##### 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 December 31, 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 Statements
    
    
    2Condensed Consolidated Balance Sheets as of December 31, 2009 (unaudited) and March 31, 2009
    
    
    2Condensed Consolidated Statements of Operations for the Three and Nine Months ended December 31,
2009 and 2008 (unaudited)
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the Nine Months ended December 31,
2009 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months ended December 31, 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
    
    
    41Item 4. Controls and Procedures
    
    
    41Part II: Other InformationItem 1. Legal Proceedings
    
    
    42Item 1A. Risk Factors
    
    
    42Item 6. Exhibits
    
    
    50Exhibits
    
    
    51Signatures
    
    
    50Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   1




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##### Table of Contents



(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 December 31,
    
    
    March 31,2009
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,308
    
    
    $
    1,522Accounts receivable, net of allowance of
$3,403 and $3,386, respectively
    
    
    13,478
    
    
    
    15,679Inventories, net
    
    
    832
    
    
    
    863Prepaid expenses and other current assets
    
    
    1,408
    
    
    
    1,764Current assets of discontinued operations
    
    
    
    
    
    
    5,458Total current assets
    
    
    23,026
    
    
    
    25,286Property and equipment, net
    
    
    1,759
    
    
    
    2,308Goodwill
    
    
    17,099
    
    
    
    17,053Acquired intangible assets, net
    
    
    7,829
    
    
    
    8,305Other assets
    
    
    522
    
    
    
    590Restricted cash
    
    
    500
    
    
    
    Assets of discontinued operations
    
    
    
    
    
    
    5,850Total assets
    
    $
    50,735
    
    
    $
    59,392LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Lines of credit, current portion
    
    $
    
    
    
    $
    437Accounts payable
    
    
    2,504
    
    
    
    2,765Accrued expenses:Compensation and related taxes
    
    
    1,906
    
    
    
    2,986Interest
    
    
    91
    
    
    
    89Health insurance
    
    
    470
    
    
    
    545Other
    
    
    1,538
    
    
    
    917Payable to affiliated agencies
    
    
    749
    
    
    
    1,284Fair value of warrant liability
    
    
    2,109
    
    
    
    Long-term obligations, current portion
    
    
    939
    
    
    
    596Capital lease obligations, current portion
    
    
    68
    
    
    
    59Current liabilities of discontinued operations
    
    
    
    
    
    
    2,037Total current liabilities
    
    
    10,374
    
    
    
    11,715Lines of credit, less current portion
    
    
    9,012
    
    
    
    10,889Long-term obligations, less current portion
    
    
    24,691
    
    
    
    26,918Capital lease obligations, less current portion
    
    
    36
    
    
    
    37Total liabilities
    
    
    44,113
    
    
    
    49,559Commitments and contingenciesSTOCKHOLDERS EQUITYPreferred stock, $.001 par value, 5,000,000 shares
authorized, none outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 300,000,000 shares
authorized; 177,771,794 shares and 161,249,529
shares issued, respectively
    
    
    178
    
    
    
    161Additional paid-in capital
    
    
    144,564
    
    
    
    135,920Accumulated deficit
    
    
    (138,120
    )
    
    
    (126,248
    )Total stockholders equity
    
    
    6,622
    
    
    
    9,833Total liabilities and stockholders equity
    
    $
    50,735
    
    
    $
    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
    
    
    Nine Month Period EndedDecember 31,
    
    
    December 31,(Unaudited)
    
    
    (Unaudited)2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net
    
    $
    26,106
    
    
    $
    26,693
    
    
    $
    78,131
    
    
    $
    80,189Cost of revenues
    
    
    18,639
    
    
    
    18,819
    
    
    
    55,811
    
    
    
    55,991Gross profit
    
    
    7,467
    
    
    
    7,874
    
    
    
    22,320
    
    
    
    24,198Selling, general and administrative
    
    
    9,422
    
    
    
    9,426
    
    
    
    29,170
    
    
    
    29,750Depreciation and amortization
    
    
    484
    
    
    
    564
    
    
    
    1,425
    
    
    
    1,636Total operating expenses
    
    
    9,906
    
    
    
    9,990
    
    
    
    30,595
    
    
    
    31,386Operating loss
    
    
    (2,439
    )
    
    
    (2,116
    )
    
    
    (8,275
    )
    
    
    (7,188
    )Other expenses (income):Interest expense, net
    
    
    934
    
    
    
    1,031
    
    
    
    2,618
    
    
    
    3,041Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Change in fair value of warrant liability
    
    
    (368
    )
    
    
    
    
    
    
    (368
    )
    
    
    Other
    
    
    
    
    
    
    (2
    )
    
    
    30
    
    
    
    53Total other expenses (income)
    
    
    566
    
    
    
    1,029
    
    
    
    2,280
    
    
    
    3,342Loss from continuing operations before
income taxes
    
    
    (3,005
    )
    
