##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 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 of Incorporation)
    
    (I.R.S. Employer I.D. Number)9229 DELEGATES ROW, SUITE 260INDIANAPOLIS, IN
    
    46240(Address of principal executive offices)
    
    (Zip Code)
  þ o
  o þ o
 o þ




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##### 



Table of Contents
 Part I: Financial InformationItem 1. Unaudited Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II: Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSignaturesExhibitsAmended and Restated BylawsEmployment Agreement - Steven L. Zeller dated September 24, 2007Employment Agreement - Michelle M. Molin dated October 22, 2007Escrow Release AgreementCertification of the Chief Executive Officer Required by Rule 13a-14(a) or Rule 15d-14(a)Certification of the Principal Accounting and Financial Officer Required by Rule 13a-14(a) or Rule 15d-14(a)Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350Principal Accounting and Financial Officer Certification Pursuant to U.S.C. Section 1350




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##### Table of Contents



September 30,
    
    March 31,2007
    
    2007(Unaudited)
    
    (Audited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,748,027
    
    
    $
    2,994,322Accounts receivable, net of allowance of $8,672,000 and $8,310,000,
respectively
    
    
    31,852,146
    
    
    
    33,427,284Inventories, net
    
    
    1,653,746
    
    
    
    2,732,533Prepaid expenses and other current assets
    
    
    2,780,470
    
    
    
    2,768,231Total current assets
    
    
    38,034,389
    
    
    
    41,922,370Property and equipment, net
    
    
    7,230,047
    
    
    
    12,606,480Assets held for sale
    
    
    210,819
    
    
    
    Goodwill
    
    
    33,894,693
    
    
    
    33,335,921Acquired intangible assets, net
    
    
    25,680,369
    
    
    
    28,982,628Other assets
    
    
    195,760
    
    
    
    380,374Total assets
    
    $
    105,246,077
    
    
    $
    117,227,773LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Lines of credit, current portion
    
    $
    1,648,035
    
    
    $
    2,612,996Accounts payable
    
    
    3,189,274
    
    
    
    6,861,262Accrued expenses:Compensation and related taxes
    
    
    4,939,889
    
    
    
    4,462,726Commissions
    
    
    416,560
    
    
    
    359,401Accrued interest
    
    
    659,423
    
    
    
    818,655Other
    
    
    1,394,175
    
    
    
    1,049,065Liabilities of operations held for sale
    
    
    793,419
    
    
    
    Payable to affiliated agencies, current portion
    
    
    1,863,246
    
    
    
    1,548,827Long-term obligations, current portion
    
    
    16,823,308
    
    
    
    21,320,198Capital lease obligations, current portion
    
    
    76,736
    
    
    
    1,020,421Deferred revenue
    
    
    326,080
    
    
    
    659,258Total current liabilities
    
    
    32,130,145
    
    
    
    40,712,809Other liabilities
    
    
    457,161
    
    
    
    457,161Lines of credit, less current portion
    
    
    16,429,789
    
    
    
    20,342,796Payable to affiliated agencies, less current portion
    
    
    
    
    
    
    37,848Long-term obligations, less current portion
    
    
    373,596
    
    
    
    896,870Capital lease obligations, less current portion
    
    
    143,357
    
    
    
    696,787Total liabilities
    
    
    49,534,048
    
    
    
    63,144,271Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 200,000,000 shares authorized; 126,126,685
shares and 121,059,177 shares issued and outstanding, respectively
    
    
    126,127
    
    
    
    121,059Additional paid-in capital
    
    
    128,569,059
    
    
    
    110,342,704Accumulated deficit
    
    
    (72,983,157
    )
    
    
    (56,380,261
    )Total stockholders equity
    
    
    55,712,029
    
    
    
    54,083,502Total Liabilities and Stockholders Equity
    
    $
    105,246,077
    
    
    $
    117,227,773
 See accompanying notes to these condensed consolidated financial statements.




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##### Table of Contents



Three-Month Period Ended
    
    Six-Month Period EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues, net
    
    $
    38,721,330
    
    
    $
    38,323,885
    
    
    $
    77,852,181
    
    
    $
    74,302,920Cost of revenues
    
    
    26,473,563
    
    
    
    26,281,586
    
    
    
    52,990,111
    
    
    
    50,335,068Gross profit
    
    
    12,247,767
    
    
    
    12,042,299
    
    
    
    24,862,070
    
    
    
    23,967,852Selling, general and administrative
    
    
    14,830,748
    
    
    
    12,075,238
    
    
    
    29,202,376
    
    
    
    23,417,698Depreciation and amortization
    
    
    989,507
    
    
    
    601,469
    
    
    
    1,949,276
    
    
    
    1,083,169Total operating expenses
    
    
    15,820,255
    
    
    
    12,676,707
    
    
    
    31,151,652
    
    
    
    24,500,867Operating loss
    
    
    (3,572,488
    )
    
    
    (634,408
    )
    
    
    (6,289,582
    )
    
    
    (533,015
    )Other expenses:Interest expense, net
    
    
    963,239
    
    
    
    912,529
    
    
    
    2,122,500
    
    
    
    1,317,656Total other expenses
    
    
    963,239
    
    
    
    912,529
    
    
    
    2,122,500
    
    
    
    1,317,656Loss from continuing operations before
income taxes
    
    
    (4,535,727
    )
    
    
    (1,546,937
    )
    
    
    (8,412,082
    )
    
    
    (1,850,671
    )Current income tax expense
    
    
    6,914
    
    
    
    44,650
    
    
    
    22,602
    
    
    
    83,450Loss from continuing operations
    
    
    (4,542,641
    )
    
    
    (1,591,587
    )
    
    
    (8,434,684
    )
    
    
    (1,934,121
    )Discontinued operations:(Loss) earnings from discontinued operations
    
    
    (2,472,939
    )
    
    
    855,968
    
    
    
    (6,008,500
    )
    
