##### 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 June 30, 2009
 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 Incorporation)
    
    (I.R.S. Employer IdentificationNumber)
 9229 DELEGATES ROW, SUITE 260INDIANAPOLIS, INDIANA
    
    46240(Address of principal executive offices)
    
    (Zip Code)
  þ 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
 PageNo.Part I: Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2009 (unaudited) and March 31, 2009
    
    
    2Condensed Consolidated Statements of Operations for the Three Months ended June 30, 2009 and 2008 (unaudited)
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the Three Months ended June 30, 2009 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months ended June 30, 2009 and 2008 (unaudited)
    
    
    5Notes to the Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31Part II: Other InformationItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    33Item 5. Other
    
    
    38Item 6. Exhibits
    
    
    38Exhibits
    
    
    40Signatures
    
    
    39Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   1




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##### Table of Contents



Item 1.
    
    Financial Statements
  
  (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 June 30,
    
    
    March 31,2009
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    517
    
    
    $
    1,522Accounts receivable, net of allowance of $3,571 and $3,386, respectively
    
    
    14,803
    
    
    
    15,679Inventories, net
    
    
    841
    
    
    
    863Prepaid expenses and other current assets
    
    
    1,577
    
    
    
    1,764Current assets of discontinued operations
    
    
    757
    
    
    
    5,458Total current assets
    
    
    18,495
    
    
    
    25,286Property and equipment, net
    
    
    2,180
    
    
    
    2,308Goodwill
    
    
    17,053
    
    
    
    17,053Acquired intangible assets, net
    
    
    8,146
    
    
    
    8,305Other assets
    
    
    629
    
    
    
    590Restricted cash
    
    
    500
    
    
    
    Assets of discontinued operations
    
    
    34
    
    
    
    5,850Total assets
    
    $
    47,037
    
    
    $
    59,392LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Lines of credit, current portion
    
    $
    
    
    
    $
    437Accounts payable
    
    
    2,579
    
    
    
    2,765Accrued expenses:Compensation and related taxes
    
    
    2,662
    
    
    
    2,986Interest
    
    
    41
    
    
    
    89Health insurance
    
    
    524
    
    
    
    545Other
    
    
    1,046
    
    
    
    917Payable to affiliated agencies
    
    
    809
    
    
    
    1,284Long-term obligations, current portion
    
    
    1,235
    
    
    
    596Capital lease obligations, current portion
    
    
    73
    
    
    
    59Current liabilities of discontinued operations
    
    
    1,064
    
    
    
    2,037Total current liabilities
    
    
    10,033
    
    
    
    11,715Lines of credit, less current portion
    
    
    7,749
    
    
    
    10,889Long-term obligations, less current portion
    
    
    23,646
    
    
    
    26,918Capital lease obligations, less current portion
    
    
    64
    
    
    
    37Total liabilities
    
    
    41,492
    
    
    
    49,559Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 200,000,000 shares authorized; 161,291,415
shares and 161,249,529 shares issued, respectively
    
    
    161
    
    
    
    161Additional paid-in capital
    
    
    136,205
    
    
    
    135,920Accumulated deficit
    
    
    (130,821
    )
    
    
    (126,248
    )Total stockholders equity
    
    
    5,545
    
    
    
    9,833Total liabilities and stockholders equity
    
    $
    47,037
    
    
    $
    59,392
 See accompanying notes to these condensed consolidated financial statements.
  2




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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 Three Month Period Ended June 30,(Unaudited)2009
    
    
    2008Revenues, net
    
    $
    26,409
    
    
    $
    26,778Cost of revenues
    
    
    18,961
    
    
    
    18,668Gross profit
    
    
    7,448
    
    
    
    8,110Selling, general and administrative
    
    
    9,666
    
    
    
    10,244Depreciation and amortization
    
    
    411
    
    
    
    459Total operating expenses
    
    
    10,077
    
    
    
    10,703Operating loss
    
    
    (2,629
    )
    
    
    (2,593
    )Other expenses:Interest expense, net
    
    
    838
    
    
    
    956Loss on extinguishment of debt
    
    
    
