##### 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, 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 000-32935
 ARCADIA RESOURCES, INC.
  NEVADA
    
    88-0331369(State or other jurisdiction of Incorporation)
    
    (I.R.S. Employer
Identification Number)9229 DELEGATES ROW, SUITE 260INDIANAPOLIS, INDIANA
    
    46240(Address of principal executive offices)
    
    (Zip Code)
  þ o
 Yes o No 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 September 30, 2009 (unaudited) and March 31, 2009
    
    
    2Condensed Consolidated Statements of Operations for the Three and Six Months ended September 30,
2009 and
2008 (unaudited)
    
    
    3Condensed Consolidated Statement of Stockholders Equity for the Six Months ended September 30,
2009 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six Months ended September 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
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41Part II: Other InformationItem 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    42Item 6. Exhibits
    
    
    49Signatures
    
    
    49ExhibitsCertification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002Certification of Chief Executive Officer and 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



Item 1.
    
    Financial Statements
  
  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 September 30,
    
    
    March 31,2009
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    1,522Accounts receivable, net of allowance of $3,609 and $3,386,
respectively
    
    
    14,454
    
    
    
    15,679Inventories, net
    
    
    575
    
    
    
    863Prepaid expenses and other current assets
    
    
    1,154
    
    
    
    1,764Current assets of discontinued operations
    
    
    117
    
    
    
    5,458Total current assets
    
    
    16,300
    
    
    
    25,286Property and equipment, net
    
    
    1,822
    
    
    
    2,308Goodwill
    
    
    17,053
    
    
    
    17,053Acquired intangible assets, net
    
    
    7,987
    
    
    
    8,305Other assets
    
    
    626
    
    
    
    590Restricted cash
    
    
    500
    
    
    
    Assets of discontinued operations
    
    
    29
    
    
    
    5,850Total assets
    
    $
    44,317
    
    
    $
    59,392LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Lines of credit, current portion
    
    $
    
    
    
    $
    437Accounts payable
    
    
    2,101
    
    
    
    2,765Accrued expenses:Compensation and related taxes
    
    
    2,904
    
    
    
    2,986Interest
    
    
    69
    
    
    
    89Health insurance
    
    
    511
    
    
    
    545Other
    
    
    1,112
    
    
    
    917Payable to affiliated agencies
    
    
    852
    
    
    
    1,284Long-term obligations, current portion
    
    
    3,434
    
    
    
    596Capital lease obligations, current portion
    
    
    67
    
    
    
    59Current liabilities of discontinued operations
    
    
    590
    
    
    
    2,037Total current liabilities
    
    
    11,640
    
    
    
    11,715Lines of credit, less current portion
    
    
    6,715
    
    
    
    10,889Long-term obligations, less current portion
    
    
    24,242
    
    
    
    26,918Capital lease obligations, less current portion
    
    
    55
    
    
    
    37Total liabilities
    
    
    42,652
    
    
    
    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;
161,858,403 shares and 161,249,529 shares issued, respectively
    
    
    162
    
    
    
    161Additional paid-in capital
    
    
    136,470
    
    
    
    135,920Accumulated deficit
    
    
    (134,967
    )
    
    
    (126,248
    )Total stockholders equity
    
    
    1,665
    
    
    
    9,833Total liabilities and stockholders equity
    
    $
    44,317
    
    
    $
    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
    
    
    Six Month Period EndedSeptember 30,
    
    
    September 30,(Unaudited)
    
    
    (Unaudited)2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net
    
    $
    25,616
    
    
    $
    26,719
    
    
    $
    52,025
    
    
    $
    53,497Cost of revenues
    
    
    18,210
    
    
    
    18,504
    
    
    
    37,171
    
    
    
    37,172Gross profit
    
    
    7,406
    
    
    
    8,215
    
    
    
    14,854
    
    
    
    16,325Selling, general and administrative
    
    
    10,082
    
    
    
    10,081
    
    
    
    19,748
    
    
    
    20,263Depreciation and amortization
    
    
    531
    
    
    
    613
    
    
    
    942
    
    
    
    1,072Total operating expenses
    
    
    10,613
    
    
    
    10,694
    
    
    
    20,690
    
    
    
    21,335Operating loss
    
    
    (3,207
    )
    
    
    (2,479
    )
    
    
    (5,836
    )
    
    
    (5,010
    )Other expenses (income):Interest expense, net
    
    
    846
    
    
    
    1,054
    
    
    
    1,684
    
    
    
    2,010Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other
    
    
    (6
    )
    
    
    44
    
    
    
    30
    
    
    
    54Total other expenses (income)
    
    
    840
    
    
    
    1,098
    
    
    
    1,714
    
    
    
    2,312Loss from continuing operations before income taxes
    
    
    (4,047
    )
    
    
    (3,577
    )
    
    
    (7,550
    )
    
    
    (7,322
    )Income tax expense
    
    
    7
    
    
    
    198
    
    
    
    100
    
    
    