    
    1,040,569Net loss on disposal
    
    
    (2,159,712
    )
    
    
    
    
    
    
    (2,159,712
    )
    
    
    (4,632,651
    )
    
    
    855,968
    
    
    
    (8,168,212
    )
    
    
    1,040,569NET LOSS
    
    $
    (9,175,292
    )
    
    $
    (735,619
    )
    
    $
    (16,602,896
    )
    
    $
    (893,552
    )Weighted average number of common shares
outstanding
    
    
    123,455,814
    
    
    
    90,130,314
    
    
    
    119,249,723
    
    
    
    88,238,312Basic and diluted net loss per share:Loss from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.02
    )(Loss) earnings from discontinued operations
    
    
    (0.04
    )
    
    
    0.01
    
    
    
    (0.07
    )
    
    
    0.01$
    (0.07
    )
    
    $
    (0.01
    )
    
    $
    (0.14
    )
    
    $
    (0.01
    )
 See accompanying notes to these condensed consolidated financial statements.




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##### Table of Contents



Six-Month Period EndedSeptember 30,2007
    
    2006Cash provided by (used in) operating activities:Net loss for the period
    
    $
    (16,602,896
    )
    
    $
    (893,552
    )Adjustments to reconcile net loss to net cash used in operating
activities:Provision for doubtful accounts
    
    
    1,272,240
    
    
    
    745,952Amortization and depreciation of property and equipment
    
    
    2,732,739
    
    
    
    1,530,472Gain on early retirement of debt and amortization of debt
discount
    
    
    (121,057
    )
    
    
    52,045Loss on business disposals
    
    
    2,159,712
    
    
    
    Amortization of intangible assets
    
    
    1,484,967
    
    
    
    804,705Impairment of long-lived assets
    
    
    1,900,387
    
    
    
    Reduction in expense due to return of common stock previously
issued
    
    
    (246,400
    )
    
    
    Stock-based compensation expense
    
    
    2,131,517
    
    
    
    301,189Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    1,096,046
    
    
    
    (6,427,061
    )Inventories
    
    
    (361,797
    )
    
    
    (1,047,539
    )Other assets
    
    
    (42,546
    )
    
    
    (826,883
    )Accounts payable
    
    
    (3,702,761
    )
    
    
    1,217,531Accrued expenses
    
    
    450,535
    
    
    
    240,322Due to affiliated agencies
    
    
    276,571
    
    
    
    (244,746
    )Deferred revenue
    
    
    (438,148
    )
    
    
    Net cash used in operating activities
    
    
    (8,010,891
    )
    
    
    (4,547,565
    )Cash provided by (used in) investing activities:Business acquisitions, net of cash acquired
    
    
    (383,904
    )
    
    
    (7,064,875
    )Proceeds from business disposals
    
    
    5,751,332
    
    
    
    Purchases of property and equipment
    
    
    (1,078,839
    )
    
    
    (1,629,462
    )Net cash provided by (used in) investing activities
    
    
    4,288,589
    
    
    
    (8,694,337
    )Cash provided by (used in) financing activities:Proceeds from issuance of note payable
    
    
    
    
    
    
    15,000,000Proceeds from issuance of common stock, net of fees
    
    
    12,442,082
    
    
    
    Proceeds from exercise of stock options/warrants
    
    
    
    
    
    
    274,590Net advances (payments) on line of credit
    
    
    (4,877,968
    )
    
    
    1,719,475Payments on notes payable and capital lease obligations
    
    
    (5,088,107
    )
    
    
    (2,682,772
    )Net cash provided by financing activities
    
    
    2,476,007
    
    
    
    14,311,293Net change in cash and cash equivalents
    
    
    (1,246,295
    )
    
    
    1,069,391Cash and cash equivalents, beginning of period
    
    
    2,994,322
    
    
    
    530,344Cash and cash equivalents, end of period
    
    $
    1,748,027
    
    
    $
    1,599,735
 See accompanying notes to these condensed consolidated financial statements.




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Six-Month Period EndedSeptember 30,2007
    
    2006Supplementary information:Cash paid during the period for:Interest
    
    $
    2,281,732
    
    
    $
    353,419Non-cash investing / financing activities:Payments on note payable with issuance of common stock
    
    $
    1,280,692
    
    
    $
    339,168Common stock issued in conjunction with JASCORP, LLC
acquisition
    
    
    1,800,364
    
    
    
    DME cost of disposal paid in common stock
    
    
    875,875
    
    
    
    Contingent consideration relating to prior year
acquisition settled with issuance of notes payable
    
    
    714,688
    
    
    
    
 See accompanying notes to these condensed consolidated financial statements.




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Note 1  Description of Company and Significant Accounting Policies
 Description of Company
   Unaudited Interim Financial Information
  Principles of Consolidation




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##### Table of Contents



Use of Estimates
  Cash and Cash Equivalents
  Allowance for Doubtful Accounts
  Inventories
  Property and Equipment
  Goodwill and Acquired Intangible Assets
   Trade name
    
    30 yearsCustomers and referral source relationships (depending on
the type of business purchased)
    
    5 and 20 yearsAcquired technology
    
    3 to 5 yearsNon-competition agreements (length of agreement)
    
    5 years




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Impairment of Long-Lived Assets
  Payables to Affiliated Agencies
  Income Taxes
  Revenue Recognition and Concentration of Credit Risk




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Business Combinations and Valuation of Intangible Assets
  Earnings (Loss) Per Share
  Stock-Based Compensation
  Fair Value of Financial Instruments
  Advertising Expense
  Reclassifications




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Recent Accounting Pronouncements
    Note 2  Managements Plan




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##### Table of Contents



Note 3  Discontinued Operations
 Sears Retail Operations
   Care Clinic, Inc.




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##### Table of Contents



Florida Durable Medical Equipment Operations (Beacon Respiratory Services, Inc.)
    Colorado Durable Medical Equipment Operations (Beacon Respiratory Services of Colorado,
Inc.)