    
    
    
    248Other
    
    
    36
    
    
    
    10Total other expenses
    
    
    874
    
    
    
    1,214Loss from continuing operations before income taxes
    
    
    (3,503
    )
    
    
    (3,807
    )Income tax expense
    
    
    93
    
    
    
    196Loss from continuing operations
    
    
    (3,596
    )
    
    
    (4,003
    )Discontinued operations:Income / (loss) from discontinued operations
    
    
    (1,193
    )
    
    
    717Net gain on disposal
    
    
    216
    
    
    
    Net loss
from discontinued operations
    
    
    (977
    )
    
    
    717NET LOSS
    
    $
    (4,573
    )
    
    $
    (3,286
    )Weighted average number of common shares outstanding
    
    
    160,552
    
    
    
    131,688Basic and diluted net loss per share:Loss from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.03
    )Loss from discontinued operations
    
    
    (0.01
    )
    
    
    Net loss per share
    
    $
    (0.03
    )
    
    $
    (0.03
    )
 See accompanying notes to these condensed consolidated financial statements.
  3




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(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
  Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance, April 1, 2009
    
    
    161,249,529
    
    
    $
    161
    
    
    $
    135,920
    
    
    $
    (126,248
    )
    
    $
    9,833Stock-based compensation
expense
    
    
    64,375
    
    
    
    
    
    
    
    285
    
    
    
    
    
    
    
    285Cashless exercise of warrants
    
    
    (22,489
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,573
    )
    
    
    (4,573
    )Balance, June 30, 2009
    
    
    161,291,415
    
    
    $
    161
    
    
    $
    136,205
    
    
    $
    (130,821
    )
    
    $
    5,545
 See accompanying notes to these condensed consolidated financial statements.
  4




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(IN THOUSANDS)
 Three-Month Period EndedJune 30,(Unaudited)2009
    
    
    2008Operating activitiesNet loss for the period
    
    $
    (4,573
    )
    
    $
    (3,286
    )Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:Provision for doubtful accounts
    
    
    873
    
    
    
    811Depreciation of property and equipment
    
    
    531
    
    
    
    1,012Amortization of intangible assets
    
    
    246
    
    
    
    456Gain on business disposals
    
    
    (216
    )
    
    
    Non-cash interest expense
    
    
    584Loss on sale of property and equipment
    
    
    
    
    
    
    10Amortization of deferred financing costs and debt discounts
    
    
    52
    
    
    
    246Stock-based compensation expense
    
    
    285
    
    
    
    401Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    1,750
    
    
    
    (792
    )Inventories
    
    
    639
    
    
    
    (228
    )Other assets
    
    
    233
    
    
    
    1,176Accounts payable
    
    
    (547
    )
    
    
    (63
    )Accrued expenses
    
    
    (1,146
    )
    
    
    625Due to affiliated agencies
    
    
    (327
    )
    
    
    16Deferred revenue
    
    
    
    
    
    
    (9
    )Net cash provided by (used in) operating activities
    
    
    (1,616
    )
    
    
    375Investing activitiesBusiness acquisitions, net of cash acquired
    
    
    (190
    )
    
    
    (363
    )Proceeds from business disposal
    
    
    9,157
    
    
    
    Increase in restricted cash
    
    
    (500
    )
    
    
    Proceeds from disposals of property and equipment
    
    
    
    
    
    
    19Purchases of property and equipment
    
    
    (75
    )
    
    
    (264
    )Net cash provided by (used in) investing activities
    
    
    8,392
    
    
    
    (608
    )Financing activitiesNet payments on lines of credit
    
    
    (3,577
    )
    
    
    (3,299
    )Payments on notes payable and capital lease obligations
    
    
    (4,204
    )
    
    
    (438
    )Net cash used in financing activities
    
    
    (7,781
    )
    
    
    (3,737
    )Net change in cash and cash equivalents
    
    
    (1,005
    )
    
    
    (3,970
    )Cash and cash equivalents, beginning of period
    
    
    1,522
    
    
    