    394Loss from continuing operations
    
    
    (4,054
    )
    
    
    (3,775
    )
    
    
    (7,650
    )
    
    
    (7,716
    )Discontinued operations:Income / (loss) from discontinued operations
    
    
    (255
    )
    
    
    540
    
    
    
    (1,448
    )
    
    
    1,195Net gain on disposal
    
    
    163
    
    
    
    
    
    
    
    379
    
    
    
    (92
    )
    
    
    540
    
    
    
    (1,069
    )
    
    
    1,195NET LOSS
    
    $
    (4,146
    )
    
    $
    (3,235
    )
    
    $
    (8,719
    )
    
    $
    (6,521
    )Weighted average number of common shares outstanding
    
    
    161,201,000
    
    
    
    133,019,000
    
    
    
    160,709,000
    
    
    
    132,357,000Basic and diluted net income (loss) per share:Loss from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.03
    )
    
    $
    (0.05
    )
    
    $
    (0.06
    )Income from discontinued operations
    
    
    
    
    
    
    0.01
    
    
    
    
    
    
    
    0.01Net loss per share
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.05
    )
    
    $
    (0.05
    )
 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
    
    
    120,625
    
    
    
    
    
    
    
    551
    
    
    
    
    
    
    
    551Cashless exercise of warrants
    
    
    488,249
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,719
    )
    
    
    (8,719
    )Balance, September 30, 2009
    
    
    161,858,403
    
    
    $
    162
    
    
    $
    136,470
    
    
    $
    (134,967
    )
    
    $
    1,665
 See accompanying notes to these condensed consolidated financial statements.
  4




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(IN THOUSANDS)
 Six-Month Period EndedSeptember 30,(Unaudited)2009
    
    
    2008Operating activitiesNet loss for the period
    
    $
    (8,719
    )
    
    $
    (6,521
    )Adjustments to reconcile net loss to net cash used in operating activities:Provision for doubtful accounts
    
    
    1,155
    
    
    
    1,654Depreciation of property and equipment
    
    
    912
    
    
    
    2,297Amortization of intangible assets
    
    
    405
    
    
    
    943Gain on business disposals
    
    
    (379
    )
    
    
    Non-cash interest expense
    
    
    1,224
    
    
    
    1,102Loss on sale of property and equipment
    
    
    
    
    
    
    55Amortization of deferred financing costs and debt discounts
    
    
    121
    
    
    
    492Stock-based compensation expense
    
    
    551
    
    
    
    741Loss on extinguishment of debt
    
    
    
    
    
    
    248Changes in operating assets and liabilities, net of acquisitions:Accounts receivable
    
    
    2,440
    
    
    
    (2,952
    )Inventories
    
    
    904
    
    
    
    (611
    )Other assets
    
    
    821
    
    
    
    689Accounts payable
    
    
    (1,449
    )
    
    
    908Accrued expenses
    
    
    (956
    )
    
    
    781Due to affiliated agencies
    
    
    (277
    )
    
    
    166Deferred revenue
    
    
    
    
    
    
    (19
    )Net cash used in operating activities
    
    
    (3,247
    )
    
    
    (27
    )Investing activitiesBusiness acquisitions, net of cash acquired
    
    
    (196
    )
    
    
    (429
    )Proceeds from business disposal
    
    
    9,320
    
    
    
    356Increase in restricted cash
    
    
    (500
    )
    
    
    Proceeds from disposals of property and equipment
    
    
    
    
    
    
    19Purchases of property and equipment
    
    
    (96
    )
    
    
    (462
    )Net cash provided by (used in) investing activities
    
    
    8,528
    
    
    
    (516
    )Financing activitiesNet payments on lines of credit
    
    
    (4,610
    )
    
    
    (2,956
    )Proceeds from note payable, net of fees
    
    
    2,141
    
    
    
    Payments on notes payable and capital lease obligations
    
    
    (4,334
    )
    
    
    (558
    )Net cash used in financing activities
    
    
    (6,803
    )
    
    
    (3,514
    )Net change in cash and cash equivalents
    
    
    (1,522
    )
    
    
    (4,057
    )Cash and cash equivalents, beginning of period
    
    
    1,522
    
    
    
    6,351Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    2,294Supplementary information:Cash paid during the period for:Interest
    
    $
    322
    
    
    $
    485Income taxes
    
    
    33
    
    
    
    97Non-cash investing / financing activities:Capital lease
    
    
    70
    
    
    
    Accounts payable converted to notes payable
    
    
    750
    
    
    
    Warrants issued in conjunction with line of credit amendment
    
    
    
    
    
    
    248Accrued interest converted to notes payable
    
    
    1,224
    
    
    
    
 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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##### Table of Contents



Note 2  Managements Plan
         7




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##### Table of Contents



Note 3  Discontinued Operations
 Industrial Staffing Operations
  HHE Operations
     Retail Pharmacy Software Business
   8




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##### Table of Contents



September 30, 2009Services -Industrial
    
    
    
