction of SG&A expense
 Centralized management with local delivery of products and services
 Our Operating Segments
  Pharmacy Segment.
   Services Segment.
  5




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Segment Financial Information
  Government Regulation and Compliance
   6




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Invoicing, Billing and Accounts Receivable Management
  Employees
  Pharmacy
    
    
    61Services
    
    
    131Corporate
    
    
    37Total
    
    
    229
  Supply
  Environmental Compliance
   7




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Available Information
   Executive Officers
  Served as ExecutiveName
    
    Age
    
    Position(s)
    
    Officer SinceMarvin R. Richardson
    
    53
    
    President and Chief Executive Officer
    
    February 2007Matthew R. Middendorf
    
    41
    
    Chief Financial Officer, Secretary and Treasurer
    
    February 2008Steven L. Zeller
    
    54
    
    Chief Operating Officer and General Counsel
    
    September 2007Charles L. Goodall
    
    49
    
    Executive Vice President, Pharmacy Operations
    
    April 2011
 Marvin R. Richardson
 Matthew R. Middendorf,
  8




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Steve L. Zeller,
 Charles L. Goodall
  9




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ITEM 1A.
    
    RISK FACTORS
  We have a history of operating losses and negative cash flow that may continue into the
foreseeable future.
  Our indebtedness could adversely affect our financial condition and operations, prevent us from
fulfilling our debt service obligations and adversely affect our ability to operate our business.
   
    
    We may be unable to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate or other purposes.
 
    
    We may be unable to plan for, or react to, changes in our business and general market
conditions.
 
    
    We may be more vulnerable in a volatile market and at a competitive disadvantage to less
leveraged competitors.
 
    
    Our operating flexibility is more limited due to financial and other restrictive
covenants, including restrictions on incurring additional debt, creating liens on our
properties, making acquisitions and paying dividends.
 
    
    We are subject to the risks that interest rates and our interest expense will increase.
 
    
    Our ability to use operating cash flow in other areas of our business may be limited
because we must dedicate a substantial portion of these funds to make principal and
interest payments on our indebtedness.
 
    
    Our ability to make investments or take other actions or borrow additional funds may be
limited based on the financial and other restrictive covenants in our indebtedness.
 
    
    The amount we are permitted to draw on our revolving credit facilities may be limited
and we may be unable to fund our early-stage pharmacy product and patient care services and
home care staffing business strategies.
 
    
    We may be forced to implement cost reductions, which could impact our product and
service offerings.
 
    
    We may be unable to successfully implement our growth strategy and spread our cost
structure over a larger revenue base and ultimately become profitable.
 The Company may not be successful in selling its Services segment, which is necessary to
generate cash to fund the remaining operations.
   10




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With the sale of our Services segment, the Company results will be entirely dependent on the
performance of its Pharmacy segment, which is still in its early stages of a broad market
roll-out.
     
 As part of a recapitalization or restructuring plan necessary to address the Companys
significant amount of outstanding debt, current and future shareholders could be substantially
diluted.
  Due to our debt level, our history of operating losses and negative cash flows, and the current
conditions in the credit markets, we may not be able to increase the amount we can draw on our
revolving credit facility with Comerica Bank, or to obtain credit from other sources, to fund our
future needs for working capital, funding early-stage strategies and ongoing business operations,
or acquisitions.
  We may not be able to meet the financial covenants contained in our credit facilities, and we may
not be able to obtain waivers for any violations of those covenants should they occur.
   11




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The terms of our credit agreements with various lenders subject us to the risk of foreclosure on
certain property.
  In order to fund operations, repay our debt obligations, or pursue our growth strategies, we may
seek additional equity financing, which could result in dilution to our security holders and
adversely affect our stock price.
  To the extent we are unable to generate sufficient cash from operations or raise adequate funds
from the equity or debt markets, we would need to sell assets or modify or abandon our growth
strategy.
  Given the recurring losses from operations and net capital deficiency, we received a going
concern opinion from our independent auditors, which could negatively affect our business and
results of operation.
   12




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Due to our low stock price and operating losses during recent fiscal years, our stock could be
delisted by the NYSE Amex Equities Exchange.
     Our Pharmacy segment revenue is highly dependent upon our relationships with key state Medicaid
programs, managed care organizations, health plans and other payers.
  Declines in prescription volumes may negatively affect our net revenues and profitability.
  The success of our business depends on maintaining a well-secured pharmacy operation and
technology infrastructure and failure to do so could adversely impact our business.
   13




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We are exposed to certain risks related to the frequency and rate of the introduction of generic
drugs and brand-name prescription products.
  Changes in federal and state laws that govern our financial relationships with physicians and
other health care providers may impact potential or current referral sources.
  We are required to comply with laws governing the transmission of privacy of health information.
   Because we depend on key management, the loss of the services or advice of any of these persons
could have a material adverse effect on our business and prospects.
   14




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We do not have long-term agreements or exclusive guaranteed order contracts with our home care,
hospital and healthcare facility clients.
  Our operations subject us to risk of litigation.
   Absent a divestiture of our Services segment, a significant decline in sales in our Services
business would adversely impact our revenue, operating income and cash flow and our ability to
repay indebtedness and invest in new products and services.
  Sales of certain of our services and products are largely dependent upon payments from
governmental programs and private insurance, and cost containment initiatives by these payers may
reduce our revenues, thereby harming our performance.
   15




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The markets in which we operate are highly competitive and we may be unable to compete
successfully against competitors with greater resources.
  We cannot predict the impact that registration of shares may have on the price of our common
stock.
  The price of our common stock has been, and will likely continue to be, volatile, which could
diminish the ability to recoup an investment, or to earn a return on an investment, in our common
stock.
  Resale of our securities by any holder may be limited and affected by state blue-sky laws, which
could adversely affect the price of our securities and the holders investment in our Company.
  The issuance of our preferred stock could materially impact the market price of our common stock
and the rights of holders of our common stock.
   16




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The exercise of common stock warrants and stock options may depress our stock price and may
result in dilution to our common security holders.
   We depend on our affiliated agencies and our internal sales force to sell our services and
products, the loss of which could adversely affect our business.
  Any additional impairment of intangible assets could negatively impact our results of operations.
   17




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Negative publicity or changes in public perception of our services may adversely affect our
ability to receive referrals, obtain new agreements and renew existing agreements.
  Delays in reimbursement due to state budget deficits or otherwise have decreased, and may in the
future further decrease, our liquidity.
  We are subject to extensive government regulation. Changes to the laws and regulations governing
our business could negatively impact our profitability and any failure to comply with these
regulations could adversely affect our business.
  
    
    Licensure and certification;
    
    Adequacy and quality of health care services;
    
    Qualifications and training of health care and support personnel;
    
    Confidentiality, maintenance and security issues associated with medical records and claims processing;
    
    Relationships with physicians and other referral sources;
    
    Operating policies and procedures;
    
    Addition of facilities and services; and
    
    Billing for services.
    18




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We are subject to reviews, compliance audits and investigations that could result in adverse
findings that negatively affect our net service revenues and profitability.
   Several anti-takeover measures under Nevada law could delay or prevent a change of control,
despite such change of control being in the best interest of the holders of our common stock.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS.
  
 ITEM 2.
    
    PROPERTIES
   
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    RESERVED
  19




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Part II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  Fiscal Year Ended March 31, 20114th Quarter
    
    
    3rd Quarter
    
    
    2nd Quarter
    
    
    1st QuarterHigh
    
    $
    0.34
    
    
    $
    0.42
    
    
    $
    0.58
    
    
    $
    0.75Low
    
    $
    0.10
    
    
    $
    0.27
    
    
    $
    0.37
    
    
    $
    0.39
 Fiscal Year Ended March 31, 20104th Quarter
    
    
    3rd Quarter
    
    
    2nd Quarter
    
    
    1st QuarterHigh
    
    $
    0.74
    
    
    $
    1.09
    
    
    $
    1.24
    
    
    $
    0.74Low
    
    $
    0.35
    
    
    $
    0.38
    
    
    $
    0.57
    
    
    $
    0.38
     20




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Stock Performance Graph
  
  21




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ITEM 6.
    
    SELECTED FINANCIAL DATA
 Form 10-K.
  Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Revenues, net
    
    $
    100,041
    
    
    $
    98,084
    
    
    $
    100,999
    
    
    $
    99,216
    
    
    $
    102,899Cost of revenues
    
    
    72,636
    
    
    
    70,274
    
    
    
    70,749
    
    
    
    70,690
    
    
    
    73,186Gross profit
    
    
    27,405
    
    
    
    27,810
    
    
    
    30,250
    
    
    
    28,526
    
    
    
    29,713Selling, general and administrative expenses
    
    
    36,403
    
    
    
    38,500
    
    
    
    38,565
    
    
    
    35,501
    
    
    
    34,005Depreciation and amortization
    
    
    1,380
    
    
    
    1,300
    
    
    
    1,513
    
    
    
    1,769
    
    
    
    1,923Goodwill and intangible asset impairment
    
    
    2,500
    
    
    
    14,599
    
    
    
    22,619
    
    
    
    
    
    
    
    Operating loss
    
    
    (12,878
    )
    
    
    (26,589
    )
    
    
    (32,447
    )
    
    
    (8,744
    )
    
    
    (6,215
    )Total other expenses
    
    
    2,376
    
    
    
    2,422
    
    
    
    8,634
    
    
    
    3,765
    
    
    
    3,041Loss from continuing operations before income taxes
    
    
    (15,254
    )
    
    
    (29,011
    )
    
    
    (41,081
    )
    
    
    (12,509
    )
    
    
    (9,256
    )Current income tax expense
    
    
    33
    
    
    
    29
    
    
    
    122
    
    
    
    207
    
    
    
    88Loss from continuing operations
    
    
    (15,287
    )
    
    
    (29,040
    )
    
    
    (41,203
    )
    
    
    (12,716
    )
    
    
    (9,344
    )Discontinued operations:Loss from discontinued operations
    
    
    (464
    )
    
    
    (2,603
    )
    
    
    (4,009
    )
    
    
    (10,725
    )
    
    
    (34,361
    )Net gain (loss) on disposal
    
    
    1,400
    
    
    
    557
    
    
    
    (1,258
    )
    
    
    43
    
    
    
    936
    
    
    
    (2,046
    )
    
    
    (5,267
    )
    
    
    (10,682
    )
    
    
    (34,361
    )NET LOSS
    
    $
    (14,351
    )
    
    $
    (31,086
    )
    
    $
    (46,470
    )
    
    $
    (23,398
    )
    
    $
    (43,705
    )Basic and diluted loss per share:Loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.17
    )
    
    $
    (0.31
    )
    
    $
    (0.10
    )
    
    $
    (0.10
    )Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.02
    )
    
    
    (0.04
    )
    
    
    (0.09
    )
    
    
    (0.38
    )$
    (0.08
    )
    
    $
    (0.19
    )
    
    $
    (0.35
    )
    
    $
    (0.19
    )
    
    $
    (0.48
    )Weighted average number of basic and diluted
common shares outstanding
    
    
    185,796
    
    
    
    166,840
    
    
    
    134,583
    
    
    
    122,828
    
    
    
    91,433
 As of March 31,2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Balance Sheet Data (excluding
assets/liabilities of
discontinued
operations):Total current assets
    
    $
    16,435
    
    
    $
    19,575
    
    
    $
    8,604
    
    
    $
    24,770
    
    
    $
    24,927Working capital
    
    
    9,559
    
    
    
    8,004
    
    
    
    10,283
    
    
    
    17,835
    
    
    
    (1,104
    )Total assets
    
    
    26,131
    
    
    
    32,133
    
    
    
    45,990
    
    
    
    53,619
    
    
    
    54,778Total long-term debt, including current maturities
    
    
    39,525
    
    
    
    33,964
    
    
    
    38,936
    
    
    
    38,735
    
    
    
    44,044Total liabilities
    
    
    46,187
    
    
    
    44,562
    
    
    
    49,558
    
    
    
    49,775
    
    
    
    34,588Total stockholders (deficit) equity
    
    
    (20,056
    )
    
    
    (11,775
    )
    
    
    9,833
    
    
    
    49,797
    
    
    
    54,084
  22




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Statement Concerning Forward-Looking Statements
  Critical Accounting Policies
   Revenue Recognition
  
    
    Evidence of an arrangement exists;
    
    Services have been provided or goods have been delivered;
    