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##### Table of Contents



Three-Month Period Ended
    
    Six-Month Period EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenues, net:Sears retail operations
    
    $
    48,024
    
    
    $
    131,126
    
    
    $
    209,218
    
    
    $
    277,785Care Clinic, Inc.
    
    
    63,865
    
    
    
    
    
    
    
    201,666
    
    
    
    Beacon Respiratory
    
    
    808,501
    
    
    
    2,676,872
    
    
    
    3,355,410
    
    
    
    3,892,658Beacon Colorado
    
    
    266,281
    
    
    
    287,522
    
    
    
    649,547
    
    
    
    493,4881,186,671
    
    
    
    3,095,520
    
    
    
    4,415,841
    
    
    
    4,663,931Earnings (loss) from operations:Sears retail operations
    
    
    (24,495
    )
    
    
    (197,425
    )
    
    
    (165,768
    )
    
    
    (556,663
    )Care Clinic, Inc.
    
    
    (1,733,725
    )
    
    
    (169,867
    )
    
    
    (5,644,230
    )
    
    
    (169,867
    )Beacon Respiratory
    
    
    (777,430
    )
    
    
    1,156,022
    
    
    
    (412,646
    )
    
    
    1,684,436Beacon Colorado
    
    
    62,711
    
    
    
    67,238
    
    
    
    214,144
    
    
    
    82,663(2,472,939
    )
    
    
    855,968
    
    
    
    (6,008,500
    )
    
    
    1,040,569Loss on disposal:Sears retail operations
    
    
    (13,167
    )
    
    
    
    
    
    
    (13,167
    )
    
    
    Care Clinic, Inc.
    
    
    (770,215
    )
    
    
    
    
    
    
    (770,215
    )
    
    
    Beacon Respiratory
    
    
    (2,070,942
    )
    
    
    
    
    
    
    (2,070,942
    )
    
    
    Beacon Colorado
    
    
    694,612
    
    
    
    
    
    
    
    694,612
    
    
    
    (2,159,712
    )
    
    
    
    
    
    
    (2,159,712
    )
    
    
    Earnings (loss) from discontinued operations:Sears retail operations
    
    
    (37,662
    )
    
    
    (197,425
    )
    
    
    (178,935
    )
    
    
    (556,663
    )Care Clinic, Inc.
    
    
    (2,503,940
    )
    
    
    (169,867
    )
    
    
    (6,414,445
    )
    
    
    (169,867
    )Beacon Respiratory
    
    
    (2,848,372
    )
    
    
    1,156,022
    
    
    
    (2,483,588
    )
    
    
    1,684,436Beacon Colorado
    
    
    757,323
    
    
    
    67,238
    
    
    
    908,756
    
    
    
    82,663$
    (4,632,651
    )
    
    $
    855,968
    
    
    $
    (8,168,212
    )
    
    $
    1,040,569
 Note 4  Business Acquisition
   Share consideration
    
    $
    1,800,364Cash consideration
    
    
    383,904Acquisition costs
    
    
    35,694Total purchase price
    
    $
    2,219,962Current assets
    
    $
    501,727Fixed assets
    
    
    229,473Liabilities
    
    
    (236,340
    )Intangible assets:Customer relationships
    
    
    345,483Acquired technology
    
    
    863,707Goodwill
    
    
    515,912Total net identifiable assets
    
    $
    2,219,962




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Note 5  Goodwill and Acquired Intangible Assets
  In-Home
    
    Durable
    
    RetailerHealth
    
    Medical
    
    & EmployerCare Services
    
    Equipment
    
    Services
    
    TotalGoodwill at March 31, 2007
    
    $
    13,922,354
    
    
    $
    2,771,982
    
    
    $
    16,641,585
    
    
    $
    33,335,921Acquisitions during the period
    
    
    
    
    
    
    
    
    
    
    515,912
    
    
    
    515,912Disposals during the period
    
    
    
    
    
    
    (702,601
    )
    
    
    
    
    
    
    (702,601
    )Contingent consideration
    
    
    
    
    
    
    
    
    
    
    714,688
    
    
    
    714,688Purchase price allocation adjustments
    
    
    108,758
    
    
    
    (54,388
    )
    
    
    (23,597
    )
    
    
    30,773Goodwill at September 30, 2007
    
    $
    14,031,112
    
    
    $
    2,014,993
    
    
    $
    17,848,588
    
    
    $
    33,894,693
    September 30, 2007
    
    
    March 31, 2007Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationTrade name
    
    $
    8,000,000
    
    
    $
    537,042
    
    
    $
    8,000,000
    
    
    $
    445,987Customer relationships
    
    
    22,776,514
    
    
    
    5,747,389
    
    
    
    27,941,031
    
    
    
    7,098,834Non-competition agreements
    
    
    674,362
    
    
    
    311,353
    
    
    
    874,360
    
    
    
    309,054Acquired technology
    
    
    1,623,707
    
    
    
    798,430
    
    
    
    760,000
    
    
    
    738,88833,074,583
    
    
    $
    7,394,214
    
    
    
    37,575,391
    
    
    $
    8,592,763Less accumulated amortization
    
    
    (7,394,214
    )
    
    
    
    
    
    
    (8,592,763
    )Net acquired intangible assets
    
    $
    25,680,369
    
    
    
    
    
    
    $
    28,982,628
  Remainder of fiscal 2008
    
    $
    967,000Fiscal 2009
    
    
    1,940,000Fiscal 2010
    
    
    1,951,000Fiscal 2011
    
    
    1,747,000Fiscal 2012
    
    
    1,567,000Thereafter
    
    
    17,508,000Total
    
    $
    25,680,000




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Note 6  Impairment of Long-Lived Assets
  Note 7  Lines of Credit




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Note 8  Long-Term Obligations
  September 30,
    
    March 31,2007
    
    2007Note payable to Jana Master Fund, Ltd.
originally dated November 30, 2006 and
amended June 25, 2007 with unpaid accrued
interest and the principal due in full on
June 30, 2008. 50% of the accrued unpaid
interest is payable on the following dates:September 30, 2007, December 31, 2007 and
March 31, 2008. The original interest rate
was the one-year LIBOR rate plus 7.5%.
Starting on February 1, 2007, the interest
rate increased 1.0% on the first day of each
month for five months. On July 1, 2007, the
interest rate changed to the one-year LIBOR
rate plus 8%. When the total amount
outstanding under the note is less than
$8,500,000, the interest rate will be
reduced to the one-year LIBOR rate plus 4%.
At September 30, 2007, the effective
interest rate was 13.24%. The note payable
includes various loan covenants, all of
which the Company was in compliance as of
September 30, 2007.
    