    
    
    
    Pharmacy -Staffing
    
    
    HHE
    
    
    Software
    
    
    TotalAssetsAccounts receivable, net of allowance of $516
    
    $
    
    
    
    $
    
    
    
    $
    9
    
    
    $
    9Prepaid expenses and other current assets
    
    
    
    
    
    
    30
    
    
    
    78
    
    
    
    108Total current assets of discontinued operations
    
    
    
    
    
    
    30
    
    
    
    87
    
    
    
    117Property and equipment, net
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    29Total assets of discontinued operations
    
    $
    
    
    
    $
    59
    
    
    $
    87
    
    
    $
    146LiabilitiesAccounts payable
    
    $
    
    
    
    $
    163
    
    
    $
    33
    
    
    
    196Accrued compensation and related taxes
    
    
    
    
    
    
    84
    
    
    
    129
    
    
    
    213Accrued other
    
    
    59
    
    
    
    122
    
    
    
    
    
    
    
    181Total liabilities of discontinued operations
    
    $
    59
    
    
    $
    369
    
    
    $
    162
    
    
    $
    590
  9




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##### Table of Contents



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
    
    
    Six Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net:Services  Industrial Staffing
    
    $
    
    
    
    $
    4,821
    
    
    $
    1,223
    
    
    $
    10,039Home Health Equipment
    
    
    
    
    
    
    4,855
    
    
    
    1,423
    
    
    
    9,687Pharmacy  Software
    
    
    
    
    
    
    528
    
    
    
    348
    
    
    
    1,085$
    
    
    
    
    10,204
    
    
    $
    2,994
    
    
    
    20,811Income (loss) from operations:Services  Industrial Staffing
    
    $
    (8
    )
    
    $
    425
    
    
    $
    (44
    )
    
    $
    837Home Health Equipment
    
    
    (189
    )
    
    
    124
    
    
    
    (1,230
    )
    
    
    315Pharmacy  Software
    
    
    (58
    )
    
    
    (9
    )
    
    
    (174
    )
    
    
    43$
    (255
    )
    
    $
    540
    
    
    $
    (1,448
    )
    
    $
    1,195Gain / (loss) on disposal:Services  Industrial Staffing
    
    $
    3
    
    
    $
    
    
    
    $
    129
    
    
    $
    Home Health Equipment
    
    
    160
    
    
    
    
    
    
    
    280
    
    
    
    Pharmacy  Software
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    $
    163
    
    
    $
    
    
    
    $
    379
    
    
    $
    Income (loss) from discontinued operations:Services  Industrial Staffing
    
    $
    (5
    )
    
    $
    425
    
    
    $
    85
    
    
    $
    837Home Health Equipment
    
    
    (29
    )
    
    
    124
    
    
    
    (950
    )
    
    
    315Pharmacy  Software
    
    
    (58
    )
    
    
    (9
    )
    
    
    (204
    )
    
    
    43$
    (92
    )
    
    $
    540
    
    
    $
    (1,069
    )
    
    $
    1,195
  10




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##### Table of Contents



Note 4  Goodwill and Acquired Intangible Assets
  Services
    
    
    Pharmacy
    
    
    Catalog
    
    
    TotalBalance
    
    $
    14,553
    
    
    $
    2,500
    
    
    $
    
    
    
    $
    17,053
    September 30, 2009
    
    
    March 31, 2009Accumulated
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Cost
    
    
    AmortizationTrade name
    
    $
    6,664
    
    
    $
    765
    
    
    $
    6,664
    
    
    $
    682Customer relationships
    
    
    4,720
    
    
    
    2,632
    
    
    
    4,720
    
    
    
    2,39711,384
    
    
    $
    3,397
    
    
    
    11,384
    
    
    $
    3,079Less accumulated amortization
    
    
    (3,397
    )
    
    
    
    
    
    
    (3,079
    )Net acquired intangible assets
    
    $
    7,987
    
    
    
    
    
    
    $
    8,305
   Remainder of fiscal 2010
    
    $
    316Fiscal 2011
    
    
    571Fiscal 2012
    
    
    518Fiscal 2013
    
    
    476Fiscal 2014
    
    
    382Thereafter
    
    
    5,724Total
    
    $
    7,987
  11




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##### Table of Contents



Note 5  Lines of Credit
  At September 30, 2009MaximumAvailable
    
    
    
    
    
    
    March 31,Lending Institution
    
    Maturity date

    
    Borrowing
    
    
    Balance
    
    
    2009
    
    
    Interest rateComerica Bank
    
    August 1, 2011
    
    $
    10,157
    
    
    $
    6,715
    
    
    $
    9,126
    
    
    Prime plus 2.75
    %AmerisourceBergen
Drug Corporation
    
    September 30, 2010
    
    
    
    
    
    
    
    
    
    
    2,200
    
    

    10
    %Total lines of
credit obligations
    
    
    
    
    
    $
    10,157
    
    
    
    6,715
    
    
    
    11,326Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )Long-term portion
    
    
    
    
    
    
    
    
    
    $
    6,715
    
    
    $
    10,889
 Comerica Bank
     12




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AmerisourceBergen Drug Corporation
    13




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##### Table of Contents



Note 6  Long-Term Obligations
  September 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.
    