    
    (3,145
    )
    
    
    (10,555
    )
    
    
    (10,530
    )Income tax (benefit) expense
    
    
    16
    
    
    
    (274
    )
    
    
    116
    
    
    
    120Loss from continuing operations
    
    
    (3,021
    )
    
    
    (2,871
    )
    
    
    (10,671
    )
    
    
    (10,650
    )Discontinued operations:Income (loss) from discontinued operations
    
    
    (147
    )
    
    
    330
    
    
    
    (1,595
    )
    
    
    1,587Net gain (loss) on disposal
    
    
    15
    
    
    
    (696
    )
    
    
    394
    
    
    
    (696
    )(132
    )
    
    
    (366
    )
    
    
    (1,201
    )
    
    
    891NET LOSS
    
    $
    (3,153
    )
    
    $
    (3,237
    )
    
    $
    (11,872
    )
    
    $
    (9,759
    )Weighted average number of common shares
outstanding
    
    
    168,788,000
    
    
    
    135,949,000
    
    
    
    163,412,000
    
    
    
    133,559,000Basic and diluted net income (loss) per share:Loss from continuing operations
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.08
    )Income from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net loss per share
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.07
    )
 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
    )
    
    $
    9,833Sale of common stock and
warrants, net of $885 in fees
    
    
    15,857,141
    
    
    
    16
    
    
    $
    7,722
    
    
    
    
    
    
    
    7,738Stock-based compensation expense
    
    
    176,875
    
    
    
    
    
    
    
    923
    
    
    
    
    
    
    
    923Cashless exercise of warrants
    
    
    488,249
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,872
    )
    
    
    (11,872
    )Balance, December 31, 2009
    
    
    177,771,794
    
    
    $
    178
    
    
    $
    144,564
    
    
    $
    (138,120
    )
    
    $
    6,622
 See accompanying notes to these condensed consolidated financial statements.
  4




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(IN THOUSANDS)
 Nine Month Period EndedDecember 31,(Unaudited)2009
    
    
    2008Operating activitiesNet loss for the period
    
    $
    (11,872
    )
    
    $
    (9,759
    )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Provision for doubtful accounts
    
    
    1,432
    
    
    
    2,598Depreciation of property and equipment
    
    
    1,241
    
    
    
    3,353Amortization of intangible assets
    
    
    564
    
    
    
    1,403(Gain) loss on business disposals
    
    
    (394
    )
    
    
    696Non-cash interest expense
    
    
    1,789
    
    
    
    1,677Loss on sale of property and equipment
    
    
    
    
    
    
    35Amortization of deferred financing costs and debt discounts
    
    
    280
    
    
    
    738Stock-based compensation expense
    
    
    923
    
    
    
    1,030Change in fair value of warrant liability
    
    
    (368
    )
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    248Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    3,088
    
    
    
    (1,845
    )Inventories
    
    
    648
    
    
    
    (788
    )Other assets
    
    
    267
    
    
    
    590Accounts payable
    
    
    (1,252
    )
    
    
    (30
    )Accrued expenses
    
    
    (1,477
    )
    
    
    (140
    )Due to affiliated agencies
    
    
    (373
    )
    
    
    261Deferred revenue
    
    
    
    
    
    
    (29
    )Net cash provided by (used in) operating activities
    
    
    (5,504
    )
    
    
    38Investing activitiesBusiness acquisitions, net of cash acquired
    
    
    (253
    )
    
    
    (653
    )Proceeds from business disposal
    
    
    9,335
    
    
    
    356Increase in restricted cash
    
    
    (500
    )
    
    
    Proceeds from disposals of property and equipment
    
    
    
    
    
    
    20Purchases of property and equipment
    
    
    (329
    )
    
    
    (892
    )Net cash provided by (used in) investing activities
    
    
    8,253
    
    
    
    (1,169
    )Financing activitiesNet payments on lines of credit
    
    
    (113
    )
    
    
    (4,211
    )Proceeds from equity financing, net of fees paid in cash of $839
    
    
    10,260
    
    
    
    Proceeds from note payable, net of fees
    
    
    2,142
    
    
    
    Payments on notes payable and capital lease obligations
    
    
    (9,252
    )
    
    
    (707
    )Net cash provided by (used in) financing activities
    
    
    3,037
    
    
    
    (4,918
    )Net change in cash and cash equivalents
    
    
    5,786
    
    
    
    (6,049
    )Cash and cash equivalents, beginning of period
    
    
    1,522
    
    
    
    6,351Cash and cash equivalents, end of period
    
    $
    7,308
    
    
    $
    302Supplementary information:Cash paid during the period for:Interest
    
    $
    564
    
    
    $
    673Income taxes
    
    
    67
    
    
    
    104Non-cash investing / financing activities:Accounts payable converted to notes payable
    
    
    750
    
    
    
    Warrants issued in conjunction with line of credit amendment
    
    
    
    
    