    6,351Cash and cash equivalents, end of period
    
    $
    517
    
    
    $
    2,381Supplementary information:Cash paid during the period for:Interest
    
    $
    209
    
    
    $
    480Income taxes
    
    
    14
    
    
    
    83Non-cash investing / financing activities:Capital lease
    
    
    70
    
    
    
    Accounts payable converted to notes payable
    
    
    750
    
    
    
    Warrants issued in conjunction with line of credit amendment
    
    
    
    
    
    
    248Prior period liability satisfied with equity
    
    
    
    
    
    
    45Accrued interest converted to notes payable
    
    
    628
    
    
    
    541
 See accompanying notes to these condensed consolidated financial statements.
  5




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Note 1  Description of Company and Recent Accounting Pronouncements
 Description of Company
  Unaudited Interim Financial Information
  Reclassifications
  Recent Accounting Pronouncements
 , Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
   6




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7




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Note 2  Managements Plan
        8




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Note 3  Discontinued Operations
 Industrial Staffing Operations
  HHE Operations
     Retail Pharmacy Software Business
    9




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June 30, 2009Services -Industrial
    
    
    
    
    
    
    Pharmacy -Staffing
    
    
    HHE
    
    
    Software
    
    
    TotalAssetsAccounts receivable, net of allowance of $845
    
    $
    139
    
    
    $
    431
    
    
    $
    
    
    
    $
    570Prepaid expenses and other current assets
    
    
    
    
    
    
    103
    
    
    
    84
    
    
    
    187Total current assets of discontinued
operations
    
    
    139
    
    
    
    534
    
    
    
    84
    
    
    
    757Property and equipment, net
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    34Total assets of discontinued operations
    
    $
    139
    
    
    $
    568
    
    
    $
    84
    
    
    $
    791LiabilitiesAccounts payable
    
    $
    
    
    
    $
    555
    
    
    $
    76
    
    
    $
    631Accrued compensation and related taxes
    
    
    
    
    
    
    43
    
    
    
    172
    
    
    
    215Accrued other
    
    
    80
    
    
    
    138
    
    
    
    
    
    
    
    218Total liabilities of discontinued operations
    
    $
    80
    
    
    $
    736
    
    
    $
    248
    
    
    $
    1,064
 March 31, 2009Services -Industrial
    
    
    
    
    
    
    Pharmacy -Staffing
    
    
    HHE
    
    
    Software
    
    
    TotalAssetsAccounts receivable, net of allowance of $968
    
    $
    972
    
    
    $
    3,199
    
    
    $
    138
    
    
    $
    4,309Inventory, net
    
    
    
    
    
    
    829
    
    
    
    20
    
    
    
    849Prepaid expenses and other current assets
    
    
    35
    
    
    
    175
    
    
    
    90
    
    
    
    300Total current assets of discontinued operations
    
    
    1,007
    
    
    
    4,203
    
    
    
    248
    
    
    
    5,458Property and equipment, net
    
    
    17
    
    
    
    1,716
    
    
    
    132
    
    
    
    1,865Goodwill
    
    
    
    
    
    
    507
    
    
    
    923
    
    
    
    1,430Acquired intangibles assets, net
    
    
    
    
    
    
    1,822
    
    
    
    733
    
    
    
    2,555Total non-current assets of discontinued
operations
    
    
    17
    
    
    
    4,045
    
    
    
    1,788
    
    
    
    5,850Total assets of discontinued operations
    
    $
    1,024
    
    
    $
    8,248
    
    
    $
    2,036
    
    
    $
    11,308LiabilitiesAccounts payable
    
    $
    4
    
    
    $
    986
    
    
    $
    74
    
    
    $
    1,064Accrued compensation and related taxes
    
    
    228
    
    
    
    350
    
    
    
    93
    
    
    
    671Accrued other
    
    
    84
    
    
    
    64
    
    
    
    60
    
    
    
    208Long-term obligations, current portion
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    94Total current liabilities of discontinued operations
    
    $
    316
    
    
    $
    1,494
    
    
    $
    227
    
    
    $
    2,037
  10




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Three Months EndedJune 30,2009
    