    $
    15,646,287
    
    
    $
    17,000,000Notes payable to two executives dated
September 10, 2007 bearing interest at 4%
per year payable in monthly payments of
principal and interest with the final
payments due on April 10, 2008.
    
    
    630,406
    
    
    
    Note payable to Jana Master Fund, Ltd. dated
March 20, 2007 bearing interest at the one-
year LIBOR rate plus 7.5%. The note payable
was paid in full in April 2007.
    
    
    
    
    
    
    2,564,103Purchase price payable to the selling
shareholder of Alliance Oxygen & Medical
Equipment, Inc., dated July 12, 2006,
bearing simple interest of 8% per year
payable in equal quarterly payments of
principal and interest. The final payment
was made in July 2007.
    
    
    
    
    
    
    1,019,800Purchase price payable to Remedy
Therapeutics, Inc. dated January 27, 2006,
bearing simple interest of 8% per year
payable in equal quarterly payments of
principal and interest with the final
payment due on January 27, 2009.
    
    
    331,617
    
    
    
    617,455Other purchase price payables to be paid
over time to the selling shareholders or
selling entities of various acquired
entities, due dates ranging from September
2007 to March 2008.
    
    
    20,000
    
    
    
    187,606Other long-term obligations with interest
charged at various rates ranging from 4% to
18% to be paid over time based on respective
terms, due dates ranging from October 2007
to November 2011.
    
    
    568,594
    
    
    
    828,104Total long-term obligations
    
    
    17,196,904
    
    
    
    22,217,068Less current portion of long-term obligations
    
    
    (16,823,308
    )
    
    
    (21,320,198
    )Long-term obligations, less current portion
    
    $
    373,596
    
    
    $
    896,870
  Remainder of fiscal 2008:
    
    $
    357,000Fiscal 2009:
    
    
    16,685,000Fiscal 2010:
    
    
    96,000Fiscal 2011:
    
    
    50,000Fiscal 2012:
    
    
    9,000Total
    
    $
    17,197,000




---



##### Table of Contents



Note 9  Stockholders Equity
 General
   Escrow Shares
  Common Stock Transactions




---



##### Table of Contents



Stock Price Guarantees
  Warrants
  September 30,Description
    
    Exercise Price
    
    Granted
    
    Expiration
    
    2007
    
    March 31, 2007Class A
    
    $0.50
    
    May 2004
    
    May 2011
    
    
    5,749,036
    
    
    
    5,749,036Class B-1
    
    $0.001
    
    September 2005
    
    September 2009
    
    
    8,990,277
    
    
    
    8,990,277Class B-2
    
    $2.25
    
    September 2005
    
    September 2009
    
    
    4,711,110
    
    
    
    4,711,110May 2007 Private Placement
    
    $1.75
    
    May 2007
    
    May 2014
    
    
    2,754,726
    
    
    
    Total Warrants Outstanding
    
    
    
    
    
    
    
    
    
    
    22,205,149
    
    
    
    19,450,423
    Note 10  Contingencies




---



##### Table of Contents



Note 11  Stock-Based Compensation
   Stock Options
    Three-Month Period Ended
    
    Six-Month Period EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Weighted-average
expected volatility
    
    
    64
    %
    
    
    20
    %
    
    
    64
    %
    
    
    20
    %Expected dividend yields
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    7
    
    
    
    7
    
    
    
    7
    
    
    
    7Risk-free interest rate
    
    
    4.67
    %
    
    
    5.11
    %
    
    
    4.67
    %
    
    
    5.11
    %
  Weighted-Weighted-
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    IntrinsicOptions
    
    Shares
    
    Price
    
    Term (Years)
    
    ValueOutstanding at March 31, 2007
    
    
    7,431,653
    
    
    $
    0.42Granted
    
    
    23,275
    
    
    
    1.38Forfeited or expired
    
    
    (1,000,000
    )
    
    
    0.25Outstanding at September 30, 2007
    
    
    6,454,928
    
    
    $
    0.45
    
    
    
    1.4
    
    
    $
    3,135,000Exercisable at September 30, 2007
    
    
    6,454,928
    
    
    $
    0.45
    
    
    
    1.4
    
    
    $
    3,135,000




---



##### Table of Contents



Restricted Stock  Arcadia Resources, Inc.