    $
    16,997
    
    
    $
    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.
    
    
    6,193
    
    
    
    7,882Notes payable in the aggregate amount of
$2.4 million, dated September 10, 2009 with
principal due in full on April 1, 2010. The
notes payable are unsecured. The amounts
reported are net of unamortized original
issue discounts of $90,000 on September 30,
2009. The notes include a mandatory
repayment provision whereby if the Company
raises in excess of $5 million in a debt or
equity transaction, the notes would be paid
in full.
    
    
    2,310
    
    
    
    Note 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.
    
    
    1,052
    
    
    
    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.
    
    
    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.
    
    
    185
    
    
    
    408Other
    
    
    189
    
    
    
    189Total long-term obligations
    
    
    27,676
    
    
    
    27,514Less current portion of long-term obligations
    
    
    (3,434
    )
    
    
    (596
    )Long-term obligations, less current portion
    
    $
    24,242
    
    
    $
    26,918
   14




---



##### Table of Contents



Remainder of fiscal 2010
    
    $
    284Fiscal 2011
    
    
    3,240Fiscal 2012
    
    
    Fiscal 2013
    
    
    24,24227,766Less  unamortized debt discount
    
    
    (90
    )Total
    
    $
    27,676
  Note 7  Stockholders Equity
 General
  Warrants
  September 30,
    
    
    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
    
    
    
    
    May 2004
    
    May 2011
    
    
    2,299,696
    
    
    
    2,436,307$
    0.50
    
    
    
    
    May 2004
    
    March 2014
    
    
    1,104,729
    
    
    
    1,104,729$
    0.75
    
    
    
    
    June 2008
    
    June 2015
    
    
    490,000
    
    
    
    490,000$
    2.25
    
    
    
    
    September 2005
    
    May 2014
    
    
    44,444
    
    
    
    44,4443,991,669
    
    
    
    4,519,924
    15




---



##### Table of Contents



Note 8  Stock-Based Compensation
   Stock Options
    Three-Month Period Ended
    
    Six-Month Period EndedSeptember 30,
    
    September 30,Weighted-average
    
    2009
    
    
    2008
    
    2009
    
    
    2008Expected volatility
    
    
    85
    %
    
    N/A
    
    
    78
    %
    
    
    74
    %Expected dividend yields
    
    
    0
    %
    
    N/A
    
    
    0
    %
    
    
    0
    %Expected terms (in years)
    
    
    4
    
    
    N/A
    
    
    4
    
    
    
    4Risk-free interest rate
    
    
    2.59
    %
    
    N/A
    
    
    2.64
    %
    
    
    3.23
    %
  16




---



##### Table of Contents



Weighted-Weighted-
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicExercise
    
    
    Contractual
    
    
    ValueOptions
    
    Shares
    
    
    Price
    
    
    Term (Years)
    
    
    (thousands)Outstanding at April 1, 2009
    
    
    3,771,225
    
    
    $
    0.76Granted
    
    
    35,000
    
    
    
    0.67Forfeited or expired
    
    
    (332,250
    )
    
    
    1.12Outstanding at September 30, 2009
    
    
    3,473,975
    
    
    $
    0.72
    
    
    
    5.1
    
    
    $
    1,668Exercisable at September 30, 2009
    
    
    3,129,400
    
    
    $
    0.75
    
    
    
    4.9
    
    
    $
    1,435
   WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageNumber
    
    
    Contractual
    
    
    Exercise
    
    
    Number
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.18  $0.25
    
    
    516,000
    
    
    
    4.1
    
    
    $
    0.25
    
    
    
    508,000
    
    
    $
    0.25$0.26  $1.00
    
    
    2,389,395
    
    
    
    4.8
    
    
    $
    0.61
    
    
    
    2,052,820
    
    
    $
    0.64$1.01  $1.50
    
    
    450,967
    
    
    
    3.3
    
    
    $
    1.34
    
    
    
    450,967
    
    
    $
    1.34$1.51  $2.25
    
    
    43,000
    
    
    
    3.6
    
    
    $
    2.22
    
    
    
    43,000
    
    
    $
    2.22$2.92
    
    
    74,613
    
    
    
    3.8
    
    
    $
    2.92
    
    
    
    74,613
    
    
    $
    2.92Outstanding at September
30, 2009
    
    
    3,473,975
    
    
    
    
    
    
    $
    0.72
    
    
    
    3,129,400
    
    
    $
    0.75
      17




---



##### Table of Contents



Restricted Stock
   Weighted-AverageGrant DateFair ValueShares
    
    
    per ShareUnvested at April 1, 2009
    
    
    476,092
    
    
    $
    1.45Vested
    
    
    (120,625
    )
    