    The price is fixed or determinable; and
    
    Collection is reasonably assured.
  Allowance for Doubtful Accounts
    23




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Goodwill
   2011
    
    
    2010
    
    
    2009Services
    
    $
    
    
    
    $
    
    
    
    $
    14,553Pharmacy
    
    
    
    
    
    
    2,500
    
    
    
    2,500Total Goodwill
    
    $
    
    
    
    $
    2,500
    
    
    $
    17,053
     Intangible Assets
  Trade name
    
    30 yearsCustomer relationships (depending on the type of business purchased)
    
    
    5 to 15 years
  24




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Income Taxes
     25




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Fiscal Year Ended March 31, 2011 Compared to the Fiscal Year Ended March 31, 2010
  Results of Continuing Operations (in thousands, except per share amounts)
 Years EndedMarch 31,2011
    
    
    2010Services
    
    
    83,328
    
    
    
    86,635Pharmacy
    
    
    16,713
    
    
    
    11,449Revenues, net
    
    
    100,041
    
    
    
    98,084Cost of revenues
    
    
    72,636
    
    
    
    70,274Gross profit
    
    
    27,405
    
    
    
    27,810Selling, general and administrative expenses
    
    
    36,403
    
    
    
    38,500Depreciation and amortization
    
    
    1,380
    
    
    
    1,300Goodwill and intangible impairment
    
    
    2,500
    
    
    
    14,599Total operating expenses
    
    
    40,283
    
    
    
    54,399Operating loss
    
    
    (12,878
    )
    
    
    (26,589
    )Other expenses (income):Interest expense, net
    
    
    3,799
    
    
    
    3,371Change in fair value of warrant liability
    
    
    (1,423
    )
    
    
    (979
    )Other
    
    
    
    
    
    
    30Total other expenses (income)
    
    
    2,376
    
    
    
    2,422Net loss before income tax expense
    
    
    (15,254
    )
    
    
    (29,011
    )Income tax expense
    
    
    33
    
    
    
    29Net loss from continuing operations
    
    $
    (15,287
    )
    
    $
    (29,040
    )Weighted average number of shares  basic and diluted
    
    
    185,796
    
    
    
    166,840Net loss from continuing operations per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.17
    )
  26




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Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2011
    
    
    Revenue
    
    
    2010
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Revenues, net:Services
    
    $
    83,328
    
    
    
    83.3
    %
    
    $
    86,635
    
    
    
    88.3
    %
    
    $
    (3,307
    )
    
    
    -3.8
    %Pharmacy
    
    
    16,713
    
    
    
    16.7
    %
    
    
    11,449
    
    
    
    11.7
    %
    
    
    5,264
    
    
    
    46.0
    %100,041
    
    
    
    100.0
    %
    
    
    98,084
    
    
    
    100.0
    %
    
    
    1,957
    
    
    
    2.0
    %Cost of revenues:Services
    
    
    58,342
    
    
    
    
    
    
    
    60,247
    
    
    
    
    
    
    
    (1,905
    )
    
    
    -3.2
    %Pharmacy
    
    
    14,294
    
    
    
    
    
    
    
    10,027
    
    
    
    
    
    
    
    4,267
    
    
    
    42.6
    %72,636
    
    
    
    
    
    
    
    70,274
    
    
    
    
    
    
    
    2,362
    
    
    
    3.4
    %Gross
    
    
    GrossMargin %
    
    
    Margin %Gross margins:Services
    
    
    24,986
    
    
    
    30.0
    %
    
    
    26,388
    
    
    
    30.5
    %
    
    
    (1,402
    )
    
    
    -5.3
    %Pharmacy
    
    
    2,419
    
    
    
    14.5
    %
    
    
    1,422
    
    
    
    12.4
    %
    
    
    997
    
    
    
    70.1
    %$
    27,405
    
    
    
    27.4
    %
    
    $
    27,810
    
    
    
    28.4
    %
    
    $
    (405
    )
    
    
    -1.5
    %
 Services Segment
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2011
    
    
    Revenue
    
    
    2010
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    67,116
    
    
    
    80.5
    %
    
    $
    68,511
    
    
    
    79.2
    %
    
    $
    (1,395
    )
    
    
    -2.0
    %Per diem medical staffing
    
    
    11,014
    
    
    
    13.2
    %
    
    
    12,296
    
    
    
    14.2
    %
    
    
    (1,282
    )
    
    
    -10.4
    %Travel staffing
    
    
    5,198
    
    
    
    6.3
    %
    
    
    5,828
    
    
    
    6.6
    %
    
    
    (630
    )
    
    
    -10.8
    %Total Services
    
    $
    83,328
    
    
    
    100.0
    %
    
    $
    86,635
    
    
    
    100.0
    %
    
    $
    (3,307
    )
    
    
    -3.8
    %
    27




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Pharmacy Segment
    28




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Selling, General and Administrative
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2011
    
    
    SG&A
    
    
    2010
    
    
    SG&A
    
    
    (Decrease)
    
    
    (Decrease)Services
    
    
    20,043
    
    
    
    55.1
    %
    
    
    22,003
    
    
    
    57.1
    %
    
    
    (1,960
    )
    
    
    -8.9
    %Pharmacy
    
    
    8,080
    
    
    
    22.2
    %
    
    
    7,069
    
    
    
    18.4
    %
    
    
    1,011
    
    
    
    14.3
    %Corporate
    
    
    8,280
    
    
    
    22.7
    %
    
    
    9,428
    
    
    
    24.5
    %
    
    
    (1,148
    )
    
    
    -12.2
    %$
    36,403
    
    
    
    100.0
    %
    
    $
    38,500
    
    
    
    100.0
    %
    
    $
    (2,097
    )
    
    
    -(5.4
    %)SG&A as a % of net revenue
    
    
    43.7
    %
    
    
    
    
    
    
    44.4
    %
 Services Segment
  Pharmacy Segment
  Corporate
   29




---



##### Table of Contents



Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2011
    
    
    2010
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property and equipment
    
    $
    808
    
    
    $
    665
    
    
    
    143
    
    
    
    21.5
    %Amortization of acquired intangible assets
    
    
    572
    
    
    
    635
    
    
    
    (63
    )
    
    
    -9.9
    %Depreciation and amortization
    
    $
    1,380
    
    
    $
    1,300
    
    
    $
    80
    
    
    
    6.2
    %
   Goodwill and Intangible Asset Impairment
  2011
    
    
    2010Services:Goodwill
    
    $
    
    
    
    $
    14,599
    
    
    
    14,599Pharmacy:Goodwill
    
    
    2,500
    
    
    
    2,500
    
    
    
    Total
    
    $
    2,500
    
    
    $
    14,599
  Fiscal 2011
  Fiscal 2010
   30




---



##### Table of Contents



Interest Expense and Income
  $ Increase/
    
    
    % Increase/2011
    
    
    2010
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    3,810
    
    
    $
    3,395
    
    
    $
    415
    
    
    
    12.2
    %Interest income
    
    
    (11
    )
    
    
    (24
    )
    
    
    13
    
    
    
    -54.2
    %$
    3,799
    
    
    $
    3,371
    
    
    $
    428
    
    
    
    12.7
    %
   Change in Fair Value of Warrant Liability
   31




---



##### Table of Contents



Income Taxes
    32




---



##### Table of Contents



Earnings (Loss) from Discontinued Operations
  Year Ended March 31, 2011Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net:
    
    $
    
    
    
    $
    3,194
    
    
    $
    
    
    
    $
    660
    
    
    $
    3,854Cost of revenue
    
    
    
    
    
    
    2,541
    
    
    
    
    
    
    
    397
    
    
    
    2,938Gross profit
    
    
    
    
    
    
    653
    
    
    
    
    
    
    
    263
    
    
    
    916Selling, general and administrative
    
    
    
    
    
    
    923
    
    
    
    
    
    
    
    372
    
    
    
    1,295Depreciation and amortization
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Total operating expenses
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    372
    
    
    
    1,380Gain (loss) from operations
    
    
    
    
    
    
    (355
    )
    
    
    
    
    
    
    (109
    )
    
    
    (464
    )Net gain (loss) on disposal
    
    
    686
    
    
    
    127
    
    
    
    655
    
    
    
    (68
    )
    
    
    1,400Earnings (loss) from discontinued
operations
    
    $
    686
    
    
    $
    (228
    )
    
    $
    655
    
    
    $
    (177
    )
    
    $
    936
 Year Ended March 31, 2010Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net
    
    $
    1,223
    
    
    $
    4,054
    
    
    $
    1,423
    
    
    $
    1,813
    
    
    $
    8,513Cost of revenue
    
    
    979
    
    
    
    3,078
    
    
    
    511
    
    
    
    1,095
    
    
    
    5,663Gross profit
    
    
    244
    
    
    
    976
    
    
    
    912
    
    
    
    718
    
    
    
    2,850Selling, general and administrative
    
    
    290
    
    
    
    1,426
    
    
    
    2,251
    
    
    
    795
    
    
    
    4,762Depreciation and amortization
    
    
    3
    
    
    
    600
    
    
    
    88
    
    
    
    
    
    
    
    691Total operating expenses
    
    
    293
    
    
    
    2,026
    
    
    
    2,339
    
    
    
    795
    
    
    
    5,453Gain (loss) from operations
    
    
    (49
    )
    
    
    (1,050
    )
    
    
    (1,427
    )
    
    
    (77
    )
    
    
    (2,603
    )Net gain (loss) on disposal
    
    
    201
    
    
    
    (30
    )
    
    
    386
    
    
    
    
    
    
    
    557Earnings (loss) from discontinued
operations
    
    $
    152
    
    
    $
    (1,080
    )
    
    $
    (1,041
    )
    
    $
    (77
    )
    
    $
    (2,046
    )
 Services Segment
    33




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##### Table of Contents



Pharmacy Segment
   HHE Segment
       Catalog Segment
   34




---



##### Table of Contents



Fiscal Year Ended March 31, 2010 Compared to the Fiscal Year Ended March 31, 2009
 Results of Continuing Operations (in thousands, except per share amounts)
 Years EndedMarch 31,2010
    
    
    2009Services
    
    
    86,635
    
    
    
    97,537Pharmacy
    
    
    11,449
    
    
    
    3,462Revenues, net
    
    
    98,084
    
    
    
    100,999Cost of revenues
    
    
    70,274
    
    
    
    70,749Gross profit
    
    
    27,810
    
    
    
    30,250Selling, general and administrative expenses
    
    
    38,500
    
    
    
    38,565Depreciation and amortization
    
    
    1,300
    
    
    
    1,513Goodwill and intangible asset impairment
    
    
    14,599
    
    
    
    22,619Total operating expenses
    
    
    54,399
    
    
    
    62,697Operating loss
    
    
    (26,589
    )
    
    
    (32,447
    )Other expenses (income):Interest expense, net
    
    
    3,371
    
    
    
    4,072Loss on extinguishment of debt
    
    
    
    
    
    
    4,487Change in fair value of warrant liability
    
    
    (979
    )
    
    
    Other
    
    
    30
    
    
    
    75Total other expenses
    
    
    2,422
    
    
    
    8,634Net loss before income tax expense
    
    
    (29,011
    )
    
    
    (41,081
    )Income tax expense
    
    
    29
    
    
    
    122Net loss from continuing operations
    
    $
    (29,040
    )
    
    $
    (41,203
    )Weighted average number of shares  basic and diluted
    
    
    166,840
    
    
    
    134,583Net loss from continuing operations per share 
basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.31
    )
  35




---



##### Table of Contents



Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2010
    
    
    Revenue
    
    
    2009
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Revenues, net:Services
    
    $
    86,635
    
    
    
    88.3
    %
    
    $
    97,537
    
    
    
    96.6
    %
    
    $
    (10,902
    )
    
    
    -11.2
    %Pharmacy
    
    
    11,449
    
    
    
    11.7
    %
    
    
    3,462
    
    
    
    3.4
    %
    
    
    7,987
    
    
    
    230.7
    %98,084
    
    
    
    100.0
    %
    
    
    100,999
    
    
    
    100.0
    %
    
    
    (2,915
    )
    
    
    -2.9
    %Cost of revenues:Services
    
    
    60,247
    
    
    
    
    
    
    
    67,779
    
    
    
    
    
    
    
    (7,532
    )
    
    
    -11.1
    %Pharmacy
    
    
    10,027
    
    
    
    
    
    
    
    2,970
    
    
    
    
    
    
    
    7,057
    
    
    
    237.6
    %70,274
    
    
    
    
    
    
    
    70,749
    
    
    
    
    