    
    248Accrued interest converted to notes payable
    
    
    1,789
    
    
    
    1,677Non-cash equity financing fee
    
    
    45
    
    
    
    
 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
    6




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Note 2  Managements Plan
       7




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Note 3  Discontinued Operations
 Industrial Staffing Operations
  HHE Operations
    8




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Retail Pharmacy Software Business
    9




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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
  Three Months Ended
    
    
    Nine Months EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net:Services  Industrial Staffing
    
    $
    
    
    
    $
    3,706
    
    
    $
    1,223
    
    
    $
    13,746Home Health Equipment
    
    
    
    
    
    
    4,595
    
    
    
    1,423
    
    
    
    14,281Pharmacy  Software
    
    
    
    
    
    
    523
    
    
    
    348
    
    
    
    1,607$
    
    
    
    
    8,824
    
    
    $
    2,994
    
    
    
    29,634Income (loss) from operations:Services  Industrial Staffing
    
    $
    (3
    )
    
    $
    213
    
    
    $
    (47
    )
    
    $
    1,112Home Health Equipment
    
    
    (124
    )
    
    
    133
    
    
    
    (1,374
    )
    
    
    447Pharmacy  Software
    
    
    (20
    )
    
    
    (16
    )
    
    
    (174
    )
    
    
    28$
    (147
    )
    
    $
    330
    
    
    $
    (1,595
    )
    
    $
    1,587Gain / (loss) on disposal:Services  Industrial Staffing
    
    $
    15
    
    
    $
    
    
    
    $
    144
    
    
    $
    Home Health Equipment
    
    
    
    
    
    
    (696
    )
    
    
    279
    
    
    
    (696
    )Pharmacy  Software
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    $
    15
    
    
    $
    (696
    )
    
    $
    394
    
    
    $
    (696
    )Income (loss) from discontinued operations:Services  Industrial Staffing
    
    $
    12
    
    
    $
    213
    
    
    $
    97
    
    
    $
    1,112Home Health Equipment
    
    
    (124
    )
    
    
    (563
    )
    
    
    (1,095
    )
    
    
    (249
    )Pharmacy  Software
    
    
    (20
    )
    
    
    (16
    )
    
    
    (203
    )
    
    
    28$
    (132
    )
    
    $
    (366
    )
    
    $
    (1,201
    )
    
    $
    891
  10




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Note 4  Goodwill and Acquired Intangible Assets
  Services
    
    
    Pharmacy
    
    
    TotalGoodwill at April 1, 2009
    
    $
    14,553
    
    
    $
    2,500
    
    
    $
    17,053Acquisitions during the period
    
    
    46
    
    
    
    
    
    
    
    46Goodwill at December 31, 2009
    
    $
    14,599
    
    
    $
    2,500
    
    
    $
    17,099
        11




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December 31, 2009
    
    
    March 31, 2009Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationTrade name
    
    $
    6,664
    
    
    $
    805
    
    
    $
    6,664
    
    
    $
    682Customer relationships
    
    
    4,720
    
    
    
    2,750
    
    
    
    4,720
    
    
    
    2,39711,384
    
    
    $
    3,555
    
    
    
    11,384
    
    
    $
    3,079Less accumulated amortization
    
    
    (3,555
    )
    
    
    
    
    
    
    (3,079
    )Net acquired intangible assets
    
    $
    7,829
    
    
    
    
    
    
    $
    8,305
   Remainder of fiscal 2010
    
    $
    158Fiscal 2011
    
    
    571Fiscal 2012
    
    
    518Fiscal 2013
    
    
    476Fiscal 2014
    
    
    382Thereafter
    
    
    5,724Total
    
    $
    7,829
 Note 5  Lines of Credit
  At December 31, 2009MaximumAvailable
    
    
    
    
    
    
    March 31,Lending Institution
    
    Maturity date
    
    Borrowing
    
    
    Balance
    
    
    2009
    
    
    Interest rateComerica Bank
    
    August 1, 2011
    
    $
    9,534
    
    
    $
    9,012
    
    
    $
    9,126
    
    
    Prime plus 2.75%AmerisourceBergen Drug Corporation
    
    N/A
    
    
    
    
    
    
    
    
    
    
    2,200
    
    
    
    10
    %Total lines of credit obligations
    
    
    
    $
    9,534
    
    
    
    9,012
    
    
    
    11,326Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )Long-term portion
    
    
    
    
    
    
    
    $
    9,012
    
    
    $
    10,889
  12




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Comerica Bank
    AmerisourceBergen Drug Corporation
    13




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Note 6  Long-Term Obligations
  December 31,
    
    
    March 31,2009
    
    
    2009Note payable to JANA Master Fund, Ltd.
(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.
    
    $
    17,264
    
    
    $
    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.
    
    
    6,349
    
    
    
    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.
    