    
    1.40Forfeited
    
    
    (10,000
    )
    
    
    1.48Unvested at September 30, 2009
    
    
    345,467
    
    
    $
    1.42
    Note 9  Contingencies
   Note 10  Income Taxes
    18




---



##### Table of Contents



Note 11  Related Party Transactions
      19




---



##### Table of Contents



Note 12  Segment Information
       20




---



##### Table of Contents



Three Month Period Ended
    
    
    Six Month Period EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenue, net:Services
    
    $
    21,709
    
    
    $
    24,824
    
    
    $
    44,389
    
    
    $
    49,831Pharmacy
    
    
    3,409
    
    
    
    1,214
    
    
    
    6,627
    
    
    
    2,319Catalog
    
    
    498
    
    
    
    681
    
    
    
    1,009
    
    
    
    1,347Total revenue
    
    
    25,616
    
    
    
    26,719
    
    
    
    52,025
    
    
    
    53,497Operating income (loss):Services
    
    $
    1,036
    
    
    $
    1,103
    
    
    $
    2,243
    
    
    $
    2,269Pharmacy
    
    
    (1,564
    )
    
    
    (1,024
    )
    
    
    (2,877
    )
    
    
    (1,875
    )Catalog
    
    
    7
    
    
    
    (9
    )
    
    
    (31
    )
    
    
    1Unallocated corporate overhead
    
    
    (2,686
    )
    
    
    (2,549
    )
    
    
    (5,171
    )
    
    
    (5,405
    )Total operating income (loss)
    
    
    (3,207
    )
    
    
    (2,479
    )
    
    
    (5,836
    )
    
    
    (5,010
    )Other expenses:Interest expense, net
    
    
    846
    
    
    
    1,054
    
    
    
    1,684
    
    
    
    2,010Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248Other
    
    
    (6
    )
    
    
    44
    
    
    
    30
    
    
    
    54Net loss before income tax
expense
    
    
    (4,047
    )
    
    
    (3,577
    )
    
    
    (7,550
    )
    
    
    (7,322
    )Income tax expense
    
    
    7
    
    
    
    198
    
    
    
    100
    
    
    
    394Net loss from continuing
operations
    
    $
    (4,054
    )
    
    $
    (3,775
    )
    
    $
    (7,650
    )
    
    $
    (7,716
    )Depreciation and amortization:Services
    
    $
    191
    
    
    $
    277
    
    
    $
    385
    
    
    $
    559Pharmacy
    
    
    206
    
    
    
    239
    
    
    
    293
    
    
    
    370Catalog
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    26Corporate
    
    
    134
    
    
    
    84
    
    
    
    264
    
    
    
    117Total depreciation and
amortization
    
    $
    531
    
    
    $
    613
    
    
    $
    942
    
    
    $
    1,072
 September 30,2009
    
    
    2008Capital expenditures:Services
    
    $
    26
    
    
    $
    66Pharmacy
    
    
    61
    
    
    
    82Corporate
    
    
    7
    
    
    
    115Discontinued operations
    
    
    2
    
    
    
    199Total capital expenditures
    
    $
    96
    
    
    $
    462
 September 30, 2009
    
    
    March 31, 2009Assets:Services
    
    $
    37,526
    
    
    $
    39,183Pharmacy
    
    
    5,024
    
    
    
    5,514Catalog
    
    
    189
    
    
    
    221Unallocated corporate assets
    
    
    1,432
    
    
    
    3,166Assets of discontinued operations
    
    
    146
    
    
    
    11,308Total assets
    
    $
    44,317
    
    
    $
    59,392
  21




---



##### Table of Contents



Note 13  Subsequent Event
     22




---



##### Table of Contents



ITEM 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
  Cautionary Statement Concerning Forward-Looking Statements
     Overview
   23




---



##### Table of Contents



Critical Accounting Policies
  Three-Month Period Ended September 30, 2009 Compared to the Three-Month Period Ended September 30,
2008
 Results of Continuing Operations, (in thousands, except share amounts)
 Three-Month PeriodEnded September 30,2009
    
    
    2008Revenues, net
    
    $
    25,616
    
    
    $
    26,719Cost of revenues
    
    
    18,210
    
    
    
    18,504Gross profit
    
    
    7,406
    
    
    
    8,215Selling, general and administrative expenses
    
    
    10,082
    
    
    
    10,081Depreciation and amortization
    
    
    531
    
    
    
    613Total operating expenses
    
    
    10,613
    
    
    
    10,694Operating loss
    
    
    (3,207
    )
    
    
    (2,479
    )Other expenses
    
    
    840
    
    
    
    1,098Net loss before income tax expense
    
    
    (4,047
    )
    
    
    (3,577
    )Income tax expense
    
    
    7
    
    
    
    198Net loss from continuing operations
    
    $
    (4,054
    )
    
    $
    (3,775
    )Weighted average number of shares  basic and diluted
    
    
    161,201,000
    
    
    
