##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2005
 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 000-31249
 ARCADIA RESOURCES, INC.
  NEVADA
    
    88-0331369(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer I.D. Number)26777 CENTRAL PARK BLVD., SUITE 200
SOUTHFIELD, MI
    
    48076(Address of principal executive offices)
    
    Zip Code
  þ o
 o þ
 o þ




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Table of Contents
  
 Page No.Part I: Financial InformationItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II: Other InformationItem 2: Unregistered Sales of Equity Securities and use of ProceedsItem 6. ExhibitsSignaturesSection 302 Certification of Chief Executive OfficerSection 302 Certification of Chief Financial OfficerSection 906 Certification of Chief Executive OfficerSection 906 Certification of Chief Financial Officer
  2




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##### Table of Contents



PART I: Financial Information
 
 Item 1. Financial Statements
    3




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Arcadia Resources, Inc.
 Consolidated Balance Sheets
 September 30,
    
    
    March 31,2005
    
    
    2005(Unaudited)
    
    
    (Audited)Assets (Note 7)Current AssetsCash
    
    $
    4,111,667
    
    
    $
    1,412,268Accounts receivable, net of allowance of $2,021,000 and $1,692,000, respectively
    
    
    24,609,729
    
    
    
    21,453,424Inventory, net of allowance of $40,000 and $80,000
    
    
    762,656
    
    
    
    664,269Prepaid expenses and other current assets
    
    
    2,893,589
    
    
    
    876,523Income taxes receivable (Note 11)
    
    
    131,602
    
    
    
    130,000Total Current Assets
    
    
    32,509,243
    
    
    
    24,536,484Fixed AssetsEquipment
    
    
    2,935,738
    
    
    
    2,033,919Software
    
    
    1,039,889
    
    
    
    251,446Furniture and fixtures
    
    
    701,382
    
    
    
    376,095Vehicles
    
    
    504,370
    
    
    
    205,080Leasehold improvements
    
    
    449,810
    
    
    
    196,3375,631,189
    
    
    
    3,062,877Accumulated depreciation and amortization
    
    
    (1,302,385
    )
    
    
    (787,899
    )Net Fixed Assets
    
    
    4,328,804
    
    
    
    2,274,978Other Assets (Note 4)Goodwill
    
    
    24,865,453
    
    
    
    15,704,743Trade name, net of accumulated amortization of $378,000 and $244,000
    
    
    7,622,223
    
    
    
    7,755,556Customer relationships, net of accumulated amortization of $614,000 and $306,000
    
    
    5,608,251
    
    
    
    4,694,444Technology, net of accumulated amortization of $359,000 and $232,000
    
    
    401,111
    
    
    
    527,778Non-competition agreements, net of accumulated amortization of $46,000 and $0
    
    
    184,000
    
    
    
    Deferred financing costs, net of accumulated amortization of $57,000 and $231,000
    
    
    23,466
    
    
    
    99,099Total Other Assets
    
    
    38,704,504
    
    
    
    28,781,620$
    75,542,551
    
    
    $
    55,593,082Liabilities and Stockholders EquityCurrent LiabilitiesLine of credit, current portion (Note 7)
    
    $
    225,420
    
    
    $
    1,150,186Accounts payable and checks issued against future deposits
    
    
    1,684,204
    
    
    
    1,649,551Accrued expenses
    
    
    5,068,041
    
    
    
    3,367,812Payable to affiliated agencies, current portion (Note 5)
    
    
    2,862,788
    
    
    
    1,612,715Long-term debt, current portion (Note 6)
    
    
    1,051,954
    
    
    
    6,723,830Total Current Liabilities
    
    
    10,892,407
    
    
    
    14,504,094Payable to affiliate, less current portion (Note 5)
    
    
    383,077
    
    
    
    615,544Long-term debt, less current portion (Note 6)
    
    
    739,042
    
    
    
    546,572Line of credit, less current portion (Note 7)
    
    
    5,172,979
    
    
    
    14,404,404Total Liabilities
    
    
    17,187,505
    
    
    
    30,070,614Commitments and Contingencies (Notes 6, 7 and 14)Stockholders Equity (Note 8)Common stock $.001 par value, 150,000,000 shares authorized, 93,915,590
and 90,413,662 shares issued and outstanding, respectively
    