---



##### Table of Contents



Weighted-AverageGrant DateFair ValueShares
    
    per ShareUnvested at March 31, 2007
    
    
    2,732,542
    
    
    $
    2.75Granted
    
    
    560,795
    
    
    
    1.04Vested
    
    
    (776,300
    )
    
    
    2.76Forfeited
    
    
    (1,223,663
    )
    
    
    2.90Unvested at September 30, 2007
    
    
    1,293,374
    
    
    $
    1.86
    Note 12  Income Taxes
      Note 13  Related Party Transactions




---



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---



##### Table of Contents



Note 14  Segment Information




---



##### Table of Contents



Three-Month Period Ended
    
    Six-Month Period EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006Revenue, net:Services
    
    $
    31,164,216
    
    
    $
    30,729,256
    
    
    $
    62,377,779
    
    
    $
    60,633,558Durable Medical Equipment
    
    
    4,809,536
    
    
    
    4,896,785
    
    
    
    9,778,171
    
    
    
    10,185,166Retailer and Employer Services
    
    
    2,747,578
    
    
    
    2,697,844
    
    
    
    5,696,231
    
    
    
    3,484,196Total revenue
    
    
    38,721,330
    
    
    
    38,323,885
    
    
    
    77,852,181
    
    
    
    74,302,920Operating income/(loss):Services
    
    $
    843,156
    
    
    $
    1,294,648
    
    
    $
    1,911,440
    
    
    $
    2,393,728Durable Medical Equipment
    
    
    (983,648
    )
    
    
    (473,675
    )
    
    
    (1,927,214
    )
    
    
    (163,870
    )Retailer and Employer Services
    
    
    (521,620
    )
    
    
    (150,183
    )
    
    
    (907,645
    )
    
    
    (305,822
    )Unallocated corporate overhead
    
    
    (2,910,376
    )
    
    
    (1,305,198
    )
    
    
    (5,366,163
    )
    
    
    (2,457,051
    )Total operating income/(loss)
    
    
    (3,572,488
    )
    
    
    (634,408
    )
    
    
    (6,289,582
    )
    
    
    (533,015
    )Interest, net
    
    
    963,239
    
    
    
    912,529
    
    
    
    2,122,500
    
    
    
    1,317,656Net loss before income tax expense
    
    
    (4,535,727
    )
    
    
    (1,546,937
    )
    
    
    (8,412,082
    )
    
    
    (1,850,671
    )Income tax expense
    
    
    6,914
    
    
    
    44,650
    
    
    
    22,602
    
    
    
    83,450Net loss from continuing operations
    
    $
    (4,542,641
    )
    
    $
    (1,591,587
    )
    
    $
    (8,434,684
    )
    
    $
    (1,934,121
    )Depreciation and amortization (continuing
operations):Services
    
    $
    307,484
    
    
    $
    291,441
    
    
    $
    640,891
    
    
    $
    583,423Durable Medical Equipment  cost of revenue
    
    
    610,886
    
    
    
    485,211
    
    
    
    1,240,123
    
    
    
    873,612Durable Medical Equipment  operating
expense
    
    
    338,303
    
    
    
    213,213
    
    
    
    695,566
    
    
    
    384,491Retailer and Employer Services
    
    
    171,207
    
    
    
    38,303
    
    
    
    298,185
    
    
    
    48,233Corporate
    
    
    172,512
    
    
    
    58,511
    
    
    
    314,635
    
    
    
    67,021Total depreciation and amortization
    
    $
    1,600,392
    
    
    $
    1,086,679
    
    
    $
    3,189,400
    
    
    $
    1,956,780
 September 30, 2007
    
    March 31, 2007Assets:Services
    
    $
    50,397,544
    
    
    $
    51,068,493Durable Medical Equipment
    
    
    20,176,032
    
    
    
    30,377,088Retailer and Employer Services
    
    
    33,796,451
    
    
    
    33,217,909Clinics
    
    
    301,931
    
    
    
    Unallocated corporate assets
    
    
    574,119
    
    
    
    2,564,283Total assets
    
    $
    105,246,077
    
    
    $
    117,227,773




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Statement Concerning Forward-Looking Statements
    Overview




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
  
    
    Evidence of an arrangement exists
    
    Services have been provided or goods have been delivered
    
    The price is fix or determinable
    
    Collection is reasonably assured.
   Allowance for Doubtful Accounts




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##### Table of Contents



Goodwill and Intangible Assets
  .
   Income Taxes




---



##### Table of Contents



Three-Month Period Ended September 30, 2007 Compared to Three-Month Period Ended September 30, 2006
 Results of Operations  Continuing Operations
 Three-Month PeriodEnded September 30,2007
    
    2006Revenues, net
    
    $
    38,721,000
    
    
    $
    38,324,000Cost of revenues
    
    
    26,473,000
    
    
    
    26,282,000Gross profit
    
    
    12,248,000
    
    
    
    12,042,000Selling, general and administrative expenses
    
    
    14,831,000
    
    
    
    12,075,000Depreciation and amortization
    
    
    989,000
    
    
    
    601,000Total operating expenses
    
    
    15,820,000
    
    
    
    12,676,000Operating loss
    
    
    (3,572,000
    )
    
    
    (634,000
    )Interest expense, net
    
    
    963,000
    
    
    
    913,000Net loss before income tax expense
    
    
    (4,535,000
    )
    
    
    (1,547,000
    )Income tax expense
    
    
    7,000
    
    
    
    45,000Net loss from continuing operations
    
    $
    (4,542,000
    )
    
    $
    (1,592,000
    )Weighted average number of shares  basic and diluted
    
    
    123,455,814
    
    
    
    90,130,314Net loss from continuing operations per share  basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.01
    )
 Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    % of Total2007
    
    Revenue
    
    2006
    
    RevenueRevenues, net:In-Home Health Care Services
    
    $
    31,164,000
    
    
    
    80.5
    %
    
    $
    30,729,000
    
    
    
    80.2
    %Durable Medical Equipment
    
    
    4,809,000
    
    
    
    12.4
    %
    
    
    4,897,000
    
    
    
    12.8
    %Retailer and Employer Services
    
    
    2,748,000
    
    
    
    7.1
    %
    
    
    2,698,000
    
    
    
    7.0
    %38,721,000
    
    
    
    100.0
    %
    
    
    38,324,000
    
    
    
    100.0
    %Cost of revenues:In-Home Health Care Services
    
    
    23,064,000
    
    
    
    
    
    
    
    22,516,000Durable Medical Equipment
    
    
    1,619,000
    
    
    
    
    
    
    