    133,019,000Net loss from continuing operations per share 
basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.03
    )
  24




---



##### 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
    
    $
    21,709
    
    
    
    84.7
    %
    
    $
    24,824
    
    
    
    92.9
    %
    
    $
    (3,115
    )
    
    
    -12.5
    %Pharmacy
    
    
    3,409
    
    
    
    13.3
    %
    
    
    1,214
    
    
    
    4.5
    %
    
    
    2,195
    
    
    
    180.8
    %Catalog
    
    
    498
    
    
    
    2.0
    %
    
    
    681
    
    
    
    2.6
    %
    
    
    (183
    )
    
    
    -26.9
    %25,616
    
    
    
    100.0
    %
    
    
    26,719
    
    
    
    100.0
    %
    
    
    (1,103
    )
    
    
    -4.1
    %Cost of revenues:Services
    
    $
    15,028
    
    
    
    
    
    
    $
    17,113
    
    
    
    
    
    
    $
    (2,085
    )
    
    
    -12.2
    %Pharmacy
    
    
    2,895
    
    
    
    
    
    
    
    1,012
    
    
    
    
    
    
    
    1,883
    
    
    
    186.1
    %Catalog
    
    
    287
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    (92
    )
    
    
    -24.3
    %18,210
    
    
    
    
    
    
    
    18,504
    
    
    
    
    
    
    
    (294
    )
    
    
    -1.6
    %
 Gross
    
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    
    Margin %Gross margins:Services
    
    
    6,681
    
    
    
    30.8
    %
    
    
    7,711
    
    
    
    31.1
    %
    
    
    (1,030
    )
    
    
    -13.4
    %Pharmacy
    
    
    514
    
    
    
    15.1
    %
    
    
    202
    
    
    
    16.6
    %
    
    
    312
    
    
    
    154.5
    %Catalog
    
    
    211
    
    
    
    42.4
    %
    
    
    302
    
    
    
    44.3
    %
    
    
    (91
    )
    
    
    -30.1
    %$
    7,406
    
    
    
    28.9
    %
    
    $
    8,215
    
    
    
    30.7
    %
    
    $
    (809
    )
    
    
    -9.8
    %
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    17,255
    
    
    
    79.5
    %
    
    $
    17,451
    
    
    
    70.3
    %
    
    $
    (196
    )
    
    
    -1.1
    %Medical staffing
    
    
    3,127
    
    
    
    14.4
    %
    
    
    4,985
    
    
    
    20.1
    %
    
    
    (1,858
    )
    
    
    -37.3
    %Travel staffing
    
    
    1,327
    
    
    
    6.1
    %
    
    
    2,388
    
    
    
    9.6
    %
    
    
    (1,061
    )
    
    
    -44.4
    %Total Services
    
    $
    21,709
    
    
    
    100.0
    %
    
    $
    24,824
    
    
    
    100.0
    %
    
    $
    (3,115
    )
    
    
    -12.5
    %
 Services Segment
   25




---



##### Table of Contents



Pharmacy Segment
    26




---



##### Table of Contents



Catalog Segment
   27




---



##### Table of Contents



Selling, General and Administrative
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    SG&A
    
    
    2008
    
    
    SG&A
    
    
    (Decrease)
    
    
    (Decrease)Services
    
    $
    5,454
    
    
    
    54.1
    %
    
    $
    6,330
    
    
    
    62.8
    %
    
    $
    (876
    )
    
    
    -13.8
    %Pharmacy
    
    
    1,873
    
    
    
    18.6
    %
    
    
    988
    
    
    
    9.8
    %
    
    
    885
    
    
    
    89.6
    %Catalog
    
    
    204
    
    
    
    2.0
    %
    
    
    298
    
    
    
    3.0
    %
    
    
    (94
    )
    
    
    -31.5
    %Corporate
    
    
    2,551
    
    
    
    25.3
    %
    
    
    2,465
    
    
    
    24.4
    %
    
    
    86
    
    
    
    3.5
    %$
    10,082
    
    
    
    100.0
    %
    
    $
    10,081
    
    
    
    100.0
    %
    
    $
    1
    
    
    
    0.0
    %SG&A as a % of net
revenue
    
    
    39.4
    %
    
    
    
    
    
    
    37.7
    %
 Services Segment
  Pharmacy Segment
    28




---



##### Table of Contents



Catalog Segment
  Corporate
   Depreciation and Amortization
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Depreciation and amortization of property
and equipment
    
    $
    372
    
    
    $
    307
    
    
    $
    65
    
    
    
    21.2
    %Amortization of acquired intangible assets
    
    
    159
    
    
    
    306
    
    
    
    (147
    )
    
    
    -48.0
    %$
    531
    
    
    $
    613
    
    
    $
    (82
    )
    
    
    -13.4
    %
   Other Expenses
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    850
    
    
    $
    1,068
    
    
    $
    (218
    )
    
    
    -20.4
    %Interest income
    
    
    (4
    )
    