    
    93,916
    
    
    
    90,414Additional paid-in capital
    
    
    69,207,972
    
    
    
    33,516,506Treasury stock, 169,224 and 112,109 shares, respectively
    
    
    (319,975
    )
    
    
    (187,375
    )Accumulated deficit
    
    
    (10,626,867
    )
    
    
    (7,897,077
    )Total Stockholders Equity
    
    
    58,355,046
    
    
    
    25,522,468$
    75,542,551
    
    
    $
    55,593,082
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Arcadia Resources, Inc.
 Consolidated Statements of Operations
(Unaudited)
 SuccessorQuarter
    
    
    QuarterEnded
    
    
    EndedSeptember 30, 2005
    
    
    September 30, 2004Net Sales (Note 15)
    
    $
    32,665,292
    
    
    $
    25,512,001Cost of Sales
    
    
    21,964,338
    
    
    
    18,190,107Gross Profit
    
    
    10,700,954
    
    
    
    7,321,894General and Administrative Expenses
    
    
    10,359,241
    
    
    
    7,086,773Depreciation and Amortization
    
    
    716,156
    
    
    
    53,701Operating Income (Loss)
    
    
    (374,443
    )
    
    
    181,420Other ExpensesInterest expense, net
    
    
    554,878
    
    
    
    152,730Amortization of debt discount (Note 6)
    
    
    509,404
    
    
    
    122,217Total Other Expenses
    
    
    1,064,282
    
    
    
    274,947Net Loss Before Income Tax Expense
    
    
    (1,438,725
    )
    
    
    (93,527
    )Income Tax Expense (Note 11)
    
    
    40,000
    
    
    
    67,139Net Loss
    
    $
    (1,478,725
    )
    
    $
    (160,666
    )Loss Per Share (Note 8):Basic
    
    $
    (0.02
    )
    
    $
    0.00Diluted
    
    $
    (0.02
    )
    
    $
    0.00Weighted average number of shares (in thousands):Basic
    
    
    83,782
    
    
    
    68,449Diluted
    
    
    83,782
    
    
    
    68,449
 5




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Arcadia Resources, Inc.
 Consolidated Statements of Operations
(Unaudited)
 Successor
    
    
    PredecessorTwo Quarters
    
    
    Period From
    
    
    Period FromEnded
    
    
    May 10, 2004 to
    
    
    April 1, 2004 toSeptember 30, 2005
    
    
    September 30, 2004
    
    
    May 9, 2004Net Sales (Note 15)
    
    $
    63,404,332
    
    
    $
    39,133,058
    
    
    $
    9,486,601Cost of Sales
    
    
    42,807,360
    
    
    
    27,889,200
    
    
    
    6,905,998Gross Profit
    
    
    20,596,972
    
    
    
    11,243,858
    
    
    
    2,580,603General and Administrative Expenses
    
    
    20,132,674
    
    
    
    10,871,769
    
    
    
    2,101,381Impairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Depreciation and Amortization
    
    
    1,131,130
    
    
    
    87,445
    
    
    
    Operating Income (Loss)
    
    
    (666,832
    )
    
    
    284,644
    
    
    
    463,167Other ExpensesInterest expense, net
    
    
    1,029,773
    
    
    
    397,012
    
    
    
    Amortization of debt discount (Note 6)
    
    
    933,185
    
    
    
    157,451
    
    
    
    Total Other Expenses
    
    
    1,962,958
    
    
    
    554,463
    
    
    
    Net Income (Loss) Before Income Tax Expense
    
    
    (2,629,790
    )
    
    
    (269,819
    )
    
    
    463,167Income Tax Expense (Note 11)
    
    
    100,000
    
    
    
    7,139
    
    
    
    Net Income (Loss)
    
    $
    (2,729,790
    )
    
    $
    (276,958
    )
    
    $
    463,167Unaudited pro forma amounts to reflect
pro forma Income Taxes from tax status change
    
    
    
    
    
    
    
    
    
    
    158,000Pro Forma Income After Income Tax from tax status change
    
    
    
    
    
    
    
    
    
    $
    305,167Income (Loss) Per Share (Note 8):Basic
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    0.49Diluted
    