    
    2008Revenues, net:Services  Industrial Staffing
    
    $
    1,223
    
    
    $
    5,218Home Health Equipment
    
    
    1,423
    
    
    
    4,832Pharmacy  Software
    
    
    356
    
    
    
    556$
    3,002
    
    
    
    10,606Earnings (loss) from operations:Services  Industrial Staffing
    
    $
    (37
    )
    
    $
    475Home Health Equipment
    
    
    (1,061
    )
    
    
    190Pharmacy  Software
    
    
    (95
    )
    
    
    52$
    (1,193
    )
    
    $
    717Gain / (loss) on disposal:Services  Industrial Staffing
    
    $
    126
    
    
    $
    Home Health Equipment
    
    
    120
    
    
    
    Pharmacy  Software
    
    
    (30
    )
    
    
    $
    216
    
    
    $
    Earnings (loss) from discontinued operations:Services  Industrial Staffing
    
    $
    89
    
    
    $
    475Home Health Equipment
    
    
    (941
    )
    
    
    190Pharmacy  Software
    
    
    (125
    )
    
    
    52$
    (977
    )
    
    $
    717
 Note 4  Goodwill and Acquired Intangible Assets
  Services
    
    
    Pharmacy
    
    
    Catalog
    
    
    TotalBalance
    
    $
    14,553
    
    
    $
    2,500
    
    
    $
    
    
    
    $
    17,053
   11




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June 30, 2009
    
    
    March 31, 2009Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationTrade name
    
    $
    6,664
    
    
    $
    724
    
    
    $
    6,664
    
    
    $
    682Customer relationships
    
    
    4,720
    
    
    
    2,514
    
    
    
    4,720
    
    
    
    2,39711,384
    
    
    $
    3,238
    
    
    
    11,384
    
    
    $
    3,079Less accumulated
amortization
    
    
    (3,238
    )
    
    
    
    
    
    
    (3,079
    )Net acquired
intangible assets
    
    $
    8,146
    
    
    
    
    
    
    $
    8,305
   Remainder of fiscal 2010
    
    $
    476Fiscal 2011
    
    
    571Fiscal 2012
    
    
    518Fiscal 2013
    
    
    476Fiscal 2014
    
    
    382Thereafter
    
    
    5,723Total
    
    $
    8,146
 Note 4  Lines of Credit
  At June 30, 2009MaximumAvailable
    
    
    
    
    
    
    March 31,Lending Institution
    
    Maturity date
    
    Borrowing
    
    
    Balance
    
    
    2009
    
    
    Interest rateComerica Bank
    
    August 1, 2011
    
    $
    10,220
    
    
    $
    7,749
    
    
    $
    9,126
    
    
    Prime plus 2.75
    %AmerisourceBergen Drug
Corporation
    
    September 30, 2010
    
    
    
    
    
    
    
    
    
    
    2,200
    
    
    
    10
    %Total lines of credit obligations
    
    
    
    
    
    $
    10,220
    
    
    
    7,749
    
    
    
    11,326Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )Long-term portion
    
    
    
    
    
    
    
    
    
    $
    7,749
    
    
    $
    10,889
 Comerica Bank
   12




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AmerisourceBergen Drug Corporation
    13




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Note 5  Long-Term Obligations
  June 30,
    
    
    March 31,2009
    
    
    2009Note payable to JANA in the 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.
    
    $
    16,579
    
    
    $
    18,035Note payable to Vicis Capital Master Fund (Vicis) in the 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.
    
    
    6,040
    
    
    
    7,882Note 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.
    
    
    1,027
    
    
    
    1,000Payable due
to AmerisourceBergen Drug Corporation consistent with the terms of an amendment to a line of credit agreement date June 10, 2009 bearing an
effective interest rate of 8.0% with unpaid accrued interest and principal due
in full on April 1, 2010. The note payable is secured by the assets of the
Pharmacy segment.
    
    
    750
    
    
    
    Post-closing risk share obligation relating to the PrairieStone acquisition
due to Lunds, bearing an effective interest rate of 10%, maturing on February
17, 2010 with monthly principal payments of $37,000. The balance is
unsecured.
    