    
    
    (475
    )
    
    
    -0.7
    %
 Gross
    
    
    GrossMargin %
    
    
    Margin %Gross margins:Services
    
    
    26,388
    
    
    
    30.5
    %
    
    
    29,758
    
    
    
    30.5
    %
    
    
    (3,370
    )
    
    
    -11.3
    %Pharmacy
    
    
    1,422
    
    
    
    12.4
    %
    
    
    492
    
    
    
    14.2
    %
    
    
    930
    
    
    
    189.0
    %$
    27,810
    
    
    
    28.4
    %
    
    $
    30,250
    
    
    
    30.0
    %
    
    $
    (2,440
    )
    
    
    -8.1
    %
 Services Segment
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2010
    
    
    Revenue
    
    
    2009
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    68,511
    
    
    
    79.1
    %
    
    $
    69,204
    
    
    
    71.1
    %
    
    $
    (693
    )
    
    
    -1.0
    %Per diem medical staffing
    
    
    12,296
    
    
    
    14.2
    %
    
    
    18,779
    
    
    
    19.3
    %
    
    
    (6,483
    )
    
    
    -34.5
    %Travel staffing
    
    
    5,828
    
    
    
    6.7
    %
    
    
    9,554
    
    
    
    9.7
    %
    
    
    (3,726
    )
    
    
    -39.0
    %Total Services
    
    $
    86,635
    
    
    
    100.0
    %
    
    $
    97,537
    
    
    
    100.0
    %
    
    $
    (10,902
    )
    
    
    -11.2
    %
   36




---



##### Table of Contents



Pharmacy Segment
    37




---



##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2010
    
    
    SG&A
    
    
    2009
    
    
    SG&A
    
    
    (Decrease)
    
    
    (Decrease)Services
    
    $
    22,003
    
    
    
    57.2
    %
    
    $
    25,316
    
    
    
    65.6
    %
    
    $
    (3,313
    )
    
    
    -13.1
    %Pharmacy
    
    
    7,069
    
    
    
    18.4
    %
    
    
    3,612
    
    
    
    9.4
    %
    
    
    3,457
    
    
    
    95.7
    %Corporate
    
    
    9,428
    
    
    
    24.5
    %
    
    
    9,637
    
    
    
    25.0
    %
    
    
    (209
    )
    
    
    -2.2
    %$
    38,500
    
    
    
    100.0
    %
    
    $
    38,565
    
    
    
    100.0
    %
    
    $
    (65
    )
    
    
    -(0.2
    %)SG&A as a % of net revenue
    
    
    44.4
    %
    
    
    
    
    
    
    39.5
    %
 Services Segment
  Pharmacy Segment
  Corporate
  
    
    legal fees as the number of claims and disputes arising during the normal course of
business was higher in fiscal 2010 than fiscal 2009; and,
    
    equity compensation, which was higher in fiscal 2010 due to a stock option grant to
senior management in March 2010 which vested immediately resulting in a $464,000 charge
during fiscal fourth quarter 2010.
  38




---



##### Table of Contents



Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property and equipment
    
    $
    666
    
    
    $
    601
    
    
    
    65
    
    
    
    10.8
    %Amortization of acquired intangible assets
    
    
    634
    
    
    
    704
    
    
    
    (70
    )
    
    
    -9.9
    %Depreciation and amortization  operating expense
    
    $
    1,300
    
    
    $
    1,305
    
    
    $
    (5
    )
    
    
    -0.4
    %
   Goodwill and Intangible Asset Impairment
  2010
    
    
    2009Services:Goodwill
    
    $
    14,599
    
    
    $
    14,599
    
    
    
    Pharmacy:Goodwill
    
    
    
    
    
    
    13,217Intangible assets
    
    
    
    
    
    
    9,402
    
    
    
    22,619Total
    
    $
    14,599
    
    
    $
    22,619
  Fiscal 2010
   39




---



##### Table of Contents



Fiscal 2009
   Interest Expense and Income
  $ Increase/
    
    
    % Increase/2010
    
    
    2009
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    3,395
    
    
    $
    4,123
    
    
    $
    (728
    )
    
    
    -17.7
    %Interest income
    
    
    (24
    )
    
    
    (51
    )
    
    
    27
    
    
    
    -52.9
    %$
    3,371
    
    
    $
    4,072
    
    
    $
    (701
    )
    
    
    -17.2
    %
   40




---



##### Table of Contents



Loss on Extinguishment of Debt
  2009JANA/Vicis debt refinancing  value of equity
    
    $
    3,769Write off of remaining debt discount
    
    
    470AmerisourceBergen line of credit amendment
    
    
    248Loss on extinguishment of debt  total
    
    $
    4,487
     Change in Fair Value of Warrant Liability
  Income Taxes
    41




---



##### Table of Contents



Earnings (Loss) from Discontinued Operations
  Year Ended March 31, 2010Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net
    
    $
    1,223
    
    
    $
    4,054
    
    
    $
    1,423
    
    
    $
    1,813
    
    
    $
    8,513Cost of revenue
    
    
    979
    
    
    
    3,078
    
    
    
    511
    
    
    
    1,095
    
    
    
    5,663Gross profit
    
    
    244
    
    
    
    976
    
    
    
    912
    
    
    
    718
    
    
    
    2,850Selling, general and administrative
    
    
    290
    
    
    
    1,426
    
    
    
    2,251
    
    
    
    795
    
    
    
    4,762Depreciation and amortization
    
    
    3
    
    
    
    600
    
    
    
    88
    
    
    
    
    
    
    
    691Total operating expenses
    
    
    293
    
    
    
    2,026
    
    
    
    2,339
    
    
    
    795
    
    
    
    5,453Gain (loss) from operations
    
    
    (49
    )
    
    
    (1,050
    )
    
    
    (1,427
    )
    
    
    (77
    )
    
    
    (2,603
    )Net gain (loss) on disposal
    
    
    201
    
    
    
    (30
    )
    
    
    386
    
    
    
    
    
    
    
    557Earnings (loss) from discontinued
operations
    
    $
    152
    
    
    $
    (1,080
    )
    
    $
    (1,041
    )
    
    $
    (77
    )
    
    $
    (2,046
    )
 Year Ended March 31, 2009Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net
    
    $
    15,842
    
    
    $
    4,690
    
    
    $
    17,643
    
    
    $
    2,576
    
    
    $
    40,751Cost of revenue
    
    
    12,675
    
    
    
    2,463
    
    
    
    5,266
    
    
    
    1,594
    
    
    
    21,998Gross profit
    
    
    3,167
    
    
    
    2,227
    
    
    
    12,377
    
    
    
    982
    
    
    
    18,753Selling, general and administrative
    
    
    2,155
    
    
    
    2,436
    
    
    
    11,158
    
    
    
    1,130
    
    
    
    16,879Depreciation and amortization
    
    
    277
    
    
    
    686
    
    
    
    1,031
    
    
    
    53
    
    
    
    2,047Goodwill and intangible asset impairment
    
    
    2,403
    
    
    
    
    
    
    
    541
    
    
    
    892
    
    
    
    3,836Total operating expenses
    
    
    4,835
    
    
    
    3,122
    
    
    
    12,730
    
    
    
    2,075
    
    
    
    22,762Gain (loss) from operations
    
    
    (1,668
    )
    
    
    (895
    )
    
    
    (353
    )
    
    
    (1,093
    )
    
    
    (4,009
    )Net gain (loss) on disposal
    
    
    
    
    
    
    
    
    
    
    (1,258
    )
    
    
    
    
    
    
    (1,258
    )Earnings (loss) from discontinued
operations
    
    $
    (1,668
    )
    
    $
    (895
    )
    
    $
    (1,611
    )
    
    $
    (1,093
    )
    
    $
    (5,267
    )
 Services Segment
    42




---



##### Table of Contents



Pharmacy Segment
   HHE Segment
       Catalog Segment
    43




---



##### Table of Contents



Liquidity and Capital Resources
 TM
     2011
    
    
    2010
    
    
    2009Net loss
    
    $
    (14,351
    )
    
    $
    (31,086
    )
    
    $
    (46,470
    )Net cash provided by (used in) operating activities
    
    
    (11,192
    )
    
    
    (5,881
    )
    
    
    778Net cash provided by (used in) investing activities
    
    
    397
    
    
    
    8,143
    
    
    
    (1,286
    )Net cash provided by (used in) financing activities
    
    
    7,487
    
    
    
    1,660
    
    
    
    (4,321
    )Net change in cash and cash equivalents
    
    
    (3,308
    )
    
    
    3,922
    
    
    
    (4,829
    )Cash and cash equivalents, end of year
    
    
    2,136
    
    
    
    5,444
    
    
    
    1,522Availability under line of credit agreement
    
    $
    2,033
    
    
    $
    389
    
    
    $
    2,945
   44




---



##### Table of Contents



Lender
    
    Description
    
    Maturity
    
    BalanceJANA Master Fund, Ltd.
    
    note payable
    
    April 1, 2012
    
    $
    19,406Vicis Capital Master Fund
    
    note payable
    
    April 1, 2012
    
    
    7,181Comerica Bank (Home Care/Medical Staffing segment)
    
    line of credit
    
    April 1, 2012
    
    
    7,130H.D. Smith (net of unamortized debt discount)
    
    line of credit
    
    April 23, 2013
    
    
    4,374LSP Partners, LP
    
    note payable
    
    April 1, 2012
    
    
    1,220Other
    
    note payable
    
    March 31, 2012
    
    
    189Various
    
    capital leases
    
    various
    
    
    25Total
    
    
    
    
    
    $
    39,525
   45




---



##### Table of Contents



Off-Balance Sheet Arrangements
   46




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments due by periodMoreLess than 1
    
    
    
    
    
    
    
    
    
    
    than 5Total
    
    
    year
    
    
    2 - 3 years
    
    
    4 - 5 years
    
    
    yearsOperating leases
    
    $
    3,811
    
    
    $
    976
    
    
    $
    1,539
    
    
    $
    777
    
    
    $
    519Capital leases
    
    
    25
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    Long-term obligations
    
    
    27,966
    
    
    
    189
    
    
    
    27,807
    
    
    
    
    
    
    
    Lines of credit (1)
    
    
    11,504
    
    
    
    
    
    
    
    11,504
    
    
    
    
    
    
    
    Interest (2)
    
    
    4,018
    
    
    
    3,659
    
    
    
    358
    
    
    
    
    
    
    
    Total
    
    $
    47,324
    
    
    $
    4,849
    
    
    $
    41,208
    
    
    $
    777
    
    
    $
    519
 (1)
    
    Balance includes the amounts due to Comerica Bank and H.D. Smith at March 31, 2011
under two working capital lines of credit agreement. The balance fluctuates on a daily
balance depending on working capital needs.(2)
    
    Future interest amounts for variable interest obligations are based on the interest rate in
effect as of March 31, 2011. The debt agreements with JANA Master Fund, Ltd., Vicis Capital
Master Fund, and LSP Partners, LP provide for the Company to elect to either pay the quarterly
interest in cash or to add the amount to the principal balance. The future payment schedule
assumes that these amounts are paid in cash. The aggregate amounts due to these three lenders
in the above schedule are: less than 1 year  $3,231,000. Recent Accounting Pronouncements
     47




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##### Table of Contents



ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
    48




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect our transactions and dispositions of our assets;
    
    Provide reasonable assurance our transactions are recorded as necessary to permit
preparation of our financial statements in accordance with GAAP, and that receipts and
expenditures are being made only in accordance with authorizations of our management and
directors; and
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a material effect on the
financial statement.
     Changes in Internal Control Over Financial Reporting
  
 ITEM 9B.
    
    OTHER INFORMATION
   49




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##### Table of Contents



Part III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   50




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  1.
    
    Financial Statements:Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of March 31, 2011 and 2010Consolidated Statements of Operations for the years ended March 31, 2011, 2010 and 2009Consolidated Statements of Stockholders Equity (Deficit) for the years ended March 31, 2011, 2010 and 2009Consolidated Statements of Cash Flows for the years ended March 31, 2011, 2010 and 2009Notes to Consolidated Financial Statements2.
    
    Financial Statement Schedules:Schedule I  Consolidated Financial Information of RegistrantSchedule II  Valuation and Qualifying Accounts
All other schedules for which provision is made in Regulation S-X either (i) are not required under the
related instructions or are inapplicable and, therefore, have been omitted, or (ii) the information
required is included in the Consolidated Financial Statements or the Notes thereto that are a part hereof.3.
    