    1,563,000Retailer and Employer Services
    
    
    1,790,000
    
    
    
    
    
    
    
    2,203,00026,473,000
    
    
    
    
    
    
    
    26,282,000Gross
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    Margin %Gross margins:In-Home Health Care Services
    
    
    8,100,000
    
    
    
    26.0
    %
    
    
    8,213,000
    
    
    
    26.7
    %Durable Medical Equipment
    
    
    3,190,000
    
    
    
    66.3
    %
    
    
    3,334,000
    
    
    
    68.1
    %Retailer and Employer Services
    
    
    958,000
    
    
    
    34.9
    %
    
    
    495,000
    
    
    
    18.4
    %$
    12,248,000
    
    
    
    31.6
    %
    
    $
    12,042,000
    
    
    
    31.4
    %




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##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    % of Total2007
    
    SG&A
    
    2006
    
    SG&AIn-Home Health Care Services
    
    $
    6,950,000
    
    
    
    46.9
    %
    
    $
    6,627,000
    
    
    
    54.9
    %Durable Medical Equipment:
    
    
    3,836,000
    
    
    
    25.9
    %
    
    
    3,594,000
    
    
    
    29.8
    %Retailer and Employer Services
    
    
    1,307,000
    
    
    
    8.8
    %
    
    
    607,000
    
    
    
    5.0
    %Corporate
    
    
    2,738,000
    
    
    
    18.4
    %
    
    
    1,247,000
    
    
    
    10.3
    %$
    14,831,000
    
    
    
    100.0
    %
    
    $
    12,075,000
    
    
    
    100.0
    %
  
    
    Within the Retailer and Employer Services segment, pharmacy expenses incurred
subsequent to the PrairieStone Pharmacy, LLC and Wellscripts, LLC acquisitions on February
16, 2007 and June 30, 2006, respectively, contributed $717,000 in selling, general and
administrative expenses during the three-month period ended September 30, 2007 compared to
no expenses in the same period of the prior year. Personnel costs represent approximately
77.7% of the additional expenses.
    
    Corporate selling, general and administrative expenses increased by $1,491,000 during
the three-month period ended September 30, 2007 compared to the three-month period ended
September 30, 2006. Salaries and benefits increased $1,054,000 compared to the same period
in the previous year, primarily due to equity compensation as previously discussed in Note
10 of the condensed consolidated financial statements. Most notably, the Company
recognized $707,000 upon the vesting 2,000,000 stock options held by the former CEO.
Additionally, professional fees increased by $351,000 due to compliance costs related to
Sarbanes-Oxley and other audit related fees.
 Depreciation and Amortization
  2007
    
    2006Depreciation  cost of revenues
    
    $
    611,000
    
    
    $
    485,000Depreciation and amortization of property and equipment
    
    $
    376,000
    
    
    $
    181,000Amortization of acquired intangible assets
    
    
    614,000
    
    
    
    420,000Depreciation and amortization  operating expense
    
    $
    990,000
    
    
    $
    601,000




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##### Table of Contents



Interest Expense and Income
  2007
    
    2006Interest expense
    
    $
    978,000
    
    
    $
    913,000Interest income
    
    
    15,000
    
    
    
    $
    963,000
    
    
    $
    913,000
  Income Taxes
  Loss from Discontinued Operations




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##### Table of Contents



Six-Month Period Ended September 30, 2007 Compared to Six-Month Period Ended September 30, 2006
 Results of Operations  Continuing Operations
 Six-Month PeriodEnded September 30,2007
    
    2006Revenues, net
    
    $
    77,852,000
    
    
    $
    74,303,000Cost of revenues
    
    
    52,990,000
    
    
    
    50,335,000Gross profit
    
    
    24,862,000
    
    
    
    23,968,000Selling, general and administrative expenses
    
    
    29,202,000
    
    
    
    23,418,000Depreciation and amortization
    
    
    1,949,000
    
    
    
    1,083,000Total operating expenses
    
    
    31,151,000
    
    
    
    24,501,000Operating loss
    
    
    (6,289,000
    )
    
    
    (533,000
    )Interest expense, net
    
    
    2,123,000
    
    
    
    1,318,000Net loss before income tax expense
    
    
    (8,412,000
    )
    
    
    (1,851,000
    )Income tax expense
    
    
    23,000
    
    
    
    83,000Net loss from continuing operations
    
    $
    (8,435,000
    )
    
    $
    (1,934,000
    )Weighted average number of shares  basic and diluted
    
    
    119,249,723
    
    
    
    88,238,312Net loss from continuing operations per share  basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.01
    )
 Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    % of Total2007
    
    Revenue
    
    2006
    
    RevenueRevenues, net:In-Home Health Care Services
    
    $
    62,378,000
    
    
    
    80.1
    %
    
    $
    60,634,000
    
    
    
    81.6
    %Durable Medical Equipment
    
    
    9,778,000
    
    
    
    12.6
    %
    
    
    10,185,000
    
    
    
    13.7
    %Retailer and Employer Services
    
    
    5,696,000
    
    
    
    7.3
    %
    
    
    3,484,000
    
    
    
    4.7
    %77,852,000
    
    
    
    100.0
    %
    
    
    74,303,000
    
    
    
    100.0
    %Cost of revenues:In-Home Health Care Services
    
    
    45,857,000
    
    
    
    
    
    
    
    44,454,000Durable Medical Equipment
    
    
    3,213,000
    
    
    
    
    
    
    
    2,980,000Retailer and Employer Services
    
    
    3,920,000
    
    
    
    
    
    
    
    2,901,00052,990,000
    
    
    
    
    
    
    
    50,335,000Gross
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    Margin %Gross margins:In-Home Health Care Services
    
    
    16,521,000
    
    
    
    26.5
    %
    
    
    16,180,000
    
    
    
    26.7
    %Durable Medical Equipment
    
    
    6,565,000
    
    
    
    67.1
    %
    
    
    7,205,000
    
    
    