    
    (14
    )
    
    
    10
    
    
    
    -71.4
    %$
    846
    
    
    $
    1,054
    
    
    $
    (208
    )
    
    
    -19.7
    %
  29




---



##### Table of Contents



Income Taxes
   Loss from Discontinued Operations
 Industrial Staffing Operations
   HHE Operations
     30




---



##### Table of Contents



Pharmacy Operations
   Six-Month Period Ended September 30, 2009 Compared to the Six-Month Period Ended September 30, 2008
 Results of Continuing Operations, (in thousands, except share amounts)
 Six-Month PeriodEnded September 30,2009
    
    
    2008Revenues, net
    
    $
    52,025
    
    
    $
    53,497Cost of revenues
    
    
    37,171
    
    
    
    37,172Gross profit
    
    
    14,854
    
    
    
    16,325Selling, general and administrative expenses
    
    
    19,748
    
    
    
    20,263Depreciation and amortization
    
    
    942
    
    
    
    1,072Total operating expenses
    
    
    20,690
    
    
    
    21,335Operating loss
    
    
    (5,836
    )
    
    
    (5,010
    )Other expenses
    
    
    1,714
    
    
    
    2,312Net loss before income tax expense
    
    
    (7,550
    )
    
    
    (7,322
    )Income tax expense
    
    
    100
    
    
    
    394Net loss from continuing operations
    
    $
    (7,650
    )
    
    $
    (7,716
    )Weighted average number of shares  basic and diluted
    
    
    160,709,000
    
    
    
    132,357,000Net loss from continuing operations per share 
basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.06
    )
  31




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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
    
    $
    44,389
    
    
    
    85.3
    %
    
    $
    49,831
    
    
    
    93.1
    %
    
    $
    (5,442
    )
    
    
    -10.9
    %Pharmacy
    
    
    6,626
    
    
    
    12.7
    %
    
    
    2,319
    
    
    
    4.3
    %
    
    
    4,307
    
    
    
    185.7
    %Catalog
    
    
    1,010
    
    
    
    2.0
    %
    
    
    1,347
    
    
    
    2.6
    %
    
    
    (337
    )
    
    
    -25.0
    %52,025
    
    
    
    100.0
    %
    
    
    53,497
    
    
    
    100.0
    %
    
    
    (1,472
    )
    
    
    -2.8
    %Cost of revenues:Services
    
    $
    30,792
    
    
    
    
    
    
    $
    34,513
    
    
    
    
    
    
    $
    (3,721
    )
    
    
    -10.8
    %Pharmacy
    
    
    5,757
    
    
    
    
    
    
    
    1,925
    
    
    
    
    
    
    
    3,832
    
    
    
    199.1
    %Catalog
    
    
    622
    
    
    
    
    
    
    
    734
    
    
    
    
    
    
    
    (112
    )
    
    
    -15.3
    %37,171
    
    
    
    
    
    
    
    37,172
    
    
    
    
    
    
    
    (1
    )
    
    
    0.0
    %
 Gross
    
    
    
    
    
    
    GrossMargin %
    
    
    
    
    
    
    Margin %Gross margins:Services
    
    
    13,597
    
    
    
    30.6
    %
    
    
    15,318
    
    
    
    30.7
    %
    
    
    (1,721
    )
    
    
    -11.2
    %Pharmacy
    
    
    869
    
    
    
    13.1
    %
    
    
    394
    
    
    
    17.0
    %
    
    
    475
    
    
    
    120.6
    %Catalog
    
    
    388
    
    
    
    38.4
    %
    
    
    613
    
    
    
    45.5
    %
    
    
    (225
    )
    
    
    -36.7
    %$
    14,854
    
    
    
    28.6
    %
    
    $
    16,325
    
    
    
    30.5
    %
    
    $
    (1,471
    )
    
    
    -9.0
    %
  % of Total
    
    
    
    
    
    
    % of Total
    
    
    $ Increase/
    
    
    % Increase/2009
    
    
    Revenue
    
    
    2008
    
    
    Revenue
    
    
    (Decrease)
    
    
    (Decrease)Home care
    
    $
    34,943
    
    
    
    78.7
    %
    
    $
    34,349
    
    
    
    68.9
    %
    
    $
    594
    
    
    
    1.7
    %Medical staffing
    
    
    6,702
    
    
    
    15.1
    %
    
    
    10,495
    
    
    
    21.1
    %
    
    
    (3,793
    )
    
    
    -36.1
    %Travel staffing
    
    
    2,744
    
    
    
    6.1
    %
    
    
    4,987
    
    
    
    10.0
    %
    
    
    (2,243
    )
    
    
    -45.0
    %Total Services
    
    $
    44,389
    
    
    
    100.0
    %
    
    $
    49,831
    
    
    
    100.0
    %
    
    $
    (5,442
    )
    
    
    -10.9
    %
 Services Segment
    32




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Pharmacy Segment
    33




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##### Table of Contents



Catalog Segment
    34




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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
    