    $
    (0.03
    )
    
    $
    0.00
    
    
    $
    0.49Proforma Income Per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32Diluted
    
    
    
    
    
    
    
    
    
    $
    0.32Weighted average number of shares (in thousands):Basic
    
    
    83,138
    
    
    
    68,449
    
    
    
    948Diluted
    
    
    83,138
    
    
    
    68,449
    
    
    
    948
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Arcadia Resources, Inc.
 Consolidated Statements of Cash Flows
(Unaudited)
 Period fromTwo Quarters
    
    
    Period from May 10,
    
    
    April 1, 2004Ended
    
    
    2004 to September
    
    
    ToSeptember 30, 2005
    
    
    30, 2004
    
    
    May 9, 2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income (Loss)
    
    $
    (2,729,790
    )
    
    $
    (276,958
    )
    
    $
    463,167Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities net of impact of acquisitions:Provision for bad debts
    
    
    367,264
    
    
    
    204,393
    
    
    
    42,192Depreciation and amortization
    
    
    642,358
    
    
    
    87,445
    
    
    
    77Amortization of debt discount and deferred financing costs
    
    
    1,358,818
    
    
    
    157,451
    
    
    
    Issuance of stock for services
    
    
    42,713
    
    
    
    
    
    
    
    Accrual of stock option expense
    
    
    87,612Amortization of intangibles
    
    
    614,193
    
    
    
    
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Loss on disposition of asset
    
    
    
    
    
    
    89,810
    
    
    
    Recording of expected release of stock from escrow
    
    
    410,000
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,386,353
    )
    
    
    (2,730,806
    )
    
    
    (692,193
    )Inventory
    
    
    (78,586
    )
    
    
    (157,227
    )
    
    
    Prepaid expenses and other current assets
    
    
    (2,012,904
    )
    
    
    (1,531,743
    )
    
    
    27,903Income taxes receivable
    
    
    38,398
    
    
    
    
    
    
    
    Checks issued against future deposits
    
    
    
    
    
    
    (850,125
    )
    
    
    (314,025
    )Accounts payable
    
    
    (317,480
    )
    
    
    144,005
    
    
    
    42,823Accrued expenses and other current liabilities
    
    
    909,987
    
    
    
    (204,166
    )
    
    
    (301,999
    )Due to affiliated agencies
    
    
    (218,374
    )
    
    
    (266,885
    )
    
    
    170,915NET CASH (USED IN) OPERATING ACTIVITIES
    
    
    (3,272,144
    )
    
    
    (5,334,806
    )
    
    
    (545,085
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchases of businesses
    
    
    (4,134,396
    )
    
    
    (3,352,634
    )
    
    
    (157,500
    )Purchases of property and equipment
    
    
    (2,122,215
    )
    
    
    (13,949
    )
    
    
    NET CASH (USED IN) INVESTING ACTIVITIES
    
    
    (6,256,611
    )
    
    
    (3,366,583
    )
    
    
    (157,500
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of common stock warrants
    
    
    29,180,000
    
    
    
    
    
    
    
    Proceeds from issuance of convertible note payable
    
    
    5,000,000
    
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    1,980,065
    
    
    
    5,157,860
    
    
    
    Proceeds from exercise of stock option
    
    
    37,500Net (payments) drawn on line of credit
    
    
    (12,092,353
    )
    
    
    2,735,144
    
    
    
    Payments on acquisition debt
    
    
    (1,383,882
    )
    
    
    (5,657,109
    )
    
    
    Payments on notes payable
    
    
    (10,493,176
    )
    
    
    (613,243
    )
    
    
    Cash acquired with reverse merger
    
    
    
    
    
    
    7,536,180
    
    
    
    Advances from stockholder
    
    
    
    
    
    
    
    
    
    
    702,585NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    12,228,154
    
    
    
    9,158,832
    
    
    
    702,585NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
    
    
    2,699,399
    
    
    
    457,443
    
    
    
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    1,412,268
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    4,111,667
    
    
    $
    457,443
    
    
    $
    Supplementary information:Cash paid during the period for:Interest paid
    
    $
    929,220
    
    
    $
    397,012
    
    
    
    Income taxes
    
    
    24,500
    
    
    