    70.7
    %Retailer and Employer Services
    
    
    1,776,000
    
    
    
    31.2
    %
    
    
    583,000
    
    
    
    16.7
    %$
    24,862,000
    
    
    
    31.9
    %
    
    $
    23,968,000
    
    
    
    32.3
    %




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---



##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    % of Total2007
    
    SG&A
    
    2006
    
    SG&AIn-Home Health Care Services
    
    $
    13,968,000
    
    
    
    47.8
    %
    
    $
    13,202,000
    
    
    
    56.4
    %Durable Medical Equipment
    
    
    7,795,000
    
    
    
    26.7
    %
    
    
    6,986,000
    
    
    
    29.8
    %Retailer and Employer Services
    
    
    2,386,000
    
    
    
    8.2
    %
    
    
    840,000
    
    
    
    3.6
    %Corporate
    
    
    5,053,000
    
    
    
    17.3
    %
    
    
    2,390,000
    
    
    
    10.2
    %$
    29,202,000
    
    
    
    100.0
    %
    
    $
    23,418,000
    
    
    
    100.0
    %
  
    
    Within the Retailer and Employer Services segment, pharmacy expenses incurred
subsequent to the PrairieStone Pharmacy, LLC and Wellscripts, LLC acquisitions on February
16, 2007 and June 30, 2006, respectively, contributed $1,085,000 in selling, general and
administrative expenses during the six-month period ended September 30, 2007 compared to no
expenses in the same period of the prior year. Personnel costs represent approximately
74.4% of the additional expenses.
    
    Corporate selling, general and administrative expenses increased by $2,664,000 during
the six-month period ended September 30, 2007 compared to the six-month period ended
September 30, 2006. Salaries and benefits increased $1,208,000 compared to the same period
in the previous year, primarily due to equity compensation as previously discussed in Note
10 of the condensed consolidated financial statements. Most notably, the Company
recognized $707,000 upon the vesting 2,000,000 stock options held by the former CEO.
Additionally, professional fees increased by $1,229,000 due to compliance costs related to
Sarbanes-Oxley and other audit related fees.
 Depreciation and Amortization
  2007
    
    2006Depreciation  cost of revenues
    
    $
    1,240,000
    
    
    $
    873,000Depreciation and amortization of property and equipment
    
    $
    762,000
    
    
    $
    320,000Amortization of acquired intangible assets
    
    
    1,187,000
    
    
    
    763,000Depreciation and amortization  operating expense
    
    $
    1,949,000
    
    
    $
    1,083,000




---



##### Table of Contents



Interest Expense and Income
  2007
    
    2006Interest expense
    
    $
    2,181,000
    
    
    $
    1,318,000Interest income
    
    
    (58,000
    )
    
    
    $
    2,123,000
    
    
    $
    1,318,000
  Income Taxes
  Loss from Discontinued Operations




---



##### Table of Contents



Liquidity and Capital Resources




---



##### Table of Contents



2007
    
    2006Net cash used in operating activities
    
    $
    (8,011,000
    )
    
    $
    (4,548,000
    )Net cash provided by (used in) investing activities
    
    
    4,289,000
    
    
    
    (8,694,000
    )Net cash provided by financing activities
    
    
    2,476,000
    
    
    
    14,311,000Net (decrease) increase in cash and cash
equivalents
    
    
    (1,246,000
    )
    
    
    1,069,000Cash and cash equivalents at the end of the period
    
    $
    1,748,000
    
    
    $
    1,600,000




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---



##### Table of Contents



Government-funded
    
    
    27
    %Institutions
    
    
    41
    %Commercial Insurance
    
    
    11
    %Private Pay
    
    
    21
    %
   Recent Accounting Pronouncements




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures.
 Design of Internal Control Over Financial Reporting
  
    
    Pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of our assets;
    
    Provide reasonable assurance that our transactions are recorded as necessary to permit
preparation of financial statements in accordance with U.S. generally accepted accounting
principles;
    
    Provide reasonable assurances that our 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 statements.
 Status of Managements Remedial Action
 
    
    Management did not design and maintain effective controls relating to the month-end
closing and financial reporting process due to lack of evidence of review surrounding
various account reconciliations and properly evidenced journal entries. Additionally, the
Company had insufficient personnel resources and technical accounting and reporting
expertise within the Companys financial closing and reporting functions.




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##### Table of Contents




    
    Management did not maintain adequate control relating to the business acquisition
process due to lack of formalized due diligence procedures and evidentiary support of
purchase accounting review.
    
    Management did not design and maintain controls to analyze and record appropriate
adjustments to the accounts receivable reserve and properly monitor review of reductions to
accounts receivable due to ineffective controls over contract pricing and the
standardization of a contract pricing system emphasized by changes in payer mix and other
contracting licensure issues.
  Changes in Internal Controls.




---



##### Table of Contents



Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  We recently became a public company and have a limited operating history as a public company upon
which you can base an investment decision.
  To finance the numerous acquisitions made as part of our growth strategy, the Company incurred
significant debt which must be repaid. Our debt level could adversely affect our financial health
and affect our ability to run our business.
  o
    
    We may be unable to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes.o
    
    Our ability to adapt to changing market conditions may be hampered. We may be more
vulnerable in a volatile market and at a competitive disadvantage to our competitors that
have less debt.o
    
    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.o
    
    We are subject to the risks that interest rates and our interest expense will increase.o
    
    Our ability to plan for, or react to, changes in our business is more limited.




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Due to our debt level, 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 or acquisitions.
  The terms of our Credit Agreements with Comerica Bank subject us to the risk of foreclosure on
certain property.
  In order to repay our short-term debt obligations, as well as to pursue our growth strategy, we may
seek additional equity financing, which could result in dilution to our security holders.
  The Company has completed approximately 30 acquisitions since the reverse merger in May 2004. The
licensure and credentialing process under the new ownership must be satisfied timely in order to
bill and collect for services rendered to beneficiaries of government-based health care programs
and other insurance carriers. Cash flow related to these transitions can be impaired sufficient to
require additional external financing in the form of debt or equity.