    
    1,078
    
    
    
    1,000Payable due to AmerisourceBergen Drug
Corporation consistent with the terms of an
amendment to a line of credit agreement
dated 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 debt is secured by the assets
of the Pharmacy segment. (see also Note 5
- Line of Credit)
    
    
    750
    
    
    
    Post-closing risk share obligation
relating to the PrairieStone acquisition,
bearing an effective interest rate of 10%.
    
    
    
    
    
    
    408Other
    
    
    189
    
    
    
    189Total long-term obligations
    
    
    25,630
    
    
    
    27,514Less current portion of long-term obligations
    
    
    (939
    )
    
    
    (596
    )Long-term obligations, less current portion
    
    $
    24,691
    
    
    $
    26,918
    14




---



##### Table of Contents



Remainder of fiscal 2010
    
    $
    Fiscal 2011
    
    
    939Fiscal 2012
    
    
    Fiscal 2013
    
    
    24,691Total
    
    $
    25,630
  Note 7  Stockholders Equity
 General
  Common Stock Transactions
    Warrants
  December 31,
    
    
    March 31,Exercise Price
    
    
    Granted
    
    Expiration
    
    2009
    
    
    2009$
    0.001
    
    
    September 2005
    
    September 2010
    
    
    
    
    
    
    444,444$
    0.41
    
    
    April 2009
    
    April 2014
    
    
    52,800
    
    
    
    $
    0.50
    
    
    various
    
    May 2011
    
    
    2,301,774
    
    
    
    2,438,385$
    0.50
    
    
    May 2004
    
    March 2014
    
    
    1,070,796
    
    
    
    1,070,796$
    0.75
    
    
    June 2008
    
    June 2015
    
    
    490,000
    
    
    
    490,000$
    0.95
    
    
    November 2009
    
    May 2015
    
    
    7,135,713
    
    
    
    $
    2.25
    
    
    September 2005
    
    September 2010
    
    
    44,444
    
    
    
    44,44411,095,527
    
    
    
    4,488,069
  15




---



##### Table of Contents



Weighted-average
    
    November 17, 2009
    
    
    December 31, 2009Expected volatility
    
    
    86
    %
    
    
    84
    %Expected dividend yields
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    5.5
    
    
    
    5.5Risk-free interest rate
    
    
    2.19
    %
    
    
    2.69
    %
  Note 8  Stock-Based Compensation
     16




---



##### Table of Contents



Stock Options
    Three-Month Period Ended
    
    
    Nine-Month Period EndedDecember 31,
    
    
    December 31,Weighted-average
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Expected volatility
    
    
    90
    %
    
    
    84
    %
    
    
    78
    %
    
    
    76
    %Expected dividend yields
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    4Risk-free interest rate
    
    
    1.68
    %
    
    
    1.74
    %
    
    
    1.69
    %
    
    
    2.90
    %
  Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term (Years)
    
    
    (thousands)Outstanding at April 1, 2009
    
    
    3,771,225
    
    
    $
    0.76Granted
    
    
    2,830,572
    
    
    
    0.73Forfeited or expired
    
    
    (368,350
    )
    
    
    1.07Outstanding at December 31, 2009
    
    
    6,233,447
    
    
    $
    0.73
    
    
    
    5.5
    
    
    $
    182Exercisable at December 31, 2009
    
    
    3,326,663
    
    
    $
    0.75
    
    
    
    4.8
    
    
    $
    165
   17




---



##### Table of Contents



WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life (years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.18 - $0.25
    
    
    516,000
    
    
    
    3.9
    
    
    $
    0.25
    
    
    
    510,000
    
    
    $
    0.25$0.26 - $1.00
    
    
    5,148,867
    
    
    
    4.5
    
    
    
    0.68
    
    
    
    2,248,083
    
    
    
    0.64$1.01 - $1.50
    
    
    450,967
    
    
    
    3.1
    
    
    
    1.34
    
    
    
    450,967
    
    
    
    1.34$1.51 - $2.25
    
    
    43,000
    
    
    
    3.3
    
    
    
    2.22
    
    
    
    43,000
    
    
    
    2.22$2.92
    
    
    74,613
    
    
    
    3.6
    
    
    $
    2.92
    
    
    
    74,613
    
    
    $
    2.92Outstanding at December 31, 2009
    
    
    6,233,447
    
    
    
    
    
    
    
    
    
    
    
    3,326,663
     Restricted Stock
   Weighted-AverageGrant DateFair ValueShares
    
    
    per ShareUnvested at April 1, 2009
    
    
    476,092
    
    
    $
    1.45Vested
    
    
    (176,875
    )
    
    
    1.42Forfeited
    
    
    (10,000
    )
    
    
    1.48Unvested at December 31, 2009
    
    
    289,217
    
    
    $
    1.40
   18




---



##### Table of Contents



Note 9  Contingencies
   Note 10  Income Taxes
   Note 11  Related Party Transactions
     19