    Exhibits:The exhibits included as part of this report are listed in the attached Exhibit Index, which is
incorporated herein by reference.
  51




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##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2011 and 2010
    
    
    F-3Consolidated Statements of Operations for the years ended March 31, 2011, 2010 and 2009
    
    
    F-4Consolidated Statements of Stockholders Equity (Deficit) for the years ended March 31, 2011, 2010 and 2009
    
    
    F-5Consolidated Statements of Cash Flows for the years ended March 31, 2011, 2010 and 2009
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-8Schedule I  Consolidated Financial Information of Registrant
    
    
    F-35Schedule II  Valuation and Qualifying Accounts
    
    
    F-39
  52




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##### Table of Contents



June 28, 2011
    
    By:
    
    /s/ Marvin R. Richardson

Marvin R. RichardsonChief Executive Officer (PrincipalExecutive Officer) and a DirectorJune 28, 2011
    
    By:
    
    /s/ Matthew R. Middendorf

Matthew R. MiddendorfTreasurer and Chief Financial Officer(Principal Financial and Accounting Officer)
  June 28, 2011
    
    By:
    
    /s/ Marvin R. Richardson

Marvin R. RichardsonPresident, Chief Executive Officer and DirectorJune 28, 2011
    
    By:
    
    /s/ John T. Thornton

John T. ThorntonDirectorJune 28, 2011
    
    By:
    
    /s/ Peter A. Brusca, M.D.

Peter A. Brusca, M.D.DirectorJune 28, 2011
    
    By:
    
    /s/ Joseph Mauriello

Joseph MaurielloDirectorJune 28, 2011
    
    By:
    
    /s/ Daniel Eisenstadt

Daniel EisenstadtDirector
  53




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##### Table of Contents



Exhibit Index
  ExhibitNumber
    
    Description of Exhibit3.1
    
    
    Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of Form 8-K filed
November 9, 2009)3.2
    
    
    Amended and Restated Bylaws of Arcadia Resources, Inc. (Nov. 5, 2008) (incorporated by reference to Exhibit
3.2 of Form 10-Q filed on November 6, 2008)4.1
    
    
    Form of Regulation D Class A Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 of Form
8-K filed on May 24, 2004)4.2
    
    
    Class A Warrant issued to John E. Elliott, II (incorporated by reference to Exhibit 4.2 of Form 8-K filed on
May 24, 2004)4.3
    
    
    Class A Warrant issued to Lawrence Kuhnert (incorporated by reference to Exhibit 4.3 of Form 8-K filed on May
24, 2004)4.4
    
    
    John E. Elliot, II and Lawrence Kuhnert Registration Rights Agreement, dated May 7, 2004 (incorporated by
reference to Exhibit 4.6 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.5
    
    
    Form Note Purchase Agreement (incorporated by reference to Exhibit 4.7 of Form S-1/A, Amendment No. 1, filed
August 27, 2004)4.6
    
    
    Cleveland Overseas Settlement Agreement, dated June 16, 2004 (incorporated by reference to Exhibit 4.11 of
Form S-1/A, Amendment No. 1, filed August 27, 2004)4.7
    
    
    Cleveland Overseas Warrant for Purchase of 100,000 Shares of Common Stock (incorporated by reference to
Exhibit 4.12 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.8
    
    
    Cleveland Overseas Registration Rights Agreement, dated February 28, 2003 (incorporated by reference to
Exhibit 4.13 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.9
    
    
    Stephen Garchik Option to Acquire 500,000 Shares, dated February 3, 2004, between Critical Home Care, Inc.
and Jana Master Fund, Ltd. (incorporated by reference to Exhibit 4.14 of Form S-1/A, Amendment No. 1, filed
August 27, 2004)4.10
    
    
    Stephen Garchik Registration Rights Agreement, dated February 3, 2004 (incorporated by reference to Exhibit
4.15 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.11
    
    
    Global Asset Management Settlement Agreement which includes provision regarding registration rights (to be
filed by amendment) (incorporated by reference to Exhibit 4.16 of Form S-1/A, Amendment No. 1, filed August
27, 2004)4.12
    
    
    Stanley Scholsohn Family Partnership Stock Option Agreement, dated February 22, 2003 (incorporated by
reference to Exhibit 4.17 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.13
    
    
    Stanley Scholsohn Family Partnership Registration Rights Agreement, dated February 22, 2004 (incorporated by
reference to Exhibit 4.18 of Form S-1/A, Amendment No. 1, filed August 27, 2004)4.14
    
    
    Form of Regulation D Registration Rights Agreement (incorporated by reference to Exhibit 4.19 of Form S-1/A,
Amendment No. 1, filed August 27, 2004)4.15
    
    
    Form of stock purchase agreement (incorporated by reference to Exhibit 4.1 of Form 8-K/A filed on May 2, 2005)4.16
    
    
    Warrant Purchase and Registration Rights Agreement dated September 26, 2005 (incorporated by reference to
Exhibit 4.1 of Form 8-K filed on September 30, 2005)4.17
    
    
    Warrant Purchase and Registration Rights Agreement dated September 28, 2005 (incorporated by reference to
Exhibit 4.2 of Form 8-K filed on September 30, 2005)4.18
    
    
    Form of B-1 Warrant (incorporated by reference to Exhibit 4.3 of Form 8-K filed on September 30, 2005)4.19
    
    
    Form of B-2 Warrant (incorporated by reference to Exhibit 4.4 of Form 8-K filed on September 30, 2005)4.20
    
    
    Private Stock Purchase Agreement SICAV 1 dated November 28, 2005 (incorporated by reference to Exhibit 4.1 of
Form 10-Q on February 14, 2006)4.21
    
    
    Private Stock Purchase Agreement SICAV 2 dated November 28, 2005 (incorporated by reference to Exhibit 4.2 of
Form 10-Q on February 14, 2006)4.22
    
    
    Master Exchange Agreement among JANA Master Fund, Ltd., Vicis Capital Master Fund, LSP Partners, LP and
Arcadia Resources, Inc. dated March 25, 2009 (incorporated by reference to Exhibit 10.1 of Form 8-K filed on
March 31, 2009)4.23
    
    
    JANA Master Fund, Ltd. Promissory Note dated March 25, 2009 (incorporated by reference to Exhibit 10.2 of
Form 8-K filed on March 31, 2009)4.24
    
    
    Vicis Capital Master Fund Promissory Note dated March 25, 2009 (incorporated by reference to Exhibit 10.3 of
Form 8-K filed on March 31, 2009)
  54




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit4.25
    
    
    LSP Partners, LP Promissory Note dated March 25, 2009 (incorporated by reference to Exhibit 10.4 of Form 8-K
filed on March 31, 2009)4.26
    
    
    Assignment and Assumption Agreement among JANA Master Fund, Ltd., Vicis Capital Master Fund, LSP Partners, LP
and Arcadia Resources, Inc. dated March 25, 2009 (incorporated by reference to Exhibit 10.5 of Form 8-K filed
on March 31, 2009)4.27
    
    
    Form of Subscription Agreement (incorporated by reference to Exhibit 4.1 of Form 8-K filed on November 9,
2009)4.28
    
    
    Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.2 of Form 8-K filed on
November 9, 2009)4.29
    
    
    Common Stock Purchase Warrant No. 99 dated April 23, 2010 issued to H. D. Smith Wholesale Drug Co.
(incorporated by reference to Exhibit 2.5 of Form 8-K filed on April 23, 2010)4.30
    
    
    Common Stock Purchase Warrant No. 100 dated April 23, 2010 issued to H. D. Smith Wholesale Drug Co.
(incorporated by reference to Exhibit 2.5 of Form 8-K filed on April 23, 2010)9.1
    
    
    Form of Voting Agreement (incorporated by reference to Exhibit 9.1 of Form 8-K filed on May 24, 2004)10.1
    
    
    2006 Equity Incentive Plan as Amended (incorporated by reference to Appendix B to the Companys Proxy
Statement on Schedule 14A filed on September 18, 2009)10.2
    
    
    Agreement and Plan of Merger dated May 7, 2004 by and among RKDA, Inc., CHC Sub, Inc., Critical Home Care,
Inc., John E. Elliott, II, Lawrence Kuhnert and David Bensol (incorporated by reference to Exhibit 2.1 of
Form 8-K filed on May 24, 2004)10.3
    
    
    Stock Purchase Agreement dated as of May 7, 2004 by and among RKDA, Inc., Arcadia Services, Inc., Addus
Healthcare, Inc. and W. Andrew Wright (incorporated by reference to Exhibit 2.3 of Form 8-K filed on May 24,
2004)10.4
    
    
    Stock Option Agreement dated May 7, 2004, between Critical Home Care, Inc. and John E. Elliott, II
(incorporated by reference to Exhibit 10.7 of Form 8-K filed on May 24, 2004)10.5
    
    
    Stock Option Agreement dated May 7, 2004, between Critical Home Care, Inc. and Lawrence Kuhnert (incorporated
by reference to Exhibit 10.8 of Form 8-K filed on May 24, 2004)10.6
    
    
    Lease of City Center Office ParkSouth Building (incorporated by reference to Exhibit 10.38 of Form S-1/A,
Amendment No. 1, filed August 27, 2004)10.7
    
    
    Critical Home Care, Inc. Common Stock Purchase Warrant to Purchase up to 3,150,000 Shares of the Common Stock
of Critical Home Care, Inc., dated September 21, 2004 (incorporated by reference to Exhibit 10.3 of Form 8-K
filed on September 27, 2004)10.8
    
    
    Investor Rights Agreement by and among Critical Home Care, Inc. and BayStar Capital II, L.P. dated September
21, 2004 (incorporated by reference to Exhibit 10.4 of Form 8-K filed on September 27, 2004)10.9
    
    
    Asset Purchase Agreement dated August 30, 2004 by and between Arcadia Health Services, Inc., Second
Solutions, Inc., Merit Staffing Resources, Inc. and Harriette Hunter (incorporated by reference to Exhibit
99.1 of Form 8-K filed on September 2, 2004)10.10
    
    
    Agreement and Plan of Merger between Critical Home Care, Inc. and Arcadia Resources, Inc. (incorporated by
reference to Exhibit 10.1 of Form 8-K filed on November 16, 2004)10.11
    
    
    Form Stock Purchase Agreement (incorporated by reference to Exhibit 4.1 of Form 8-K filed on February 8, 2005)10.12
    
    
    Stock Option Agreement dated March 22, 2005 (incorporated by reference to Exhibit 10.2 of Form 8-K filed on
March 28, 2005)10.13
    
    
    Stock Purchase Agreement dated April 29, 2005, by and among Arcadia Health Services of Michigan, Inc., Home
Health Professionals, Inc., and the selling shareholders (incorporated by reference to Exhibit 10.1 of Form
8-K/A filed on May 2, 2005)10.14
    
    
    Form of Director Compensation Agreement (incorporated by reference to Exhibit 10.62 of Form 10-K filed on
June 29, 2006)10.15
    
    
    Form of Director Stock Option Agreement (incorporated by reference to Exhibit 10.63 of Form 10-K filed on
June 29, 2006)10.16
    
    
    Form of Stock Grant Agreement dated June 22, 2006 (incorporated by reference to Exhibit 10.64 of Form 10-K
filed on June 29, 2006)10.17
    
    
    Amended and Restated Employment Agreement dated August 12, 2009, by and between Arcadia Resources, Inc. and
Marvin Richardson (incorporated by reference to Exhibit 10.1 of Form 10-Q filed on August 13, 2009)10.18
    
    
    Amendment to the Amended and Restated Employment Agreement dated August 12, 2009, by and between Arcadia
Resources, Inc. and Marvin Richardson (filed herewith)10.19
    
    
    Limited Liability Company Ownership Interest Purchase Agreement dated January 28, 2007 by and among Arcadia
Resources, Inc., PrairieStone Pharmacy, LLC, and the selling shareholders of PrairieStone Pharmacy, LLC
(incorporated by reference to Exhibit 10.1 of Form 10-Q filed on February 14, 2007)
  55




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.20
    
    
    Registration Rights Agreement dated February 16, 2007 by and among Arcadia Resources, Inc., PrairieStone
Pharmacy, LLC, and the selling shareholders of PrairieStone Pharmacy, LLC (incorporated by reference to
Exhibit 10.70 of Form 10-K filed on June 29, 2007)10.21
    
    
    Form of Securities Purchase Agreement from December 2006 Private Placement (incorporated by reference to
Exhibit 10.1 of Form 8-K filed on January 4, 2007)10.22
    