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To the extent we do not raise adequate funds from the equity markets or possible business
divestitures to satisfy short-term debt obligations, we would need to seek debt financing or modify
or abandon our growth strategy or product and service offerings.
  Because the Company is dependent on key management and advisors, the loss of the services or advice
of any of these persons could have a material adverse effect on our business and prospects. We also
face certain risks as a result of the recent changes to our management team.
  A decline in the rate of growth of the staffing and home care industries, or negative growth, could
adversely affect us by reducing sales, thereby resulting in less cash being available for the
payment of operating expenses, debt obligations and to pursue our strategic plans.




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Sales of certain of our services and products are largely dependent upon payments from governmental
programs and private insurance, and cost containment initiatives may reduce our revenues, thereby
harming our performance.
    We could be subject to severe fines and possible exclusion from participation in federal and state
healthcare programs if we fail to comply with the laws and regulations applicable to our business
or if those laws and regulations change.
  The markets in which the Company operates are highly competitive and the Company may be unable to
compete successfully against competitors with greater resources.




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We may not be able to successfully integrate acquired businesses, which could result
in our failure to increase revenues or to avoid duplication of costs among acquired businesses,
thereby adversely affecting our financial results and profitability.
  The failure to implement the Companys business strategy may result in our inability to be
profitable and adversely impact the value of our common stock.
  We cannot predict the impact that the registration of the shares may have on the price of the
Companys shares of common stock.




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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 Company.
  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 price of common tock and the
rights of holders of our common stock.
  The exercise of common stock warrants may depress our stock price and may result in dilution to our
common security holders.




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We have granted stock options to certain management employees and directors as compensation, which
may depress our stock price and result in dilution to our common security holders.
   The Company has entered into several agreements whereby it has guaranteed the stock price at
certain times in the future. If the future stock price is below the guaranteed stock price, the
Company is obligated to true up the difference in either common stock or cash. The issuance of common stock would result in dilution to our common
stock holders, and the settlement of the liability with cash would decrease cash available for
other purpose, such as funding operations, paying down debt or investing in growth initiatives.




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We are dependent on our affiliated agencies and our internal sales force to sell our services and
products, the loss of which could adversely affect our business.
  Our recurring losses from operations have caused us to receive a going concern opinion from our
independent auditors, which could negatively affect our business and results of operation.
  In connection with our evaluation of internal controls over financial reporting as required by
Section 404 under the Sarbanes-Oxley Act of 2002, we identified certain material weaknesses, which
could impact our ability to provide reliable and accurate financial reports and prevent fraud. We
could fail to meet our financial reporting responsibilities in future reporting periods if these
weaknesses are not remediated timely, or if any future failures by us to maintain adequate internal
controls over financial reporting result in additional material weaknesses.




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We may not be able to secure the additional financing to fund operating activities through the end
of fiscal year 2008, which would raise substantial doubt about our ability to continue as a going
concern and would have a material adverse effect on our business and prospects.
  Our financial results could suffer as a result of a goodwill and/or intangible asset impairment
expense being recognized.
  Our financial results could suffer if the goodwill and other intangible assets we
acquired in our acquisition of PrairieStone Pharmacy, LLC become impaired, or as a result of costs
associated with the acquisition.




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We have a history of operating losses and negative cash flow that may continue into the foreseeable
future.
  We may not be able to meet the financial covenants contained in our credit facility, and we may not
be able to obtain a waiver for such violations.
   The disposition of businesses that do not fit with our evolving strategy can be highly uncertain.
  The Centers for Medicare and Medicaid Services (CMS) recently announced a competitive bidding
program related to durable medical equipment. The program will operate within the ten largest
metropolitan areas during 2008 and then be expanded to 70 additional areas in 2009. As a durable
medical equipment vendor, the competitive bidding program could result in loss of revenue due to
over-bidding by the Company and will increase the compliance costs.




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Several anti-takeover measures under Nevada law could delay or prevent a change of our control,
despite such change of control being in the best interest of the holders of our shares of Common
Stock.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.




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Item 6. Exhibits.
  
 SIGNATURES
  November 9, 2007
    
    By:
    
    /s/ Marvin R. Richardson

Marvin R. RichardsonChief Executive Officer(Principal Executive Officer) and
DirectorNovember 9, 2007
    
    By:
    
    /s/ Lynn K. FettermanLynn K. FettermanInterim Chief Financial Officer(Principal Financial and 
Accounting Officer)




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EXHIBIT INDEX
  ExhibitNo.
    
    Exhibit Description3.2
    
    Amended and Restated Bylaws of Arcadia Resources, Inc. (November 7, 2007).10.1
    
    Employment Agreement between Arcadia Resources, Inc. and Steven L. Zeller dated September 24, 200710.2
    
    Employment Agreement between Arcadia Resources, Inc. and Michelle M. Molin dated October 22, 200710.3
    
    Escrow Release Agreement relating to the sale of the Florida
Durable Medical Equipment Division of Arcadia Resources, Inc. dated July 19, 2007.31.1
    
    Certification of the Chief Executive Officer required by rule 13a  14(a) or rule 15d  14(a).31.2
    
    Certification of the Principal Accounting and Financial Officer required by rule 13a  14(a) or rule 15d  14(a).32.1
    
    Chief Executive Officer Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to
§206 of the Sarbanes  Oxley Act of 2002.32.2
    
    Principal Accounting and Financial Officer Certification Pursuant to 18 U.S.C. §1350, as
Adopted Pursuant to §206 of the Sarbanes  Oxley Act of 2002.99.1
    
    Current Report on Form 8-K filed previously filed with the Securities and Exchange
Commission on September 10, 2007 (file no. 0001071941)