---



##### Table of Contents



Note 12  Segment Information
       20




---



##### Table of Contents



Three Month Period Ended
    
    
    Nine Month Period EndedDecember 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue, net:Services
    
    $
    21,563
    
    
    $
    24,505
    
    
    $
    65,952
    
    
    $
    74,335Pharmacy
    
    
    4,106
    
    
    
    1,527
    
    
    
    10,732
    
    
    
    3,846Catalog
    
    
    437
    
    
    
    661
    
    
    
    1,447
    
    
    
    2,008Total revenue
    
    
    26,106
    
    
    
    26,693
    
    
    
    78,131
    
    
    
    80,189Operating income (loss):Services
    
    $
    896
    
    
    $
    901
    
    
    $
    3,140
    
    
    $
    3,082Pharmacy
    
    
    (1,437
    )
    
    
    (1,253
    )
    
    
    (4,314
    )
    
    
    (3,128
    )Catalog
    
    
    (10
    )
    
    
    (125
    )
    
    
    (42
    )
    
    
    (98
    )Unallocated corporate overhead
    
    
    (1,888
    )
    
    
    (1,639
    )
    
    
    (7,059
    )
    
    
    (7,044
    )Total operating income (loss)
    
    
    (2,439
    )
    
    
    (2,116
    )
    
    
    (8,275
    )
    
    
    (7,188
    )Other expenses:Interest expense, net
    
    
    934
    
    
    
    1,031
    
    
    
    2,618
    
    
    
    3,041Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Change in fair value of warrant
    
    
    (368
    )
    
    
    
    
    
    
    (368
    )
    
    
    liabilityOther
    
    
    
    
    
    
    (2
    )
    
    
    30
    
    
    
    53Net loss before income tax expense
    
    
    (3,005
    )
    
    
    (3,145
    )
    
    
    (10,555
    )
    
    
    (10,530
    )Income tax expense
    
    
    16
    
    
    
    (274
    )
    
    
    116
    
    
    
    120Net loss from continuing operations
    
    $
    (3,021
    )
    
    $
    (2,871
    )
    
    $
    (10,671
    )
    
    $
    (10,650
    )Depreciation and amortization:Services
    
    $
    189
    
    
    $
    279
    
    
    $
    574
    
    
    $
    838Pharmacy
    
    
    212
    
    
    
    144
    
    
    
    504
    
    
    
    513Catalog
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    40Corporate
    
    
    83
    
    
    
    128
    
    
    
    347
    
    
    
    245Total depreciation and amortization
    
    $
    484
    
    
    $
    564
    
    
    $
    1,425
    
    
    $
    1,636December 31,2009
    
    
    2008Capital expenditures:Services
    
    $
    44
    
    
    $
    73Pharmacy
    
    
    266
    
    
    
    573Corporate
    
    
    19
    
    
    
    132Discontinued operations
    
    
    
    
    
    
    114Total capital expenditures
    
    $
    329
    
    
    $
    892December 31, 2009
    
    
    March 31, 2009Assets:Services
    
    $
    43,235
    
    
    $
    39,183Pharmacy
    
    
    5,788
    
    
    
    5,514Catalog
    
    
    232
    
    
    
    221Unallocated corporate assets
    
    
    1,480
    
    
    
    3,166Assets of discontinued operations
    
    
    
    
    
    
    11,308Total assets
    
    $
    50,735
    
    
    $
    59,392
  21




---



##### Table of Contents



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




---



##### Table of Contents



Overview
  Critical Accounting Policies
  Three-Month Period Ended December 31, 2009 Compared to the Three-Month Period Ended December 31,
2008
 Results of Continuing Operations, (in thousands, except share amounts)
 Three-Month PeriodEnded Decembe 31,2009
    
    
    2008Revenues, net
    
    $
    26,106
    
    
    $
    26,693Cost of revenues
    
    
    18,639
    
    
    
    18,819Gross profit
    
    
    7,467
    
    
    
    7,874Selling, general and administrative expenses
    
    
    9,422
    
    
    
    9,426Depreciation and amortization
    
    
    484
    
    
    
    564Total operating expenses
    
    
    9,906
    
    
    
    9,990Operating loss
    
    
    (2,439
    )
    
    
    (2,116
    )Other expenses
    
    
    566
    
    
    
    1,029Net loss before income tax expense
    
    
    (3,005
    )
    
    
    (3,145
    )Income tax expense (benefit)
    
    
    16
    
    
    
    (274
    )Net loss from continuing operations
    
    $
    (3,021
    )
    
    $
    (2,871
    )Weighted average number of shares  basic and diluted
    
    
    168,788,000
    
    
    
    135,949,000Net loss from continuing operations per share  basic and diluted
    
    $
    (0.02
    )
    
    $
    (0.02
    )
  23




---



##### 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
    
    $
    21,563
    
    
    
    82.6
    %
    
    $
    24,505
    
    
    
    91.8
    %
    
    $
    (2,942
    )
    