    
    Form of Registration Rights Agreement from December 2006 Private Placement (incorporated by reference to
Exhibit 10.2 of Form 8-K filed on January 4, 2007)10.23
    
    
    Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 of the Companys
Registration Statement on Form S-8 on October 4, 2006)10.24
    
    
    Form of Stock Option Agreement (incorporated by reference to Exhibit 10.2 of the Companys Registration
Statement on Form S-8 on October 4, 2006)10.25
    
    
    Stock Purchase Agreement between Arcadia Products, Inc. and AeroCare Holdings, Inc. dated September 10, 2007
(incorporated by reference to Exhibit 10.1 of Form 8-K filed on September 14, 2007)10.26
    
    
    Amended and Restated Employment Agreement between Arcadia Resources, Inc. and Steven L. Zeller dated August
12, 2009 (incorporated by reference to Exhibit 10.3 of Form 10-Q filed on August 13, 2009)10.27
    
    
    Amendment to the Amended and Restated Employment Agreement between Arcadia Resources, Inc. and Steven L.
Zeller dated August 12, 2009 (filed herewith)10.28
    
    
    Amended and Restated Employment Agreement between Arcadia Resources, Inc. and Matthew R. Middendorf, dated
August 12, 2009 (incorporated by reference to Exhibit 10.2 of Form 10-Q filed on August 13, 2009)10.29
    
    
    Amendment to the Amended and Restated Employment Agreement between Arcadia Resources, Inc. and Matthew R.
Middendorf, dated August 12, 2009 (filed herewith)10.30
    
    
    Arcadia Resources, Inc. 2008 Executive Performance Based Compensation Plan (incorporated by reference to
Exhibit 10.1 of Form 8-K filed on July 17, 2008)10.31
    
    
    Amendment No. One to the Arcadia Resources, Inc. 2008 Executive Performance Based Compensation Plan
(incorporated by reference to Exhibit 10.2 of Form 8-K filed on July 17, 2008)10.32
    
    
    Stock Purchase Agreement between Arcadia Products, Inc. and Aerocare Holdings, Inc. dated May 16, 2009
(incorporated by reference to Exhibit 10.1 of Form 8-K filed on May 21, 2009)10.33
    
    
    Asset Purchase Agreement among Braden Partners, L.P., American Oxygen and Medical Equipment, Inc., Arcadia
Home Oxygen and Medical Equipment, Inc., Arcadia Products, Inc., RKDA, Inc. and Arcadia Resources, Inc. dated
May 19, 2009 (incorporated by reference to Exhibit 10.2 of Form 8-K filed on May 21, 2009)10.34
    
    
    Amended and Restated Credit Agreement by and among Arcadia Services, Inc., Arcadia Health Services, Inc.,
Grayrose, Inc., Arcadia Health Services of Michigan, Inc., Arcadia Employee Services, Inc. and Comerica Bank
dated July 13, 2009 ((incorporated by reference to Exhibit 10.42 of Form 10-K filed on July 14, 2009)10.35
    
    
    Comerica Revolving Credit Note dated July 13, 2009 (incorporated by reference to Exhibit 10.43 of Form 10-K
filed on July 14, 2009)10.36
    
    
    Placement Agent Agreement between Arcadia Resources, Inc. and Burnham Hill Partners dated November 6, 2009
(incorporated by reference to Exhibit 1.1 of Form 8-k filed on November 9, 2009)10.37
    
    
    Line of Credit and Security Agreement dated April 23, 2010 by and between PrairieStone Pharmacy, LLC and H.D.
Smith Wholesale Drug Co. (incorporated by reference to Exhibit 2.1 of Form 8-K filed on April 28, 2010)10.38
    
    
    Line of Credit Note dated April 23, 2010 made in favor of H. D. Smith by PrairieStone Pharmacy, LLC
(incorporated by reference to Exhibit 2.2 of Form 8-K filed on April 28, 2010)10.39
    
    
    Guaranty Agreement dated April 23, 2010 by Arcadia Resources, Inc. in favor of H. D. Smith Wholesale Drug Co.
(incorporated by reference to Exhibit 2.3 on April 28, 2010)10.40
    
    
    Pledge Agreement dated April 23, 2010 by and between Arcadia Resources, Inc., and H. D. Smith Wholesale Drug
Co. (incorporated by reference to Exhibit 2.4 of Form 8-K filed on April 28, 2010)10.41
    
    
    Placement Agent Agreement between the Company and Wilmington Capital Securities, LLC dated October 28, 2010
(incorporated by reference to Exhibit 1.1 of Form 8-k filed on October 29, 2010)10.42
    
    
    Exhibit 10.1 Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 of Form 8-k filed on
October 29, 2010)10.43
    
    
    Amendment dated October 31, 2010 to the Amended and Restated Credit Agreement by and among Arcadia Services,
Inc., Arcadia Health Services, Inc., Grayrose, Inc., Arcadia Health Services of Michigan, Inc., Arcadia
Employee Services, Inc. and Comerica Bank dated July 13, 2009 (incorporated by reference to Exhibit 10.1 of
Form 10-Q filed on November 9, 2010)10.44
    
    
    Arcadia Employee Services, Inc. and Comerica Bank dated July 13, 2009 10.2 Amendment dated October 31, 2010
to the Comerica Revolving Credit Note dated July 13, 2009 (incorporated by reference to Exhibit 10.2 of Form
10-Q filed on November 9, 2010)
  56




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ExhibitNumber
    
    
    Description of Exhibit10.45
    
    
    Employment Agreement by and between Charlie Goodall and Arcadia Resources, Inc. dated December 23, 2009
(filed herewith)10.46
    
    
    Promissory Note dated April 4, 2011 payable to BestCare Travel Staffing, LLC by Arcadia Resources, Inc.
(filed herewith)10.47
    
    
    Purchase of Assets and Termination Agreement dated as of April 1, 2011 by and among Arcadia Resources, Inc.,
BestCare Travel Staffing, LLC and Steven L. Zeller (filed herewith)14.1
    
    
    Arcadia Resources, Inc. Code of Ethics and Conduct as Amended and Restated Effective April 1, 2009
(incorporated by reference to Exhibit 14.1 of Form 10-K filed on July 14, 2009)21.1
    
    
    Subsidiaries of Arcadia Resources, Inc. (filed herewith)23.1
    
    
    Consent of Independent Registered Public Accounting Firm (filed herewith)31.1
    
    
    Section 302 CEO Certification (filed herewith)31.2
    
    
    Section 302 Principal Financial and Accounting Officer Certification (filed herewith)32.1
    
    
    Section 906 CEO Certification (filed herewith)32.2
    
    
    Section 906 Principal Financial and Accounting Officer Certification (filed herewith)
  57




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ARCADIA RESOURCES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of March 31, 2011 and 2010
    
    
    F-3Consolidated Statements of Operations for the years ended March 31, 2011, 2010 and 2009
    
    
    F-4Consolidated Statements of Stockholders Equity (Deficit) for the years ended March 31, 2011, 2010 and 2009
    
    
    F-5Consolidated Statements of Cash Flows for the years ended March 31, 2011, 2010 and 2009
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-8Schedule I  Consolidated Financial Information of Registrant
    
    
    F-35Schedule II  Valuation and Qualifying Accounts
    
    
    F-39
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
  F-2




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##### Table of Contents



(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
 March 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,136
    
    
    $
    5,444Accounts receivable, net of allowance of $1,897 and $2,614, respectively
    
    
    12,049
    
    
    
    11,960Inventories, net
    
    
    795
    
    
    
    703Prepaid expenses and other current assets
    
    
    1,455
    
    
    
    1,468Current assets of discontinued operations
    
    
    
    
    
    
    801Total current assets
    
    
    16,435
    
    
    
    20,376Property and equipment, net
    
    
    1,253
    
    
    
    1,476Goodwill
    
    
    
    
    
    
    2,500Acquired intangible assets, net
    
    
    7,098
    
    
    
    7,670Other assets
    
    
    345
    
    
    
    412Restricted cash
    
    
    1,000
    
    
    
    500Assets of discontinued operations
    
    
    
    
    
    
    262Total assets
    
    $
    26,131
    
    
    $
    33,196LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    1,226
    
    
    $
    2,826Accrued expenses:Compensation and related taxes
    
    
    2,792
    
    
    
    3,145Interest
    
    
    35
    
    
    
    82Health insurance
    
    
    756
    
    
    
    463Other
    
    
    952
    
    
    
    1,507Fair value of warrant liability
    
    
    285
    
    
    
    1,499Payable to affiliate agencies
    
    
    616
    
    
    
    1,076Long-term obligations, current portion
    
    
    189
    
    
    
    939Capital lease obligations, current portion
    
    
    25
    
    
    
    34Liabilities of discontinued operations
    
    
    
    
    
    
    409Total current liabilities
    
    
    6,876
    
    
    
    11,980Lines of credit
    
    
    11,504
    
    
    
    7,774Long-term obligations, less current portion
    
    
    27,807
    
    
    
    25,192Capital lease obligations, less current portion
    
    
    
    
    
    
    25Total liabilities
    
    
    46,187
    
    
    
    44,971Commitments and contingenciesSTOCKHOLDERS DEFICITPreferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 300,000,000 shares authorized; 193,162,544 and 177,918,044 shares issued and outstanding, respectively
    
    
    193
    
    
    
    178Additional paid-in capital
    
    
    151,436
    
    
    
    145,381Accumulated deficit
    
    
    (171,685
    )
    
    
    (157,334
    )Total stockholders deficit
    
    
    (20,056
    )
    
    
    (11,775
    )Total liabilities and stockholders deficit
    
    $
    26,131
    
    
    $
    33,196
 See accompanying notes to these consolidated financial statements.
  F-3




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##### Table of Contents



(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 Year Ended March 31,2011
    
    
    2010
    
    
    2009Services
    
    $
    83,328
    
    
    $
    86,635
    
    
    $
    97,537Pharmacy
    
    
    16,713
    
    
    
    11,449
    
    
    
    3,462Revenues, net
    
    
    100,041
    
    
    
    98,084
    
    
    
    100,999Cost of revenues
    
    
    72,636
    
    
    
    70,274
    
    
    
    70,749Gross profit
    
    
    27,405
    
    
    
    27,810
    
    
    
    30,250Selling, general and administrative
    
    
    36,403
    
    
    
    38,500
    
    
    
    38,565Depreciation and amortization
    
    
    1,380
    
    
    
    1,300
    
    
    
    1,513Goodwill and intangible asset impairment
    
    
    2,500
    
    
    
    14,599
    
    
    
    22,619Total operating expenses
    
    
    40,283
    
    
    
    54,399
    
    
    
    62,697Operating loss
    
    
    (12,878
    )
    
    
    (26,589
    )
    
    
    (32,447
    )Other expenses (income):Interest expense, net
    
    
    3,799
    
    
    
    3,371
    
    
    
    4,072Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    4,487Change in fair value of warrant liability
    
    
    (1,423
    )
    
    
    (979
    )
    
    
    Other
    
    
    
    
    
    
    30
    
    
    
    75Total other expenses
    
    
    2,376
    
    
    
    2,422
    
    
    
    8,634Loss from continuing operations before income taxes
    
    
    (15,254
    )
    
    
    (29,011
    )
    
    
    (41,081
    )Current income tax expense
    
    
    33
    
    
    
    29
    
    
    
    122Loss from continuing operations
    
    
    (15,287
    )
    
    
    (29,040
    )
    
    
    (41,203
    )Discontinued operations:Loss from discontinued operations
    
    
    (464
    )
    
    
    (2,603
    )
    
    
    (4,009
    )Net gain (loss) on disposal
    
    
    1,400
    
    
    
    557
    
    
    
    (1,258
    )936
    
    
    
    (2,046
    )
    
    
    (5,267
    )NET LOSS
    
    $
    (14,351
    )
    
    $
    (31,086
    )
    
    $
    (46,470
    )Weighted average number of common shares outstanding
    
    
    185,796
    
    
    
    166,840
    
    
    
    134,583Basic and diluted net loss per share:Loss from continuing operations
    
    $
    (0.08
    )
    
    $
    (0.17
    )
    
    $
    (0.31
    )Loss from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    (0.04
    )Net loss per share
    
    $
    (0.08
    )
    
    $
    (0.19
    )
    
    $
    (0.35
    )
 See accompanying notes to these consolidated financial statements.
  F-4