    
    296
    
    
    
    408Note payable, unsecured bearing interest at prime plus 1% due on July 31, 2009.
    
    
    189
    
    
    
    189Total long-term obligations
    
    
    24,881
    
    
    
    27,514Less current portion of long-term obligations
    
    
    (1,235
    )
    
    
    (596
    )Long-term obligations, less current portion
    
    $
    23,646
    
    
    $
    26,918
   14




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Remainder of fiscal 2010
    
    $
    485Fiscal 2011
    
    
    750Fiscal 2012
    
    
    Fiscal 2013
    
    
    23,646Total
    
    $
    24,881
  Note 6  Stockholders Equity
 Warrants
  June 30,
    
    
    March 31,Description
    
    Exercise Price
    
    
    Granted
    
    Expiration
    
    2009
    
    
    2009Class A
    
    $
    0.50
    
    
    May 2004
    
    May 2011
    
    
    3,593,836
    
    
    
    3,593,836Class B-1
    
    $
    0.001
    
    
    September 2005
    
    September 2009
    
    
    444,444
    
    
    
    444,444Class B-2
    
    $
    1.20
    
    
    September 2005
    
    May 2014
    
    
    44,444
    
    
    
    44,444ABDC issuance
    
    $
    0.75
    
    
    June 2008
    
    June 2015
    
    
    490,000
    
    
    
    490,0004,572,724
    
    
    
    4,572,724
   Note 7  Contingencies
 Contingencies
    15




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Note 8  Stock-Based Compensation
   Stock Options
    Three-Month Period EndedJune 30,Weighted-average
    
    2009
    
    
    2008Expected volatility
    
    
    N/A
    
    
    
    73
    %Expected dividend yields
    
    
    N/A
    
    
    
    0
    %Expected terms (in years)
    
    
    N/A
    
    
    
    4Risk-free interest rate
    
    
    N/A
    
    
    
    3.19
    %
  16




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Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term (Years)
    
    
    (thousands)Outstanding at April 1, 2009
    
    
    3,771,225
    
    
    $
    0.76Forfeited or expired
    
    
    (31,667
    )
    
    
    0.71Outstanding at June 30, 2009
    
    
    3,739,558
    
    
    $
    0.76
    
    
    
    3.7
    
    
    
    395,608Exercisable at June 30, 2009
    
    
    3,196,920
    
    
    $
    0.81
    
    
    
    4.9
    
    
    
    285,396
   Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.18  $0.25
    
    
    524,000
    
    
    
    5.8
    
    
    $
    0.25
    
    
    
    509,000
    
    
    $
    0.25$0.26  $1.00
    
    
    2,446,978
    
    
    
    5.9
    
    
    $
    0.61
    
    
    
    1,919,340
    
    
    $
    0.66$1.01  $1.50
    
    
    650,967
    
    
    
    3.6
    
    
    $
    1.37
    
    
    
    650,967
    
    
    $
    1.37$1.51  $2.25
    
    
    43,000
    
    
    
    3.8
    
    
    $
    2.22
    
    
    
    43,000
    
    
    $
    2.22$2.92
    
    
    74,613
    
    
    
    4.1
    
    
    $
    2.92
    
    
    
    74,613
    
    
    $
    2.92Outstanding at June 30, 2009
    
    
    3,739,558
    
    
    
    
    
    
    $
    0.76
    
    
    
    3,196,920
    
    
    $
    0.81
      17




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##### Table of Contents



Restricted Stock
   Weighted-AverageGrant DateFair ValueShares
    
    
    per ShareUnvested at April 1, 2009
    
    
    656,092
    
    
    $
    1.41Vested
    
    
    (244,375
    )
    
    
    1.37Forfeited
    
    
    (10,000
    )
    
    
    1.48Unvested at June 30, 2009
    
    
    401,717
    
    
    $
    1.44
    Note 9  Income Taxes
   Note 10  Related Party Transactions
    18