    
    -12.0
    %Pharmacy
    
    
    4,106
    
    
    
    15.7
    %
    
    
    1,527
    
    
    
    5.7
    %
    
    
    2,579
    
    
    
    168.9
    %Catalog
    
    
    437
    
    
    
    1.7
    %
    
    
    661
    
    
    
    2.5
    %
    
    
    (224
    )
    
    
    -33.9
    %26,106
    
    
    
    100.0
    %
    
    
    26,693
    
    
    
    100.0
    %
    
    
    (587
    )
    
    
    -2.2
    %Cost of revenues:Services
    
    $
    14,980
    
    
    
    
    
    
    $
    17,069
    
    
    
    
    
    
    $
    (2,089
    )
    
    
    -12.2
    %Pharmacy
    
    
    3,394
    
    
    
    
    
    
    
    1,271
    
    
    
    
    
    
    
    2,123
    
    
    
    167.0
    %Catalog
    
    
    265
    
    
    
    
    
    
    
    479
    
    
    
    
    
    
    
    (214
    )
    
    
    -44.7
    %18,639
    
    
    
    
    
    
    
    18,819
    
    
    
    
    
    
    
    (180
    )
    
    
    -1.0
    %Gross
    
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    
    Margin %Gross margins:Services
    
    
    6,583
    
    
    
    30.5
    %
    
    
    7,436
    
    
    
    30.3
    %
    
    
    (853
    )
    
    
    -11.5
    %Pharmacy
    
    
    712
    
    
    
    17.3
    %
    
    
    256
    
    
    
    16.8
    %
    
    
    456
    
    
    
    178.1
    %Catalog
    
    
    172
    
    
    
    39.4
    %
    
    
    182
    
    
    
    27.5
    %
    
    
    (10
    )
    
    
    -5.5
    %$
    7,467
    
    
    
    28.6
    %
    
    $
    7,874
    
    
    
    29.5
    %
    
    $
    (407
    )
    
    
    -5.2
    %
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    17,095
    
    
    
    79.3
    %
    
    $
    17,532
    
    
    
    71.5
    %
    
    $
    (437
    )
    
    
    -2.5
    %Medical staffing
    
    
    2,941
    
    
    
    13.6
    %
    
    
    4,572
    
    
    
    18.7
    %
    
    
    (1,631
    )
    
    
    -35.7
    %Travel staffing
    
    
    1,527
    
    
    
    7.1
    %
    
    
    2,401
    
    
    
    9.8
    %
    
    
    (874
    )
    
    
    -36.4
    %Total Services
    
    $
    21,563
    
    
    
    100.0
    %
    
    $
    24,505
    
    
    
    100.0
    %
    
    $
    (2,942
    )
    
    
    -12.0
    %
 Services Segment
   24




---



##### Table of Contents



Pharmacy Segment
    25




---



##### Table of Contents



Catalog Segment
    26




---



##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    SG&A
    
    
    2008
    
    
    SG&A
    
    
    (Decrease)
    
    
    (Decrease)Services
    
    $
    5,496
    
    
    
    58.3
    %
    
    $
    6,243
    
    
    
    66.2
    %
    
    $
    (747
    )
    
    
    -12.0
    %Pharmacy
    
    
    1,938
    
    
    
    20.6
    %
    
    
    1,365
    
    
    
    14.5
    %
    
    
    573
    
    
    
    42.0
    %Catalog
    
    
    183
    
    
    
    1.9
    %
    
    
    307
    
    
    
    3.3
    %
    
    
    (124
    )
    
    
    -40.4
    %Corporate
    
    
    1,805
    
    
    
    19.2
    %
    
    
    1,511
    
    
    
    16.0
    %
    
    
    294
    
    
    
    19.5
    %$
    9,422
    
    
    
    100.0
    %
    
    $
    9,426
    
    
    
    100.0
    %
    
    $
    (4
    )
    
    
    0.0
    %SG&A as a % of net revenue
    
    
    36.1
    %
    
    
    
    
    
    
    35.3
    %
 Services Segment
  Pharmacy Segment
    27




---



##### Table of Contents



Catalog Segment
  Corporate
   Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property and equipment
    
    $
    325
    
    
    $
    258
    
    
    $
    67
    
    
    
    26.0
    %Amortization of acquired intangible assets
    
    
    159
    
    
    
    306
    
    
    
    (147
    )
    
    
    -48.0
    %$
    484
    
    
    $
    564
    
    
    $
    (80
    )
    
    
    -14.2
    %
   Other Expenses
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    940
    
    
    $
    1,047
    
    
    $
    (107
    )
    
    
    -10.2
    %Interest income
    
    
    (6
    )
    
    
    (16
    )
    
    
    10
    
    
    
    -62.5
    %$
    934
    
    
    $
    1,031
    
    
    $
    (97
    )
    