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##### Table of Contents



(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Equity (Deficit)Balance, April 1, 2008
    
    
    133,113,440
    
    
    
    133
    
    
    
    129,442
    
    
    
    (79,778
    )
    
    
    49,797Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    248
    
    
    
    
    
    
    
    248Stock-based compensation expense
    
    
    1,159,694
    
    
    
    1
    
    
    
    1,653
    
    
    
    
    
    
    
    1,654Contingent consideration relating to prior year acquisitions
    
    
    3,316,893
    
    
    
    3
    
    
    
    692
    
    
    
    
    
    
    
    695Cashless exercise of warrants
    
    
    8,545,833
    
    
    
    9
    
    
    
    (9
    )
    
    
    
    
    
    
    Equity issued in conjunction with debt refinancing
    
    
    15,113,669
    
    
    
    15
    
    
    
    3,894
    
    
    
    
    
    
    
    3,909Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,470
    )
    
    
    (46,470
    )Balance, March 31, 2009
    
    
    161,249,529
    
    
    
    161
    
    
    
    135,920
    
    
    
    (126,248
    )
    
    
    9,833Sale of common stock and warrants, net of $902 in fees
    
    
    15,857,141
    
    
    
    16
    
    
    
    7,704
    
    
    
    
    
    
    
    7,720Stock-based compensation expense
    
    
    323,125
    
    
    
    
    
    
    
    1,758
    
    
    
    
    
    
    
    1,758Cashless exercise of warrants
    
    
    488,249
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,086
    )
    
    
    (31,086
    )Balance, March 31, 2010
    
    
    177,918,044
    
    
    
    178
    
    
    
    145,381
    
    
    
    (157,334
    )
    
    
    (11,775
    )Sale of common stock, net of $564 in fees
    
    
    15,606,250
    
    
    
    16
    
    
    
    4,414
    
    
    
    
    
    
    
    4,430Stock-based compensation expense
    
    
    227,500
    
    
    
    
    
    
    
    1,315
    
    
    
    
    
    
    
    1,315Issuance and reclassification of warrants in conjunction with debt financing
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    
    
    
    
    323Cancellation of shares held in escrow
    
    
    (600,000
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    10,750
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,351
    )
    
    
    (14,351
    )Balance, March 31, 2011
    
    
    193,162,544
    
    
    $
    193
    
    
    $
    151,436
    
    
    $
    (171,685
    )
    
    $
    (20,056
    )
 See
accompanying notes to these consolidated financial statements.
  F-5




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##### Table of Contents



(IN THOUSANDS)
 Year Ended March 31,2011
    
    
    2010
    
    
    2009Operating activitiesNet loss for the year
    
    $
    (14,351
    )
    
    $
    (31,086
    )
    
    $
    (46,470
    )Adjustments
to reconcile net loss to net cash provided by (used in) operating activities:Provision for doubtful accounts
    
    
    676
    
    
    
    1,736
    
    
    
    4,433Depreciation and amortization of property and equipment
    
    
    894
    
    
    
    1,507
    
    
    
    4,505Amortization of intangible assets
    
    
    571
    
    
    
    722
    
    
    
    1,850Goodwill and intangible asset impairment
    
    
    2,500
    
    
    
    14,599
    
    
    
    26,455Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    4,487Non-cash interest expense
    
    
    2,892
    
    
    
    2,397
    
    
    
    2,215(Gain) loss on business disposals
    
    
    (1,400
    )
    
    
    (557
    )
    
    
    1,258Loss on disposal of property and equipment
    
    
    
    
    
    
    
    
    
    
    75Amortization and write off of debt discount and deferred financing costs
    
    
    391
    
    
    
    332
    
    
    
    972Change in fair value of warrant liability
    
    
    (1,423
    )
    
    
    (979
    )
    
    
    Stock-based compensation expense
    
    
    1,315
    
    
    
    1,758
    
    
    
    1,654Changes in operating assets and liabilities, net of business acquisitions:Accounts receivable
    
    
    (360
    )
    
    
    3,895
    
    
    
    (856
    )Inventories
    
    
    124
    
    
    
    546
    
    
    
    (1,652
    )Other assets
    
    
    125
    
    
    
    558
    
    
    
    515Accounts payable
    
    
    (1,997
    )
    
    
    (596
    )
    
    
    1,278Accrued expenses
    
    
    (733
    )
    
    
    (694
    )
    
    
    7Due to affiliated agencies
    
    
    (416
    )
    
    
    (19
    )
    
    
    81Deferred revenue
    
    
    
    
    
    
    
    
    
    
    (29
    )Net cash provided by (used in) operating activities
    
    
    (11,192
    )
    
    
    (5,881
    )
    
    
    778Investing activitiesBusiness acquisitions, net of cash acquired
    
    
    (164
    )
    
    
    (281
    )
    
    
    (675
    )Proceeds from business disposals
    
    
    1,532
    
    
    
    9,498
    
    
    
    670Increase in restricted cash
    
    
    (500
    )
    
    
    (500
    )
    
    
    Purchases of property and equipment
    
    
    (471
    )
    
    
    (574
    )
    
    
    (1,281
    )Net cash provided by (used in) investing activities
    
    
    397
    
    
    
    8,143
    
    
    
    (1,286
    )Financing activitiesProceeds from notes payables, net of fees
    
    
    
    
    
    
    2,142
    
    
    
    2,800Proceeds from exercise of stock options
    
    
    2
    
    
    
    
    
    
    
    Net borrowings (payments) on lines of credit
    
    
    3,868
    
    
    
    (3,550
    )
    
    
    (6,416
    )Payments on notes payable and capital lease obligations
    
    
    (813
    )
    
    
    (7,175
    )
    
    
    (705
    )Proceeds
from equity financing, net cash fees of $564 in fiscal 2011 and $857 in fiscal 2010
    
    
    4,430
    
    
    
    10,243
    
    
    
    Net cash provided by (used in) financing activities
    
    
    7,487
    
    
    
    1,660
    
    
    
    (4,321
    )Net change in cash and cash equivalents
    
    
    (3,308
    )
    
    
    3,922
    
    
    
    (4,829
    )Cash and cash equivalents, beginning of year
    
    
    5,444
    
    
    
    1,522
    
    
    
    6,351Cash and cash equivalents, end of year
    
    $
    2,136
    
    
    $
    5,444
    
    
    $
    1,522
  F-6




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##### Table of Contents



Year Ended March 31,2011
    
    
    2010
    
    
    2009Supplementary information:Cash paid during the period for:Interest
    
    $
    527
    
    
    $
    623
    
    
    $
    904Income taxes
    
    
    33
    
    
    
    35
    
    
    
    49Non-cash investing / financing activities:Accounts payable converted to notes payable
    
    
    
    
    
    
    750
    
    
    
    Line of credit converted to note payable in conjunction with refinancing
    
    
    
    
    
    
    
    
    
    
    5,000Accrued interest converted to debt
    
    
    2,892
    
    
    
    2,397
    
    
    
    2,215Non-cash equity financing fee
    
    
    
    
    
    
    45
    
    
    
    Contingent consideration relating to prior year acquisition settled with issuance of common stock
    
    
    
    
    
    
    
    
    
    
    695Financing of equipment with notes payable / capital lease obligations
    
    
    
    
    
    
    70
    
    
    
    Equity issued in conjunction with debt financing
    
    
    
    
    
    
    
    
    
    
    3,909
 See accompanying notes to these consolidated financial statements.
  F-7




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##### Table of Contents



Note 1  Description of Company and Significant Accounting Policies
 Description of Company
   Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  Affiliated Agencies
   F-8




---



##### Table of Contents



Allowance for Doubtful Accounts
   Inventories
  Property and Equipment
   Equipment
    
    5 yearsSoftware
    
    3 yearsFurniture and fixtures
    
    5 yearsVehicles
    
    5 yearsLeasehold improvements
    
    Lesser of life of lease or expected useful life
 Goodwill
      F-9




---



##### Table of Contents



Intangible Assets
  Trade name
    
    30 yearsCustomer relationships (depending on the type of business purchased)
    
    5 to 15 years
 Impairment of Long-Lived Assets
  Deferred Financing Costs
  Income Taxes
  Revenue Recognition and Concentration of Credit Risk
   F-10




---



##### Table of Contents



Earnings (Loss) Per Share
  Fair Value of Financial Instruments
  Advertising Expense
  Reclassifications
  Recent Accounting Pronouncements
    F-11




---



##### Table of Contents



Note 2  Managements Plan
 TM
     F-12




---



##### Table of Contents



Note 3  Discontinued Operations
 Services Segment
   Pharmacy Segment
   HHE Segment
      F-13




---



##### Table of Contents



Catalog Segment
     Pharmacy
    
    
    Catalog
    
    
    TotalAssetsAccounts receivable, net
    
    $
    330
    
    
    $
    76
    
    
    $
    406Inventories, net
    
    
    214
    
    
    
    17
    
    
    
    231Prepaid expenses and other current assets
    
    
    83
    
    
    
    81
    
    
    
    164Total current assets of discontinued operations
    
    
    627
    
    
    
    174
    
    
    
    801Property and equipment, net
    
    
    262
    
    
    
    
    
    
    
    262Total non-current assets of discontinued operations
    
    
    262
    
    
    
    
    
    
    
    262Total assets of discontinued operations
    
    $
    889
    
    
    $
    174
    
    
    $
    1,063LiabilitiesAccounts payable
    
    $
    27
    
    
    $
    300
    
    
    $
    327Accrued compensation and related taxes
    
    
    39
    
    
    
    8
    
    
    
    47Capital lease obligations, current portion
    
    
    35
    
    
    
    
    
    
    
    35Total current liabilities of discontinued operations
    
    $
    101
    
    
    $
    308
    
    
    $
    409
  F-14




---



##### Table of Contents



Year Ended March 31, 2011Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net:
    
    $
    
    
    
    $
    3,194
    
    
    $
    
    
    
    $
    660
    
    
    $
    3,854Cost of revenue
    
    
    
    
    
    
    2,541
    
    
    
    
    
    
    
    397
    
    
    
    2,938Gross profit
    
    
    
    
    
    
    653
    
    
    
    
    
    
    
    263
    
    
    
    916Selling, general and administrative
    
    
    
    
    
    
    923
    
    
    
    
    
    
    
    372
    
    
    
    1,295Depreciation and amortization
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Total operating expenses
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    372
    
    
    
    1,380Loss from operations
    
    
    
    
    
    
    (355
    )
    
    
    
    
    
    
    (109
    )
    
    
    (464
    )Net gain (loss) on disposal
    
    
    686
    
    
    
    127
    
    
    
    655
    
    
    
    (68
    )
    
    
    1,400Earnings (loss) from discontinued operations
    
    $
    686
    
    
    $
    (228
    )
    
    $
    655
    
    
    $
    (177
    )
    
    $
    936
 Year Ended March 31, 2010Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net
    
    $
    1,223
    
    
    $
    4,054
    
    
    $
    1,423
    
    
    $
    1,813
    
    
    $
    8,513Cost of revenue
    
    
    979
    
    
    
    3,078
    
    
    
    511
    
    
    
    1,095
    
    
    
    5,663Gross profit
    
    
    244
    
    
    
    976
    
    
    
    912
    
    
    
    718
    
    
    
    2,850Selling, general and administrative
    
    
    290
    
    
    
    1,426
    
    
    
    2,251
    
    
    
    795
    
    
    
    4,762Depreciation and amortization
    
    
    3
    
    
    
    600
    
    
    
    88
    
    
    
    
    
    
    
    691Total operating expenses
    
    
    293
    
    
    
    2,026
    
    
    
    2,339
    
    
    
    795
    
    
    
    5,453Loss from operations
    
    
    (49
    )
    
    
    (1,050
    )
    
    
    (1,427
    )
    
    
    (77
    )
    
    
    (2,603
    )Net gain (loss) on disposal
    
    
    201
    
    
    
    (30
    )
    
    
    386
    
    
    
    
    
    
    
    557Earnings (loss) from discontinued operations
    
    $
    152
    
    
    $
    (1,080
    )
    
    $
    (1,041
    )
    
    $
    (77
    )
    
    $
    (2,046
    )
  F-15




---



##### Table of Contents



Year Ended March 31, 2009Home HealthServices
    
    
    Pharmacy
    
    
    Equipment
    
    
    Catalog
    
    
    TotalRevenues, net
    
    $
    15,842
    
    
    $
    4,690
    
    
    $
    17,643
    
    
    $
    2,576
    
    
    $
    40,751Cost of revenue
    
    
    12,675
    
    
    