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##### Table of Contents



19




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##### Table of Contents



Note 11  Segment Information
       20




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##### Table of Contents



Three Month Period EndedJune 30,2009
    
    
    2008Revenue, net:Services
    
    $
    22,680
    
    
    $
    25,006Pharmacy
    
    
    3,218
    
    
    
    1,106Catalog
    
    
    511
    
    
    
    666Total revenue
    
    
    26,409
    
    
    
    26,778Operating income (loss):Services
    
    $
    1,207
    
    
    $
    1,105Pharmacy
    
    
    (1,313
    )
    
    
    (851
    )Catalog
    
    
    (38
    )
    
    
    9Unallocated corporate overhead
    
    
    (2,485
    )
    
    
    (2,856
    )Total operating income (loss)
    
    
    (2,629
    )
    
    
    (2,593
    )Other expenses:Interest expense, net
    
    
    838
    
    
    
    956Loss on extinguishment of debt
    
    
    
    
    
    
    248Other
    
    
    36
    
    
    
    10Net loss before income tax expense
    
    
    (3,503
    )
    
    
    (3,807
    )Income tax expense
    
    
    93
    
    
    
    196Net loss from continuing operations
    
    $
    (3,596
    )
    
    $
    (4,003
    )Depreciation and amortization:Services
    
    $
    193
    
    
    $
    282Pharmacy
    
    
    87
    
    
    
    131Catalog
    
    
    
    
    
    
    13Corporate
    
    
    131
    
    
    
    33Total depreciation and amortization
    
    $
    411
    
    
    $
    459
 June 30,2009
    
    
    2008Capital expenditures:Services
    
    $
    15
    
    
    $
    37Pharmacy
    
    
    58
    
    
    
    103Corporate
    
    
    2
    
    
    
    101Discontinued operations
    
    
    
    
    
    
    23Total capital expenditures
    
    $
    75
    
    
    $
    264
 June 30, 2009
    
    
    March 31, 2009Assets:Services
    
    $
    38,848
    
    
    $
    39,183Pharmacy
    
    
    5,462
    
    
    
    5,514Catalog
    
    
    358
    
    
    
    221Unallocated corporate assets
    
    
    1,578
    
    
    
    3,166Assets of discontinued operations
    
    
    791
    
    
    
    11,308Total assets
    
    $
    47,037
    
    
    $
    59,392
  21




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##### Table of Contents



ITEM 2.
    
    Managements Discussion And Analysis Of Financial Condition And Results Of Operations
  Cautionary Statement Concerning Forward-Looking Statements
     Overview
   22




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##### Table of Contents



Critical Accounting Policies
  Three-Month Period Ended June 30, 2009 Compared to the Three-Month Period Ended June 30, 2008
 Results of Continuing Operations, (in thousands, except share amounts)
 Three-Month PeriodEnded June 30,2009
    
    
    2008Revenues, net
    
    $
    26,409
    
    
    $
    26,778Cost of revenues
    
    
    18,961
    
    
    
    18,668Gross profit
    
    
    7,448
    
    
    
    8,110Selling, general and administrative expenses
    
    
    9,666
    
    
    
    10,244Depreciation and amortization
    
    
    411
    
    
    
    459Total operating expenses
    
    
    10,077
    
    
    
    10,703Operating loss
    
    
    (2,629
    )
    
    
    (2,593
    )Other expenses
    
    
    874
    
    
    
    1,214Net loss before income tax expense
    
    
    (3,503
    )
    
    
    (3,807
    )Income tax expense
    
    
    93
    
    
    
    196Net loss from continuing operations
    
    $
    (3,596
    )
    
    $
    (4,003
    )Weighted average number of shares  basic and diluted
    
    
    160,552
    
    
    
    131,688Net loss from continuing operations per share 
basic and diluted
    
    
    ($0.02
    )
    
    
    ($0.03
    )
  23




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##### Table of Contents



Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Revenues, net:Services
    
    $
    22,680
    
    
    
    85.9
    %
    
    $
    25,006
    
    
    
    93.4
    %
    
    $
    (2,326
    )
    