    
    
    
    
    Non cash investing activities:Issuance of common stock for the purchases of businesses
    
    $
    3,086,925
    
    
    $
    1,143,000
    
    
    
    Non cash financing activities:Debt issue discount
    
    $
    1,127,727
    
    
    $
    1,507,600
    
    
    
    Exercise of cashless warrants
    
    
    132,600
    
    
    
    
    
    
    
    Payment of note payable with issuance of common stock
    
    
    119,231
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Arcadia Resources, Inc. and Subsidiaries
 Summary of Accounting Policies (Unaudited)
          8




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Arcadia Resources, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements (Unaudited)
          10




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(in thousands)Description of assets and (liabilities) purchased:Current and other assets
    
    $
    1,098Fixed assets
    
    
    574Intangibles and goodwill
    
    
    10,613Liabilities
    
    
    (2,015
    )Total assets and liabilities acquired
    
    $
    10,270
       11




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Purchase price payable to the selling stockholders of Trinity Healthcare of
Winston-Salem, Inc. (Trinity) dated September 23, 2004, bearing simple
interest of 8% per year payable in equal quarterly payments of principal and
interest beginning January 15, 2005, due October 15, 2006. The note payable is
unsecured and interest began accruing on January 15, 2005.
    
    $
    471,958Unsecured note payable to the selling stockholders of Trinity dated January 15,
2005, bearing simple interest of 8% per year with equal payments due October 15,
2005 and January 15, 2006.
    
    
    160,746Purchase price escrowed to the selling stockholders of Beacon Respiratory
Services, Inc. (Beacon) dated January 1, 2005, payable on January 1, 2006 (See
Notes 4 and 12) secured by 16.33% of the outstanding shares of the Beacon
companies.
    
    
    150,000Purchase price payable to United Health Care Services, Inc., payable in 2 equal
semi-annual payments due on October 7, 2005 and April 7, 2006 bearing simple
interest of 5%.
    
    
    100,000
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Purchase price payable (non-interest bearing) to HealthLink, payable in 12 equal
monthly installments of $6,700 plus a final payment of $80,000 due May 13, 2006.
    
    
    134,000Other interest-bearing obligations to be paid over time based on respective terms
    
    
    774,292Less  Current portion of long-term debt
    
    
    (1,051,954
    )LONG-TERM DEBT
    
    $
    739,042
      1 2
  13




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Year ending March 31:2006
    
    $
    810,0002007
    
    
    700,0002008
    
    
    597,0002009
    
    
    94,000Total
    
    $
    2,201,000
       15




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Quarter ended
    
    
    Quarter ended(in thousands)
    
    September 30, 2005
    
    
    September 30, 2004Net Revenues:Services
    
    $
    27,850
    
    
    $
    24,334Products
    
    
    4,815
    
    
    
    1,178Total Revenues
    
    $
    32,665
    
    
    $
    25,512Operating Income (Loss) and Net Loss:Services
    
    $
    1,076
    
    
    $
    1,378Products
    
    
    (263
    )
    
    
    (479
    )Unallocated Corporate Overhead
    
    
    (1,188
    )
    
    
    (718
    )Total Operating Income (Loss)
    
    
    (375
    )
    
    
    181Interest Expense
    
    
    555
    
    
    
    153Amortization of Debt Discount
    
    
    509
    
    
    
    122Net Loss before Income Tax Expense
    
    
    (1,439
    )
    
    
    (94
    )Income Tax Expense
    
    
    40
    
    
    
    67Net Loss
    
    $
    (1,479
    )
    
    $
    (161
    )
 Two Quarters
    
    
    Two QuartersEnded
    
    
    EndedSeptember 30,
    
    
    September 30,(in thousands)
    
    2005
    
    
    2004Net Revenues:Services
    
    $
    54,601
    
    
    $
    46,732Products
    
    
    8,803
    
    
    
    1,888Total Revenues
    
    $
    63,404
    
    
    $
    48,620Operating Income (Loss) and Net Income (Loss):Services
    
    $
    2,306
    
    
    $
    2,468Products
    
    
    89
    
    
    
    (908
    )Unallocated Corporate Overhead
    
    
    (3,062
    )
    