    2,463
    
    
    
    5,266
    
    
    
    1,594
    
    
    
    21,998Gross profit
    
    
    3,167
    
    
    
    2,227
    
    
    
    12,377
    
    
    
    982
    
    
    
    18,753Selling, general and administrative
    
    
    2,155
    
    
    
    2,436
    
    
    
    11,158
    
    
    
    1,130
    
    
    
    16,879Depreciation and amortization
    
    
    277
    
    
    
    686
    
    
    
    1,031
    
    
    
    53
    
    
    
    2,047Goodwill and intangible asset impairment
    
    
    2,403
    
    
    
    
    
    
    
    541
    
    
    
    892
    
    
    
    3,836Total operating expenses
    
    
    4,835
    
    
    
    3,122
    
    
    
    12,730
    
    
    
    2,075
    
    
    
    22,762Loss from operations
    
    
    (1,668
    )
    
    
    (895
    )
    
    
    (353
    )
    
    
    (1,093
    )
    
    
    (4,009
    )Net loss on disposal
    
    
    
    
    
    
    
    
    
    
    (1,258
    )
    
    
    
    
    
    
    (1,258
    )Loss from discontinued operations
    
    $
    (1,668
    )
    
    $
    (895
    )
    
    $
    (1,611
    )
    
    $
    (1,093
    )
    
    $
    (5,267
    )
 Note 4  Business Acquisitions
 Fiscal 2011
  Fiscal 2010
  Fiscal 2009
   F-16




---



##### Table of Contents



Note 5  Fair Value
   Fair ValueMeasurementsUsing SignificantUnobservableInputs (Level 3)Warrant LiabilityBalance at April 1, 2009
    
    $
    Warrants issued
    
    
    2,478Decrease in market value
    
    
    (979
    )Balance at March 31, 2010
    
    
    1,499Warrants issued
    
    
    273Reclassification to permanent equity
    
    
    (35
    )Decrease in market value
    
    
    (1,452
    )Balance at March 31, 2011
    
    $
    285
   F-17




---



##### Table of Contents



Note 6  Property and Equipment
  2011
    
    
    2010Accumulated
    
    
    
    
    
    
    AccumulatedDepreciation/
    
    
    
    
    
    
    Depreciation/Cost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationEquipment
    
    $
    1,737
    
    
    $
    1,086
    
    
    $
    1,484
    
    
    $
    827Software
    
    
    2,196
    
    
    
    1,848
    
    
    
    1,947
    
    
    
    1,357Vehicles
    
    
    49
    
    
    
    39
    
    
    
    49
    
    
    
    33Furniture and fixtures
    
    
    915
    
    
    
    725
    
    
    
    834
    
    
    
    648Leasehold improvements
    
    
    94
    
    
    
    40
    
    
    
    55
    
    
    
    284,991
    
    
    $
    3,738
    
    
    
    4,369
    
    
    $
    2,893Less accumulated depreciation and amortization
    
    
    (3,738
    )
    
    
    
    
    
    
    (2,893
    )Net property and equipment
    
    $
    1,253
    
    
    
    
    
    
    $
    1,476
  Note 7  Goodwill and Acquired Intangible Assets
  Services
    
    
    Pharmacy
    
    
    TotalGoodwill at April 1, 2008
    
    $
    13,996
    
    
    $
    15,717
    
    
    $
    29,713Acquisitions during the year
    
    
    557
    
    
    
    
    
    
    
    557Impairment expense
    
    
    
    
    
    
    (13,217
    )
    
    
    (13,217
    )Goodwill at March 31, 2009
    
    
    14,553
    
    
    
    2,500
    
    
    
    17,053Acquisitions during the year
    
    
    46
    
    
    
    
    
    
    
    46Impairment expense
    
    
    (14,599
    )
    
    
    
    
    
    
    (14,599
    )Goodwill at March 31, 2010
    
    
    
    
    
    
    2,500
    
    
    
    2,500Impairment expense
    
    
    
    
    
    
    (2,500
    )
    
    
    (2,500
    )Goodwill at March 31, 2011
    
    $
    
    
    
    $
    
    
    
    $
    
   F-18




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##### Table of Contents



2011
    
    
    2010Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationTrade name
    
    $
    6,664
    
    
    $
    1,016
    
    
    $
    6,664
    
    
    $
    847Customer relationships
    
    
    4,720
    
    
    
    3,270
    
    
    
    4,720
    
    
    
    2,86711,384
    
    
    $
    4,286
    
    
    
    11,384
    
    
    $
    3,714Less accumulated
amortization
    
    
    (4,286
    )
    
    
    
    
    
    
    (3,714
    )Net acquired
intangible assets
    
    $
    7,098
    
    
    
    
    
    
    $
    7,670
   Fiscal 2012
    
    $
    518Fiscal 2013
    
    
    476Fiscal 2014
    
    
    382Fiscal 2015
    
    
    350Fiscal 2016
    
    
    329Thereafter
    
    
    5,043Total
    
    $
    7,098
 Impairment Expense
  2011
    
    
    2010
    
    
    2009Services:Goodwill
    
    $
    
    
    
    $
    14,599
    
    
    $
    
    
    
    
    14,599
    
    
    
    Pharmacy:Goodwill
    
    
    2,500
    
    
    
    
    
    
    
    13,217Intangible assets
    
    
    
    
    
    
    
    
    
    
    9,4022,500
    
    
    
    
    
    
    
    22,619Total
    
    $
    2,500
    
    
    $
    14,599
    
    
    $
    22,619
  F-19




---



##### Table of Contents



Fiscal 2011
  Fiscal 2010
   Fiscal 2009
    F-20




---



##### Table of Contents



Note 8  Lines of Credit
  At March 31, 2011MaximumAvailable
    
    
    
    
    
    
    March 31,Lending Institution
    
    Maturity date
    
    
    Borrowing
    
    
    Balance
    
    
    2010
    
    
    Interest rateComerica Bank
    
    April 1, 2012
    
    $
    9,163
    
    
    $
    7,130
    
    
    $
    7,774
    
    
    Prime plus 2.75
    %H.D. Smith
    
    April 23, 2013
    
    
    4,777
    
    
    
    4,777
    
    
    
    
    
    
    
    7
    %Total lines of credit obligations
    
    
    
    
    
    $
    13,940
    
    
    
    11,907
    
    
    
    7,774H.D. Smith unamortized debt discount
    
    
    
    
    
    
    
    
    
    
    (403
    )
    
    
    $
    11,504
    
    
    $
    7,774
 Comerica Bank
     F-21




---



##### Table of Contents



H.D. Smith Wholesale Drug Co.
    F-22




---



##### Table of Contents



Note 9  Long-Term Obligations
  2011
    
    
    2010Note payable to JANA Master Fund, Ltd.
(JANA) in the original amount of $18.0 million,
dated March 25, 2009 bearing an effective interest
rate of 10% with unpaid accrued interest and
principal due in full on April 1, 2012. Cash
interest that would otherwise be payable on such
quarterly interest payment dates may be added to
the principal balance of the note payable at the
Companys option. The note payable is unsecured.
    
    $
    19,406
    
    
    $
    17,581Note payable to Vicis Capital Master Fund (Vicis)
in the original amount of $7.8 million, dated March
25, 2009 bearing an effective interest rate of 10%
with unpaid accrued interest and principal due in
full on April 1, 2012. Cash interest that would
otherwise be payable on such quarterly interest
payment dates may be added to the principal balance
of the note payable at the Companys option. The
note payable is unsecured.
    
    
    7,181
    
    
    
    6,505Note payable to LSP Partners, LP (LSP) in the
amount of $1.0 million, dated March 25, 2009
bearing an effective interest rate of 10% with
unpaid accrued interest and principal due in full
on April 1, 2012. Cash interest that would
otherwise be payable on such quarterly interest
payment dates may be added to the principal balance
of the note payable at the Companys option. The
note payable is unsecured.
    
    
    1,220
    
    
    
    1,106Payable due to AmerisourceBergen Drug Corporation
bearing an effective interest rate of 8.0%. The
unpaid accrued interest and principal was paid in
full in April 2010. The debt was secured.
    
    
    
    
    
    
    750Other
    
    
    189
    
    
    
    189Total long-term obligations
    
    
    27,996
    
    
    
    26,131Less current portion of long-term obligations
    
    
    (189
    )
    
    
    (939
    )Long-term obligations, less current portion
    
    $
    27,807
    
    
    $
    25,192
    F-23




---



##### Table of Contents



Fiscal 2012
    
    $
    189Fiscal 2013
    
    
    27,807Total
    
    $
    27,996
  Note 10  Stockholders Deficit
 General
  Escrow Shares
  Common Stock Transactions  Fiscal 2011
  Common Stock Transactions  Fiscal 2010
   Common Stock Transactions  Fiscal 2009
    F-24




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##### Table of Contents



Warrants
  Exercise Price
    
    
    Granted
    
    Expiration
    
    2011
    
    
    2010$
    0.13
    
    
    March 2011
    
    March 2016
    
    
    500,000
    
    
    
    $
    0.40
    
    
    April 2010
    
    April 2015
    
    
    500,000
    
    
    
    $
    0.41
    
    
    April 2009
    
    April 2014
    
    
    52,800
    
    
    
    52,800$
    0.50
    
    
    various
    
    May 2011
    
    
    2,301,774
    
    
    
    2,301,774$
    0.50
    
    
    May 2004
    
    March 2014
    
    
    1,070,796
    
    
    
    1,070,796$
    0.75
    
    
    June 2008
    
    June 2015
    
    
    490,000
    
    
    
    490,000$
    0.95
    
    
    November 2009
    
    May 2015
    
    
    7,135,713
    
    
    
    7,135,713$
    2.25
    
    
    September 2005
    
    September 2010
    
    
    
    
    
    
    44,44412,051,083
    
    
    
    11,095,527
  
   F-25




---



##### Table of Contents



Weighted-average
    
    March 31, 2011
    
    
    March 31, 2010
    
    
    November 17, 2009Expected volatility
    
    
    99
    %
    
    
    84
    %
    
    
    86
    %Expected dividend yields
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    4.1
    
    
    
    5.1
    
    
    
    5.5Risk-free interest rate
    
    
    1.80
    %
    
    
    2.69
    %
    
    
    2.19
    %
          F-26




---



##### Table of Contents



Note 11  Commitments and Contingencies
 Lease Commitments
   Capital
    
    
    OperatingLeases
    
    
    LeasesYear ending March 31:2012
    
    $
    27
    
    
    $
    9762013
    
    
    
    
    
    
    8402014
    
    
    
    
    
    
    7002015
    
    
    
    
    
    
    4412016
    
    
    
    
    
    
    335Thereafter
    
    
    
    
    
    
    519Total minimum lease payments
    
    
    27
    
    
    $
    3,811Less amount representing interest
    
    
    (2
    )Total principal payments
    
    $
    25
 Contingencies
   Note 12  Stock-Based Compensation
   F-27




---



##### Table of Contents



Weighted-average
    
    2011
    
    
    2010
    
    
    2009Expected volatility
    
    
    84
    %
    
    
    92
    %
    
    
    77
    %Expected dividend yields
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    6.86
    
    
    
    4.38
    
    
    
    4.65Risk-free interest rate
    
    
    1.83
    %
    
    
    1.81
    %
    
    
    2.67
    %
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term (Years)
    
    
    (thousands)Outstanding at April 1, 2009
    
    
    3,771,225
    
    
    $
    0.76Granted
    
    
    4,961,572
    
    
    
    0.60Exercised
    
    
    (396,613
    )
    
    
    1.03Outstanding at March 31, 2010
    
    
    8,336,184
    
    
    
    0.65Granted
    
    
    1,097,465
    
    
    
    0.37Exercised
    
    
    (10,750
    )
    
    
    0.25Forfeited or expired
    
    
    (496,062
    )
    
    
    0.89Outstanding at March 31, 2011
    
    
    8,926,837
    
    
    $
    0.60
    
    
    
    5.0
    
    
    $
    Exercisable at March 31, 2011
    
    
    8,263,792
    
    
    $
    0.62
    
    
    
    4.9
    
    
    $
    
   F-28




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.18  $0.42
    
    
    4,251,109
    
    
    
    5.6
    
    
    $
    0.38
    
    
    
    3,595,876
    
    
    $
    0.38$0.43  $0.72
    
    
    3,550,501
    
    
    
    4.4
    
    
    $
    0.72
    
    
    