    $
    10,968
    
    
    
    55.5
    %
    
    $
    12,489
    
    
    
    61.6
    %
    
    $
    (1,521
    )
    
    
    -12.2
    %Pharmacy
    
    
    3,454
    
    
    
    17.5
    %
    
    
    1,900
    
    
    
    9.4
    %
    
    
    1,554
    
    
    
    81.8
    %Catalog
    
    
    419
    
    
    
    2.1
    %
    
    
    587
    
    
    
    2.9
    %
    
    
    (168
    )
    
    
    -28.6
    %Corporate
    
    
    4,907
    
    
    
    24.9
    %
    
    
    5,287
    
    
    
    26.1
    %
    
    
    (380
    )
    
    
    -7.2
    %$
    19,748
    
    
    
    100.0
    %
    
    $
    20,263
    
    
    
    100.0
    %
    
    $
    (515
    )
    
    
    -2.5
    %SG&A as a % of net
revenue
    
    
    38.0
    %
    
    
    
    
    
    
    37.9
    %
 Services Segment
  Pharmacy Segment
    35




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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
    
    $
    625
    
    
    $
    465
    
    
    $
    160
    
    
    
    34.4
    %Amortization of acquired intangible assets
    
    
    317
    
    
    
    607
    
    
    
    (290
    )
    
    
    -47.8
    %$
    942
    
    
    $
    1,072
    
    
    $
    (130
    )
    
    
    -12.1
    %
   Other Expenses
  $ Increase/
    
    
    % Increase/2009
    
    
    2008
    
    
    (Decrease)
    
    
    (Decrease)Interest expense
    
    $
    1,695
    
    
    $
    2,042
    
    
    $
    (347
    )
    
    
    -17.0
    %Interest income
    
    
    (11
    )
    
    
    (32
    )
    
    
    21
    
    
    
    -65.6
    %$
    1,684
    
    
    $
    2,010
    
    
    $
    (326
    )
    
    
    -16.2
    %
   36




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##### Table of Contents



Loss on Extinguishment of Debt
  Income Taxes
   Industrial Staffing Operations
   HHE Operations
   37




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Pharmacy Operations
   Liquidity and Capital Resources
       38




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##### Table of Contents



2009
    
    
    2008Net cash used in operating activities
    
    $
    (3,247
    )
    
    $
    (27
    )Net cash provided (used in) investing activities
    
    
    8,528
    
    
    
    (516
    )Net cash used in financing activities
    
    
    (6,803
    )
    
    
    (3,514
    )Net change in cash and cash equivalents
    
    $
    (1,522
    )
    
    $
    (4,057
    )Cash and cash equivalents, end of period
    
    
    
    
    
    
    2,294Availability under line of credit agreements
    
    $
    3,442
    
    
    $
    1,818
     39




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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.
   40




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Item 4. Controls and Procedures.
      
  
 Item 1. Legal Proceedings.
   41




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##### Table of Contents



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.
 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.
   42




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##### Table of Contents



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.
  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.
   43




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##### Table of Contents



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.
  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.
   44




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##### Table of Contents



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.
   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.
   45




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##### Table of Contents



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.
  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.
   46




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##### Table of Contents



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.
  Declines in prescription volumes may negatively affect our net revenues and profitability.
   47




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##### Table of Contents



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.
  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.
   48




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  1.
    
    Two Class A Directors were proposed by us and were elected to serve for a three
(3) year term:
 Percentage ofVotes Cast inFor
    
    
    Withheld
    
    
    Favor of:Marvin R. Richardson
    
    
    150,879,650
    
    
    
    525,652
    
    
    
    93.29
    %John T. Thornton
    
    
    150,082,359
    
    
    
    1,322,943
    
    
    
    92.79
    %
 2.
    
    An Amendment to our Restated Articles of Incorporation to increase the number of
authorized shares of our common stock was submitted and approved:
 Percentage ofVotes Cast inFor
    
    Against
    
    Abstain
    
    Favor of:134,811,067
    
    
    16,278,142
    
    
    
    316,089
    
    
    
    93.29
    %
 3.
    
    An Amendment of our 2006 Equity Incentive Plan to increase the number of shares
available for awards under the Plan was submitted and approved:
 Percentage ofBroker
    
    Shares Voted inFor
    
    Against
    
    Abstain
    
    Non-Votes
    
    Favor of:88,638,283
    
    
    12,920,927
    
    
    
    146,786
    
    
    
    49,699,306
    
    
    
    54.80
    %
 
 Item 6. Exhibits.
  
 SIGNATURES
  November  16, 2009
    By:
    /s/ Marvin R. RichardsonMarvin R. RichardsonChief Executive Officer
(Principal Executive Officer) and DirectorNovember  16, 2009
    By:
    /s/ Matthew R. MiddendorfMatthew R. MiddendorfTreasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)  49




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EXHIBIT INDEX
  ExhibitNo.
    
    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.
  50