    
    (812
    )Total Operating Income (Loss)
    
    
    (667
    )
    
    
    748Interest Expense
    
    
    1,030
    
    
    
    397Amortization of Debt Discount
    
    
    933
    
    
    
    158Net Income (Loss) before Income Tax Expense
    
    
    (2,630
    )
    
    
    193Income Tax Expense
    
    
    100
    
    
    
    7Net Income (Loss)
    
    $
    (2,730
    )
    
    $
    186
 17




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 General
     Overview
  18




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Results of Operations
 Quarter Ended September 30, 2005 Compared to Quarter Ended September 30, 2004
  Successor
    
    
    SuccessorQuarter
    
    
    QuarterEnded
    
    
    EndedConsolidated Statements of Operations (in thousands)
    
    September 30, 2005
    
    
    September 30, 2004Net Sales
    
    $
    32,665
    
    
    $
    25,512Cost of Sales
    
    
    21,964
    
    
    
    18,190Gross Profit
    
    
    10,701
    
    
    
    7,322General and Administrative Expenses
    
    
    10,359
    
    
    
    7,087Impairment of Goodwill
    
    
    
    
    
    
    Depreciation and Amortization
    
    
    716
    
    
    
    54Operating Income (Loss)
    
    
    (374
    )
    
    
    181Other ExpensesInterest Expense, Net
    
    
    555
    
    
    
    153Amortization of Debt Discount
    
    
    510
    
    
    
    122Total Other Expenses
    
    
    1,065
    
    
    
    275Net Loss Before Income Tax Expense
    
    
    (1,439
    )
    
    
    (94
    )Income Tax Expense
    
    
    40
    
    
    
    67Net Loss
    
    $
    (1,479
    )
    
    $
    (161
    )
  Increase from prior
    
    Increase from sameNet sales by quarter:
    
    (in millions)
    
    Quarter
    
    quarter prior yearFirst quarter ended June 30, 2004*
    
    $
    23.1
    
    
    
    11.5
    %
    
    
    26.9
    %Second quarter ended September 30, 2004
    
    
    25.5
    
    
    
    10.4
    %
    
    
    30.5
    %Third quarter ended December 31, 2004
    
    
    28.1
    
    
    
    10.2
    %
    
    
    41.4
    %Fourth quarter ended March 31, 2005
    
    
    28.6
    
    
    
    1.8
    %
    
    
    38.1
    %First quarter ended June 30, 2005
    
    
    30.7
    
    
    
    7.4
    %
    
    
    33.0
    %Second quarter ended September 30, 2005
    
    
    32.7
    
    
    
    6.5
    %
    
    
    28.2
    %
 
 *
    
    Includes results from the predecessor entity  19




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Quarter Ended
    
    
    Quarter Ended(in thousands)
    
    September 30, 2005
    
    
    September 30, 2004Operating Income (Loss)
    
    $
    (374
    )
    
    $
    181Depreciation and Amortization
    
    
    856
    
    
    
    54EBITDA
    
    $
    482
    
    
    $
    235
   20




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Results of Operations
 Two Quarters Ended September 30, 2005 Compared to Two Quarters Ended September 30, 2004
  Successor
    
    
    Successor
    
    
    PredecessorPeriod From
    
    
    Period FromTwo Quarters
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToConsolidated Statements of Operations (in thousands)
    
    September 30, 2005
    
    
    September 30, 2004
    
    
    May 9, 2004Net Sales
    
    $
    63,404
    
    
    $
    39,133
    
    
    $
    9,487Cost of Sales
    
    
    42,807
    
    
    
    27,889
    
    
    
    6,906Gross Profit
    
    
    20,597
    
    
    
    11,244
    
    
    
    2,581General and Administrative Expenses
    
    
    20,133
    
    
    
    10,872
    
    
    
    2,102Impairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16Depreciation and Amortization
    
    
    1,131
    
    
    
    87
    
    
    
    Operating Income (Loss)
    
    
    (667
    )
    
    
    285
    
    
    
    463Other Expenses OtherInterest Expense, Net
    
    
    1,030
    
    
    
    397
    
    
    
    Amortization of Debt Discount
    
    
    933
    
    
    
    157
    
    
    