    
    -9.3
    %Pharmacy
    
    
    3,218
    
    
    
    12.2
    %
    
    
    1,106
    
    
    
    4.1
    %
    
    
    2,112
    
    
    
    191.0
    %Catalog
    
    
    511
    
    
    
    1.9
    %
    
    
    666
    
    
    
    2.5
    %
    
    
    (155
    )
    
    
    -23.3
    %26,409
    
    
    
    100.0
    %
    
    
    26,778
    
    
    
    100.0
    %
    
    
    (369
    )
    
    
    -1.4
    %Cost of revenues:Services
    
    $
    15,764
    
    
    
    
    
    
    $
    17,399
    
    
    
    
    
    
    $
    (1,635
    )
    
    
    -9.4
    %Pharmacy
    
    
    2,863
    
    
    
    
    
    
    
    914
    
    
    
    
    
    
    
    1,949
    
    
    
    213.2
    %Catalog
    
    
    334
    
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    (21
    )
    
    
    -5.9
    %18,961
    
    
    
    
    
    
    
    18,668
    
    
    
    
    
    
    
    293
    
    
    
    1.6
    %Gross
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    Margin %Gross margins:Services
    
    
    6,916
    
    
    
    30.5
    %
    
    
    7,607
    
    
    
    30.4
    %
    
    
    (691
    )
    
    
    -9.1
    %Pharmacy
    
    
    355
    
    
    
    11.0
    %
    
    
    192
    
    
    
    17.4
    %
    
    
    163
    
    
    
    84.9
    %Catalog
    
    
    177
    
    
    
    34.6
    %
    
    
    311
    
    
    
    46.7
    %
    
    
    (134
    )
    
    
    -43.1
    %$
    7,448
    
    
    
    28.2
    %
    
    $
    8,110
    
    
    
    30.3
    %
    
    $
    (662
    )
    
    
    -8.2
    %
  % of Total
    
    
    
    
    
    
    % of  Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    17,688
    
    
    
    78.0
    %
    
    $
    16,900
    
    
    
    67.6
    %
    
    $
    788
    
    
    
    4.7
    %Medical staffing
    
    
    3,574
    
    
    
    15.8
    %
    
    
    5,508
    
    
    
    22.0
    %
    
    
    (1,934
    )
    
    
    -35.1
    %Travel staffing
    
    
    1,418
    
    
    
    6.2
    %
    
    
    2,598
    
    
    
    10.4
    %
    
    
    (1,180
    )
    
    
    -45.4
    %Total Services
    
    $
    22,680
    
    
    
    100.0
    %
    
    $
    25,006
    
    
    
    100.0
    %
    
    $
    (2,326
    )
    
    
    -9.3
    %
 Services Segment
    24




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Pharmacy Segment
   Catalog Segment
   25




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##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    SG&A
    
    
    2008
    
    
    SG&A
    
    
    (Decrease)
    
    
    (Decrease)Services
    
    $
    5,515
    
    
    
    57.1
    %
    
    $
    6,221
    
    
    
    60.7
    %
    
    $
    (706
    )
    
    
    -11.3
    %Pharmacy
    
    
    1,581
    
    
    
    16.4
    %
    
    
    912
    
    
    
    8.9
    %
    
    
    669
    
    
    
    73.4
    %Catalog
    
    
    215
    
    
    
    2.2
    %
    
    
    289
    
    
    
    2.8
    %
    
    
    (74
    )
    
    
    -25.6
    %Corporate
    
    
    2,355
    
    
    
    24.4
    %
    
    
    2,822
    
    
    
    27.5
    %
    
    
    (467
    )
    
    
    -16.5
    %$
    9,666
    
    
    
    100.0
    %
    
    $
    10,244
    
    
    
    100.0
    %
    
    $
    (578
    )
    
    
    -5.6
    %SG&A as a % of net
revenue
    
    
    36.6
    %
    
    
    
    
    
    
    38.3
    %
 Services Segment
  Pharmacy Segment
  Catalog Segment
  Corporate
     26




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##### Table of Contents



Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property
and equipment
    
    $
    252
    
    
    $
    158
    
    
    $
    94
    
    
    