    3,548,939
    
    
    $
    0.72$0.73  $1.07
    
    
    756,647
    
    
    
    4.7
    
    
    $
    0.79
    
    
    
    750,397
    
    
    $
    0.79$1.08  $1.50
    
    
    250,967
    
    
    
    3.1
    
    
    $
    1.25
    
    
    
    250,967
    
    
    $
    1.25$1.51  $2.25
    
    
    43,000
    
    
    
    2.1
    
    
    $
    2.22
    
    
    
    43,000
    
    
    $
    2.22$2.92
    
    
    74,613
    
    
    
    2.3
    
    
    $
    2.92
    
    
    
    74,613
    
    
    $
    2.92Outstanding at March 31, 2011
    
    
    8,926,837
    
    
    
    
    
    
    $
    0.60
    
    
    
    8,263,792
    
    
    $
    0.62
    Restricted Stock
   Weighted-AverageGrant DateFair ValueShares
    
    
    per ShareUnvested at April 1, 2009
    
    
    476,092
    
    
    $
    1.45Granted
    
    
    100,000
    
    
    
    0.52Vested
    
    
    (233,125
    )
    
    
    1.67Forfeited
    
    
    (10,000
    )
    
    
    1.48Unvested at March 31, 2010
    
    
    332,967
    
    
    
    1.45Vested
    
    
    (187,500
    )
    
    
    1.42Unvested at March 31, 2011
    
    
    145,467
    
    
    $
    0.66
   F-29




---



##### Table of Contents



Note 13  Income Taxes
   2011
    
    
    2010
    
    
    2009Income tax benefit at 34%
    
    
    -34.0
    %
    
    
    -34.0
    %
    
    
    -34.0
    %State and local income taxes
    
    
    -5.0
    %
    
    
    -3.3
    %
    
    
    -2.6
    %Goodwill amortization/impairment
    
    
    0.0
    %
    
    
    9.1
    %
    
    
    1.1
    %Permanent deductions not recorded on books
    
    
    -3.6
    %
    
    
    -0.8
    %
    
    
    0.1
    %Other
    
    
    1.8
    %
    
    
    0.4
    %
    
    
    7.5
    %Change in valuation allowance
    
    
    40.8
    %
    
    
    28.7
    %
    
    
    28.2
    %Effective tax rate
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.3
    %
  2011
    
    
    2010Net operating losses
    
    $
    28,216
    
    
    $
    28,477Allowance for doubtful accounts
    
    
    730
    
    
    
    1,096Depreciation and amortization
    
    
    5,299
    
    
    
    4,659Other temporary differences
    
    
    2,679
    
    
    
    2,644Total
    
    
    36,924
    
    
    
    36,876Valuation allowance
    
    
    (36,924
    )
    
    
    (36,876
    )Net deferred income taxes
    
    $
    
    
    
    $
    
  September 30, 2022
    
    $
    58September 30, 2023
    
    
    1,066September 30, 2024
    
    
    114March 31, 2025
    
    
    1,944March 31, 2026
    
    
    2,080March 31, 2027
    
    
    8,946March 31, 2028
    
    
    18,868March 31, 2029
    
    
    13,553March 31, 2030
    
    
    16,554March 31, 2031
    
    
    15,203$
    78,386
  F-30




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes Income Taxes
  Note 14  Employee Benefit Plans
  Note 15  Related Party Transactions
    F-31




---



##### Table of Contents



Note 16  Segment Information
      F-32




---



##### Table of Contents



Year Ended March 31,2011
    
    
    2010
    
    
    2009Revenue, net:Services
    
    $
    83,328
    
    
    $
    86,635
    
    
    $
    97,537Pharmacy
    
    
    16,713
    
    
    
    11,449
    
    
    
    3,462Total revenue
    
    $
    100,041
    
    
    $
    98,084
    
    
    $
    100,999Operating income (loss):Services
    
    $
    4,286
    
    
    $
    (10,973
    )
    
    $
    3,583Pharmacy
    
    
    (8,370
    )
    
    
    (5,765
    )
    
    
    (26,019
    )Unallocated corporate overhead
    
    
    (8,794
    )
    
    
    (9,851
    )
    
    
    (10,011
    )Total operating loss
    
    
    (12,878
    )
    
    
    (26,589
    )
    
    
    (32,447
    )Other income (expenses):Interest expense, net
    
    
    3,799
    
    
    
    3,371
    
    
    
    4,072Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    4,487Change in fair value of warrant liability
    
    
    (1,423
    )
    
    
    (979
    )
    
    
    Other
    
    
    
    
    
    
    30
    
    
    
    75Net loss before income tax expense
    
    
    (15,254
    )
    
    
    (29,011
    )
    
    
    (41,081
    )Income tax expense
    
    
    33
    
    
    
    29
    
    
    
    122Net loss from continuing operations
    
    $
    (15,287
    )
    
    $
    (29,040
    )
    
    $
    (41,203
    )Depreciation and amortization:Services
    
    $
    657
    
    
    $
    758
    
    
    $
    859Pharmacy
    
    
    209
    
    
    
    118
    
    
    
    280Corporate
    
    
    514
    
    
    
    424
    
    
    
    374Total depreciation and amortization
    
    $
    1,380
    
    
    $
    1,300
    
    
    $
    1,513Goodwill and intangible asset impairment:Services
    
    $
    
    
    
    $
    14,599
    
    
    $
    Pharmacy
    
    
    2,500
    
    
    
    
    
    
    
    22,619Total goodwill and intangible asset
impairment
    
    $
    2,500
    
    
    $
    14,599
    
    
    $
    22,619Capital expenditures:Services
    
    $
    58
    
    
    $
    63
    
    
    $
    75Pharmacy
    
    
    288
    
    
    
    457
    
    
    
    850Corporate
    
    
    125
    
    
    
    54
    
    
    
    150Total capital expenditures
    
    $
    471
    
    
    $
    574
    
    
    $
    1,075
 March 31,2011
    
    
    2010Assets:Services
    
    $
    21,164
    
    
    $
    25,007Pharmacy
    
    
    4,177
    
    
    
    4,990Unallocated corporate assets
    
    
    790
    
    
    
    2,136Assets of discontinued operations
    
    
    
    
    
    
    1,063Total assets
    
    $
    26,131
    
    
    $
    33,196
  F-33




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##### Table of Contents



Note 17  Quarterly Results


(Unaudited)
  Quarter EndedJune 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,2010
    
    
    2010
    
    
    2010
    
    
    2011Revenues, net
    
    $
    24,406
    
    
    $
    24,848
    
    
    $
    25,359
    
    
    $
    25,428Gross profit
    
    
    6,592
    
    
    
    6,844
    
    
    
    7,031
    
    
    
    6,938Loss from continuing operations
    
    
    (4,731
    )
    
    
    (3,070
    )
    
    
    (2,454
    )
    
    
    (5,032
    )Income (loss) from discontinued operations
    
    
    691
    
    
    
    176
    
    
    
    135
    
    
    
    (66
    )Net loss
    
    
    (4,040
    )
    
    
    (2,894
    )
    
    
    (2,319
    )
    
    
    (5,098
    )Basic and diluted net loss per share:(1) Loss from continuing operations
    
    
    (0.03
    )
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    (0.03
    )(1) Loss from discontinued operations
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
 Quarter EndedJune 30,
    
    
    September 30,
    
    
    December 31,
    
    
    March 31,2009
    
    
    2009
    
    
    2009
    
    
    2010Revenues, net
    
    $
    24,930
    
    
    $
    24,227
    
    
    $
    24,784
    
    
    $
    24,143Gross profit
    
    
    7,152
    
    
    
    6,988
    
    
    
    7,082
    
    
    
    6,588Loss from continuing operations
    
    
    (3,304
    )
    
    
    (3,775
    )
    
    
    (2,840
    )
    
    
    (19,121
    )Income (loss) from discontinued operations
    
    
    (1,269
    )
    
    
    (371
    )
    
    
    (313
    )
    
    
    (93
    )Net loss
    
    
    (4,573
    )
    
    
    (4,146
    )
    
    
    (3,153
    )
    
    
    (19,214
    )Basic and diluted net loss per share:(1) Loss from continuing operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.12
    )(1) Income (loss) from discontinued
operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    
    
    
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.12
    )
 (1)
    
    Because of the method used in calculating per share data, the quarterly per share data
may not necessarily total to the per share data as computed for the entire year.  
    
    Total goodwill impairment expense recognized in the fiscal fourth quarter 2011 of
$2,500,000.
  
    
    Total goodwill impairment expense recognized in the fiscal fourth quarter 2010 of
$14,599,000.
  F-34




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##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 
  (In Thousands)
 March 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    300Prepaid expenses and other current assets
    
    
    472
    
    
    
    574Total current assets
    
    
    472
    
    
    
    874Property and equipment, net
    
    
    207
    
    
    
    596Other assets
    
    
    204
    
    
    
    412Investment in subsidiaries
    
    
    8,627
    
    
    
    15,367Total assets
    
    $
    9,510
    
    
    $
    17,249LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable
    
    $
    619
    
    
    $
    1,099Accrued expenses
    
    
    855
    
    
    
    1,234Fair value of warrant liability
    
    
    285
    
    
    
    1,499Total current liabilities
    
    
    1,759
    
    
    
    3,832Long-term obligations
    
    
    27,807
    
    
    
    25,192Total liabilities
    
    
    29,566
    
    
    
    29,024STOCKHOLDERS DEFICITTotal stockholders deficit
    
    
    (20,056
    )
    
    
    (11,775
    )Total liabilities and stockholders deficit
    
    $
    9,510
    
    
    $
    17,249
 See accompanying note to these financial statements.
  F-35




---



##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 (In Thousands)
 Year Ended March 31,2011
    
    
    2010
    
    
    2009Loss from operations
    
    $
    (8,793
    )
    
    $
    (9,852
    )
    
    $
    (10,011
    )Interest expense
    
    
    2,819
    
    
    
    2,760
    
    
    
    3,146Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    4,239Change in fair value of warrant liability
    
    
    (1,423
    )
    
    
    (979
    )
    
    
    Loss before equity in consolidated subsidiaries
    
    
    (10,189
    )
    
    
    (11,633
    )
    
    
    (17,396
    )Equity in consolidated subsidiaries
    
    
    (4,162
    )
    
    
    (19,453
    )
    
    
    (29,074
    )NET LOSS
    
    $
    (14,351
    )
    
    $
    (31,086
    )
    
    $
    (46,470
    )
 See accompanying note to these financial statements.
  F-36




---



##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 (In Thousands)
 Year Ended March 31,2011
    
    
    2010
    
    
    2009Operating activitiesNet cash used in operating activities
    
    $
    (4,604
    )
    
    $
    (6,529
    )
    
    $
    (6,039
    )Investing activitiesPurchases of property and equipment
    
    
    (126
    )
    
    
    (54
    )
    
    
    (440
    )Net cash used in investing activities
    
    
    (126
    )
    
    
    (54
    )
    
    
    (440
    )Financing activitiesProceeds from the issuance of notes payable / line of
credit, net of fees
    
    
    
    
    
    
    2,142
    
    
    
    2,800Payments on notes payable
    
    
    
    
    
    
    (6,524
    )
    
    
    Proceeds from the issuance of common stock, net of fees
    
    
    4,430
    
    
    
    10,243
    
    
    
    Net cash provided by financing activities
    
    
    4,430
    
    
    
    5,861
    
    
    
    2,800Net change in cash and cash equivalents
    
    
    (300
    )
    
    
    (722
    )
    
    
    (3,679
    )Cash and cash equivalents, beginning of year
    
    
    300
    
    
    
    1,022
    
    
    
    4,701Cash and cash equivalents, end of year
    
    $
    
    
    
    $
    300
    
    
    $
    1,022
 See accompanying note to these financial statements.
  F-37




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##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
   F-38




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##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 
   Balance at
    
    
    Charged to
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    
    
    
    
    
    
    
    
    Endof Period
    
    
    Expenses
    
    
    Recoveries
    
    
    Deductions
    
    
    of Period2011
    
    $
    2,614
    
    
    $
    610
    
    
    
    470
    
    
    
    (1,797
    )
    
    $
    1,8972010
    
    
    3,386
    
    
    
    1,145
    
    
    
    22
    
    
    
    (1,939
    )
    
    
    2,6142009
    
    
    2,492
    
    
    
    1,442
    
    
    
    228
    
    
    
    (776
    )
    
    
    3,386
  F-39