    Total Other Expenses
    
    
    1,963
    
    
    
    554
    
    
    
    Net Income (Loss) Before Income Tax Expense
    
    
    (2,630
    )
    
    
    (270
    )
    
    
    463Income Tax Expense
    
    
    100
    
    
    
    7
    
    
    
    Net Income (Loss)
    
    $
    (2,730
    )
    
    $
    (277
    )
    
    $
    463
    22




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##### Table of Contents



Two Quarters Ended
    
    
    Two Quarters EndedSeptember 30, 2005
    
    
    September 30, 2004Operating Income (Loss)
    
    $
    (667
    )
    
    $
    748Depreciation and Amortization
    
    
    1,391
    
    
    
    87EBITDA
    
    $
    724
    
    
    $
    835
   23




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##### Table of Contents



Liquidity and Capital Resources
  Successor
    
    Successor
    
    PredecessorTwo Quarters
    
    Period from May 10,
    
    Period from April 1,SUMMARY CONSOLIDATED
    
    ended
    
    2004 to September 30,
    
    2004 to May 9,STATEMENTS OF CASH FLOWS (in millions)
    
    September 30, 2005
    
    2004
    
    2004Net income (loss)
    
    $
    (2.7
    )
    
    $
    (0.3
    )
    
    $
    0.5Net cash (used in) operating activities
    
    
    (3.3
    )
    
    
    (5.3
    )
    
    
    (0.5
    )Net cash (used in) investing activities
    
    
    (6.2
    )
    
    
    (3.4
    )
    
    
    (0.2
    )Net cash provided by financing activities
    
    
    12.2
    
    
    
    9.2
    
    
    $
    0.7Net increase in cash and cash equivalents
    
    $
    2.7
    
    
    $
    0.5
    
    
    
    Cash and cash equivalents at the end of the period
    
    $
    4.1
    
    
    $
    0.5
    
    
    
    
      24




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##### Table of Contents



25




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##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments due by March 31,Total
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010Operating Leases
    
    $
    2,201,121
    
    
    $
    809,915
    
    
    $
    700,177
    
    
    $
    597,146
    
    
    $
    93,883
    
    
    $
    Debt Maturities
    
    
    5,032,776
    
    
    
    781,800
    
    
    
    4,174,131
    
    
    
    47,616
    
    
    
    20,514
    
    
    
    8,715Employment Agreements
    
    
    995,834
    
    
    
    516,667
    
    
    
    414,167
    
    
    
    65,000
    
    
    
    
    
    
    
    Interest Expense
    
    
    2,190,362
    
    
    
    2,028,202
    
    
    
    162,160
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    10,420,093
    
    
    $
    4,136,584
    
    
    $
    5,450,635
    
    
    $
    709,762
    
    
    $
    114,397
    
    
    $
    8,715
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures.
 Changes in Internal Controls .
 26




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##### Table of Contents



Part II: Other Information
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
       
 Item 6. Exhibits.
  
 SIGNATURES
  November 11, 2005
    
    By:
    
    /s/ John E. Elliott, IIJohn E. Elliott, IIChairman and Chief Executive Officer(Principal Executive Officer)November 11, 2005
    
    By:
    
    /s/ Rebecca R. IrishRebecca R. IrishSecretary and Chief Financial Officer(Principal Financial and Accounting Officer)
 27




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.
    
    Exhibit Description4.1
    
    Warrant Purchase and Registration Rights Agreement dated September 26, 2005.*4.2
    
    Warrant Purchase and Registration Rights Agreement dated September 28, 2005.*4.3
    
    Form of B-1 Warrant.*4.4
    
    Form of B-2 Warrant.*31.1
    
    Certification of the Chief Executive Officer required by rule 13a  14(a) or rule 15d  14(a).31.2
    
    Certification of the Principal Accounting and Financial Officer required by rule 13a  14(a) or rule 15d  14(a).32.1
    
    Chief Executive Officer Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to §206 of the Sarbanes 
Oxley Act of 2002.32.2
    
    Principal Accounting and Financial Officer Certification Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to
§206 of the Sarbanes  Oxley Act of 2002.
 
 *
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Current Report
on Form 8-K filed on September 30, 2005 and incorporated herein by reference (File No. 000-31249). 28