    59.5
    %Amortization of acquired intangible assets
    
    
    159
    
    
    
    301
    
    
    
    (142
    )
    
    
    -47.2
    %$
    411
    
    
    $
    459
    
    
    $
    (48
    )
    
    
    -10.5
    %
   Other Expenses
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    845
    
    
    $
    974
    
    
    $
    (129
    )
    
    
    -13.2
    %Interest income
    
    
    (7
    )
    
    
    (18
    )
    
    
    11
    
    
    
    -61.1
    %$
    838
    
    
    $
    956
    
    
    
    ($118
    )
    
    
    -12.3
    %
  Loss on Extinguishment of Debt
   27




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##### Table of Contents



Income Taxes
   Loss from Discontinued Operations
 Industrial Staffing Operations
   HHE Operations
      Pharmacy Operations
   28




---



##### Table of Contents



Liquidity and Capital Resources
        29




---



##### Table of Contents



2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    (1,615
    )
    
    $
    375Net cash provided (used in) investing activities
    
    
    8,392
    
    
    
    (608
    )Net cash used in financing activities
    
    
    (7,782
    )
    
    
    (3,737
    )Net change in cash and cash equivalents
    
    
    (1,005
    )
    
    
    (3,970
    )Cash and cash equivalents, end of period
    
    
    517
    
    
    
    2,381Availability under line of credit agreements
    
    $
    2,471
    
    
    $
    2,022
         30




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##### Table of Contents



Medicare
    
    
    0
    %Medicaid/other government
    
    
    28
    %Commercial insurance
    
    
    15
    %Institution/facilities
    
    
    35
    %Private pay
    
    
    22
    %
 Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
       31




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##### Table of Contents



Item 1.
    
    Legal Proceedings.
  
 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 and prevent us from
fulfilling our debt service obligations and 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.
  32




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##### Table of Contents




    
    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 to establish home care
staffing business and spread our cost structure over a rapidly growing and larger revenue
base and ultimately become profitable.
 Due to our debt level, our history of operating losses and negative cash flows, and the current
credit crisis, 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.
   The terms of our credit agreements with various lenders subject us to the risk of foreclosure on
certain property.
   33




---



##### Table of Contents



In order to repay our debt obligations, as well as to pursue our growth strategies, we may seek
additional equity financing, which could result in dilution to our security holders.
  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.
  Due to our operating losses during recent fiscal years, our stock could be at risk of being
delisted by the NYSE Amex Equities Exchange.
  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.
   34




---



##### Table of Contents



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.
  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.
   A significant decline in sales in our home care and staffing businesses would adversely impact our
revenue, operating income and cash flow and our ability to repay indebtedness and invest in new
products and services.
   35




---



##### Table of Contents



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.
  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 the Companys
shares of 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.
   36




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##### Table of Contents



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.
  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.
   37




---



##### Table of Contents



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 execute could adversely impact our business.
  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.
  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 5.
    
    Other Information.
   
 Item 6.
    
    Exhibits.
   38




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##### Table of Contents



SIGNATURES
  August 13, 2009
    
    By:
    
    /s/ Marvin R. Richardson

Marvin R. RichardsonChief Executive Officer(Principal Executive Officer) and DirectorAugust 13, 2009
    
    By:
    
    /s/ Matthew R. Middendorf

Matthew R. MiddendorfTreasurer and Chief Financial Officer(Principal Financial and Accounting Officer)
  39




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.
    
    Exhibit Description10.1
    
    
    Amended
and Restated Employment Agreement dated August 12, 2009, by and
between Arcadia Resources, Inc. and Marvin Richardson.10.2
    
    
    Amended
and Restated Employment Agreement dated August 12, 2009, by and
between Arcadia Resources, Inc. and Matthew R. Middendorf.10.3
    
    
    Amended
and Restated Employment Agreement dated August 12, 2009, by and
between Arcadia Resources, Inc. and Steven L. Zeller.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 §906
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 §906 of the Sarbanes  Oxley Act of 2002.
  40