    
    -9.4
    %
   28




---



##### Table of Contents



Change in Fair Value of Warrant Liability
  Income Taxes
   Loss from Discontinued Operations
 Industrial Staffing Operations
   HHE Operations
    29




---



##### Table of Contents



Pharmacy Operations
    30




---



##### Table of Contents



Nine-Month Period Ended December 31, 2009 Compared to the Nine-Month Period Ended December 31, 2008
 Results of Continuing Operations, (in thousands, except share amounts)
 Nine-Month PeriodEnded Decembe 31,2009
    
    
    2008Revenues, net
    
    $
    78,131
    
    
    $
    80,189Cost of revenues
    
    
    55,811
    
    
    
    55,991Gross profit
    
    
    22,320
    
    
    
    24,198Selling, general and administrative expenses
    
    
    29,170
    
    
    
    29,750Depreciation and amortization
    
    
    1,425
    
    
    
    1,636Total operating expenses
    
    
    30,595
    
    
    
    31,386Operating loss
    
    
    (8,275
    )
    
    
    (7,188
    )Other expenses
    
    
    2,280
    
    
    
    3,342Net loss before income tax expense
    
    
    (10,555
    )
    
    
    (10,530
    )Income tax expense
    
    
    116
    
    
    
    120Net loss from continuing operations
    
    $
    (10,671
    )
    
    $
    (10,650
    )Weighted average number of shares  basic and diluted
    
    
    163,412,000
    
    
    
    133,559,000Net loss from continuing operations per share  basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.08
    )
 Revenues, Cost of Revenues and Gross Profits
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Revenues, net:Services
    
    $
    65,952
    
    
    
    84.4
    %
    
    $
    74,335
    
    
    
    92.7
    %
    
    $
    (8,383
    )
    
    
    -11.3
    %Pharmacy
    
    
    10,732
    
    
    
    13.7
    %
    
    
    3,846
    
    
    
    4.8
    %
    
    
    6,886
    
    
    
    179.0
    %Catalog
    
    
    1,447
    
    
    
    1.9
    %
    
    
    2,008
    
    
    
    2.5
    %
    
    
    (561
    )
    
    
    -27.9
    %78,131
    
    
    
    100.0
    %
    
    
    80,189
    
    
    
    100.0
    %
    
    
    (2,058
    )
    
    
    -2.6
    %Cost of revenues:Services
    
    $
    45,773
    
    
    
    
    
    
    $
    51,582
    
    
    
    
    
    
    $
    (5,809
    )
    
    
    -11.3
    %Pharmacy
    
    
    9,151
    
    
    
    
    
    
    
    3,196
    
    
    
    
    
    
    
    5,955
    
    
    
    186.3
    %Catalog
    
    
    887
    
    
    
    
    
    
    
    1,213
    
    
    
    
    
    
    
    (326
    )
    
    
    -26.9
    %55,811
    
    
    
    
    
    
    
    55,991
    
    
    
    
    
    
    
    (180
    )
    
    
    -0.3
    %Gross
    
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    
    Margin %Gross margins:Services
    
    
    20,179
    
    
    
    30.6
    %
    
    
    22,753
    
    
    
    30.6
    %
    
    
    (2,574
    )
    
    
    -11.3
    %Pharmacy
    
    
    1,581
    
    
    
    14.7
    %
    
    
    650
    
    
    
    16.9
    %
    
    
    931
    
    
    
    143.2
    %Catalog
    
    
    560
    
    
    
    38.7
    %
    
    
    795
    
    
    
    39.6
    %
    
    
    (235
    )
    
    
    -29.6
    %$
    22,320
    
    
    
    28.6
    %
    
    $
    24,198
    
    
    
    30.2
    %
    
    $
    (1,878
    )
    
    
    -7.8
    %
  31




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##### Table of Contents



% of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    52,039
    
    
    
    78.9
    %
    
    $
    51,881
    
    
    
    69.8
    %
    
    $
    158
    
    
    
    0.3
    %Medical staffing
    
    
    9,642
    
    
    
    14.6
    %
    
    
    15,066
    
    
    
    20.3
    %
    
    
    (5,424
    )
    
    
    -36.0
    %Travel staffing
    
    
    4,271
    
    
    
    6.5
    %
    
    
    7,388
    
    
    
    9.9
    %
    
    
    (3,117
    )
    
    
    -42.2
    %Total Services
    
    $
    65,952
    
    
    
    100.0
    %
    
    $
    74,335
    
    
    
    100.0
    %
    
    $
    (8,383
    )
    
    
    -11.3
    %
 Services Segment
    Pharmacy Segment
   32




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Catalog Segment
    33




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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
    
    $
    16,465
    
    
    
    56.4
    %
    
    $
    18,794
    
    
    
    63.2
    %
    
    $
    (2,329
    )
    
    
    -12.4
    %Pharmacy
    
    
    5,392
    
    
    
    18.5
    %
    
    
    3,264
    
    
    
    11.0
    %
    
    
    2,128
    
    
    
    65.2
    %Catalog
    
    
    601
    
    
    
    2.1
    %
    
    
    893
    
    
    
    3.0
    %
    
    
    (292
    )
    
    
    -32.7
    %Corporate
    
    
    6,712
    
    
    
    23.0
    %
    
    
    6,798
    
    
    
    22.8
    %
    
    
    (86
    )
    
    
    -1.3
    %$
    29,170
    
    
    
    100.0
    %
    
    $
    29,749
    
    
    
    100.0
    %
    
    $
    (579
    )
    
    
    -1.9
    %SG&A as a % of net revenue
    
    
    37.3
    %
    
    
    
    
    
    
    37.1
    %
 Services Segment
  Pharmacy Segment
    34




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##### Table of Contents



Catalog Segment
  Corporate
  Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property and equipment
    
    $
    949
    
    
    $
    722
    
    
    $
    227
    
    
    
    31.4
    %Amortization of acquired intangible assets
    
    
    476
    
    
    
    914
    
    
    
    (438
    )
    
    
    -47.9
    %$
    1,425
    
    
    $
    1,636
    
    
    $
    (211
    )
    
    
    -12.9
    %
   Other Expenses
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    2,635
    
    
    $
    3,089
    
    
    $
    (454
    )
    
    
    -14.7
    %Interest income
    
    
    (17
    )
    
    
    (48
    )
    
    
    31
    
    
    
    -64.6
    %$
    2,618
    
    
    $
    3,041
    
    
    $
    (423
    )
    
    
    -13.9
    %
   35




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Loss on Extinguishment of Debt
   Change in Fair Value of Warrant Liability
  Income Taxes
   Industrial Staffing Operations
    36




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##### Table of Contents



HHE Operations
      Pharmacy Operations
   Liquidity and Capital Resources
     37




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38




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##### Table of Contents



2009
    
    
    2008Net cash provided by (used in) operating activities
    
    $
    (5,504
    )
    
    $
    38Net cash provided (used in) investing activities
    
    
    8,253
    
    
    
    (1,169
    )Net cash used in financing activities
    
    
    3,037
    
    
    
    (4,918
    )Net change in cash and cash equivalents
    
    
    5,786
    
    
    
    (6,049
    )Cash and cash equivalents, end of period
    
    
    7,308
    
    
    
    302Availability under line of credit agreements
    
    $
    522
    
    
    $
    2,784
         39




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##### Table of Contents



Medicare
    
    
    0
    %Medicaid/other government
    
    
    28
    %Commercial insurance
    
    
    15
    %Institution/facilities
    
    
    35
    %Private pay
    
    
    22
    %
  40




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##### Table of Contents



Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
       41




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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.
    
    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.
  42




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##### Table of Contents



Due to our debt level, our history of operating losses and negative cash flows, and the current
conditions in the credit markets, we may not be able to increase the amount we can draw on our
revolving credit facility with Comerica Bank, or to obtain credit from other sources, to fund our
future needs for working capital, funding early-stage strategies and ongoing business operations,
or acquisitions.
  We may not be able to meet the financial covenants contained in our credit facilities, and we may
not be able to obtain waivers for any violations of those covenants should they occur.
   The terms of our credit agreements with various lenders subject us to the risk of foreclosure on
certain property.
  In order to fund operations, repay our debt obligations, or pursue our growth strategies, we may
seek additional equity financing, which could result in dilution to our security holders.
   43




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##### Table of Contents



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.
   44




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##### 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.
  Sales and profitability in our Pharmacy segment depends on continued demonstration of the
effectiveness of our DailyMed business model, which is in its early stages of broad market
roll-out.
  Our operations subject us to risk of litigation.
    45




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##### Table of Contents



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.
  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.
   46




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##### Table of Contents



The price of our common stock has been, and will likely continue to be, volatile, which could
diminish the ability to recoup an investment, or to earn a return on an investment, in our common
stock.
  Resale of our securities by any holder may be limited and affected by state blue-sky laws, which
could adversely affect the price of our securities and the holders investment in our Company.
  The issuance of our preferred stock could materially impact the market price of our common stock
and the rights of holders of our common stock.
  The exercise of common stock warrants and stock options may depress our stock price and may result
in dilution to our common security holders.
    47




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##### Table of Contents



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.
  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.
  Any impairment of goodwill and other intangible assets could negatively impact our results of
operations.
   48




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##### Table of Contents



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.
   49




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 6. Exhibits.
  
 SIGNATURES
  February 4, 2010
    By:
    /s/ Marvin R. RichardsonMarvin R. RichardsonChief Executive Officer
(Principal Executive Officer) and DirectorFebruary 4, 2010
    By:
    /s/ Matthew R. MiddendorfMatthew R. MiddendorfTreasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)  50




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.
    
    Exhibit Description31.1
    
    
    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.
  51